OFFERING MEMORANDUM

SINGLE-TENANT OFFERING KRYSTAL GROUND LEASE Mobile, AL

Thomas T. Ladt +1 760 930 7931 [email protected] CA License No. 01803956 Representative Photo KRYSTAL MOBILE Amenities Aerial

41,230 CPD ZEIGLER BLVD

13,000 CPD

SUN RAY PLAZA

CODY RD S 14,8341 STUDENTS 5,500 EMPLOYEES

AMBASSADOR 18,100 CPD PLAZA SCHILLINGER RD OLD SHELL RD

MOBLIE REGIONAL 38,850 CPD AIRPORT

AIRPORT BLVD WESTWOOD PLAZA SUBJECT PROPERTY

® HILLCREST RD

PICCADILLY SQUARE

SHOPPES OF BAKER HIGH SCHOOL SCHILLINGER TOWNHOUSE 2,803 STUDENTS DEVELOPMENT 200 Units (2019)

¨

28,800 CPD

RESIDENTIAL COMMUNITIES 175,475 RESIDENTS IN THE MOBILE COUNTY

2 KRYSTAL MOBILE West Facing

BAKER HIGH SCHOOL 2,821 STUDENTS

MOBILE AIRPORT AUTHORITY

41,230 CPD SCHILLINGER RD

38,850 CPD AIRPORT BLVD

3 KRYSTAL MOBILE South Facing

TOWNHOUSE DEVELOPMENT 200 Units (2019)

BAKER HIGH SCHOOL 2,821 STUDENTS

MOBILE AIRPORT AUTHORITY

38,850 CPD

AIRPORT BLVD

41,230 CPD

SCHILLINGER RD

4 KRYSTAL MOBILE Offering Summary

LEASE SUMMARY PRICE $1,842,000 LEASE TYPE Ground Lease ROOF & STRUCTURE Tenant Responsible

LEASE TERM 15 Years CAP RATE 6.00% RENT COMMENCEMENT 10/24/1999 RENT EXPIRATION 4/30/2034

INCREASES Annually YEAR BUILT 2019 OPTIONS Five, 5-Year *Grand Re-Opening OPTIONS TO TERMINATE None Scheduled for 4/16/2019 OPTIONS TO PURCHASE None

RIGHT OF FIRST REFUSAL None GROSS LEASABLE AREA 1,788 SF RENT SUMMARY

LOT SIZE TERM ANNUAL TERM ANNUAL 0.69 Acres Year 1 $110,550 Year 9 $119,490

Year 2 $111,548 Year 10 $120,718

OWNERSHIP Year 3 $112,616 Year 11 $121,969

Ground Lease Year 4 $113,706 Year 12 $123,247

Year 5 $114,817 Year 13 $124,549 ADDRESS 475 Schillinger Rd. S. Year 6 $115,951 Year 14 $125,878 Mobile, AL 36695 Year 7 $117,108 Year 15 $127,233 Year 8 $118,287

5 KRYSTAL MOBILE Investment Highlights

SECURE INCOME STREAM • New 15-Year Absolute NNN Lease with Annual Increases • Corporate Guaranty with 360+ Location • 19-Year Operating History, Complete Scrape and Rebuild of Previous Structure • Brand New Construction and Prototype Design with Drive-Thru • High-Performing Location, Rare 24-Hour Service on Weekend • 70% of System-Wide Sales Generated at Drive-Thru

CLOSE PROXIMITY • 175,475 Residents in Growing Trade Area • Average Household Income Exceeds $74,000 within 3 Miles • Minutes to 14,834 Students at the University of South with Actual Photo, Opening 4/16 5,500 Employees • Surrounded by Several K-12 Schools, Over 57,900 Students Enrolled in Mobile County • 2 Miles to Providence Hospital, a 277-Acre Medical Campus with a 349-Bed Regional Hospital • Close Proximity to the Greater Gulf State Fairgrounds with 150,000+ Visitors Annually

STRONG MARKET FUNDAMENTALS • Highly Visible to 80,080 Cars/Day Along Primary Retail Corridor • Outparcel to Hobby Lobby, Ross, Rouses Market, PetSmart, and ULTA Anchored Power Center • Adjacent to Walmart Supercenter and Across from Super Target and Lowe’s Anchored Centers Actual Photo, Opening 4/16 • Strong Daytime Population, 46,871 Employees in 5 Miles 6 KRYSTAL MOBILE Construction Photos Grand Re-Opening Scheduled for April 16, 2019

7 KRYSTAL MOBILE Tenant Overview

Krystal Burger is a fast-food chain that began in 1932 and quickly spread throughout the South. Their restaurants, both company-owned and franchised, operate in Alabama, , , , , , , and . It is often compared to the northern restaurant chain White Castle, and has been owned by Argonne Capital Group since early 2012. Krystal’s product line centers on a square patty slider with a steamed bun, together with diced , pickle, and mustard, and collectively called a “Krystal”. Small hot dogs called “pups” are also featured menu items. The chain has occasionally expanded its menu to include larger burgers, such as the “Big Angus Burger,” a full-size hamburger made of 100% Angus beef. Krystal is known for a diverse menu, which includes a made-to-order country breakfast, meat and egg , and biscuits, as well as other items. In 1998, Krystal introduced the Krystal Chik, a fried chicken breast filet slider served on the signature steamed square bun. Krystal Chiks are extremely popular, along with other chicken, chili, and dessert items. Krystal continues to focus on their core menu products, but is also in the process of redesigning and upgrading their stores to appeal to a mobile and multi-tasking audience. In the mid-2000s Krystal tested a prototype for a new high-tech drive-in featuring individual television monitors for ordering and watching television (audio accessed via car stereo), and indoor and outdoor seating areas with multiple big-screen television monitors and free digital jukeboxes.

www.krystalburger.com

LOCATIONS SALES VOLUME FOUNDED HEADQUARTERS OWNERSHIP TENANT 350+ $421.1 1932 PRIVATE CORPORATE 11 States MILLION GEORGIA

8 KRYSTAL MOBILE Krystal News

KRYSTAL RESTAURANT REVITALIZATION DRIVES SALES AND MORE JOBS ATLANTA, Jan. 22, 2019 /PRNewswire/ -- The Krystal Company is seeing results from recent revitalization initiatives implemented during CEO Paul Macaluso’s tenure. Razed and redesigned stores, also known as “scrape and rebuilds,” in multiple markets are generating sustained sales volume lifts of 70-80 percent with average staffing increases of 66 percent. The redesigns are part of a company-wide initiative to improve the dining experience and adapt to changes in consumer behavior. “The impact of the redesigned stores has exceeded our expectations. Customers love the streamlined, efficient drive-through and the fresh look and feel of the new restaurants, which are also a magnet for recruiting and energizing employees,” Macaluso said. Krystal opened its first “Iconic Series” prototype restaurant, named after Krystal’s iconic burger and new abstract burger emblem used in both the exterior and interior design, in Jackson, Mississippi in August 2018, followed by locations in Tifton, Georgia, Tuscaloosa, Alabama, Memphis and Chattanooga, Tennessee. Atlanta’s first prototype stores are scheduled to open in early February. The new restaurants are smaller with expanded work zones and a double drive-through lane. Architecturally, the buildings are both contemporary and nostalgic, with full-glass fronts and wood-framed open ceilings and community tables in the dining rooms. The buildings are square like Krystal’s famous burgers.

Increased sales have necessitated additional labor. Staffing has increased on average from 30 employees to 50 employees at each of the five prototype stores. Updated kitchens and facility layouts are contributing to consistently higher overall satisfaction (OSAT) scores. The company will redesign 75-100 restaurants over the next five years, representing approximately 40 percent of Krystal’s corporate portfolio.

Third-party delivery (3PD) is emerging as a key sales driver, particularly for dinner and late-night dayparts. Krystal continues to grow its 3PD business, from 2 percent of its restaurants in early 2018 to over 60 percent by the end of this month via Uber, DoorDash, GrubHub and Waitr. “Delivery is a huge trend that’s increased late-night sales by eight percent over last year,” Macaluso said. According to Macaluso, 2018 delivery sales soared for late night, Krystal’s sweet spot, with 50 percent of 3PD sales occurring after 10 p.m. and 75 percent after 4 p.m. with the average check increasing significantly. Krystal plans to grow its 3PD partners as it expands delivery into new markets. About The Krystal Company Founded in Chattanooga, Tennessee, in 1932, The Krystal Company is the original quick-service restaurant chain in the South. Its are still served fresh and hot off the grill on the iconic square bun at over 350 restaurants in 11 states. Krystal’s Atlanta-based Restaurant Support Center serves a team of 6,000 employees. For more information, visit krystal.com.

https://www.marketwatch.com/press-release/krystal-restaurant-revitalization-drives-sales-and-more-jobs-2019-01-22

9 KRYSTAL MOBILE Parent Company Overview

Argonne Capital Group Founded in 2003, Argonne Capital Group is a closely- held private investment firm that seeks to make equity investments in a diverse range of middle market enterprises. Unlike traditional private equity firms, Argonne independently capitalizes each investment it makes, allowing the firm meaningful flexibility in the types of transactions it pursues and an indefinite time horizon for its ownership of any given asset. This flexibility has made Argonne a preferred acquirer in situations involving closely-held companies or unique deal dynamics.

Argonne has established itself as a long-term investor that is steadfastly focused on growing assets under management by investing in stable and established businesses that maintain relevance despite a constantly changing marketplace. Since the firm’s first acquisition in 2004, Argonne has relied on this principle to build a diversified portfolio of companies and real estate that now generate in excess of $1.6 billion in annual sales and employs 32,000 people. WWW.ARGONNECAPITAL.COM ARGONNE CAPITAL GROUP COMPANIES

CONCEPT ENTITY # OF LOCATIONS LOCATION OF STORES

Applebee’s NRP Florida 71 FL, GA, AL Applebee’s NRP 52 GA, TX IHOP Sunshine Restaurant Partners 193 FL, GA IHOP ACG 73 TX

IHOP Peak Restaurant Partners 38 7 Western States

IHOP Alliance Pancake Partners 28 AL, GA, NC, SC, TN, VA

Krystal The Krystal Company 356 11 Southern States

On the Border On the Border 153 36 Southern States 10 KRYSTAL MOBILE Site Plan

ADT LOT SIZE PARKING 80,080 0.689 42 Cars per day at Intersection Acres Spaces

11 KRYSTAL MOBILE Mobile, AL

THE FOOTBALL STATE Located at the junction of the Mobile River and Mobile Bay on the northern Gulf of Mexico, Mobile is the largest Gulf Coast city between and Tampa. Mobile is Alabama’s the second largest metropolitan city and is home to the state’s only saltwater port, allowing it to have the largest concentration of shopping within a 70-mile radius. The Port of Mobile has always played a key role in the economic health of the city, and is supplemented with growing sectors in aerospace and retail. Additionally, Mobile is ranked as one of the nation’s best places to live and grow a business. The low cost of doing business, diverse business base, availability of professional and skilled workforce, intermodal transportation hub and quality lifestyle continue to attract people and business.

EDUCATION ECONOMY The largest single campus is the University of Alabama, located The state has invested in aerospace, education, health care, banking, in Tuscaloosa, with 37,665 enrolled for fall 2016. Troy University and various heavy industries, including automobile manufacturing, was the largest institution in the state in 2010, with an enrollment mineral extraction, steel production and fabrication. By 2006, of 29,689 students across four Alabama campuses (Troy, Dothan, crop and animal production in Alabama was valued at $1.5 billion. Montgomery, and Phenix City), as well as sixty learning sites in In contrast to the primarily agricultural economy of the previous seventeen other states and eleven other countries. The oldest century, this was only about 1% of the state’s gross domestic institutions are the public University of North Alabama in Florence product. The number of private farms has declined at a steady and the Catholic Church-affiliated Spring Hill College in Mobile, rate since the 1960s, as land has been sold to developers, timber both founded in 1830. companies, and large farming conglomerates.

TRANSPORTATION TOURISM The Port of Mobile, Alabama’s only saltwater port, is a large An estimated 20 million tourists visit the state each year. Over seaport on the Gulf of Mexico with inland waterway access to the 100,000 of these are from other countries, including from Canada, Midwest by way of the Tennessee-Tombigbee Waterway. The Port the United Kingdom, Germany and Japan. In 2006, 22.3 million of Mobile was ranked 12th by tons of traffic in the United States travelers spent $8.3 billion providing an estimated 162,000 jobs in during 2009. For rail transport, Amtrak schedules the Crescent, a the state. Some of the most popular areas include the Rocket City daily passenger train, running from New York to New Orleans with of Huntsville, the beaches along the Gulf, and the state’s capitol in station stops at Anniston, Birmingham, and Tuscaloosa. Montgomery. 12 KRYSTAL MOBILE Demographics

Mobile, AL

POPULATION 1 MI 3 MI 5 MI 2010 Estimate 3,003 40,384 102,192 2018 Estimate 3,482 45,443 114,344 2023 Projected 3,416 47,135 118,442 Total Daytime Population 6,559 54,522 112,609

POPULATION GROWTH 1 MI 3 MI 5 MI 114,344 2000 to 2018 Population 135.6% 66.7% 47.9% 2010 to 2023 Population 39.0% 31.8% 27.5% 5 Miles

45,443 INCOME 1 MI 3 MI 5 MI 3 Miles 2018 Median Income $42,337 $51,951 $56,869 3,482 2018 Average Income $69,968 $74,830 $78,068 1 Miles Median Income Change 2018-23 18.9% 20.9% 24.1% 475 Schillinger Rd. AGE/HOME VALUE 1 MI 3 MI 5 MI $69,968 2018 Est. Median Age 36.1 34.2 36.3 19 and Under 25.3% 25.3% 25.6% 2018 Est. Median Home Value $120,878.40 $156,573.40 $154,307.50 $74,830 2018 Est. Average Home Value $150,248.70 $191,086.10 $196,848.10

EDUCATION 1 MI 3 MI 5 MI $78,068 Bachelor’s Degree or Higher 36.2% 43.5% 43.2%

Population (2018)

Average. Household Income (2018) 13 KRYSTAL MOBILE

CONFIDENTIALITY DISCLAIMER

The information contained herein, including an pro forma income and expense information (collectively, the “Information”) is based upon assumption and projections and has been compiled or modeled from sources we consider reliable and is based on the best available information at the time the brochure was issued. However, the Information is subject to change and is not guaranteed as to completeness or accuracy. While we have no reason to believe that the Information set forth in this brochure, underwriting, cash flows, valuation, and other financial information (or any Information that is subsequently provided or made available to you) contains any material inaccuracies, no representations or warranties, express or implied, are made with respect to the accuracy or completeness of the Information. Independent estimates of pro forma income and expenses should be developed before any decision is made on whether to invest in the Property. Summaries of any documents are not intended to be comprehensive or all-inclusive, but rather only outline some of the provisions contained therein and are qualified in their entirety by the actual document to which they relate. You understand that the Information is confidential and is furnished solely for the purpose of your review in connection with a potential investment in the Property. You further understand that the Information is not to be used for any purpose or made available to any other person without express written consent of Colliers International. This offering is subject to prior placement and withdrawal, cancellation, or modification without notice. This publication is the copyrighted property of Colliers International and/or its licensor(s). ©2018. All rights reserved.

14 OFFERING MEMORANDUM Colliers International Colliers Dr, Suite 100 5901 Priestly Carlsbad, CA 92008 +1 760 930 8950 of Record Broker Joe Sander, IV AL License No. 000024727 Thomas T. Ladt Thomas T. +1 760 930 7931 [email protected] CA License No. 01803956