FUTURE MERCER ISLAND DEVELOPMENT SITE275577TH AVENUE SEMercer Island, Washington 98040

OFFERING MEMORANDUM

www.cbremarketplace.com/MercerIslandDev

AFFILIATED BUSINESS DISCLOSURE AND CONFIDENTIALITY AGREEMENT

CBRE, Inc. operates within a global family of companies with many subsidiaries and/or related entities (each an “Affiliate”) engaging in a broad range of commercial real estate businesses including, but not limited to, brokerage services, property and facilities management, valuation, investment fund management and development. At times different Affiliates may represent various clients with competing interests in the same transaction. For example, this 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 in this Memorandum (the “Property”) may submit an offer to purchase the Property and may be the successful bidder for the Property. You hereby acknowledge that possibility and agree that neither CBRE, Inc. nor any involved Affiliate will have any obligation to disclose to you the involvement of any Affiliate in the sale or purchase of the Property. In all instances, however, CBRE, Inc. will act in the best interest of the client(s) it represents in 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 or prospective offeror, but rather will conduct its business in a manner consistent with the law and any fiduciary duties owed to the client(s) it represents in the transaction described in this Memorandum.

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.

This Memorandum contains selected information pertaining to the Property and does not purport to be a representation of the state of affairs of the Property or the owner of the Property (the “Owner”), to be all-inclusive or to contain all or part of the information which prospective investors may require to evaluate a purchase of real property. All financial projections and information are provided for general reference purposes only and are based on assumptions relating to the general economy, market conditions, competition and other factors 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 and qualified prospective purchasers. In this Memorandum, certain documents, including leases and other materials, are described in summary form. These summaries do not purport to be complete nor necessarily accurate descriptions of the full agreements referenced. Interested parties are expected to review all such summaries and other documents of whatever nature independently and not rely on the contents of this Memorandum in any manner.

Neither the Owner or CBRE, Inc, nor any of their respective directors, officers, Affiliates or representatives make any representation or warranty, expressed or implied, as to the accuracy or completeness of this Memorandum or any of its

contents, and no legal commitment or obligation shall arise by reason of your receipt of this Memorandum or use of its contents; and you are to rely solely on your investigations and inspections of the Property in evaluating a possible purchase of the real property.

The Owner expressly reserved the right, at its sole discretion, to reject any or all expressions of interest or offers to purchase the Property, and/or to terminate discussions with any entity at any time with or without notice which may arise as a result of review of this Memorandum. The 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 purchase of the Property have been fully executed, delivered and approved by the Owner and any conditions to the Owner’s obligations therein have been satisfied or waived.

By receipt of this Memorandum, you agree that this Memorandum and its contents are of a confidential nature, that you will hold and treat it in the strictest confidence and that you will not disclose this Memorandum or any of its contents to any other entity without the prior written authorization of the Owner or CBRE, Inc. You also agree that you will not use this Memorandum or any of its contents in any manner detrimental to the interest of the Owner or CBRE, Inc.

If after reviewing this Memorandum, you have no further interest in purchasing the Property, kindly return this Memorandum to CBRE, Inc.

© 2015 CBRE, Inc. The information contained in this document has been obtained from sources believed reliable. While CBRE, Inc. does not doubt its accuracy, CBRE, Inc. has not verified it and makes no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property. The value of this transaction to you depends on tax and other factors which should be evaluated by your tax, financial and legal advisors. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs.

CBRE and the CBRE logo are service marks of CBRE, Inc. and/or its affiliated or related companies in the United States and other countries. All other marks displayed on this document are the property of their respective owners.

Photos herein are the property of their respective owners and use of these images without the express written consent of the owner is prohibited.

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CONTACT US

TABLE OF CONTENTS

AUSTIN COHN+1 206 292 6075austin.cohn@cbre.com

ART WAHL+1 206 292 6127art.wahl@cbre.com

01 EXECUTIVE SUMMARY

06 PROPERTY DESCRIPTION

11 LEASE ANALYSIS

13 MARKET OVERVIEW

21 FINANCIAL OVERVIEW

EXECUTIVE SUMMARYEXECUTIVE SUMMARY

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1E X E C U T I V E S U M M A R Y

THE OFFERING

CBRE, as exclusive representative, is pleased to present the opportunity to acquire future development rights to the land and potential rental income from New Seasons Market at 2755 77th Avenue SE in Mercer Island, Washington. This 2.74 acre property sits at the heart of Mercer Island’s Town Center.

Mercer Island is positioned directly between the Puget Sound region’s two major economic hubs, Seattle and Bellevue, making it a convenient commute to either city. The Mercer Island submarket is one of the wealthiest in the State of Washington, ranking sixth in a recent ranking of the wealthiest zip codes1. In addition, Mercer Island has a highly educated population, and NeighborhoodScout.com ranks Mercer Island Public School district as the number one public school district in Washington State.

1. Mongabay.com wealth data (http://wealth.mongabay.com/cities/WASHINGTON.html)

Property Overview

Site Area 119,354 SF / 2.74 Acres

Building Area 37,076 SF

Ground Lessee Montbert Associates

Sub-Lessee (Tenant) New Seasons Market

Ground Lease Termination December 1, 2033

2755 77TH AVENUE SE

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INVESTMENT HIGHLIGHTS

+ High Net Worth Submarket

The Mercer Island submarket is one of the wealthiest in the State of Washington, ranking sixth in a recent summary of the wealthiest zip codes in the United States1. Average household income within a one mile radius of The Property is estimated at $143,0922.

+ Ideally Situated Location

Mercer Island is positioned between the Puget Sound region’s two major economic hubs, seven miles from Seattle and six miles from Bellevue.

+ In-Place Income

2755 77th Avenue SE is an income producing property, with potential cash flow through December 31, 2033.

+ Highly Educated Population

75% of Mercer Island residents have a Bachelor’s Degree or higher2, and Mercer Island Public School District is ranked number one amongst public school districts in the State of Washington3.

+ Development Potential

Beginning January 1, 2034, the property will be free and clear of any lease encumbrances, available for a new lease or redevelopment.

1. Mongabay.com wealth data (http://wealth.mongabay.com/cities/WASHINGTON.html)

2. CBRE Demographic Report/Nielsen

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3E X E C U T I V E S U M M A R Y

6 miles to Downtown Seattle(9 minutes without traffic)6 miles to Downtown Seattle(10 minutes without traffic)

6 miles to Downtown Bellevue(9 minutes without traffic)

2755 77TH AVENUE SE

2755 77TH AVENUE SE

PROPERTY DESCRIPTION

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PROPERTY DESCRIPTION

2755 77th Avenue SE is a rectangular shaped site consisting of 119,354 square feet of land and 37,076 square feet of single-story retail space. Bordered by 77th Avenue SE to the east and SE 29th Street to the south, the Property is centrally located in the heart of the Mercer Island Town Center. The City of Mercer Island averages a Walk Score© of 30, however, apartment buildings surrounding the property received an average of 73, or “Very Walkable,” according to WalkScore.com.

Property Summary

Address 2755 77th Avenue SE, Mercer Island, WA 98040

County King

Parcel No. 531510-1395

Zoning Town Center (TC), City of Mercer Island

Site Area 119,354 SF / 2.74 Acres

Building Area 37,076 SF

Year Built 1977

No. of Stories 1

Ground Lessee Montbert Associates

Sub-Lessee (Tenant) New Seasons Market

Ground Lease Termination December 1, 2033

2755 77TH AVENUE SE

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9P R o P E R T Y D E S C R I P T I o n

ZONING ANALYSIS

Zoning for the property is TC (Town Center), City of Mercer Island. The Mercer Island City Council is currently reviewing the Town Center zoning plan. On February 2, 2015 the Council placed a development moratorium on the submission or acceptance of applications for any building permits or any other land development permits or approvals for major new construction in the Town Center zone for four months on buildings over two stories. The moratorium has since been extended through December 16, 2015.

Zoning Summary

Zone Town Center - Residential Central (City of Mercer Island)

Base Building Height A base building height of up to two stories (not to exceed 26 feet) shall be allowed; one-story structures located adjacent to the public right-of-way shall be a minimum of 18 feet

Base Building Height with Major Site Feature

Three stories but not to exceed 39 feet

Maximum Building Height with Significant Public Amenity

Four stories, but not to exceed 52 feet

LEASE ANALYSIS

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11L E A S E A n A L Y S I S

LEASE ANALYSIS

GROUND LEASE

A ground lease between the Landlord and Albertsons commenced January 2, 1979 for a primary term of 25 years, with six, five-year extension options. The ground lease is currently in its third option period, expiring January 1, 2019.

+ The last ground lease extension option term will terminate on January 1, 2034.

SUBLEASE

The ground tenant’s interest in the ground lease was assigned by Albertson’s to Montbert Associates. Montbert Associates is managed by Rabina Properties. Montbert Associates previously subleased the property to Albertson’s. Montbert Associates currently subleases the property to New Seasons Market.

BOTTOM LINE

+ On January 2, 2034 the Landlord recaptures full rights to the property, free of the ground lease.

+ The Landlord has no right to the income stream from the subtenant, New Seasons Market to the ground tenant, Montbert Associates. Base rent payable by the subtenant to the ground tenant is unknown.

+ The Landlord has no approval rights with respect to transactions between the ground tenant and any subtenants for the term of the ground lease

+ Base Rent payable to the Landlord under the ground lease is $1,700 per month. Percentage rent payable to the Landlord under the ground lease is calculated at .5% of annual gross sales in excess of $4,000,000.

On January 2, 2034 the Landlord

recaptures full rights to the

property, free of the ground lease.

MARKET OVERVIEW

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PUGET SOUND REGION

STATE OF THE ECONOMY

The Puget Sound region’s real estate market has been performing very well in recent years. This is due, at least in part, to a generous spread of heavyweight real estate occupiers that have effectively anchored a variety of key submarkets. With these well-established regional pillars, Seattle’s market has been able to swing fully into expansion and is now a contender among the top cities for real estate investment. Over the past few years, measures of the excitement surrounding Seattle have been provided in abundance. Most recently, Glassdoor ranked the city 5th in the nation on a list of “Best Cities for Jobs.” Sophisticated international investors have bolstered the demand for A Class assets, at the same time, domestic and local companies have been gravitating toward Seattle and reinvesting in the area to take advantage of the out-of-town attention. As a result, developers have been scrambling to meet the frantic demand for more space. The stars seem to be nearing alignment for investors in the Puget Sound region, although the bold confidence of investors is far from unfounded. According to Moody’s Economy.com, “Seattle-Bellevue-Everett’s expansion is on a steady footing. Job growth is outpacing the U.S. average and is close to the 90th percentile of all metro areas… Average hourly earnings growth is surging and has climbed nearly a full percentage point above core inflation.” With these fundamentals well in hand, the regional cycle into expansion is expected to remain well balanced.

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MERCER ISLAND

Bordered by water on all sides and featuring high income levels, a low crime rate, and the highest rated public school system in the State of Washington, Mercer Island is one of the most desirable places to live in the Puget Sound region. Mercer Island’s $127,175 median income is more than twice the state average while median home values top $929,0001. Ranked among the wealthiest areas to live in the State, Mercer Island’s proximity to the major metropolitan centers of Seattle and Bellevue make it an ideal long term investment in which to live, work and play.

DEMOGRAPHIC SNAPSHOT1

2015 POPULATION

23,966

POPULATION GROWTH2010-2015

5.58%

NUMBER OF BUSINESSES

1,142

MEDIAN HOUSEHOLD INCOME

$127,175State Average2

$58,405

MEDIAN HOME VALUE

$929,261State Average2 $250,800

1. CBRE Demographic Report/Nielsen. 2. CityData.com

HIGHLIGHTS

+ Median household income above state average.

+ Median house value significantly above state average.

+ Unemployed percentage significantly below state average.

+ Percentage of population with a bachelor’s degree or higher significantly above state average.

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MERCER ISLAND (continued)

Apartment Stats 9/2010 3/2011 9/2011 3/2012 9/2012 3/2013 9/2013 3/2014 9/2014 3/2015 5 Year Avg.

Market Vacancy 4.5% 6.2% 5.6% 4.1% 4.7% 5.7% 4.9% 4.7% 4.5% 3.6% 4.8%

Average Rent $1,443 $1,390 $1,540 $1,442 $1,618 $1,597 $1,616 $1,693 $1,700 $1,725 $1,576

Avg. Rent Increase 0.0% 1.0% 3.2% 3.3% 1.8% 2.5% 4.2% 2.8% 4.2% 3.9% 2.7%

New Units 0 0 0 0 0 0 166 85 0 0 25

Source: Dupre + Scott

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2755 77TH AVENUE SE

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2015 Demographics (estimated) 1 mile radius 3 mile radius 10 minute drive

Population 10,278 69,001 115,969

Daytime Employment (Total Employees) 4,730 75,512 260,181

2020 Projected Population 11,082 73,865 123,949

Population Growth 2010 to 2015 8.91% 9.28% 7.97%

Projected Population Growth 2015 to 2020 7.82% 7.05% 6.88%

Households 4,684 30,243 56,213

2020 Projected Households 5,082 32,671 60,647

Average Household Size 2.18 2.26 1.98

Household Growth 2010 to 2015 9.87% 11.57% 9.77%

Projected Household Growth 2015 to 2020 8.49% 8.03% 7.89%

Average Household Income $143,092 $132,875 $99,124

2020 Projected Average Household Income $155,771 $143,421 $107,885

Median Household Income $95,354 $90,832 $65,713

2020 Projected Median Household Income $105,139 $98,739 $71,715

Per Capita Income $65,207 $58,240 $48,048

Associate's Degree 4.14% 5.72% 6.81%

Bachelor's Degree 38.24% 35.00% 33.34%

Master's Degree 19.80% 18.34% 14.48%

Professional Degree 9.27% 7.42% 4.81%

Doctorate Degree 4.18% 3.58% 2.87%

2015 Housing Units 5,252 34,165 63,040

2015 Owner-Occupied Housing Units 2,476 18,288 23,755

2015 Renter-Occupied Housing Units 2,208 11,956 32,458

2015 Median Home Value $832,717 $727,732 $568,895

2015 Average Home Value $881,206 $806,964 $675,903

DEMOGRAPHIC REPORT

Source: CBRE Demographic Report/Nielsen.

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2755 77TH AVENUE SE

FINANCIAL OVERVIEW

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21F I n A n C I A L o V E R V I E w

Year Est. Rent to Rabina Properties

Average Gross Sales

Percentage Rent Breakpoint

Est. Annual % Rent to LL

Annual Base Rent

Total Est. Annual Rent

2015 $0 $27,500 $27,500

2016 $1,000,000 $25,000,000 $21,000,000 $115,000 $27,500 $142,500

2017 $1,000,000 $25,500,000 $21,500,000 $117,500 $27,500 $145,000

2018 $1,000,000 $26,010,000 $22,010,000 $120,050 $27,500 $147,550

2019 $1,000,000 $26,530,200 $22,530,200 $122,651 $30,000 $152,651

2020 $1,100,000 $27,060,804 $23,060,804 $125,304 $30,000 $155,304

2021 $1,100,000 $27,602,020 $23,602,020 $128,010 $30,000 $158,010

2022 $1,100,000 $28,154,060 $24,154,060 $130,770 $30,000 $160,770

2023 $1,100,000 $28,717,142 $24,717,142 $133,586 $30,000 $163,586

2024 $1,210,000 $29,291,485 $25,291,485 $136,457 $32,500 $168,957

2025 $1,331,000 $29,877,314 $25,877,314 $139,387 $32,500 $171,887

2026 $1,331,000 $30,474,860 $26,474,860 $142,374 $32,500 $174,874

2027 $1,331,000 $31,084,358 $27,084,358 $145,422 $32,500 $177,922

2028 $1,331,000 $31,706,045 $27,706,045 $148,530 $32,500 $181,030

2029 $1,331,000 $32,340,166 $28,340,166 $151,701 $35,000 $186,701

2030 $1,464,100 $32,986,969 $28,986,969 $154,935 $35,000 $189,935

2031 $1,464,100 $33,646,708 $29,646,708 $158,234 $35,000 $193,234

2032 $1,464,100 $34,319,643 $30,319,643 $161,598 $35,000 $196,598

2033 $1,464,100 $35,006,035 $31,006,035 $165,030 $35,000 $200,030

RENT ANALYSIS

Total Rent to Rabina Properties $22,121,400

Total Rent to Landlord $3,094,039

Assumptions

Lease Commencement 9/01/2015

Rent Commencement 6/01/2016

Tenant Improvement Allowance (Est.) $1,500,000

Average Gross Sales (Est.) $25,000,000

Average Gross Sales Increases 2%

First Percentage Rent Breakpoint $3,000,000

Percentage Rent from $3M to $4M 1.00%

Rent from $3M to $4M $10,000

Percentage Rent Breakpoint $4,000,000

Percentage Rent 0.5%

Percentage Rent Cap None

CONTACT US

AUSTIN COHN+1 206 292 6075austin.cohn@cbre.com

ART WAHL+1 206 292 6127art.wahl@cbre.com

CBRE, Inc.1420 5th Avenue, Suite 1700Seattle, WA 98101

www.cbremarketplace.com/MercerIslandDev