Freddy’s

Missoula, mT

MISSOU

L

A, m t

New Build-to-Suit Construction 15-YEAR Absolute Net Lease 4855 N Reserve St, Missoula, MT 59808 [ www.CapitalPacific.com ]

FREDDY’S FROZEN CUSTARD & STEAKBURGERS IS A NEW CONSTRUCTION BUILD-TO-SUIT PROPERTY ON A 15-YEAR ABSOLUTE NET LEASE OWNED AND OPERATED BY A SUCCESSFUL FRANCHISEE LOCATED IN MISSOULA, MONTANA.

Investment Highlights

The offering provides an opportunity to acquire an absolute net-leased asset 100% leased to Freddy’s, a nationally recognized fast-casual restaurant chain. The 15 year lease, which recently commenced, provides 10% rent escalations every five years during the primary term and throughout each of the four five-year option periods. These escalations will increase an investor’s yield by 120 basis points over the primary term. Construction was completed in early 2016 and a grand opening followed on January 12, 2016. The Tenant is one of the top Freddy’s franchisees in the system. He has the franchise rights for Idaho, Montana, Utah, most of Arizona, and the Dakotas. This operator has over 50 total restaurants, 16 Freddy’s locations that are currently open and is the majority shareholder in Native Grill, which is a 35 unit chain that operates in Arizona, Texas, Montana, and Massachusetts. The Property’s frontage on Reserve Street (the primary north/south arterial that connects to Interstate-90) provides excellent exposure to high traffic counts of 19,885 VPD and is situated less than 1/4 mile south of I-90 (traffic count 17,070 VPD). This ideal location allows the Property to cater to a large population of local and regional traffic. The immediate trade area has 10 hotels within one half-mile north and south of the Subject along Reserve Street.

PRICE: $2,773,400 CAP: 6.00% LEASABLE SF. . . . . . . . . . . . . . ±3,325 SF LAND AREA. . . . . . . . . . . . . . . ±38,768 SF LEASE TYPE. . . . . . . . . . . . . . . Absolute NNN YEAR BUILT. . . . . . . . . . . . . . . . 2016 PARKING. . . . . . . . . . . . . . . . . . ±33 Spaces or 9.9/1,000 SF ADDRESS: 4855 N Reserve St, Missoula, MT, 59808

FREDDY’S | 2

Investment Highlights

NO LANDLORD RESPONSIBILITIES Freddy’s recently executed a brand new 15-year Absolute NNN lease with the ability to extend the lease a total of 20 additional years through four, five-year options. Freddy’s is responsible for all operating expenses and the Landlord maintains no responsibilities in the operation of the Property. The lease is guaranteed by three personal guarantees. HIGH TRAFFIC VOLUME Located alongside Reserve Street, Freddy’s benefits from high visibility and traffic counts of 19,885 VPD. Notably, Reserve Street is the primary north/south arterial in the city of Missoula and connects to Interstate-90 less than 1/4 mile north of the Subject, offering excellent local and regional access to the site. SCHEDULED RENT GROWTH Freddy’s lease calls for scheduled rent escalations of 10% every five years, including throughout all option periods. An investor can expect their yield to increase by more than 120 basis points over the 15-year primary term. SUCCESSFUL OPERATOR OF ESTABLISHED RESTAURANT BRAND Freddy’s is a well-known, privately-held burger chain with 175 locations throughout 23 U.S. states. The Company is styled in a late 40’s-50’s era design and sits at the top of the Entrepreneur’s Franchise 2015 500 list. The Tenant is one of the top Freddy’s franchisees in the system. He has the franchise rights for Idaho, Montana, Utah, most of Arizona, and the Dakota’s. This operator has over 50 total restaurants, 16 Freddy’s locations that are currently open and is the majority shareholder in Native Grill, which is a 35 unit chain that operates in Arizona, Texas, Montana, and Massachusetts. NEW CONSTRUCTION BUILD-TO-SUIT Construction of the build-to-suit premises was completed in early 2016. Freddy’s grand opening and rent commencement took place on January 12, 2016. HIGH GROWTH AREA Freddy’s benefits from a growing surrounding demographic area of 66,642 residents living within a five-mile radius. The dense Missoula population experienced aggressive growth and saw a 4.47% higher increase in population between 2010-2015 than the national average. Missoula is recognized as one of the fastest growing cities and sits at #10 on the Top 10 U.S. Growth Cities for 2015. FREDDY’S | 3

ABOUT THE FRANCHISEE

About Freddy’s FREDDY’S FROZEN CUSTARD & STEAKBURGERS Freddy’s Frozen Custard & Steakburgers is a quick-service restaurant chain based in Wichita, Kansas. The company opened its doors in 2002, franchised in 2004, and there are currently 175 Freddy’s restaurants. From sandwiches to sundaes, Freddy’s makes food fresh after the customer asks for it because Freddy’s believes that’s the kind of quality the customer deserves. Freddy’s Frozen Custard has again been recognized by Franchise Times® Magazine, this time on its inaugural Fast and Serious list in the March issue. The list uses a 10-point formula to identify fast-growing franchise systems that also have staying power. It is based on three years of impressive unit and sales growth, and includes brands in other industries, not just restaurants. For 2013, Freddy’s was again named among Entrepreneur Magazine’s “Franchise 500®”, repeated its recognition by QSR® magazine as one of four “Rising Stars” in the Best Franchise Deals issue, Franchise Times® Magazine’s “Next 300 Franchise Chains” and was included among Inc. Magazine’s 500/5000 list of “Fastest Growing Private Companies”. In 2015, Freddy’s maintained their spot on the 2015 Top Franchises “Franchise 500®” list and was listed on the 2015 Top 100 2015 Chain Report from Nation’s Restaurant News.

TOP 100

2015 CHAIN REPORT FROM NATION’S RESTAURANT NEWS

38.4% 2015 SALES INCREASE FROM PREVIOUS YEAR

16

LOCATIONS OWNED & OPERATED (3 CURRENTLY UNDER CONSTRUCTION)

CLICK HERE FOR MORE INFO ON FRANCHISEE

60-UNIT FREDDY’S FRANCHISEE AGREEMENT

50 STORES IN OPERATION *16 OF WHICH ARE FREDDY’S

175

LOCATIONS THROUGHOUT

23 STATES 2015 TOP FRANCHISES

500 LIST

FROM ENTREPRENEUR’S FRANCHISE [ REPRESENTATIVE PHOTO ]

FREDDY’S | 4

Aerial

FREDDY’S GRANT CREEK TOWN CENTER AT&T Arby’s Carter’s Cold Stone Creamery Famous Footwear Montata Lil’s Casino

15,222 DAILY

Providence Medical Center Quiznos REI Ross Dress for Less TJ Maxx Ulta

W

19,885 DAILY

BR

OA

DW AY S

T

N RESERVE ST

NORTH CENTRE & NORTH CENTRE II Barnes & Nobles Best Buy Michael’s Old Navy PetSmart Pier 1 Imports

I-90 1/4 MILE NORTH 17,070 VPD

Real Estate Lending Sport’s Authority Verizon Wendy’s

93

NORTHGATE PLAZA Albertsons Ambrosia Cafe Rio Mexican Grill Cost Cutters Exxon GNC

Jimmy Johns Party America Pizza Hut Redbox Staples Taco Bell

ADDITIONAL RETAIL American Red Cross Carmike 12 Costco Wholesale Hooters IHOP Lowe’s

Outback Steakhouse Sportsman’s Warehouse Target The Home Depot Walgreens Walmart

15,517 DAILY

MULL

AN RD

FREDDY’S | 5

Site Plan

SITE PLAN KEY PARCEL OUTLINE: LAND AREA:

±38,768 SF

BUILDING AREA:

±3,325 SF

FREDDY’S: PYLON SIGN: INGRESS/EGRESS:

DRIVE THRU

Site plan not to scale

SHARED ACCESS WITH NATIVE GRILL

RESERVE STREET

19,885 DAILY

FREDDY’S | 6

Featured Photos

[ DRIVE-THRU ]

FREDDY’S | 7

Financial Summary

PRICE

$2,773,400

Capitalization Rate: Price Per Foot:

NET OPERATING INCOME SUMMARY SCHEDULED INCOME Scheduled Rent: Equals: Effective Gross Income Less: OPERATING EXPENSES CAMS Property Taxes Insurance Total Operating Expenses

6.00% 3,325 Square Feet

8/1/2016

$834

Per SF $50.05 $50.05

$166,404 $166,404

Per SF

NNN

Equals: NET OPERATING INCOME

This information has been secured from sources we believe to be reliable but we make no representations or warranties, expressed or implied, as to the accuracy of the information. Buyer must verify the information and bears all risk for any inaccuracies.

NNN NNN NNN $166,404

FREDDY’S | 8

Rent Roll

TWO 10% RENT INCREASES

Rent Roll

RENT SUMMARY

TENANT INFO

TERM

Tenant Name

Size

Date

Monthly Rent

Freddy's

3,325

1/12/2016 1/12/2021

$13,867 $15,253

Occupancy Date :

1/12/2016

1/12/2026

Lease Expiration :

1/11/2031 Option 1

Percent Increase

Annual Rent

PSF

Cap Rate

$166,404

$50.05

6.00%

10.0%

$183,036

$55.05

6.60%

$16,779

10.0%

$201,348

$60.56

7.26%

1/12/2031

$18,457

10.0%

$221,484

$66.61

7.99%

Option 2

1/12/2036

$20,302

10.0%

$243,624

$73.27

8.78%

Option 3

1/12/2041

$22,332

10.0%

$267,984

$80.60

9.66%

Option 4

1/12/2046

$24,566

10.0%

$294,792

$88.66

10.63%

$166,404

$50.05

6.00%

Lease Notes Comments: Lease is Absolute Net - Landlord has no responsibilities. Lease is guaranteed by three personal guarantees. Current Totals:

3,325

$13,867

This information has been secured from sources we believe to be reliable but we make no representations or warranties, expressed or implied, as to the accuracy of the information. Buyer must verify the information and bears all risk for any inaccuracies.

This information has been secured from sources we believe to be reliable but we make no representations or warranties, expressed or implied, as to the accuracy of the information. Buyer must verify the information and bears all risk for any inaccuracies. This information has been secured from sources we believe to be reliable but we make no representations or warranties, expressed or implied, as to the accuracy of the information. Buyer must verify the information and bears all risk for any inaccuracies.

FREDDY’S | 9

Lease Abstract

TAXES Tenant is responsible for direct payment of Property Taxes to the appropriate taxing authority.

INSURANCE

PREMISES/TERM TENANT SQUARE FEET LEASE TYPE OCCUPANCY DATE LEASE EXPIRATION DATE OPTIONS GUARANTEES

Freddy’s Frozen Custard & Steakburgers (Montana Steakburgers, LLC) 3,325 SF Absolute NNN 1/12/2016 1/11/2031 4, 5-year Options; 180 Days’ notice required by three personal guarantees

Tenant is responsible for maintaining fire insurance, general liability, loss of income, and liquor law liability insurance policies.

UTILITIES Tenant is responsible for direct payment of all utilities.

TENANT’S OBLIGATIONS Tenant is responsible for the maintenance and repair of the Premises, including the building structure, roof, foundation, and all mechanical operating systems.

LANDLORD’S OBLIGATIONS

BASE RENT 1/12/2016 – 1/11/2021:

$13,867/Month

$166,400/Annually

1/12/2021 – 1/11/2026:

$15,523/Month

$183,040/Annually

1/12/2026 – 1/11/2031:

$16,779/Month

$201,344/Annually

#1 1/12/2031 –1/11/2036:

$18,457/Month

$221,478/Annually

#2 1/12/2036 – 1/11/2041:

$20,302/Month

$243,626/Annually

#3 1/12/2041 – 1/11/2046:

$22,332/Month

$267,989/Annually

#4 1/12/2046 – 1/11/2051:

$24,566/Month

$294,788/Annually

No responsibilities.

OPTION RENTS

LEASE PROVISIONS ASSIGNMENT/SUBLETTING Tenant may assign or sublease any interest in

the Premises with 30-days prior written notice to Landlord to any affiliate of Tenant.

FREDDY’S | 10

Construction Details

WINDOWS Storefront window systems with aluminum frames and swinging glass doors

FOUNDATION Concrete slab on grade foundation.

EXTERIOR WALLS

CONSTRUCTION TYPE

HVAC

Steel frame.

1 Roof-mounted HVAC system & 5 condensing units.

EIFS & Faux Stone.

PARKING Total: ±33 Spaces or 9.9/1,000 SF

ROOF Flat, single-ply membrane roof (20-year warranty).

FREDDY’S | 11

TOP 10 Area Intel & Demos

MISSOULA IS INCLUDED IN THE TOP 10 US GROWTH CITIES FOR 2015

ECONOMY

POPULATION – 1, 3, & 5 MILE RADIUS

The city’s economy, once primarily driven by lumber and agriculture, is now driven by higher education, government, healthcare, and a growing tech industry. The University of Montana is the city’s largest employer with over 1,600 employees and an enrollment of 13,000 undergraduate students. The 220-acre University of Montana campus has been a part of the culture of Missoula since it was founded in 1893, giving the city an educated workforce not available in most of the state.

2010 2016 2020

1-Mile 1,998 2,472 2,725

3-Miles 5-Miles 21,473 63,708 23,095 66,642 24,620 69,510

POPULATION – 5, 10, & 15-MIN DRIVE TIMES 2010 2016 2021

5-Min 6,700 7,786 8,517

2016 HOUSEHOLD INCOMES – 1, 3, & 5 MILE RADIUS Median Average

1-Mile 3-Miles 5-Miles $51,470 $35,493 $37,920 $58,748 $48,786 $52,515

2016 HOUSEHOLD INCOMES – 5, 10, & 15-MIN DRIVE TIMES

10-Min 15-Min 45,288 72,884 48,459 77,135 51,061 80,728

Median Average

5-Min 10-Min 15-Min $44,957 $36,621 $39,927 $58,788 $54,337 $58,006

METROPOLITAN AREA OVERVIEW U-Haul Top 10 U.S. Growth Cities for 2015 ranked Missoula as #10, reflecting an increasing residential base. Missoula houses a growing base of 100,000 residents which increased by double the national average since 2010. Missoula is home to nearly 4 million out-of-state visitors annually, which makes tourism a significant aspect of the Missoula economy.

CLICK HERE FOR INFORMATION ON MISSOULA’S GROWING RESIDENTIAL BASE

5 minutes 10 minutes 15 minutes

FREDDY’S

Spokane, wa 197 Miles 3 Hrs, 27 Min

DRIVE-TIME KEY

168 Miles 2 Hrs, 42 Min

Great Falls

Missoula Helena

1 MILE 3 MILES 5 MILES

114 Miles 1 Hr, 49 Min FREDDY’S | 12

THE CAPITAL PACIFIC EXPERIENCE - OUR DAILY COMMITMENT TO OUR CLIENTS [ www.CapitalPacific.com ]

JOHN ANDREINI

[email protected] | (415) 274-2715 CA BRE#: 01440360

SEAN MACK

[email protected] | (503) 675-8378 OR BRE# 990100161

Listed in conjunction with GEORGE WARMER Coldwell Banker Commercial CBS [email protected] | (406) 869-0564

[ Copyright © 2016 Capital Pacific LLC ]