Subject Property

Offering Memorandum Health Network -Sponsored Single-Tenant Medical Office Building 171 Red Horse Road | Pottsville, PA 17901 Confidentiality and Offered by Restricted Use Agreement David Bailey Associate Director This Confidential Offering Memorandum (“COM”) is provided by Stan Johnson Company (“SJC”), solely for PA Broker Lic. #ABR002472 your consideration of the opportunity to acquire the commercial property described herein (the “Property”). This COM may be used only as stated herein and shall not be used for any other purpose, or in any other manner, without prior written authorization and consent of SJC. Contact Broker This COM does not constitute or pertain to an offer of a security or an offer of any investment contract. This COM contains descriptive materials, financial information and other data compiled by SJC for the convenience of parties who may be interested in the Property. Such information is not all inclusive and is not represented to include all information that may be material to an evaluation of the acquisition opportunity presented. SJC has not independently verified any of the information contained herein and makes no representations or warranties of any kind concerning the accuracy or completeness thereof. All summaries and discussions of documentation and/or financial information contained herein are qualified in their entirety by reference to the actual documents and/or financial statements, which upon request may be made available. An interested party must conduct its own independent investigation and verification of any information the party deems material to consideration of the opportunity, or otherwise appropriate, without reliance upon SJC.

The Property may be financed or withdrawn from the market without notice, and its owner(s) reserve(s) the right to negotiate with any number of interested parties at any time. The Property is offered and sold by its owner(s) as is, where is, and with all faults, without representation or warranty of any kind except for any customary warranties of title.

BY ACCEPTING THIS COM, YOU AGREE THAT: (1) all information contained herein, and all other information you have received or may hereafter receive from SJC relating to the Property, whether oral, written or in any other form (collectively, the “Information”), is strictly confidential; (2) you will not copy or reproduce, and claim as your own without attribution to SJC, all or any part of this COM or the Information; (3) upon request by SJC at any time, you will return and/or certify your complete destruction of all copies of this COM and the Information; (4) for yourself and all your affiliates, officers, employees, representatives, agents and principals, you hereby release and agree to indemnify and hold harmless SJC all of its affiliates, officers, employees, representatives, agents and principals, from and with respect to any and all claims and liabilities arising from or related to the receipt or use of this COM and/or any other Information concerning the Property; (5) you will not provide this COM or any of the Information to any other party unless you first obtain such party’s acceptance and approval of all terms, conditions, limitations and agreements set forth herein, as being applicable to such party as well as to you; and (6) monetary damages alone will not be an adequate remedy for a violation of these terms and that SJC shall be entitled to equitable relief, including, but not limited to, injunctive relief and specific performance, in connection with such a violation and shall not be required to post Stan Johnson Company 180 Madison Avenue | Suite 1500 a bond when obtaining such relief. New York City, NY 10016 P: 646.778.5561 stanjohnsonco.com Table of Contents

Section 1: About the Investment

Executive Summary...... 5 Investment Highlights ...... 6

Section 2: About the Property

Lease Abstract ...... 8 Property Overview & Rent Roll ...... 9

Section 3: About the Tenant

Parent Company Overview...... 11

Section 4: About the Location

Market Summary & Demographics ...... 13 Location Overview...... 14 Lehigh Valley Business and Economic Environment ...... 15 Short-Term Acute Care Market Study ...... 16 Surrounding Medical Tenants ...... 17 Strip Map...... 18

Lehigh Valley Health Network • Pottsville, PA 3 Section One About the Investment Offering Price: $5,670,720 Cap Rate: 6.25%

Executive Summary

Lehigh Valley Physician Tenant Group - Schuylkill Lehigh Valley Health Parent Company Network - Moody's Aa2

Interest Fee Simple

171 Red Horse Road, Address Pottsville, PA

New York Land Area (Acres) ± 6.43 AC Pottsville RBA ± 21,480 SF

Rent 4/1/2019 Commencement

Lease Expiration 3/31/2031

Remaining Lease 12.0 Years Term

Renewal Options 2, 5-Year Options

Philadelphia Annual Base Rent $354,420

Rent PSF $16.50

Rent Increases 3.00% Every 2 Years

Lease Type NNN

Landlord responsible for Landlord Roof, Structure, Parking Responsibilities & Building Systems Baltimore

Lehigh Valley Health Network • Pottsville, PA 5 Investment Highlights

Long-Term NNN Lease with Desirable Rental Increases The Property is subject to a 12-year, Triple Net Lease generating passive cash flow with limited Landlord obligations. The Lease provides rental increases annually in the initial term, as well as in each Option Period. This rent structure provides a hedge against future inflation and increasing yield Hospital Tenancy over time.

100% leased to Schuylkill Health Investment Grade Hospital Tenancy System Medical Group, Inc. The Property is 100% leased to Schuylkill Health System Medical Group, Inc. d/b/a Lehigh Valley Physician Group-Schuylkill. The Tenant’s parent corporation is Lehigh Valley Health Network, an Investment Grade health system which carries a Moody’s rating of A2.

Market-Dominant Operator The top 5 hospital systems in the 50-mile radius of the Property are Geisinger, Saint Luke’s, UPMC, and Lehigh Valley Hospital. Among these five, Lehigh stacked up as the most dominant in both number of beds at 1,552 (33% of total) and number of discharges at 63,174 (26.5% of total). Lehigh Valley Hospital operates at five locations in the 50-mile radius, the highest performing of which serves 958 beds, with a total of 40,748 discharges.

Lehigh Valley Market Favorable Geographic Location Lehigh Valley is part of the larger Lehigh Valley is part of the larger NYC metropolitan area. This is the 3rd most populous MSA in the NYC metropolitan area State of Pennsylvania with a population of over 821,000. Lehigh Valley benefits from being near two of the nation’s largest cities: New York City, and Philadelphia. The region has been recognized as the second-best performing of its size for economic development in the United States.

Proximity to Hospital The Property is located within three miles of the only two short-term acute care facilities within Pottsville, Lehigh Valley Hospital Schuylkill E Norwegian Street (+/- 129 beds), and Lehigh Valley Hospital Schuylkill S. Jackson Street (+/-187 beds), providing a convenient source of referrals for patients transferring to long-term acute care.

Strong Market Statistics Proximity to Hospital Pottsville is located in the Lehigh Valley MSA of eastern Pennsylvania, with highway 209 running Property is located within 3-miles directly through it. The local office market boasts a tight vacancy rate of 7.0% with market rental of the only two short-term acute rates at $18.75 per square foot, just above the Property’s rental rate of $16.50 per square foot. The care facilities within Pottsville market is comprised of 1,694 buildings, totaling 27.8 million square feet of rentable office space.

Lehigh Valley Health Network • Pottsville, PA 6 Section Two About the Property Lease Abstract

Tenant Schuylkill Health System Medical Group, Inc. D/b/a Lehigh Valley Physician Group-Schuylkill

Parent Company Lehigh Valley Health Network - Moody's Aa2

Commencement April 1, 2019

Lease Expiration March 31, 2031

Initial Term Twelve (12) Years

Termination Option None

Renewal Options Two (2), Five (5) Year Options

Renewal Options Rent See Rent Schedule on Page 9 The Landlord is responsible for repairs and replacements and the costs and expenses thereof (and not as an Operating Cost payable or Landlord's Maintenance reimbursable by Tenant) as follows: (1) repairs and replacements to the exterior of the Building (2) maintenance, repairs and replacements of the Obligations Building foundation, structure and roof; (3) replacement of Building systems Insurance Tenant shall reimburse Landlord for the commercially reasonable cost of property and liability insurance as part of 'Operating Expenses'

Taxes Tenant shall reimburse Landlord as part of 'Operating Expenses'

ROFR None

Assignment Tenant shall not assign their interest in the Lease without prior written consent of the Landlord

Representative Photo

Lehigh Valley Health Network • Pottsville, PA 8 Property Overview Demographics

Ownership Interest Fee Simple Population 5 miles 10 miles 20 miles Parcel ID 18-24-0116.000 2018 Population 45,100 82,708 220,320 Address 171 Red Horse Rd City Pottsville State PA Households 5 miles 10 miles 20 miles Zip Code 17901 2018 Total Households 19,040 32,419 88,509 Land (Acres) ± 6.43 AC Built 1999 Household Income 5 miles 10 miles 20 miles RBA ± 21,480 SF 2018 Average HH Income $59,373 $62,783 $64,455 Floors Two (2) Use Medical Office - OB/GYN Services, On-Site Lab

Rent Schedule

Monthly Year Annual Rent Rent PSF Inc. Rent 4/1/2019 - 3/31/2021 $354,420 $16.50 $29,535 4/1/2021 - 3/31/2023 $365,160 $17.0 0 $30,430 3.0% 4/1/2023 - 3/31/2025 $376,115 $17.51 $31,343 3.0% 4/1/2025 - 3/31/2027 $ 3 87,392 $18.04 $32,283 3.0%

Base Term Base 4/1/2027 - 3/31/2029 $399,098 $18.58 $33,258 3.0% 5 miles 4/1/2029 - 3/31/2031 $411,020 $19.14 $34,252 3.0% 4/1/2031 - 3/31/2033 $423,263 $19.71 $35,272 3.0% 10 miles 4/1/2033 - 3/31/2035 $435,936 $20.29 $36,328 3.0% Opt 1 4/1/2035 - 3/31/2036 $449,039 $20.91 $ 37,420 3.0% 4/1/2036 - 3/31/2037 $449,039 $20.91 $ 37,420 0.0%

4/1/2037 3/31/2039 $462,464 $21.53 $38,539 3.0% 20 miles Opt 2 4/1/2039 - 3/31/2041 $476,319 $22.18 $39,693 3.0%

Lehigh Valley Health Network • Pottsville, PA 9 Section Three About the Tenant Parent Company Overview

At Lehigh Valley Health Network, they continually go the extra mile to fulfill their mission to heal, comfort and care for the people of their community. Lehigh has over 17,000 2018 Health Network Profile colleagues, 1,340 primary care and specialty physicians, including more than 750 physicians, Operating Income $35.1 Million and 400+ advanced practice clinicians employed by the health network that contribute to Credit Rating Moody's: A2 their mission to help make LeHigh Valley a healthier place to live. Acute Admissions 74,928 1,039,864 Their tagline – A Passion for Better Medicine – reflects a legacy of patient-centered care Outpatient Registrations that began with 13 compassionate, civic-minded women more than a century ago. Caring ER Visits 304,086 deeply about the health and well-being of their community, they raised $5,300 for a plot of ExpressCARE visits 185,868 land at 17th and Chew streets in Allentown, Pa., and in 1899, opened The Allentown Hospital. Website https://www.lvhn.org/ Their generous example was the first step in their health network’s journey.

Lehigh Valley Health Network is among seven of the nation’s leading health systems that have formed an interstate consortium called AllSpire that will address quality, population health management, best practices and medical research in the Northeast region.

Guided by Pool’s vision, they have since transformed into one of the nation's most respected health networks, offering comprehensive care in 95 clinical specialties. This care is complemented by clinical research and education, including a medical school partnership with the University of South Florida Morsani College of Medicine that’s preparing the doctors of tomorrow.

In January 2014, they merged with the Greater Hazleton Health Alliance to give residents of Northeast Pennsylvania enhanced access to special care. Its hospital, Hazleton General Hospital, was established in 1891 to provide medical care to coal miners of the region.

In September, 2016, Schuylkill Health of the Pottsville area in Schuylkill County, became part of Lehigh Valley Health Network. Schuylkill Health had two . Schuylkill Medical Center – East Norwegian Street was established in 1920 by a group of area physicians as the A.C. Miliken Hospital. The East Norwegian Street hospital spent more than 50 years as a Catholic facility under the direction of the Missionary Sisters of the Most Sacred Heart of Jesus. Schuylkill Medical Center – South Jackson Street was founded in 1895 as the Hospital of Pottsville primary for the care of people associated with industrial businesses in and around Pottsville.

8 18 163 45 26 81 20 1 Campuses ExpressCARE Physician Rehabilitation Health Testing & Pediatric Children's Locations Practices Locations Centers Imaging Specialists Hospital Locations

Lehigh Valley Health Network • Pottsville, PA 11 Section Four About the Location Market Summary Pottsville, Pennsylvania

Pottsville, PA Profile

County Schuylkill State PA Land Area 4.17 sq mi Population 14,324 Population Density 3,297/sq mi Website www.city.pottsville.pa.us

New York Pottsville Allentown Allentown, PA Profile County Lehigh State PA Land Area 18.03 sq mi N Population 120,128 Philadelphia Population Density 6,662/sq mi MSA Lehigh Valley MSA Population 827,048 Website www.allentownpa.gov Demographics 0 - 5 mi. 0 - 10 mi. 0 - 20 mi. Submarket Highlights 2018 Population 45,100 82,708 220,320 • The city of Pottsville is located in the Lehigh Valley MSA and is part of Schuylkill County. Pottsville is positioned in the eastern part of 2023 Population 44,394 81,521 218,521 Pennsylvania, with Highway 209 running directly through it. The nearest neighboring cities are Allentown (38.1 miles), Harrisburg (47.4 miles), and Philadelphia (74.2 miles).

2018 Total Households 19,040 32,419 88,509 • Current average household income is $59,373 within 5 miles, around the U.S. average of $59,039 for all households. 2023 Total Households 18,693 31,836 87,472 • Median home value in the area is $68,800, compared to a median home value of $220,100 for the U.S. In just one year, median value is projected to change by 3.9% annually to roughly $71,483. 2018 Average Household Income $59,373 $62,783 $64,455 • Local market vacancy is 7.0% with current market rental rates at $18.75. 2018 Median Household Income $46,706 $50,476 $51,076 The market contains 1,694 office buildings, totaling 27.8 million square feet of space.

Lehigh Valley Health Network • Pottsville, PA 13 Location Overview

Pottsville is a city in, and the county seat of, Schuylkill County, Pennsylvania. The population was 14,324 at the 2010 census and is the principal city of the Pottsville, PA Micropolitan Statistical Area. Pottsville is located in Lehigh Valley.

The Lehigh Valley is a metropolitan region officially consisting of Carbon, Lehigh and Northampton counties in eastern Pennsylvania and Warren Bethlehem, PA County on the western edge of New Jersey, in the Eastern United States. The Lehigh Valley's largest city, with a population of 120,443, is Allentown. The region is a part of the larger New York City metropolitan area but borders the Philadelphia metropolitan area.

The Lehigh Valley is the third most populous Metropolitan Statistical Area in the state of Pennsylvania with a population of 821,173 residents as of the 2010 U.S. Census. The region's population is the third largest in Pennsylvania, surpassed only by the Philadelphia and Pittsburgh metropolitan statistical areas. It is the 64th most populated metropolitan area in the United States. Lehigh County, the Valley's largest county in terms of overall population, is among the fastest growing in the state. The Lehigh Valley is proximate to two of the nation's largest cities: New York City, which is about 75 miles to its east, and Philadelphia, which is Allentown, PA 50 miles to its southeast.

In March 2014, the Lehigh Valley was recognized by Site Selection Magazine as the best performing region of its size for economic development in the United States. It was also ranked by Fortune in May 2015 as being among the top 10 best places in the U.S. to locate corporate finance and information technology operations for companies such as call centers and IT support. Allentown, the region's largest city, was cited as a "national success story" in April 2016 by the Urban Land Institute for its downtown redevelopment and transformation, one of only six communities nationwide to achieve this distinction.

Allentown, PA

Lehigh Valley Health Network • Pottsville, PA 14 Lehigh Valley Business and Economic Environment

Located 60 minutes north of Philadelphia and 90 minutes west of New York City, Lehigh Valley is the 65th largest metropolitan region in the United States, with a $40 billion GDP, larger than that of 112 sovereign nations. Lehigh Valley is a two-county region in eastern Pennsylvania consisting of 62 distinct municipalities and three cities: Allentown, Bethlehem, and Easton. Lehigh Valley has been recognized by Site Selection magazine as the best performing region of its size for Click Here for economic development in the Northeastern United States. More Information

Lehigh Valley offers a lower cost of living, more affordable real estate, lower taxes and a more affordable labor pool than most other Northeastern US regions. These attributes, when combined with sizable investments and a friendlier regulatory environment, provide an attractive business climate in comparison to surrounding states and areas.

Due in large part to the aforementioned favorable business climate, the Lehigh Valley has experienced success in attracting large, established businesses as well as new startup companies from nearby states such as New York and New Jersey, generating thousands of new jobs in the area. Large companies such as Amazon have praised the region for its commitment to business investments and incentives, citing them as a major reason for continued expansions and increased hiring in Lehigh Valley.

Further reaffirming this advantageous business and economic environment, Lehigh Valley was recognized by business publication Site Selection Magazine in March 2014 as being the second-best performing region of its size for economic development in the United States. It was also ranked by Fortune in May 2015 as being amongst the top 10 best places in the U.S. to locate corporate finance and information technology operations for companies, such as call centers and IT support.

The Norfolk Southern Railway, a subsidiary of Norfolk Southern Corporation, is Lehigh Valley's major rail operator. Norfolk Southern Railway uses the former Lehigh Valley Railroad's main line, the Lehigh Line and also uses a former Reading Company branch line, the Reading Line. Norfolk Southern Railway has major classification rail yards in Allentown and Bethlehem.

The Lehigh Valley is also one of the largest areas on the East Coast for the location of warehouses and distribution centers. Because of this, it is sometimes referred to as the nation's "second Inland Empire" for freight. Companies that own and operate warehouses and distribution centers in the Lehigh Valley include Amazon, B. Braun, Boston Beer Company (brewer of Samuel Adams brand beer), BMW, Bridgestone, FedEx SmartPost, Home Depot, J. C. Penney, Nestlé Purina, ShopRite, Stitch Fix, The Coca-Cola Company, True Value, Uline, Zulily, and many others. Most of these distribution centers are located along the U.S. Route 22, Interstate 78 and Interstate 476 corridors.

Lehigh Valley was ranked one of the top five regions for development in the Northeast, and the number one region of its population size by Site Selection Magazine in its prestigious Governor’s Cup Awards for 2016 and 2017. The only Northeast regions to out pace Lehigh Valley are New York, Philadelphia, Pittsburgh, and Boston.

Lehigh Valley Health Network • Pottsville, PA 15 Short-Term Acute Care Market Study Short-Term Acute Care Hospitals Within 50 Miles of Subject Property Hospital Name CMS Certification Number Beds Bed % Gross Revenue Discharges Market Share %

Geisinger Shamokin Area Community Hospital 1 390189 70 2% $74,798,521 2,126 0.89%

Geisinger Holy Spirit 390004 232 5% $178,478,194 11,359 4.77%

Geisinger Medical Center - Danville 390006 332 7% $8,101,311,191 28,486 11.97%

Geisinger Wyoming Valley Medical Center 390270 238 5% $4,083,913,713 18,250 7.67%

Geisinger Bloomsburg Hospital 390003 50 1% $11,993,381 1,842 0.77%

Geisinger Hospital Totals: 922 20% $12,450,495,000 62,063 26.07%

Lancaster General Hospitals Totals: 390100 463 10% $2,702,009,248 30,931 12.99%

Saint Luke's Allentown Campus 390242 117 3% $61,384,404 4,344 1.82%

Saint Luke's Gnaden Huetten Campus 390194 159 3% $264,072,802 3,080 1.29%

Saint Luke's Miners Campus 390183 74 2% $363,666,454 2,456 1.03%

Saint Luke's Sacred Heart Campus 390197 175 4% $543,718,344 3,094 1.30%

Saint Luke's University Hospital - Bethlehem 390049 491 11% $5,291,712,520 31,747 13.34%

Saint Luke's Totals: 1,016 22% $6,524,554,524 44,721 18.78%

UPMC Pinnacle Harrisburg Campus 390067 628 14% $2,380,068,613 36,262 15.23%

UPMC Susquehanna Sunbury 390084 63 1% $104,178,990 917 0.39%

UPMC Totals: 691 15% $2,484,247,603 37,179 15.62%

Lehigh Valley Hospital - Cedar Crest 390133 958 21% $7,669,051,640 40,748 17.12%

Lehigh Valley Hospital - Muhlenberg 390263 140 3% $1,769,137,157 9,294 3.90%

Lehigh Valley Hospital - Hazelton 390185 138 3% $564,085,644 5,645 2.37%

Lehigh Valley Hospital Schuylkill E. Norwegian Street 2 390031 129 3% $299,547,584 5,284 2.22%

Lehigh Valley Hospital-Schuylkill S. Jackson Street 3 390030 187 4% $129,432,042 2,203 0.93%

Leigh Valley Hospital Totals: 1,552 33% $10,431,254,067 63,174 26.54%

Market Totals: 4,644 100% $34,592,560,442.00 238,068 100%

1. This facility reports in a consolidated fashion with 2. Schuylkill Health became a part of Lehigh Valley Health Network on September 16, 2016. Data for this facility includes information for Lehigh Valley Hospital-Schuylkill S. Jackson Street. 3. Schuylkill Health became a part of Lehigh Valley Health Network on September 16, 2016. This facility reports in a consolidated fashion with Lehigh Valley Hospital Schuylkill E. Norwegian Street

Lehigh Valley Health Network • Pottsville, PA 16 Surrounding Medical Tenants

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11/12 6 9/10 7 8 Legend 5 1. Cressona Medical Center 11. Schuylkill Medical Center

2. Hanger Clinic 12. Geisinger Radiation Oncology 4 3. Integrated Medical Group 13. Geisinger Medical Group

4. Quest Diagnostics Pottsville 14. Schuylkill Medical Center

5. Integrated Medical Group 15. Good Samaritan Medical Clinic

Schulkill County VA 6. 16. Schuylkill Medical Imaging Community Clinic 7. Integrated Medical Group 17. Integrated Medical Group, PC Integrated Medical Group, 8. VA Clinic: Dubowitz 18. Medical Clinic Schuylkill Community Health 9. Dr. Lazur - Internist 19. Center

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Lehigh Valley Health Network • Pottsville, PA 17 Corporation

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Lehigh Valley Health Network • Pottsville, PA 18 going beyond

David Bailey Associate Director PA Broker Lic. #ABR002472

Contact Broker

Stan Johnson Company 180 Madison Avenue | Suite 1500 New York City, NY 10016 P: 646.778.5561 stanjohnsonco.com

The information contained herein was obtained from sources believed reliable, however, Stan Johnson Company makes no guaranties, warranties or representations as to the completeness thereof. The presentation of this property for sale, rent or exchange is submitted subject to errors, omissions, change of price or conditions, or withdrawal without notices.