OFFERING MEMORANDUM VICTOR VALLEY TOWN CENTER NEC BEAR VALLEY RD & HESPERIA RD | VICTORVILLE, CA

CAPITAL MARKETS | INVESTMENT PROPERTIES

Shane Hariz Matthew C. Sullivan Alan Krueger Senior Investment Advisor, Partner Managing Director, Principal Senior Vice President 213-623-0800 ext. 2 213-623-0800 ext. 1 909-418-2062 [email protected] [email protected] [email protected] BRE License # 02025736 BRE License # 00848427 BRE License # 00880814 CONFIDENTIALITY AGREEMENT The information contained in the following Marketing Proposal is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Lee & Associates - Investment Services Group and should not TABLE OF CONTENTS be made available to any other person or entity without the written consent of Lee & Associates Investment Services Group. This Marketing Proposal has been prepared to 1. EXECUTIVE SUMMARY...... 3 provide summary, unverified information to the aforementioned owner of the property 2. PROPERTY DESCRIPTION...... 5 receiving it. The information contained herein is not a substitute for a thorough due diligence 3. TENANT PROFILES...... 11 investigation. Lee & Associates Investment Services Group has not made any investigation, 4. FINANCIAL ANALYSIS...... 1 5 and makes no warranty or representation, with respect to the income or expenses for the 5. MARKET OVERVIEW...... 20 subject property, the future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB’s or asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any tenant s plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Prooposal has been obtained from sources we believe to be reliable; however, Lee & Associates Investment Services Group has not verified, and will not verify, any of the information contained herein, nor has Lee & Associates Investment Services Group conducted any investigation regarding these matters and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. The owner must take appropriate measures to verify all of the information set forth herein. EXECUTIVE 1 SUMMARY

VICTOR VALLEY TOWN CENTER 3 PRICE INVESTMENT SUMMARY

Address: 12133 - 12249 Hesperia Road, 17080-17222 Bear Valley Road, Victorville, CA NEC Bear Valley Road & Hesperia Road | Signalized Corner

Building Size: ±135,140 Zoning: C-2T General Commercial $20,000,000 Land Area: ±20.05 Acres (87,000 SF Surplus Land*) Traffic: 68,000 CPD

Vons (NAP), Ross, Waba, Wingstop, Occupancy: 83% Tenants: Verizon Vacancy: 17% 9 Parcels; 3091-271-07; 09; 12; 14; 17; APN: O 44; 46; 58; 59 N I

Parking: 750 Spaces, 676 Required

* 87,000 SF of excess land is not a part of the offering, but available for purchase (Parcel 44)

$1,655,313 LOAN SUMMARY LOCATION HIGHLIGHTS • Signalized Corner, 68,000 CPD Loan Amount: $13,000,000 • Great Layout & Design, No elbows or Dead Space Interest Rate: 5.27% • Close to 15 Freeway TE IN- A PL $326,000 Principal R A Payment: Reduction; $700,732 Interest • Average Household Income $75,000 P C

A E

Due Date: 8/26 C

Reserves: $162,168 (Annual) INVESTMENT HIGHLIGHTS Replacement Reserves: ($135,000 Cap) 8.28% • 8.28% on Actual Income, 17% Vacant Leasing Reserves: ($450,000 Cap) • $148 per SF 9 Parcels; 3091-271-07; 09; APN: • The excess 4.84 acres on north end of the center 12; 14; 17; 44; 46; 58; 59 is not a part of the offering, but can be bought separate • There is 18,500 buildable sq. ft. of land next to Ross and a 1,500 sq. ft. with a drive thru on parcel 2 included in this offering

4 PROPERTY 2 DESCRIPTION

VICTOR VALLEY TOWN CENTER 5 PROPERTY OVERVIEW Victor Valley Town Center is a +/-135,140 SF dominant community center located in Victorville, CA. Opportunity to add value exists through both lease up of vacant space as well as development of excess land available for purchase. Anchored by Vons (NAP) & Ross, Victor Valley Town Center features an excellent mix of national tenants including Verizon, Subway, Great Clips, Wing Stop, and more. The property is also easily accessible through multiple ingress/egress points along Hesperia Road and Bear Valley Road, which are major thoroughfares in Victor Valley. Victor Valley Town Center offers ample surface parking for tenants and visitors. Furthermore, the property offers nearby access to the heavily travelled 15 Freeway.

Year Completed: 1989

APN: 3091-271-07, 09, 12, 14, 17, 44, 46, 58, 59

Building Size: ±135,140 net rentable square feet

Land Area: ±667,775 square feet (± 15.33 acres)

Parking: 670 parking spaces (0.5 per 1,000 sf)

Zoning: C2

Traffic Counts: 24,098 ADT at Hesperia Rd (c. Bear Valley)

Demographics: 1 Mile 3 Miles 5 Miles Population (2020): 7,277 62,668 176,533 Avg. HH Income (2020): $59,508 $67,782 $67,812

Current Major Tenants: Ross, Petco, Subway, Waba Grill, Verizon

PROPERTY PARCEL SF ACRES 7 42,319 0.97 HIGHLIGHTS 9 47,044 1.08 12 35,020 0.80 • ±135,140 SF Retail on ±20.05 Acres 14 30,000 0.69 • Excellent Visibility With Signage 17 42,253 0.97 • Close to 15 Freeway 44 210,830 4.84 46 30,240 0.69 • Ideal Busy Intersection Location 58 207,346 4.76 • Easy Access With Ample Parking 59 228,254 5.24 TOTAL 873,306 20.05

6 SITE PLAN Jasmine Street

EXCESS LAND FOR PURCHASE

NAP 1

1A

NAP Vacant Units

Hesperia Road Future Buildings 2P 2M-N 22LL 2K 2-

2 E 2 2 2 2B NAP 2 A NAP 22A

A 3 3C 3 E - -2 -3

3 6-2 6-3

E 5G - 1 3 5D 5 5 5 - A- 5A-B 5C L- M L- N 5 5 K A 3 P 3L-3M 3P 4C 4 3 3 3 4 3 3 4 Apatite Street 1 2 3

NAP D4-54- 5 1194 NAP NAP

Bear Valley Road

7 WIMBLEDON APARTMENTS SHERWIN WILLIAMS DISTRIBUTION CENTER

EXCESS LAND FOR PURCHASE

HI DESERT PLAZA SHOPPING CENTER

FUTURE BUILDINGS BEAR VALLEY BUSINESS PARK

FUTURE BLDG.

8 LOCATION MAP

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WIMBLEDON APARTMENTS

JASMINE ST EXCESS LAND FOR PURCHASE

HI DESERT PLAZA SHOPPING CEN- TER

VICTOR VALLEY HESPERIA RD TOWN FUTURE CENTER BUILDINGS

FUTURE BEAR VALLEY RD BUILDINGS

BEAR VALLEY RD

10 TENANT 3 PROFILES

VICTOR VALLEY TOWN CENTER 11 TENANT PROFILES

Rent-A-Center (commonly abbreviated as RAC) is a furniture and Headquarters: Plano, Texas electronics rent-to-own retail chain headquartered in Plano, Texas. The company’s business model allows customers to rent brand name furniture Website: http://www.rentacenter.com and electronics with the option of owning the product after paying off the Stock Symbol: NASDAQ: RCII value over a period of time. Rent-A-Center operates over 3,000 locations across the U.S. and Canada with a small portion of them being franchised. Employees: 14,500 As of 2018, the company’s annual revenue was $2.7 billion. Market Locations: 3,000+ locations in 31 States

Ross Stores Inc operating under the brand name Ross Dress Company Type : Public for Less is the largest off-priced retailer in the U.S with 88,100 employees as of 2019. This American chain discount stores Stock Symbol: (NASDAQ: ROST) department is headquartered in Dublin California and has 1483 stores in 37 U.S. states, the District of Columbia, and Headquarters: Dublin, California Guam. Ross has no presence in New England, New York, Northern New Jersey, Alaska and Employees: 88,100 areas of the Midwest. Its key products are Clothing, footwear, bedding, furniture, jewelry, beauty products, toys, housewares. S&P Credit Rating:

Website: Rossstores.com Ross Department Store was first opened in San Bruno, California, in 1950 by Morris Ross. In 1958 Ross sold his store to William Isackson to become a residential and commercial real estate Market Locations: 1483 developer. By the end of 1995 the chain reached an annual sale of $1.4 billion with 292 stores in Annual Revenue $14 bn (2018) 18 states. By 2012 Ross reached $9.7 billion for the fiscal year with 1,091 stores in 33 states with an additional 108 for Dd’s Discounts in 8 states. By 2015, the company’s revenue was $11.94 billion. Ross is traded as a Nasdaq-100 component, and a S&P 500 component.

12 Vons operates as a banner of Albertsons Companies, one Company Type: Public (Under Albertson’s) of the largest food and drug retailers in the United States. With both a strong local presence and national scale, Stock Symbol: (NYS: ACI) the company operates stores across 35 states and the 250 Parkcenter Blvd. Boise, Idaho, Headquarters: District of Columbia under 20 well-known banners. Albertsons Companies is committed 83706 to helping people across the country live better lives by making a meaningful difference, Employees: 270,000 neighborhood by neighborhood. In 2017 alone, along with the Albertsons Companies Foundation, the company gave nearly $300 million in food and financial support. These S&P Credit Rating efforts helped millions of people in the areas of hunger relief, education, cancer research https://www.vons.com/ and treatment, programs for people with disabilities and veterans outreach. Website: https://www.albertsonscompanies. com As of February 29, 2020, we operated 2,252 stores across 34 states and the District of Market Locations: 2,252 Columbia under 20 well-known banners, including Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Jewel-Osco, Acme, Shaw’s, Star Market, United Supermarkets, Annual Revenue: $5.4 bn (2018) Market Street and Haggen. We provide our customers with convenient and value-added services, including through our 1,726 pharmacies, 1,290 in-store branded coffee shops and 402 adjacent fuel centers. Complementary to our large network of stores, we aim to provide our customers a seamless omni-channel shopping experience by offering a growing set of digital offerings, including home deliveries, “Drive Up & Go” curbside pickup and online prescription refills.

Wingstop is the largest fast casual chicken wings- Company Type: Public focused restaurant chain in the world, with nearly 1,400 locations worldwide. Wingstop is dedicated Stock Symbol: (NASDAQ: WING) to serving the world flavor through an unparalleled 5501 LBJ Freeway, 5th Floor, Headquarters: guest experience and offering of classic wings, Dallas, Texas boneless wings and tenders, always cooked to order and hand-sauced-and tossed in 11 Employees: 784 bold, distinctive flavors. S&P Credit Rating: The Company is primarily a franchisor, with approximately 98% of Wingstop’s restaurants currently owned and operated by independent franchisees. We believe our asset-light, Website: https://www.wingstop.com/ highly franchised business model generates strong operating margins and requires low Market Locations: 1,354 capital expenditures, creating stockholder value through strong and consistent free cash flow and capital-efficient growth. Annual Revenue: $199.7 Million FY 2019

13 14 NOT A PART

FINANCIAL 4 ANALYSIS

VICTOR VALLEY TOWN CENTER 15 PRICE NOI

$20,000,000 $1,655,313

Base Rent: $1,792,668

Tenant Reimbursement: $688,355 [1]

Gross Rent: $2,481,023

Vacancy Actual: 17%

Adjustable Gross Rent: $2,481,023

Expenses: $825,710 [2]

NOI: $1,655,313

Debt: $1,026,732

Cash Flow: $628,581 (9%) [3]

[1] Includes 2020 Acutal $637,212 adjusted up for taxes $15,143 and $36,000 for new tenants

[2] 2020 Actual with taxes adjusted up approximately $18,000

[3] Does not include $162,168 in reserves. There is also $326,000 in principal reduction, $954,581 (13.0%) total return

You are solely responsible for independently verifying the information in this Memorandum. Any reliance on it is solely at your own risk. 16 EXPENSES CAM EXPENSES NON-CAM EXPENSES Janitorial Supplies $4,590.55 HVAC Repairs $1,633.34 Day Porter Contract $34,262.00 Other Repair/Maintenance $5,263.00 Sweeping Contract $23,568.40 Utilties $4,068.57 Steam Cleaning $20,133.00 Tenant Billback-Power Washing $2,835.00 Grafitti Removal $230.00 Keys & Locks $165.00 HVAC Contract $5,378.88 Total Non-CAM Expense $13,964.91 HVAC Repair/Maintenance $5,778.78 Security Patrols $117,386.00 INSURANCE EXPENSE Repair/Maintenance $2,645.21 Insurance Expense-Building $13,780.16 Signage/Directory $2,329.80 Insurance Expense-Liability $24,615.24 Backflow $3,331.23 Insurance Expense-Earthquake $14,641.18 Pest Control $2,994.00 Total Insurance Expense $53,036.58 Plumbing Repair/Maint $2,450.00 Landscape Contract $31,077.00 TAX EXPENSE Landscape Repair/Maint $305.00 Property Tax Expense $204,271.17 Parking Lot Repair/Maint $234.00 License & Permits $800.00 Lights Contract $5,731.00 State Income Tax $6,000.00 Lights Repair/Maint $3,198.44 Total Tax Expense $230,000.00 Roofing $21,334.00 TOTAL OPERATING EXPENSE: $825,710.00 Alarm Monitoring $5,233.51 Fire Systems Maintenance $1,461.47 Fire Sprinkler Inspection $1,021.67 Electric-Parking Lot Lights $17,748.18 Electric-Building $7,430.17 Water-Domestic $11,017.15 Water-Irrigation $7,173.46 Sewer $20,066.10 Trash $58,389.89 Dump/Disposal $1,240.00 Management Fee $77,222.40 Postage $149.50 Telephone-Firelines $3,619.81 Promotions/Marketing ($147.55) Total CAM Expenses $498,583.05

17 You are solely responsible for independently verifying the information in this Memorandum. Any reliance on it is solely at your own risk. RENT ROLL

SUITE TENANT SQ. FT BASE RENT $ PSF INCREASE DATE INCREASE AMOUNT START EXPIRE 12249 Hesperia Road - Bldg 1 1A Rent A Center #746 3,200 $4,458.32 $1.39 4/1/21 $89.00 11/4/91 3/31/23 1B&C Craig Sports Bar [1] 4,000 $4,400.00 $1.10 N/A $130.00 6/1/10 5/31/25 12209 Hesperia Road - Bldg 2 P John Sun-Super Spa 1,875 $1,987.50 $106 11/1/20 $61.00 11/1/16 10/31/22 L Expanding Ride & Rhythm [2] 1,501 $2,252.00 $1.50 8/1/21 $53.00 3/1/21 8/31/24 M,N Golden Triangle Corporation 2,625 $2,625.00 $1.00 4/1/21 $85.00 4/1/16 3/31/24 K Rhythm & Ride - Vince & Vinnie L 1,500 $2,250.00 $1.50 8/1/20 $53.00 8/12/19 8/31/24 G Dalton & Associates 4,293 $4,925.63 $1.15 6/1/21 $139.00 5/1/17 4/30/27 F Vacant 1,200 E Inter Valley Health Plan 1,200 $2,435.16 $2.03 5/1/21 10/1/09 4/30/22 D HEARx West, LLC 1,500 $2,458.75 $1.64 8/1/20 $49.00 7/11/16 7/31/22 C Tobacco Zone 900 $1,350.00 $1.50 2/1/21 $31.00 3/1/09 1/31/24 B Vacant 1,128 - A Shine Bright New [3] 1,080 $1,890.00 $1.75 month 13 $57.00 3 years 12133 Hesperia Road - Pad C 12133 Verizon Wireless #14302 [4] 5,500 $9,149.72 $1.83 4/30/10 7/31/23 17100 Bear Valley Road - Bldg. 3 A Donut Shop- Nabil Idris 1,080 $2,127.21 $1.97 10/1/20 $35.00 9/15/14 9/30/24 B Postal Annex #186 1,128 $2,494.82 $2.21 6/1/21 $38.00 6/1/10 5/31/22 C Vacant 1,200 - D D' Bootery 1,200 $2,087.11 $1.74 2/1/21 $38.00 8/6/89 1/31/22 E Acceptance Auto Insurance 900 $1,671.00 $1.86 8/1/20 $29.00 12/11/02 7/31/22 F&G Wingstop [5] 2,908 $4,000.00 $1.38 N/A $94.00 4/23/16 4/30/21 H & J Guadalupe & Dolores Castellanos 2,445 $2,853.29 $1.17 N/A $79.00 5/1/15 4/30/21 K Noor-Gray, Inc. dba Waba Grill 1,500 $2,130.82 $1.42 5/1/21 $51.00 4/24/17 4/30/22 L&M Vacant 3,000 - N Dr. Shin's Dental Office 1,125 $2,389.60 $2.12 11/1/20 $32.00 6/21/89 10/31/24 P HM Clothing [6] 1,875 $2,343.75 $1.25 Ann. 3% 3 years 17140 Bear Valley Road - Bldg 4 A OneMain Financial [7] 1,500 $2,687.00 $1.74 1/1/23 $81.00 1/12/15 12/31/23 B Sally Beauty Supply #778 1,500 $3,405.00 $2.27 9/1/20 $56.00 8/29/90 8/31/23 C Vacant 3,000 -

[1] Signed five-year renewal [5] Three-year option out for [2] Tenant signed expansion signature [3] New lease [6] New lease [4] Signed two-year renewal [7] Signed three-year renewal 18 You are solely responsible for independently verifying the information in this Memorandum. ANY RELIANCE ON IT IS SOLELY AT YOUR OWN RISK. RENT ROLL

SUITE TENANT SQ. FT BASE RENT $ PSF INCREASE DATE INCREASE AMOUNT START EXPIRE 2/24 $16,441 17150 Petco #1510 [1] 15,962 $15,962.00 $1.00 8/8/02 1/31/26 2/25 $16,993 17180 Bear Valley Road - Bldg 5 A, B & C Children Dentist [2] 3,900 $5,850.00 $1.50 - 5 years D Vacant 2,600 F Purpose Financial [3] 1,300 $2,538.00 $1.95 N/A $44.00 7/9/99 7/1/21 G Vacant 8,800 17080 Bear Valley Road - Pad D 1 Tutti Frutti Yogurt 1,800 $4,500.00 $2.50 3/1/21 $61.00 1/15/10 2/28/25 2 Great Clips 1,500 $3,343.35 $2.23 9/1/20 $51.00 8/20/03 8/31/21 3 Subway #2396 [4] 1,500 $4,229.00 $2.82 N/A $48.00 3/25/00 2/29/20 4 & 5 Tonyan Coffee [5] 2,640 $5,242 $2.00 12/1/21 3% 12/1/20 12/1/25 New Lease 17194 Bear Valley Road - Pad G 17194 Strop Hair Parlor-Wheatley 3,650 $6,579.13 $1.80 10/1/20 $118.00 9/6/16 9/30/21 Strg Storage 1,538 - 17222 Bear Valley Road - Bldg 6 1 Long's Nail Spa 1,300 $2,587.23 $1.99 1/1/21 $44.00 1/1/02 12/31/21 2&3 Vacant 2,600 - 4 Ross Dress For Less #524 30,187 $30,187.00 $1.00 N/A $152.00 6/15/00 1/31/22 Total Shop GLA 135,140 PAD OWNERS Total $145,202

PAD OWNERS SQ. FT TOTAL 12229 CVS Health #09911-01 (Dark) 25,820 N/A $3,489.00 N/A - 5/12/88 N/A 12199 Vons #2131 64,484 N/A $8,713.00 N/A - 1/11/89 N/A 12253 Del Taco #242 3,272 N/A $442.00 N/A - 12/29/89 N/A 12113 US Bank 5,765 N/A $779.00 N/A - 1/11/89 N/A 12183 Pizza Hut #509 2,845 N/A $384.00 N/A - 5/23/89 N/A 17110 Carl's Jr. #543 3,576 N/A $483.00 N/A - 8/9/88 N/A 17250 Taco Bell #004660 3,500 N/A $473.00 N/A - 8/7/91 N/A Total Pad Owners 109,262 $145,202 -

[1] Signed five-year renewal [4] Three-year option out for [2] New tenant signature [3] Signed one-year renewal [5] New tenant 19 You are solely responsible for independently verifying the information in this Memorandum. ANY RELIANCE ON IT IS SOLELY AT YOUR OWN RISK. MARKET 5 OVERVIEW VICTOR VALLEY TOWN HESPERIA RD CENTER

BEAR VALLEY RD

VICTOR VALLEY TOWN CENTER 20 MARKET OVERVIEW

VICTORVILLE

Victorville is home to affordable and available land, logistics advantages with easy access to I-15 and US 395, a growing population for retail opportunities, and an international airport dedicated to cargo processing at Southern California Logistics Airport (SCLA). Victorville is situated approximately 50 miles Northeast of Los Angeles County and 35 miles northeast of San Bernardino. Interstate 15 and State Highway 18 intersect near the heart of the city and Victorville is bordered on the west by State Highway 395.

The residential population of Victorville is nearly 130,000 and is growing rapidly. Estimates suggest that this figure more than doubles during business hours. The average household income is about $70,060 per year.

A dependable and qualified labor force is one of the keys to business success. Victorville is home to a large and diverse pool of workers and has many educational opportunities to ensure a qualified supply of workers for the future.

With rapid growth comes the need for more commercial development, and Victorville is the shopping destination of the High Desert. Victorville is home to the largest enclosed regional shopping center between San Bernardino and Las Vegas. The Mall of Victor Valley is the only regional mall located in the Victor Valley and has served the local consumer base since being built in 1985. Owned by Macerich, the mall underwent an entire interior and exterior renovation allowing it to reposition its major tenancies to better serve the local shopping demand. The Mall of Victor Valley hosts Dick’s Sporting Goods, Macy’s, Barnes & Noble, and many other shops offering a wide range of apparel merchandise. Victorville’s Restaurant Row is the High Desert’s premiere dining destination featuring 19 eateries including California’s first Cracker Barrel. Options for sit-down meals include BJ’s Restaurant and Brew House, Pancho Villa’s, Panera Bread, Freddy’s Frozen Custard and Steak Burgers, the Original Roadhouse Grill, Chili’s, Applebee’s, Johnny Carino’s and Mimi’s Cafe. Quick bites are offered by Which Wich, Starbucks, Cafe Rio, The Habit Burger Grill, Pieology, Ono Hawaiian BBQ, and Sonic Drive-In. Nekter Juice Bar offers healthy options. Whatever your palate craves, you’ll find it at our Restaurant Row.

21 INLAND EMPIRE

The Inland Empire, often referred to as the I.E., is a metropolitan area and region of Southern California.

Situated directly east of Los Angeles, the Inland Empire spans 27,298 square miles and is made up of Riverside and San Bernardino counties stretching from Adelanto all the way down through Temecula.

As home to over 4 million people, the area is the 3rd most populated metropolitan area in California and the 12th most in the entire United States. Encompassing over 50 cities, the Inland Empire has been rated in the top tier for various measures of growth from population and job creation to construction and office space absorption over the last decade.

Earning the name “Inland Empire” from a 1914 article written in the Riverside Enterprise newspaper, the I.E. is accompanied by a diverse and rich culture. The “Inland” part of the name was derived from the region’s ideal location, just 60 miles inland from Los Angeles and the Pacific Ocean. The “Empire” part of the name is in honor of the acres of orange and citrus groves that thrived in the area during the first half of the 20th century. California’s first orange tree was and is still located in the city of Riverside. The area was so successful in its countless fruit groves that it was considered California’s second gold rush.

As California’s suburban lifestyle became more and more appealing to the state’s residents, the Inland Empire’s expansive and diverse landscapes became the perfect backdrop for numerous housing tracks and developments. Sensible housing costs and community feel allowed the region to expand at a notable rate over the past 20 years earning it its place as one of the fastest-growing regions in the state and country. This massive growth has created a great demand for retail, education, and other businesses in the area opening up a new and exciting market in the heart of Southern California.

22 TRANSPORTATION

The Inland Empire is serviced by some of California’s most travelled freeways. The I-15, I-10, and I-215 span across the two counties along with state routes 30, 60, 74, 79, 91, 210, and a handful of others. As primarily a commuter region, with over 40% of its residents commuting 30 minutes or more for work, the Inland Empire roads are known for being some of the busiest in nation. Many of the existing freeways were completed in the late 1970s long before the affordable housing boom that took place in the last few decades. Due to this, the county is working on multiple projects to update and widen freeways aiding in a more enjoyable commute for residents.

While the Inland Empire has multiple forms of public transportation, they are considered to be underdeveloped compared to other major metropolitan areas. The area’s first rapid transit line, a new brt system, has currently finished construction in the cities of San Bernardino and Loma Linda with an expected launch date of spring 2014. The new line, dubbed San Bernardino Express, will offer rapid transit service which functions just like light-rail with center running stations. Stations will be scattered throughout the region with its northern terminus in Verdemont and southern terminus in Loma Linda’s VA hospital, passing through downtown San Bernardino and the city’s Hospitality Lane Business District. For those traveling into outside cities and metropolis areas, the Metrolink offers rail service to Los Angeles, Orange and San Diego Counties. Omnitrans acts as the largest bus agency in San Bernardino County, while the Riverside Transit Agency is the largest in Riverside County. Both lines have weekly routes that run every 1–2 hours and a handful that run on evenings and weekends.

Two commercial airports serve the Inland Empire. Ontario International Airport is located in San Bernardino County on the western end of the region and the Palm Springs International Airport in east Riverside County. Both airports service multiple airlines and see millions of visitors year-round. Other airports frequented by Inland Empire residents and visitors include Los Angeles, Burbank, Long Beach, and Santa Ana. The Inland Empire is also home to several general aviation airports across the Bi-County region.

23 ECONOMY

Inexpensive land prices, a large supply of vacant land, and a prime location where many highways and railroads intersect, have made the Inland Empire a major shipping hub. Many of the nation’s largest manufacturing companies have chosen the Inland Empire for their distribution facilities including Toyota Motor Corporation’s North American, APL Logistics, Nordstrom, Kohl’s, and multiple other companies. These centers operate as part of the system that transports finished goods and materials from the ports of Los Angeles and Long Beach to destinations all over the country. More than 80 percent of the state’s imported cargo is shipped through the Los Angeles/Inland Empire Corridor making the area a powerhouse for the industrial market.

While the global economic downturn greatly affected the area’s largest industries, the Inland Empire is projected to remain California’s fastest-growing region. Inexpensive land prices and innovative institutional support networks have attracted many small businesses and technology startups to the area. While the region is known for having modest annual wages, compared to the surrounding counties, the cost of homes, land, and potential growth have IE NORTH RETAIL MARKET SUMMARY made the Inland Empire a desirable area for residents and business. Vacancies for retail properties in Mojave River Valley were under the five-year average during the third quarter, but they were essentially unchanged from this time last year. The rate also sits above the overall market’s average. Meanwhile, retail rents have risen by 2.0% in the past 12 months.

As for the pipeline, development has been relatively steady over the past few years in Mojave River Valley, and that trend has continued in the third quarter.

Mojave River Valley is a very liquid investment market, characterized by heavy trading, and the market proved to be liquid yet again this past year. At $209/SF, market pricing is considerably lower than the region’s average pricing.

However, the coronavirus outbreak has led to considerable uncertainty in commercial real estate. The effects of the pandemic will likely continue having a profound impact on demand, rent growth, and investment trends, and the retail sector, in particular, could face significant headwinds. 24 INLAND EMPIRE RETAIL

The Inland Empire’s retail market fundamentals in Q2 2020 showed the struggle retailers faced during the stay-at-home orders imposed by the state and local governments due to COVID-19. Vacancy increased 70 bps from Q1 2020 to 9.3%. Entertainment, fitness, and restaurants all suffered a loss in traffic and sales, and some vacated their space, such as a 24-Hour Fitness in Victorville (22,000 sq. ft.) and a bowling alley (40,000 sq. ft.) in Moreno Valley. Medical uses within retail centers is becoming more prevalent. Medical users benefit from retail centers’ proximity to the population, parking and patient convenience. BioLife Plasma signed two new leases in Rialto (12,000 sq. ft.) and Moreno Valley (17,500 sq. ft.) in Q2 2020.

The COVID-19 pandemic dealt a considerable blow to the IE’s workforce as unemployment climbed to 14.9% in May 2020—up 11.4% compared to the same month last year. Though the job market in the IE showed some early signs of improvement as total non-farm employment increased by 17,800 jobs between April 2020 and May 2020. Construction firms reported the largest job gains month-to-month (10,500) while office using employers reported an uptick of 5,300 jobs in the same period. Leisure and hospitality, one of the hardest industries impacted, grew by 4,400 jobs while trade, transportation, and utilities added 1,700. Despite the immediate gains, there is still a long road ahead for recovery as total non-farm employment is still down 176,300 jobs compared with the same period the year prior.

The IE’s average asking lease rate decreased from $2.06 per sq. ft. in Q1 2020 to $2.01 per sq. ft. in Q2 2020. The average asking lease rate decreased 5.0% year over year. Asking lease rates slipped down year over year in all but one submarket—the West End which increased 0.1% to $2.15 per sq. ft. but is a decrease of 9.0% from Q1 2020. CBRE EA forecasts the average asking lease rate to decline 13% over the next 12 months.

More vacancies popped up in Q2 2020 as retailers felt the impact of COVID-19. Net absorption dipped to negative 396,151 sq. ft. in Q2 2020. Notable vacancies that contributed to the negative net absorption were a former swap meet in Rancho Cucamonga vacating 52,000 sq. ft., 24 Hour fitness vacated 22,000 sq. ft. in Victorville, Golden Lanes vacated 40,000 sq. ft. in Moreno Valley, and Stater Brothers vacated 25,000 sq. ft. in Norco. Medical uses within retail centers are gaining traction. BioLife Plasma signed two new leases in the East End -11,998 sq. ft. in Rialto and 17,500 sq. ft. in Moreno Valley. Fresenius Kidney Center signed a new lease for 13,058 sq. ft. in Murrieta. dd’s Discount is adding a new location in Cathedral City, where they signed a new leased for 19,300 sq. ft. This will be their second location in the Coachella Valley.

Leasing activity slowed, dropping 53% from Q2 2019 and 37% from Q1 2020. As a result, vacancy ticked up 120 bps year over year and 70 bps quarter over quarter to 9.3%. The largest year over year increase in vacancy was in the High Desert submarket where vacancy increased 390 bps from 10.4% to 14.3%. The West End remained stable while the East End increased 113 bps. The Low Desert and South Riverside submarkets increased by 79 bps and 141 bps, respectively. CBRE EA forecasts vacancy to increase at a measured pace over the next 12 months.

25 DEMOGRAPHICS CITY OF VICTORVILLE

Place of Work American Indian or Alaska Native 1,586 1.2% 2020 Businesses 3,323 3,323 Pacific Islander 518 0.4% 2020 Employees 33,687 Other Race 33,734 26.3% Population Two or More Races 8,910 6.9% 2020 Population - Current Year Estimate 128,353 Hispanic 71,260 55.5% 2025 Population - Five Year Projection 134,200 White Non-Hispanic 28,165 21.9% 2010 Population - Census 115,913 Education 2000 Population - Census 65,139 2020 Population 25 and Over 78,009 2010-2020 Annual Population Growth Rate 1.00% Less than 9th Grade 5,879 7.5% 2020-2025 Annual Population Growth Rate 0.89% 9-12th Grade - No Diploma 9,457 12.1% Population High School Diploma 19,662 25.2% 2020 Population 128,353 GED or Alternative Credential 3,731 4.8% Age 0-4 11,154 8.7% Some College - No Degree 21,095 27.0% Age 5-9 10,824 8.4% Associate`s Degree 7,519 9.6% Age 10-14 9,823 7.7% Bachelor`s Degree 6,899 8.8% Age 15-19 8,906 6.9% Graduate or Professional Degree 3,767 4.8% Age 20-24 9,637 7.5% Household Income Age 25-29 12,967 10.1% 2020 Households 35,428 Age 30-34 10,880 8.5% Under $15,000 4,223 11.9% Age 35-39 8,753 6.8% $15,000-$24,999 3,796 10.7% Age 40-44 7,697 6.0% $25,000-$34,999 3,415 9.6% Age 45-49 7,260 5.7% $35,000-$49,999 4,349 12.3% Age 50-54 6,640 5.2% $50,000-$74,999 6,969 19.7% Age 55-59 6,334 4.9% $75,000-$99,999 4,737 13.4% Age 60-64 5,446 4.2% $100,000-$149,999 4,993 14.1% Age 65-69 4,306 3.4% $150,000-$199,999 2,026 5.7% Age 70-74 3,044 2.4% $200,000 and Over 920 2.6% Age 75-79 2,089 1.6% 2020 Average Household Income $70,060 Age 80-84 1,354 1.1% 2025 Average Household Income $78,961 Age 85 and Older 1,241 1.0% 2020 Median Household Income $55,025 2020 Median Age 30.40 2025 Median Household Income $59,975 Generation 2020 Per Capita Income $19,639 2020 Population 128,353 2025 Per Capita Income $21,998 Generation Alpha (Born 2017 or Later) 8,885 6.9% Generation Z (Born 1999-2016) 35,583 27.7% Millennials (Born 1981-1998) 38,477 30.0% Generation X (Born 1965-1980) 22,907 17.9% Baby Boomers (Born 1946-1964) 17,821 13.9% Greatest Generations (Born 1945 or Earlier) 4,684 3.7% Race and Ethnicity 2020 Population 128,353 White 58,472 45.6% Black or African American 19,452 15.2% Asian 5,682 4.4%

26 BEAR VALLEY & HESPERIA

1 MILE 3 MILES 5 MILES Place of Work 2020 Businesses 699 2,153 5,662 2020 Employees 5,902 17,637 48,444 Population 2020 Population - Current Year Estimate 7,499 63,623 179,010 2025 Population - Five Year Projection 7,797 66,203 185,211 2010 Population - Census 6,985 58,585 166,301 2000 Population - Census 4,732 42,432 123,093 2010-2020 Annual Population Growth Rate 0.70% 0.81% 0.72% 2020-2025 Annual Population Growth Rate 0.78% 0.80% 0.68% Population 2020 Population 7,499 63,623 179,010 Age 0-4 702 9.4% 4,985 7.8% 13,962 7.8% Age 5-9 655 8.7% 4,894 7.7% 13,752 7.7% Age 10-14 602 8.0% 4,706 7.4% 13,057 7.3% Age 15-19 545 7.3% 4,256 6.7% 12,402 6.9% Age 20-24 640 8.5% 4,512 7.1% 13,076 7.3% Age 25-29 758 10.1% 5,367 8.4% 15,826 8.8% Age 30-34 593 7.9% 4,725 7.4% 13,123 7.3% Age 35-39 473 6.3% 3,896 6.1% 10,549 5.9% Age 40-44 402 5.4% 3,262 5.1% 9,119 5.1% Age 45-49 355 4.7% 3,192 5.0% 9,288 5.2% Age 50-54 345 4.6% 3,307 5.2% 9,378 5.2% Age 55-59 370 4.9% 3,596 5.7% 9,967 5.6% Age 60-64 295 3.9% 3,198 5.0% 9,312 5.2% Age 65-69 249 3.3% 2,954 4.6% 8,210 4.6% Age 70-74 176 2.3% 2,416 3.8% 6,672 3.7% Age 75-79 141 1.9% 1,779 2.8% 4,765 2.7% Age 80-84 94 1.3% 1,259 2.0% 3,276 1.8% Age 85 and Older 104 1.4% 1,317 2.1% 3,272 1.8% 2020 Median Age 29.00 33.30 32.80 Generation 2020 Population 7,499 63,623 179,010 Generation Alpha (Born 2017 or Later) 559 7.5% 4,003 6.3% 11,162 6.2% Generation Z (Born 1999-2016) 2,193 29.2% 16,612 26.1% 47,187 26.4% Millennials (Born 1981-1998) 2,216 29.6% 16,728 26.3% 47,400 26.5% Generation X (Born 1965-1980) 1,176 15.7% 10,469 16.5% 29,758 16.6% Baby Boomers (Born 1946-1964) 1,016 13.6% 11,457 18.0% 32,189 18.0% Greatest Generations (Born 1945 or Earlier) 339 4.5% 4,355 6.9% 11,314 6.3%

27 1 MILE 3 MILES 5 MILES Race and Ethnicity 2020 Population 7,499 63,623 179,010 White 3,472 46.3% 34,022 53.5% 95,680 53.4% Black or African American 923 12.3% 6,292 9.9% 18,427 10.3% Asian 320 4.3% 2,452 3.9% 6,428 3.6% American Indian or Alaska Native 79 1.1% 667 1.0% 2,222 1.2% Pacific Islander 40 0.5% 201 0.3% 681 0.4% Other Race 2,212 29.5% 16,016 25.2% 44,550 24.9% Two or More Races 452 6.0% 3,973 6.2% 11,021 6.2% Hispanic 4,146 55.3% 31,809 50.0% 91,467 51.1% White Non-Hispanic 1,905 25.4% 21,257 33.4% 57,704 32.2% Education 2020 Population 25 and Over 4,353 40,270 112,758 Less than 9th Grade 396 9.1% 3,346 8.3% 8,924 7.9% 9-12th Grade - No Diploma 589 13.5% 4,001 9.9% 12,604 11.2% High School Diploma 1,007 23.1% 10,352 25.7% 30,491 27.0% GED or Alternative Credential 186 4.3% 1,707 4.2% 4,623 4.1% Some College - No Degree 1,323 30.4% 10,527 26.1% 29,747 26.4% Associate`s Degree 333 7.6% 3,900 9.7% 10,110 9.0% Bachelor`s Degree 388 8.9% 4,457 11.1% 10,752 9.5% Graduate or Professional Degree 131 3.0% 1,980 4.9% 5,507 4.9% Household Income 2020 Households 2,380 20,527 55,857 Under $15,000 381 16.0% 2,477 12.1% 6,543 11.7% $15,000-$24,999 280 11.8% 2,160 10.5% 6,275 11.2% $25,000-$34,999 228 9.6% 1,867 9.1% 5,206 9.3% $35,000-$49,999 333 14.0% 2,658 13.0% 7,195 12.9% $50,000-$74,999 452 19.0% 3,842 18.7% 10,692 19.1% $75,000-$99,999 353 14.8% 2,861 13.9% 7,120 12.8% $100,000-$149,999 184 7.7% 2,762 13.5% 7,789 13.9% $150,000-$199,999 99 4.2% 1,069 5.2% 2,749 4.9% $200,000 and Over 70 2.9% 830 4.0% 2,287 4.1% 2020 Average Household Income $63,104 $73,385 $73,184 2025 Average Household Income $73,175 $82,355 $81,668 2020 Median Household Income $48,113 $55,266 $54,570 2025 Median Household Income $53,927 $60,508 $59,198 2020 Per Capita Income $18,888 $23,623 $22,845 2025 Per Capita Income $21,781 $26,434 $25,431

28 VICTOR HESPERIA RD VALLEY TOWN CENTER

BEAR VALLEY RD

VICTOR VALLEY TOWN CENTER NEC BEAR VALLEY RD & HESPERIA RD | VICTORVILLE, CA

Alan Krueger Senior Vice President

CAPITAL MARKETS | INVESTMENT PROPERTIES 909-418-2062 [email protected]

Matthew C. Sullivan Shane Hariz Managing Director, Principal Senior Investment Advisor, Partner 213-623-0800 ext. 1 213-623-0800 ext. 2 [email protected] [email protected]