Credit Rating Report

Semi-Annual UpdateApril 2018

RESEARCH

CALKAIN|RESEARCH

12930 Worldgate Dr | Suite 150 Herndon, VA 20170 703.787.4714 | calkain.com

2222CALKAIN RESEARCH | Page 2

APRIL 2018 | Credit Rating Report

Rated Tenants

Tenant Name Stock Symbol 1 S&P 2 S&P

Outlook Moody's Moody's Outlook

C-Stores7-Eleven SE AA- Negative Baa1 Stable

Circle K / Kangaroo ANCUF BBB Stable Baa2 Stable

Shell Oil SHOI A+ Positive Aa3 Stable

Pilot Flying J N/A BB+ Stable Ba1 Stable

AutomotiveAdvance Auto Parts AAP BBB- Stable Baa2 Stable

AutoZone AZO BBB Stable Baa1 Stable

O'Reilly Auto Parts ORLY BBB+ Stable Baa1 Stable

Pep Boys IEP BB+ Stable Ba3 Stable

Casual DiningCarrabba's BLMN BB Negative Ba2 Stable

Chili's EAT BB+ Stable Ba1 StableDarden Restaurants DRI BBB Stable Baa2 Stable

Red Lobster N/A NR NR B3 Negative

P.F. Chang's / Pei Wei N/A CCC+ Negative B3 Stable

QSRBurger King QSR B+ Stable NR NR

Dairy Queen BRK.A AA Stable Aa2 Stable

McDonald's MCD BBB+ Stable Baa1 Stable

Starbucks SBUX A- Stable A3 Stable

Taco Bell / KFC YUM BB Stable Ba3 Stable

Wendy's WEN B Stable B2 Stable

Banks Bank of America BAC A- Stable A3 StableBankUnited BKU NR NR Ba1 Stable

BB&T Bank BBT A- Stable A2 Stable

BMO Harris Bank BMO A+ Stable Baa1 Stable

Chase Bank JPM A+ Stable A3 Stable

PNC Bank PNC A Stable A2 Stable

SunTrust STI BBB+ Positive Baa1 Stable

TD Bank TD AA- Stable A2 Stable

Tenant Name Stock Symbol 1 S&P 2 S&P

Outlook Moody's Moody's Outlook

Big BoxBest Buy BBY BBB Stable Baa1 Stable

Costco COST A+ Stable A1 Positive

Kohl's KSS BBB- Stable Baa2 Stable

Lowe's LOW A- Stable A3 Stable

Walmart WMT AA Stable Aa2 Stable

Petco N/A B- Negative B2 Stable

Pharmacies

CVS CVS BBB Stable Baa1 Under Review (Possible Upgrade)

Rite Aid RAD B Stable B2 StableWalgreens WBA BBB Stable Baa2 Stable

MedicalAffordable Care N/A B- Stable B3 Stable

DaVita Dialysis DVA BB Stable Ba2 Stable

Fresenius Medical Care FME BBB- Positive Baa3 Stable

Dollar StoresDollar General DG BBB Stable Baa2 StableDollar Tree / Family Dollar DLTR BBB- Stable Baa3 Stable

GroceryDelhaize DEG NR NR Baa1 Stable

Kroger KR BBB Stable Baa1 StableWegmans N/A BBB+ Stable NR NR

Whole Foods AMZN A+ Stable Baa1 Stable

GeneralBuilders FirstSource BLDR B+ Positive B2 Stable

Burlington BURL BB Stable NR NR

FedEx FDX BBB Stable Baa2 Stable

Sherwin-Williams SHW BBB Stable Baa3 Stable

Verizon VZ BBB+ Stable Baa1 Stable

1 N/A = Private company 2 According to S&P credit conditions: policy uncertainty and rising rates

pose risks in North America, but faster growth may help

*NR = Not rated by the rating agency

KEY: Rating decrease since last report | Rating increase since last report

As of 3/26/2018

3333CALKAIN RESEARCH | Page 3

APRIL 2018 | Credit Rating Report

Unrated Tenants - Listed

Tenant Stock Symbol

Store Count Founded Net Income

(Millions)Market Cap

(Billions) Notes

Aaron's AAN 1860+ 1955 $292.54 $3.24 Aaron's is looking to accelerate their omnichannel platform to increase the ways they engage customers.

Applebee's / IHOP (owned by DineEquity) DIN 3,722 2008 -$324.02 $1.20 DineEquity has rebranded as Dine Brands Global.

BankUnited BKU 93 1984 $591.02 $4.28

BankUnited Small Business Finance announced it has expanded into Washington, Ohio, and Wisconsin, while also deepening their footprint in Florida. Ranked on Forbes Magazine's list as one of the "Best Banks in America 2016".

Bojangles' BOJA 716 1977 $72.01 $0.51 Bojangles’ opened 52 new locations in 2017.

Chipotle CMG 2400+ 1993 $176.25 $9.16 Chipotle expects to open between 130 and 150 additional restaurants in 2018.

Cracker Barrel CBRL 654 1969 $201.90 $3.73 Cracker Barrel has opened 6 stores in 2017 and plans to open 8 or 9 in 2018.

Dunkin' Donuts DNKN 12,538 1950 $350.91 $4.99 Over the last ten years, Dunkin' Donuts US systemwide sales have grown at 5.8% compound annual growth rate.

Fred's Pharmacy FRED 597 1947 -$66.53 $0.11

Fred’s has continued executing its turnaround strategy. The team remains committed to delivering long-term growth and value creation and is continuing to focus on driving traffic, reducing selling, general and administrative expenses, generating free cash flow and lowering debt.

Napa Auto Parts (Owned by Genuine Auto Parts) GPC 3,100 1925 $616.76 $13.00 Auto parts sales accounted for 53% of Genuine Auto Parts net sales

in 2017.

Pier 1 Imports PIR 1,011 1962 $30.13 $0.25 Pier 1 Imports expects to close 17 stores during 2018.

Tractor Supply Co. TSCO 1,853 1938 $422.60 $8.26 Tractor Supply plans to open 80 new locations during 2018.

4444CALKAIN RESEARCH | Page 4

APRIL 2018 | Credit Rating Report

Unrated Tenants - Unlisted

Tenant Net Income Store Count Founded Notes

ALDI $10.1B in annual sales 1,750 1948 Owned by a German company who also owns Trader Joe's. By 2022, ALDI will bring its total number of US stores to nearly 2,500.

Arby's $3.6B in annual sales 3,415 1964 Owned by private equity firm Roark Capital Group.

Ashley Furniture $3.85B in annual revenue 800 1970 Privately owned by a father and son team.

Aspen Dental $645M in annual revenue 675 1964 Owned by PE companies, Leonard Green & Partners and Ares Capital.

Bass Pro Shops $4.58B in annual revenue 95 1971 Acquired Cabela's Inc. in October 2016, uniting the two biggest sellers of outdoor sports gear.

Captain D's $1.5B in annual sales 520 1969 Privately owned fast-casual seafood chain.

Chick-fil-A $8B in annual sales 2,200 1946 Has the highest sales per location of any QSR restaurant.

Church's Chicken $1B in annual sales 1,650 1952 Private fast food chain with locations in 27 countries.

Giant Eagle $9.6B in annual sales 232 1931 Privately owned and largest supermarket chain in Western Pennsylvania.

Hardee's $1.28B in annual revenue 1,932 1960 Owned by CKE Restaurants Holdings.

Hobby Lobby $4.3B in annual revenue 800 1972 One-stop-shop for craft supplies.

Imagine School $234M in annual revenue 57 2004 Operates charter schools.

PDQ $28M in annual sales 63 2011 Florida based fast-casual chain.

Publix Super Markets $34B in annual revenue 1,175 1930 Employee-owned corporation.

RaceTrac $9.1B in annual revenue 670 1934 Gas station and convenience stores. 42nd largest privately owned US company.

Royal Farms $80M in annual revenue 178 1959 Privately owned gas station and convenience stores. Actively expanding in Maryland, Delaware, Virginia, and Pennsylvania.

The Save Mart Companies $4.2B in annual revenue 207 1952 Formerly Save Mart Supermarkets owns Lucky, FoodMaxx, S-Mart Foods, and

Maxx Value Foods.

Sheetz $5.6B in annual revenue 565 1952 Family owned and operated convenience stores open 24/7. Named convenience store of the year in 2017.

Steak 'n Shake $792M in annual revenue 615 1934 Steak ‘n Shake Operations, Inc. is a wholly owned subsidiary of Biglari Holdings Inc.

Tilted Kilt $250M in annual revenue 47 2003 Privately owned Celtic-themed sports bar and franchise restaurant chain.

Wawa $9.08B in annual revenue 750 1964 Privately owned gas station and convenience stores, opening 50+ stores per year.

Wegmans $8.7B in annual sales 96 1916 Privately owned supermarket chain.

Zaxby's $1B in annual sales 800 1990 Fast-casual chicken chain.

5555CALKAIN RESEARCH | Page 5

APRIL 2018 | Credit Rating Report

Moody’s S&P FITCH DBRSTIER GRADE

Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term Long-Term Short-Term

Aaa

P-1

AAA

A-1+

AAA

F1+

AAAR-1H

PRIME

Aa1 AA+ AA+ AA(high)HIGH

GRADEAa2 AA AA AAR-1M

Aa3 AA- AA- AA(low)A1 A+

A-1A+

F1A(high)

R-1L UPPER MEDIUM GRADEA2 A A A

A3P-2

A-A-2

A-F2

A(low)Baa1 BBB+ BBB+ BBB(high) R-2H LOWER

MEDIUM GRADE

Baa2P-3

BBBA-3

BBBF3

BBB R-2MBaa3 BBB- BBB- BBB(low) R-2L, R-3Ba1

Not prime

BB+

B

BB+

B

BB(high)

R-4 NON-INVESTMENT

GRADE SPECULATIVE

Ba2 BB BB BBBa3 BB- BB- BB(low)B1 B+ B+ B(high)B2 B B B

R-5

B3 B- B- B(low)Caa1 CCC+

C CCC C

CCC(high)SUBSTANTIAL

RISKSCaa2 CCC CCCCaa3 CCC- CCC(low)

Ca

CCCC(high)

EXTREMELY SPECULATIVE

CCCC(low)

CC(high)

CC(low)

C D /

DDD

/ D D IN DEFAULTDD

D

Chart Rating Tiers

6666CALKAIN RESEARCH | Page 6

APRIL 2018 | Credit Rating Report

Years

S&P Moody's 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

AAA Aaa 0.00 0.03 0.13 0.24 0.35 0.46 0.52 0.60 0.66 0.72 0.75 0.78 0.81 0.88 0.94

AA+ Aa1 0.00 0.05 0.05 0.11 0.16 0.22 0.28 0.33 0.40 0.46 0.52 0.59 0.65 0.72 0.79

AA Aa2 0.02 0.03 0.09 0.22 0.37 0.49 0.62 0.73 0.83 0.93 1.01 1.08 1.19 1.26 1.33

AA- Aa3 0.03 0.09 0.18 0.26 0.35 0.47 0.54 0.60 0.66 0.72 0.78 0.85 0.88 0.93 0.98

A+ A1 0.05 0.10 0.21 0.35 0.47 0.57 0.69 0.82 0.97 1.12 1.27 1.43 1.61 1.83 2.02

A A2 0.06 0.16 0.25 0.37 0.51 0.71 0.90 1.08 1.29 1.53 1.73 1.89 2.03 2.13 2.32

A- A3 0.07 0.18 0.29 0.42 0.60 0.78 1.04 1.23 1.38 1.51 1.63 1.79 1.94 2.08 2.19

BBB+ Baa1 0.12 0.32 0.56 0.82 1.08 1.39 1.63 1.88 2.16 2.44 2.72 2.92 3.18 3.51 3.88

BBB Baa2 0.17 0.44 0.69 1.08 1.47 1.87 2.23 2.60 2.99 3.39 3.80 4.17 4.46 4.57 4.79

BBB- Baa3 0.26 0.81 1.48 2.24 3.01 3.70 4.32 4.90 5.39 5.84 6.34 6.76 7.15 7.71 8.13

BB+ Ba1 0.36 1.17 2.12 3.09 4.08 5.02 5.82 6.41 7.10 7.79 8.23 8.75 9.25 9.66 10.27

BB Ba2 0.58 1.79 3.57 5.22 6.87 8.19 9.39 10.38 11.31 12.12 12.94 13.65 14.05 14.36 14.77

BB- Ba3 1.05 3.28 5.60 7.96 10.01 12.02 13.68 15.28 16.55 17.66 18.50 19.18 19.94 20.67 21.27

B+ B1 2.15 5.89 9.51 12.59 14.98 16.83 18.54 20.02 21.41 22.66 23.68 24.41 25.11 25.76 26.41

B B2 3.89 8.85 13.03 16.18 18.57 20.77 22.28 23.34 24.27 25.25 26.04 26.75 27.37 27.93 28.55

B- B3 7.49 14.64 19.91 23.59 26.42 28.53 30.21 31.25 31.95 32.48 33.19 33.73 33.96 34.24 34.55

CCC/C Caa1/Ca 26.78 35.88 40.96 44.06 46.42 47.38 48.56 49.52 50.38 51.03 51.55 52.10 52.81 53.37 53.37

Investment Grade 0.10 0.27 0.46 0.71 0.96 1.21 1.45 1.67 1.89 2.11 2.33 2.51 2.69 2.86 3.05

Speculative Grade 3.83 7.48 10.63 13.20 15.29 17.01 18.45 19.65 20.71 21.67 22.47 23.13 23.73 24.27 24.80

All Rated 1.52 2.99 4.27 5.35 6.25 7.02 7.67 8.22 8.72 9.18 9.58 9.91 10.22 10.50 10.78

Source: S&P

Global Corporate Average Cumulative Default Rates (1981-2016) (%)

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DISCLOSURES: As part of our market research, we collect sales price, cap rate, and lease years remaining for all publicly advertised and sold STNL properties. a) We are not able to capture 100% of the off-market transactions that occur; however the nature of off-market typically limits their value as true market comps. b) Sources include public records, sales announcements, Calkain sales, and appraiser obtained sales amongst others. c) Our collection process, while thorough, is not all encompassing and there may be biases in the data as it relates to geography, tenancy, or brokers involved in the transaction. d) Public records often lag behind when transactions actually close, months in some cases. e) In sectors with a skew of greater than |2|, we have replaced the mean with the median to better describe these sectors. Consequently the data supplied here for any given quarter is likely to miss a material amount of transactions that actually closed in it.

CALKAIN|RESEARCH

12930 Worldgate Dr | Suite 150 Herndon, VA 20170 703.787.4714 | calkain.com

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