Sleep Train Murrieta, CA

[ REPRESENTATIVE PHOTO ]

Murriet a, C A New Construction Net Lease With Mattress Firm, Inc.

39535 Avenida Acacias, Murrieta, CA 92563 [ www.CapitalPacific.com] Investment Highlights SLEEP TRAIN IS A CORPORATE-BACKED BUILD-TO- SUIT ASSET LOCATED WITHIN AN EXPLODING GROWTH AREA.

The offering provides the opportunity to acquire a brand new built-to- suit Sleep Train on a NNN lease located in Murrieta, CA. Sleep Train has executed a long term 11-year lease with an estimated rent commencement date of December 15, 2016. The lease provides rent escalations of 10% at the beginning of the seventh lease year and at the beginning of each five-year option period. The Property benefits from its location within a dense, affluent residential base. Murrieta is experiencing a surge in new housing developments, with roughly 2,300 new homes having been built between 2014 and 2015, and numerous new residential and multifamily developments planned or currently under construction. Sleep Train was acquired in 2014 by the largest mattress retailer in the U.S., Mattress Firm Inc., which operates a combined total of 3,500 stores across the nation. Mattress Firm Holding Corp. has S&P and Moody’s ratings of B+ and B1 respectively.

PRICE: $3,645,000 CAP: 6.00%

LEASABLE SF...... ±6,997 SF LAND AREA...... ±38,332 SF LEASE TYPE...... NNN YEAR BUILT...... 2016 LEASE TERM...... 11 Years DELIVERY DATE...... September 20, 2016 RENT COMMENCEMENT. . . .December 15, 2016 PARKING...... ±28 Spaces or 4.0/1,000 SF

ADDRESS: 39535 Avenida Acacias, Murrieta, CA 92563

[ REPRESENTATIVE PHOTO ] SLEEP TRAIN - MURRIETA | 2 Core Characteristics NEW CONSTRUCTION BUILD-TO-SUIT PROPERTY The Tenant signed an 11-year lease with built-in rent growth of 10% after the 6th lease year and at the beginning of each, five-year option period. The Premises is currently under construction and is being built-to-suit for Sleep Train with an expected turnover date on September 20, 2016 and an expected rent commencement of December 15, 2016.

CREDIT RATED TENANT WITH CORPORATE GUARANTEE Sleep Train has a Standard and Poor’s credit rating of “B+” with a stable outlook. Moody’s recently upgraded their credit rating for Mattress Firm Holding Corp. to B1. Mattress Firm Inc., the primary operating subsidiary of Mattress Firm Holding Corp., is the guarantor on the Subject’s lease.

FEW LANDLORD RESPONSIBILITIES The Premises is net-leased to Sleep Train, with Landlord responsibilities limited to replacement of the roof, monument sign, and building structure. The Tenant is responsible for all remaining operating expenses associated with the Property, including routine maintenance and repair of the roof and monument sign.

AFFLUENT HIGH GROWTH TRADE AREA The Property benefits from an affluent demographic base with average household incomes of $95,918 within a dense surrounding residential base of 184,608 residents living within a five-mile radius. The population of Murrieta is set to increase by 8% in the next five years, which will continue to spur the high number of new residential developments within the growth area. Between 2014-2015, roughly 2,300 new homes were built to accommodate the growing population.

PRIMARY LOCATION WITHIN FURNITURE RETAIL CORRIDOR Numerous furniture stores are located within this center creating a critical mass of furniture retail that generates an unusually large trade area for the shopping center. The Property’s location on the entrance road to this shopping center provides it with the most accessible, visible location among the furniture retailers in the center. Traffic flow and visibility will be increased as Clinton Keith Road (the primary east-west arterial linking Interstates 15 and 215) is scheduled to be extended to connect Interstate 215 to Highway 79. This will result in traffic bring driven west from Highway 79 and French Valley along Clinton Keith Road toward the immediate trade area of Sleep Train. Please refer to Page 4 for more information.

SLEEP TRAIN - MURRIETA | 3 [ REPRESENTATIVE PHOTO ] DEVELOPMENT GROWTH 1 New Developments Many new developments are underway within the growth area of Murrieta, with an estimated 2,300 homes built in 2014- PLANNING PHASE 2015 and several major commercial and 3 retail projects in development. There are 1 KAISER PERMANENTE HOSPITAL (OPENS IN 2023) an estimated 17 single and multi-family SIZE: 37-ACRES ADDRESS: CORNER OF ANTELOPE AND KELLER RD. developments either recently completed or underway, including a 64-acre asset 5 6 2 MITCHELL CROSSING recently approved for development at the SIZE: 230 MULTI-FAMILY UNITS WITH 80 SINGLE-FAMILY HOMES ADDRESS: CORNER OF CLINTON KEITH RD/I-215 INTERCHANGE confluence of two major highways that will include office, retail and a brand new hotel. FUTURE CLINTON MURRIETA HILLS CLINTON KEITH RD & 3 LOS ALAMOS RD KEITH RD & HIGHWAY SIZE: 750 SINGLE-FAMILY HOMES The City has added several positions to the 79 CONNECTION ADDRESS: CORNER OF KELLER RD AND I-215 2 CONNECTION planning department for the first time in THE TRIANGLE (HOTEL, OFFICE & RETAIL SPACE) 11 4 the last 7-8 years to accommodate the large CLINTON KEITH RD SIZE: 64-ACRES number of building permit applications ADDRESS: CONFLUENCE OF I-15 AND I-215 received, which have seen a significant uptick in the last three years. UNDERWAY

5 CARMAX SIZE: 38-ACRES LOS ALAMOS RD ADDRESS: CORNER OF MADISON AND GUAVA ST. 215 79 6 GOLDEN CITY SIZE: 500 SINGLE-FAMILY HOMES Sleep 9 LOCATION: EAST OF LOMA LINDA MEDICAL CENTER 15 Train 7 MAHOGANY HILLS SIZE: 500 SINGLE-FAMILY HOMES ADDRESS: 30163 MAHOGANY ST. 8 MARRIOT COURTYARD SIZE: 210-ROOM 12 4 10 ADDRESS: 25407 MADISON AVE. 8 CLINTON KEITH ROAD EXTENSION 7 9 MEADOWLARK Clinton Keith Road is the main east-west SIZE: 109 SINGLE-FAMILY HOMES arterial linking Interstates 15 and 215 ADDRESS: 37837 MOCKINGBIRD AVE. and is heavily congested as Murrieta has become a more popular place to COMPLETED live and shop. To accommodate the increasing traffic, Clinton Keith Road is 10 CREEKSIDE VILLAGE SIZE: 182 CONDOMINIUMS scheduled to be extended to connect ADDRESS: WHITEWOOD RD & MURRIETA HOT SPRINGS RD 15 I-215 with Highway 79, to the east. This connection will drive traffic west from 11 PACIFIC LANDING APARTMENTS (COMPLETED 2015) French Valley toward the immediate SIZE: 325 MULTI-FAMILY UNITS ADDRESS: 36125 CREIGHTON AVE. trade area.

12 WALMART (COMPLETED MID-2014) Expected Completion: 7/1/2017 SIZE: 10-ACRES ADDRESS: 41200 MURRIETA HOT SPRINGS RD. CLICK HERE FOR MORE INFO Los Angeles 81 Miles 1 Hr, 17 Min Area Intel & Demos Palm Springs

1, 3, & 5 MILE RADIUS DEMOGRAPHICS* 78 Miles 2015 HOUSEHOLD INCOMES Murrieta 1 Hr, 13 Min 1-Mile 3-Mile 5-Mile $95K+ Median $67,735 $72,043 $77,620 AVERAGE 66 Miles Average $86,776 $91,235 $95,811 INCOME 1 Hr, 2 Min

POPULATION San Diego 1-Mile 3-Mile 5-Mile 8% 2010 16,217 94,149 170,855 PROJECTED 2015 17,040 97,504 183,203 POPULATION 2020 17,931 102,127 197,272 GROWTH

*All demographic data excludes the sizable seasonal resident population as well as the subsequent increase in average household incomes.

MURRIETA, CA Murrieta is one of the fastest-growing cities in California, making up part of the Murrieta-Temecula-Menifee urban area in close proximity to San Diego, Los Angeles, and Orange Counties. Murrieta is a relatively new city, officially established in 1991, with a growing population. The city experienced a 133.7% increase in population between years 2000-2010, driving continued SLEEP TRAIN residential development in the city. Murrieta is conveniently located at the confluence of I-15 and I-215 freeways, providing housing for residents commuting to jobs in 1-Mile radius larger, neighboring cities. Along with the exponential growth 3-Mile Murrieta has experienced, commercial growth has followed radius with upscale retail, hotels, healthcare facilities, and research and 5-Mile development/medical technology firms. radius The City began as a connection point for the railroad’s transcontinental route in the 1800s and experienced an economic boom after I-15 was built in the 1980s, connecting the city to larger neighboring cities and spurring rapid development growth as the population continued to increase. MURRIETA TOWN CENTER Brass & Bass Murrieta Academy of Burlington Coat Music Retail Factory Ross VILLAGE WALK PLAZA CosmoProf Sizzler Del Taco Toys "R" Us Babies "R" Us Dollar Tree SURROUNDING RETAIL Bed Bath & Beyond Albertsons CVS Mor Furniture for Less Subway BevMo! Applebee's Denny's O'Reilly Auto Parts Taco Bell David's Bridal MURRIETA PLAZA Ashley Furniture Ethan Furniture Ortho Mattress Target Famous Footwear Buffalo Wild Wings Walgreens AT&T Goodwill Payless ShoeSource U-Haul Guitar Center Dick's Sporting Goods Wendy's AutoZone Home Depot PetSmart UPS Store Jenny Craig El Pollo Loco Yogurtland Best Buy IHOP Pizza Hut Walgreens Jerome's Furniture Harbor Freight Tools 24 Hour Fitness Big Lots In-N-Out Burger Popeyes Walmart Office Depot Sam's Club Burger King Jack in the Box Savers YMCA Petco Carl's Jr Kohl's Sit 'n Sleep Sally Beauty Supply Chick-fil-A LA Fitness Sonic Drive-In Sports Authority PLAZA LAS BRISAS Chipotle Lowe's Staples Style For Less Circle K Mobil Chuck E. Cheese's McDonald's Stater Bros. Markets Verizon Gentle Dental State Farm 9 Round Fitness McDonald's Subway

23,000 DAILY

Sleep Train

ETHAN FURNITURE

CALIFORNIA OAKS RD

215 LOS ALAMOS RD

SOUTHWEST HEALTHCARE SYSTEM

93,000 DAILY

180,000 DAILY Aerial

LOS ALAMOS RD 14,7000 DAILY

23,000 DAILY Sleep Train

LAS BRISAS RD ETHAN FURNITURE

215

19,200 DAILY

1,2000 DAILY

AVENIDA ACACIAS

93,000 DAILY About Sleep Train

B+ 320

STANDARD & POOR'S NEW OR ACQUIRED CREDIT RATING STORES IN PREVIOUS 3,500+ UPGRADED B1 YEAR $3.5B SEPTEMBER 2015

MATTRESS FIRM INC. & FRANCHISED MOODY'S INVESTORS PROFORMA SALES STORES ACROSS 48 STATES SERVICE RATING OVER LAST 12 MONTHS UPGRADED IN 2015

ABOUT

With more than manufacturers, including Sealy, Tempur-Pedic, Serta, Simmons Beautyrest, Serta, King Coil, Stearns & Foster 3,500 company- Simmons, Stearns & Foster, and Hampton & Rhodes. and more. operated and Mattress Firm acquired Sleepy's in February 2016 in a Together, this will create the nation's first border-to- franchised stores across 48 states, Mattress Firm $780 Million purchase. Sleepy's is a privately-owned border, coast-to-coast specialty bedding retailer. The Holding Corp. (MFRM) has the largest geographic fourth-generation company with over 1,050 retail company will operate approximately 3,500 stores and footprint in the United States among multi-brand locations in 17 states and the District of Columbia, have combined pro forma sales of over $3.5 Billion mattress retailers. Founded in 1986, Houston-based spanning from Maine to South Carolina and available over the last 12 months. MFRM is the nation's leading specialty bedding nationally through www.sleepys.com. Throughout retailer with over $3.5 billion in sales over the past 12 Sleepy's over 58-year history, the company has months. MFRM, through its family of brands, including remained committed to providing sleep comfort Mattress Firm and Sleep Train, offers a broad selection and expertise with its highly trained Mattress of both traditional and specialty mattresses, bedding Professionals and an extensive selection of top accessories and other related products from leading brands, including Tempur-Pedic, Sealy Posturepedic, SLEEP TRAIN - MURRIETA | 8 In The News

STEINHOFF TO BUY MATTRESS FIRM FOR $3.8 BILLION INCLUDING DEBT

August 8, 2016 - cnbc.com

South African retailer Steinhoff International will buy Mattress Firm, the largest specialty Steinhoff is a German-listed $22 billion furniture conglomerate led by South African retail bedding retailer in the United States, for $3.8 billion which includes debt, both companies mogul Christo Wiese who is also Steinhoff's chairman and largest shareholder. said on Sunday. Steinhoff, which owns brands in Africa, Australia, the U.K. and across Europe, last month Steinhoff said it will pay $64 per share, a premium of about 115 percent to Mattress agreed to pay nearly $800 million for British-based discount chain Poundland after two Firm's Friday close in a deal that will create the world's largest mattress retail distribution previous attempts to expand in Europe fell through this year. company. The boards of both firms have approved the deal, the companies said in a statement. The Mattress Firm Holding deal would give Steinhoff access to the growing U.S. market, and help diversify its operations and guard against possible repercussions following Founded in 1986, Mattress Firm has approximately 3,500 stores across 48 states with 80 Britain's June vote to leave the European Union. distribution centers. In February, the company solidified its position as a leader in the U.S. mattress retail market when it completed its $780 million acquisition of HMK Mattress, Markus Jooste, chief executive officer of Steinhoff, said the deal "will allow Steinhoff to the holding company of Sleepy's. Sleepy's was the second-largest specialty mattress not only enter the U.S. market with an industry leading partner and a national supply retailer in the U.S. with over 1,050 stores in 17 states in the Northeast, New England, the chain, but it will also expand Steinhoff's global market reach in the core product category Mid-Atlantic and Illinois. of mattresses." LINK TO ARTICLE The deal with Steinhoff is subject to completion of a successful tender offer for Mattress Firm's shares. The transaction is expected to close in the third quarter of 2016, the companies said.

SLEEP TRAIN - MURRIETA | 9 [ REPRESENTATIVE PHOTO ] Site Plan

SITE PLAN KEY PARCEL OUTLINE: LAND AREA: ±38,332 SF LEASABLE AREA: ±6,997 SF TRASH/RECYCLE: AVENIDA ACACIAS

INGRESS/EGRESS: EXISTING ROAD

SHOPPING CENTER ENTRANCE ROAD

EXISTING ROAD

Site Plan Not To Scale SLEEP TRAIN - MURRIETA | 10 Income & Expense

Financial Summary

PRICE $3,645,000 Capitalization Rate: 6.00% Price Per Foot: 6,997 Square Feet $521

NET OPERATING INCOME SUMMARY SCHEDULED INCOME Per SF Scheduled Rent: 12/15/2016 $31.25 $218,656 Equals: Effective Gross Income $31.25 $218,656

Less: OPERATING EXPENSES Per SF CAMS NNN Property Taxes NNN Insurance NNN Total Operating Expenses NNN -

Equals: NET OPERATING INCOME $218,656

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. Buyer must verify the information and bears all risk for any inaccuracies. SLEEP TRAIN - MURRIETA | 11

9/16/2016 [ ] Rent Roll

Rent Roll

TENANT INFO TERM RENT SUMMARY Percent Tenant Name Size Date Monthly Rent Annual Rent PSF Cap Rate Increase SLEEP TRAIN 6,997 12/15/2016 $18,221 $218,656 $31.25 6.00% 12/15/2022 $20,046 10.0% $240,557 $34.38 6.60% Occupancy Date : 9/20/2016 Lease Expiration : 12/14/2027

Option 1 12/15/2027 $22,046 10.0% $264,557 $37.81 7.26% Option 2 12/15/2032 $24,250 10.0% $291,005 $41.59 7.98% Lease Notes Comments: NNN lease corporate-backed by Mattress Firm, Inc. Rent commencement is the earlier to occur of 120 days after turnover date of 9/20/2016, or date Tenant opens for business. Tenant is responsible for 100% of Property Taxes, insurance, utilities, and common area operating expenses, including roof and monument sign maintenance. Landlord is responsible for roof and monument sign replacement, as well as building structure and utility lines from the parking lot up to the Building.

Current Totals: 6,997 $18,221 $218,656 $31.25 6.00%

9/16/2016 [ ] Lease Abstract

TAXES PREMISES/TERM All real estate taxes shall be paid entirely by the Tenant to the taxing authority. BUILDING SF: ±6,997 SF INSURANCE LEASE TYPE: NNN Tenant is responsible for full reimbursement of Special Perils property insurance TURNOVER DATE: 9/20/2015 to Landlord and for maintaining an All Risk policy directly with insurer, covering RENT COMMENCEMENT: 12/15/2016 fire, theft, vandalism, etc. TERM: 11 Years GUARANTOR: Mattress Firm, Inc. UTILITIES Tenant is responsible for payment of all utilities used at the Premises.

TENANT’S OBLIGATIONS BASE RENT Tenant is responsible for the routine maintenance and repair of the roof, 120 day rent-free grace period following turnover date of 8/15/16. monument sign, and all non-structural portions of the Premises, including Term Monthly Rent Annual Rent parking areas and landscaping. 9/20/2016 - 12/14/2016 $0.00 $0.00 LANDLORD’S OBLIGATIONS 12/15/2016-12/14/2022 $18,221 $218,656 12/15/2022-12/14/2027 $20,046 $240,557 Landlord is responsible for the replacement of the roof and monument sign, and the repair and replacement of the building structure and utility lines from OPTION PERIODS the parking lot up to the building. Term Monthly Rent Annual Rent ASSIGNMENT/SUBLETTING 12/15/2027-12/14/2032 $22,046 $264,557 Tenant may not assign or sublease any interest in the Premises without prior 12/15/2032-12/14/2037 $24,250 $291,005 written consent of the Landlord.

SLEEP TRAIN - MURRIETA | 13 [ REPRESENTATIVE PHOTO ] A unique HUMAN THE CAPITAL PACIFIC EXPERIENCE - OUR DAILY COMMITMENT TO OUR CLIENTS - RESULTS DRIVEN [ www.CapitalPacific.com ] client experience

[ REPRESENTATIVE PHOTO ]

SCOTT FRANK SEAN TUFTS CHRIS PETERS [email protected] | (503) 675-8383 [email protected] | (206) 743-8468 [email protected] | (415) 274-2703 OR BRE# 980400138 WA BRE# 74057 CA BRE# 0133983