1815 Division Street Development Opportunity

DIVISION STREET 1815 Nashville, Tennessee

DEVELOPMENT OPPORTUNITY

WEST END AVENUE

BROADWAY

DIVISION ST LOCATED IN THE HEART OF

NASHVILLE, TENNESSEE

Affiliated Business Disclosure and Confidentiality Agreement

CBRE, Inc. operates within a global family of companies with many subsidiaries and/or related and qualified prospective purchasers. In this Memorandum, certain documents, including entities (each an “Affiliate”) engaging in a broad range of commercial real estate businesses leases and other materials, are described in summary form. These summaries do not purport including, but not limited to, brokerage services, property and facilities management, to be complete nor necessarily accurate descriptions of the full agreements referenced. valuation, investment fund management and development. At times different Affiliates may Interested parties are expected to review all such summaries and other documents of whatever represent various clients with competing interests in the same transaction. For example, this nature independently and not rely on the contents of this Memorandum in any manner. Memorandum may be received by our Affiliates, including CBRE Investors, Inc. or Trammell Crow Company. Those, or other, Affiliates may express an interest in the property described Neither the Owner or CBRE, Inc, nor any of their respective directors, officers, Affiliates or in this Memorandum (the “Property”) may submit an offer to purchase the Property and representatives make any representation or warranty, expressed or implied, as to the accuracy may be the successful bidder for the Property. You hereby acknowledge that possibility or completeness of this Memorandum or any of its contents, and no legal commitment or and agree that neither CBRE, Inc. nor any involved Affiliate will have any obligation to obligation shall arise by reason of your receipt of this Memorandum or use of its contents; and disclose to you the involvement of any Affiliate in the sale or purchase of the Property. In all you are to rely solely on your investigations and inspections of the Property in evaluating a instances, however, CBRE, Inc. will act in the best interest of the client(s) it represents in possible purchase of the real property. the transaction described in this Memorandum and will not act in concert with or otherwise conduct its business in a way that benefits any Affiliate to the detriment of any other offeror The Owner expressly reserved the right, at its sole discretion, to reject any or all expressions of or prospective offeror, but rather will conduct its business in a manner consistent with the law interest or offers to purchase the Property, and/or to terminate discussions with any entity at and any fiduciary duties owed to the client(s) it represents in the transaction described in this any time with or without notice which may arise as a result of review of this Memorandum. The Memorandum. Owner shall have no legal commitment or obligation to any entity reviewing this Memorandum or making an offer to purchase the Property unless and until written agreement(s) for the This is a confidential Memorandum intended solely for your limited use and benefit in purchase of the Property have been fully executed, delivered and approved by the Owner and determining whether you desire to express further interest in the acquisition of the Property. 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 By receipt of this Memorandum, you agree that this Memorandum and its contents are of a purport to be a representation of the state of affairs of the Property or the owner of the confidential nature, that you will hold and treat it in the strictest confidence and that you Property (the “Owner”), to be all-inclusive or to contain all or part of the information which will not disclose this Memorandum or any of its contents to any other entity without the prior prospective investors may require to evaluate a purchase of real property. All financial written authorization of the Owner or CBRE, Inc. You also agree that you will not use this projections and information are provided for general reference purposes only and are based on Memorandum or any of its contents in any manner detrimental to the interest of the Owner or assumptions relating to the general economy, market conditions, competition and other factors CBRE, Inc. beyond the control of the Owner and CBRE, Inc. Therefore, all projections, assumptions and other information provided and made herein are subject to material variation. All references to acreages, square footages, and other measurements are approximations. Additional information and an opportunity to inspect the Property will be made available to interested 2 1815 DIVISION STREET

TABLE OF CONTENTS

Contact Executive Summary 05 Lance Bloom Senior Associate CBRE, Inc. Comparables 11 P: +1 615 248 3500 [email protected] Market Overview 16

3 1815 DIVISION STREET Property Details

Parcel 1 DIVISION STREET 1815 City Nashville, TN Address 1815 Division St

Acreage 0.68 AC

EXECUTIVE SUMMARY Building Size 12,600 SF

The Opportunity Zoning MUI - 20 Stories CBRE, Inc. is pleased to represent the Owner as the exclusive marketing advisor in the sale Parcel 2 of two adjacent trophy land sites, located in the premiere Vanderbilt/Midtown submarket of Nashville, Tennessee (the “Property”). The subject sites are located at the southeast corner City Nashville, TN of 19th and Division Street two blocks away from Vanderbilt University. The Midtown/ Vanderbilt submarket is the most desirable mixed use submarket in Nashville and one of Address 808 & 812 19th Ave S the most difficult areas to secure prime real estate. Condo sale prices in the Vanderbilt/ 0.52 AC Midtown neighborhood eclipse both SoBro and the Gulch. The site is zoned for mixed use Acreage development, with a 20 story height limit. The property lies in the Midtown Overlay, and is Building Size 6,100 SF & 3,700 SF NOT effected by any Music Row overlay. Zoning MUI - 20 Stories

Offering Highlights

• Nashville is a top market for investment in the country and is projected to lead the US in job growth over the next two years. • Site offers flexibility as a long term investment or potential upscale hospitality/ multifamily project based on current zoning and submarket. • Core location in the Vanderbilt/Midtown neighborhood. • The neighborhood is home to the highest priced condos in Nashville, with the Adelicia reaching $1,000/SF for the Penthouses. • Irreplaceable real estate near 4 story hotels, Class A condos and Office, incredible medical employment and Vanderbilt University. • One-of-a-kind location.

5 1815 DIVISION STREET

30 CHURCH ST

18 4 21 WEST END AVENUE 3 20 2 19 22

1 24 5 23

9 6 7 10 VANDERBILT UNIVERSITY BROADWAY 15 14 DIVISION ST 25 26 8 28

6 Restaurants - Purple

Hotels - Red

Retail - Blue

Places of Interest - Green

1 Hattie B’s Hot Chicken Midtown 11 Giovanni Ristorante - Upscale Italian 21 Aloft West End

2 Midtown Cafe - Casual Fine Dining 12 Starbucks 22 Hilton Garden Inn

3 Valentino’s Ristorante - Upscale Italian 13 Panera Bread 23 Embassy Suites

4 Blackstone Pub & Brewery 14 Union Common - Retro-modern Steakhouse 24 Hilton Home2 Suites

5 Tavern - Gastropub 15 Donatos Pizza 25 Kimpton Hotel

6 Chuy’s - Mexican Restaurant 16 Residence Inn / SpringHill Suites 26 Losers Bar - Live Music Venue

7 The Red Door Saloon 17 Hutton Hotel 27 Caviar & Bananas - High End Gourmet Market

8 Soulshine Pizza Factory 18 Loews Vanderbilt 28 Orange Theory Fitness

9 JJ’s Market & Cafe 19 Hampton Inn 29 St Thomas Hospital

10 The Patterson House - Speakeasy 20 Marriott Courtyard 30 TITLE Boxing Club

7 HCA Headquarters

Centennial Park

Tristar Centennial Medical Center

WEST END / ELLISTON PLACE

St. Thomas Hospital

Lowes Vanderbilt Hotel

1818 Church St Apartment Development CHURCH ST VANDERBILT WEST END AVE

Midtown Aertson Midtown Entertainment Palmer Plaza Mixed-use Development District Offices

BROADWAY

DIVISION ST

Adelicia Condos SkyHouse Apartment MIDTOWN Development

Lennar Apartment Development Virgin Hotel MUSIC ROW / DEMONBREUN Development

8 GERMANTOWN CBD SOBRO

THE GULCH

The Cadence Apartment Roundabout Development Plaza Offices 120,000 SF Class A Element Music Office Development Row Apartments Olympus Midtown Apartments SkyHouse Apartment Virgin Hotel Development Development 96,000 SF Class A WEST END Office Development

1818 Church St Apartment Development MIDTOWN MUSIC ROW / DEMONBREUN

Music Square Flats Apartment Development

DIVISION ST BROADWAY

Lennar Apartment CHURCH ST WEST END AVE Development

Midtown Adelicia Condos Entertainment District

9 1815 DIVISION STREET

DIVISION ST

BROADWAY

10 COMPARABLES

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PROPERTY Pine Street Flats RENT COMPARABLES MAP ADDRESS 1055 Pine St 1 SUBMARKET Gulch UNITS 296 AVG RENT/SF $2.64

PROPERTY Velocity ADDRESS 320 11th Ave S 2 SUBMARKET Gulch UNITS 264 AVG RENT/SF $2.26

2 3 PROPERTY 1505 Demonbreun 4 1 ADDRESS 1505 Demonbreun 3 SUBMARKET Music Row UNITS 209 AVG RENT/SF $2.49

PROPERTY Element Music Row ADDRESS 1515 Demonbreun 24 SUBMARKET Music Row UNITS 430 AVG RENT/SF $2.70

12 1815 DIVISION STREET

PROPERTY Artisan on 18th RENT COMPARABLES MAP ADDRESS 819 18th Ave S 51 SUBMARKET Midtown UNITS 153 AVG RENT/SF $2.30

PROPERTY Note16 ADDRESS 1520 Horton Ave 6 SUBMARKET Edgehill UNITS 86 5 AVG RENT/SF $2.37 7

8 PROPERTY Twenty & Grand ADDRESS 2000 Grand Ave 73 SUBMARKET Midtown UNITS 99 AVG RENT/SF $2.28

6 PROPERTY Wesley Place ADDRESS 2001 Scarritt Place 28 SUBMARKET Midtown UNITS 45 AVG RENT/SF $2.24

13 SALES COMPARABLES No. Property Name Property Comparables Year Built Avg Sale Price Avg SF/Unit Avg PSF

ADELICIA 11 1815 20th Ave South 2008 $883,173 1,498 $590 Nashville, TN 37212

TWELVE | TWELVE 22 1212 Laurel Street 2014 $426,500 885 $481 Nashville, TN 37203

ICON 33 600 12th Ave South 2008 $542,043 1,132 $479 Nashville, TN 37203

TERAZZO 44 700 12th Ave South 2009 $643,700 1,542 $418 Nashville, TN 37203

3821 WEST END 55 3821 West End Avenue 2006 $1,575,000 4,016 $392 Nashville, TN 37205

ENCORE 66 301 Demonbreun Street 2008 $335,633 860 $390 Nashville, TN 37201

THE WEST END 77 110 31st Avenue North 2009 $626,250 1,889 $332 Nashville, TN 37203

POSTON AT THE PARK 88 30th Avenue & Poston Ave 2016 $600,000 1,750 $342 Nashville, TN 37203

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SALES COMPARABLES MAP

2 3 4 1

8 7

15 MARKET OVERVIEW

NASHVILLE, TENNESSEE

16 MARKET OVERVIEW The Nashville market has risen to one of the strongest and most DIVISION STREET vibrant economies in the U.S.. Nashville’s ideal geographic location 1815 in the heart of the U.S. encompasses a skilled workforce fueled by 100,000 college students in the region and bears a low cost of living, which is over 13% below the national average. All of these attributes enhance Nashville’s already lively economy. Bridgestone is relocating NASHVILLE, TENNESSEE its that its North American headquarters to downtown Nashville, Nashville, Tennessee has captured national and global attention over the past decade bringing more than 1,700 jobs, with more than 600 jobs being new as a unique and exciting destination for business, entrepreneurship, the medical to Nashville. In 2012, Nashville led the nation in job growth, with a business sector, and of course entertainment. Nashville is the “It City” with its 3.9% increase from 2011 to 2012, according to the Bureau of Labor abundant options for a live-work-play lifestyle. Statistics, and that momentum continued through 2015. Nashville’s recent accolades are a testament to the city’s thriving economy. BRIDGESTONE is bringing more than 1,700 jobs, to Nashville.

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MARKET OVERVIEW LOCAL ENTERTAINMENT AND AMENITIES Nashville has become one of the most sought after places to visit, live game experience would be complete without a visit to the SoBro district, which and play over the last decade and the Downtown Nashville area is the features some of the best honky tonks and live music bars in the world. People main attraction. Boasting over 190 restaurants and 40 live-music venues, can also take in a variety of other attractions including the Country Music including the Ryman Auditorium and Bridgestone Arena, Downtown Hall of Fame and the First Center for the Visual Arts. With a diverse set of Nashville is the place to be. Accompanying the plethora of restaurants attractions, Downtown Nashville has established itself as a premier destination and renowned music venues, Nashville is also home to two professional for tourists and residents alike. sports teams, the Tennessee Titans and Nashville Predators. However, no

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MARKET OVERVIEW TOP 20 PROJECTED GROWTH Nashville 3.8 EDUCATION Austin 3.6 TOP UNIVERSITIES & COLLEGES West Palm Beach 3.4 > American Baptist College Fort Lauderdale 3.0 Fort Worth 2.9 > Austin Peay University San Antonio 2.8 Salt Lake City 2.8 > Belmont University Orlando 2.7 > Fisk University Greenville 2.5 Raleigh 2.4 TRANSPORTATION INFRASTRUCTURE & NETWORKS > Lipscomb University Tuscon 2.3 Infrastructure development, while largely taken for granted, is critical Phoenix 2.3 > Meharry Medical College for continued metropolitan growth. Investment in infrastructure, while Dallas 2.3 sometimes costly, enhances a region’s competitiveness and helps to > Middle Tennessee State University Riverside 2.2 foster communal prosperity and economic well-being. Middle Tennessee Miami 2.2 accounts for nearly one-third of the state’s ongoing infrastructure budget. > Tennessee State University Indianapolis 2.2 Transportation needs account for nearly half of the ongoing infrastructure El Paso 2.2 needs of the region and as the local population continues to grow, > Trevecca Nazarene University infrastructure expenditures are crucial to supporting growth in the area’s Denver 2.2 economic output. > Vanderbilt University Charlotte 2.2 Atlanta 2.2

Projected Annual % Employment Growth Over Next Two Years 19 “Why is Nashville the Silicon Valley of health care? I DIVISION STREET might ask you, why wouldn’t it be? I don’t think there’s 1815 any other choice. It has the right people at the right time at the right place to solve the needs of health care in our ever-changing world.” - Dr . Thomas Frist, Jr. HEALTH CARE Nashville is widely recognized as a national health care industry capital and global health care industry leader. With a reputation for nurturing dynamic, innovative health care companies, the Nashville region has a rich tradition of entrepreneurship and strong industry management talent. Nashville has helped shape the nation’s health care landscape for the past four decades and continues to improve the delivery of patient care across the world. The health care industry contributes an overall benefit of nearly $40 billion annually and more than 250,000 jobs to the local economy. The entrepreneurial climate is strong, with nearly $1 billion in venture capital invested in Nashville health care companies between 2001 and 2011.

Investor-owned hospital More than 250 health care companies are located in Middle Tennessee, beds in the US operated making it the region’s largest and fastest-growing industry. Fourteen 40% by Nashville companies publicly traded health care companies are headquartered in the region, with combined worldwide employment of nearly 500,000 and $73 billion in global revenue. Forty percent of privately owned hospital beds in the U.S. are Publicly Traded Health Care operated by Nashville companies. Nashville’s industry has also developed a Companies in the Nashville network of 300 professional service firms specializing in health care industry support – including legal, accounting, finance and real estate services. 16 Region

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Leading Health Care Companies

Company Location # Of Employees Vanderbilt Medical Center Nashville 19,600 HCA Inc. (HQ) Nashville 7,000 Saint Thomas Health Services Nashville 7,000 Community Health Systems Franklin 2,000 National HealthCare Corp. Murfreesboro 2,000 UnitedHealth Group Brentwood 1,342 Cigna-Healthspring Nashville 1,200 Centerstone Nashville 1,110

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EMPLOYMENT Nashville’s ascent as an up-and-coming city is expected to continue throughout 2016 with substantial job growth. The auto and healthcare industries are at the heart of this rapid expansion as Nashville has become a major hub for both industries. Specifically, the downtown area of Nashville has been the major geographical area of growth for the city with key additions such as Bridgestone Americas in 2015. In 2014, employment hit pre-recession levels at the local, national and state levels. National and local employment levels are growing at an annualized rate of over 2%, which is the fastest rate of employment growth experienced in nine years. Nashville’s cumulative job growth from 2005 through 2015 was 18%. NASHVILLE up-and-coming city!

22 NASHVILLE, TENNESSEE ECONOMICS Accolades DIVISION STREET 1815 Business Insider Nashville was named one of The 13 Hottest American Cities for 1 2016 based on new jobs, growing industries, burgeoning art and food scenes, and affordable real estate.

Forbes Nashville is ranked #4 in “America’s Top Spots for Tech Jobs” due to a 30% increase in technology jobs between 2010 and 2015. It was also ranked #4 for “White Collar Job Growth”.

Atlas Nashville took the #1 spot for Job Growth and Capital Investment in Advertising December of 2015.

New Geography The Nashville MSA leads the nation among metro areas that are increasing employment in financial services at the fastest rate.

Area Development Tennessee was ranked #4 in the “Top States for Doing Business”. Magazine

LIFESTYLE

2 Forbes Nashville ranked Top 10 for “Most Popular Cities for Millennials”. Lonely Planet Nashville named as one of the Top 10 Best Value Destinations in the U.S.

Conde’ Nast Nashville was ranked in the Top 10 for the “Friendliest Cities” Traveler

Travel + Leisure In the 2015 America’s Favorite Cities Survey, Nashville ranked in the following categories:

#1: Concerts, Music Scene, Live Music Scene, Friendliest #2: Bars #3: Festivals, Dive Bars #4 Hip/Cool, People-Watching #5: Safety, Barbecue

www.cbre.com/nashville 23 1815910 DIVISION STREET

The Gulch Nashville’s Gulch Neighborhood is the center of Nashville’s Urban Renaissance. The Gulch is the south’s first LEED certified neighborhood. Master planning of the Gulch began in 2001, and the area was officially designated a special district in 2006. Since then, more than 2,000 condos and apartments, 200 hotel rooms, and 600,000 SF of Class A Office has been developed. The Gulch enjoys the highest apartment rents, condo prices, and office rents in Metro Nashville. The growth of the gulch has seeped into the neighboring North and East Gulch. The North Gulch is home to the 300,000 SF HQ to HCA affiliates, and the Boyle Capitol View project. Capitol View will be home to over 1,000 multi-family units, 700,000 SF of additional office space, and 300,000 SF of retail. The East Gulch stands at the strategic intersection of the Gulch and SoBro. The East Gulch is home to the most luxurious hotel developments in Nashville, including the JW Marriott and Westin Hotels. A full service Hyatt is also planned for the area.

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SoBro What once was an area made up entirely of industrial uses is now the heart of Music City’s hospitality and tourism industries. More than 1,300 hotel rooms and another 1,000 are under construction across the SoBro landscape. Demand drivers in the area include Bridgestone Arena, Music City Center and The Country Music Hall of Fame.

Music City Center Music City Center is one of the newest addition to Nashville’s skyline. The new Convention Center is over 2.1 million SF and spans more than six city blocks. The Center is also Nashville’s newest LEED Silver Certified building. The Nashville Visitors and Convention Bureau has booked 101 trade shows for the new Center so far. That list includes 37 organizations that have never held events in Nashville.

Bridgestone Arena Bridgestone Arena, which opened in 1996, has hosted more than 12 million guests. The Arena has hosted the NCAA Men’s and Women’s Basketball Tournament, the NCAA Women’s Final Four, CMA and CMT Awards, and was named 2007 Pollstar Concert Venue of the Year. The Arena is currently the home The new Convention Center is over of Nashville’s NHL Franchise, The Nashville Predators. The Predators pack an average of 16,600 fans into Bridgestone Arena for 41 nights a year. 2.1 million SF and spans more than six city blocks.

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MULTIFAMILY Nashville’s position as one of the country’s hottest investment markets is proving itself by the numbers. Rents have continued their ascent among all asset classes and locations. With job growth projected to be #1 in the country for the next two years, the fundamentals should remain strong. Office development is firing on all cylinders, with nearly 1.2 million sq. ft. underway and several high profile buildings in the works, primarily in the Gulch, SoBro, and Cool Springs/Brentwood submarkets, which will continue to fuel rental demand. Millennials are moving to Music City in droves, as Nashville is ranked in the “Top 10” destinations in the U.S. for Millennials. With a fast growing economy and attractive demographics, the Nashville apartment market has little trouble absorbing new supply, keeping apartment fundamentals in great shape.

2016 MULTIFAMILY MARKET OVERVIEW The Nashville multifamily market’s tremendous expansion continued throughout the first half of 2016. Demand appears to be accelerating across all asset classes, driving average rental rate growth up 6.7%1 and compressed vacancy to an average of 4.2%. The employment market continued its roll, adding an impressive 17,1815 jobs in the first half of 2016, an increase of 2.0%, with the average household income growing to $76,225. Led by world- class healthcare, educational employers and a burgeoning tech scene, the rate of job growth in Nashville is currently about 50% faster than that at the national level. According to the Nashville chamber of commerce, Nashville ranked in the top five for both blue collar and white collar job growth in 2015. As a top ten market for Millennial growth, young professionals are flocking to the city, driving strong rental demand and fueling a cultural and entertainment scene that’s nationally recognized.

26 TRANSACTIONS The 1st half of 2016 outpaced 2015 with $650 million in transactions with Over the last several years and even through the first half of 2016, demand has approximately $274 million of trades in the Class A space, and $376 million outstripped supply. 2016 will test the market, as roughly 8,500 units will be trading in the “value-add” space. Cap rates continue to compress, based on delivered, while the peak historical absorption was 3,814 units in 2015. Roughly a combination of buyers with a more competitive cost of capital entering the half of the new deliveries will occur in the urban neighborhoods, however thus market and strong forecasted rental rate growth. Cap rates on A assets ranged far through 2016, urban lease-ups have maintained adequate velocity, and from 4.8% – 5.3%, while B and C assets saw cap rates in the 5.3% - 6.5% lease-up concessions appear to holding firm. range. Notable sales included Note 16 ($224,753 PU) and Opus 29 ($247,482 PU).

27 OFFICE MARKET

Direct Vacancy Overall Rates Avg A Rates Net Absorption Construction 6.0% $22.93 Per Sq. Ft. $27.93 Per Sq. Ft. 230,253 Sq.Ft. 3,610,037 Sq. Ft.

*Arrows indicate change from previous quarter

The Nashville office market is tight. Strong tenant demand caused Nashville’s there are sixteen developments under construction, totaling 3.6 million sq. ft. Of overall vacancy to drop to 6.0%, a record low. Available space for tenants this new construction approximately 1.8 million sq. ft. is spec. The majority of in highly sought after submarkets such as Downtown and Cool Springs are this new construction is located downtown Nashville with 2 million sq. ft. under dwindling and the market is highly awaiting new product to be delivered. The construction. Downtown projects include Bridgestone’s new headquarters, Nashville office market has now experienced declining vacancy since Q4 222 2nd Avenue South, Capitol View, 1201 Demonbreun and 615 3rd Avenue 2012, giving owners throughout the market the leverage needed to maximize South. Cool Springs /Brentwood follows with 1 million sq. ft. of Class A office rent potential. Despite record-low vacancy, tenants are still finding space space under construction. Cool Springs/Brentwood projects include Seven to expand and grow their business. Q2 saw 222,591 sq. ft. of positive net Springs II and Seven Springs West, Two Greenway, Two Franklin Park, Hill Center absorption in the Nashville market. This number indicates that despite limited Brentwood, Brentwood Commons and Mallory Park. available space, tenants are still expanding into previously vacant space. The majority of this positive net absorption in Q2 was in second generation office Lifeway recently broke ground on its 250,000 sq. ft. office building in downtown’s space. The past three years have shown fairly consistent, organic positive latest office development, Capitol View. Lifeway will join other headquarter net absorption quarter after quarter. Healthcare, creative industries and relocations including HCA’s Parallon and Sarah Cannon. technology continued to be the leading industries occupying office space in Q2. Key Lease Transactions

Rents have seen a corresponding increase due to Nashville’s dwindling Tenant Sq. Ft. Submarket Address

vacancy. Overall rental rates are on the brink of increasing substantially due to Schneider Electric 175,000 Cool Springs/Brentwood 6100 Tower Circle

the increased costs associated with new construction delivering to the market. Allstate 50,000 Airport North 555 Marriott Drive Overall rental rates have seen an increase to a new all-time high of $22.93 Digital Reasoning 50,000 Cool Springs/Brentwood 701 Cool Springs Blvd per sq. ft. Likewise, Class A rents rose to an average of $27.93 per sq. ft. With Parallon Business 38,000 MetroCenter 621 Mainstream Drive high rents and limited available Class A office space, developers are planning Solutions to finally answer tenants’ demands throughout 2016 and 2017. Currently, Lyft 19,428 Downtown 150 2nd Avenue North

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OFFICE MARKET AVERAGE A & B RENTAL RATES Overall asking rental rates for Nashville’s office market mirrored growth tighten and new construction delivers in Q3 and Q4, pushes average rental recorded in Q1. The average overall asking rate increased by $0.36 per sq. rates. The average quoted asking rental rate in Nashville’s CBD ft., to an all-time high of $22.93 per sq. ft. Likewise, Class A space remained was $26.92 at the end of the second quarter 2016, and $23.32 unchanged at $27.68 per sq. ft. average. Class B properties increased from in the suburban markets. In the first quarter 2016, quoted rates $19.88 per sq. ft. to $20.37 per sq. ft. The Nashville market is likely to see were $27.29 in the CBD and $22.37 in the suburbs. increasing rate trends throughout 2016 as Class A vacancy continues to

Average Class A & B Office Rental Rates

$23.00

$22.00

$20.00

$19.00

Price Per Sq. Ft. Sq. Per Price $18.00

$17.00 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q1 2012 2013 2013 2014 2014 2015 2015 2016

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OFFICE MARKET VACANCY RATES, ABSORPTION, AVAILABILITY Strong Q1 leasing activity and tenant growth in metro and suburban Nashville The overall vacancy rate decreased by 50 basis points (bps) to a record low led to new occupancy gains in Q2 2016. Q2 net absorption was 222,591 sq. of 6.0% in Q2 2016. Class B was responsible for the majority of the overall ft. This figure closes out the first half of 2016 with positive net absorption of decrease, with its vacancy falling by 50 bps to end Q2 2016 at 7.1%. Class 533,242 sq. ft. The Downtown submarket experienced the greatest amount A saw a vacancy decrease of 10 bps to 4.1%, while Class C experienced a of net absorption in Q2, with 82,000 sq. ft., while Airport South followed with slight decrease to 11.3%. The anticipated delivery of Nashville’s office spec approximately 44,000 sq. ft. Airport North and West End/Belle Meade also throughout 2016 and 2017 may increase vacancy temporarily while lease-up contributed to occupancy gains during Q2. Unlike previous quarters, Class B activity occurs. properties reclaimed the top spot over Class A for the highest contribution to net absorption in Q2, posting a net total of 94,000 sq. ft.

Vacancy by Property Type Quarterly Net Absorption

30 Source: CBRE Research, Q2 2016 1815 DIVISION STREET

OFFICE MARKET UNEMPLOYMENT According to the Bureau of Labor Statistics, Tennessee’s unemployment third time the rate has been below 5.0% since 2008. The economic outlook dropped to 4.7% which is a 1% decrease from 2015. Tennessee’s is extremely promising in both the state of Tennessee and Nashville, as unemployment rate has remained below 6.0% for the past four quarters. the positive trend in unemployment should continue. The Nashville MSA The city of Nashville continued to be a major factor in the low state continues to post unemployment rates lower than other major cities in unemployment rate as it’s rate registered at 3.5% this quarter. This low the region, including: Memphis, Atlanta, Charlotte, Louisville, Tampa, and quarterly unemployment rate speaks volumes for Nashville, as it marks the Birmingham.

Employment Chart

United States 5.1% Tennessee 4.7% Nashville MSA 3.5%

Q1 2016 31 1815 DIVISION STREET

Q1 2016 1201 DEMONBREUN GULCH CROSSING AT&T *Under Construction Direct Available: 21,679 SF Direct Available: 78,000 SF Direct Available: 0 SF Sublease Available: 0 SF Sublease Available: 0 SF Sublease Available: 108,742 SF CITY SPACE Gross Rent: $37.00 PSF Gross Rent: $36.50 PSF Gross Rent: $23.00 PSF Direct Available: 23,578 SF % Leased: 89% % Leased: 73% % Leased: 100% Sublease Available: 0 SF Class: A Class: A Gross Rent: $26.00 PSF Class: A % Leased: 83% Class: B

NASHVILLE CITY CENTER Direct Available: 113,141 SF Sublease Available: 0 SF Gross Rent: $25.50 PSF % Leased: 96% Class: A ONE NASHVILLE PLACE Direct Available: 61,700 SF Sublease Available: 0 SF Gross Rent: $28.50 PSF BANK OF AMERICA PLAZA % Leased: 92% Direct Available: 103,110 SF Class: A Sublease Available: 0 SF Gross Rent: $24.50 PSF % Leased: 77% L&C TOWER Class: B Direct Available: 106,167 SF Sublease Available: 0 SF Gross Rent: $25.50-$28.50 PSF FIFTH THIRD CENTER % Leased: 46% Direct Available: 93,163 SF Class: B Sublease Available: 0 SF Gross Rent: $26.00 PSF % Leased: 84% Class: A

4TH & CHURCH UBS TOWER Direct Available: 43,207 SF Direct Available: 147,621 SF Sublease Available: 0 SF Sublease Available: 0 SF Gross Rent: $24.50 PSF Gross Rent: $25.50 PSF % Leased: 88% % Leased: 77% Class: B Class: B

Q1 2016

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OFFICE INVESTMENT Nashville is poised to see additional investment in office sector, as investors migrate from primary to secondary markets in search of a higher yield. Large institutional buyers have entered the Downtown Market. Examples include the CIM Group purchasing the L&C Complex, CA Ventures acquiring Palmer Plaza, Continental Capital Partners purchasing Lingerfelt’s Airport North Portfolio and LBA acquiring One Dell Parkway. Of those sales, the average price per sq. ft. was $144 with a 7% average cap rate.

Historically, cap rates have trended about 100 to 150 basis points higher than the national average. Strong fundamentals will keep cap rates from rising and could result in further compression in some sectors, especially as asking rates continue their rise.

Office Sale Transactions - 2016

Building Sq. Ft. Price in Millions ($) Submarket Bank of America Plaza 435,525 74 Downtown

Cool Springs Commons 235,306 40.7 Cool Springs/Brentwood

Commerce Center East 235,000 40 Downtown

Five Corporate Center 151,833 35.9 Cool Springs/Brentwood

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RETAIL MARKET OVERVIEW

Over the last 5 years, retail sales in Nashville have grown at an annual rate of 4.8% and 2015’s retail sales reached $20.60 billion, according to CBRE Econometric Advisors. Recent population and employment growth have both contributed to Nashville’s rising retail market. The population of the Nashville area stands at 1.84 million and the average per capita income is estimated to be $51,275, approximately 6% above the national average, according to Moody’s Economy.com. Demand is at an all-time high for Class A and newly redeveloped retail product in Nashville’s urban submarkets due to vacancy being at an all-time low. To satisfy this demand, the first half of 2016 saw many developers announce plans for new retail developments. Currently, Nashville has 495,000 sq. ft. of retail under construction and that total is expected to grow substantially throughout the year. Nashville is also experiencing new growth in such emerging neighborhoods as Germantown and Wedgewood-Houston with new retail opportunities in the pipeline. High demand for quality space, low vacancy and new construction have applied pressure to retail lease rates. The first half of 2016 reported an overall asking rental rate of $17.07 per sq. ft. and Class A and/or new construction in Nashville’s urban core is reaching new heights at $38.00 per sq. ft.

More expansion lies ahead for the Nashville retail sector, asking lease rates are anticipated to rise for the next two years. Tenant demand should place upward pressure on rents, which could approach the $30 per sq. ft. on a triple net basis by year-end 2017 in Nashville’s urban core and premium submarkets.

34 RETAIL MARKET Rental Rates Overall asking rates have remained relatively consistent within the Nashville The past three years have shown fairly consistent, positive absorption quarter retail market. The first half of 2016 recorded an average asking rental rate of after quarter. The first half of 2016 saw 28,000 sq. ft. of positive absorption $17.07 per sq. ft. Existing Class A space and/or new construction in Downtown in the Nashville market. Green Hills/Belle Meade largely contributed to Nashville, Green Hills/Belle Meade, Cool Springs and West End, continue to occupancy gains during the first half of 2016 with 22,000 sq. ft. of positive command the highest rents in the Nashville market, reaching $35.00+ per sq. ft. absorption. Downtown, Green Hills/Belle Meade, Cool Springs and West End are Nashville’s highly sought after retail submarkets. Green Hills/Belle Meade reported the Construction Activity highest average rental rate in the Nashville area of $21.77 per sq. ft., followed by Currently, there are two retail centers under construction in the Nashville area. West End at $20.96 per sq. ft. Hill Center Sylvan Heights, located in the Bellevue/West Nashville submarket, is now under construction and expected to be delivered in August 2016. Hill Vacancy & Demand Center Sylvan Heights will include 15,000 sq. ft. of retail storefront space and The Nashville retail market is tight. Strong tenant demand caused Nashville’s will be the home to marketplace, wine bar and bottle shop concept, Salt and overall vacancy to stay at 4.6%, a record low. Available space for tenants Vine, along with Double Dogs and Urban Juicer. In addition, the retail portion in premier submarkets such as Downtown, Green Hills and Cool Springs is of Ovation is now under construction in the Cool Springs/Franklin submarket. dwindling and the market is highly awaiting new projects to be delivered. South Star’s Ovation will include a 480,000 sq. ft. lifestyle center in the heart of Despite record-low vacancy, tenants are finding space to expand and grow their Cool Springs. Looking forward, the Nashville area will continue see a series of businesses. restaurants/retailers open in new and/or renovated mixed-use developments.

Nashville Quarterly Rental Rate/Overall Vacancy

35 Retail Market Statistics

INVENTORY VACANCY YTD NET YTD Under Quoted Submarkets 2016 ABSORPTION Deliveries CONST SF Rates # BLDGS TOTAL GLA Direct SF TOTAL SF VAC %

Bellevue / W Nashville 738 6,283,924 163,665 169,165 2.7% (32,242) 7,489 20,810 $19.11

Brentwood 224 3,186,355 33,917 33,917 1.1% 6,343 0 40,000 $19.75

Columbia 464 5,237,822 123,476 123,476 2.4% 31,598 6,144 9,000 $9.47

Cool Springs / Franklin 682 11,586,602 171,261 201,181 1.7% 26,879 18,185 502,106 $21.52

Donelson / Hermitage 532 6,570,283 166,775 166,775 2.5% 34,605 0 8,654 $14.83

Downtown Nashville 338 3,485,152 116,621 116,621 3.3% 9,595 0 55,659 $32.11

Green Hills / Belle Meade 205 3,632,821 53,225 112,625 3.1% 45,103 22,122 145,846 $23.47

Hendersonville / Gallatin 879 8,798,793 298,570 301,606 3.4% 224,502 179,750 12,720 $14.36

Mt Juliet / Lebanon 845 8,329,389 261,680 261,680 3.1% 23,421 0 8,232 $14.47

North Nashville 1,231 11,497,855 629,751 666,785 5.8% 74,683 9,989 13,600 $13.23

Rutherford County 1,242 15,177,330 651,364 660,364 4.4% 237,014 72,219 396,719 $16.28

Southeast Corridor 1,186 12,588,332 1,291,815 1,433,238 11.4% 73,218 37,950 111,399 $12.97

Vanderbilt / West End 523 3,669,905 60,538 66,374 1.8% 6,108 7,700 43,151 $25.55

Total: Nashville 9,089 100,044,563 4,022,658 4,313,807 4.3% 760,827 361,548 1,367,896 $16.32

Source: CoStar 2016

36 1815 DIVISION STREET Retail Market Statistics