LEAGUE CITY, | SINGLE-TENANT NNN OPPORTUNITY

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RYAN WEST WILLIAM DUNCAN Senior Managing Director Real Estate Analyst (713) 852-3535 (713) 852-3435 [email protected] [email protected] HFFLP.COM PROPERTY HIGHLIGHTS PROPERTY OVERVIEW • Brand New NNN Asset with Contractual Rental Increases and Zero Landlord LOCATION SEQ of League City Pkwy & South Shore Blvd Responsibilities League City, Texas 77573

• Dual Grocery-Anchored by a 98,000 Square Foot HEB and a 77,000 Square Foot NOI $75,000 Kroger Located Adjacent to the East and Directly Across the Street to the North | Two of Texas’ LAND AREA ±40,000 SF (±0.9 Acres) Most Dominate Grocers BUILDING AREA ±1,395 SF • Proven Retailer with More Than 60 Years of Business and Over 3,500 Locations in 44 States YEAR BUILT Under Construction (Estimated 3Q 2016) • Experienced Franchisee With Over 40 Locations Across Texas and Estimated Revenue of $50 Million PARKING TBD – Currently Under Construction (est. 5.00/1,000 SF) • Outstanding Demographics | Nearly 121,000 Residents are Located within a Five-Mile Radius TYPE OF OWNERSHIP Fee Simple with Average Income of over $119,000 Within a 1-Mile Radius. TENANT SDI 96 League City, LLC • Surrounded by Master Planned Communities Including Tuscan Lakes with More Than 1,800 Single Family Homes and South Shore Harbour with Over 1,100 Single Family Homes LEASE TYPE Absolute NNN

ROOF AND STRUCTURE Tenant Responsible • Exceptional Population Growth | 44.8% Growth since 2000 | An Additional 9.51%

Projected by 2021 RENT COMMENCEMENT Estimated August 2016

• Significant Capital Investment by Tenant | 100% Ground-Up Development Costs Paid By LEASE EXPIRATION DATE Estimated August 2026 Tenant, Solidifying Their Occupancy and Displaying Commitment to the Property TERM REMAINING ON LEASE 10 Years REPRESENTATIVE IMAGE OPTIONS Four (4), Five (5) Year Options

RENT ESCALATIONS YEARS ANNUAL RENT 6-10 $82,500

RENEWAL OPTIONS YEARS ANNUAL RENT 11-15 $90,750 16-20 $99,825 21-25 $109,806 26-30 $120,786

2 RETAILER PROFILE TENANT PROFILE

SDI 96 LEAGUE CITY, LLC

COMPANY: SDI 96 League City, LLC PUBLIC/PRIVATE: Public OWNER/OPERATOR: Garza Management Corporation 2015 REVENUE: 647.7 MM PUBLIC/PRIVATE: Private # OF STORES: 3,500 WEBSITE: www.sonicdrivein.com

SONIC, America's Drive-In is the nation's largest drive-in restaurant chain serving more than 3 The tenant, SDI 96 League City, LLC., is owned and operated by Garza Management Corporation, million customers every day. It is 89% franchised and has a unique franchise agreement with a a business management company based in Stafford, Texas. Garza Management Corporation is a royalty rate that rises and falls with changes in same-store sales growth, which helps increase the privately held company founded in 2011 by president and owner Joel Garza, with a 2015 annual operating leverage in the model. Sonic has roughly 3,500 stores in 44 states in the United States. It revenue estimated at $50 million. The company manages over 40 properties in Texas, including also reported a 2015 revenue of $647.7 Million and has a market capitalization of $1.198 Billion. Over numerous Sonic Drive-In’s. For Parkway Commons Sonic, the company will be investing a the past 60 years, SONIC has differentiated itself with its drive-in stalls, diverse menu, and more significant amount of capital to fund 100% of development costs of the project, solidifying their than 1.3 million drink combinations and friendly service by iconic skating carhops. It is a publicly occupancy and displaying their long-term commitment to the Property. traded company over the NASDAQ with ticker symbol: (SONC).

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3 PROPERTY OVERVIEW

SITE PLAN

South Shore Boulevard | 8,680 VPD 8,680 | Boulevard Shore South

77,000 SF

League City Parkway (SH 9 8) | 22,040 VPD

Strip Retail To-be-Built (Not A Part)

±0.9 Acres

98,000 SF

eacrest Boulevard

S

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4 105 6 CLEVELAND WASHINGTON 105 CONROE 105 770 336 SARATOGA

45 69 MAGNOLIA 242 321 146 PINEHURST THE National 105 WOODLANDS NEW CANEY Wildlife Refuge 290 770 SOUR LAKE

TOMBALL PORTER HEMPSTEAD 326 6 SPRING WALLER LIBERTY DAYTON HUFFMAN 90 159 249 HUMBLE ATASCOCITA George Bush CYPRESS International BELLVILLE Airport LOCATION AERIAL 8 59 99 ALDINE CROBY 61 CLEAR CREEK INTERMEDIATE SCHOOL JERSEY VILLAGE 6 45 290 69 90 MONT BELVIEU HIGHLANDS 10

65 SEALY BROOKSHIRE KATY 10 10 HUNTERS CHANNELVIEW 330 George Bush JACINTO CITY Park CREEK VILLAGE 99 CLEAR CREEK HIGH SCHOOL FM 518 CINCO RANCH GALENA PARK BAYTOWN 59 BELLAIRE 225 DEER PARK 2,400 Students MISSION BEND 610 PASADENA SOUTH SHORE VILLAGE 99 MEADOWS LA PORTE PLACE 90 146 PECAN GROVE William P. Hobby 8 $220k - $330k 36 SUGAR LAND Airport Anahuac National Louisiana Avenue Wildlife Refuge RICHMOND 69 PEARLAND SEABROOK 90 ROSENBERG GREATWOOD FRESNO WEBSTER KEMAH MEADOW BEND 4 EAST BERNARD FRIENDSWOOD 10 LEAGUE CITY BACLIFF East Bay 6 146 BOLIVAR $120k - $200k 60 SAN LEON GOAT ISLAND PENINSULA MANVEL DICKINSON AVENUE AT ALVIN 3 NEEDVILLE 197 SOUTH SHORE 288 SANTA FE TEXAS CITY SOUTH SHORE HARBOR ROSHARON HITCHCOCK 36 APARTMENTS 35 1,101 Homes WHARTON GALVESTON 59 $170k - $400k 60 MAR BELLA 547 Homes CLEAR FALLS $200k - $450k LEAGUE CITY GOFORTH HIGH SCHOOL INTERMEDIATE ELEMENTARY AVENUE AT BAYRIDGE TUSCAN LAKES INTERMEDIATE BAYRIDGE SCHOOL TUSCAN LAKES APARTMENTS $275k - $900k

AVENUE AT D P TUSCAN LAKES RAVELIO AT V 52 WHISPERING RANCH TUSCAN LAKES ,5 74 310 Homes | 1 THE VILLAGE y kwa $420k - $650k AT TUSCAN LAKES Par e City Leagu WATERSHED CHURCH

HOMETOWN HEROES PARK

5 LOCATION OVERVIEW

Shadow Anchored by two of the largest grocery stores in Texas, the recently developed 98,000 square foot HEB and recently expanded 77,000 square foot Kroger, Parkway Commons Sonic is ideally positioned on the League City Parkway (Highway 96) in one of the fastest growing markets in the state. The site is located within 3 miles of over six master-planned communities, including South Shore Harbour, Tuscan Lakes, Whispering Lakes Ranch, Meadow Bend 4, Mar Bella and South Shore Village. Having been fueled by massive employment growth in aerospace (NASA), petrochemical, and medical industries, this area of Houston is one of the leading markets for residential expansion with over 145% residential growth since 2000 within a 1 mile radius of the Property. The three largest master-planned communities within the immediate of the Property include Tuscan Lakes, South Shore Harbour and Marbella. Tuscan Lakes is an 870 acre mixed-use, master- Parkway Commons Sonic is positioned just east of the signaled intersection of the League City planned community developed by Johnson Development Corporation with over 1,850 single family Parkway and South Shore Boulevard, with recorded traffic counts of 174,552 vehicles per day. The homes. The community includes active adult living and 80 acres of multi-family dwellings for an League City Parkway (Highway 96) is the major east/west thoroughfare of League City connecting estimated 8,000 residents, with single family homes priced from $150,000 to over $1 million. South to I-45 to the west and Highway 146 to the east, providing tremendous mobility throughout virtually Shore Harbour is a 2,200 acre master planned community with roughly 1,100 single family homes every major trade area in the city. and house prices in the subdivision ranging from $170,000 to $400,000. The master-planned community of Marbella comprises a total of 482 acres, with 547 single family homes and house prices ranging from $200,000 to $450,000.

DESCRIPTION 1 MILE RADIUS 3 MILE RADIUS 5 MILE RADIUS POPULATION 2021 Projection 8,904 64,212 132,389 2016 Estimate 7,907 58,614 120,898 2010 Census 6,473 51,151 105,677 2000 Census 2,922 36,983 80,472 Growth 2016 - 2021 12.6% 9.6% 9.5% Growth 2010 - 2016 22.1% 14.6% 14.4% Growth 2000 - 2010 121.5% 38.3% 31.3% 2016 Est. Median Age 35 36 37 2016 Est. Average Age 34 37 38 Households 2021 Projection 2,367 16,826 34,470 2016 Estimate 2,120 15,411 31,500 2010 Census 1,800 13,556 27,558 2000 Census 809 9,827 21,290 Growth 2016 - 2021 11.7% 9.2% 9.4% Growth 2010 - 2016 17.7% 13.7% 14.3% Growth 2000 - 2010 122.6% 37.9% 29.4% INCOME 2016 Est. Average Household Income $119,446 $96,999 $95,564 2016 Est. Median Household Income $104,308 $77,514 $72,773 HOUSING VALUE 2016 Est. Median All Owner-Occupied Housing Value $254,515 $214,201 $199,431

6 The Property is situated within the Clear Creek Independent School District (CCISD), which serves most of the Area and some other neighboring parts of the Houston metropolitan area. CCISD is the 29th largest school district in Texas, spanning 103 square miles and serving over 41,000 students. The district was founded in 1948 and operates 44 distinct campuses, consisting of 5 high schools, 10 intermediates, 26 elementary schools, and 3 alternative campuses, with a total staff of 4,963 to date. This school district is also poised to grow from the influx of people as nearby master-planned communities continue to grow. The schools nearest Sonic, which will have the most direct impact on the Property, are Clear Falls High School (less than 1 mile), Bayside Intermediate School (less than 1 mile), League City Intermediate School (2.5 miles), Clear Creek High School (3.5 miles) and Clear Creek Intermediate School (3.5 miles).

League City has emerged as one of the healthiest job markets in the city, as its local demand drivers of the aerospace, petrochemical and health care industries were among the city’s leading areas of job growth and financial stability in 2015. The largest local employer, NASA’s Lyndon B Johnson Space Center (“JSC”), has 14,000 personnel with an average salary of $103,000. JSC’s workforce continues to grow as evidenced by a recent $4.2 billion Boeing contract win. The area health care industry is expanding as exemplified by the nearby UTMB League City campus hiring 200 new medical professionals this year. Eventually 2.9 million square feet of space will be built on the 62-acre campus. Webster, a neighboring municipality referred to as the “Medical Center of the South”, has more than 25 medical facilities and a growing workforce of over 4,000. The Port of Houston and Houston Ship Channel is a major Houston MSA employer with 54,000 jobs and is undergoing $35 billion in improvements in anticipation of the Panama Canal expansion. The Houston Ship Channel is part of the U.S. Petrochemical Belt, where $90 billion of new plants are underway that are not dependent upon oil prices.

7 HOUSTON SOUTHEAST RETAIL OVERVIEW

Total Percent Total Net Sq. Ft. Sq. Ft. Total • Medistar Corp. purchased 177 acres in Webster from ExxonMobil for a space-themed, mixed- Total Avg. Gross Submarket Rentable Occupied Absorption Under Delivered Deliveries Buildings Rents use development dubbed ‘SpaceWalk’. The project is expected to cost more than $500 mil- Sq. Ft. Overall T-12 Mo. Construction 4Q 2015 T-12 Mo. lion. Phase I will include a 10,000-17,000 seat amphitheater, hotel and conference center, Overall Houston 12,481 321,434,295 94.50% 3,320,113 2,481,117 602,528 2,682,192 $15.56 retail and dining, and phase II is planned to include retail, dining and additional entertainment Southeast 1,972 50,286,887 93.90% 300,814 461,736 108,088 218,622 $14.17 venues. It is located next to a new TopGolf, and Ellington Airport, which recently received a During the recent U.S. shale oil boom, advances in drilling technology, such as hydraulic fractur- spaceport designation. [Houston Business Journal, 8/12]

ing and directional drilling helped the U.S. return to preeminence as the world’s largest producer • Turfway FEC and Mickey Gilley plan to develop a mixed-use sports and entertainment district of crude oil and natural gas, supplanting both Saudi Arabia and Russia, respectively, in 2014. called the La Porte Town Center in La Porte, TX, to include a new 50,000-55,000-SF Gil- As oil and natural gas prices began their steady decline from fourth quarter 2014 peaks of over ley-themed bar. The immensely popular honky tonk, which was located in nearby Pasadena, $100/bbl and over $6/MMBtu to $29/bbl and $2/MMBtu today (as of January 22, 2016), petro- drew national attention in the 1980s as it was a central location in the movie "Urban Cow- chemical activity around the Houston Ship Channel boomed. The low price feedstocks saw the boy", and was destroyed by fire 20 years ago. At a cost of $55 million, the district will include return of the U.S. as one of the most attractive locations in the world for refining. 50,000 SF of retail space, a 20,000 SF conference, theater and museum center, 5,000 SF of Recent retail headlines – surrounding area: office space, a 114-room hotel, a mini-golf course and water park. [Houston Business Journal, • Ley-Wilson Development and H5 Ventures are developing the 24-acre, 169,000 SF Market [12/11/2015]

at Crenshaw shopping center on Beltway 8 between Crenshaw Road and Fairmont Parkway Population 1 Mile 3 Mile 5 Mile in Pasadena (Southeast Houston). The property's first phase of 109,000 SF is more than 90% 2015 Total Population: 13,295 124,620 225,506 pre-leased and expected to deliver in 3Q. Phase II will break ground in 3Q, and its expected 2020 Population: 14,339 134,239 243,583 completion date is 2Q 2016. [GlobeSt, 8/14] Pop Growth 2015-2020: 7.85% 7.72% 8.02% Average Age: 34.4 34.6 33.8 • H-E-B opened a new 57,600-SF store in Texas City, which is double the size of the existing Households store it replaced [Houston Chronicle, 9/18] 2015 Total Households: 4,729 42,189 73,212 • A partnership led by Fidelis Realty HH Growth 2015-2020: 7.89% 7.78% 8.05% Median Household Inc: $45,360 $50,031 $48,525 Partners acquired the 1.2 million-SF Avg Household Size: 2.8 3 3.1 San Jacinto Mall from Triyar, a South- 2015 Avg HH Vehicles: 2 2 2 ern California-based investment Housing group, and envisions its redevel- Median Home Value: $93,089 $112,303 $110,327 opment as a 1 million SF open-air Median Year Built: 1974 1974 1974 shopping center. The mall’s existing anchors – Macy’s, J.C. Penney and Sears – own their own sites and plan to stay, and the developer will work with them on the redevelopment. The mall is located on a 107-acre site in Baytown, is 70% occupied and was in need of repairs. The acquisition represented a unique investment oppor- tunity, due to the mall’s existing status as a regional retail destination and recent petrochem- ical-driven growth in the area.

8 RETAIL INVESTMENT SALES

RYAN WEST WILLIAM DUNCAN HFF L.P. Senior Managing Director Real Estate Analyst 9 Greenway Plaza Tel (713) 852-3535 Tel (713) 852-3435 Suite 700 [email protected] [email protected] Houston, TX 77046 T. 713.852.3500 F. 713.527.8725 hfflp.com

Holliday Fenoglio Fowler, L.P. acting by and through Holliday GP Corp a Texas licensed real estate broker (“HFF”). This Offering Memorandum has been prepared by HFF for use by a limited number of parties and has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it, and make no guarantee, warranty or representation about it. It is your responsibility to confirm, independently, its accuracy and completeness. All projections have been developed by HFF, Owner and designated sources, are based upon assumptions relating to the general economy, competition, and other factors beyond the control of Owner, and therefore are subject to variation. No representation is made by HFF or Owner as to the accuracy or completeness of the information contained herein, and nothing contained herein is or shall be relied on as a promise or representation as to the future performance of the property. Although the information contained herein is believed to be correct, Owner and its employees disclaim any responsibility for inaccuracies and expect prospective purchasers to exercise independent due diligence in verifying all such information. Further, HFF, Owner and its employees disclaim any and all liability for representations and warranties, expressed and implied, contained in, or for omissions from, the Offering Memorandum or any other written or oral communication transmitted or made available to the recipient. The Offering Memorandum does not constitute a representation that there has been no change in the business or affairs of the property or Owner since the date of preparation of the Offering Memorandum. Analysis and verification of the information contained in the Offering Memorandum is solely the responsibility of the prospective purchaser. Additional information and an opportunity to inspect the property will be made available upon written request to interested and qualified prospective investors. Owner and HFF each expressly reserve the right, at their sole discretion, to reject any or all expressions of interest or offers regarding the property and/or terminate discussions with any entity at any time with or without notice. Owner shall have no legal commitment or obligations to any entity reviewing this Offering Memorandum or making an offer to purchase the property unless and until such offer is approved by Owner, a written agreement for the purchase of the property has been fully executed, delivered and approved by Owner and its legal counsel, and any obligations set by Owner thereunder have been satisfied or waived. This Offering Memorandum and the contents, except such information, which is a matter of public record or is provided in sources available to the public, are of a confidential nature. By accepting this Offering Memorandum, you agree that you will hold and treat it in the strictest confidence, that you will not photocopy or duplicate it, that you will not disclose this Offering Memorandum or any of the contents to any other entity (except to outside advisors retained by you, if necessary, for your determination of whether or not to make a proposal and from whom you have obtained an agreement of confidentiality) without the prior written authorization of Owner or HFF and that you will use the information in this Offering Memorandum for the sole purpose of evaluating your interest in the property and you will not use the Offering Memorandum or any of the contents in any fashion or manner detrimental to the interest of Owner or HFF If you have no interest in the property, please return the Offering Memorandum forthwith.