THE MATHER PORTFOLIO · CBRE, Inc., as exclusive advisor, is pleased to offer for sale a three-building 214,349 square foot Class A office portfolio located within Mather Field Business

THE MATHER PORTFOLIOThree Class A office buildings • ±214,349 sq. ft.

SACRAMENTO, CALIFORNIA

Capital Markets | Investment Properties

Armstrong Property

OFFERING MEMORANDUM

10370 / 10390 Peter A. McCuen Blvd.

McCuen Property

10590 Armstrong Ave.

| THE MATHER PORTFOLIO2

INVESTMENT CONTACTS

RANDY GETZExecutive Vice PresidentLic. 00828903+1 916 446 [email protected]

MATT POSTSenior AssociateLic. 01899707+1 916 446 [email protected]

STUART WRIGHTSenior AssociateLic. 01451087+1 916 446 [email protected]

CBRE, Inc.500 Capitol MallSuite 2400Sacramento, CA 95814

THE MATHER PORTFOLIO | 3

Executive Summary ..................................................... 3

The McCuen Property : 10370 & 10390 Peter A. McCuen Blvd. Highlights ....................................................................14 Property Description ....................................................16 Financial Overview ....................................................... 20 Tenant Profiles .............................................................31

The Armstrong Property : 10590 Armstrong Ave.

Highlights ....................................................................34 Property Description ....................................................36 Financial Overview ....................................................... 40

Area Overview ........................................................... 47

Market Trends ........................................................... 53



EXECUTIVE SUMMARY


CBRE, Inc., as exclusive advisor, is pleased to offer for sale a three-building 214,349 square foot Class A office

portfolio located within Mather Field Business Park in Sacramento County. 10370 and 10390 Peter A. McCuen

Boulevard (“McCuen Property”) is a 178,494 rentable square foot, two-building office complex that has enjoyed

strong historical occupancy since its development in 2008. 10590 Armstrong Avenue (“Armstrong Property”), a block

east of the McCuen Property, is a 35,855 rentable square foot office building developed in 2009 as a build-to-suit

for the current tenant – the County of Sacramento’s Environmental Management Department. The McCuen Property

and the Armstrong Property are offered for sale individually or as a portfolio.

EXECUTIVE SUMMARY

OFFERING SUMMARY

MCCUEN PROPERTY ARMSTRONG PROPERTY MATHER PORTFOLIO

PRICE $33,100,000 $8,290,000 $41,390,000

SQUARE FEET 178,494 35,855 214,349

PRICE PSF $185 $231 $193

CURRENTLY LEASED 100% 100% 100%

YEAR CONSTRUCTED 2008 2009

KEY TENANTS

Educational Credit Management Corporation,

California Office of Emergency Services, ACS/

Xerox, Sutter

Sacramento County Environmental

Management Department


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• Offered at $41,390,000 ($193 per square foot)

• Institutional quality assets

• High-credit quality tenants with staggered lease terms

• Great location in Mather campus environment with concentration of government tenants

• Strong historical occupancy and high tenant retention

• Excellent 16.94% projected leveraged return by assuming existing loan on the McCuen Property (4.435%

interest rate; 69% LTV)

• High-quality construction; award-winning tilt panel design (Tilt-Up Concrete Association)

• Immediate Highway 50 freeway access; Mather Field off-ramp is an underutilized, low traffic exit

• Public transportation – Light Rail and Sacramento Regional Transit bus

• Significant tenant investment in leased space

• Abundant parking – each building offers at least 5 spaces per 1,000 rentable square feet

• 3.5% vacancy in Mather Field portion of Highway 50 Corridor

• Proximity to Mather Field Airport with capacity to land the largest jets

• Best-in-class property management, which is available to any prospective buyer

INVESTMENT HIGHLIGHTS

BIDDING PROTOCOL

Ownership requests that initial expressions of interest be in the form of a non-binding Letter of Intent to CBRE, Inc. Offers

should identify the significant terms and conditions of the Bidder’s proposal including, at minimum, the following:

• Price and sources of funding (including debt and equity and relative ratios)

• Price for each property included in the offer

• Background and qualifications of bidder with transactional references

• Proposed time frames for due diligence, financing, and closing


Downtown Sacramento


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Located approximately 85 miles northeast of San Francisco at the junction of Interstate 5 and

Interstate 80, Sacramento has convenient access to airports, rail, and a deep-water port. As the

capital of California, the region benefits from a strong government presence. Government jobs

make up more than 25% of the employment in the region and much of the State’s $171 billion

budget flows through Sacramento in some form. Sacramento has become increasingly attractive

to non-governmental industries including technology, life sciences, renewable energy, health care,

and education which have been drawn by the deep and well-educated labor pool, lower cost of

living, lack of seismic risk, and optimal location in proximity to other metropolitan areas throughout

the West.

AREA OVERVIEW

Newly developed Golden 1 Center in Downtown Sacramento


10370 & 10390 Peter A. McCuen Blvd.

Downtown Sacramento

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The Mather Portfolio

is situated within the

Highway 50 Corridor, the

largest office submarket

in Sacramento with 11.4

million square feet of office

buildings. The Highway 50

Corridor is an ideal location

for tenants seeking a lower-

cost alternative to the CBD,

ease of freeway access,

abundance of free parking,

proximity to light rail and

public transportation and

diverse housing alternatives

for employees and

executives. Because of these

features, the submarket has

long catered to government

and large corporate tenants

and been a focal point for

institutional investors.

More particularly, the Mather

Portfolio is located within

Mather Field, an area within

the Highway 50 Corridor.

There are 27 office buildings

in Mather Field totaling

approximately 1,205,000

square feet. Office vacancy

in Mather Field is 3.52%

which reflects strong demand

for office space in this

location.

Downtown Sacramento

FOLSOM BLVD

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MATHER FIELD RD



The McCuen Property


CLASS A BUILDINGS WITH ABUNDANT PARKING

Built in 2008, the two Class A buildings that comprise the

McCuen Property sit on one 12.1-acre parcel and benefit from

abundant parking, at 5 per 1,000 square feet. The McCuen

Property and Armstrong Property were constructed using an

award-winning tilt-up panel design devised by Comstock

Johnson and LPA Sacramento and recognized by the Tilt-Up

Concrete Association.

DESIRABLE LOCATION

The Property is strategically positioned with convenient

freeway access to Highway 50, one of the region’s major

east-west routes. This access allows employers to draw from

several suburban residential areas and provides direct access

to Downtown Sacramento, only a 15-minute drive to the west.

Nearby public transit is essential to government tenants.

HIGHLIGHTS

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TENANT COMMITMENT

• California Office of Emergency Services, which

has occupied approximately 70% of the 10390

building since January 2012, has a specialized

LEED Gold-certified build-out in its suite that

includes room for the federal Department of

Homeland Security. In October 2015, Cal OES

committed an additional $1,401,463 of its own

funds to make further improvements to its space.

The Agency also owns a headquarters building

a short distance away within Mather. Cal OES’s

lease runs through December 2026.

• ECMC has leased space in the 10370 building

since January 2011 and recently signed a 7-year

renewal through December 2023. The space

includes a dedicated 4,500 square foot fitness

center for the exclusive use of its employees.

ATTRACTIVE LOAN ASSUMPTION

The existing loan, to be assumed, carries a 4.435%

interest rate, matures in February 2023, and requires

only a 31% down payment.

HIGH LEVERAGED RETURN

Using the debt assumptions in our DCF mode,

Buyer’s leveraged return is projected to be 16.94%.

PUBLIC TRANSPORTATION

The property connects to the Mather Field/Mills

Station Light Rail Station two miles away by a

Regional Transit bus line that stops on the south side

of McCuen Blvd. Access to public transportation is a

high priority for government tenants.

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MATHER BLVD

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PROPERTY DESCRIPTION

McCUEN PROPERTY

ADDRESS 10370 & 10390 Peter A. McCuen Boulevard, Mather, CA 95655

CITY none

COUNTY Sacramento

PARCEL # 067-0990-001

LAND AREA 12.1 acres

BUILDING SQUARE FOOTAGE ±178,494

YEAR BUILT 2008

FLOOD ZONE X – outside 500-year floodplain

FLOORS 2

PARKING 872 spaces; ±5.00:1,000 SF parking ratio

ZONING SPA (MFSPA) – Mather Field Special Planning Area


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CONSTRUCTION DETAIL

ARCHITECT Comstock Johnson

GENERAL CONTRACTOR Ballance Construction

CONSTRUCTION TYPE Concrete tilt-up

EXTERIOR WALLS Concrete tilt-up panels with overlaying panels

FOUNDATION Reinforced concrete slab

ROOF Flat built-up roofing system

CEILING HEIGHT 9’ interior ceiling height

FLOOR PLATE Building 10370 – 56,120 SF per floor; Building 10390 – 33,127 SF per floor

INTERIOR FINISHES

Floor – commercial grade carpeting, slate

Walls – wallpaper/gypsum

Ceilings – lay-in acoustic panels

Lighting – fluorescent fixtures

ELEVATORSBuilding 10370 – 1 passenger elevator and 1 freight elevator;

Building 10390 – 1 passenger elevator

HVAC Two rooftop units in each building

SPRINKLERS/FIRE ALARM Fully sprinklered (wet pipe system); intrusion alarm

SECURITYCard access system in both buildings. Building 10370 includes a secured lobby/

foyer area with access control desk and glass wall

COLUMN SPACING 30’ x 32’

POWER SPECIFICATIONS 2400 amps per building

ADDITIONAL FEATURES

Building 10370 and part of Building 10390 served by back-up generator

maintained and operated by Landlord. Building 10390 has a back-up

generator only serving ACS/Xerox that is maintained and operated by Tenant.


10370 Peter A. McCuen Blvd.

10390 Peter A. McCuen

Blvd.

The McCuen Boulevard Property is on the southeast line of Peter A. McCuen Boulevard, just southwest of Schriever

Avenue. Peter A. McCuen is a two-lane, fully improved arterial for the neighborhood. The Subject benefits from

easy access to Highway 50 approximately one mile north of site via nearby Mather Field Road.

SITE DESCRIPTION

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BUILDING 10370

Educational Credit Mgmt Corp 84,998 sf

Sutter Connect LLC 27,242 sf

BUILDING 10390

Xerox/ACS State & Local Solutions 19,103 sf

Cal. Office Emergency Services 43,102 sf (usable)

NOT TO SCALE -- ALL DIMENSIONS ARE APPROXIMATE.


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FINANCIAL OVERVIEW

You are solely responsible for independently verifying the information in this Memorandum. ANY RELIANCE ON IT IS SOLELY AT YOUR OWN RISK.

McCUEN PROPERTY

Purchase Price $33,100,000

Total Rentable Square Feet (1) 178,494

Price per Foot $185

Financing:

Type Existing, Assumable

Interest Rate - fixed 4.435%

Principal Balance as of August 2017 (69% LTV) $22,315,936

Down Payment (31% equity) $10,784,064

Amortization (months) 360

Maturity date February 1, 2023

Monthly Payment $121,685

Annual Payment $1,460,220

Current (2)

Scheduled Gross Income $3,629,119

plus projected expense reimbursements $26,733

Adjusted Scheduled Gross Income $3,655,852

less general vacancy loss $0

Effective Gross Income $3,655,852

less Operating Expenses ($1,305,056)

per square foot $7.31

Net Operating Income $2,350,796

Initial Cap Rate 7.1%

Year 2 Cap Rate 7.9%

Unleveraged IRR 9.36%

Leveraged IRR 16.94%

(1) The OES lease was converted from usable to rentable square footage for consistency purposes.(2) Current income represents Argus Year 1 figures.


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ANALYSIS ASSUMPTIONS - McCUEN PROPERTY

ANALYSIS TERM AND STARTING DATE: Ten years commencing August 2017

INFLATION RATES:

General: 3.0%

Market rent: 3.0%

Operating expenses: 3.0%

Property taxes: 2.0%

CURRENT MARKET RENT: $1.90 per square foot per month

RESERVES: $0.10 per square foot per year

OPERATING EXPENSES: Owner's 2017 budget, with taxes adjusted to reflect post-sale value and management fees based on 3% of EGI.

EXPENSE REIMBURSEMENTS

Current: The State OEM lease is gross with no reimbursements. The other tenants have full service leases and reimburse expenses pro-rata above a base year amount. ECMC has a 2016 Base Year but with an exclusion for increase in property taxes as a result of a property sale. Sutter has a 2015 Base Year. Xerox/ACS has a 2011 Base Year, but increases in "controllable expenses" are capped at 4% per year.

Future: Same

VACANCY ABSORPTION: Sutter Connect vacates 12/31/2017. See below.

MARKET LEASING ASSUMPTIONS MLA1

Renewal probability: 75%

Options: None considered.

Months dark: 6

Starting rent: 100% of fair market rent when the lease commences.

Escalations: Assumes rent is increased annually by $.05 per square foot per month.

T.I. Allowance: $25 per rentable square foot on new leases; $7 per square foot on renewals.

Concessions: None

Term length: 7 years.

Leasing commissions: 6% of base rent on the first five years and 3% on the remaining years.

GENERAL VACANCY RATE: 5%

DEBT / REFINANCING: Existing debt ($22.3m outstanding; 4.435% int; 30-yr amort; due Feb 2023) is assumed. Buyer refinances in Feb 2023 at 65% LTV, 5% interest, 30-yr amort, due in 10 years, and pays 1% loan origination fee.

REVERSION:

Terminal capitalization rate: 7.50%

Present value discounting method: Annually, midpoint on cash flow; endpoint on resale

Costs of Sale: 1.5% of purchase price.


PROJECTED CASH FLOW

Schedule Of Prospective Cash Flow In Inflated Dollars for the Fiscal Year Beginning 8/1/2017

YEAR 1 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 YEAR 11

FOR THE YEARS ENDING $/SF/YR JUL-2018 JUL-2019 JUL-2020 JUL-2021 JUL-2022 JUL-2023 JUL-2024 JUL-2025 JUL-2026 JUL-2027 JUL-2028

Potential Gross Revenue

Base Rental Revenue $22.58 $3,939,678 $4,101,043 $4,096,955 $4,070,019 $4,136,104 $4,197,878 $4,479,084 $4,658,450 $4,812,247 $4,839,521 $4,959,290

Absorption & Turnover Vacancy (1.78) (310,559) (38,506) (39,661) (385,670) (63,658) (65,568) (213,706) (97,557)

Scheduled Base Rental Revenue 20.80 3,629,119 4,101,043 4,058,449 4,030,358 4,136,104 4,197,878 4,093,414 4,594,792 4,746,679 4,625,815 4,861,733

Base Rental Step Revenue 1,362 17,707 34,053 60,905 88,711 116,518 156,041 128,602 206,046 222,080

Expense Reimbursement Revenue 0.15 26,733 46,669 67,977 63,669 90,621 118,892 85,098 69,144 65,470 103,345 133,717

Total Potential Gross Revenue 20.96 3,655,852 4,149,074 4,144,133 4,128,080 4,287,630 4,405,481 4,295,030 4,819,977 4,940,751 4,935,206 5,217,530

General Vacancy (142,184) (108,679) (109,538) (154,439) (159,793) (118,750) (122,974) (18,000) (168,197)

Effective Gross Revenue 20.96 3,655,852 4,006,890 4,035,454 4,018,542 4,133,191 4,245,688 4,295,030 4,701,227 4,817,777 4,917,206 5,049,333

Operating Expenses

Ad valorem Property Taxes 2.27 396,505 404,435 412,524 420,774 429,190 437,773 446,529 455,459 464,569 473,860 524,139

Direct Levies 0.22 37,842 37,842 37,842 37,842 37,842 37,842 37,842 37,842 37,842 37,842 37,842

Utilities - Electric & Gas 1.60 278,703 306,190 313,073 322,466 334,582 344,620 331,898 361,801 372,655 375,094 393,675

Sewer, Water 0.19 32,981 33,970 34,990 36,039 37,120 38,234 39,381 40,562 41,779 43,033 44,324

Trash 0.15 25,499 26,264 27,052 27,863 28,699 29,560 30,447 31,361 32,301 33,270 34,269

Insurance 0.21 36,080 37,162 38,277 39,426 40,608 41,827 43,081 44,374 45,705 47,076 48,489

Property Management 0.63 109,676 120,207 121,064 120,556 123,996 127,371 128,851 141,037 144,533 147,516 151,480

Repairs & Maintenance 0.31 53,576 56,962 58,457 60,210 62,244 64,111 63,890 67,662 69,692 70,969 73,780

Janitorial/Cleaning 0.97 168,891 184,016 188,325 193,975 201,079 207,111 201,198 217,723 224,254 226,386 237,031

Carpet cleaning 0.11 18,989 19,559 20,145 20,750 21,372 22,013 22,674 23,354 24,055 24,776 25,520

Elevator Repair 0.04 7,647 7,876 8,113 8,356 8,607 8,865 9,131 9,405 9,687 9,978 10,277

HVAC 0.20 35,007 36,775 37,792 38,926 40,185 41,391 41,767 43,769 45,082 46,106 47,764

Landscaping/Parking 0.43 74,265 76,493 78,788 81,151 83,586 86,093 88,676 91,337 94,077 96,899 99,806

Window Washing 0.04 7,080 7,292 7,511 7,737 7,969 8,208 8,454 8,708 8,969 9,238 9,515

Telephone for HVAC/Elev/Fire 0.10 16,872 17,378 17,900 18,436 18,990 19,559 20,146 20,750 21,373 22,014 22,675

Fire/Life Safety 0.02 2,995 3,085 3,177 3,273 3,371 3,472 3,576 3,683 3,794 3,908 4,025

Pest Control 0.01 2,448 2,521 2,597 2,675 2,755 2,838 2,923 3,011 3,101 3,194 3,290

Total Operating Expenses 7.48 1,305,056 1,378,027 1,407,627 1,440,455 1,482,195 1,520,888 1,520,464 1,601,838 1,643,468 1,671,159 1,767,901

Net Operating Income 13.48 2,350,796 2,628,863 2,627,827 2,578,087 2,650,996 2,724,800 2,774,566 3,099,389 3,174,309 3,246,047 3,281,432

Debt Service

Interest Payments 5.62 980,029 958,294 935,576 911,829 887,007 1,070,280 1,341,193 1,320,250 1,298,236 1,275,095

Principal Payments 2.75 480,191 501,926 524,644 548,391 573,213 510,904 409,344 430,287 452,301 475,442

Origination Points & Fees 271,744

Total Debt Service 8.37 1,460,220 1,460,220 1,460,220 1,460,220 1,460,220 1,852,928 1,750,537 1,750,537 1,750,537 1,750,537

Leasing & Capital Costs

Tenant Improvements 3.90 681,050 240,055 1,167,159 396,858 646,741 295,238

Leasing Commissions 1.61 281,464 53,584 129,518 43,882 71,390

CapEx Reserve at $0.10/sf 0.10 17,444 17,968 18,507 19,062 19,634 20,223 20,830 21,455 22,098 22,761 23,444

Total Leasing & Capital Costs 5.62 979,958 17,968 18,507 312,701 19,634 20,223 1,317,507 21,455 462,838 740,892 318,682

Cash Flow After Debt ServiceBut Before Taxes ($0.51) ($89,382) $1,150,675 $1,149,100 $805,166 $1,171,142 $851,649 ($293,478) $1,327,397 $960,934 $754,618 $2,962,750

Revenue/Expense Notes 2016 ad valorem taxes ECM has a 2016 base year with Prop. 13 protection. ECM will pay a pro rata share of increases over 2016 taxes ignoring any increase due to sale or transfer. This amount increases 2%/year.



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Base Rental Revenue $22.58 $3,939,678 $4,101,043 $4,096,955 $4,070,019 $4,136,104 $4,197,878 $4,479,084 $4,658,450 $4,812,247 $4,839,521 $4,959,290

Absorption & Turnover Vacancy (1.78) (310,559) (38,506) (39,661) (385,670) (63,658) (65,568) (213,706) (97,557)

Scheduled Base Rental Revenue 20.80 3,629,119 4,101,043 4,058,449 4,030,358 4,136,104 4,197,878 4,093,414 4,594,792 4,746,679 4,625,815 4,861,733

Base Rental Step Revenue 1,362 17,707 34,053 60,905 88,711 116,518 156,041 128,602 206,046 222,080

Expense Reimbursement Revenue 0.15 26,733 46,669 67,977 63,669 90,621 118,892 85,098 69,144 65,470 103,345 133,717

Total Potential Gross Revenue 20.96 3,655,852 4,149,074 4,144,133 4,128,080 4,287,630 4,405,481 4,295,030 4,819,977 4,940,751 4,935,206 5,217,530

General Vacancy (142,184) (108,679) (109,538) (154,439) (159,793) (118,750) (122,974) (18,000) (168,197)

Effective Gross Revenue 20.96 3,655,852 4,006,890 4,035,454 4,018,542 4,133,191 4,245,688 4,295,030 4,701,227 4,817,777 4,917,206 5,049,333

Operating Expenses

Ad valorem Property Taxes 2.27 396,505 404,435 412,524 420,774 429,190 437,773 446,529 455,459 464,569 473,860 524,139

Direct Levies 0.22 37,842 37,842 37,842 37,842 37,842 37,842 37,842 37,842 37,842 37,842 37,842

Utilities - Electric & Gas 1.60 278,703 306,190 313,073 322,466 334,582 344,620 331,898 361,801 372,655 375,094 393,675

Sewer, Water 0.19 32,981 33,970 34,990 36,039 37,120 38,234 39,381 40,562 41,779 43,033 44,324

Trash 0.15 25,499 26,264 27,052 27,863 28,699 29,560 30,447 31,361 32,301 33,270 34,269

Insurance 0.21 36,080 37,162 38,277 39,426 40,608 41,827 43,081 44,374 45,705 47,076 48,489


Repairs & Maintenance 0.31 53,576 56,962 58,457 60,210 62,244 64,111 63,890 67,662 69,692 70,969 73,780


Carpet cleaning 0.11 18,989 19,559 20,145 20,750 21,372 22,013 22,674 23,354 24,055 24,776 25,520

Elevator Repair 0.04 7,647 7,876 8,113 8,356 8,607 8,865 9,131 9,405 9,687 9,978 10,277

HVAC 0.20 35,007 36,775 37,792 38,926 40,185 41,391 41,767 43,769 45,082 46,106 47,764

Landscaping/Parking 0.43 74,265 76,493 78,788 81,151 83,586 86,093 88,676 91,337 94,077 96,899 99,806

Window Washing 0.04 7,080 7,292 7,511 7,737 7,969 8,208 8,454 8,708 8,969 9,238 9,515

Telephone for HVAC/Elev/Fire 0.10 16,872 17,378 17,900 18,436 18,990 19,559 20,146 20,750 21,373 22,014 22,675

Fire/Life Safety 0.02 2,995 3,085 3,177 3,273 3,371 3,472 3,576 3,683 3,794 3,908 4,025

Pest Control 0.01 2,448 2,521 2,597 2,675 2,755 2,838 2,923 3,011 3,101 3,194 3,290

Total Operating Expenses 7.48 1,305,056 1,378,027 1,407,627 1,440,455 1,482,195 1,520,888 1,520,464 1,601,838 1,643,468 1,671,159 1,767,901

Net Operating Income 13.48 2,350,796 2,628,863 2,627,827 2,578,087 2,650,996 2,724,800 2,774,566 3,099,389 3,174,309 3,246,047 3,281,432

Debt Service

Interest Payments 5.62 980,029 958,294 935,576 911,829 887,007 1,070,280 1,341,193 1,320,250 1,298,236 1,275,095



Total Debt Service 8.37 1,460,220 1,460,220 1,460,220 1,460,220 1,460,220 1,852,928 1,750,537 1,750,537 1,750,537 1,750,537


Tenant Improvements 3.90 681,050 240,055 1,167,159 396,858 646,741 295,238

Leasing Commissions 1.61 281,464 53,584 129,518 43,882 71,390

CapEx Reserve at $0.10/sf 0.10 17,444 17,968 18,507 19,062 19,634 20,223 20,830 21,455 22,098 22,761 23,444

Total Leasing & Capital Costs 5.62 979,958 17,968 18,507 312,701 19,634 20,223 1,317,507 21,455 462,838 740,892 318,682

Cash Flow After Debt ServiceBut Before Taxes ($0.51) ($89,382) $1,150,675 $1,149,100 $805,166 $1,171,142 $851,649 ($293,478) $1,327,397 $960,934 $754,618 $2,962,750

Revenue/Expense Notes 2016 ad valorem taxes ECM has a 2016 base year with Prop. 13 protection. ECM will pay a pro rata share of increases over 2016 taxes ignoring any increase due to sale or transfer. This amount increases 2%/year.


RESALE AND IRR

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

FOR THE YEARS ENDING JUL-2018 JUL-2019 JUL-2020 JUL-2021 JUL-2022 JUL-2023 JUL-2024 JUL-2025 JUL-2026 JUL-2027

Resale Amount

Gross Proceeds from Sale $35,051,507 $35,037,693 $34,374,493 $35,346,613 $36,330,667 $36,994,213 $41,325,187 $42,324,120 $43,280,627 $43,752,427

Commissions & Adjustments (525,773) (525,565) (515,617) (530,199) (544,960) (554,913) (619,878) (634,862) (649,209) (656,286)

Net Proceeds From Sale 34,525,734 34,512,128 33,858,876 34,816,414 35,785,707 36,439,300 40,705,309 41,689,258 42,631,418 43,096,141

Outstanding Debt Retirement

Total Principal Balances (21,835,745) (21,333,820) (20,809,176) (20,260,785) (19,687,572) (27,009,783) (26,600,438) (26,170,151) (25,717,851) (25,242,409)

Net Resale Proceeds After Debt $12,689,989 $13,178,308 $13,049,700 $14,555,629 $16,098,135 $9,429,517 $14,104,871 $15,519,107 $16,913,567 $17,853,732

Unleveraged Annual IRR 8.62% 8.23% 7.50% 8.02% 8.48% 8.66% 9.49% 9.58% 9.53% 9.36%

Leveraged Annual IRR 16.78% 15.16% 12.93% 14.09% 14.99% 15.21% 17.23% 17.45% 17.34% 16.94%

Note: All resale values are calculated using the following year Proposition 13 expense value as shown on the Schedule of Prospective Cash Flow Report.


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Resale Amount

Gross Proceeds from Sale $35,051,507 $35,037,693 $34,374,493 $35,346,613 $36,330,667 $36,994,213 $41,325,187 $42,324,120 $43,280,627 $43,752,427

Commissions & Adjustments (525,773) (525,565) (515,617) (530,199) (544,960) (554,913) (619,878) (634,862) (649,209) (656,286)

Net Proceeds From Sale 34,525,734 34,512,128 33,858,876 34,816,414 35,785,707 36,439,300 40,705,309 41,689,258 42,631,418 43,096,141

Outstanding Debt Retirement

Total Principal Balances (21,835,745) (21,333,820) (20,809,176) (20,260,785) (19,687,572) (27,009,783) (26,600,438) (26,170,151) (25,717,851) (25,242,409)

Net Resale Proceeds After Debt $12,689,989 $13,178,308 $13,049,700 $14,555,629 $16,098,135 $9,429,517 $14,104,871 $15,519,107 $16,913,567 $17,853,732

Unleveraged Annual IRR 8.62% 8.23% 7.50% 8.02% 8.48% 8.66% 9.49% 9.58% 9.53% 9.36%

Leveraged Annual IRR 16.78% 15.16% 12.93% 14.09% 14.99% 15.21% 17.23% 17.45% 17.34% 16.94%

Note: All resale values are calculated using the following year Proposition 13 expense value as shown on the Schedule of Prospective Cash Flow Report.



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Presentation Rent Roll & Current Term Tenant Summary As of Aug-2017

TENANT NAMETYPE & SUITE NUMBERLEASE DATES & TERM

SQFTBLDG

SHARE

RATE & AMOUNTPER YEAR

PER MONTHCHANGES

ON

CHANGES

TO RECOVER METHOD

ASSUMPTION ABOUTSUBSEQUENT TERMS

FOR THIS TENANT NOTES

1 Educational Credit Mgmt Corp $17.40 Jan-2018 $1.60 ECMC - 2016 Base Year with Prop 13 protection

MarketSee assumption:

MLA1

Analysis ignores $0.83/sf/mo rent reduction received through 12/31/17 in lieu of TI allowance. Seller will provide Buyer with purchase price credit in the amount of the reduced rent remaining post-closing. Tenant has one-time right to terminate on or after 12/31/21 with 12 months prior notice and payment of termination penalty (Para. 2.4 of First Amendment to Lease).

Building 10370 84,998 $1,478,965 Jul-2018 $1.65

Jan-2011 to Dec-2023 48.72% $1.45 Jul-2019 $1.70

156 Months $123,247 Jul-2020 $1.75

Jul-2021 $1.80

Jul-2022 $1.85

Jul-2023 $1.90

2 Sutter Connect LLC $22.20 - - 2015 BY VacateSee assumption:

MLA1

Analysis assumes Tenant does not exercise its 3-year renewal option.

Building 10370 27,242 $604,772

Jan-2011 to Dec-2017 15.62% $1.85

84 Months $50,398

3 Xerox/ACS State & Local Solutions $24.00 Jun-2017 $2.06 Xerox/ACS - 2011 Base Year, but increases in controllable expenses capped at 4%/yr

OptionSee assumption:

MLA1

2-year option must be exercised by 9/30/17; assumed exercised.

Building 10390 19,103 $458,472

Jun-2011 to Jun-2018 10.95% $2.00

85 Months $38,206

3 Xerox/ACS State & Local Solutions $25.44 Jul-2019 $2.19 Xerox/ACS - same as above

MarketSee assumption:

MLA1 Building 10390 19,103 $485,980

Jul-2018 to Jun-2020 10.95% $2.12

24 Months $40,498

4 Cal. Office Emergency Srvcs (1) $29.34 Jan-2018 $2.50 Full Service: No reimbursement

Market See

assumption:MLA1

State has option to terminate this lease at any time on or after 12/31/19, but this seems unlikely given its specialized use and financial commitment to the space.

Building 10390 43,102 $1,264,451 Jan-2019 $2.55

Jan-2012 to Dec-2026 24.71% $2.44 Jan-2020 $2.29

180 Months $105,371 Jan-2022 $2.34

Jan-2024 $2.39

Total Occupied SqFt 174,445 (1)

(1) Square footage shown for Cal. Office of Emergency Services is “usable.”

RENT ROLL





Minimum Debt Service

Interest Payments $980,029 $958,294 $935,576 $911,829 $887,007 $505,513

Principal Payments 480,191 501,926 524,644 548,391 573,213 346,281

Total Minimum Debt Service 1,460,220 1,460,220 1,460,220 1,460,220 1,460,220 851,794

Reductions & Retirement

Principal Balloon or Call 19,341,291

Total Reductions & Retirement 19,341,291

Total Cash Flow Paid To Lender $1,460,220 $1,460,220 $1,460,220 $1,460,220 $1,460,220 $20,193,085

Principal Balance Summary

Beginning Principal Balance $22,315,936 $21,835,746 $21,333,820 $20,809,176 $20,260,785 $19,687,572

Periodic Principal Reductions (480,191) (501,926) (524,644) (548,391) (573,213) (346,281)

Principal Balloon Payments (19,341,291)

Ending Principal Balance $21,835,745 $21,333,820 $20,809,176 $20,260,785 $19,687,572

Interest Rates

Interest Rate on Principal 4.44% 4.44% 4.44% 4.44% 4.44% 2.59%

Cash Flow Coverage Ratios

Cash to Total Interest Charged 239.87% 274.33% 280.88% 282.74% 298.87% 539.02%

Cash to Minimum Debt Service 160.99% 180.03% 179.96% 176.55% 181.55% 319.89%

Loan To Value Ratios

Loan to Purchase Price 67.42% 65.97% 64.45% 62.87% 61.21% 59.48%

Loan to Capitalized Value 71.20% 62.30% 60.89% 60.54% 57.32% 54.19%

Loan to Lowest Present Value 70.94% 69.42% 67.82% 66.15% 64.41% 62.59%

Loan to Highest Present Value 64.06% 62.68% 61.24% 59.73% 58.16% 56.51%

Lenders Yields (IRR)

Base Yield to Maturity 4.44%

INDIVIDUAL LOAN AND DEBT SERVICE SUMMARY

Loan Number 1 - Existing Loan

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Minimum Debt Service

Interest Payments $564,767 $1,341,193 $1,320,250 $1,298,236 $1,275,095

Principal Payments 164,623 409,344 430,287 452,301 475,442

Total Minimum Debt Service 729,390 1,750,537 1,750,537 1,750,537 1,750,537

Fees & Contingencies


Total Fees & Contingencies 271,744

Reductions & Retirement

Principal Balloon or Call 25,242,409

Total Reductions & Retirement 25,242,409

Total Cash Flow Paid To Lender $1,001,134 $1,750,537 $1,750,537 $1,750,537 $26,992,946

Principal Balance Summary

Beginning Principal Balance $27,174,406 $27,009,782 $26,600,438 $26,170,152 $25,717,851

Periodic Principal Reductions (164,623) (409,344) (430,287) (452,301) (475,442)

Principal Balloon Payments (25,242,409)

Ending Principal Balance $27,009,783 $26,600,438 $26,170,151 $25,717,851

Interest Rates

Interest Rate on Principal 2.08% 5.00% 5.00% 5.00% 5.00%

Cash Flow Coverage Ratios

Cash to Total Interest Charged 482.46% 206.87% 234.76% 244.51% 254.57%

Cash to Minimum Debt Service 373.57% 158.50% 177.05% 181.33% 185.43%

Loan To Value Ratios

Loan to Purchase Price 82.10% 81.60% 80.36% 79.06% 77.70%

Loan to Capitalized Value 74.80% 73.01% 64.37% 61.83% 59.42%

Loan to Lowest Present Value 86.39% 85.87% 84.56% 83.20% 81.76%

Loan to Highest Present Value 78.00% 77.53% 76.36% 75.12% 73.82%

Lenders Yields (IRR)

Base Yield to Maturity 5.00%

Including Fees & Penalties 5.26%

Loan Number 2 - Refinance

INDIVIDUAL LOAN AND DEBT SERVICE SUMMARY



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TENANT PROFILES

EDUCATIONAL CREDIT MANAGEMENT CORPORATIONwww.ecmc.org

10370 Peter A. McCuen Blvd Square Footage: 84,998 Lease Expiration: Dec-23

Established in 1994, ECMC is a non-profit company that provides support for the administration of the Federal Family Education Loan (FFEL) Program as a student loan guaranty agency. ECMC also sponsors programs to help students and families plan and pay for college. In 2010, ECMC assumed responsibility for the FFEL Program guaranty portfolio. Accordingly, federal student loans guaranteed by the California Student Aid Commission and serviced by EdFund were transferred to ECMC.

SUTTER CONNECT (DBA SUTTER PHYSICIAN SERVICES)www.sutterphysicianservices.org

10370 Peter A. McCuen Blvd Square Footage: 27,242 Lease Expiration: Dec-17

Established in 1999 as a Sutter Health affiliate, Sutter Physician Services provides medical billing services to physician groups, hospitals, and integrated delivery networks across the nation. More specifically, the company provides revenue cycle, patient access, and accountable care solutions to health care provider and payer organizations.

XEROX STATE & LOCAL SOLUTIONS, INC.www.xerox.com

10390 Peter A. McCuen BlvdSquare Footage: 19,103Lease Expiration: Jun-18

Xerox State & Local Solutions, Inc. provides administrative and healthcare services. The Company’s services include solutions for human services such as eligibility determination and case management, electronic payment card services, customer care, and child support services; solutions for transportation including, electronic toll collection, parking management, weigh-in-motion, and credential verification and public safety and justice solutions. The Company also offers healthcare solutions including health program administration and pharmacy benefits management. The Company was formerly known as ACS State & Local Solutions, Inc. and changed its name to Xerox State & Local Solutions, Inc. in April, 2012.

Lease Guarantor: Affiliated Computer Services Inc. (which merged with Xerox in 2010)

STATE OF CALIFORNIA - GOVERNOR’S OFFICE OF EMERGENCY SERVICESwww.caloes.ca.gov

10390 Peter A. McCuen Blvd Square Footage: 43,102 (usable) Lease Expiration: Dec-26

The Governor’s Office of Emergency Services administers numerous programs to address threats and risks to California’s people, property, economy and environment. The office coordinates overall state agency and local government response to disasters. This office has been renamed a number of times throughout its over 70-year history. Most recently, from 2009 until 2013, the office was known as the California Emergency Management Agency.

http://www.ecmc.org

http://www.sutterphysicianservices.org

http://www.xerox.com

http://www.caloes.ca.gov



The Armstrong Property


SELF-FUNDED GOVERNMENT TENANT

The sole tenant at 10590 Armstrong Avenue, the County of Sacramento’s Environmental Management Department

(“EMD”), is responsible for an extensive and growing list of public health and environmental regulatory programs.

EMD is the delegated local implementing agency for more than 35 state and federal program authorities divided

into three operating divisions – Environmental Health, Hazardous Materials, and Water Protection. Over 150

employees work at the Armstrong Property providing administrative services and conducting various operations

and field programs. EMD generates its own revenue through fees from annual restaurant inspections and a

component of the gasoline tax is allocated to this agency for management of service station remediation. The

fees paid by regulated industry participating businesses fund EMD’s programs and operating costs. As lease

costs are an operating expense, EMD pays rent at the Armstrong Property from its own revenue and does not

rely on the County’s General Fund.

HIGHLIGHTS


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BUILD-TO-SUIT

This 2009 build-to-suit provides EMD with a layout

specifically tailored to its needs with generous public

counter space, large conference rooms for public meetings

and industry training sessions, interview rooms, a mix

of hard-walled offices and modular workstations, space

for records storage and supplies and secured parking.

Upon construction in 2009, EMD paid $2,347,168 for its

initial interior build-out ($65.46 per square foot) while the

Owner provided an interior finish allowance of $20 per

square foot ($717,100).

TENANT COMMITMENT

All Sacramento County leases contain a

Constitutional Debt Limitation clause which allows

for early termination relating to the availability of

funds which are appropriated and allocated by

the County Board of Supervisors. However, the

County’s substantial investment in the Armstrong

Property and the fact that EMD generates revenue

to pay for its own overhead make early termination

unlikely. Other reasons why lease renewal is likely

include the customized build-to-suit nature of the

Property, the strategic location adjacent to other

County departments that provide complementary

services, free and abundant parking, proximity

to public transportation, freeways and diverse

housing options and the institutional-quality

property management that has been provided

during their occupancy.

INSTITUTIONAL QUALITY ASSET

The building was constructed in 2009 and has

been meticulously maintained to the highest

standards. The Property benefits from abundant

parking at 5.05 per 1,000 square feet.


ADDRESS 10590 Armstrong Avenue, Mather, CA 95655

CITY none

COUNTY Sacramento

PARCEL # 067-1000-001

LAND AREA ±2.65 acres

BUILDING SQUARE FOOTAGE ±35,855

YEAR BUILT 2009

FLOOD ZONE X – outside 500-year floodplain

FLOORS Two

PARKING181 spaces (includes 30 spaces secured by fence with automatic gate);

±5.05:1,000 SF parking ratio

ZONING SPA (MFSPA) – Mather Field Special Planning Area

ARMSTRONG PROPERTY

PROPERTY DESCRIPTION


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ARCHITECT Comstock Johnson

GENERAL CONTRACTOR Ballance Construction

CONSTRUCTION TYPE Concrete tilt-up

EXTERIOR WALLS Concrete tilt-up

FOUNDATION Reinforced concrete slab

ROOF Flat built-up roofing system

STRUCTURAL FRAME Steel

WINDOWS Dual pane windows in aluminum frames

CEILING HEIGHT 9’ interior ceiling height

INTERIOR FINISHES

Floor – commercial grade carpeting, vinyl tile, tile

Walls – painted drywall double sheetrocked for sound insulation

Ceilings – acoustic panels in suspended t-bar system

Lighting – recessed and affixed fluorescent fixtures

ELEVATORS One passenger elevator

HVAC Central system – one rooftop unit

SPRINKLERS/FIRE ALARM Fully sprinklered (wet pipe system); intrusion alarm

SECURITY Card access system

COLUMN SPACING 30’ x 32’

CONSTRUCTION DETAIL


The Armstrong Property is located on the south side of Armstrong Avenue between Bleckley Street and Bullard

Street, within the eastern portion of the Mather Commerce Center project. The Subject benefits from proximity to

Highway 50 (approximately one mile north of site) which is accessible from nearby Mather Field Road to the west.

SITE DESCRIPTION

SITE PLAN


10590 ARMSTRONG AVENUE

County of Sacramento - Environmental Management Department 35,855 sf

NOT TO SCALE -- ALL DIMENSIONS ARE APPROXIMATE.


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FINANCIAL OVERVIEW

ARMSTRONG PROPERTY

Purchase Price $8,290,000

Total Rentable Square Feet 35,855

Price per Foot $231

Potential Financing:

Type Proposed New

Interest Rate (fixed for first 5 yrs, then at 4.25%) 3.50%

Amount (@ 65% LTV) $5,388,500

Down Payment $2,901,500

Amortization (years) 25

Years Due 10

Monthly Payment $26,976

Annual Payment $323,713

Current

Scheduled Gross Income $911,553

plus expense reimbursements $0

Effective Gross Income $911,553

less Operating Expenses ($281,328)

per square foot $7.85

Net Operating Income $630,225

Initial Cap Rate 7.60%

Unleveraged IRR 8.74%

Leveraged IRR 14.26%

Note: Current income represents Argus Year 1 figures.



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ARGUS ASSUMPTIONS

ANALYSIS TERM AND STARTING DATE: Ten years commencing August 2017

INFLATION RATES:

General: 3.0%

Market rent: 3.0%

Operating expenses: 3.0%

Property taxes: 2.0%

CURRENT MARKET RENT: $1.95 per square foot per month

RESERVES: $0.10 per square foot per year, as well as a Year 1 $10,000 landscape renovation expense. This projected landscape renovation expense is included in Owner's 2017 budget; this analysis treats it as a capital expense item due to its one-time elective nature.

OPERATING EXPENSES: Owner's 2017 year-end budgeted expenses, with property taxes adjusted to reflect post-sale value and management fees of 3% of EGI.

EXPENSE REIMBURSEMENTS

Current: None. Gross lease with Tenant directly paying own utilities.

Future: Same.

VACANCY ABSORPTION: None.

ROLLOVER ASSUMPTIONS

Renewal probability: Assumes Tenant signs a ten-year extension in 2019 at then-market rent with five months of free rent and 3% annual rent increases. Assumes Tenant receives a refresh allowance of $5.00 psf and no leasing commissions are payable on the renewal. No other rollover occurs during the term of this analysis.

GENERAL VACANCY RATE: Natural as leases roll.

PROPOSED DEBT: Proposed new debt at 65% LTV; estimated 3.50% interest rate fixed for five years; then estimated 4.25% until maturity; 25-year amortization; 10-year term; 3%-2%-1% prepay over first three years; 1% origination fee; partial recourse.

REVERSION:

Terminal capitalization rate: 7.50%

Present value discounting method: Annually, midpoint on cash flow; endpoint on resale

Costs of Sale: 2.5% of purchase price.


PROJECTED CASH FLOW





Base Rental Revenue $25.42 $911,553 $698,933 $748,428 $923,682 $951,392 $979,934 $1,009,332 $1,039,612 $1,070,800 $1,102,924 $1,136,012

Absorption & Turnover Vacancy

Scheduled Base Rental Revenue 25.42 911,553 698,933 748,428 923,682 951,392 979,934 1,009,332 1,039,612 1,070,800 1,102,924 1,136,012

Total Potential Gross Revenue 25.42 911,553 698,933 748,428 923,682 951,392 979,934 1,009,332 1,039,612 1,070,800 1,102,924 1,136,012

Effective Gross Revenue 25.42 911,553 698,933 748,428 923,682 951,392 979,934 1,009,332 1,039,612 1,070,800 1,102,924 1,136,012

Operating Expenses

Property Taxes 2.77 99,306 101,292 103,318 105,384 107,492 109,642 111,835 114,071 116,353 118,680 123,538

Direct Levies 0.23 8,348 8,348 8,348 8,348 8,348 8,348 8,348 8,348 8,348 8,348 8,348

Sewer, Water & Trash 0.33 12,000 12,360 12,731 13,113 13,506 13,911 14,329 14,758 15,201 15,657 16,127

Insurance 0.25 9,037 9,308 9,587 9,875 10,171 10,476 10,791 11,114 11,448 11,791 12,145


Repair & Maintenance 0.54 19,233 19,810 20,404 21,016 21,647 22,296 22,965 23,654 24,364 25,095 25,848


Telephone (HVAC & Fire) 0.15 5,400 5,562 5,729 5,901 6,078 6,260 6,448 6,641 6,841 7,046 7,257

Pest Control 0.03 984 1,014 1,044 1,075 1,108 1,141 1,175 1,210 1,247 1,284 1,322

HVAC 0.29 10,450 10,764 11,086 11,419 11,762 12,114 12,478 12,852 13,238 13,635 14,044

Elevator Repair 0.07 2,554 2,631 2,710 2,791 2,875 2,961 3,050 3,141 3,235 3,332 3,432

Window Washing 0.05 1,780 1,833 1,888 1,945 2,003 2,064 2,125 2,189 2,255 2,322 2,392

Fire/Life Safety Monitoring 0.06 2,285 2,354 2,424 2,497 2,572 2,649 2,728 2,810 2,895 2,981 3,071

Landscaping 0.83 29,604 30,492 31,407 32,349 33,320 34,319 35,349 36,409 37,501 38,627 39,785

Total Operating Expenses 7.85 281,328 281,326 289,357 301,338 309,076 317,021 325,186 333,568 342,189 351,039 362,617

Net Operating Income 17.58 630,225 417,607 459,071 622,344 642,316 662,913 684,146 706,044 728,611 751,885 773,395

Debt Service

Interest Payments 5.20 186,409 181,525 176,468 171,231 165,808 194,767 188,229 181,407 174,290 166,864


Origination Points & Fees 1.50 53,885

Total Debt Service 10.53 377,598 323,713 323,713 323,713 323,713 345,635 345,635 345,635 345,635 345,635


Tenant Improvements 179,275

CapEx Reserves at $0.10/sf 0.10 3,586 3,693 3,804 3,918 4,036 4,157 4,281 4,410 4,542 4,678 4,819

Proposed Landscape Renovation 0.28 10,000

Total Leasing & Capital Costs 0.38 13,586 182,968 3,804 3,918 4,036 4,157 4,281 4,410 4,542 4,678 4,819

Cash Flow After Debt ServiceBut Before Taxes $6.67 $239,041 ($89,074) $131,554 $294,713 $314,567 $313,121 $334,230 $355,999 $378,434 $401,572 $768,576



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Base Rental Revenue $25.42 $911,553 $698,933 $748,428 $923,682 $951,392 $979,934 $1,009,332 $1,039,612 $1,070,800 $1,102,924 $1,136,012

Absorption & Turnover Vacancy

Scheduled Base Rental Revenue 25.42 911,553 698,933 748,428 923,682 951,392 979,934 1,009,332 1,039,612 1,070,800 1,102,924 1,136,012

Total Potential Gross Revenue 25.42 911,553 698,933 748,428 923,682 951,392 979,934 1,009,332 1,039,612 1,070,800 1,102,924 1,136,012

Effective Gross Revenue 25.42 911,553 698,933 748,428 923,682 951,392 979,934 1,009,332 1,039,612 1,070,800 1,102,924 1,136,012

Operating Expenses

Property Taxes 2.77 99,306 101,292 103,318 105,384 107,492 109,642 111,835 114,071 116,353 118,680 123,538

Direct Levies 0.23 8,348 8,348 8,348 8,348 8,348 8,348 8,348 8,348 8,348 8,348 8,348

Sewer, Water & Trash 0.33 12,000 12,360 12,731 13,113 13,506 13,911 14,329 14,758 15,201 15,657 16,127

Insurance 0.25 9,037 9,308 9,587 9,875 10,171 10,476 10,791 11,114 11,448 11,791 12,145


Repair & Maintenance 0.54 19,233 19,810 20,404 21,016 21,647 22,296 22,965 23,654 24,364 25,095 25,848


Telephone (HVAC & Fire) 0.15 5,400 5,562 5,729 5,901 6,078 6,260 6,448 6,641 6,841 7,046 7,257

Pest Control 0.03 984 1,014 1,044 1,075 1,108 1,141 1,175 1,210 1,247 1,284 1,322

HVAC 0.29 10,450 10,764 11,086 11,419 11,762 12,114 12,478 12,852 13,238 13,635 14,044

Elevator Repair 0.07 2,554 2,631 2,710 2,791 2,875 2,961 3,050 3,141 3,235 3,332 3,432

Window Washing 0.05 1,780 1,833 1,888 1,945 2,003 2,064 2,125 2,189 2,255 2,322 2,392

Fire/Life Safety Monitoring 0.06 2,285 2,354 2,424 2,497 2,572 2,649 2,728 2,810 2,895 2,981 3,071

Landscaping 0.83 29,604 30,492 31,407 32,349 33,320 34,319 35,349 36,409 37,501 38,627 39,785

Total Operating Expenses 7.85 281,328 281,326 289,357 301,338 309,076 317,021 325,186 333,568 342,189 351,039 362,617

Net Operating Income 17.58 630,225 417,607 459,071 622,344 642,316 662,913 684,146 706,044 728,611 751,885 773,395

Debt Service

Interest Payments 5.20 186,409 181,525 176,468 171,231 165,808 194,767 188,229 181,407 174,290 166,864


Origination Points & Fees 1.50 53,885

Total Debt Service 10.53 377,598 323,713 323,713 323,713 323,713 345,635 345,635 345,635 345,635 345,635


Tenant Improvements 179,275

CapEx Reserves at $0.10/sf 0.10 3,586 3,693 3,804 3,918 4,036 4,157 4,281 4,410 4,542 4,678 4,819

Proposed Landscape Renovation 0.28 10,000

Total Leasing & Capital Costs 0.38 13,586 182,968 3,804 3,918 4,036 4,157 4,281 4,410 4,542 4,678 4,819

Cash Flow After Debt ServiceBut Before Taxes $6.67 $239,041 ($89,074) $131,554 $294,713 $314,567 $313,121 $334,230 $355,999 $378,434 $401,572 $768,576



RENT ROLL

Annual rents are projected as of August 1, 2017.

RENTABLE SQ. FT.

LEASE TERM CURRENT BASE RENT NEXT INCREASE OPTIONS

TENANT START END MONTHLY PER

SQ. FT. ANNUAL LEASE TYPE DATE

NEW MO. RENT

PER SQ. FT.

NO. X TERM

OPTION RENT PRO RATA

County of Sacramento - Environmental Management Department

35,855 May-09 Apr-29 $75,397 $2.10 $911,553 Gross (2)

May-18 $77,659 $2.17 none 100.0%

Assume 10-year extension (1) May-19 $74,220 $2.07

May-20 Annual 3% inc.

Total 35,855 $75,397 $911,553 100.0%

(1) Tenant has no renewal options. This analysis assumes a 10-year extension at then-market rent with 3% annual increases and five months free rent. (2) Tenant pays for gas, electricity, and security system. Landlord pays all other operating expenses.


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Area Overview


SACRAMENTO MARKET

Sacramento, with an estimated population of 2,207,469 residents, is the cultural and economic center of the

Sacramento Metropolitan Area (MSA) which includes seven counties. Its metropolitan area is the 4th largest in

California after the Greater Los Angeles, San Francisco Bay, and the San Diego Metropolitan Areas and the 25th

largest in the United States. Sacramento benefits from a strong government employment base, a deep and well-

educated labor pool and an affordable cost of living. Located approximately 85 miles northeast of San Francisco at

the junction of Interstate 5 and 80, Sacramento has convenient access to airports, rail and a deep-water port.

Sacramento boasts an increasingly diversified economy with traditional and innovative economic activity that provides

stability and growth to the market. The Region is quickly developing into a world-class technology community with

specific competitive advantages in renewable energy, health care, biotechnology and agricultural and food sciences.

SACRAMENTO REGION’S COMPETITIVE ADVANTAGES

• California’s Policy HQ – Home base for federal and state agencies and departments as well as executive

and legislative arms of state government.

• Affordability – The most affordable of California’s major metro areas, from business costs to costs of living.

• Talented Workforce – Employers can draw from world-class universities, including University of California

at Davis and California State University, Sacramento.

• Strong Education – UC Davis, Sacramento State and several community colleges provide over 150,000

students with a diverse, world-class education.

• Optimal Logistics Location – Strategic location at the intersection of I-5 and I-80 with a strong air, roadway,

rail, and waterway transportation system.

TOP EMPLOYERS

Some of the top public and private employers in the Sacramento area are tenants at the Mather Portfolio buildings.

PUBLIC PRIVATE

Federal....................... 13,732

State ........................ 115,362

Local ........................ 102,882

University of California, Davis ........................................ 12,639

Sutter Health Sacramento Region ................................... 11,242

UC Davis Health System .................................................. 9,905

Kaiser Permanente .......................................................... 9,247

Intel Corp. ...................................................................... 6,000

Raley’s Inc. ..................................................................... 5,507

Dignity Health................................................................. 5,212

California State University, Sacramento ............................ 2,999

Source: Sacramento Business Journal, 2015 Book of Lists


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MAJOR REDEVELOPMENT ACTIVITY

• Downtown Arena – The new downtown entertainment and sports arena, Golden 1 Center, has created a swell

of activity and attracted the interest of investors and developers not previously in this market. The Golden

1 Center, built at a cost of $588 million and home to the NBA’s Sacramento Kings, is an indoor-outdoor

multi-use facility that accommodates sporting and entertainment events such as professional and collegiate

sports, concerts, ice shows, indoor rodeo, trade shows, large graduations, family shows, and other indoor

entertainment. The Center will host approximately 240 events per year. In addition, the partnership that

owns the Sacramento Kings is constructing a mixed-use development next door dubbed DOCO (Downtown

Commons) that includes a new 250-room Kimpton hotel, 475,000 square feet of office space, 350,000

square feet of retail and up to 500,000 square feet for residential units.

• Sacramento Railyards – This 244-acre former Union Pacific rail yard is the largest infill project in the country

and is adjacent to Sacramento’s downtown. Currently undergoing infrastructure improvements, the Railyards

will essentially double the size of downtown and be a mixed-use hub for entertainment, retail, housing, office,

theaters, parks, museums, and hotels. Kaiser Permanente recently purchased 18 acres in the northwest

corner of the Railyards near Interstate 5 for a new hospital campus.

These two major developments in downtown Sacramento will increase office rents and parking rates which will

motivate tenants to seek lower cost alternatives such as the Highway 50 submarket.

Rendering courtesy SacramentoESC.com

A mixed-use development next door to the Golden 1 Center will include a hotel, office, retail, and residential space.


HIGHWAY 50 CORRIDOR

The Mather Portfolio is situated within the Highway 50 Corridor submarket which consists of 11.4 million square feet.

The Highway 50 Corridor generally extends from Howe Avenue on the western end to Hazel Avenue on the eastern

end. The largest submarket in the Sacramento MSA, the Highway 50 Corridor is an ideal location for tenants seeking

a lower-cost alternative to the CBD, ease of freeway access, abundant free parking, proximity to public transportation

and diverse housing alternatives for employees and executives. Large floor plate users find the submarket attractive

due to the many options available.

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Highway 50 Corridor


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MATHER FIELD

Existing Buildings

Future Buildings

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To Independence Homes,Golf Course and Regional Park

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For over 70 years, Mather Air Force Base played

a significant role in the defense of the nation as

well as the economic base of the Sacramento

region. After the air base was closed in 1993,

Sacramento County initiated a comprehensive

reuse planning effort and in May 1997 the

Sacramento County Mather Field Specific

Plan was established to set the guidelines for

conversion of the base from military to private

uses. Consisting of approximately 5,716 acres,

the Mather Field complex has been transformed

into mixed commercial, industrial, recreation

and residential land uses. Government-

related tenants occupy a large percentage of

the office space in Mather Field, creating a

campus environment where agencies and their

employees can easily connect. Below is a site

map for that portion of Mather Field north of

the airstrip.

Armstrong Property

McCuen Property


10370 & 10390 Peter A. McCuen Blvd.

Downtown Sacramento

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Downtown Sacramento

FOLSOM BLVD

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Market Trends


SACRAMENTO MARKET

Sacramento’s office market recorded 882,885 square feet of positive absorption in 2016 and ended Q1 2017

with 36,529 square feet more. 2016 represents the 5th straight year of positive net absorption. The vacancy rate

decreased in Q1 2017 to 14.5%, down ten basis points from the previous quarter. This represents the lowest

vacancy rate in the market since Q4 2007. The average asking lease rate sits at $1.79 full service gross, with

Class A asking rents increasing to $2.14.

The continued tightening of Sacramento’s Central Business District, with its higher lease rates, costly and limited

parking options, and lack of available office space has prompted more leasing activity in the suburbs. The positive

absorption seen most recently in Sacramento is due largely to healthy suburban leasing activity. While market

asking rates have stabilized, achieved rents are increasing throughout the market. While nationally it is expected

that overbuilding and softening tenant requirements will result in an increase in vacancy in the near-term, the

Sacramento market will likely be protected from this due to a lack of new office construction.


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The Mather Portfolio is located within

Mather Field, an area within the

Highway 50 submarket. There are

approximately 27 office buildings in

Mather Field, totaling approximately

1,205,000 square feet. Current

office vacancy in Mather Field is

3.52% which reflects the desirability

of the location.

Vacancy of Class A office properties

in the Highway 50 submarket as

of Q1 2017 is 10.7%, below the

market wide vacancy rate for Class

A of 11.5%. Average asking rents

HIGHWAY 50 SUBMARKET

VACANCY/RENTAL RATE ANALYSIS

HISTORICAL NET ABSORPTION - HWY 50 CORRIDOR OFFICE SUBMARKET

Source: CBRE Research, Q1 2017

NO NEW CONSTRUCTION

No Class A buildings have been delivered to the

Highway 50 Submarket since 2012 and none are

under construction in the submarket at this time. It

is reported that development is set to begin this

summer on a 300,000 square foot California Military

Department headquarters at 10100 Bear Hollow Drive,

which is two blocks east of 10590 Armstrong Avenue.

This 30-acre complex would house various agencies

within the Military Department, including the California

Air National Guard, California State Military Reserve

and California National Guard, the last of which would

relocate from Bradshaw Business Park.

INSTITUTIONAL OWNERSHIP

The enduring strength of the Highway 50 Submarket is

evidenced by the high number of institutional investors

who own office properties in this area, including:

FUTURE HOUSING DEVELOPMENT

Rancho Cordova is one of Sacramento’s largest bedroom communities with over 65,000 residents and plans are in

progress to make it larger. Residential developers are planning to build 3,000 homes on 900 acres south of Mather

Airport, which will include commercial lots, greenways and parks, and a sporting complex. These developments

include projects by Richmond American Homes, Woodside Homes, and Lennar.

• KBS

• Griffin Capital

• UBS

• Deutsche Asset & Wealth Management

• Panattoni

• Eaton Vance

• CalPERS

• Divco West

• Hines

HIGHWAY 50 CORRIDOR OFFICE SUBMARKETHistorical Net Absorption

108,810

(73,303)

(183,004)

(426,586)

(6,466)

(355,534)

178,622 246,632

52,551

435,809

(173,335)

2,137

(500,000)

(400,000)

(300,000)

(200,000)

(100,000)

0

100,000

200,000

300,000

400,000

500,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

Source: CBRE Research, Q1 2017.

in Highway 50 for Class A properties are at $1.74 full service gross and have held steady for the past several years.

Net absorption in Highway 50 for all classes in 2016 was negative 173,335 square feet, reflecting Bank of America’s

closure of a 194,0000 square foot office. By contrast, 2015 saw 435,809 square feet of positive absorption in this

submarket.


LEASE COMPS

2882 PROSPECT PARK DR RANCHO CORDOVA

10391 PETER A. MCCUEN BLVD MATHER

3100 ZINFANDEL DR RANCHO CORDOVA

10940 WHITE ROCK RD RANCHO CORDOVA

10834 INTERNATIONAL DR RANCHO CORDOVA

YEAR BUILT 1999 2009 1990 2002 1998

TENANT VITEK Real Estate Kleinfelder, Inc. Sutter Health Farmers Insurance Westin Engineering AMEC Foster Wheeler Blue Shield

SF 19,716 17,791 110,960 12,129 3,912 12,811 50,000

MONTHLY RATE $1.85/SF $2.02/SF $1.39/SF $1.90/SF $2.10/SF $1.80/SF $1.16/SF

LEASE TYPE FSG FSG NNN FSG FSG FSG NNN

START DATE Apr-17 Sep-15 Mar-17 Jul-16 Nov-15 Jun-16 Jan-16

TERM (YRS) 7 7 8 5 4 5 10

NEW OR RENEWAL New New Renewal New New New New

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2882 PROSPECT PARK DR RANCHO CORDOVA

10391 PETER A. MCCUEN BLVD MATHER

3100 ZINFANDEL DR RANCHO CORDOVA

10940 WHITE ROCK RD RANCHO CORDOVA

10834 INTERNATIONAL DR RANCHO CORDOVA

YEAR BUILT 1999 2009 1990 2002 1998

TENANT VITEK Real Estate Kleinfelder, Inc. Sutter Health Farmers Insurance Westin Engineering AMEC Foster Wheeler Blue Shield

SF 19,716 17,791 110,960 12,129 3,912 12,811 50,000

MONTHLY RATE $1.85/SF $2.02/SF $1.39/SF $1.90/SF $2.10/SF $1.80/SF $1.16/SF

LEASE TYPE FSG FSG NNN FSG FSG FSG NNN

START DATE Apr-17 Sep-15 Mar-17 Jul-16 Nov-15 Jun-16 Jan-16

TERM (YRS) 7 7 8 5 4 5 10

NEW OR RENEWAL New New Renewal New New New New

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SALE COMPS

10391 PETER A. MCCUEN BLVD. MATHER

2241 & 2251 HARVARD ST. SACRAMENTO

3300 ZINFANDEL & 10834 INTERNATIONAL DR.

RANCHO CORDOVA2365 IRON POINT RD.

FOLSOM11185 INTERNATIONAL DR.

RANCHO CORDOVA11150 INTERNATIONAL DR.

RANCHO CORDOVA10949 N. MATHER BLVD.

RANCHO CORDOVA

DATE SOLD 03/15/17 08/24/16 08/16/16 10/13/15 04/27/15 04/10/15 10/28/13

SALE TYPE Investment Investment Investment Investment Investment Investment Investment

PURCHASER Rich Uncles REIT Basin Street Properties Equity Capital Management Swift Real Estate Oddo Family Trust Rohit Kumar GPT Properties, Massachusetts

YEAR BUILT 2009 1987-88 1996 2003 1999 1999 2012

OCC. 100% 91% 100% 99% 100% 100% 100%

PRICE $27,000,000 $38,600,000 $39,725,000 $28,100,000 $13,150,000 $16,500,000 $21,190,000

CAP RATE 6.87% 7.75% 6.95% 7.80% 8.11% 7.80% 8.00%

SIZE 110,960 283,487 175,000 148,534 71,817 90,111 93,807

PRICE/SF $243 $136 $227 $189 $183 $183 $226

RELATIVE LOCATION Similar Similar Similar Superior Similar Similar Similar

COMMENTSLeased until July 2025 to

Sutter HealthMulti-tenant property

Leased to Blue Shield until January 2026

Freeway-fronting, multi-tenant property; 25% of space

expires within first 12 months

Leased to Delta Dental until 2020

Leased to the State; new 4+4 extension term

Leased to Cal. Dep’t. of Consumer Affairs through

June 2027

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10391 PETER A. MCCUEN BLVD. MATHER

2241 & 2251 HARVARD ST. SACRAMENTO

3300 ZINFANDEL & 10834 INTERNATIONAL DR.

RANCHO CORDOVA2365 IRON POINT RD.

FOLSOM11185 INTERNATIONAL DR.

RANCHO CORDOVA11150 INTERNATIONAL DR.

RANCHO CORDOVA10949 N. MATHER BLVD.

RANCHO CORDOVA

DATE SOLD 03/15/17 08/24/16 08/16/16 10/13/15 04/27/15 04/10/15 10/28/13

SALE TYPE Investment Investment Investment Investment Investment Investment Investment

PURCHASER Rich Uncles REIT Basin Street Properties Equity Capital Management Swift Real Estate Oddo Family Trust Rohit Kumar GPT Properties, Massachusetts

YEAR BUILT 2009 1987-88 1996 2003 1999 1999 2012

OCC. 100% 91% 100% 99% 100% 100% 100%

PRICE $27,000,000 $38,600,000 $39,725,000 $28,100,000 $13,150,000 $16,500,000 $21,190,000

CAP RATE 6.87% 7.75% 6.95% 7.80% 8.11% 7.80% 8.00%

SIZE 110,960 283,487 175,000 148,534 71,817 90,111 93,807

PRICE/SF $243 $136 $227 $189 $183 $183 $226

RELATIVE LOCATION Similar Similar Similar Superior Similar Similar Similar

COMMENTSLeased until July 2025 to

Sutter HealthMulti-tenant property

Leased to Blue Shield until January 2026

Freeway-fronting, multi-tenant property; 25% of space

expires within first 12 months

Leased to Delta Dental until 2020

Leased to the State; new 4+4 extension term

Leased to Cal. Dep’t. of Consumer Affairs through

June 2027

NMAP NOT TO SCALE

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AFFILIATED BUSINESS DISCLOSURE

CBRE, Inc. operates within a global family of companies with many subsidiaries and related entities (each an “Affiliate”) engaging in a broad range of commercial real estate businesses including, but not limited to, brokerage services, property and facilities management, valuation, investment fund management and development. At times different Affiliates, including CBRE Global Investors, Inc. or Trammell Crow Company, may have or represent clients who have competing interests in the same transaction. For example, Affiliates or their clients may have or express an interest in the property described in this Memorandum (the “Property”), and may be the successful bidder for the Property. Your receipt of this Memorandum constitutes your acknowledgement of that possibility and your agreement that neither CBRE, Inc. nor any Affiliate has an obligation to disclose to you such Affiliates’ interest or involvement in the sale or purchase of the Property. In all instances, however, CBRE, Inc. and its Affiliates will act in the best interest of their respective client(s), at arms’ length, not in concert, or in a manner detrimental to any third party. CBRE, Inc. and its Affiliates will conduct their respective businesses in a manner consistent with the law and all fiduciary duties owed to their respective client(s).

CONFIDENTIALITY AGREEMENT

Your receipt of this Memorandum constitutes your acknowledgement that (i) it is a confidential Memorandum solely for your limited use and benefit in determining whether you desire to express further interest in the acquisition of the Property, (ii) you will hold it in the strictest confidence, (iii) you will not disclose it or its contents to any third party without the prior written authorization of the owner of the Property (“Owner”) or CBRE, Inc., and (iv) you will not use any part of this Memorandum in any manner detrimental to the Owner or CBRE, Inc.

If after reviewing this Memorandum, you have no further interest in purchasing the Property, kindly return it to CBRE, Inc.

DISCLAIMER

This Memorandum contains select information pertaining to the Property and the Owner, and does not purport to be all-inclusive or contain all or part of the information which prospective investors may require to evaluate a purchase of the Property. The information contained in this Memorandum has been obtained from sources believed to be reliable, but has not been verified for accuracy, completeness, or fitness for any particular purpose. All information is presented “as is” without representation or warranty of any kind. Such information includes estimates based on forward-looking assumptions relating to the general economy, market conditions, competition and other factors which are subject to uncertainty and may not represent the current or future performance of the Property. All references to acreages, square footages, and other measurements are approximations. This Memorandum describes certain documents, including leases and other materials, in summary form. These summaries may not be complete nor accurate descriptions of the full agreements referenced. Additional information and an opportunity to inspect the Property may be made available to qualified prospective purchasers. You are advised to independently verify the accuracy and completeness of all summaries and information contained herein, to consult with independent legal and financial advisors, and carefully investigate the economics of this transaction and Property’s suitability for your needs. ANY RELIANCE ON THE CONTENT OF THIS MEMORANDUM IS SOLELY AT YOUR OWN RISK.

The Owner expressly reserves the right, at its sole discretion, to reject any or all expressions of interest or offers to purchase the Property, and/or to terminate discussions at any time with or without notice to you. All offers, counteroffers, and negotiations shall be non-binding and neither CBRE, Inc. nor the Owner shall have any legal commitment or obligation except as set forth in a fully executed, definitive purchase and sale agreement delivered by the Owner.

COPYRIGHT NOTICE

© 2017 CBRE, Inc. All Rights Reserved. This information has been obtained from sources believed reliable, but has not been verified for accuracy or completeness. You should conduct a careful, independent investigation of the property and verify all information. Any reliance on this information is solely at your own risk. CBRE and the CBRE logo are service marks of CBRE, Inc. and/or its affiliated or related companies in the United States and other countries. All other marks displayed on this document are the property of their respective owners. Photos herein are the property of their respective owners and use of these images without the express written consent of the owner is prohibited. 20524173-203958


INVESTMENT CONTACTS

RANDY GETZExecutive Vice PresidentLic. 00828903+1 916 446 [email protected]

MATT POSTSenior AssociateLic. 01899707+1 916 446 [email protected]

STUART WRIGHTSenior AssociateLic. 01451087+1 916 446 [email protected]

CBRE, Inc.500 Capitol MallSuite 2400Sacramento, CA 95814

THE MATHER PORTFOLIOSACRAMENTO, CALIFORNIA

Documents

THE MATHER PORTFOLIO · CBRE, Inc., as exclusive advisor, is pleased to offer for sale a three-building 214,349 square foot Class A office portfolio located within Mather Field Business