OFFERING MEMORANDUM Capital Markets | Investment Properties Affiliated Business Disclosure CBRE, Inc

SACRAMENTO, CALIFORNIA

OFFERING MEMORANDUM Capital Markets | Investment Properties Affiliated Business Disclosure CBRE, Inc. operates within a global family of companies with many Additional information and an opportunity to inspect the Property subsidiaries and/or related entities (each an “Affiliate”) engaging in will be made available to interested and qualified prospective a broad range of commercial real estate businesses including, but not purchasers. In this Memorandum, certain documents, including limited to, brokerage services, property and facilities management, leases and other materials, are described in summary form. These valuation, investment fund management and development. At times summaries do not purport to be complete nor necessarily accurate different Affiliates may represent various clients with competing descriptions of the full agreements referenced. Interested parties interests in the same transaction. For example, this Memorandum are expected to review all such summaries and other documents of may be received by our Affiliates, including CBRE Investors, Inc. or whatever nature independently and not rely on the contents of this Trammell Crow Company. Those, or other, Affiliates may express Memorandum in any manner. an interest in the property described in this Memorandum (the “Property”) may submit an offer to purchase the Property and may Neither the Owner or CBRE, Inc, nor any of their respective directors, be the successful bidder for the Property. You hereby acknowledge officers, Affiliates or representatives make any representation or that possibility and agree that neither CBRE, Inc. nor any involved warranty, expressed or implied, as to the accuracy or completeness Affiliate will have any obligation to disclose to you the involvement of this Memorandum or any of its contents, and no legal of any Affiliate in the sale or purchase of the Property. In all instances, commitment or obligation shall arise by reason of your receipt of however, CBRE, Inc. will act in the best interest of the client(s) it this Memorandum or use of its contents; and you are to rely solely represents in the transaction described in this Memorandum and on your investigations and inspections of the Property in evaluating will not act in concert with or otherwise conduct its business in a possible purchase of the real property. a way that benefits any Affiliate to the detriment of any other offeror or prospective offeror, but rather will conduct its business The Owner expressly reserved the right, at its sole discretion, to in a manner consistent with the law and any fiduciary duties owed reject any or all expressions of interest or offers to purchase the to the client(s) it represents in the transaction described in this Property, and/or to terminate discussions with any entity at any Memorandum. time with or without notice which may arise as a result of review of this Memorandum. The Owner shall have no legal commitment or Confidentiality Agreement obligation to any entity reviewing this Memorandum or making an This is a confidential Memorandum intended solely for your limited offer to purchase the Property unless and until written agreement(s) use and benefit in determining whether you desire to express for the purchase of the Property have been fully executed, delivered further interest in the acquisition of the Property. and approved by the Owner and any conditions to the Owner’s obligations therein have been satisfied or waived. This Memorandum contains selected information pertaining to the Property and does not purport to be a representation of the state of By receipt of this Memorandum, you agree that this Memorandum affairs of the Property or the owner of the Property (the “Owner”), and its contents are of a confidential nature, that you will hold and to be all-inclusive or to contain all or part of the information which treat it in the strictest confidence and that you will not disclose prospective investors may require to evaluate a purchase of real this Memorandum or any of its contents to any other entity without property. All financial projections and information are provided for the prior written authorization of the Owner or CBRE, Inc. You also general reference purposes only and are based on assumptions agree that you will not use this Memorandum or any of its contents relating to the general economy, market conditions, competition in any manner detrimental to the interest of the Owner or CBRE, and other factors beyond the control of the Owner and CBRE, Inc. Inc. Therefore, all projections, assumptions and other information provided and made herein are subject to material variation. All If after reviewing this Memorandum, you have no further interest in references to acreages, square footages, and other measurements purchasing the Property, kindly return this Memorandum to CBRE, are approximations. Inc.

2 • pavilions 05 Executive Summary

15 Property Overview

23 Financial

41 Tenant Profiles

47 Area Overview

53 RANDY GETZ STEVE EDWARDS Market Trends Executive Vice President President Lic. 00828903 Lic. 00977718 +1 916 446 8287 +1 916 277 8123 [email protected] [email protected]

CBRE, Inc. The Edwards Company 500 Capitol Mall 301 University Avenue Suite 2400 Suite 140 Sacramento, CA 95814 Sacramento, CA 95825 pavilions • 3 4 • pavilions Executive Summary

pavilions • 5 CBRE, Inc. is pleased to offer the opportunity to acquire Sacramento’s truly iconic boutique shopping destination – Pavilions Center. Located on Fair Oaks Boulevard just east of Howe Avenue, Pavilions is a retail landmark that features a variety of superb restaurants and specialty shops catering to a clientele that can afford the best in food, clothing, accessories, and personal services. With a level of attention to maintenance and cleanliness seldom encountered at other shopping venues, time spent at Pavilions is more than an outing, it’s an experience.

The asset is priced at $25,625,000 ($334 per square foot), which represents a 7.5% capitalization rate on projected first year income. The Center is 95.2% leased to 22 tenants with two shop spaces presently available. An Argus™ discounted cash flow analysis projects that if the asset is held for 10 years and then sold, annual yields could average 10.6% on a cash basis, and 17.0% if leverage is employed as in our model.

Built in 1984 by preeminent Sacramento developer Robert Powell, Pavilions quickly became known for its attention to detail, meticulous cleanliness, manicured landscaping, lavish holiday decorations, and valet parking and day porter staff attired in distinctive red and white-striped shirts. In the 34 years since, Pavilions has had only two owners. Now there is an opportunity for someone new to carry on Pavilions’ traditions of outstanding service to its tenants and their customers by acquiring this distinctive and unique property. 6 • pavilions OFFERING SUMMARY

Property type Specialty Retail

Property name Pavilions Center

500-581 Pavilions Lane, Address Sacramento, CA 95825

Net rentable area 76,719 square feet

Current occupancy 95.2%

Offering price (psf) $25,625,000 ($334 psf)

Capitalization rate 7.5% on projected year-one NOI

Projected annual yields Cash: 10.6% Leveraged: 17.0% (Argus™ 10-year DCF analysis)

pavilions • 7 Investment Highlights

• Sacramento’s premier upscale boutique shopping destination since 1984.

• A synergistic blend of tenants offering food, apparel, accessories, and personal services to some of Sacramento’s most discerning shoppers.

• Offered at $25,625,000, which represents a 7.5% capitalization rate on projected first year net operating income.

• The Center is 95.2% leased to a group of experienced, successful proprietors who specialize in quality products and nonpareil customer service.

• Rents and expense reimbursements are among the most robust of any retail center in Sacramento.

• Outstanding location on Fair Oaks Boulevard between Howe Avenue and Munroe Street. Average daily traffic on Howe at Fair Oaks is 47,551 and on Fair Oaks at University is 30,410 for a total of 77,961 per day. 1

• Affluent neighborhood demographics: Within a five-mile radius 12.5% - nearly 19,000 households - have annual incomes that exceed $100,000, and within one mile 9% of household incomes exceed $200,000.

• Internet-resistant tenants feature food, apparel and personal services, with annual sales averaging $514 per square foot.

• Julius Clothing, Hamilton Jewelers, Madam Butterfly, Patrick James and several other tenants are exclusive to Pavilions, with some customers traveling as much as 100 miles to patronize these establishments.

8 • pavilions 1 Sacramento County 2016 data TENANT SUMMARY

Tenant SF Leased Tenant Since Expires Base Rent psf2 Madam Butterfly 1,500 Jul. 1998 Jun. 2023 $48.00

Ruth’s Chris Steak House 7,200 Dec. 2005 Mar. 2021 $34.28

It’s A Small World 850 Sep. 2006 m-t-m $24.00

Hamilton Jewelers 1,650 Aug. 1985 Jan. 2022 $46.73

Soma Intimates 2,500 Jan. 2014 Jan. 2024 $40.00

Eyeglass Charlie’s 711 Jun 2015 Jun 2020 $43.87

Chico’s 3,000 May 2014 Apr. 2024 $40.00

Café Bernardo 3,780 Aug. 2013 Aug. 2023 $36.00

Williams-Sonoma 9,575 Oct. 1998 Jan. 2024 $34.98

Studio 55 6,510 Jan. 2013 Nov. 2023 $25.20

Patrick James 2,845 Jan. 2011 Jan. 2020 $33.00

Gregory Evrigenis, DDS 2,700 Sep. 1998 Jan. 2020 $35.64

Wildwood Kitchen & Bar 3,627 Aug. 2016 Jul. 2026 $39.00

J. Jill 4,225 Feb. 2012 Feb. 2022 $29.91

Pure Barre 1,898 Oct. 2017 Oct. 2022 $37.80

Paper Garden 1,100 Jan. 2012 Dec. 2021 $45.00

Pavilion Shoes & Gifts 1,700 Aug. 2014 m-t-m $17.16

Ristoranti Piatti 5,890 Jun. 2002 May 2022 $39.60

Julius Clothing 4,200 Sep. 1999 Aug. 2022 $35.00

Talbots 7,600 Feb. 2003 Jan. 2020 $42.00

2 Does not include reimbursements or percentage rent

pavilions • 9 Area Overview

Sacramento, California is the capital of the most populous state in America, and its roughly 2.2 million residents make Sacramento the 25th largest market in the country. The Sacramento MSA is at the junction of Interstates 5 and 80, includes seven counties, and is the cultural and economic center of the region. Its economy is characterized by a strong, stable base of government employment, a well-educated labor pool, and a cost of living more affordable than the cities and counties in the Greater San Francisco Bay and Silicon Valley areas.

Over the last two decades, a number of Bay Area tech companies have established a presence in Sacramento, citing its lower cost of living and freedom from potentially disruptive seismic activity. Public/private partnerships have been successful in helping the region develop and grow its technology community, and publicize the region’s competitive advantages. Health care companies such as Sutter, Kaiser, and Dignity Health, have thrived in Sacramento. Other key areas of growth are in the fields of agricultural/food sciences, biotechnology, and renewable energy.

The Sacramento retail market contains 48.9 million square feet of retail space. In 2017 the market experienced record-breaking absorption totaling 1.1 million square feet which drove the vacancy rate down to 8.5%. Through the third quarter of 2018 absorption has continued, although at a less breathtaking pace, and vacancy is now down to its lowest level in more than a decade at 7.9%. Average retail rents have increased 5.3% thus far in 2018.

According to data from CoStar Group, within a one- mile radius of Pavilions there are 847,000 square feet of shopping center retail space with a reported vacancy rate of 8.3%. However, 27,000 sf of that is the former Fresh Market, which left the space but continues to pay healthy rent which Landlord is delighted to accept. The true vacancy rate is approximately 5.1%.

10 • pavilions Regional

pavilions • 11 Sacramento

12 • pavilions Neighborhood

pavilions • 13 14 • pavilions Property Overview

pavilions • 15 PROPERTY SUMMARY Name Pavilions Center Address 500-581 Pavilions Lane, Sacramento, California 95825 County Sacramento 294-0110-014 ±1.49 acres 294-0110-015 ±1.09 acres Parcel numbers and land area 294-0120-001 ±3.67 acres 294-0120-011 ±1.67 acres Total ±7.92 acres (net) Parking total / ratio 403 spaces / 5.25 per 1,000 sf. ADA parking consists of ten disabled-access spaces with four van-accessible spaces. Zoning LC – limited commercial Year built 1984 Building Area Stories A 12,055 Two B 6,933 One C 4,200 One Building inventory D 10,211 One E 7,600 One F 10,980 One G 9,575 One H 15,165 One Exterior Concrete masonry units and brick veneer. Foundation Concrete spread footings, continuous perimeter footings and concrete slab-on-grade. Pitched mansard roof with asphalt tiles. Main roof is flat built-up TPO (thermoplastic polyolefin membrane). A roof Roof audit was conducted in 2016 and will be available in due diligence. Curtainwall/storefront Aluminum frame Elevators Two hydraulic elevators rated at 1,500 and 2,500 pound capacities. Rooftop package units with gas-fired heating coils and electric heat pumps with electric-resistance coils. Cooling is HVAC via rooftop units with split system electric condensers. Automatic wet type sprinkler system with 100% coverage and chemical fire suppression (Ansul System) in cooking Fire suppression areas. Confidentiality Agreement and Please contact us if you would like to receive a link to execute the Confidentiality Agreement and access to the Due Diligence Access Virtual Deal Room which contains documents and additional information about the property.

16 • pavilions Site

Pavilions Center occupies a nearly square site on the north side of Fair Oaks Boulevard, ¼-mile east of the intersection of Howe Avenue and Fair Oaks Boulevard. A frontage road parallel to Fair Oaks Blvd. facilitates ingress/egress for Pavilions as well as the other commercial buildings east and west of the Center.

Unlike most shopping centers with acres of asphalt parking, much of the parking space at Pavilions is in the form of a meandering drive that starts with a brick-paved traffic circle, weaves through the center, and ultimately returns to the traffic circle. Parking spaces are delineated not by paint stripes but by inlaid brick in exposed aggregate concrete. Regardless of where you park, all stores are within easy walking distance, making it both fun and easy to “window shop” your way through Pavilions.

Two tenants – The Niello Company and Pavilions Car Wash – operate in the common areas and do not occupy shop space. Niello, recognizing that many of Pavilions’ customers drive luxury vehicles, exhibits beautiful automobiles in common areas throughout The Center.

Pavilions Car Wash and Auto Detail operates in the parking lot at the northeast corner of the property. Customers find it convenient and time-efficient to have their cars washed and pampered while they shop or dine.

B E A C

G F

N pavilions • 17 STE. 542 1,800 SF

STE. 544 Site Plan 2,700 SF

STE. 536 2,845 SF STE. 530 6,510 SF Not A Part

STE. 525 9,575 SF STE.564 5,317 SF

STE.564 1,898 SF

STE. 566 MEANINE 1,408 SF 2,104 SF 850 SF STE. 502 STE. 1,500 SF

PAD 500 STE. FUTURE STE. 504 5,896 SF 1,650 SF FIRST FLOOR STE. 561 STE. 580 4,225 SF STE. 514 STE. 508 4,200 SF 3,000 SF 2,500 SF 711 SF STE. 518 STE. STE. 531 2,250 SF STE. 515 STE. 565 3,780 SF 1,100 SF

STE. 567 1,700 SF

STE. 571 NOT A PART 8,670 SF

STE. 501 STE. 581 7,200 SF 7,600 SF PAVILIONS LN PAVILIONS

N FAIR OAKS BLVD 18 • pavilions pavilions • 19 The Niello Company exhibits its luxury automobiles at Pavilions, such as the Maserati and Jaguar shown here. 20 • pavilions The eight buildings that comprise Pavilions Center were constructed on four parcels, one of which is owned in fee while the other three are leased. All three ground leases have an initial expiration date of December 31, 2034, but Lessee has an option to extend Ground each lease until December 31, 2064. Lessee also has a Right of First Offer to purchase each parcel should it be offered for sale.

Leases The site plan below shows each of the four parcels, with the leasehold parcels labeled. (A, B, C)

STE. 542 1,800 SF

STE. 544 2,700 SF Parcel A Rent is adjusted every four years Parcel B Rent is adjusted every three years Parcel C Rent is adjusted annually

STE. 536 FEE STE. 530 2,845 SF 294-0110-015 6,510 SF

The actual leases and a summary STE. 525 C 9,575 SF of each will be made available for AVAILABLE 294-0120-011 STE.564 review in due diligence. In our DCF 5,317 SF analysis the timing of adjustments follows the lease structures, with STE. 566 1,408 SF NAP amounts calculated assuming 850 SF

STE. 502 STE. annual CPI increases of 2.5%. 1,500 SF A 500 STE. Based on historical inflation STE. 504 1,650 SF 294-0110-014 STE. 561 these estimates should closely STE. 580 4,225 SF STE. 514 STE. 508 4,200 SF 3,000 SF 2,500 SF approximate future rents. 711 SF STE. 518 STE. STE. 531 B 2,250 SF STE. 515 STE. 565 3,780 SF 294-0120-001 1,100 SF STE. 567 1,700 SF

STE. 571 8,670 SF

STE. 501 STE. 581 7,200 SF 7,600 SF PAVILIONS LN PAVILIONS

N FAIR OAKS BLVD pavilions • 21 22 • pavilions Financial

pavilions • 23 24 • pavilions PRICE $25,625,000 Financial Net Rentable Area 76,719 Summary Price per Square Foot $334 Potential Financing: Type Proposed Pavilions Center is priced at $25,625,000 which represents a 7.5% capitalization rate on projected first Interest Rate 5.05% year net operating income in our 10-year discounted Amount 65% $16,656,250 cash flow analysis. Several tenants are paying percentage rent and this component of income can Down Payment $8,968,750 be difficult to underwrite due to volatility during Amortization (years) 30 inevitable economic cycles. Since the economy is strong current percentage rents are high. Therefore, Years Due 10 we modeled the trailing ten-year historical average Estimated Monthly Payment $89,924 to avoid overstating percentage rent income. Estimated Annual Payment $1,079,088 Following are several additional exhibits that help Year 1 Argus illustrate the financial performance of the asset. Scheduled Gross Income $2,689,761 plus expense reimbursements & marketing fees $1,375,985 percentage rent (ten-year annual average) $124,088 Adjusted Scheduled Gross Income $4,189,834 less vacancy and collection allowance ($120,730) Effective Gross Income $4,069,104 less ground rent (non-recoverable) ($669,898) less reimbursable operating expenses ($1,477,292) Total Expenses ($2,147,190) Net Operating Income $1,921,914 per square foot $25.05 Estimated Annual Debt Service ($1,079,088) Pre-Tax Cash Flow $842,826 Capitalization Rate 7.5% Cash-on-Cash 9.4% Unleveraged IRR 10.6% Leveraged IRR 17.0%

pavilions • 25 The rent roll shows each tenant’s square footage, current rent, next scheduled rent increase, and summarizes each lessee’s options to extend, if any. Note that the annual rents shown are for the twelve months commencing March 1, 2019 and include any scheduled Rent Roll rent increases. Each tenant’s estimated cost recovery is taken from the Argus analysis including administrative and marketing fees.

Lease Term Current Base Rent Next Rent Adjustment Options Projected Expense Suite Tenant Rentable Sq. Ft. Start End Monthly Per Sq. Ft. Annual Recovery Date New Mo. Rent Per Sq. Ft. No. x Term Option Rent Pro Rata 500 Madam Butterfly 1,500 Jul-03 Jun-23 $6,000 $4.00 $73,440 $26,888 Jul-19 $6,180 $4.12 - - 2.0% 501 Ruth's Chris Steak House 7,200 Dec-05 Mar-21 $20,570 $2.86 $246,840 $146,515 - - - 2x5-Yr. $3.14 9.4% 502 It's A Small World (1) 850 Sep-06 m-t-m $1,700 $2.00 $20,400 $15,671 - - - - - 1.1% 504 Hamilton Jewelers 1650 Feb-06 Jan-22 $6,425 $3.89 $77,362 $29,575 Feb-20 $6,683 $4.05 1x5-Yr. $4.38 2.2% 508 Soma Intimates 2500 Jan-14 Jan-24 $8,333 $3.33 $100,000 $42,890 - - - 1x5-Yr. $3.75 3.3% 510 Eyeglass Charlie's 711 Jun-15 Jun-20 $2,599 $3.66 $32,021 $12,266 Jul-19 $2,703 $3.80 1x5-Yr. fmr 0.9% 514 Chico's 3,000 May-14 Apr-24 $10,000 $3.33 $132,500 $51,674 May-19 $11,250 $3.75 1x5-Yr. $4.17 3.9% 515 Café Bernardo 3,780 Aug-13 Aug-23 $11,340 $3.00 $136,080 $65,224 - - - 2x5-Yr. $3.30 4.9% 525 Williams-Sonoma 9,575 Oct-98 Jan-24 $27,914 $2.92 $334,965 $189,515 - - - - - 12.5% 530 Studio 55 6,510 Jan-13 Nov-23 $13,671 $2.10 $164,052 $111,691 Dec-20 $13,997 $2.15 2x5-Yr. fmr 8.5% 536 Patrick James 2,845 Jan-11 Jan-20 $7,824 $2.75 $93,885 $44,919 - - - - - 3.7% 540 Pavilions Car Wash (2) - Sep-17 Dec-22 $1,050 - $12,600 - Jan-21 $1,100 - - - 0.0% 544 Gregory Evrigenis, DDS 2,700 Sep-98 Jan-20 $8,019 $2.97 $96,228 $48,394 - - - 1x5-Yr. fmr 3.5% 556 Wildwood Kitchen & Bar 3,627 Aug-16 Jul-26 $11,788 $3.25 $141,453 $62,586 Aug-21 $13,058 $3.60 2x5-Yr. $3.90 4.7% 561 J Jill 4,225 Feb-12 Feb-22 $10,531 $2.49 $126,370 $74,927 - - - 1x5-Yr. $2.66 5.5% 564 Pure Barre 1,898 Oct-17 Oct-22 $5,979 $3.15 $71,744 $31,865 - - - 1x5-Yr. $3.50 2.5% 565 Paper Garden (3) 1,100 Jan-12 Dec-21 $4,125 $3.75 $49,706 $18,981 Jan-20 $4,228 $3.84 - - 1.4% 567 Pavilion Shoes & Gifts (4) 1,700 Aug-14 m-t-m $2,431 $1.43 $29,172 $0 - - - - - 2.2% 571 Ristoranti Piatti 5,890 Jun-02 May-22 $19,437 $3.30 $233,244 $94,062 - - - 1x5-Yr. $3.71 7.7% 580 Julius Clothing 4,200 Sep-99 Aug-22 $12,250 $2.92 $148,470 $75,314 Sep-19 $12,495 $2.98 1x5-Yr. $3.19 5.5% 581 Talbots 7,600 Feb-06 Jan-20 $26,600 $3.50 $319,200 $118,380 - - - - - 9.9% NLO Niello (2) - Jan-10 m-t-m $500 - $6,000 $0 - - - - - 0.0% Subtotal Leased 73,061 $219,086 $3.00 $2,645,732 $1,261,337 95.2% 531 Available 2,250 Month 4 $7,500 $3.33 $90,000 $38,606 - - - - - 2.9% 566 Available 1,408 Month 8 $4,459 $3.17 $53,504 $24,159 - - - - - 1.8% Subtotal Available 3,658 $11,959 $143,504 $62,765 4.8% Total Pavilions 76,719 $231,044 $2,789,236 $1,324,102 100%

26 • pavilions Footnotes: (3) Three-year extension being negotiated at projected rent shown. (1) M-T-M. Analysis assumes tenant remains in place through Feb-2020 at current rent. (4) M-T-M. Analysis assumes tenant remains in place through Feb-2020 at current rent. (2) Tenant is assumed to remain in occupancy throughout the analysis. Expense reimbursements have been abated.

pavilions • 27 Expense Summary

OPERATING EXPENSES (2019 Budget) Contract Services $582,866 Materials & Supplies $48,200 Prepairs & Maintenance $136,567 Utilities $168,700 Administrative $1,830 Management $122,073 Insurance $23,291 Real Estate Taxes $318,453 Marketing charges $75,312 Ground Rent $669,898 TOTAL OPERATING EXPENSES $2,147,190

28 • pavilions Argus Assumptions The table below summarizes the key assumptions used in the Argus™ discounted cash flow analysis. Pavilions Center 500-581 Pavilions Lane, Sacramento, CA 95825 Analysis term and starting date: Ten years commencing March 2019 Inflation Rates: General: 2.5% Market rent: 2.5% Operating expenses: 2.5% Property taxes: 2.0% Current Market Rent: $36.00-$48.00 psf/year, NNN Reserves: $0.15 per square foot per year. Operating Expenses: Based on 2019 budget with property taxes adjusted to reflect reassessment following sale. Expense Reimbursements Current: NNN with most tenants also paying a 10%-15% administrative fee Future: Same. Two available spaces lease in the fourth and eighth months of the analysis at market rent, with a $25 psf TI Vacancy Absorption: allowance, five months of free rent, and 7.5% leasing commissions. Rollover Assumptions Renewal probability: 80% Options: Assumes any options to extend are exercised. Months dark: 6 Starting rent: 100% of fair market rent when the lease commences. Escalations: Assumes rent is increased annually by 3%. T.I. Allowance: $25 per rentable square foot on new leases. Concessions: None Term length: 5 years. Leasing commissions: 7.5% of base rent on the first five years of term; 3.75% on renewal Minimum stabilized vacancy: 5.0% Debt / Refinancing: 65% loan-to-value; 30-year amortization, due in 10 years; 5.05% interest rate. Reversion: Terminal capitalization rate: 7.5% Present value discounting method: Annually, midpoint on cash flow, endpoint on sale.

Costs of Sale: 1.0% pavilions • 29 Property Summary

Timing & Inflation Reporting Period: March 1, 2019 to February 28, 2029; 10 years Inflation Month: January General Inflation Rate: 2.50% Property Size & Occupancy Property Size: 76,719 Square Feet Alternate Size: 1 Square Foot Number of rent roll tenants: 24 Total Occupied Area: 73,061 Square Feet, 95.23%, during first month of analysis Space Absorption Talbot's space 7,600.00 Square Feet, leasing from 7/20 to 1/21 1 lease per quarter, 2,533.33 SqFt per lease General Vacancy Method: Percent of Potential Gross Revenue Rate: 5.00% Debt Financing Number of Notes: 1 Beginning Principal Balance: $16,656,250 Average Year 1 Interest Rate 5.05% Property Purchase & Resale Purchase Price: $25,625,000 Resale Method: Capitalize Net Operating Income Cap Rate: 7.50% Cap Year: Year 10 Commission/Closing Cost: $352,193 Net Cash Flow from Sale: $21,298,148 Present Value Discounting Discount Method: Annually (Midpoint on Cash Flow/Endpoint on Resale) Unleveraged Discount Rate: 10.60% Unleveraged Present Value: $25,655,520 at 10.60% Unleveraged Annual IRR: 10.62% Leveraged Discount Rate: 17.00% Value of Equity Interest: $8,972,941 at 17.00% 30 • pavilions Leveraged Annual IRR: 17.01% Cash Flow Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 For the Years Ending Feb-2020 Feb-2021 Feb-2022 Feb-2023 Feb-2024 Feb-2025 Feb-2026 Feb-2027 Feb-2028 Feb-2029 Potential Gross Revenue Base Rental Revenue $2,795,314 $2,935,575 $3,029,183 $3,106,549 $3,179,622 $3,311,966 $3,353,953 $3,436,768 $3,560,553 $3,649,840 Absorption & Turnover Vacancy (93,433) (229,103) (3,949) 0 (37,529) (23,648) (57,618) (11,528) (62,410) (17,876) Base Rent Abatements (12,120) (155,835) (48,707) (13,171) (19,422) (45,467) (67,692) 0 (74,091) (6,665) Scheduled Base Rental Revenue 2,689,761 2,550,637 2,976,527 3,093,378 3,122,671 3,242,851 3,228,643 3,425,240 3,424,052 3,625,299 Expense Reimbursement Revenue 1,300,673 1,323,619 1,441,098 1,480,505 1,497,430 1,514,471 1,537,410 1,593,073 1,600,804 1,666,824 Percentage Rent 124,088 127,190 130,370 133,629 136,970 140,394 143,904 147,502 151,189 154,969 Marketing Charges 75,312 77,195 79,125 81,103 83,131 85,209 87,339 89,523 91,761 94,055 Total Potential Gross Revenue 4,189,834 4,078,641 4,627,120 4,788,615 4,840,202 4,982,925 4,997,296 5,255,338 5,267,806 5,541,147 General Vacancy (120,730) 0 (227,604) (239,431) (206,358) (226,681) (195,128) (251,815) (204,101) (260,075) Effective Gross Revenue 4,069,104 4,078,641 4,399,516 4,549,184 4,633,844 4,756,244 4,802,168 5,003,523 5,063,705 5,281,072 Operating Expenses Contract Services 582,866 597,438 612,375 627,684 643,375 659,459 675,946 692,845 710,167 727,921 Materials & Supplies 48,200 49,405 50,640 51,906 53,204 54,534 55,897 57,295 58,727 60,195 Repairs & Maintenance 136,567 139,981 143,480 147,067 150,744 154,513 158,375 162,335 166,393 170,553 Utilities 168,700 172,917 177,240 181,672 186,214 190,868 195,641 200,531 205,545 210,683 Administrative 1,830 1,875 1,923 1,971 2,019 2,070 2,122 2,175 2,229 2,284 Management Fee 122,073 122,359 131,985 136,476 139,015 142,687 144,065 150,106 151,911 158,432 Insurance 23,291 23,873 24,471 25,083 25,709 26,353 27,011 27,687 28,379 29,089 Real Estate Taxes 318,453 324,687 331,046 337,532 344,148 350,896 357,780 364,800 371,962 379,266 Marketing Charges 75,312 77,195 79,125 81,103 83,131 85,209 87,339 89,523 91,761 94,055 Ground Rent (NR) 669,898 687,270 697,756 711,027 723,088 742,915 757,200 768,351 782,388 807,150 Total Operating Expenses 2,147,190 2,197,000 2,250,041 2,301,521 2,350,647 2,409,504 2,461,376 2,515,648 2,569,462 2,639,628 Net Operating Income 1,921,914 1,881,641 2,149,475 2,247,663 2,283,197 2,346,740 2,340,792 2,487,875 2,494,243 2,641,444 Debt Service Interest Payments 835,555 822,968 809,730 795,808 781,167 765,769 749,575 732,544 714,632 695,795 Principal Payments 243,533 256,120 269,358 283,280 297,921 313,319 329,513 346,545 364,456 383,293 Origination Points & Fees 166,563 0 0 0 0 0 0 0 0 0 Total Debt Service 1,245,651 1,079,088 1,079,088 1,079,088 1,079,088 1,079,088 1,079,088 1,079,089 1,079,088 1,079,088 Leasing & Capital Costs Tenant Improvements 91,450 388,976 5,923 0 8,279 74,859 95,497 0 115,523 9,366 Leasing Commissions 42,309 149,291 8,933 0 13,272 102,646 152,818 0 167,262 15,047 Capital Reserves 7,704 7,896 8,094 8,296 8,504 8,716 8,934 9,157 9,386 9,621 Total Leasing & Capital Costs 141,463 546,163 22,950 8,296 30,055 186,221 257,249 9,157 292,171 34,034 Cash Flow After Debt Service $534,800 $256,390 $1,047,437 $1,160,279 $1,174,054 $1,081,431 $1,004,455 $1,399,629 $1,122,984 $1,528,322 Revenue/Expense Notes

Revenue/Expense Notes Insurance Subsidy: Tenant’s have subsidies in recovery structures to reduce their total costs. Percentage Rent: Analysis includes average percentage rent over the past 10 years and assumes Tax Subsid: Tenant’s have subsidies in recovery structures to reduce their total costs. this to inflate 2.5% annually. Reimbursable Mgmt Fee: Tenant’s have subsidies in recovery structures to reduce their total CAM Subsidy: Tenant’s have subsidies in recovery structures to reduce their total costs. costs. pavilions • 31 Resale and IRR

For the Years Ending Feb-2020 Feb-2021 Feb-2022 Feb-2023 Feb-2024 Feb-2025 Feb-2026 Feb-2027 Feb-2028 Feb-2029

Resale Amount Gross Proceeds from Sale $25,625,520 $25,088,547 $28,659,667 $29,968,840 $30,442,627 $31,289,867 $31,210,560 $33,171,667 $33,256,573 $35,219,253 Commissions & Adjustments (256,255) (250,885) (286,597) (299,688) (304,426) (312,899) (312,106) (331,717) (332,566) (352,193)

Net Proceeds From Sale 25,369,265 24,837,662 28,373,070 29,669,152 30,138,201 30,976,968 30,898,454 32,839,950 32,924,007 34,867,060

Outstanding Debt Retirement Total Principal Balances (16,412,717) (16,156,597) (15,887,239) (15,603,958) (15,306,037) (14,992,719) (14,663,205) (14,316,660) (13,952,204) (13,568,912)

Net Resale Proceeds After Debt $8,956,548 $8,681,065 $12,485,831 $14,065,194 $14,832,164 $15,984,249 $16,235,249 $18,523,290 $18,971,803 $21,298,148

Unleveraged Annual IRR 6.16% 4.74% 10.35% 10.93% 10.69% 10.64% 10.18% 10.62% 10.34% 10.62% Leveraged Annual IRR 6.00% 2.92% 18.07% 19.15% 18.32% 17.95% 16.80% 17.43% 16.70% 17.01%

32 • pavilions Argus Rent Roll

Rate & Tenant Name Floor SqFt Amount per Changes Changes Months to Pcnt to Description Imprvmnts Commssns Assumption about Type & Suite Number Bldg Share Year per on to Abate Abate of Operating Rate Rate subsequent terms Lease Dates & Term Month Expense Amount Amount for this tenant Madam Butterfly $48.00 Jul-2019 $49.44 - - See method: - - Market Retail, Suite: 500 1,500.00 $72,000 Jul-2020 $50.92 NNN+10% See assumption: Jul-2003 to Jun-2023 1.96% $4.00 Jul-2021 $52.45 Admin on $42.00 NNN 240 Months $6,000 Jul-2022 $54.02 CAM Excl Util

Ruth's Chris Steak Ho $34.28 - - - - See method: - - Option Retail, Suite: 501 7,200.00 $246,840 NNN + See assumption: Dec-2005 to Mar-2021 9.38% $2.86 15% Admin $36.00 NNN 184 Months $20,570 (Ruths)

Ruth's Chris Steak Ho OPTION $37.71 - - - - See method: - - Option Option, Suite: 501 7,200.00 $271,524 NNN + See assumption: Apr-2021 to Mar-2026 9.38% $3.14 15% Admin $36.00 NNN 60 Months $22,627 (Ruths)

Ruth's Chris Steak Ho OPTION $41.48 - - - - See method: - - Market Option, Suite: 501 7,200.00 $298,680 NNN + See assumption: Apr-2026 to Mar-2031 9.38% $3.46 15% Admin $36.00 NNN 60 Months $24,890 (Ruths)

It's a Small World MTM $24.00 - - - - See method: - - Market Retail, Suite: 502 850.00 $20,400 NNN + See assumption: Sep-2006 to Feb-2020 1.11% $2.00 15% Admin $41.00 NNN 162 Months $1,700 (Small World)

Hamilton Jewelers $46.73 Feb-2020 $48.60 - - See method: - - Option Retail, Suite: 504 1,650.00 $77,105 Feb-2021 $50.54 NNN+10% See assumption: Feb-2006 to Jan-2022 2.15% $3.89 Admin on $42.00 NNN 192 Months $6,425 CAM Excl Util

Hamilton Jewelers OPTION $52.56 Feb-2023 $54.66 - - See method: - - Market Option, Suite: 504 1,650.00 $86,727 Feb-2024 $56.85 NNN+10% See assumption: Feb-2022 to Jan-2027 2.15% $4.38 Feb-2025 $59.12 Admin on $42.00 NNN 60 Months $7,227 Feb-2026 $61.49 CAM Excl Util

Soma Intimates $40.00 ------Option See method: Retail, Suite: 508 2,500.00 $100,000 See assumption: NNN + Feb-2014 to Jan-2024 3.26% $3.33 $42.00 NNN 15% (Soma) 120 Months $8,333

pavilions • 33 Argus Rent Roll

Soma Intimates OPTION $45.00 ------Market See method: Option, Suite: 508 2,500.00 $112,500 See assumption: NNN + Feb-2024 to Jan-2029 3.26% $3.75 $42.00 NNN 15% (Soma) 60 Months $9,375

Eyeglass Charlie's $43.87 Jul-2019 $45.62 - - See method: - - Option Retail, Suite: 510 711.00 $31,192 NNN + See assumption: Jun-2015 to Jun-2020 0.93% $3.66 15% Admin $42.00 NNN 61 Months $2,599 (Incl Subsidy)

Eyeglass Charlie's OPTION $47.44 Jul-2021 $49.34 - - See method: - - Market Option, Suite: 510 711.00 $33,730 Jul-2022 $51.31 NNN + See assumption: Jul-2020 to Jun-2025 0.93% $3.95 Jul-2023 $53.36 15% Admin $42.00 NNN 60 Months $2,811 Jul-2024 $55.50 (Incl Subsidy)

Chico's $40.00 May-2019 $45.00 - - See method: - - Option Retail, Suite: 514 3,000.00 $120,000 NNN + See assumption: May-2014 to Apr-2024 3.91% $3.33 15% Admin $38.00 NNN 120 Months $10,000 (Chicos)

Chico's OPTION $50.00 - - - - See method: - - Market Option, Suite: 514 3,000.00 $150,000 NNN + See assumption: May-2024 to Apr-2029 3.91% $4.17 15% Admin $38.00 NNN 60 Months $12,500 (Chicos)

Cafe Bernardo $36.00 - - - - See method: - - Option Retail, Suite: 515 3,780.00 $136,080 NNN + See assumption: Aug-2013 to Aug-2023 4.93% $3.00 15% Admin $40.00 NNN 121 Months $11,340 (Incl Subsidy)

Cafe Bernardo OPTION $39.60 - - - - See method: - - Option Option, Suite: 515 3,780.00 $149,688 NNN + See assumption: Sep-2023 to Aug-2028 4.93% $3.30 15% Admin $40.00 NNN 60 Months $12,474 (Incl Subsidy)

Cafe Bernardo OPTION $43.56 - - - - See method: - - Market Option, Suite: 515 3,780.00 $164,657 NNN + See assumption: Sep-2028 to Aug-2033 4.93% $3.63 15% Admin $40.00 NNN 60 Months $13,721 (Incl Subsidy)

34 • pavilions Argus Rent Roll

Williams-Sonoma $34.98 Feb-2021 $38.13 - - See method: - - Market Retail, Suite: 525 9,575.00 $334,965 NNN + See assumption: Nov-1998 to Jan-2024 12.48% $2.92 10% $35.00 NNN (Williams 303 Months $27,914 Sonoma)

Studio 55 $25.20 Dec-2020 $25.80 - - See method: - - Option Retail, Suite: 530 6,510.00 $164,052 NNN + See assumption: Jan-2013 to Nov-2023 8.49% $2.10 15% Admin $32.00 NNN 131 Months $13,671 (Studio 55)

Studio 55 OPTION $36.13 Dec-2024 $37.21 - - See method: - - Option Option, Suite: 530 6,510.00 $235,210 Dec-2025 $38.33 NNN + See assumption: Dec-2023 to Nov-2028 8.49% $3.01 Dec-2026 $39.48 15% Admin $32.00 NNN 60 Months $19,601 Dec-2027 $40.67 (Studio 55)

Studio 55 OPTION $40.88 Dec-2029 $42.10 - - See method: - - Market Option, Suite: 530 6,510.00 $266,119 Dec-2030 $43.37 NNN + See assumption: Dec-2028 to Nov-2033 8.49% $3.41 Dec-2031 $44.67 15% Admin $32.00 NNN 60 Months $22,177 Dec-2032 $46.01 (Studio 55)

VACANT (531) $40.41 Jun-2020 $41.63 1 100.00% See method: $25.00 $11.80 Market Retail, Suite: 531 2,250.00 $90,931 Jun-2021 $42.87 13 100.00% NNN + 6.00% See assumption: Jun-2019 to May-2024 2.93% $3.37 Jun-2022 $44.16 25 100.00% 15% Admin $56,250 $26,552 $40.00 NNN 60 Months $7,578 Jun-2023 $45.49 37 100.00% (Incl Subsidy)

Patrick James $33.00 - - - - See method: - - Market Retail, Suite: 536 2,845.00 $93,885 NNN + See assumption: Jan-2011 to Jan-2020 3.71% $2.75 15% Admin $33.00 NNN 109 Months $7,824 (Incl Subsidy)

Gregory W. Evrigenis, $35.64 - - - - See method: - - Option Retail, Suite: 544 2,700.00 $96,228 NNN+10% See assumption: Sep-1998 to Jan-2020 3.52% $2.97 Admin on $38.00 NNN 257 Months $8,019 CAM Excl Util

Gregory W. Evrigenis, OPTION $39.03 Feb-2021 $40.59 - - See method: - - Market Option, Suite: 544 2,700.00 $105,382 Feb-2022 $42.22 NNN+10% See assumption: Feb-2020 to Jan-2025 3.52% $3.25 Feb-2023 $43.90 Admin on $38.00 NNN 60 Months $8,782 Feb-2024 $45.66 CAM Excl Util

pavilions • 35 Argus Rent Roll Rate & Tenant Name Floor SqFt Amount per Changes Changes Months to Pcnt to Description Imprvmnts Commssns Assumption about Type & Suite Number Bldg Share Year per on to Abate Abate of Operating Rate Rate subsequent terms Lease Dates & Term Month Expense Amount Amount for this tenant

Wildwood Kitchen & Ba $39.00 Aug-2021 $43.20 - - See method: - - Option Retail, Suite: 556 3,627.00 $141,453 NNN + See assumption: Aug-2016 to Jul-2026 4.73% $3.25 15% Admin $36.00 NNN 120 Months $11,788 (Incl Subsidy)

Wildwood Kitchen & Ba OPTION $46.80 - - - - See method: - - Option Option, Suite: 556 3,627.00 $169,744 NNN + See assumption: Aug-2026 to Jul-2031 4.73% $3.90 15% Admin $36.00 NNN 60 Months $14,145 (Incl Subsidy)

Wildwood Kitchen & Ba OPTION $0.00 - - - - See method: - - Market Excluded from analysi 3,627.00 $0 NNN + See assumption: Aug-2031 to Jul-2036 4.73% $0.00 15% Admin $36.00 NNN 60 Months $0 (Incl Subsidy)

J Jill $29.91 - - - - See method: - - Option Retail, Suite: 561 4,225.00 $126,370 NNN + See assumption: Mar-2012 to Feb-2022 5.51% $2.49 15% Admin $38.00 NNN 120 Months $10,531 (J Jill)

J Jill OPTION $31.91 - - - - See method: - - Market Option, Suite: 561 4,225.00 $134,820 NNN + See assumption: Mar-2022 to Feb-2027 5.51% $2.66 15% Admin $38.00 NNN 60 Months $11,235 (J Jill)

Pure Barre $37.80 - - - - See method: - - Option Retail, Suite: 564 1,898.00 $71,744 NNN + See assumption: Oct-2017 to Oct-2022 2.47% $3.15 15% Admin $38.00 NNN 61 Months $5,979 (PureBarre)

Pure Barre OPTION $42.00 - - - - See method: - - Market Option, Suite: 564 1,898.00 $79,716 NNN + See assumption: Nov-2022 to Oct-2027 2.47% $3.50 15% Admin $38.00 NNN 60 Months $6,643 (PureBarre)

Paper Garden EXP 12/18 $43.80 Jan-2020 $46.13 - - See method: - - Market Retail, Suite: 565 1,100.00 $48,180 Jan-2021 $47.28 NNN + See assumption: Jan-2012 to Dec-2021 1.43% $3.65 15% Admin $40.00 NNN 120 Months $4,015 (Incl Subsidy)

36 • pavilions Argus Rent Roll Rate & Tenant Name Floor SqFt Amount per Changes Changes Months to Pcnt to Description Imprvmnts Commssns Assumption about Type & Suite Number Bldg Share Year per on to Abate Abate of Operating Rate Rate subsequent terms Lease Dates & Term Month Expense Amount Amount for this tenant

VACANT (566) $38.71 Oct-2020 $39.68 1 100.00% See method: $25.00 $11.19 Market Retail, Suite: 566 1,408.00 $54,504 Oct-2021 $40.67 13 100.00% NNN + 6.00% See assumption: Oct-2019 to Sep-2024 1.84% $3.23 Oct-2022 $41.69 25 100.00% 15% Admin $35,200 $15,757 $38.00 NNN 60 Months $4,542 Oct-2023 $42.73 37 100.00% (Incl Subsidy)

Pavilion Shoes and Gi MTM $17.16 ------Market Retail, Suite: 567 1,700.00 $29,172 See method: See assumption: Aug-2014 to Feb-2020 2.22% $1.43 GROSS $38.00 NNN 67 Months $2,431

Ristoranti Piatti $39.60 - - - - See method: - - Option Retail, Suite: 571 5,890.00 $233,244 NNN + See assumption: Jun-2002 to May-2022 7.68% $3.30 10% Admin $38.00 NNN 240 Months $19,437 (Piatti)

Ristoranti Piatti OPTION $44.52 - - - - See method: - - Market Option, Suite: 571 5,890.00 $262,223 NNN + See assumption: Jun-2022 to May-2027 7.68% $3.71 10% Admin $38.00 NNN 60 Months $21,852 (Piatti)

Julius Clothing $35.00 Sep-2019 $35.70 - - See method: - - Option Retail, Suite: 580 4,200.00 $147,000 Sep-2020 $36.41 NNN + See assumption: Sep-1999 to Aug-2022 5.47% $2.92 Sep-2021 $37.14 10% Admin $36.00 NNN 276 Months $12,250 (Julius)

Julius Clothing OPTION $39.41 Sep-2023 $40.59 - - See method: - - Market Option, Suite: 580 4,200.00 $165,528 Sep-2024 $41.81 NNN + See assumption: Sep-2022 to Aug-2027 5.47% $3.28 Sep-2025 $43.07 10% Admin $36.00 NNN 60 Months $13,794 Sep-2026 $44.36 (Julius)

Talbots VACATE $42.00 - - - - See method: - - ReAbsorb Retail, Suite: 581 7,600.00 $319,200 NNN + See assumption: Feb-2006 to Jan-2020 9.91% $3.50 10% Admin $42.00 NNN 168 Months $26,600 (Talbots)

Pavilions Car Wash NAP $12,600.00 Jan-2021 ******* - - - - Market Pad Site, Suite: 540 1.00 $12,600 See method: See assumption: Sep-2017 to Dec-2029 0.00% $1,050.00 GROSS /month Car Wash 148 Months $1,050

pavilions • 37 Argus Rent Roll

Niello Company NAP $6,000.00 ------Market Pad Site, Suite: OTH4 1.00 $6,000 See method: See assumption: Jan-2010 to Dec-2029 0.00% $500.00 GROSS 00/month Niello 240 Months $500

Talbot's space ASSUMED $49.81 Jul-2021 $51.31 1-5 100.00% See method: $47.15 $14.62 Market Retail, Suite: Qtr 6 2,533.33 $126,188 Jul-2022 $52.84 NNN + 6.00% See assumption: Jul-2020 to Jun-2025 3.30% $4.15 Jul-2023 $54.43 15% Admin $119,447 $37,042 $48.00 NNN 60 Months $10,516 Jul-2024 $56.06 (Incl Subsidy)

Talbot's space ASSUMED $50.12 Oct-2021 $51.62 1-5 100.00% See method: $47.15 $14.71 Market Retail, Suite: Qtr 7 2,533.34 $126,970 Oct-2022 $53.17 NNN + 6.00% See assumption: Oct-2020 to Sep-2025 3.30% $4.18 Oct-2023 $54.77 15% Admin $119,447 $37,272 $48.00 NNN 60 Months $10,581 Oct-2024 $56.41 (Incl Subsidy)

Talbot's space ASSUMED $50.43 Jan-2022 $51.94 1-5 100.00% See method: $48.33 $14.80 Market Retail, Suite: Qtr 8 2,533.33 $127,756 Jan-2023 $53.50 NNN + 6.00% See assumption: Jan-2021 to Dec-2025 3.30% $4.20 Jan-2024 $55.11 15% Admin $122,433 $37,502 $48.00 NNN 60 Months $10,646 Jan-2025 $56.76 (Incl Subsidy)

Total Occupied SqFt 73,063.00 Total Available SqFt 3,656.00

38 • pavilions pavilions • 39 40 • pavilions Tenant Profiles

pavilions • 41 Madam Butterfly | www.mbflagship.com

MB is a one-of-a-kind family-run clothing and accessory boutique now operated by the original shop founder’s daughters. Its styles and fashion offerings reflect the sophisticated tastes of its owners who are constantly looking for ways to expand their services which now include shopping by appointment, personal styling, and gift registries.

Ruth’s Chris Steak House | www.ruthschris.com

Ruth’s Hospitality Group operates a chain of fine dining restaurants with more than 100 locations in the United States, Canada, and Mexico. Founded in the 1960s, it is the largest luxury steakhouse operator in number of locations, operating income, and profits.

It’s A Small World | www.mbflagship.com

The oldest and most prestigious children’s clothing store in Sacramento, showcasing top international and American designer brands. Specializing in sizes from newborn to 14, the store is a popular destination for baby shower gifts and special occasions.

Hamilton Jewelers | www.hamiltonpavilions.com

Hamilton Jewelers has been offering some of the worlds’ finest timepieces and showcasing leading jewelry designers since 1946. They were one of the first tenants, having opened their Pavilions store in 1985, and are the exclusive Sacramento retailer for such celebrated Swiss timepieces as Cartier, Chopard, and Bell & Ross. They also specialize in custom and handcrafted designs, and their professional staff is devoted to exemplary customer service.

Chico’s and Soma Intimates | www.chicos.com

Chico’s is a publicly-traded apparel company founded in 1983 and headquartered in Ft. Myers, Florida. Subsidiary brands include Soma Intimates, Parrot Wings, Pazo, Inc. and others. For the last fiscal year the company reported earnings of $101-million on sales of $2.28-billion. Shareholder equity was $656-million.

42 • pavilions Café Bernardo | www.paragarys.com

The Paragary’s Restaurant Group operates nine restaurants in and around Sacramento under the brands Paragary’s, Café Bernardo, R15, Centro, Esquire Grill, Berkley Bar, and WikiBar. The Café Bernardo restaurant at Pavilions opened in 2013 and has been highly successful from the beginning, specializing in farm-to-fork and seasonal offerings that are delicious, carefully prepared and thoughtfully presented.

Williams-Sonoma | www.williams-sonoma.com

Williams-Sonoma is publicly-traded on the NYSE with the ticker WMS. Subsidiary brands include Pottery Barn, West Elm and others. They offer high-quality merchandise for every room in the home, although they are perhaps best known for their cookware, cutlery, and other kitchen products. The Pavilions store opened in 1998, and at 9,575 square feet is The Center’s largest tenant.

Studio 55 Salon Suites | www.studio55salonsuites.com

Studio 55 master-leases 6,510 square feet and then subleases individual suites to a wide variety of cosmetic, aesthetic, and medical practitioners. Some of the special services offered include hair styling, aesthetics (Botox, laser treatments, and fillers), wax and makeup consulting, and nails.

Patrick James | www.patrickjames.com

A purveyor of fine menswear since 1962, and a Pavilions tenant since 2011, Patrick James delivers classic looks to keep their customers’ wardrobes looking confident and modern. They offer a wide choice of men’s sport shirts, trousers, sweaters, leather jackets, activewear, footwear, and accessories from their own Patrick James and Reserve labels as well as a curated selection from designer brands such as Peter Millar, Bugatchi Uomo, True Grit, Tommy Bahama, Scott Barber, and Viyella.

Gregory Evrigenis, DDS | www.evrigenisorthodontics.com

Specializing in orthodontics, Dr. Evrigenis and his team are motivated by the positive changes they see both in their patients and their families. With outstanding academic credentials and more than 22 years in practice, Dr. Evrigenis is deeply involved in the community and is associated with the UC Davis Medical Center as well as being part of the clinical faculty at Stanford University Medical Center. pavilions • 43 Wildwood Kitchen & Bar | www.wildwoodpavilions.com

Elegant and beautifully lit, the Haines Brothers reportedly spent $2-million to create a dining environment that restaurant critics and customers alike have declared an unqualified success. Delicious food and a convivial atmosphere make this outstanding restaurant a popular destination for Sacramento diners. Wildwood Kitchen & Bar has been a Pavilions tenant since 2016. J. Jill | www.jjill.com

J.Jill is an upscale specialty retailer of women’s apparel and accessories. Its target customers are active, affluent women aged 35-55. Many of its offerings are private label, and are characterized by natural fibers and unique design details. In addition to its retail stores J.Jill also markets through a conventional catalogue and online. This very popular shop has been a tenant since 2012.

Pure Barre | www.purebarre.com

One of Pavilions’ newest tenants is Pure Barre, a fitness studio that promises to “transform your body” through a series of 45 to 50-minute total body workouts designed around the use of a barre, the wall-mounted bar commonly associated with ballet training. Featuring low impact isometric movements that focus on different parts of the body, barre sessions are fun and highly effective. Nothing makes you feel better than looking great.

Paper Garden | www.papergardenboutique.com

This charming boutique offers specialty gifts with a handmade flair such as custom invitations, Japanese washi paper, and embellishments to make your gift look and feel special. Paper Garden also offers classes where students can learn to make their very own paper creations. Paper Garden has been a tenant since 2013.

Ristoranti Piatti | www.piatti.com

A culinary landmark in Sacramento and at Pavilions since 2003, Piatti features a warm, welcoming atmosphere and delicious local Italian menu. Known for their open kitchens and stone hearth ovens, each Piatti has its own unique character exemplified by unpretentious design, rustic, flavorful cuisine, and friendly, professional service.

Julius Clothing | www.juliusclothing.net

Julius is a family-owned, top-tier fashion specialty store for men and women that has been in business since 1922. Among their customers are many celebrities, politicians, community leaders and well-known sports figures. They carry hard-to-find labels such as Ermenegildo Zegna and Armani Collezioni, as well as fashion-forward labels such as DKNY and Robert Rodriguez. Many of their lines are exclusive to their store in the Sacramento market.

44 • pavilions pavilions • 45 46 • pavilions Area Overview

pavilions • 47 Sacramento, California is the capital of the most populous state in America, and its roughly 2.2 million residents make Sacramento the 25th largest market in the country. The Sacramento MSA includes seven counties and it is the cultural and economic heart of the region. Its economy is characterized by a stable base of government employment, a well- educated labor pool, and living costs much more affordable than the cities and counties in the Greater San Francisco Bay and Silicon Valley areas.

Over the last two decades Sacramento’s government and business leaders have focused their efforts on creating more jobs in the private sector to achieve an optimized balance between private and public employment. A number of Bay Area tech companies have established a presence in Sacramento, citing affordability and freedom from potentially disruptive seismic activity. Public/private partnerships have been successful in helping the region develop and grow its technology community, and publicize the region’s competitive advantages. Health care companies such as Sutter, Kaiser, and Dignity Health, have thrived in Sacramento. Other key areas of growth are in the fields of agricultural/food sciences, biotechnology, and renewable energy.

Some of the Sacramento MSA’s competitive advantages include:

• Concentration of federal and state regulatory agencies, trade associations, and the executive and legislative branches of state government.

• Low costs of living and of doing business, with lower home prices and business occupancy costs.

• Well-educated workforce. In addition to the University of California Davis and California State University Sacramento, the region has a robust system of community colleges and vocational schools. The University of the Pacific’s highly-regarded McGeorge School of Law has a Sacramento campus as well.

• Strategic Location. The junction of Interstates 5 and 80 just north of downtown Sacramento put most of the western U.S. within a one- day drive by truck, a key logistics advantage. Sacramento is also well served by air, rail, and even a deep-water port in West Sacramento, 10 minutes from the CBD.

48 • pavilions Major Employers

State Government (Non-Education) ��88,700

State Government (Education)...... 31,300

Local Government (Non-Education) ��47,200

Local Government (Education)...... 59,200

Federal Government...... 16,200

Sutter Health Sacramento Region ��15,014

Kaiser Permanente...... 14,368

U. C. Davis Health System...... 10,149

Dignity Health...... 7,853

Intel, Corp...... 6,000

Raley’s, Inc...... 5,597

Apple, Inc...... 4,000

Safeway...... 3,917

VSP Global...... 2,906

Wells Fargo...... 2,891

pavilions • 49 Downtown Renaissance Downtown and Midtown Sacramento are experiencing unprecedented growth in residential and commercial development. Construction of the $558 million Sacramento Entertainment and Sports Complex created abundant new activity and attracted the attention of investors and developers not previously active in this market. Now called Golden 1 Center, the Arena opened in October 2016 and features high-tech innovations and farm-to-fork food offerings that rival those in Sacramento’s many fine restaurants. In addition to Kings games the Arena’s state-of-the art design makes it a perfect venue for concerts and other non-sporting events – a total of ±240 per year including Kings games. Other significant developments in downtown Sacramento include the following.

×× DOCO. Adjacent to the arena, the partnership that owns the Sacramento Kings has constructed a mixed-use development called Downtown Commons (DOCO) that includes a 250-room Kimpton hotel, 475,000 square feet of office space, 350,000 square feet of retail, and will eventually include up to 500,000 square feet of residential.

×× Sacramento Railyards. Formerly a Union Pacific rail yard, this 244-acre development reportedly is the largest infill project in the country. It sits at the northern edge of the city where substantial infrastructure improvements are presently underway. The Railyards will nearly double the size of “downtown”, with planned developments to include housing, parks, retail, entertainment, office space, theaters, and hotels. Kaiser Permanente has purchased 18 acres near Interstate 5 in the northwest corner of the Railyards for a proposed hospital.

×× Developments beyond the immediate “arena zone” are feeling the economic glow as well. More than 25 projects in Downtown and Midtown are under construction or in the planning stages, and the City is rushing to hire additional staff to help manage the swell of new development and construction. The sheer volume of commercial activity is a clear signal that Sacramento is presently, and for the foreseeable future, a hot market.

To review a summary of current and planned development activity in downtown Sacramento, visit the website of the Downtown Sacramento Partnership and view their Emerging Projects page: http://downtownsac.org/developments/emerging-projects/ page/1/

50 • pavilions pavilions • 51 52 • pavilions Market Trends

pavilions • 53 Sacramento Neighborhood The Sacramento retail market contains 48.9 million square feet According to data from CoStar Group, within a one-mile radius of Pavilions there are of retail space. In 2017 the market absorbed a record-breaking 847,000 square feet of shopping center retail space with a reported vacancy rate of 1.1-million square feet which drove the vacancy rate down 8.3%. 27,000 sf of that, however, is the former Fresh Market which left the space but to 8.5%. Through the third quarter of 2018 absorption has continues to pay healthy rent. Adjusting for that, the true vacancy rate is approximately continued, although at a less breathtaking pace, and vacancy 5.1%. There is presently no new construction, but Petrovich Development has obtained is now down to its lowest level in more than a decade at 7.9%. approval to build approximately 40,000 square feet of retail on the southwest corner Average retail rents have increased 5.3% thus far in 2018. of Howe Avenue and Fair Oaks Blvd.

LeaseFOR INFORMATION: Comps Retail Lease Transactions Pavilions Center

Property Information Lease Comp Information Additional Information Loc Type: 1 Arden Creek Town Center Transaction SF: 1,715 Lessee: Burgerim, Lao Lee 1730 - 1738 Watt Avenue Activity Type: New Lease Property Class: Lessor: MGP XI Properties, LLC Sacramento, CA 95864 Actual Rate: $3.25 NEG TL Floors: Tenant Rep: CBRE, Josh Schmidt Landlord Rep: Suite: 107 TIs: $45.00/sf Park Ratio: Free Rent: 6 Months NNN Charges: $0.57/sf Rent Steps: 7-66: $3.25, 67-126: $3.66 Bldg / Site Size: 96,500 SF Sublease: No Notes: Restaurant (quick serve) Property Dev Type: Neighborhood Center Trans / Occ Date: 08/28/18 : 11/01/18 Property Status: Existing Lease Term: 126 Months Year Built / Renovated: 1953 Lease Exp Date: 04/30/29 Trans ID: 100554357 Loc Type: 2 Campus Oaks Town Center Transaction SF: 1,000 Lessee: Supercuts, Inc. SE Blue Oaks Blvd Activity Type: New Lease Property Class: Lessor: Armstrong Co. Roseville, LLC Roseville, CA 95747 Actual Rate: $3.50 NNN TL Floors: Tenant Rep: CBRE, Scott Carruth No Image Available Landlord Rep: Suite: TIs: $10.00/sf Park Ratio: Rent Steps: 1-60: $3.50 NNN Charges: $0.80/sf Notes: Bldg / Site Size: 244,365 SF Sublease: No Property Dev Type: Neighborhood Center Trans / Occ Date: 10/01/18 : 11/01/18 Property Status: Planned Lease Term: 60 Months Year Built / Renovated: 2019 Lease Exp Date: 11/01/23 Trans ID: 100558242 Loc Type: 3 Creekside Town Center Transaction SF: 2,573 Lessee: Club Champion LLC 1180 - 1256 Galleria Blvd Activity Type: New Lease Property Class: Lessor: CPT Creekside Town Center LLC Roseville, CA 95678 Actual Rate: $2.67 NNN TL Floors: Tenant Rep: Vestar Development Co., Rick Hearn Landlord Rep: CBRE, Chris Campbell Suite: 130 TIs: $30.00/sf Park Ratio: Rent Steps: 1-61: $2.67 NNN Charges: $0.80/sf Notes: Sporting Goods Bldg / Site Size: 373,791 SF / 41 acres Sublease: No Property Dev Type: Power Center Trans / Occ Date: 07/26/18 : 07/15/18 Property Status: Existing Lease Term: 61 Months Year Built / Renovated: 2000 Lease Exp Date: 07/30/23 Trans ID: 100549835

54 • pavilions

We obtained the information above from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty or representation about it. It is submitted subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice. We include projections, opinions, assumptions or estimates for example only, and they may not represent current or future performance of the property. You and your tax and legal advisors should conduct your own investigation of the property and transaction.

Retail Lease Transactions (Image) 1 of 6 11/20/2018 Lease Comps FOR INFORMATION: Retail Lease Transactions Pavilions Center

Property Information Lease Comp Information Additional Information Loc Type: 4 Delta Shores Transaction SF: 5,052 Lessee: Comcast and/or Xfinity Interstate 5 Activity Type: New Lease Property Class: Lessor: M&H VI Projects, LLC Sacramento, CA 95823 Actual Rate: $3.75 NNN TL Floors: Tenant Rep: CBRE, Heath Kastner No Image Available Landlord Rep: Merlone Geier Management, Soraya Suite: 100 TIs: $40.00/sf Park Ratio: Sharifi-Slaughter NNN Charges: $0.53/sf Free Rent: 4 months Bldg / Site Size: 1,000,000 SF Sublease: No Rent Steps: 5-42: $3.75, 43-84: $4.13 Property Dev Type: Power Center Trans / Occ Date: 03/29/17 : 07/01/17 Notes: Other Property Status: Existing Lease Term: 84 months Year Built / Renovated: 2017 Lease Exp Date: 06/30/24 Trans ID: 100470205 Loc Type: 5 Delta Shores Transaction SF: 1,101 Lessee: Joint Ventures LLC Interstate 5 Activity Type: New Lease Property Class: Lessor: M&H VI Projects, LLC Sacramento, CA 95823 Actual Rate: $3.75 NNN TL Floors: Tenant Rep: CBRE, Heath Kastner No Image Available Landlord Rep: Merlone Geier Management, Soraya Suite: 120 TIs: $20.00/sf Park Ratio: Sharifi-Slaughter NNN Charges: $0.65/sf Free Rent: 4 months Bldg / Site Size: 1,000,000 SF Sublease: No Rent Steps: 5-64: $3.75 Property Dev Type: Power Center Trans / Occ Date: 02/01/17 : 06/01/17 Notes: Medical Property Status: Existing Lease Term: 60 months Year Built / Renovated: 2017 Lease Exp Date: 05/30/22 Trans ID: 100455539 Loc Type: 6 Elk Grove Village Transaction SF: 2,400 Lessee: Arbys Restaurant 9286 Elk Grove Boulevard Activity Type: New Lease Property Class: Lessor: Elk Grove Village Elk Grove, CA 95624 Actual Rate: $2.75 NNN TL Floors: Tenant Rep: NONE Landlord Rep: CBRE, Rick Martinez Suite: TIs: $40.00/sf Park Ratio: Free Rent: 9 months NNN Charges: $0.73/sf Rent Steps: 10-69: $2.75, 70-129: $3.08 Bldg / Site Size: 115,000 SF / 10 acres Sublease: No Notes: Fast Food Property Dev Type: Community Center Trans / Occ Date: 01/19/18 : 01/19/18 Property Status: Existing Lease Term: 130 months Year Built / Renovated: 1986 / 2005 Lease Exp Date: 10/31/28 Trans ID: 100518876 Loc Type: 7 Fountains at Roseville Transaction SF: 4,254 Lessee: Comcast 1120 Roseville Parkway Activity Type: New Lease Property Class: Lessor: The Roseville Fountains Roseville, CA 95678 Actual Rate: $4.25 NNN TL Floors: Tenant Rep: CBRE, Heath Kastner No Image Available Landlord Rep: Retail West, Ariel Fox Suite: F-1 TIs: $25.00/sf Park Ratio: Free Rent: 4 months NNN Charges: $1.23/sf Rent Steps: 5-16: $4.25, 17-28: $4.38, 29-40: Bldg / Site Size: 306,478 SF Sublease: No $4.51, 41-52: $4.64, 53-64: $4.78, 65-76: Property Dev Type: Lifestyle Center Trans / Occ Date: 05/04/17 : 07/01/17 $4.93, 77-88: $5.07 Notes: Property Status: Existing Lease Term: 88 months Year Built / Renovated: 2008 Lease Exp Date: 10/31/24 Trans ID: 100474652

Retail Lease Transactions (Image) 2 of 6 11/20/2018 LeaseFOR INFORMATION: Comps Retail Lease Transactions Pavilions Center

Property Information Lease Comp Information Additional Information Loc Type: 8 Howe 'Bout Arden Transaction SF: 1,717 Lessee: AhiPoki Bowl 2100 Arden Way Activity Type: New Lease Property Class: Lessor: SY Arden Way LLC Sacramento, CA 95825 Actual Rate: $3.35 NNN TL Floors: 2 Tenant Rep: CBRE, Kelly Rule Landlord Rep: The Edwards Company, Shari Suite: 50 TIs: $25.00/sf Park Ratio: Dorenkamp NNN Charges: $0.58/sf Rent Steps: 1-60: $3.35, 61-120: $3.69 Bldg / Site Size: 268,422 SF / 9 acres Sublease: No Notes: Full Service Property Dev Type: Community Center Trans / Occ Date: 08/01/17 : 09/01/17 Property Status: Existing Lease Term: 84 months Year Built / Renovated: 1988 Lease Exp Date: 08/31/24 Trans ID: 100483364 Loc Type: 9 Laguna Promenade Transaction SF: 1,700 Lessee: Peet's Coffee 7101 - 7221 Elk Grove Boulevard Activity Type: New Lease Property Class: Lessor: Laguna Promenade LLC Elk Grove, CA 95758 Actual Rate: $3.25 NNN TL Floors: Tenant Rep: Galleli Real Estate, Jeff Hagan Landlord Rep: CBRE, Josh Schmidt Suite: 101 TIs: $50.00/sf Park Ratio: Rent Steps: 1-60: $3.25, 61-120: $3.58 NNN Charges: $0.23/sf Notes: Coffee/Tea Bldg / Site Size: 100,941 SF / 9.59 acres Sublease: No Property Dev Type: Neighborhood Center Trans / Occ Date: 08/04/17 : 01/01/18 Property Status: Existing Lease Term: 120 months Year Built / Renovated: 2003 Lease Exp Date: 12/31/27 Trans ID: 100484691 Loc Type: 10 Loehmann's Plaza Transaction SF: 2,040 Lessee: Sutter Medical Foundation 2435 - 2581 Fair Oaks Boulevard Activity Type: New Lease Property Class: Lessor: Peter P. Bollinger Investment Company Sacramento, CA 95825 Actual Rate: $2.50 NNN TL Floors: Tenant Rep: CBRE, Chris Campbell Landlord Rep: CBRE, Craig Burress Suite: 2451 TIs: $40.00/sf Park Ratio: Free Rent: 4 Months NNN Charges: $0.83/sf Rent Steps: 5-64: $2.50 Bldg / Site Size: 136,741 SF Sublease: No Notes: Offices of Physicians Property Dev Type: Community Center Trans / Occ Date: 09/28/18 : 12/01/18 Property Status: Existing Lease Term: 64 Months Year Built / Renovated: 1987 Lease Exp Date: 03/30/24 Trans ID: 100555667 Loc Type: 11 Lyon Village Transaction SF: 880 Lessee: YoYo Yogurt 2580 Fair Oaks Boulevard Activity Type: New Lease Property Class: Lessor: Sacramento, CA 95825 Actual Rate: $3.10 TL Floors: Tenant Rep: Landlord Rep: Suite: TIs: As Is Park Ratio: Free Rent: 4 months NNN, CAM: Rent Steps: 5-16: $3.10, 17-28: $3.19, 29-40: Bldg / Site Size: 35,952 SF Sublease: No $3.29, 41-52: $3.39, 53-64: $3.49, 65-75: Property Dev Type: Strip/In-Line Center Trans / Occ Date: 02/01/17 : 02/01/17 $3.59, 76-87: $3.70 Notes: Frozen Yogurt Property Status: Existing Lease Term: 88 months Year Built / Renovated: 1950 / 1988 Lease Exp Date: 05/31/24 Trans ID: 100455812

Retail Lease Transactions (Image) 3 of 6 11/20/2018 56 • pavilions Sale Comps

The Village @ 17th Street Pinole Ridge Rocky Ridge 4720-5010 Elk Pavilions Pacheco Plaza Eastlake Terraces Address Nellie Gail Ranch Promenade Shopping Ctr. Town Center Grove Blvd. Sacramento Novato San Diego Laguna Hills Costa Mesa Pinole Roseville Elk Grove

Date Sold Subject 12/28/17 12/1/17 8/21/17 7/13/17 6/19/17 4/18/17 4/3/17 Vintage Real Wohl Investment Angelo, Gordon SyWest J. Kieckhefer M. Friedman Panattoni Seller Danahue Schriber Estate Co. & Co. Development Chandler, AZ Sacramento Sacramento Los Angeles Newport Beach Los Angeles San Rafael JH Real Estate Pinole Ridge Mall, TN Retirement CH Realty ROIC California CH Realty VII Phillips Edison Purchaser TBD Partners LLC System Dallas San Diego Dallas Cincinnati Newport Beach Millbrae Nashville Ruth's ChrisSteak Gatehouse Home Walgreens, Nugget Market, Smart & Final, Pinole Dental, Sprouts, Raley's, Starbucks, House, Chico's, Furn., Mi Casa, Starbucks, Navy Tenant(s) Chase Bank, 20 Cycle Bar, BLS Nail Subway, Kinko's, Starbucks, Wells Jamba Juice, Hamilton Jewelers, Lola Rouge, Federal, Chase other tenants Resort AutoZone Fargo, AT&T Chase Bank Williams-Sonoma Starbucks Bank

Built 1984 1967 1982/2015 1961/ren. 2005 2004 2003 1996/2000 2006

Occupancy 95% 92% 97% 100% 100% 89% 96% 100%

Price $25,625,000 $31,000,000 $46,000,000 $24,250,000 $40,850,000 $19,115,619 $36,000,000 $38,100,000 Cap Rate 7.50% unreported 6.13% 6.55% 6.00% 6.43% unreported 5.75% Actual Cap Rate n/a n/a n/a n/a n/a 7.22% n/a n/a Proforma Property Size 76,719 70,552 98,976 55,840 60,972 42,073 97,237 103,853 Price/SF $334 $439 $465 $434 $670 $454 $370 $367

pavilions • 57 Downtown

California State University Sacramento

American River

Howe Ave Campus Commons University Ave Fairbanks Blvd

Howe Ave

Rio Del Ore 58 • pavilions Racquet Club pavilions • 59 SACRAMENTO, CALIFORNIA

RANDY GETZ STEVE EDWARDS Executive Vice President President Lic. 00828903 Lic. 00977718 +1 916 446 8287 +1 916 277 8123 [email protected] [email protected]

CBRE, Inc. The Edwards Company 500 Capitol Mall 301 University Avenue Suite 2400 Suite 140 Sacramento, CA 95814 Sacramento, CA 95825

© 2018 CBRE, Inc. All rights reserved. This information has been obtained from sources believed reliable, but has not been verified for accuracy or completeness. Any projections, opinions, or estimates are subject to uncertainty. The information may not represent the current or future performance of the property. You and your advisors should conduct a careful, independent investigation of the property and verify all information. Any reliance on this information is solely at your own risk. CBRE and the CBRE logo are service marks of CBRE, Inc. and/or its affiliated or related companies in the United States and other countries. All other marks displayed on this document are the property of their respective owners. Photos herein are the property of their respective owners and use of these images without the express written consent of the owner is prohibited. PMStudio_December2018 60 • pavilions