PowerPoint Presentation · Title: PowerPoint Presentation Author: Hibler, Khristian Created Date: 10/24/2017 2:17:43 PM

TOWER CENTER18838 US HIGHWAY 18

APPLE VALLEY, CA 92307

OFFERING MEMORANDUM

TOWER CENTER

Apple Valley, CA

ACT ID Y0080159

N O N - E N D O R S E M E N T A N D D I S C L A I M E R N O T I C E

Non-EndorsementsMarcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this

marketing package. The presence of any corporation's logo or name is not intended to indicate or imply affiliation with, or

sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent,

product, service, or commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant

lessee information about this listing to prospective customers.

ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY.

PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS.

DisclaimerTHIS IS A BROKER PRICE OPINION OR COMPARATIVE MARKET ANALYSIS OF VALUE AND SHOULD NOT BE

CONSIDERED AN APPRAISAL. This information has been secured from sources we believe to be reliable, but we make

no representations or warranties, express or implied, as to the accuracy of the information. References to square footage

or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a

service mark of Marcus & Millichap Real Estate Investment Services, Inc. Â© 2017 Marcus & Millichap. All rights

reserved.

TABLE OF CONTENTSSECTION

INVESTMENT OVERVIEW 01Offering Summary

Property Summary

Regional Map

Aerial Map

Executive Summary

FINANCIAL ANALYSIS 02

Tenant Summary

Lease Expiration Chart

Operating Statement

Pricing Detail

Tenant Profiles

MARKET COMPARABLES 03

Sold Comparables

Rent Comparables

MARKET OVERVIEW 04

Market Analysis

Demographic Analysis

4

INVESTMENT

OVERVIEW

#

OFFERING SUMMARY

Immediate accessibility and proximity to Interstate 15

Strong traffic along Highway 18

INVESTMENT HIGHLIGHTS

INVESTMENT OVERVIEW

5

Marcus & Millichap is pleased to present Tower Center, a ±14,388 square multi-tenant retail shopping center located along Highway 18 in the city of

Apple Valley. Apple Valley is part of a cluster of cities collectively known as the “High Desert” in San Bernardino County. Tower Center is strategically

positioned adjacent Interstate 15 and the main thoroughfare Highway 18, linking to neighbor cities Victorville, Hesperia, and Lucerne Valley. The property

provides a broad range of smaller service oriented tenants, perfect for the demand from the small business owners in the area.

Great demand for service oriented tenants to service the surrounding community

Limited retail development in the immediate area

PROPERTY SUMMARY

OFFERING SUMMARY

THE OFFERING

Property Tower Center

Price $1,095,000

Property Address 18838 US Highway 18,Apple Valley,CA

Assessors Parcel Number 0473-081-06

SITE DESCRIPTION

Gross Leasable Area 14,388

Ownership Fee Simple

Lot Size 1.2 acre(s)

6

REGIONAL MAP

7

AERIAL PHOTO

8

#

EXECUTIVE SUMMARY

OFFERING SUMMARY

MAJOR EMPLOYERS

EMPLOYER # OF EMPLOYEES

Victor Valley College 850

In-N-Out Burgers 613

Victorville Fire Department 400

Home Depot The 350

Lewis Center For Eductl RES 350

Target 327

Monrovia Ranch Market 320

Ascon Recy 250

Costco 250

Cem - Victorville River Plant 234

Heritage Medical Group 231

City of Victorville 228

DEMOGRAPHICS

1-Miles 3-Miles 5-Miles

2016 Estimate Pop 5,624 32,481 104,988

2010 Census Pop 5,375 30,628 97,680

2016 Estimate HH 1,938 10,974 34,521

2010 Census HH 1,843 10,303 31,884

Median HH Income $55,781 $50,550 $46,778

Per Capita Income $27,563 $24,355 $21,201

Average HH Income $79,747 $71,463 $64,064

VITAL DATA

YEAR 1 YEAR 2Price $1,095,000 CAP Rate 6.03% 6.23%

Down Payment 100% / $1,095,000Net Operating Income

$66,012 $68,174

Loan Type All CashNet Cash Flow After Debt Service

17.22% / $66,012 17.79% / $68,174

Gross Leasable Area (GLA)

14,358 SF Total Return 17.22% / $66,012 17.79% / $68,174

Price/SF $76.11

Current Occupancy 68.93 %Lot Size 1.2 acre(s)

9

MAJOR TENANTS

TENANT GLA LEASE EXPIRATION LEASE TYPE

Michael Moses Dba Allstate Insurance

1,250 N/A Gross

Richard West Medical Billing 770 3/1/2020 Gross

Horizon Solar Power 770 9/30/2017 Gross

Krisna Tower Center Laundry 1,540 5/30/2020 Gross

Verizon 770 3/1/2024 Gross

10

FINANCIAL

ANALYSIS

FINANCIAL ANALYSIS

11

TENANT SUMMARY

As of October,2017

% Monthly Renewal OptionsSquare Bldg Lease Dates Rent per Total Rent Total Rent Changes Changes Lease and Option Year

Tenant Name Suite Feet Share Comm. Exp. Sq. Ft. Per Month Per Year on to Type Rental Information

Alsop & Assoc Insurance

1 1,184 8.2% 8/1/17 7/31/18 $1.26 $1,486 $17,832 Oct-2018 $1,530.58 Gross

8/2017 One 3 yr.options - 08/2018 $1,576.50 and 8/2000 $1,623.79

Larina Racobs - Barber 2 592 4.1% 11/1/14 10/31/19 $0.80 $475 $5,700 Dec-1900 N/A Gross N/A

Michelle Moore - Tax 3 and 4 1,184 8.2% 4/1/13 N/A $0.85 $1,010 $12,120 Sep-2017 $1,010.00 Gross Month to month

Michael De Paolo 5 592 4.1% 10/19/17 10/31/20 $0.70 $414 $4,968 N/A N/A Gross N/A

Vacant 6 740 5.1% N/A N/A $0.00 $0 $0 N/A N/A Gross N/A


Hope Chest 8 and 9 1,887 13.1% 6/15/15 6/14/18 $0.65 $1,231 $14,772 N/A N/A Gross No option(s)

Vacant 10 and

111,258 8.7% N/A N/A $0.00 $0 $0 N/A N/A Gross N/A


Claydon Siddens 14 629 4.4% 8/15/17 8/14/19 $1.26 $795 $9,540 N/A N/A Gross N/A

Vacant 15 629 4.4% N/A N/A $0.00 $0 $0 Sep-2017 $555.00 Gross N/A

Verizon Wireless 16 770 5.4% 3/1/00 2/29/20 $3.79 $2,922 $35,062 Oct-2017 $539.00 Gross 4% annual increases

Richard West 17 770 5.4% 3/1/17 4/30/17 $0.70 $539 $6,468 N/A N/A Gross N/A

Hosopo Inc 18 770 5.4% 10/1/16 9/30/17 $0.65 $501 $6,012 N/A N/A Gross No reimbursement

Tower Center Laundry 19 and

20 1,540 10.7% 4/10/15 4/9/25 $0.78 $1,200 $14,400 Jan-2018 $1,273.00 Gross N/A

Vacant 21 770 5.4% N/A N/A $0.00 $0 $0 N/A N/A N/A

Total 14,388 $0.73 $10,573 $126,874

Occupied

Tenants: 10

Occupied GLA: 68.90%

Unoccupied Tenants: 6 Unoccupied GLA: 31.10%

12

TENANT SUMMARYFINANCIAL ANALYSIS

12

0

5

10

15

20

0%

20%

40%

60%

80%

100%

Oct-2017 Oct-2018 Oct-2019 Oct-2020 Oct-2021 Oct-2022 Oct-2023 Oct-2024 Oct-2025 Oct-2026

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Num

ber o

f Te

nants

Perc

enta

ge o

f S

quare

Fo

ota

ge E

xpirin

g

Lease Expiration Summary

% of SQFT Expiring Cumulative % of SQFT Expiring Number of Commercial Leases/Tenants Expiring

FINANCIAL ANALYSISOPERATING STATEMENT

13

Income Year 1 Year 2 Per SFScheduled Base Rental Income 128,141 130,303 9.06 Expense Reimbursement Income

CAM 829 829 0.06 Insurance 0 0 0.00 Real Estate Taxes 0 0 0.00 Management Fees 0 0 0.00

Total Reimbursement Income $829 1.3% $829 1.3% $0.06

Potential Gross Revenue 128,970 131,132 9.11 Effective Gross Revenue $128,970 $131,132 $9.11

Operating Expenses Year 1 Year 2 Per SF

Co

mm

on

Are

a M

ain

ten

ance

(C

AM

)

Utilities 46,066 46,066 3.20 Trash Removal 0 0 0.00 Repairs & Maintenance 0 0 0.00 Landscaping 0 0 0.00 Snow Removal 0 0 0.00 Insurance 4,575 4,575 0.32 Real Estate Taxes 11,825 11,825 0.82 Management Fee 492 0.4% 492 0.4% 0.03 Other Expenses - Non Reimbursable 0 0 0.00

Total Expenses $62,958 $62,958 $4.38 Expenses as % of EGR 48.8% 48.0%Net Operating Income $66,012 $68,174 $4.74 Notes and assumptions to the above analysis are on the following page.

FINANCIAL ANALYSISPRICING DETAIL

14

Summary Operating Data

Price $1,095,000 Down Payment $383,250 35% Income Year 1 Year 2

Number of Suites 16 Scheduled Base Rental Income

$128,141 $130,303

Price Per SqFt

$76.11 Total Reimbursement Income 0.6% $829 0.6% $829

Gross Leasable Area (GLA)

14,388 SF Other Income $0 $0

Lot Size 0.00 Acres Potential Gross Revenue $128,970 $131,132 Year Built/Renovated 0 General Vacancy $0 $0 Occupancy 68.93% Effective Gross Revenue $128,970 $131,132

Less: Operating Expenses 48.8% ($62,958) 48.0% ($62,958)Net Operating Income $66,012 $68,174

Returns Year 1 Year 2 Tenant Improvements $0 $0

CAP Rate 6.03% 6.23% Leasing Commissions $0 $0 Cash-on-Cash 17.22% 17.79% Capital Expenditures $0 $0 Debt Coverage Ratio 0.00 0.00 Cash Flow $66,012 $68,174

Debt Service $0 $0 Net Cash Flow After Debt Service

17.22% $66,012 17.79% $68,174

Financing 1st Loan Principal Reduction $0 $0 Loan Amount $711,750 Total Return 17.22% $66,012 17.79% $68,174 Loan Type NewInterest Rate 5.25% Operating Expenses Year 1 Year 2Amortization 0 Years CAM $46,066 $46,066 Year Due 2037 Insurance $4,575 $4,575 Loan information is subject to change. Contact your Marcus & Millichap Capital

Corporation representative.Real Estate Taxes $11,825 $11,825

Other Expenses - Non Reimbursable

$0 $0

Total Expenses $62,958 $62,958 Expenses/SF $4.38 $4.38

TENANT PROFILE

15

Racobs Barber Shop

General Information

Tenant Name Racobs Barber Shop

Rentable Square Feet 625 Square Foot

Percentage of RBA 100.00 Percent

Lease Commencement 11/1/2014

Lease Expiration 10/31/2019

Verizon Wireless

General Information

Tenant Name Verizon Wireless





TENANT PROFILE

16

Horizon Solar Power

General Information

Tenant Name Horizon Solar Power





Hope Chest Thrift Store

General Information

Tenant Name Hope Chest Thrift Store

Rentable Square Feet 1,895 Square Foot




TENANT PROFILE

17

Krisna/Tower Center Laundry

General Information

Tenant Name Krisna/Tower Center Laundry

Rentable Square Feet 1,540 Square Foot



Richard West Medical Billing

General Information

Tenant Name Richard West Medical Billing





18

MARKET

COMPARABLES

PROPERTY NAME

MARKETING TEAMSALES COMPARABLES

rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1

19

SALES COMPARABLES

2

KIOWA PLAZA12165 KIOWA ROAD, APPLE VALLEY, CA 92308

3

HESPERIA TIME SQUARE16967 MAIN STREET, HESPERIA, CA 92345

Sale Price: $1,300,000

Price/SF: $81.25

Year Built: 1754

Sale Date: 5/20/2016

I AVENUE PLAZA

10182 I AVENUE, HESPERIA, CA 92345

Sale Price: $1,550,000

Price/SF: $53.99

Year Built: 1986

Sale Date: 8/12/2016

Sale Price: $921,500

Price/SF: $109.70

Year Built: 1985

Sale Date: 9/1/2016

1

PROPERTY NAME

MARKETING TEAMRENT COMPARABLES

rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1

20

RENT COMPARABLES

2

STRIP CENTER18768 OUTER HIGHWAY 18, APPLE VALLEY, CA 92307

3

APPLE VALLEY VILLAGE21605 – 21641 YUCCA LOMA ROAD, APPLE VALLEY, CA 92307

NAVAJOPLAZA

13589 NAVAJO ROAD, APPLE VALLEY, CA 92308

Total GLA: 11,714 SF

Available SF: 1,293 SF

Asking Rent/SF: $12.00/NNN

1



Asking Rent/SF: $10.20/MG



Asking Rent/SF: $9.60/NNN

21

MARKET

OVERVIEW

Riverside-San Bernardino Counties

Market Highlights

Strategic location

Near LAX and Ontario International airports and ports in Long Beach and Los Angeles, Riverside-San

Bernardino has vast air, rail and interstate systems.

Dominant industrial market

The metro is one of the nation’s leading industrial markets in terms of sales, construction and absorption.

Strong demographic trends

Jobs, colleges, new home construction and more affordable housing will draw 372,600 new residents to the

Inland Empire by 2020.

Growing distribution market

Many Fortune 500 companies have massive distribution centers in the area. Available land allows for further

development.

RIVERSIDE-SAN BERNARDINO

The Riverside-San Bernardino metro, also referred to as the Inland Empire, is a 28,000-square-mile region in

Southern California composed of San Bernardino and Riverside counties. Valleys in the southwestern portion

of the region, adjacent to Los Angeles, Orange County and San Diego County, are the most populous in the

metro. These areas abut the San Bernardino and San Jacinto mountains, behind which lies the high desert

area of Victorville/Barstow to the north and the low-desert Coachella, home of Palm Springs, to the east.

Geography

TOWER CENTER

Riverside-San Bernardino features three interstate freeways, I-10, I-215 and I-15, that form a triangle around one

of the region’s core growth centers. Additionally, the completion of the 210 freeway extension made commuting to

and from Rialto and San Bernardino considerably easier.

The Riverside-San Bernardino metro has two major airports: Ontario International and Palm Springs International.

The region also has a cargo-dedicated facility, the Southern California Logistics Airport, located just north of

Victorville in the High Desert.

Two rail lines serve Riverside-San Bernardino, and the region boasts one of the largest and most modern

intermodal facilities in the nation. Amtrak provides passenger rail service, and MetroLink connects the area to

Orange County and Los Angeles. Local transit agencies run bus service throughout the area.

Infrastructure

The Riverside-San Bernardino Metro is:

60 miles from Los Angeles

100 miles from San Diego

113 miles from Tijuana

400 miles from San Francisco

Airports

Ontario International

Palm Springs International

33 smaller airports

Major Roadways

Interstates 10, 15 and 215

Highways 60, 71, 91 and 210

Rail

Freight – BNSF and Union Pacific

Passenger – Amtrak

Commuter – MetroLink

The Riverside-San Bernardino metro contains a population of more than 4.4 million. The largest city is Riverside

with 319,500 residents, followed by San Bernardino. Although population growth has slowed compared with the

previous five years, the metro's population is still expected to increase by 1.3 percent annually through 2020, well

above the national figure.

Metro

Largest Cities in Metro by Population

Riverside 319,500

San Bernardino 216,700

Moreno Valley 204,500

Fontana 203,000

Rancho Cucamonga 171,700

Ontario 169,000

* Forecast

Sources: Marcus & Millichap Research Services; U.S. Census

Bureau; Experian


TOWER CENTER

Marcus & Millichap

The Riverside-San Bernardino metro has one of the largest economies in the United

States. While the region’s economic expansion has been fueled by a number of

factors, robust population growth has been the primary demand driver. High home

prices throughout much of Southern California leave residents seeking more

affordable options in the Inland Empire. The resulting increase in population will

continue to heighten the need for housing, retail goods, personal services and

government services.

There has also been exceptional growth in wholesale trade and warehousing as the

area is an important distribution hub for the Southwest. Riverside-San Bernardino is

the premier location in the Los Angeles Basin for new distribution facilities. This is

because of its large pool of experienced workers, relatively inexpensive land and

highly efficient intermodal transportation system that reduces the cost of both

aggregating and distributing shipments. Amazon and Deckers have huge

warehouses in the region, and growth in the distribution industry is expected to

impact all other sectors.

During the past year, the Riverside-San Bernardino metro recorded higher industrial

absorption than most other industrial markets in the state. The distribution system

also benefits two major cargo airports: Ontario International and the Southern

California Logistics Airport in Victorville.

Economy

* Forecast

Sources: Marcus & Millichap Research Services; Bureau of Economic

Analysis; Moody's Analytics; U.S. Census Bureau; CoStar Group, Inc.


TOWER CENTER

The Riverside-San Bernardino metro employment base contains more than 1.3 million workers, and new jobs are

projected to be generated at an annual average pace of 1.7 percent through the next five years, above the

national growth rate of 1.3 percent. Traditionally, area residents who relocated from neighboring Los Angeles

County or Orange County continued to commute to these markets for work. In recent years though, a rise in

commercial development in the Inland Empire has generated more local jobs. As such, the job pool is becoming

increasingly diverse, and many of the metro’s population-serving industries are growing.

The metro’s infrastructure and proximity to the Los Angeles and Long Beach ports attract companies seeking West

Coast distribution hubs. As a result, the trade, transportation and utilities sector accounts for 24 percent of all

metro jobs. Given the prevalence of military installations and numerous cities and municipalities in the region, the

government sector makes up another 17 percent of total employment and is poised to grow by 0.3 percent

annually throughout 2020.

Education and health services is another large sector, with 201,300 employees, equaling 15 percent of the

workforce. Employment in this segment is expected to grow 3.9 percent annually during the coming five years.

Construction will also expand at 3.9 percent annually in that time.

Additionally, freeway improvements providing easier access to the eastern part of the metro and cities, including

Moreno Valley, Palm Springs and Palm Desert, should promote healthy employment growth as companies move

into these areas in the years ahead.

Labor

* Forecast

Sources: Marcus & Millichap Research Services; BLS; Moody’s Analytics


TOWER CENTER

Government entities account for some of the largest employers in the region, including Fort Irwin and March Air Reserve Base. As the base downsized, unused land was

transformed into the March Inland Port, a 350-acre aviation-based industrial business park. March Inland Port Airport is a public joint-use airport and its 13,000-foot runway is

one of the longest runways on the West Coast.

Another significant employer is Ontario International Airport. The facility provides thousands of jobs at the airport and more than 50,000 indirect, off-site positions. Strong growth

will continue at the airport, given the limits to expansion placed on neighboring airports in Los Angeles and Orange counties.

Major healthcare providers such as Loma Linda University Medical Center and Kaiser Permanente also provide a big portion of the region’s jobs. Demand for medical services is

projected to rise rapidly in the coming years because of the area’s increasing population and the baby-boomer generation’s move into its retirement years.

While Riverside-San Bernardino has a significant share of large employers, the majority of companies are small. This emphasis on small firms encourages innovation and

flexibility and is positive for the area’s long-term outlook, as most of the growth taking place in the economy is occurring in the small-business sector.

Employers

Major Employers

San Bernardino County

Riverside County

Stater Bros.

Loma Linda University Medical Center

Kaiser Permanente

Wal-Mart Stores Inc.

University of California, Riverside

Fort Irwin

Ontario International Airport

March Air Reserve Base

* Forecast

Sources: Marcus & Millichap Research Services; BLS; Moody's

Analytics; Experian


TOWER CENTER

The Riverside-San Bernardino metro consists of nearly 1.4 million households and more than 4.4 million residents, making it one of the largest metropolitan areas in the nation.

While expansion will slow from earlier in the decade, the Inland Empire is still on pace to grow 1.3 percent per year during the next five years, above the national rate of 0.8

percent annually. This population gain is driving new housing construction.

The majority of recent population growth in the area was due to in-migration rather than natural increases. Factors fueling in-migration include the strong local economy, relatively

affordable housing, large parcels of developable land and a lack of available land in Los Angeles County. The median existing home price in Riverside-San Bernardino, at

$299,700, also remains much lower than medians in adjacent counties, allowing 63 percent of households to afford to own their home.

Residents are becoming more educated, as more than 50 percent of the metro’s adults have at least some college education, and almost 20 percent of those ages 25 and older

have attained a bachelor’s degree or higher. Increasing education levels have helped to raise household earnings in the metro. The median household income rests at $56,100

per year, on par with the national median.

Demographics


* Forecast

Sources: Marcus & Millichap Research Services; Moody's Analytics; U.S.

Census Bureau

Riverside-San Bernardino offers a diversity of landscapes, including the palm-tree-lined and pool-studded Coachella Valley, the mountain communities of Big Bear and Lake

Arrowhead, the rolling hills and wineries of Temecula Valley and the suburban communities of the West San Bernardino Valley and Moreno Valley. A temperate climate offers

moderate winters, warm summers and generally low humidity.

One of the greatest draws of the metro is relatively affordable housing. The median home price in Riverside-San Bernardino is nearly 40 percent lower than in Los Angeles

County and nearly 60 percent less than in Orange County.

The Inland Empire provides a number of cultural opportunities, including the Riverside Metropolitan Museum, the Mission Inn Museum and the Museum of History and Art in

Ontario. The California Theatre of Performing Arts in San Bernardino stages a number of performances through the year, as does the refurbished Fox Center for the Performing

Arts. The Riverside County Philharmonic provides classical music concerts throughout the area.

Shopping opportunities are plentiful no matter where you live in the metro, as are parks and golf courses.

The region features an impressive offering of more than 20 college campuses, including nine community colleges, two California State University campuses and the University of

California, Riverside.

* Forecast

Sources: Marcus & Millichap Research Services; National

Association of Realtors; Moody’s Analytics; U.S. Census Bureau

Quality of Life


TOWER CENTER

2016 Retail Forecast

Construction: Advancing retail sales and

strong demographics will drive up

construction this year. Builders are

forecast to complete approximately 1

million square feet of retail space in 2016,

after completing 721,000 square feet the

previous year.

Vacancy: After increasing 10 basis pointsin 2015, the vacancy rate will drop 50basis points this year to 8.9 percent as netabsorption exceeds 1.6 million square feetof retail space.

Rents: As vacancy continues to tightenacross the Inland Empire, the averageasking rent will increase 1.9 percent in2016 to $16.30 per square foot of retailspace. In the previous annual period,asking rent inched up 0.8 percent.

Employment: After hiring 47,800 workers

in 2015, Inland Empire employers are

expected to create 43,000 jobs this year,

expanding the employment base 3.1

percent. Many companies are planning to

further expand in the metro, including UPS

and Amazon.

TOWER CENTER

Climbing Retail Sales Draw Investors Inland

Strong demographics support retail sales; tenant demand tightens vacancy and boosts construction.

A lower cost of living and the relatively close proximity to the employment hubs of Los Angeles and

Orange County are spurring population growth in Riverside-San Bernardino and driving up retail

sales. High home prices and climbing rents have also encouraged many households to move to the

metro from other Southern California markets. In particular, millennials are flocking to the Inland

Empire, comprising nearly 30 percent of the new growth as they seek out relatively affordable

housing costs. This expanding consumer base has increased retail sales, sparking demand for retail

space. As a result, builders have ramped up construction, focusing on necessity retailers as many

fast-food establishments, drugstores and supermarkets break ground. The South Riverside area,

specifically, is garnering interest from many national tenants. Wal-Mart, Marshalls and Rite Aid are

among the many retailers leasing up available space. Despite a spike in construction this year, high

absorption will improve vacancy and place upward pressure on rents.

Tightening operations and favorable demographic trends intensify the bidding environment. Strong

market fundamentals are driving many California retail buyers who want to diversify their portfolios to

the Inland Empire. Transaction velocity continues to surge in the metro, as investors snatch up a

large majority of single-tenant properties with cap rates in the mid-five percent range. In particular,

fast-food chains and restaurants are growing in popularity, as evidenced by a rise in sales. These

assets typically exchange hands at first-year yields between the high-four and low-six percent range.

Additionally, several buyers are seeking to blend their portfolios with multi-tenant assets renting at or

below market rates. However, limited listings will push some buyers to consider well-located, lower-

occupied properties that can be filled with credit-worthy tenants for value-add opportunities. Overall,

multi-tenant properties across the metro changed hands with average cap rates in the low-six

percent span, with assets in ideal locations trading up to 100 basis points less.

increase

in total

employment

1 million

3.1%

sq. ft.

will be

completed

basis point

decrease in

vacancy

50

1.9%

increase

in asking rents


Economy

Construction

* Forecast

Sources: Marcus & Millichap Research Services; CoStar Group, Inc.

* Forecast

Sources: Marcus & Millichap Research Services; Bureau of Labor

Statistics; Economy.com

Over the year ending in June, Inland Empire employers increased hiring by 3.3 percent with the addition of

44,000 jobs. This dropped the unemployment rate 80 basis points to 5.7 percent during the same time period. In

the previous year, nearly 58,000 jobs were created.

Employment gains over the last four quarters were particularly strong in the construction sector, rising 5.1 percent

with 4,400 jobs. The trade, transportation and utilities sector created the most jobs overall, increasing payrolls by

14,200 workers.

The growing employment base has driven up retail sales over the prior 12-month period. Average retail sales

advanced 2.8 percent during this time, after jumping 5.2 percent the prior year.

Outlook: As companies continue to move and expand in the metro, the employment base will increase 3.1

percent this year as 43,000 jobs are created. In 2015, employers hired 47,800 workers.

In the last 12 months ending at midyear, developers completed more than 677,000 square feet of retail space.

The majority of space was located in eastern San Bernardino and southern locations within Riverside. In the prior

year, 687,000 square feet was constructed.

More than 400,000 square feet of retail space is currently underway with delivery dates scheduled through 2017.

Approximately 60 percent of this development will be single-tenant assets in the Inland Empire East submarket.

One of the largest projects under construction is the Town Center Marketplace in the city of Menifee. The project

will sit on 12 acres and contain about 90,000 square feet of retail space. Signed tenants include a Buffalo Wild

Wings, Rubio’s and Sonic.

Outlook: High demand for retail space is expected to increase completions to 1 million square feet in 2016. The

previous year, builders delivered nearly 721,000 square feet of retail space.


Economy

Vacancy

Rents

* Forecast

Sources: Sources: Marcus & Millichap Research Services;

CoStar Group, Inc.

* Forecast

Sources: Marcus & Millichap Research Services; CoStar Group Inc.

RIVERSIDE-SAN BERNARDINO METRO AREA

During the year ending in June, the vacancy rate for retail space fell 10 basis points to 9.2 percent as new space

leased up. In the prior annual period, vacancy fell 30 basis points.

Assets in the western portion of San Bernardino and Riverside had vacancy in the high-6 percent range ending

the second quarter of 2016. Retail properties near the Ontario International Airport registered vacancy in the high-

5 percent area.

The vacancy rate for multi-tenant assets in the Inland Empire fell 10 basis points over the last four quarters to 9.8

percent. In the prior year, vacancy declined 40 basis points.

Outlook: Despite a rise in construction this year, the growing demand for retail space will trim the vacancy rate 50

basis points to 8.9 percent. In 2015, vacancy ticked up 10 basis point.

The average asking rent fell slightly, by 0.1 percent, during the last four quarters ending at midyear to $15.94 per

square foot. During the previous year, asking rent inched up 0.3 percent.

Marketwide, asking rent was higher than average at the end of the second quarter of 2016 in the city of Riverside

and within Coachella Valley. It stood in the high-$16 per square foot range. More affordable rents could be found

in the eastern and northern parts of San Bernardino between $12 to $13 per square foot.

Over the last 12 months, average asking rent edged up 0.8 percent for single-tenant assets to $15.98 per square

foot. On the other hand, rent for multi-tenant properties fell 2.2 percent to $15.83 per square foot.

Outlook: After the average rent nudged up 0.8 percent in 2015, tightening vacancy will further increase asking

rent 1.9 percent this year to $16.30 per square foot.

TOWER CENTER

Single-Tenant Sales Trends**

Multi-Tenant Sales Trends**

** Trailing 12-month period through 2Q

Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real

Capital Analytics

** Trailing 12-month period through 2Q

Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real

Capital Analytics


Trading in multi-tenant assets increased by approximately 11 percent during the last 12 months as properties in

Riverside gained popularity. In the previous year, transaction velocity rose 20 percent.

As more buyers snatched up multi-tenant assets during the last four quarters, the average price lifted nine

percent to $250 per square foot. Neighborhood centers were more affordable, averaging around $170 per square

foot.

The average first-year yield compressed 60 basis points during the year ending in the second quarter to the low-

six percent range. Properties in Riverside and the western portion of San Bernardino traded with cap rates in the

low- to high-five percent range during the same time period.

Outlook: Many buyers from other Southern California metros will seek assets in the Inland Empire to further add

yield to their portfolios as returns compress in their home markets.

Interest in single-tenant assets is growing in the Inland Empire as transaction velocity jumped more than 20 percent during the last four quarters ending at

midyear. Nearly 50 percent of the sales occurred in the San Bernardino area. In the prior annual period, the number of transactions ticked up 5 percent.

Increased demand drove the average price up nine percent over the last 12 months to $375 per square foot. Several fast-food establishments sold at

prices double this average. Single-tenant properties within Riverside were more affordable, averaging around $320 per square foot.

First-year returns fell 40 basis points over the year ending in June to the high-5 percent range. Assets near the airport traded with cap rates in the mid-four

to low-five percent range, while properties in Riverside and Coachella Valley changed hands with cap rates in the high-five to low-six percent span.

Outlook: Strong net absorption and an overall rise in rents will further entice single-tenant buyers to the Inland Empire. Demand will remain strong in fast-

food chains and restaurant establishments.

TOWER CENTER

Capital Markets

Local Highlights

TOWER CENTER


Global capital markets have remained stable over the past few weeks, even as Brexit and the continued devaluation of the Chinese yuan have induced bouts of volatility into stock and bond markets. Meanwhile, U.S. economic data has proved

resilient, with increases in retail sales and steady hiring supporting a measured pace of growth. Additionally, higher bond prices have lowered prospective yields, boosting the appeal of commercial real estate.

As the current economic cycle has continued, retail vacancy descended to 5.8 percent by the end of the second quarter. A focus on net-leased construction for pre-leased tenants and mixed-use developments has limited development activity in

relation to prior cycles, supporting robust increases in average asking rents. Builders will deliver 46 million square feet of retail space this year, with more than two-thirds of new supply slated as single-tenant structures. This environment will

sponsor a fourth straight year of average asking rent growth, with advancement projected to exceed inflation over the same period.

Capital markets remain highly competitive, with a broad assortment of fixed-rate products available through commercial banks, life-insurance companies and CMBS lenders. Loans are generally offered at terms up to 10 years at maximum

leverage of 65 to 75 percent. For 10-year terms, rates will typically reside in the high-three to mid-four percent range, depending on leverage and underwriting criteria. Floating bridge loans and financing for repositionings are typically

underwritten with LTVs above 80 percent, while pricing at 300 basis points above Libor for recourse deals and extending to 470 basis points above Libor for non-recourse transactions.

The city of Moreno Valley has approved the construction of a large warehouse named The World Logistics Center. The 40 million-square-foot center will be one of the largest

warehouse complexes in the United States. The World Logistics Center is forecast to bring nearly 20,000 jobs to the area and serve as a catalyst for new housing and retail

construction.

Hiring continues to remain healthy across the Inland Empire. UPS has announced plans to add nearly 500 jobs to its location at the LA/Ontario International Airport over the next

five years. The company recently completed construction on a 416,000-square-foot building to keep pace with the growing demand for e-commerce. Additionally, Amazon is

planning on opening a new fulfilment center in the city of San Bernardino. This development will bring approximately 1,000 jobs to the area.

A new 50,000-square-foot shopping center is under construction in the area of Rancho Cucamonga in the Inland Empire West submarket. The development, named Epicentre

Rancho Cucamonga, is expected to be delivered in the fourth quarter of 2016 and will be located at one of the busiest intersections in the community.

PROPERTY NAME

MARKETING TEAMDEMOGRAPHICS

Source: © 2016 Experian

34

POPULATION 1 Miles 3 Miles 5 Miles

2021 Projection

Total Population 6,018 34,302 113,427

2016 Estimate


2010 Census


2000 Census


Current Daytime Population

2016 Estimate 5,451 32,008 101,792

HOUSEHOLDS 1 Miles 3 Miles 5 Miles

2021 Projection

Total Households 2,076 11,628 37,326

2016 Estimate


Average (Mean) Household Size 2.76 2.89 3.00

2010 Census


2000 Census


Occupied Units

2021 Projection 2,076 11,628 37,326

2016 Estimate 2,036 11,732 37,102

HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles

2016 Estimate

$150,000 or More 9.67% 7.00% 4.92%

$100,000 - $149,000 14.42% 13.91% 12.00%

$75,000 - $99,999 12.01% 10.73% 11.13%

$50,000 - $74,999 16.36% 17.24% 18.32%

$35,000 - $49,999 16.69% 12.44% 13.65%

Under $35,000 28.99% 37.12% 38.90%

Average Household Income $79,747 $71,463 $64,064

Median Household Income $55,781 $50,550 $46,778

Per Capita Income $27,563 $24,355 $21,201

HOUSEHOLDS BY

EXPENDITURE1 Miles 3 Miles 5 Miles

Total Average Household Retail Expenditure

$67,698 $64,908 $62,607

Consumer Expenditure Top 10 Categories

Housing $20,461 $19,840 $19,347

Shelter $13,278 $12,997 $12,790

Transportation $10,404 $10,076 $9,747

Food $7,170 $6,951 $6,772

Personal Insurance and Pensions $5,856 $5,395 $5,063

Health Care $4,515 $4,152 $3,888

Utilities $3,456 $3,337 $3,246

Entertainment $2,643 $2,511 $2,396

Cash Contributions $1,932 $1,811 $1,675

Apparel $1,626 $1,614 $1,607

POPULATION PROFILE 1 Miles 3 Miles 5 Miles

Population By Age

2016 Estimate Total Population 5,624 32,481 104,988

Under 20 26.14% 28.39% 30.31%

20 to 34 Years 18.01% 19.06% 20.58%

35 to 39 Years 4.55% 4.90% 5.39%

40 to 49 Years 11.50% 11.78% 11.70%

50 to 64 Years 21.41% 19.88% 17.73%

Age 65+ 18.38% 16.02% 14.26%

Median Age 41.29 37.62 34.23

Population 25+ by Education Level

2016 Estimate Population Age 25+ 3,781 20,928 65,098

Elementary (0-8) 2.82% 5.76% 4.91%

Some High School (9-11) 8.53% 9.49% 10.94%

High School Graduate (12) 25.14% 27.02% 28.81%

Some College (13-15) 30.26% 28.39% 28.26%

Associate Degree Only 11.89% 9.43% 9.45%

Bachelors Degree Only 12.75% 11.28% 9.31%

Graduate Degree 8.19% 7.38% 6.78%

Income

Population

Households

Employment

Race and Ethnicity

PROPERTY NAME

MARKETING TEAM

Housing

Source: © 2016 Experian

DEMOGRAPHICS

35

In 2016, the population in your selected geography is 5,624. The

population has changed by 32.77% since 2000. It is estimated that the

population in your area will be 6,018.00 five years from now, which

represents a change of 7.01% from the current year. The current

population is 49.38% male and 50.62% female. The median age of the

population in your area is 41.29, compare this to the US average which

is 37.68. The population density in your area is 1,789.69 people per

square mile.

There are currently 1,938 households in your selected geography. The

number of households has changed by 25.27% since 2000. It is

estimated that the number of households in your area will be 2,076 five

years from now, which represents a change of 7.12% from the current

year. The average household size in your area is 2.76 persons.

In 2016, the median household income for your selected geography is

$55,781, compare this to the US average which is currently $54,505.

The median household income for your area has changed by 28.21%

since 2000. It is estimated that the median household income in your

area will be $69,779 five years from now, which represents a change of

25.09% from the current year.

The current year per capita income in your area is $27,563, compare

this to the US average, which is $29,962. The current year average

household income in your area is $79,747, compare this to the US

average which is $78,425.

The current year racial makeup of your selected area is as follows:

71.68% White, 8.11% Black, 0.62% Native American and 3.21%

Asian/Pacific Islander. Compare these to US averages which are:

70.77% White, 12.80% Black, 0.19% Native American and 5.36%

Asian/Pacific Islander. People of Hispanic origin are counted

independently of race.

People of Hispanic origin make up 28.86% of the current year

population in your selected area. Compare this to the US average of

17.65%.

The median housing value in your area was $217,826 in 2016, compare

this to the US average of $187,181. In 2000, there were 1,011 owner

occupied housing units in your area and there were 536 renter occupied

housing units in your area. The median rent at the time was $497.

In 2016, there are 1,080 employees in your selected area, this is also

known as the daytime population. The 2000 Census revealed that

67.53% of employees are employed in white-collar occupations in this

geography, and 36.95% are employed in blue-collar occupations. In

2016, unemployment in this area is 6.65%. In 2000, the average time

traveled to work was 33.00 minutes.

M E M O R A N D U MO F F E R I N G

E X C L U S I V E L Y L I S T E D B Y

Jon MitchellVice President Investments

Newport Beach Office

Tel: (949) 419-3200

[email protected]

CA License: 01227852

Janine Peltier, CCIMSenior Associate – Retail

Ontario Office

Tel: (909)456-3435

[email protected]

CA License: 01856798

Documents

PowerPoint Presentation · Title: PowerPoint Presentation Author: Hibler, Khristian Created Date: 10/24/2017 2:17:43 PM