OFFERING MEMORANDUM 380 & 386 Blanding Blvd

NET LEASE CAPITAL MARKETS

OFFERING MEMORANDUM 380 & 386 Blanding Blvd. | Orange Park, FL NET LEASE CAPITAL MARKETS

MATT BERRES Executive Managing Director 949.608.2066 [email protected]

KEN HEDRICK Executive Managing Director 918.878.9540 [email protected]

JERRY HOPKINS Executive Managing Director 918.878.9536 [email protected]

D. ANDREW RAGSDALE, ESQ. Senior Managing Director 918.878.9535 [email protected]

In association with: DREW FLEMING Senior Managing Director 404.806.2755 [email protected] RE Lic.# SL3268867 TABLE OF CONTENTS

Investment Summary 5

Area Overview 10

Property Description 15

Tenant Overview 18

Financial Summary 22 44 INVESTMENT SUMMARY INVESTMENT OFFERING SUMMARY SUMMARY

Newmark Knight Frank (NKF), as the exclusive broker, is pleased to present the opportunity to acquire a Two (2) Tenant Net Leased Investment located in Orange Park, FL (Jacksonville MSA). The Price Pro Forma NOI* Property consists of a freestanding 84,180 square foot Old Time Pottery and a 3,200 square foot ground leased Freddy’s Frozen Custard & Steakburgers. Old Time Pottery signed a Fifteen (15) Year Lease in 2015 and has Two (2), Five (5) Year Options to Extend and Freddy’s signed a Ten (10) Year Ground Lease in 2016 and has Four (4), Five (5) Year Options to Extend. Both $6,958,711 $469,713 Leases feature fixed rental increases every Five (5) Years, with Old Time Pottery’s rent increasing by 11% in Aug-2020 and Cap Rate Year 3 NOI Freddy’s rent increasing by 10% in Dec-2021, providing income growth and a hedge against inflation. Additionally, both Tenants are paying rents at a fraction of today’s market rate, offering stability as well as long term value creation opportunity for a Landlord. Old Time Pottery’s NN Lease and Freddy’s Absolute NNN Ground Lease Structures provide a passive investment 6.75% $477,639 ideal for local and out of area investors alike.

Located in the heart of Orange Park’s retail hub, the Property is situated along Blanding Blvd (64,000 VPD), just north of the major intersection of Blanding Blvd and Kingsley Ave (94,500 VPD). Orange Park High School, home to 1,553 students, is located directly across the intersection from the Property. Neighboring tenants include Publix, Lowe’s, McDonald’s, and Burger King.

*Pro Forma NOI is as of Aug-2020, reflecting Old Time Pottery’s Rental Increase. 6 INVESTMENT HIGHLIGHTS

LONG TERM LEASES W/ STRONG TENANTS PASSIVE LEASES, IDEAL FOR LOCAL OR OUT • Old Time Pottery signed a Fifteen (15) Year Lease in 2015 and OF AREA INVESTORS has Two (2), Five (5) Year Options to Extend • Freddy’s Absolute NNN Ground Lease requires Zero Landlord Re- • Freddy’s signed a Ten (10) Year Ground Lease in 2016 and has sponsibilities Four (4), Five (5) Year Options to Extend • Old Time Pottery is on a passive NN Lease with Landlord Respon- • Freddy’s opened 47 new stores in 2019 and currently operates sibilities limited to Roof, exterior walls, concrete floors, and structur- 373 locations across 34 states al components, and HVAC Replacement. • Old Time Pottery operates 43 locations across 11 states and is owned by Comvest Partners ($3.7B+ AUM) HIGHLY VISIBLE & EASILY ACCESSIBLE • 10.22 Years of Weighted Average Lease Term remaining LOCATION • Premier location along Blanding Blvd (64,000 VPD), Orange Park’s BELOW MARKET RENTS | LONG TERM VALUE major thoroughfare, and just north of the major intersection of Blan- CREATION ding Blvd and Kingsley Ave (94,500 VPD) • The Orange Park & Jacksonville Retail Market has experienced • Five (5) ingress/egress points increased demand leading to compressed vacancies and upward • Both tenants have prominent pylon signage along Blanding Blvd pressure on rents. This results in below market rents at the Subject Property, creating tremendous value for a long term investor. DOMINANT RETAIL CORRIDOR | STRONG • Old Time Pottery’s current rent is approximately 55% below market DEMOGRAPHICS • Freddy’s Ground Lease structure results in rent at a fraction of • Attractive Jacksonville MSA Location; Population of 140,914 and today’s market rate (approximately 44% below market) Average Household Income of $83,471 within 5 miles. • 7% Population Growth Estimated over the next 5 years FIXED RENTAL INCREASES | 11% IN NEXT • Neighboring tenants include Publix, Lowe’s, McDonald’s, and TWO YEARS Burger King • Both Tenants’ Leases provide income growth and a hedge against • Located adjacent to Orange Park High School, home to 1,553 inflation with fixed rental increases students • Old Time Pottery’s Lease increases by 11% in Aug-2020 and • Very low 3.6% Vacancy Rate in the Orange Park retail market, increases every Five (5) Years throughout the Primary Term and well below the national average of 4.57% Option Periods • Freddy’s Lease features 10% increases every Five (5) Years throughout the Primary Term and Option Periods; with its next increase in Dec-2021 7 PROPERTY OVERVIEW

380 & 386 Blanding Blvd. Orange Park, FL

Tenants

Pro Forma NOI* GLA (SF) $469,713 87,380 SF

Year Built / Renovated Land Size (Old Time Pottery) 1976 / 2015 9.37 Acres

Year Built (Freddy’s) Traffic Counts (@ Intersection) 2016 94,500 CPD

Occupancy Parking Stalls 100% 466

*Pro Forma NOI is as of Aug-2020, reflecting Old Time Pottery’s 8 Rental Increase. 9 AREA OVERVIEW ORANGE PARK, FL OVERVIEW

The city of Orange Park is located in the northeast corner of Clay County, Florida, and is within driving distance of bustling Jacksonville and its numerous beaches and attractions. The name “Orange Park” is often applied to a wider area of northern Clay County outside the town limits, covering such commu- nities as Lakeside, Fleming Island, Oakleaf Plantation, and Bellair-Meadowbrook Terrace.

Living in Orange Park offers residents a dense suburban feel, with most residents owning their homes. Many households are either affiliated with the mil- itary, due to the presence of NAS Jacksonville located less than 6 miles away, or are in the medical field. Orange Park boasts a history and culture all its own, with golf courses, varied lodging options, wedding venues, parks and shopping.

DEMOGRAPHICS POPULATION AVERAGE AGE

POPULATION 3 MILE 5 MILE 10 MILE 2019 Total Population 58,673 140,914 453,338 2024 Population 63,837 152,175 488,093 140,914 37.7 Pop Growth 2019–2024 1.8% 1.6% 1.5% Average Age 40.0 37.7 37.7 HOUSEHOLDS AVERAGE HH INCOME 2019 Total Households 22,932 52,371 176,201 HH Growth 2019-2024 1.1% 1.0% 0.9% Average Household Income $76,308 $83,471 $83,169

$83,471

11 LOCAL AERIAL

TUESDAY MORNING PLAZA

Blanding Blvd. (64,00 VPD) Loch Rane Blvd. Kingsley Ave. (30,500 VPD) THE 224 PARK

ORANGE PARK HIGH SCHOOL PINETREE (1,553 Students) PLAZA 21

12 COMPETITION AERIAL

)

0 , 4 6 (

. d lv B g in d an Bl

13 RETAIL MARKET OVERVIEW

The Orange Park and Jacksonville retail market has seen strong demand from retail ten- 7.4M SF ants chasing heightened consumer spending in the metro area. This increased demand Total SF Retail has led to compressed vacancies and upward pressure on rents.

The Jacksonville MSA retail market encompasses nearly 98 million square feet of retail space with a total vacancy rate of 3.9% and market rent of $17.91. Rents have grown 3.6% 5.1% in the past 12 months. However, rents remain a bargain compared to peer Florida Vacancy Rate metros.

Strong absorption numbers in the first half of 2019 benefitted from major tenants leas- ing anchor spaces, including: Regal Cinemas (87,532 SF), Publix (48,397 SF), Beau- ty Depot (47,084 SF), Burlington (39,985 SF), Sprouts Farmers Market (30,000 SF), 152,000 SF Lucky’s Market (30,000 SF), Petco (18,000 SF), Aldi’s (18,000 SF) and others. Addition- 12 Month ally, Sprouts plans to open another location in Jacksonville at the start of 2020. Absorption

Jacksonville appears poised for continued strength and growth due to its business-friendly environment, relative affordability, and strong demographic factors which have boosted Jacksonville’s skilled labor pool, bringing job growth to the region. Some of the metro’s largest employers include a mix of financial companies and healthcare $18.26/SF facilities including Baptist Health, Mayo Clinic, and Wells Fargo. However, as a large Na- Market Rent/SF val hub, Jacksonville’s largest employer is the Naval Air Station’s ports with over 30,000 (Total Retail) combined personnel. Duval County’s public-school system and the City of Jacksonville add another 25,000 employees to the area.

The area has also won multiple significant business expansions in recent years. The BELOW MARKET RENTS $8.00 - $12.00 Mayo Clinic recently announced over 300,000 SF of expansion taking place over the Market Rent/SF next five years, which will bring hundreds of new jobs and, along with the clinic’s recent Old Time Pottery ($4.50/SF/Yr) (Anchor) and Freddy’s ($28.75/SF/Yr) are investment of over $300 million, will push it closer to its goal of being the premier medi-

ORANGE PARK RETAIL STATS RETAIL ORANGE PARK both paying well below market cal center in the Southeast. Amazon’s recent completion of building two new fulfillment rents for buildings in their respec- centers totaling over 3 million square feet in the metro is expected to bring about 2,500 tive categories, providing long jobs to the city by the end of 2019. term stability and opportunity for income growth for the Landlord. $51.00 Market Rent/SF (QSR Pad) 14 Source: CoStar PROPERTY DESCRIPTION 16 SITE PLAN BANK OF AMERICA & PACIFIC DENTAL

439 Spaces

84,180 SF Drive Thru Lanes

3,200 SF PROPERTY DESCRIPTION

27 Spaces oulevard (64,000 VPD) landing B B

Zaxby’s Area (Not a Part)

Loch Rane Boulevard

Parcel Line 17 TENANT OVERVIEW • Number of Locations: 43 (11 States) • Number of Locations: 373 Nationwide (34 States)

• Company Type: Private • 47 New Stores Opened in 2019

• Headquarters: Murfreesboro, TN • Company Type: Private

• Parent Company: Comvest Partners (www.comvest.com) • Website / Franchisee Website: www.freddysusa.com / www.scoopingsmiles.com Old Time Pottery is a discount home decor store with a multitude of product lines. The company has departments focused on Home Accents, Furniture • Headquarters: Wichita, KS & Rugs, Around the Table, Storage & Organization, bed & Bath, Floral & DIY, Seasonal Shops, Planters & Pots. Old Time pottery also offers one of the largest seasonal selections which includes items catering to outdoor living in the #1 “Best Franchises to Buy” by Forbes (2018) summer, Fall, Halloween & Christmas Decor. Old Time Pottery has 43 locations #10 “Fastest Growing Restaurant Chains” by Nation’s Restaurant in Alabama, Florida, Georgia, Illinois, Tennessee, South Carolina, Indiana, News (2018) Missouri, North Carolina, Oklahoma, Ohio.

Old Time Pottery was acquired in 2014 by Comvest Partners, a private investment firm providing equity and debt capital to middle-market companies Founded in 2002, Freddy’s Frozen Custard & Steakburgers is an American across North America. Since its founding in 2000, Comvest has invested over quick service retailer (QSR) restaurant chain headquartered in Whichita, KS. $4.7 billion. Today, Comvest’s funds have over $3.7 billion of assets under Freddy’s menu includes popular items such as steakburgers, Vienna Beef management. Through its extensive capital resources and broad network of hot dogs, and chicken sandwiches. Freddy’s is well known for their signature industry relationships, the Company offers its companies financial sponsorship, frozen custard with a variety of speciality sundaes and concretes. critical strategic and operational support, and business development assistance.

19 20 21 FINANCIAL SUMMARY RENT ROLL

RENT

LEASE MONTHLY ANNUAL TENANT SF LEASE EXP STATUS MONTHLY ANNUAL OPTIONS START PSF PSF

Old Time Pottery 84,180 7/4/2015 7/31/2030 Current $31,567 $0.38 $378,810 $4.50 Two (2), Five (5) Year

Aug-2020 $35,075 $0.42 $420,900 $5.00

Aug-2025 $38,583 $0.46 $462,990 $5.50

Option 1 Aug-2030 $42,090 $0.50 $505,080 $6.00

Option 2 Aug-2035 $45,598 $0.54 $547,170 $6.50

Freddy’s Frozen Custard & Steak- 3,200 11/8/2016 11/30/2026 Current $7,667 $2.40 $92,000 $28.75 Four (4), Five (5) Year burgers (Ground Lease)

Dec-2021 $8,433 $2.64 $101,200 $31.62

Option 1 Dec-2026 $9,277 $2.90 $111,320 $34.79

Option 2 Dec-2031 $10,204 $3.19 $122,452 $38.27

Option 3 Dec-2036 $11,225 $3.51 $134,697 $42.09

Option 4 Dec-2041 $12,347 $3.86 $148,167 $46.30

Total/Averages 87,380 $39,234 $0.45 $470,810 $5.39

All information furnished regarding property for sale, rental or financing is from sources deemed reliable. Seller and broker make no representation as to the accuracy thereof and it is submitted subject to errors, omissions, change of price, rental or other conditions, prior sale, lease, or financing, or withdrawal without notice. 23 CASH FLOW

In-Place Pro Forma Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 As of As of For the Years Ending Dec-2019 Aug-2020 Dec-20 Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 Dec-26 Dec-27 Dec-28 Dec-29 Total Rental Income $470,810 $512,904 $488,355 $513,670 $522,096 $522,096 $522,096 $539,636 $564,986 $573,720 $573,720 $573,720

EXPENSE REIMBURSEMENT REVENUE

Utilities 0 0 0 0 0 0 0 0 0 0 0 0

Taxes $49,949 $56,606 $56,606 $57,738 $58,893 $60,071 $61,272 $62,498 $63,748 $65,023 $66,323 $67,650 Insurance $2,316 $2,316 $2,316 $2,362 $2,410 $2,458 $2,507 $2,557 $2,608 $2,660 $2,714 $2,768 CAM 0 0 0 0 0 0 0 0 0 0 0 0

Management Fee $2,300 $2,300 $2,300 $2,319 $2,530 $2,530 $2,530 $2,530 $2,550 $2,768 $2,768 $2,768

REIMBURSEMENT REVENUE $61,222 $61,222 $61,222 $62,420 $63,833 $65,059 $66,309 $67,585 $68,906 $70,451 $71,805 $73,186

EFFECTIVE GROSS REVENUE $532,032 $574,126 $549,577 $576,090 $585,929 $587,155 $588,405 $607,221 $633,892 $644,171 $645,525 $646,906

EXPENSES

Utilities 0 0 0 0 0 0 0 0 0 0 0 0 Taxes $56,606 $56,606 $56,606 $57,738 $58,893 $60,071 $61,272 $62,498 $63,748 $65,023 $66,323 $67,650 Insurance $21,845 $21,845 $21,845 $22,282 $22,728 $23,182 $23,646 $24,119 $24,601 $25,093 $25,595 $26,107 CAM $8,738 $8,738 $8,738 $8,913 $9,091 $9,273 $9,458 $9,647 $9,840 $10,037 $10,238 $10,443 Management Fee $15,961 $17,224 $16,487 $17,283 $17,578 $17,615 $17,652 $18,217 $19,017 $19,325 $19,366 $19,407

TOTAL OPERATING EXPENSES 103,150 104,413 103,677 106,216 108,289 110,141 112,029 114,481 117,206 119,478 121,522 123,606

NET OPERATING INCOME 428,882 469,713 445,901 469,874 477,639 477,014 476,377 492,740 516,686 524,693 524,003 523,299 ASSUMPTIONS OF PROSPECTIVE CASH FLOW: Total Rental Income: Actual Amounts, Assumes Tenants Exercise their Option(s) EXPENSE REIMBURSEMENT REVENUE: EXPENSES: Taxes: 100% Reimbursement Taxes: 2019 Actual Amounts Management Fee: Freddy’s pays 2.5% of its Base Rent; Old Time Pottery does not Management Fee: 3% of EGR Reimburse CAM: $0.10/SF/Yr CAM & Utilities: Assumes Tenants do not Reimburse Insurance: $0.25/SF/Yr Insurance: 2018 Actual Taxes, CAM and Insurance assumed to grow at 2% Annually.

TENANT

LEASE START July 4, 2015

LEASE EXPIRATION July 31, 2030

TOTAL SQUARE FEET 84,180

CURRENT RENT $0.38/SF/Mo | $4.50/SF/Yr | $378,810/Yr

YEARS 6-10 $0.42/SF/Mo | $5.00/SF/Yr | $420,900/Yr

YEARS 10-15 $0.46/SF/Mo | $5.50/SF/Yr | $462,990/Yr

OPTIONS Two (2), Five (5) Year

OPTION 1 (8/1/2030 - 7/31/2035) $0.50/SF/Mo | $6.00/SF/Yr | $505,080/Yr

OPTION 2 (8/1/2035 - 7/31/2040) $0.54/SF/Mo | $6.50/SF/Yr | $547,170/Yr

OPTION NOTICE Twelve (12) months before the expiration of the prior term

CAM Landlord Responsible

TAXES Tenant Responsible

INSURANCE Tenant shall pay for and maintain, commercial general liability insurance with $2 MM/$5 MM limits & All-Risk extended coverage insurance covering the premise. Tenant must also carry workers compensation insurance, builder’s risk insurance, automobile liability/garage liability insurance, as well as require all contractors to obtain insurance in the amounts of $1 MM/$2MM. LANDLORD REPAIRS Landlord shall keep and maintain the Roof, exterior walls, concrete floors, and structural components, Parking Lot Replace- ment, HVAC Replacement. TENANT R&M Tenant at its expense, shall maintain exterior doors, storefront, glass, and loading dock areas and plumbing, electrical, sewer systems, HVAC systems, parking lot maintenance and FF&E. ESTOPPEL Provide, upon not less than ten (10) days’ prior written request

SUBLEASING Permitted, so long as tenant gives LL prompt notice of sublease commencement. Sublease does not remove Old Time Pottery from original lease responsibilities. OPERATION Tenant shall have no obligation to operate continuously. Landlord has the right to terminate the lease and recapture the premises once operations have been ceased for 180 days.

All information furnished regarding property for sale, rental or financing is from sources deemed reliable. Seller and broker make no representation as to the accuracy thereof and it is submitted subject to errors, omissions, change of price, rental or other 25 conditions, prior sale, lease, or financing, or withdrawal without notice. LEASE ABSTRACT

TENANT

LEASE START April 4, 2016

LEASE EXPIRATION November 30, 2026

TOTAL SQUARE FEET 3,200

CURRENT RENT $2.40/SF/Mo | $28.75/SF/Yr | $92,000/Yr

YEARS 6-10 $2.64/SF/Mo | $31.62/SF/Yr | $101,200/Yr

OPTIONS Four (4), Five (5) Year

OPTION 1 (12/1/2026-11/30/2031) $2.90/SF/Mo | $34.79/SF/Yr | $111,320/Yr

OPTION 2 (12/1/2031-11/30/2036) $3.19/SF/Mo | $38.27/SF/Yr | $122,452/Yr

OPTION 3 (12/1/2036-11/30/2041) $3.51/SF/Mo | $42.09/SF/Yr | $134,679/Yr

OPTION 4 (12/1/2041-11/30/2046) $3.86/SF/Mo | $46.30/SF/Yr | $148,167/Yr

OPTION NOTICE 150 Days

MANAGEMENT FEE 2.5% of Base Rent

CAM Tenant Responsible (Absolute NNN Ground Lease)

TAXES Tenant Responsible (Absolute NNN Ground Lease)

INSURANCE Tenant shall pay for and maintain, commercial general liability insurance with $2 MM limit & All-Risk extended coverage insurance covering the premise. Tenant must also carry workers’ compensation insurance, Motor Vehicle liability insurance, and any insurance required under the REA. TENANT R&M Tenant shall, at its sole cost and expense, keep, maintain, repair and replace the Premises and all Improvements thereon (including, but not limited to the Building, Building systems and components, foundation, walls, roof, ventilation and air condi- tioning units and components, sprinklers and mechanical heating, systems) and all facilities appurtenant thereto, parking areas, landscaped areas, curb cuts, drive aisles and all other portions of the Premises. ESTOPPEL 30 days after landlord’s request

26 DISCLAIMER

Newmark Knight Frank, exclusive marketing representative of the Seller, is solely authorized to present this property investment NET LEASE CAPITAL MARKETS offering (the “Offering”). This is a confidential Memorandum intended solely for your limited use and benefit in determining whether you desire to express further interest in the acquisition of (the “Property”).

MATT BERRES Prior to submitting an offer to purchase the Property, interested parties should perform and rely upon their own investigations, analyses, Executive Managing Director estimates and projections and otherwise satisfy any concerns regarding material aspects of the proposed transaction including, but 949.608.2066 not limited to, legal, municipal, environmental, operational, seismic, financial and physical issues, and all other matters affecting or [email protected] pertaining to the Property. The Seller will be offering the Property including all appurtenances and tenant improvements, solely on KEN HEDRICK an “As-Is, With-All-Faults” basis, without any representations or warranties. No person is authorized to make any representations or Executive Managing Director warranties on behalf of the Seller regarding the Property. Any and all information regarding the Property provided to any interested 918.878.9540 party by the Seller or Newmark Knight Frank, including all information contained in the Offering, is provided without any representation [email protected] or assurance, express or implied, regarding the accuracy, completeness or current status of applicability of such information. Each interested party is expected to undertake such reviews and investigations and make such inquiries as such party may believe to be JERRY HOPKINS Executive Managing Director necessary, appropriate or advisable for the purpose of forming a decision to make an offer to acquire the Property. 918.878.9536 [email protected] The Owner expressly reserves the right, at is sole discretion, to reject any or all expressions of interest or offers to purchase the Property and/or to terminate discussions with an entity at any time with or without notice which may arise as a result of review of this D. ANDREW RAGSDALE, ESQ. Memorandum. The Owner shall have no legal commitment or obligation to any entity reviewing this Memorandum or making an offer Senior Managing Director 918.878.9535 to purchase the Property unless and until written agreement(s) for the purchase of the Property have been fully executed, delivered [email protected] and approved by the Owner and any conditions to the Owner’s obligations therein have been satisfied or waived. In association with: The material contained herein is confidential and is presented strictly as information for the exclusive use of the prospective DREW FLEMING purchaser. Receipt and review of this Offering by the prospective purchaser constitutes an agreement not to divulge, share or Senior Managing Director 404.806.2755 distribute the information to any other party, except the prospective purchaser’s legal counsel and financial advisors, without the [email protected] prior specific written authorization of the Seller or Newmark Knight Frank Each prospective purchaser shall also agree to and RE Lic.# SL3268867 comply with the provisions of the confidentiality agreement executed by such prospective purchaser prior to receipt of this Offering.

This Offering is submitted subject to errors, changes, omissions, changes in price, market and other conditions. It contains selected information pertaining to the Property and does not purport to be all-inclusive or to contain all of the information that prospective purchasers may desire. It should be noted that any and all market analyses, estimates and projections contained in this Offering are provided for general reference purposes only and are based on assumptions related to the general economy, competition, real estate market trends, and other factors beyond the control of the Seller or Newmark Knight Frank.

Such analyses, estimates and projections are therefore subject to material variation, and may not be consistent with the views or assumptions held by other professionals.

PHOTOCOPYING OR OTHER DUPLICATION OF THIS OFFERING IS NOT AUTHORIZED