T0300261 Oxford Plaza - Oxford PA.mpd2 - Property Line

OXFORD PLAZA OXFORD, PA

PRICING AND FINANCIAL ANALYSIS

INVESTMENT OVERVIEW Investment Highlights ■ Walgreens Represents 70% of Gross Rent Collected; Investment Grade Tenant ■ 10 Years Remain on Walgreens Lease with Attractive Rental Increases Every Three Years ■ Two of Three Established, Successful Inline Retailers; Low Management Property ■ Walgreens and Domino's Leases Allow for Billing of Roof and Parking Field Replacement Reserves ■ Growing, Affluent Trade Area; Average Household Income Level Over $80,000

Marcus & Millichap is pleased to offer for sale Oxford Plaza, a 15,600 shopping center anchored by a 12,000 square foot Walgreens store with detached inline space totaling 3,600 square feet. Constructed in 2004 by a local developer, Happy Harry’s originally occupied the Walgreens space until Walgreen Co. acquired the Happy Harry’s chain in June 2006. Happy Harry’s was the dominant drug store chain in Delaware and its neighboring communities. Upon acquisition, Walgreens assumed the lease and provided its guarantee. The neighboring shop space to the Walgreens includes three retail bays which are currently leased to two of the three tenants, Domino's Pizza and Oxford Karate, which have occupied their space since the property was constructed. The third tenant, JT Wingz is being replaced by a new tenant offering a similar product. Buyers will be attracted to this offering for a number of reasons. First and foremost, Walgreens which has a strong investment grade credit rating has rare rental increases in the base term of its lease which are approximately six percent every three years. Walgreens does not report sales, but with a low rent per square foot compared to many other Walgreens, one can conclude this store has a low cost of occupancy for the tenant. Walgreens, with investment grade credit, has approximately ten years of lease term remaining which allows one to attain strong financing. Second, the majority of the inline space tenants have established and proven businesses. To a buyer’s benefit, the Domino's and Walgreens leases also permit full recapture of management fees as well as a billing of a reserve for the roof replacement and repaving of the parking field. This property provides the additional benefits of significant depreciation versus traditional fee simple owned real estate. The interest for sale is the leasehold interest only, which may be fully depreciated (with no allocation to the land), and, therefore, provides significantly more tax shelter of the taxable income. While many purchasers are adverse to acquiring a leasehold interest, the leasehold in this instance has an option to purchase at the end of the lease’s 29th year (which is approximately 19 years away). The lease language stipulates that at any point after the 20th year of term, the landlord can acquire the fee interest for a fixed price of $350,000. For the purposes of this offering, the property is valued based upon a 6.5% capitalization rate on the Walgreens income, an 8.0% capitalization rate on the NOI of the shop space less the present value leasehold purchase price ($350,000) discounted at a 2% interest rate over 19 years, which equates to $234,000. This present value discounting will permit the purchaser to place $234,000 at closing into a conservative investment vehicle and have ample funds to purchase the leasehold out in 19 years with no impact on cash flows. Offered for sale for $3,300,000, the subject offering provides a low management property, 100% occupied by an assortment of neighborhood retailers. In five years, with forecasted rent growth, the subject offering pro forma to over a 7% capitalization rate.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed 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 Real Estate Investment Services is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2013 Marcus & Millichap T0300261

OXFORD PLAZA PRICING AND FINANCIAL ANALYSIS

OXFORD, PA

FINANCIAL OVERVIEW Annualized Operating Data

Location 2233 - 2235 Baltimore Pike Oxford, PA 19363 Year Built

Price Down Payment Gross Leasable Area (GLA) Price/SF

2003

$3,333,000 100% $3,333,000 15,600 $213.65

CAP Rate - CY 2013

6.64%

CAP Rate - CY 2017 Pro Forma

7.08%

Lot Size

CY 2013

CY 2017 Pro Forma

Occupied Space

$261,704

$278,592

Gross Potential Rent

$261,704

$278,592

$74,486

$78,210

Income Base Rent

Expense Reimbursements Gross Potential Income

$336,190

$356,802

1.7% / $4,459

1.7% / $4,801

Effective Gross Income

$331,731

$352,001

Total Expenses

$110,572

$116,094

Net Operating Income

$221,159

$235,907

6.64% / $221,159

7.08% / $235,907

Vacancy/Collection Allowance

Total Return

2.3 Acres

Expenses Real Estate Taxes Insurance

Expenses

Real Estate Taxes Snow RemovalInsurance Snow Removal Misc. Non-Reimbursed Misc. NonCAM Management Fee (% CAM Ground Lease Rental TOTAL Management Fee (% ofEXPENSES EGI) EXPENSES/SF Ground Lease Rental TOTAL EXPENSES EXPENSES/SF


$44,173 $4,692 $44,173 $46,382 $4,692 $3,400 $4,927 $3,400 $3,570 $500$525 $500 18,665 19,598 2.9% / 18,665 2.8% / $29,664 $31,140 $110,572 $116,094 2.9% / $9,478 $7 $7 $29,664

$46,382 $4,927 $3,570 $525 19,598 2.8% / $9,952 $31,140

$110,572

$116,094

$7.09

$7.44


OXFORD, PA

TENANT SUMMARY Tenant

Walgreen Co.

GLA

% of GLA

Lease Commence

Lease Expire

Annual Rent

Rent PSF

Changes On

Changes To

Expense Reimbs.

Options

12,000

76.92%

04/01/03

03/21/23

$198,000.00

$16.50

NNN +

4, 5 Yrs.

None

04/01/16

$210,000.00

dba Walgreens

04/01/19

$222,000.00

(Former Happy Harry's)

04/01/22

$234,000.00

Option 1

$246,000.00

Option 2

$258,000.00

Option 3

$270,000.00

Option 4

$282,000.00

BF Martial Arts, LLC

1,020

6.54%

07/01/04

10/31/15

$18,360.00

$18.00

11/01/14

$19,200.00

NNN

1,380

8.85%

11/01/03

08/31/14

$22,320.00

$16.17

09/01/13

$22,992.00

NNN

07/01/24

$34,320.00

07/01/29

$36,048.00

N/A

N/A

dba Oxford Karate Institute

Pizza Properties, Inc. dba Domino's Pizza

Wings

1,200

7.69%

01/01/13

12/31/13

$22,800.00

$19.00

TOTAL OCCUPIED

15,600

100.00%

$261,480.00

$1,834,560.00

TOTAL

15,600

100.00%

$261,480.00

$1,834,560.00

Gross

TOTAL VACANT

Comments - Walgreens: Tenant reimburses its pro rata share plus management fee and roof/lot replacement reserve; there is no right of first refusal in lease. - Oxford Karate: Lease has personal guarantee by from Tenant. - Domino's: Tenant reimburses its pro rata share plus management fee and roof/lot replacement reserve; Corporate and personal lease guarantee


None


OXFORD, PA

GROUND LEASE EXPENSE Ground Lease Expense Lot Size

2.3 Acres

Lease Commencement Date

July 1, 2004

Lease Expiration Date

June 30, 2031

Annual Rent Current Rent

$29,664

Increases July 1, 2014

$31,140

July 1, 2019

$32,668

July 1, 2024

$34,320

July 1, 2029

$36,048

Option to Purchase

90 days written notice after July 1, 2021

Ground Lease Abstract Option to Purchase (Section 33) Lessor hereby grants to Lessee, its successors and assigns, an option to purchase the Premises, for the price of Three Hundred Fifty Thousand Dollars ($350,000). Lessee, its leasehold mortgagee, successors or assigns shall have the right to exercise such option to purchase the Premises upon ninety (90) days written notice to Lessor at any time after July 1, 2021; but not later than the expiration or early termination of this Lease; provided, in either case, there is no uncured event of monetary default by Lessee as of the date of Lessee’s exercise of such option to purchase the Premises. In the event Lessee, its leasehold mortgagee, successors or assigns exercises such option to purchase the Premises as foresaid, closing on such purchase shall occur within sixty (60) days from the date of the exercise of such option. Prohibited Uses (Section 4) Lessee hereby agrees that the Premises shall in no event be used for the selling or exhibiting of pornographic materials or drug related paraphernalia, any massage parlor, any amusement or video arcade, flea market, pool or billiard hall, any gambling facility or any business which generates or emits an obnoxious odor, unreasonable noise or unreasonable sound which can be heard or smelled outside of any building on the Premises (each a “Prohibited Use” and collectively, the “Prohibited Uses”). Taxes (Section 7) Lessee shall pay all real estate taxes levied and assessed against the Premises commencing with the Term and continuing through the expiration or termination of this Lease. Upon request by Lessor, Lessee shall provide Lessor written proof of such tax payments.


OXFORD PLAZA OXFORD, PA

PRICING AND FINANCIAL ANALYSIS

GROUND LEASE ABSTRACT Term (Section 2) (a) Initial Term. The initial term of this Lease (the "Initial Term") shall commence on July 1,2 001 and shall terminate on June 30, 2004 or upon the date upon which the improvements are connected into the Oxford Municipal Sewer Authority public sewage disposal system which first occurs. (b) Second Term. Commencing on the first day immediately following the expiration of the Initial Term as defined above, a second term of this Lease (the "Second Term") shall commence automatically and without further notice being required from Lessor or Lessee. The Second Term shall be for a period of five (5) years beginning on the commencement date of such Second Term. Lessee shall have the right to extend the Second Term for up to four (4) additional renewal terms with each renewal term having a period of five (5) years, and a fifth and final renewal term having a period of four (4) years, eleven (11) months and twenty-nine (29) days by written notice to Lessor at any time prior to the end of the then current term. Sublease (Section 12) Lessee may sublet the Premises or the Improvements under this Lease without the prior written consent of Lessor. Lessee shall be entitled to all rents collected from such Subleases. Notwithstanding the immediately preceding sentence, Lessee shall not assign this Lease without the prior written approval of Lessor, which approval shall not be unreasonably withheld. Insurance (Section 15) Lessor will maintain and pay the premium for all insurances on the Premises and shall keep the Premises insured to the replacement value thereof during the Initial Term of this Lease. Lessee shall, on or before July 1, 2001, secure from a good and responsible company or companies doing insurance business in the Commonwealth of Pennsylvania, and shall maintain during the Second Term and any renewal term of this Lease, the following insurance covering: (i) comprehensive general liability insurance, in the minimum amount of One Million Dollars ($1,000,000); and (ii) fire and/or casualty insurance in an amount equal to the replacement value of the Premises and the Improvements. Lessee shall provide to Lessor a Certificate of Insurance evidencing such coverage which names Lessor as an additional insured and provides Lessor thirty (30) days notice prior to cancellation. Condemnation (Section 22) (a) Condemnation of Whole. If all or substantially all of the Premises (including all designated parking areas) shall be condemned for public use, then and in that event, upon the vesting of title to the same for such public use, this Lease shall terminate, anything herein contained to the contrary notwithstanding. Lessee shall have the right to prove and collect the value of Lessee’s then remaining leasehold estate plus the value of the improvements and trade fixtures constructed and installed by it, including moving expenses as provided by law. In the event of such termination of this Lease, all rent paid in advance shall be apportioned as of the date of such termination. (b) Condemnation of Part. If only a part of the Premises shall be so taken in condemnation, and the part not so taken shall be sufficient for the operation of Lessee’s business, in Lessee’s reasonable discretion, Lessee, at its election, may retain the part not so taken and there shall be a proportional reduction in the rent. (c) Condemnation Awards. All compensation awarded or paid upon such a total or partial taking of the Premises shall belong to and be the property of the Lessor and Lessee, with respect to the proportionate value of their fee and leasehold estates, respectively, and Lessee and/or Lessee’s mortgagee shall have the right to participate jointly in any condemnation negotiations, actions or settlements. Lessor and Lessee hereby agree that the entire value of the buildings and improvements constructed on the Premises shall be deemed to be part of, and allocated to, the leasehold estate. Nothing contained herein shall be construed to preclude Lessee from prosecuting any claim directly against the condemning authority in such condemnation proceedings for loss or damage to any improvements constructed by Lessee, loss of business or depreciation to, damage to, or cost of removal of, or for the value of stock, trade fixtures, furniture and other personal property belonging to Lessee. However, no such claim by Lessee shall diminish or otherwise adversely affect Lessor’s award or the award of any mortgagee.



OXFORD, PA

INCOME & EXPENSES Gross Leasable Area (GLA)

15,600

SF

CY 2013

Per SF

CY 2017 Pro Forma

Per SF

$261,704

$16.78

$278,592

$17.86

$261,704

$16.78

$278,592

$17.86

$40,776

$2.61

$42,815

$2.74

Base Rent

Occupied Space GROSS POTENTIAL RENT Expense Reimbursements Real Estate Taxes Insurance

$4,331

$0.28

$4,548

$0.29

$17,230

$1.10

$18,091

$1.16

Management Fee

$8,749

$0.56

$9,186

$0.59

Snow Removal

$3,400

$0.22

$3,570

$0.23

CAM

GROSS POTENTIAL INCOME

$336,190

$21.55

$356,802

$22.87

1.7% / $4,459

$0.29

1.7% / $4,801

$0.31

EFFECTIVE GROSS INCOME

$331,731

$21.26

$352,001

$22.56

Total Expenses

$110,572

$7.09

$116,094

$7.44

NET OPERATING INCOME

$221,159

$14.18

$235,907

$15.12

Vacancy/Collection Allowance (% of GPR)

Comments Vacancy Factor of 7% on Inline Space Only. CY 2017 Pro Forma assumes tenants renew with $100 per month increase from last contract rental rates.



OXFORD, PA

OFFERING SUMMARY

Price Down Payment

$3,333,000

Price per Square Foot (GLA)

$213.65

Gross Leasable Area (GLA)

15,600

Year Built Lot Size

2003 2.3 Acres

VITAL DATA CAP Rate - CY 2013 Net Operating Income - CY 2013 Total Return - CY 2013 CAP Rate - CY 2017 Pro Forma Net Operating Income - CY 2017 Pro Forma Total Return - CY 2017 Pro Forma

Demographics

100% $3,333,000

6.64%

3-Mile

5-Mile

7-Mile

2012 Population

13,797

28,117

48,349

2017 Population

14,553

29,471

50,519

2012 Households

4,575

8,597

15,788

2017 Households

4,744

8,927

16,443

Median HH Income

63,283

69,326

71,999

Per Capita Income

24,362

25,169

27,601

Average HH Income

72,591

80,087

83,843

$221,159 6.64% / $221,159 7.08% $235,907 7.08% / $235,907
