EMERALD CITY ATHLETICS CLUB 10110 EVERGREEN WAY, EVERETT, WA AFFILIATED BUSINESS DISCLOSURE DISCLAIMER CBRE, Inc

OFFERING MEMORANDUM

EMERALD CITY ATHLETICS CLUB 10110 EVERGREEN WAY, EVERETT, WA AFFILIATED BUSINESS DISCLOSURE DISCLAIMER CBRE, Inc. operates within a global family of This Memorandum contains select information companies with many subsidiaries and related pertaining to the Property and the Owner, and does entities (each an “Affiliate”) engaging in a broad not purport to be all-inclusive or contain all or part range of commercial real estate businesses including, of the information which prospective investors may but not limited to, brokerage services, property and require to evaluate a purchase of the Property. The facilities management, valuation, investment fund information contained in this Memorandum has management and development. At times different been obtained from sources believed to be reliable, Affiliates, including CBRE Global Investors, Inc. or but has not been verified for accuracy, completeness, Trammell Crow Company, may have or represent or fitness for any particular purpose. All information clients who have competing interests in the same is presented “as is” without representation or transaction. For example, Affiliates or their clients warranty of any kind. Such information includes may have or express an interest in the property estimates based on forward-looking assumptions described in this Memorandum (the “Property”), relating to the general economy, market conditions, and may be the successful bidder for the Property. competition and other factors which are subject to Your receipt of this Memorandum constitutes your uncertainty and may not represent the current or acknowledgement of that possibility and your future performance of the Property. All references to agreement that neither CBRE, Inc. nor any Affiliate acreages, square footages, and other measurements has an obligation to disclose to you such Affiliates’ are approximations. This Memorandum describes interest or involvement in the sale or purchase of certain documents, including leases and other the Property. In all instances, however, CBRE, Inc. materials, in summary form. These summaries may and its Affiliates will act in the best interest of their not be complete nor accurate descriptions of the respective client(s), at arms’ length, not in concert, full agreements referenced. Additional information or in a manner detrimental to any third party. CBRE, and an opportunity to inspect the Property may be Inc. and its Affiliates will conduct their respective made available to qualified prospective purchasers. businesses in a manner consistent with the law and You are advised to independently verify the accuracy all fiduciary duties owed to their respective client(s). and completeness of all summaries and information contained herein, to consult with independent legal CONFIDENTIALITY AGREEMENT and financial advisors, and carefully investigate Your receipt of this Memorandum constitutes the economics of this transaction and Property’s your acknowledgement that (i) it is a confidential suitability for your needs. ANY RELIANCE ON THE Memorandum solely for your limited use and benefit CONTENT OF THIS MEMORANDUM IS SOLELY AT in determining whether you desire to express YOUR OWN RISK. further interest in the acquisition of the Property, (ii) you will hold it in the strictest confidence, (iii) The Owner expressly reserves the right, at its you will not disclose it or its contents to any third sole discretion, to reject any or all expressions of party without the prior written authorization of the interest or offers to purchase the Property, and/ owner of the Property (“Owner”) or CBRE, Inc., and or to terminate discussions at any time with or (iv) you will not use any part of this Memorandum in without notice to you. All offers, counteroffers, and any manner detrimental to the Owner or CBRE, Inc. negotiations shall be non-binding and neither CBRE, Inc. nor the Owner shall have any legal commitment If after reviewing this Memorandum, you have no or obligation except as set forth in a fully executed, further interest in purchasing the Property, kindly definitive purchase and sale agreement delivered by return it to CBRE, Inc. the Owner. PMStudio_November2019 TABLE OF CONTENTS

1. Executive Summary

2. Location & Market Overview

3. Tenant Summary

4. Comparables 1. EXECUTIVE SUMMARY OFFERING OVERVIEW

OFFERING PRICE $11,000,000 PROVEN FITNESS OPERATOR & PROVEN LOCATION The ECA leadership team has opened and operated over PRICE PSF BUILDING $306.00 100 clubs during the past 40 years. Currently operating three clubs in Washington under the Emerald Fitness PRICE PSF LAND $92.35 Athletic Club brand with over 10,878 total members. This property was built as a fitness club and has BUILDING GLA (32,052 MAIN FLOOR + 3,896 SF MAZZANINE) 35,948 SF successfully operated as such for 40 years.

TOTAL LAND AREA SF 2.61 acres / 13,692 sf Everett ECA is the largest of the 3 clubs with a pool (complimentary water therapy included), basketball ORIGINAL CONSTRUCTION 1981 court, running track, extensive cardio and strength equipment, and multiple classrooms for a full array COMPLETE RENOVATION Q3 2019 of classes supporting all fitness levels and interests. A key to ECA fitness model success is the “Fit Lab” where CURRENT OCCUPANCY 100% trainers work with members to achieve their weight and fitness goals. CURRENT ANNUAL RENT PSF $21.03 DURABLE RETAIL LOCATION TERMS All Cash South Everett is the retail hub serving north Snohomish County and the affluent neighborhoods overlooking the Puget Sound. Sharing the neighborhood with the Boeing Everett plant and other prominent employers, 15-YEAR NNN LEASE WITH retailers benefit from a strong employment base. ESCALATIONS – GENERATES Everett Mall is in renaissance like many smaller market EXCELLENT YIELDS FOR THE INVESTOR malls throughout the country. Current anchors include 16 screen Regal theater, Burlington, LA Fitness, Floor NOI $755,986 & Décor. An all-star retail line-up surrounding the mall draws customers from miles around. CAP RATE 6.87% STRONG AREA DEMOGRAPHICS LEVERAGED CASH ON CASH RETURN IRR 7.43% Over 180,000 residents with household incomes in excess of $90,000 and 107,000-person daytime UNLEVERAGED IRR 8.27% workforce exists within a 10-minute drivetime. The residential population is well educated with over 30% LEVERAGE IRR 13.21% holding a Bachelor’s degree or higher.

5 TENANT DESCRIPTION

THE STRENGTH OF ECA RESIDES WITH THE STRENGTH OF ITS KEY EXECUTIVE TEAM NEIL SCHOBER Emerald City Athletic Club is the newest concept club for the operation team led by Neil Schober, CEO. Over Neil’s 40- year career in the fitness business, he has owned and operated over 100 clubs throughout the western United States, from 15,000 SF fitness-only clubs to 40,000 SF full-service clubs. Although some were a conversion of existing facilities, most clubs were greenfield, built from the ground up on. On multiple occasions the team created a chain of several clubs which were subsequently acquired by national fitness operators, 24 Hour Fitness & LA Fitness. CLUB POSITIONING: LEON DORIS “A FITNESS PLAYBOOK THAT GUARANTEES RESULTS. EACH Leon Doris, COO & ECA partner, has made a career VISIT, MAKING YOUR WORKOUT FUN BUT EFFECTIVE… helping people achieve their fitness goals. An early COACHING. GUIDING. INSPIRING…GETTING YOU THE RESULTS athlete himself, Leon began as a trainer in 1984 while YOU DESIRE.” still a college student and succeeded in managing his “Our founder has been in the fitness industry for over first club at the early age of 20. Over the last 35 years, 40 years, and he has created a proven fitness system Leon has worked with Neil in building three profitable that gets results. Offering world class programs and fitness brands, both in Arizona and Washington state. facilities, ECA redefines your approach to fitness. The Overseeing every aspect of the business, Leon is a 5 Components of Fitness is your playbook for fitness hands-on, integral component in implementing the ECA results, taking the drudgery out of working out, because business model. all you have to do is show up. It’s easy, painless to follow, and it works for anybody. An exclusive program available only at Emerald City Athletics. With your ECA MEIKO HART Guaranteed Results Membership Program: Mieko Hart, ECA Chief Financial Officer, a seasoned + You’ll learn how to perform exercises properly. fitness operator whose career spans 25 years, has owned and managed her own brand of clubs with 37 + You’ll have access to our staff so they can answer your locations across five states. In addition, Mieko holds questions and offer guidance when you need it. both a JD and EMBA from the University of Washington. + You’ll be assessed as you work through your fitness She oversees all financial components of the ECA program so we can help you achieve your daily, weekly platform. and monthly goals. + When you need us, we’ll be there for you.”

“We guarantee results”

6 LEASE TERMS

TENANT Emerald City Athletic Club, LLC

GLA 35,948 SF

LEASE TERM 15 Years with 3 5-year options to renew

LEASE START DATE September 1, 2019

LEASE EXPIRATION DATE August 31, 2026 Plus 3 5-year options

RENT PSF: -

YEARS 1-5 $21.03

YEARS 6-10 $23.13

YEARS 11-15 $26.62

REIMBURSEMENTS: Paid by Tenant

BUILDING/ROOF & LOT MAINTENANCE 100% Tenant responsibility

REAL ESTATE TAXES 100% Tenant responsibility

INSURANCE 100% Tenant responsibility

7 CASH FLOW / INCOME & EXPENSES

PRICE $11,000,000

CAPITALIZATION RATE 6.87%

CASH FLOW / INCOME & EXPENSES

WITHOUT DEBT WITH DEBT

YEARS 1-5 $755,986.00 $291,175.00

YEARS 6-10 $831,477.00 $366,666.00

PROPOSED DEBT & RESALE ASSUMPTIONS

LOAN AMOUNT (65% LTV)

INTEREST RATE 4.25%

AMORTIZATION 25 years

TERM 5 years

ANNUAL DEBT SERVICE $464,811.00

REVERSION CAP RATE 7%

COST OF FUTURE SALE 7.00%

8 FINANCING

POTENTIAL LOAN SUMMARY

LOAN AMOUNT 60 - 65% LTV

AMORTIZATION 25 years

TERM 5 years

RATE RANGE 4 - 4.5%

SOURCE BANK

CONTACT INFORMATION JACK STANDEFORD Senior Vice President CBRE Capital Markets 1420 5th Ave. Floor 17 Seattle, WA 98101

+1 206 830 6493 [email protected]

9 PROPERTY SUMMARY

10110 EVERGREEN WAY, EVERETT, WA 98204

COUNTY Snohomish County LOCATION South Everett at intersection of Evergreen Way & Everett Mall Way GLA SF ±35,948 SF Built in 1981, renovated consistently to maintain the building PROPERTY AGE and first class appeal of as a fitness facility. In 2019 the owner invested over $1 million into the club making it a highly desirable first class facility for years to come. HVAC Roof mounted HVAC units. Electric cooled and gas fired. Maintenance contracted with Johansen Mechanical PARCEL NUMBERS 280424-002-004-00 – 1.96 acres 280424-002-005-00 - .65 acres PROPERTY TAXES 2019 2019 TAXES $43,371.15 SPECIAL ASSESSMENT Assessed for Snohomish Conservation District in the amount of $13.93 for 2019 LAND AREA ±2.61 acres (113,691.6 SF) TRAFFIC COUNTS 27,259 (CoStar MSPI 2018 estimate) PARKING 137 surface spaces are available (3.8 stalls per 1,000)

FUTURE REDEVELOPMENT OPPORTUNITY Under the jurisdiction of the City of Everett, the site is zoned “E-1” with a mixed-use overlay “MUO”. This is the Evergreen Way corridor, a commercial district which allows a wide variety of commercial uses. The mixed-use overlay emphasizes the inclusion of a residential component. + The City of Everett is currently implementing “Rethink Zoning”, a multi-year effort to ensure that development regulations support efforts to recruit new businesses and secure a wide range of housing opportunities. The E-1 MUO zoning allows maximum density and up to 125’ building height. This provides substantial support and future investment flexibility availing the investor the option of continuing as a retail use or re-develop as a higher density project. FLOOD ZONE: Located in Zone “X,” outside the 100-year flood plain according to Flood Hazards Map No. 53061C-1040F, with an effective date of September 16, 2005. EARTHQUAKE ZONE: Seismic Zone 3, area of minor damage. This zone is typical for most of Western Washington and does not require earthquake hazard insurance

10 AEROBIC AREA BODY DENSITY TESTING

HYDRO SPA

STATIONARY WEIGHT ROOM

AEROBIC AREA 11 IMPROVEMENT DESCRIPTION

BUILDING FEATURES

ENERGETIC NEW LOBBY SETS THE TONE FOR GUESTS

AMPLE, WELL-MAINTAINED EQUIPMENT FACILITATES RESULTS

HYDRO-MASSAGE MACHINES ARE A POPULAR TREND-SETTING ADDITION TO THE FACILITY

12 DIVERSE ACTIVITY FOR MORE FUN AND TRAINING

SOOTHING WATER FEATURES INCLUDE; POOL, HOT TUB, STEAM ROOM AND SAUNA

ECA STANDS APART FROM THE COMPETITION WITH AN ABUNDANCE OF EQUIPMENT SO THERE IS SELDOM A WAIT FOR YOUR FAVORITE WORKOUT EQUIPMENT IN THE AEROBIC AREA

13 BASKETBALL COURTS ARE SCARCE IN MOST FITNESS FACILITIES, ANOTHER ADVANTAGE FOR ECA OVER THE COMPETITION

RUNNING TRACK AROUND THE ENTIRE MEZZANINE LEVEL MAKES RAINY DAYS NOT A PROBLEM FOR ECA MEMBERS

FREE WEIGHT ROOMS, STRETCHING ROOMS AND A NEW YOGA STUDIO, THERE IS SOMETHING FOR EVERYONE

14 FITNESS LAB IS THE HEART OF THE ECA PROGRAM FOR SUCCESS

OVER $1 MILLION OF IMPROVEMENTS TO THE FACILITY IN 2019 PROPELS THIS CLUB BEYOND THE COMPETITION

EXTERIOR IMPROVEMENTS The building improvements consist of concrete and wood-frame, with wood or painted metal siding and a flat built-up or pitched standing seam metal roof. The roof was resurfaced in 2018.

UTILITIES All utilities are available to the site; including water, sewer, storm water, natural gas, electricity, and telephone.

MEN’S AND WOMEN’S LOCKER ROOMS WERE UPDATED FOR A FRESH, CLEAN FEEL. DAYCARE FACILITY IS A POPULAR MEMBER BENEFIT.

15 2. LOCATION & MARKET OVERVIEW MARKET OVERVIEW

REGION The Puget Sound Region enjoys one of the strongest economies in the nation and is strengthened by a diversity of industries and employers. As the home of Amazon and Microsoft, the Puget Sound is on the cutting edge of software and technology development. In addition, manufacturing continues to be a major contributor to the economic engine with Boeing anchoring one of the world’s top aerospace clusters. Washington exports more than any other state with airplanes, software and agricultural/lumber being the primary products totaling over $28 billion in state-originated exports. The Ports of Seattle and Tacoma combine to make the Region the second largest US harbor for container traffic. The Region’s MSA has an estimated 3 million people living in King, Pierce and Snohomish Counties.

COUNTY Snohomish County is home to over 20,500 businesses, ranging from small family farms specializing in organic foods to the world’s largest advanced manufacturing facility producing state-of art aerospace equipment. The fifty largest employers account for over 96,900 jobs, or about 34% of the County’s total employment.

EVERETT Everett is the seventh-largest city in Washington state. Located 25 miles north of Seattle, Everett is the northern economic hub of the region. A broad range of economic drivers continue to fuel high-wage jobs that influence housing needs, retail spending, and office or employment-related space to support these workers.

GOVERNMENT As the county seat for Snohomish County, Everett benefits from that robust governmental influence as a job provider MEDICAL Everett is the medical center of excellence for Snohomish County and Skagit/Whatcom Counties to the north. Anchored by the Providence Regional Medical Center, a leading hospital offering cardiology, cancer treatment, birthing center and Level 2 Trauma Center. Kaiser Permanente also has a strong clinical presence in the city. INDUSTRIAL Boeing and the many supporting vendors and industries contribute greatly to the economy of Washington State. Snohomish County and Everett benefit most immediately from the presence of the Boeing 737 plant just minutes from the ECA facility. Boeing employment in Washington State as of October 2017 total of 66,242. Boeing announced in January, 2018 that near term Boeing employment in Washington is anticipated to remain stable over the next several years.

17 INDUSTRY SECTORS & TOP EMPLOYERS

46% - AEROSPACE 29% - CONST., MINING & LOGGING 12% - OTHER MANUFACTURING 6% - COMPUTER AND ELECTRONIC 5% - FABRICATED METAL 2% - AGRICULTURE & FISHING INDUSTRY SECTORS IN SNOHOMISH COUNTY Snohomish County, Washington is home to over 29% 20,500 businesses, ranging from small family farms GOODS-PRODUCING specializing in organic foods, to the world’s largest 71% advanced manufacturing facility producing state-of-the- 292,600 SERVICE PROVIDING TOTAL JOBS INFORMATION - 3% art aerospace equipment. The fifty largest employers OTHER SERVICES - 5% account for over 96,900 jobs, or about 34% of the FINANCIAL ACTIVITIES - 6% County’s total employment LEISURE & HOSPITALITY - 13% PROF. & BUSINESS SERVICES - 14% EDUCATION & HEALTH SERVICES - 17% GOVERNMENT - 19% TRADE, TRANSPORT, UTILITIES - 23%

TRANSPORTATION TOP 10 EVERETT EMPLOYERS Commercial airline service operations commenced at Paine Field in 2019 making it the region’s second # EMPLOYER NO. EMP. commercial airport. May 2019 Monocle’s annual Travel 1 Boeing 35,000 Top 50 Awards, named Paine Field’s Passenger Terminal the World’s Best Regional Airport. Daily flights to 2 Providence Regional Medical Center Everett 4,906 numerous destinations are being added regularly. 3 Naval Station Everett 2,900 EDUCATION / ARTS / WATERFRONT 4 Everett Clinic 2,871 Adding to a quality lifestyle is Everett Community 5 Snohomish County Government 2,759 College, educating over 19,000 students annually. Everett Performing Arts Center performs 5 live theatrical shows per 6 Everett School District 2,443 season and the largest theater outside of Seattle. Everett 7 City of Everettt 1,225 marina recently expanded its mooring facility making it the largest publicly owned marina on the west coast with 2300 8 Fluke Corp / Fortive 1,200 mooring slips. There are a number of popular waterfront 9 Aviation Technical Services 1,000 restaurants at the marina and The Port of Everett is adding a hotel, condominiums and more restaurants which will 10 Everett Community College 954 make the marina a major recreational destination.

18 TRADE AREA The immediate 5-mile trade area of the ECA Everett Club serves approximately 272,000 people. Highly educated, approximately 35% of the residents have attained a Bachelor’s degree or higher. A diverse mix of educated professionals, affluent baby-boomers, young, upper-middle-class families and youthful “up and comers”, these people enjoy higher disposable incomes and are more discriminating consumers interested in maintaining their health. With trade area average household incomes of $101,425 and median incomes of $81,854. The high household income and emphasis on a healthy lifestyle make the trade area population prime users of the type of fitness offerings at Emerald City Athletic Club.

10 MINUTES 5 MILES PLACE OF WORK 2019 Businesses 4,884 6,565 2019 Employees 95,031 113,447 POPULATION 2019 Population - Current Year Estimate 184,286 271,873 2024 Population - Five Year Projection 198,449 293,928 2019-2024 Annual Population Growth Rate 1.49% 1.57% 2019 Median Age 35.60 36.60 EDUCATION 2019 Population 25 and Over 124,451 184,934 Associate`s Degree 13,578 10.9% 20,283 11.0% Bachelor`s Degree 26,543 21.3% 44,666 24.2% Graduate or Professional Degree 11,065 8.9% 19,438 10.5% HOUSEHOLD INCOME 2019 Average Household Income $90,582 $101,425 2019 Median Household Income $73,486 $81,854 2019 Per Capita Income $34,988 $38,395 HOUSING VALUE 2019 Median Value of Owner Occ. Housing Units $357,523 $388,539 2019 Average Value of Owner Occ. Housing Units $414,286 $450,388 HOUSING UNITS 2019 Housing Units 74,335 106,933 2019 Occupied Housing Units 71,013 95.5% 102,643 96.0% 2019 Owner Occupied Housing Units 37,984 51.1% 61,274 57.3% 2019 Renter Occupied Housing Units 33,029 44.4% 41,369 38.7%

19 DEMOGRAPHIC MAP

20 21 COMPETITION VIEW

22 23 3. COMPARABLES RENT COMPS

PROPERTY NAME / ADDRESS SIZE (SF) AGE QUALITY / CONDITION RENT / SF TERMS COMMENTS LA FITNESS 41,805 2018 - Renovation Very Good + $20.50 PSF + Lease start date Nov. 2018 1901 S 72ND ST + 15 Years + Previously occupied space TACOMA, WA 98048 + 3/5 year’s totally renovated for LA + 10% increases every 5 years Fitness

LA FITNESS 43,600 2014 - Renovation Very Good + $16.57 PSF + Lease start date May 2015 14901 4TH AVE SW + 15 Years + Previously occupied space TACOMA, WA 98166 + 3/5 year’s totally renovated for LA + 10% increases every 5 years Fitness

SPORTSMAN’S 83,155 2005 - Renovation Very Good + $18.00 PSF + Lease start date 2017 WAREHOUSE + 10 years + Target anchored center + 10% increases every 10 years 1 mile from subject 305 SE EVERETT MALL WAY EVERETT, WA 98208

25 SALE COMPS

PROPERTY NAME / ADDRESS BLDG (SF) / LAND (SF) DATE SOLD PRICE / PRICE PSF-BLDG CAP RATES COMMENTS 17216 HWY 99 22,894 SF August 2018 $4,663,000 6.25% + Single tenant NNN leased asset 100,188 SF $203.68 VALUE VILLAGE + Built 1992 LYNWOOD, WA 98037

18820 HWY 99 25,830 SF August 2019 $5,900,000 6.20% + Single tenant NNN leased asset 87,120 SF $228.42 PETSMART + Built 1994 LYNWOOD, WA 98036

11308-11420 92ND ST SE 44,353 SF September 2018 $8,090,000 8.09% + Sale/lease back of veterenarian 826,769 SF $182.44 clinic PILCHUCK VET SNOHOMISH, WA 98290 + Multiple buildings + 15+ acres of land + Built 1975

26 27 EMERALD CITY ATHLETICS CLUB EVERETT, WA