WEST SALEM, OREGON Overview

ACTUAL BUILDING | CONCEPTUAL SIGNAGE

Mud Bay WEST SALEM, OREGON Overview

Mud Bay

525 9TH STREET NW SALEM, OR 97304

ACTUAL BUILDING | CONCEPTUAL SIGNAGE PAGE 3

Investment Summary LEASEABLE SF LAND AREA LEASE TYPE 6,136 SF 21,756 SF NNN

LEASE TERM YEAR BUILT PARKING 15 Years 2019 146 Spaces; 23/1,000 SF*

Tenant benefits from additional parking provided per CC&Rs with larger center; the parcel has 27 parking stalls.

$4,150,000 5.25% PRICE CAP

THE OFFERING provides the opportunity to acquire a single tenant Mud Bay located in The Pointe at Glen Creek, a brand-new Class A retail center. The Property is prominently located on Wallace Road, West Salem’s preeminent commuter and retail arterial. Mud Bay is a Washington-based private retailer, 100% employee-owned, with a growing Northwest following and presence. Mud Bay has grown steadily over the last 30 years with six new stores opening in 2019. Investment Highlights

• BRAND NEW 15-YEAR TERM (RENT COMMENCEMENT IS 7/23/2019).

• HIGH QUALITY, BRAND NEW CONSTRUCTION.

• MUD BAY IS A GROWING, EMPLOYEE-OWNED COMPANY BASED OUT OF THE PACIFIC NORTHWEST.

• SCHEDULED 10% RENT BUMPS EVERY FIVE YEARS INCREASES YIELD AN ESTIMATED 110 BASIS POINTS OVER THE PRIMARY TERM.

• LOCATED IN HIGH-GROWTH SUBMARKET OF WEST SALEM WITH AN AFFLUENT RESIDENTIAL BASE EARNING AN AVERAGE ANNUAL INCOME OF $96,000.

• HIGH EXPOSURE ON TWO MAJOR ARTERIALS, INCLUDING THE PRIMARY COMMUTER HWY CONNECTING WEST SALEM TO DOWNTOWN.

• SALEM NAMED AS HAVING ONE OF THE FASTEST-GROWING HOUSING MARKETS IN THE U.S. IN 2018 BY USA TODAY, OUTPACING PORTLAND. PAGE 5

MUD BAY is a northwest pet supply retailer, specialized in high- About quality dog and cat related products, with one of the largest selections of natural pet foods in the United States. The company is Mud Bay based out of Olympia, WA with steady expansion over the last few decades, primarily opening in neighborhoods, with 55 locations and over 300 employees. Mud Bay converted ownership to an Employee Stock Ownership Plan (ESOP) in 2015, providing their staff long-term stake ownership in the company, reflective of Mud Bay’s culture of empowering and investing in their employees.

55 5* 2x # OF PACIFIC AVG. ANNUAL NUMBER SALES DOUBLED NORTHWEST STORES OF NEW STORE OPENING 2011-2015 *6 slated to open in 2019

MUD BAY FOOTPRINT ROUGHLY 1/3 THE SIZE OF COMPETING BOX RETAILERS

MUD BAY PETSMART PETCO

AVERAGE STORE SIZE 5,200 SF 25,000 SF 14,500 SF

YEARS IN OPERATION 31 33 54

OREGON LOCATIONS 17 16 13

OWNERSHIP EMPLOYEE-OWNED PRIVATE PRIVATE

*PetCo and PetSmart’s credit ratings downgraded in 2018 by S&P with Negative Outlook.

Investment Highlights Surrounding Area Incomes

AVERAGE INCOMES OF WEST SALEM are extremely strong and in- line with those of several higher-end Portland MSA neighborhoods. West Salem boasts average annual incomes of $96,000 (roughly 40% higher than Salem), with strong surrounding demographics, and slated for continued growth.

West 2018 POPULATION: 31,737 TOTAL HOUSEHOLDS: 11,305 Salem AVERAGE HH INCOME: $96,538

Portland Suburbs

EAST PORTLAND GRESHAM 2018 POPULATION: 145,528 2018 POPULATION: 110,336 TOTAL HOUSEHOLDS: 50,467 TOTAL HOUSEHOLDS: 39,281 AVERAGE HH INCOME: $56,489 AVERAGE HH INCOME: $63,636

SOUTHWEST PORTLAND HILLSBORO 2018 POPULATION: 77,561 2018 POPULATION: 102,396 TOTAL HOUSEHOLDS: 34,147 TOTAL HOUSEHOLDS: 37,424 AVERAGE HH INCOME: $117,871 AVERAGE HH INCOME: $87,763

BEAVERTON TIGARD 2018 POPULATION: 95,710 2018 POPULATION: 51,355 TOTAL HOUSEHOLDS: 38,855 TOTAL HOUSEHOLDS: 20,421 AVERAGE HH INCOME: $82,039 AVERAGE HH INCOME: $89,367 Surrounding Area Incomes PAGE 7 HILLSBORO

EAST PORTLAND GRESHAM PORTLAND BEAVERTON

SOUTHWEST PORTLAND

TIGARD

WEST SALEM

SALEM

Surrounding Area Incomes Surrounding Retail & Amenities Business Summary

TOTAL 1-MILE 3-MILES 5-MILES

Businesses 996 4,401 7,598

Employees 10,674 64,243 105,031

Population 9,466 88,543 212,100

KEY 1-MILE 3-MILES 5-MILES

MAJOR RETAIL Ace Hardware Les Schwab Walgreens Dollar Tree Rite Aid Goodwill Roth’s Fresh Markets Grocery Outlet Safeway

SALEM CENTER MALL American Eagle JCPenney Subway Bath & Body Works Kohl’s TJ Maxx Famous Footwear Macy’s Victoria’s Secret Footlocker Maurices Zumiez GameStop Ross Dress for Less GNC Sephora WEST SALEM HAS approximately 400 multifamily units approved or under development in 2018-2019, including the Orchard Heights PAGE 9 Surrounding Retail & Amenities development slated to bring 322 units to the immediate trade area in $96,538 2019-2020, 1-mile NW of the Property. Click here to learn more. WEST SALEM 2018 AVERAGE HOUSEHOLD INCOME

18,320 MUD BAY VPD GLEN CREEK ROAD NW

TH STREET NW 9 WALLACE ROAD NW

MARION STREET NE

WALKER 22 MIDDLE CENTER STREET NE SCHOOL 45,400 VPD

WILLAMETTE RIVER

SALEM CENTER MALL

OREGON STATE DOWNTOWN SALEM CAPITOL

SALEM CONVENTION CENTER WILLAMETTE UNIVERSITY About the Developer

Deacon Development

DEACON DEVELOPMENT is a preeminent commercial development firm based out of Portland, Oregon, with major developments located along the West Coast. Deacon Development specializes in complex retail, healthcare, and multifamily projects. The Portland MSA footprint is shaped in large part by Deacon Development and their affiliate, Deacon Construction, as Deacon Construction has built a handful of noteworthy Portland retail developments including a New Seasons, the Hotel Eastlund, VillaSport, and a number of West Coast trophy buildings, including the San Francisco Premium Outlets and creative office developments in Bellevue and San Francisco.

SAN FRANCISCO PREMIUM OUTLETS About the Developer VILLASPORT PAGE 11

HOTEL EASTLUND

About the Developer Site Plan

6,136 0.50 146 SPACES; LEASEABLE SF ACRES 23/1,000 SF*

*Tenant benefits from additional parking provided per CC&Rs with larger center; the parcel has 27 parking stalls. PAGE 13 PATIO

AVAILABLE Two 4,800 SF retail suites with current leasing activity

SITE PLAN NOT TO SCALE

Q&A

Q: ARE THE ADJACENT PADS AVAILABLE FOR PURCHASE? A: Yes, please contact Capital Pacific for more information; adjacent pads are available for purchase as leasing is finalized.

Site Plan Income & Expense

Financial Summary

PRICE $4,150,000 CAPITALIZATION RATE 5.25%

CASH FLOW SUMMARY SCHEDULED INCOME PER SF Base Rent for the Period of: 8/1/2019 - 7/31/2020 $35.50 $217,828 Total Effective Gross Income (EGI) $35.50 $217,828

OPERATING EXPENSES PER SF CAMS NNN Property Taxes NNN Insurance NNN Total Operating Expenses NNN -

NET OPERATING INCOME $217,828

ACTUAL BUILDING | CONCEPTUAL SIGNAGE

SCHEDULED 10% RENT INCREASES

4/4/2019 [ ] FIVE YEARS

This information has been secured from sources we believe to be reliable but we make no representations or warranties, expressed or implied, as to the accuracy of the information. Buyer must verify the information and bears all risk for any inaccuracies. Rent Roll

PAGE 15

Rent Roll

MUD BAY

Lease Term: 7/23/2019 - 7/31/2034

Size (SF): 6,136

RENT SUMMARY

MONTHLY ANNUAL DATE % INCREASE PSF CAP RATE BASE RENT RENT

7/23/2019 $18,152 $217,828 $35.50 5.25% 8/1/2024 $19,968 10% $239,611 $39.05 5.77% 8/1/2029 $21,964 10% $263,572 $42.96 6.35% OPTIONS 1 8/1/2034 $24,161 10% $289,929 $47.25 6.99% 2 8/1/2039 $26,577 10% $318,922 $51.98 7.68% 3 8/1/2044 $29,235 10% $350,814 $57.17 8.45% CURRENT $18,152 $217,828 $35.50 5.25%

Lease Notes LEASE NOTES Comments: NNN Corporate lease. Tenant has three, five-year options to exercise with 180 day's prior notice. TenantCOMMENTS: reimburses NNN 100% Corporate of taxes, lease. insurance, Tenant CAM, has three, and pays five-year a 15% optionsAdmin feeto exercise on CAM/INS with 180in lieu day's of management.prior notice. ControllableTenant reimburses CAM (excludes 100% of taxes, taxes, insurance,insurance, CAM,utilities, and snow/ice pays a 15% removal) Admin arefee cappedon CAM/INS at a 5%in lieu increase of management. YOY followingControllable Year 1,CAM established (excludes once taxes, the insurance, greater utilities,shopping snow/ice center removal) operates are at capped 86%+ occupancy at a 5% increase for 12 YOY consecutive following months.Year 1, established once the greater shopping center operates at 86%+ occupancy for 12 consecutive months.

Financial Summary

4/4/2019 [ ] Lease Abstract

Premise & Term TENANT Mud Bay (Mud Bay Inc.) BUILDING SF 6,136 SF LEASE TYPE NNN RENT COMMENCEMENT 07/23/2019 EXPIRATION 07/31/2034 TERM 15 Years OPTIONS 3, 5-Yr Options; 180-Day Notice OPTION RENT 10% increase at the start of each option

ACTUAL BUILDING | CONCEPTUAL SIGNAGE PAGE 17

Expenses

TAXES Tenant reimburses property taxes to Landlord. INSURANCE Tenant reimburses Landlord’s insurance premiums. CAM CAP CAMs are capped at a 5% increase year-over-year (excludes taxes, insurance, utilities, and snow/ice removal) following the first Stabilized Year (the first year the center operates at 85% occupancy for 12 consecutive months and is reflected in current property taxes). The cap resets at the start of each option.

Lease Provisions

TENANT RESPONSIBILITIES Tenant is responsible for all interior maintenance, repair and replacement including the storefront, glass, slab and floor coverings, electrical, plumbing, and mechanical installations. LANDLORD RESPONSIBILITIES Landlord is responsible for keeping the exterior supporting walls, foundation, roof, exterior walls, down-spouting of the Premises and Common Areas in good condition and repair – tenant to reimburse the cost of all roof and structural repairs (other than those related to a latent or material defect). HVAC Tenant reimburses the cost of quarterly maintenance to Landlord and contributes up to $1K annually for repairs and replacement. SALES & FINANCIAL REPORTING Tenant to provide annual statement of gross sales for each calendar year and a financial statement within 10 days of request, no more than once per year.

Lease Abstract CC&R Abstract

ACCESS: Cross-easement access across and through all parcels is granted to one another for vehicle and pedestrian access, and shared parking. The CC&Rs oversee three parcels - one occupied by Mud Bay, a second by Gilgamesh Brewing, and a third leased to DaVita.

CAMS - GREATER SHOPPING CENTER The Declarant (Deacon Development), is responsible for the maintenance and repair of the common elements of the greater shopping center, including the managing, lighting, decorating, security, snow removal, landscaping, irrigation systems, signage, storm drainage, utilities, and parking lot maintenance and repair, including parking lot resurfacing, repaving, striping, and cleaning, alongside Declarant’s premium for general liability insurance and a management fee. Declarant to provide an annual statement to each parcel owner by April 15th annually.

CAM SHARE Each Parcel owner is responsible for the direct payment of property taxes for their underlying parcel, and the maintenance and repair for all buildings and utility lines located on their parcel, and for maintaining a liability insurance policy. Each parcel is billed their share based on the GLA on their parcel in relation to the total GLA of the center. PROHIBITED USES PER CC&RS: • Dry cleaning (not applicable to pick-up • Flea market service only) • Tattoo parlor • Auto sales/repair • School, library, church, day-care facility • Funeral parlor or crematorium • Sale of short-term pay day advances • Bar requiring all patrons to be 21+ years of age • Health spa or club more than 3K+ SF • Theatre, skating rink, bowling alley, amusement park, dance hall

EXCLUSIVE USES: • Sale of gourmet burgers and craft beer accounting for more than 10% of gross sales. • Renal dialysis/training accounting for more than 10% of gross sales. CC&R Abstract ACTUAL BUILDING | CONCEPTUAL SIGNAGE PAGE 19

• Flea market • Tattoo parlor • School, library, church, day-care facility • Sale of short-term pay day advances • Health spa or club more than 3K+ SF

CC&R Abstract Location Salem, Oregon

SALEM is located 47 miles south of Portland and serves as Oregon’s capital city. As the capital city, Salem serves as the hub for state government and recognizes more than 40,000 state employees within the city. • Significant growth of 8.2% between 2010-2016, higher than the state average.

• One of America’s 10-Fastest growing housing markets in 2018.

• Salem is located within the Mid-Willamette Valley, ideally located along I-5 between California and Washington, and within one hour of 80,000 college students between Portland and Eugene. PAGE 21

AMAZON one of the companies taking advantage of Salem’s large tax breaks to build in Salem’s Enterprise Zone. In Enterprise 2017, construction began on a $90M, one million square foot fulfillment center, projected to open in mid-2019. Zone The development will employ more than 1,000 full-time employees. The area is already home to new developments by FedEx and Home Depot. CLICK HERE FOR MORE INFO

Drive Time

POPULATION

5 MINS 10 MINS 15 MINS

2010 19,957 71,468 176,669

2018 22,346 76,926 189,713

2023 24,109 81,212 199,473

2018 HH INCOME

5 MINS 10 MINS 15 MINS KEY 5 MINS Average $87,398 $74,892 $70,138 10 MINS 15 MINS Median $65,413 $54,161 $52,255

Distance Eugene, Portland, to Oregon Oregon

66 MILES 46 MILES 1 HRS 9 MINS 57 MINS Contact Us We’d love to hear from you.

KEVIN ADATTO MICHAEL HORWITZ [email protected] [email protected] PH: 503.675.7726 PH: 503.675.8381

MICHAEL LOWES SEAN MACK [email protected] [email protected] PH: 503.210.4069 PH: 503.675.8378

The information in this Executive Summary has been secured from sources we believe to be reliable but we make no representations or warranties, expressed or implied, as to the accuracy of the information. Buyer must verify the information and bears all risk for any inaccuracies. All rights reserved to Capital Pacific, LLC.

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