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OFFERING MEMORANDUM

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3004 TOWER BOULEVARD | DURHAM, NC 27707

Net Leased, Class A Medical Office Investment Opportunity with Regional Healthcare Provider enancyT EXCLUSIVE ADVISOR

Joe Graham, CCIM 555 Fayetteville Street Executive Vice President Suite 800 +1 919 831 8196 Raleigh, NC 27601 [email protected] cbre.us/raleigh

AFFILIATED BUSINESS DISCLOSURE

CBRE, Inc. operates within a global family of companies with many subsidiaries and/ Neither the Owner or CBRE, Inc, nor any of their respective directors, officers, Affiliates or related entities (each an “Affiliate”) engaging in a broad range of commercial real or representatives make any representation or warranty, expressed or implied, as to estate businesses including, but not limited to, brokerage services, property and facilities the accuracy or completeness of this Memorandum or any of its contents, and no legal management, valuation, investment fund management and development. At times different commitment or obligation shall arise by reason of your receipt of this Memorandum or Affiliates may represent various clients with competing interests in the same transaction. For use of its contents; and you are to rely solely on your investigations and inspections of the example, this Memorandum may be received by our Affiliates, including CBRE Investors, Property in evaluating a possible purchase of the real property. Inc. or Trammell Crow Company. Those, or other, Affiliates may express an interest in the property described in this Memorandum (the “Property”) may submit an offer to purchase The Owner expressly reserved the right, at its sole discretion, to reject any or all expressions the Property and may be the successful bidder for the Property. You hereby acknowledge of interest or offers to purchase the Property, and/or to terminate discussions with any that possibility and agree that neither CBRE, Inc. nor any involved Affiliate will have any entity at any time with or without notice which may arise as a result of review of this obligation to disclose to you the involvement of any Affiliate in the sale or purchase of the Memorandum. The Owner shall have no legal commitment or obligation to any entity Property. In all instances, however, CBRE, Inc. will act in the best interest of the client(s) it reviewing this Memorandum or making an offer to purchase the Property unless and until represents in the transaction described in this Memorandum and will not act in concert written agreement(s) for the purchase of the Property have been fully executed, delivered with or otherwise conduct its business in a way that benefits any Affiliate to the detriment and approved by the Owner and any conditions to the Owner’s obligations therein have of any other offeror or prospective offeror, but rather will conduct its business in a manner been satisfied or waived. consistent with the law and any fiduciary duties owed to the client(s) it represents in the transaction described in this Memorandum. By receipt of this Memorandum, you agree that this Memorandum and its contents are of a confidential nature, that you will hold and treat it in the strictest confidence and that you CONFIDENTIALITY AGREEMENT will not disclose this Memorandum or any of its contents to any other entity without the prior written authorization of the Owner or CBRE, Inc. You also agree that you will not use this This is a confidential Memorandum intended solely for your limited use and benefit in Memorandum or any of its contents in any manner detrimental to the interest of the Owner determining whether you desire to express further interest in the acquisition of the Property. or CBRE, Inc.

This Memorandum contains selected information pertaining to the Property and does not If after reviewing this Memorandum, you have no further interest in purchasing the Property, purport to be a representation of the state of affairs of the Property or the owner of the kindly return this Memorandum to CBRE, Inc. Property (the “Owner”), to be all-inclusive or to contain all or part of the information which prospective investors may require to evaluate a purchase of real property. All financial DISCLAIMER projections and information are provided for general reference purposes only and are based on assumptions relating to the general economy, market conditions, competition and © 2019 CBRE, Inc. The information contained in this document has been obtained from other factors beyond the control of the Owner and CBRE, Inc. Therefore, all projections, sources believed reliable. While CBRE, Inc. does not doubt its accuracy, CBRE, Inc. has assumptions and other information provided and made herein are subject to material not verified it and makes no guarantee, warranty or representation about it. It is your variation. All references to acreages, square footages, and other measurements are responsibility to independently confirm its accuracy and completeness. Any projections, approximations. Additional information and an opportunity to inspect the Property will be opinions, assumptions or estimates used are for example only and do not represent the made available to interested and qualified prospective purchasers. In this Memorandum, current or future performance of the property. The value of this transaction to you depends certain documents, including leases and other materials, are described in summary form. on tax and other factors which should be evaluated by your tax, financial and legal advisors. These summaries do not purport to be complete nor necessarily accurate descriptions of the You and your advisors should conduct a careful, independent investigation of the property full agreements referenced. Interested parties are expected to review all such summaries to determine to your satisfaction the suitability of the property for your needs. and other documents of whatever nature independently and not rely on the contents of this Memorandum in any manner. Duke Health | Class A Medical Office Investment Opportunity 2 EXECUTIVE SUMMARY EXECUTIVE SUMMARY

CBRE|Raleigh has been retained as the exclusive marketing advisor The property is situated along Tower Boulevard in Southwest Durham, in for the disposition of the Duke Health Medical Office Building located close proximity to Highway 15-501 and South Square shopping center. at 3004 Tower Boulevard in Durham, North Carolina. The offering Only 2.25 miles from Duke University and just under 3.5 miles from consists of one parcel totaling 1.843 acres and a single tenant building Downtown Durham, the property is ideally located in the rapidly growing containing 14,723 square feet, leased to Duke University Health System, Durham market. Inc. on a 15 year NNN lease.

PROPERTY

Duke Health | Class A Medical Office Investment Opportunity 4 THE PROPERTY THE OFFERING

3004 Tower Boulevard ADDRESS Durham, NC 27707

SIZE 14,723 SF

15 Years TERM Commencing December 1, 2018

$19.48/SF NNN RENT All expenses passed through, but management required and additional 3% management fee passed through to the tenant

BASE RENT $286,730.43

ASKING PRICE $5,734,609

CAP RATE 5.0%

LAND SIZE 1.843 Acres

RENT ESCALATIONS 2.5% Annually

TENANT Duke University Health System, Inc.

Duke Health | Class A Medical Office Investment Opportunity 6 INVESTMENT HIGHLIGHTS

LONG TERM, TRIPLE NET LEASE The property is leased through 11/30/2033 on a triple net basis with annual increases fixed at 2.5%. The WITH ATTRACTIVE RENT net lease nature of the lease dramatically reduces expense exposure to the Landlord and the cash flow ESCALATION STRUCTURE produced by the property provides an investor with long term stability and income growth.

Originally built in 2003, the building has been retrofitted in 2018-2019 to accommodate DUHS, with a NEWLY REFINISHED BRICK new roof, new HVAC, and new windows and exterior finishes. In addition the Tenant was responsible for CONSTRUCTION the interior upfit for their new space.

100% LEASED TO LEADING The property is 100% leased to Duke University Health System, Inc. which is S&P rated AA-. More NATIONAL MEDICAL PROVIDER information regarding DUHS financials can be found here.

This premier medical office investment will be delivered free and clear of debt, allowing investors to DELIVERED FREE AND CLEAR OF benefit from the current low interest rate environment. Lenders see this asset class and this type of credit EXISTING DEBT as highly favorable.

Because of the aging population related to the baby boomer generation, as well as increased life RECESSION-RESISTANT expectancies, more and more people will seek medical services, which in turn will drive demand for PROPERTY TYPE medical office space. Medical properties also cater to long-term tenants who have established practices and where the expense to move equipment or re-establish is very cost-prohibitive.

Duke Health | Class A Medical Office Investment Opportunity 7 RENT SCHEDULE

NNN BASE LEASE YEAR MONTHLY RENT AGGREGATE RENT RENTAL RATE (/RSF)

12/1/2018 - 11/30/2019 $19.00 $23.311.42 $279,797.00

12/1/2019 - 11/30/2020 $19.48 $23,894.20 $286,730.43

12/1/2020 - 11/30/2021 $19.96 $24,491.56 $293,898.69

12/1/2021 - 11/30/2022 $20.46 $25,103.85 $301,246.15

12/1/2022 - 11/30/2023 $20.97 $25,731.44 $308,777.31

12/1/2023 - 11/30/2024 $21.50 $26,374.73 $316,496.74

12/1/2024 - 11/30/2025 $22.03 $27,034.10 $324,409.16

12/1/2025 - 11/30/2026 $22.59 $27,709.95 $332,519.39

12/1/2026 - 11/30/2027 $23.15 $28,402.70 $340,832.37

12/1/2027 - 11/30/2028 $23.73 $29,112.77 $349,353.18

12/1/2028 - 11/30/2029 $24.32 $29,840.58 $358,087.01

12/1/2029 - 11/30/2030 $24.93 $30,586.60 $367,039.19

12/1/2030 - 11/30/2031 $25.55 $31,351.26 $376,215.17

12/1/2031 - 11/30/2032 $26.19 $32,135.05 $385,620.54

12/1/2032 - 11/30/2033 $26.85 $32,938.42 $395,261.06

TOTAL RENT $5,016.223.37

Duke Health | Class A Medical Office Investment Opportunity 8 SALES COMPARABLES

SQUARE PROPERTY SALE PRICE PRICE/SF DATE SOLD CAP RATE FOOTAGE

Hock Plaza 2424 Erwin Rd 327,160 SF $141,900,000 $433.73 12/28/17 4.95% Durham, NC

Duke Medical Office 1565 Orchard 12,238 SF $5,667,000 $463.07 8/22/17 4.85% Villas Ave Apex, NC

UNC Medical Office 1181 Weaver 25,000 SF $12,767,574 $510.70 9/22/16 5.40% Dairy Rd Chapel Hill, NC

Duke Health | Class A Medical Office Investment Opportunity 9 LOCATION OVERVIEW

3004 TOWER BLVD DURHAM, NC LOCATION OVERVIEW

64,000 VPD

Wallace Wade Downtown Stadium Durham 60,000 VPD

LAKEWOOD SHOPPING CENTER

Duke University Golf Club Lakewood Elementary School

Charter Community School Durham Academy 58,000 VPD Lower School Lerner Jewish Day School Durham Academy Levin Jewish Upper School Community Center

PROPERTY

Rogers-Herr 18,000 VPD Middle School UNIVERSITY HILL OAKCREEK VILLAGE

SOUTH SQUARE

Duke Health | Class A Medical Office Investment Opportunity 11

© 2018 CBRE Limited. Data © TeleAtlas, Google, AerialExpress, DigitalGlobe, Landiscor, USGS, i-cubed. The information contained herein (the “Information”) is intended for informational purposes only and should not be relied upon by recipients hereof. Although the Information is believed to be correct, its accuracy, correctness or completeness cannot be guaranteed and has not been verified by either CBRE Limited or any of its affiliates (CBRE Limited and its affiliates are collectively referred to herein as “CBRE”). CBRE neither guarantees, warrants nor assumes any responsibility or liability of any kind with respect to the accuracy, correctness, completeness, or suitability of, or decisions based upon or in connection with, the Information. The recipient of the Information should take such steps as the recipient may deem appropriate with respect to using the Information. The Information may change and any property described herein may be withdrawn from the market at any time without notice or obligation of any kind on the part of CBRE. The Information is protected by copyright and shall be fully enforced. Layout ID:L07 MapId:5729819 LOCATION OVERVIEW

Duke University Downtown & Hospital Durham

Highway 15/501

Pickett Road Tower Boulevard PROPERTY

Duke Health | Class A Medical Office Investment Opportunity 12 LOCATION OVERVIEW

Downtown Durham UNIVERSITY HILL

Durham-Chapel Hill Boulevard

Tower Boulevard

Pickett Road PROPERTY

Duke Health | Class A Medical Office Investment Opportunity 13 3004 TOWER BLVD DURHAM, NC

LOCATION OVERVIEW

The Forest at Duke Retirement Community

PROPERTY

58,000 VPD Once & Again Durham Consignment Rescue Mission University Tower

18,000 VPD

UNIVERSITY HILL

SOUTH SQUARE

UNIVERSITY HILL

To Chapel Hill (6.7 Miles) 18,000 VPD

Durham-Chapel Hill Boulevard 58,000 VPD University Tower To Downtown Highway 15/501 Durham (3.5 Miles)

Petty Road

PROPERTY

Tower Boulevard

Duke Health | Class A Medical Office Investment Opportunity 15 DEMOGRAPHICS

POPULATION 1 MILE 3 MILES 5 MILES

2019 POPULATION 7,464 63,030 178,648

2024 POPULATION (PROJ) 7,892 68,043 194,167

DAYTIME POPULATION 12,407 87,395 224,652

HOUSEHOLD DATA 1 MILE 3 MILES 5 MILES

TOTAL HOUSEHOLDS 3,696 26,720 75,032

AVERAGE HH INCOME $93,286 $85,098 $87,478

Duke Health | Class A Medical Office Investment Opportunity 16 MARKET OVERVIEW

Durham occupies a prime location in the heart of North Carolina and is a nexus for learning, creativity, research, and industry. It’s home to Research Triangle Park (a 7,000-acre Southeast Durham-based special county research and production district encompassed on three sides by the city of Durham), Duke University DURHAM TRADE AREA and North Carolina Central University, along with many health centers. Durham is known as the City of Medicine, USA. Healthcare is a major industry, including more than 300 medical and health-related companies and medical practices with a combined payroll that exceeds $1.2 billion annually (discoverdurham. com).

Located just 3.5 miles from Downtown Durham, the subject site is in close proximity to several amenities, venues and restaurants, including the Durham Performing Arts Center (with events on 200 days a year) and the Durham Bulls Athletic Park (with 74 games and 10 concerts/events a year). Downtown Durham also DOWNTOWN DURHAM, NC boasts an amenity-rich walkable urban environment with close proximity to the American Tobacco Campus, award-winning restaurants and craft breweries, along with several mixed-use developments currently under construction (discoverdurham.com).

As one of Durham’s most notable draws and as a top school in the country, Duke University has an enrollment of over 16,000 students and employs a faculty of 3,870. Duke Medicine, which includes the Duke University Health System, the Duke University School of Medicine and the Duke University School of Nursing, combines research, clinical care and education at many different sites throughout the region DUKE UNIVERSITY and beyond. Duke Hospital is the flagship of the broader Duke University Health System, which includes two community hospitals (Duke Hospital and Duke Raleigh Hospital), affiliations with other hospitals in the region, community-based primary care physician practices, home care, infusion services and hospice care (facts.duke.edu).

Duke Health | Class A Medical Office Investment Opportunity 17 TENANT OVERVIEW TENANT OVERVIEW

Duke University Health System is a world-class health care network dedicated to providing outstanding patient care, educating tomorrow’s health care leaders, and discovering new and better ways to treat disease through biomedical research.

Founded in 1998 to provide efficient, responsive care, the health system offers a full network of health services and encompasses three highly regarded hospitals - Duke University Hospital, Durham Regional Hospital and Duke Raleigh Hospital - physician practices, home hospice care and various support services at locations across North Carolina. (duke.edu)

In addition to its hospitals, Duke Health has an extensive, geographically dispersed network of outpatient facilities that include primary care offices, urgent care centers, multi-specialty clinics and outpatient surgery centers. This network enables the same world-renowned Duke Health care teams to provide consultative services, perform medical procedures or conduct diagnostic tests without an overnight hospital stay. Duke Primary Care is the largest primary care network in the greater Triangle area with family medicine and internal medicine providers, and pediatricians in nearly 30 locations throughout the region. Duke Primary Care physicians have consulting associate faculty appointments with Duke in their respective academic departments. Duke Connected Care, a community-based, physician-led network, includes a group of doctors, hospitals and other healthcare providers who work together to deliver high-quality care to Medicare Fee-for-Service patients in Durham and its surrounding areas.

The Private Diagnostic Clinic (PDC) is the faculty physician practice for Duke Health. It was one of the first and largest academic multi-specialty group practices in the United States. The PDC owns and operates more than 70 primary and specialty care clinics in 10 counties in central and eastern North Carolina. Through a diverse and integrated network of Duke providers, patients have convenient, accessible and high-quality primary and specialty care close to home. (corporate.dukehealth.org)

Duke Health | Class A Medical Office Investment Opportunity 19 EXCLUSIVE ADVISOR

Joe Graham, CCIM Executive Vice President +1 919 831 8196 [email protected]

555 Fayetteville Street Suite 800 Raleigh, NC 27601 cbre.us/raleigh