cCARE | Offering Memorandum

NET LEASED ONCOLOGY CLINIC AND INFUSION CENTER 838 NORDAHL ROAD, SUITE 300, SAN MARCOS, CA 92069 IN AN AFFLUENT NORTH SAN DIEGO SUBURB

SIZE: 20,230 SF OFFERING PRICE: $12,100,000 ($598.12/SF)

TERM REMAINING: +/- 8.5 YEARS YR 1 PROJECTED NOI : $825,741 YR 1 CAP RATE: 6.8%

This Confidential Offering Memorandum (“Memorandum”) is being delivered subject to the terms of the Confidentiality Agreement (the “Confidentiality Agreement”) signed by you and constitutes part of the Confidential Information (as defined in the Confidentiality Agreement). It is being given to you for the sole purpose of evaluating the possible investment in 838 Nordahl Road, Suite 300, San Marcos, CA 92069 (the “Project”), and is not to be used for any other purpose or made available to any other party without the prior written consent of Nordahl Medical Centre, Inc, a California Corporation (“Owner”), or its exclusive broker, Cushman &Wakefield. This Memorandumwas prepared by Cushman &Wakefield based primarily on information supplied by Managing Member. It contains select informationabout theProject and the real estatemarket but does not containall the information necessary to evaluate the Project. The financial projections contained herein (or in any other Confidential Information) are for general reference only. They are based on assumptions relating to the overall economy and local competition, among other factors. Accordingly, actual results may vary materially from such projections. Various documents have been summarized herein to facilitate your review; these summaries are not intended to be a comprehensive statement of the terms or a legal analysis of such documents. While the information contained in this Memorandum and any other Confidential Information is believed to be reliable, neither Cushman & Wakefield nor Managing Member guarantees its accuracy or completeness. Because of the foregoing and since the investment in the Project is being offered on an “As Is, Where Is” basis, a prospective investor or other party authorized by the prospective investor to use such material solely to facilitate the prospective purchaser’s investigation, must make its independent investigations, projections and conclusions regarding the investment in the Project without reliance on this Memorandum or any other Confidential Information. Although additional Confidential Information, whichmay include engineering, environmental or other reports, may be provided to qualified parties as the marketing period proceeds, prospective purchasers should seek advice from their own attorneys, accountants, engineers and environmental experts. Neither Cushman & Wakefield nor Managing Member guarantees the accuracy or completeness of the information contained in this Memorandum or any other Confidential Information provided by Cushman & Wakefield and Managing Member. Managing Member expressly reserves the right, at its sole discretion, to reject any offer to invest in the Project or to terminate any negotiations with any party at any time with or without written notice. Managing Member shall have no legal commitment or obligations to any prospective investor unless and until a written sale agreement has been fully executed, delivered and approved by Managing Member and any conditions to Managing Member’s obligations thereunder have been satisfied or waived. Managing Member has retained Cushman & Wakefield as its exclusive broker and will be responsible for any commission due to Cushman & Wakefield in connection with a transaction relating to the Project pursuant to a separate agreement. Cushman & Wakefield is not authorized to make any representation or agreement on behalf of Managing Member. Each prospective investor will be responsible for any claims for commissions by any other broker in connection with an investment in the Project if such claims arise from acts of such prospective investor or its broker. This Memorandum is the property of Managing Member and all parties approved by Managing Member and may be used only by parties approved by Managing Member. No portion of this Memorandum may be copied or otherwise reproduced or disclosed to anyone except as permitted under the Confidentiality Agreement. D I S C L A I M E R

C O N TA C T S

PRIVATE CLIENT INVESTMENT ADVISORY

MARK AVILLA Senior Director +1 760 431 4223 mark.avilla@cushwake.com CA License 01104562

HEALTHCARE INVESTMENT ADVISORY PRACTICE

TRAVIS IVES Senior Director +1 858 334 4041 travis.ives@cushwake.com CA License 1889097

1000 Aviara Parkway, Suite 100, Carlsbad, CA 92011 T 760.431.4200 | F 760.454.3869 www.cushmanwakefield.com www.cushwakeprivateclient.com

C O N T E N T S

SUMMARY

TENANT

SITE

MARKET

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CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

SUMMARY

5

OFFERING MEMORANDUM

Cushman & Wakefield is pleased to offer for sale fee simple (condo) interest in this single-tenant, net-leased (STNL) medical office condo comprised of 20,230 square feet 100% leased through August 2027 by California Cancer Associates for Research and Excellence (cCARE); the largest independent, full- service, private oncology and hematology provider in California. This offering presents an exceptional opportunity to acquire a newly constructed, state-of-the-art facility with “mission-critical” improvements and a dependable stream of income for many years to come. The property is located in an affluent North County suburb of San Diego near the region’s premier hospital campus, Palomar Medical Center Escondido. S U M M A R Y

INVESTMENT SUMMARY

838 Nordahl Road, Suite 300 San Marcos CA 92069 California Cancer Associates for Research and Excellence (cCARE)

Address

Tenant

Ownership

Fee Simple (condo)

Lease Type

Single-Tenant NNN Lease (STNL)

Condo Size

20,230 RSF Medical Office

Lease Expires

August 31, 2027

57,333 RSF Class A Medical Office

Building Type

Condo Construction

2017

cCARE is the largest full-service, private oncology and hematology practice in California, with a long term NNN Lease through 2027.

Parking

5.0/1,000 RSF

PROJECTED YEAR-1 NOI

$825,741 (INC. 5% VACANCY)

$12,100,000 ($598/SF)

ASKING PRICE

6.8%

YEAR-1 CAP RATE

6

CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

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OFFERING MEMORANDUM

S U M M A R Y

HIGH-END TENANT IMPROVEMENT FINISHESWITH MISSION CRITICAL IMPROVEMENTS COMPLETED IN 2017 cCARE recently completed mission critical improvements to their space in 2017 which likely ensures their intent to renew in 2027 based on the significant capital they have invested in the property, and the difficulty for cCARE to relocate to another property. This significantly mitigates downside risk when cCARE’s lease matures. cCARE invested $100/SF on top of the original $115/SF Tenant Improvement Allowance provided by the Landlord (Total $215/SF).

OCCUPIED BY CCARE, WITH +/- 8.5 YEARS REMAININGON TERM & 3%ANNUAL INCREASES TO BASE RENT California Cancer Associates for Research and Excellence (cCARE) is the largest full-service, private oncology and hematology practice in California. This location provides patients with a team of board-certified oncologists, hematologists, nurses and other highly skilled cancer care professionals. Their compassionate approach, combined with their state-of-the- art facilities, comfortable environment and commitment to implementing the most advanced treatment techniques available that help make them California’s premier cancer center. cCARE’s lease has +/- 8.5 years remaining on the original 124 month lease term with attractive fixed 3% annual increases. Brand new high- quality construction and triple-net lease allow for a strong, dependable and predictable cash flow throughout the term. For a construction project such as Nordahl Medical Centre, the current base rent of $2.86/sf/mo NNN compares favorably to other newly constructed MOB’s with average starting rents of $2.95/sf/mo NNN.

PATIENT LOBBY

DEVELOPER OWNED/CONTROLLED SPACE WITHIN A CLASS “A” MEDICAL OFFICE BUILDING Located within Nordahl Medical Centre, a 57,333 square-foot Class “A” professional medical office building and notably considered North County San Diego’s finest medical project. The building is developed by Newport National Corporation, a full service, vertically integrated real estate company based in Carlsbad, California focused on development and management of commercial properties in dynamic growth areas. The property’s modern and elegant construction coupled with its extraordinarily high-end finishes and efficiency, will prove very effective in capturing an investors interest. Elegant common area finishes with timeless materials and a central common area building lobby with seating area, water feature, sculpture – all for patient/family relaxation. Views of Palomar Medical Center Escondido to the Southeast and natural hillside open space to the East, amongst a lush tropical landscaped site.

BUILDING LOBBY

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CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

S U M M A R Y

HIGHLY SOUGHT-AFTER SUBMARKET WITH LIMITED MEDICAL OFFICE AVAILABILITY cCARE’s San Marcos location is located just 1.5 miles North of the new Palomar Medical Center of Escondido (“PMCE”) and provides easy access for physicians and patients between the two facilities. PMCE has 288 private single-patient rooms, 44 emergency and trauma rooms and 11 operating rooms, and is the only Trauma Center within a 20-mile radius, serving California’s largest public healthcare district at 2,200 square miles. The former 14-acre Palomar Health hospital campus in nearbydowntownEscondido isslatedfor redevelopment into a mixed-use residential and commercial center, continuing to move the medical epicenter to the west. Additionally, much of the competitive set consists of older product in inferior locations, limiting tenant’s options to few quality buildings within close proximity to PMCE. SanDiegoCounty’s inventory of 12,622,755SFofmedical office space finished 2018 with 139,606 SF of positive net absorption. This marked the 16 th straight quarter of positive net absorption, which left every submarket in the county with single-digit vacancy. The subject property falls within the North County submarket, but also competes within the I-15 Corridor, both of which feature some of the highest average asking rates in the County. Recent medical office construction in the area includes the newly completed Palomar Health Outpatient Center (PHOC) located on the campus of Palomar Medical Center Escondido. The first of two phases was delivered in the beginning of 2018 and is 100% leased by Palomar Health. Phase II will be completed late 2019 and will also be 100% leased by Palomar Health. Each building is 75,000 SF (150,000 SF in total). The master lease signed by Palomar featured a starting rate of $2.95/SF NNN with 2.75% annual increases over a 15 year term and included a $70/SF TI allowance.

PALOMAR MEDICAL CENTER ESCONDIDO

SUPERIOR ACCESS & TRANSIT FRIENDLY LOCATION

Offering superior freeway access at Nordahl Road on and off ramps, cCARE’s San Marcos facility sits within close proximity to the crossroads of the I-15 (248,000 AADT) and SR-78 (89,500 AADT) freeways, two major thoroughfares in San Diego County, making the site highly accessible to North San Diego County, the second-most-populous region in the county after the North Central Region. Immediately adjacent to SR-78, the main east-west artery through North San Diego County, and near the merge with 1-15, one of two primary north-south arteries in San Diego. Additionally, It is in close proximity to multiple restaurants, retail services, new bus stop and Sprinter station. STRONG DEMOGRAPHICS cCARE’s San Marcos facility provides investors with the opportunity to acquire an asset located in an area with robust demographic drivers. The population within a 5-mile radius of the property is estimated at 240,300 people, which suggests a population growth rate of over 9% since the 2010 Census. Furthermore, the local population is predicted to grow by 4.5% through 2023, resulting in an estimated population of nearly 251,129 people at that point in time. Average household income within a 5-mile radius is $81,167.

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OFFERING MEMORANDUM

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1811 ASTON AVENUE | CARLSBAD

OVERVIEW

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OFFERING MEMORANDUM

TENANT PROFILE

California Cancer Associates for Research and Excellence (cCARE), is the largest, full-service, private oncology and hematology practice in California, presently with six offices in the San Diego area and two offices in Fresno. They provide extensive services and care to patients with cancer and blood disorders that include oncology, chemotherapy, radiation oncology, infusion and imaging. cCARE has 22 full-time medical oncologists, of which 5 are located at the San Marcos location, who manage each of their cancer patient’s care plans, guiding treatments such as chemotherapy, medicine plans or other targeted therapies. Additionally, their nursing team includes a higher-than-average number of certifications from the Oncology Nursing Society (ONS). cCARE nurses also average 15 years of experience delivering care and treatment plans for our patients. The cCARE San Marcos Cancer Center & Urology location features medical oncology, chemotherapy, radiation oncology, imaging, pharmacy services and clinical trials. cCARE’s research division offers a high number of clinical trials for qualifying patients. cCARE believes that cancer treatment is more than just medicine: that treatment is about compassion, prevention, research and wellness and that a strong will and a solid support group play a vital role in the healing processes. cCARE provides a compassionate approach, state-of-the-art facilities, comfortable environment and implementing the most advanced treatment techniques available. For more information, please visit their website at www.ccare.com.

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CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

T E N A N T

PRICING

YEAR-1 INCOME (JULY 2019-JUNE 2020)

$697,935

EST. AFTER-HOURS HVAC INCOME (JULY 2019-JUNE 2020)

$171,266

TOTAL YEAR-1 INCOME (JULY 2019-JUNE 2020) PROJECTED YEAR-1 NOI (LESS 5% VACANCY)

$869,201

$825,741 ASKING PRICE $12,100,000 ($598/SF) YEAR-1 CAP RATE 6.8%

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OFFERING MEMORANDUM

LEASE ABSTRACT

LEASE ABSTRACT

BASE RENT SCHEDULE

Base Rent/ RSF/MO Monthly Rent Annual Rent

838 Nordahl Road, Suite 300 San Marcos CA 92069 California Cancer Associates for Research and Excellence (cCARE)

Address

Period

Period 1 May 1, 2017 - April 30, 2018 Period 2* May 1, 2018 - April 30, 2019 Period 3* May 1, 2019 - April 30, 2020 Period 4 May 1, 2020 - April 30, 2021 Period 5 May 1, 2021 - April 30, 2022 Period 6 May 1, 2022 - April 30 2023 Period 7 May 1, 2023 - April 30, 2024 Period 8 May 1, 2024 - April 30, 2025 Period 9 May 1, 2025 - April 30, 2026 Period 10 May 1, 2026 - April 30, 2027 Period 11 May 1, 2017 - August 31, 2027

$2.70

$40,500.00 $486,000.00

Tenant

Landlord Nordahl Medical Centre, Inc. Letter of Credit $869,950, reduced by $217,487.50 each year starting in Year-2. Ownership Fee-Simple/Condo Lease Type Absolute NNN Leased Area 20,230 RSF / 17,399 USF Start Date April 21, 2017 Expiration Date August 31, 2027 Term 124 Months Security Deposit $73,434.90 Tenant Improvements Landlord TI Contribution: $115/RSF Tenant TI Contribution: $100/RSF Operating Expenses Tenant’s share of direct expenses of the total project is approx 35.29% Parking 5.0/1,000 RSF; 5 of said spaces are covered, reserved parking spaces

$2.78

$48,650.00 $583,800.00

$2.86

$57,857.80 $694,293.60

$2.95

$59,678.50 $716,142.00

$3.04

$61,499.20 $737,990.40

$3.13

$63,319.90 $759,838.80

$3.22

$65,140.60 $781,687.20

$3.32

$67,163.60 $805,963.20

$3.42

$69,186.60 $830,239.20

$3.52

$71,209.60 $854,515.20

$3.63

$73,434.90 $293,739.60

Rental Abatement

*Months 25 & 37

Right of Refusal to Expand

Tenant has the First Right of Refusal on Suite 175 within the building consisting of 5,164 RSF for the permitted use and radiation oncology.

Tenant has three (3) options to extend the lease term for a period of five (5) years each with no more than twelve ( 12) months and no less than nine (9) months written notice. The Base Rent shall be adjusted to the prevailing Fair Market Rent, including escalations, for comparable medical office space in Comparable Projects.

Options to Extend

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1811 ASTON AVENUE | CARLSBAD

AFTER-HOURS HVAC INCOME

ACTUAL AFTER HOURS HVAC INCOME REIMBURSEMENTS Per Article 6.3 of the Lease, Tenant shall reimburse Landlord for after-hours HVAC costs. The mission critical HVAC climate control is utilized for cooling of the Pet CT and Pharmacy, which are critical to tenant’s business (see locations of after-hour HVAC equipment on page 16). Tenant has paid Landlord for such costs as shown below for January through December 2018.

SUITE 320 | 6 MONTH JULY THROUGH DECEMBER 2018

SUITE 300 | 12 MONTH JANUARY THROUGH DECEMBER 2018

Amount Billed

Amount Reconciled

TOTAL PAID

Amount Billed

Amount Reconciled

TOTAL PAID

Month / Year

Month / Year

January 2018 February 2018 March 2018 April 2018 May 2018 June 2018 July 2018 August 2018 September 2018 October 2018 November 2018 December 2018

- - - - - -

$4,477.00 + $220.00 = $4,697.00 $4,477.00 + 100.00 = $4,577.00 $4,477.00 + $30.00 = $4,507.00 $4,477.00 + $33.00 = $4,510.33 $4,477.00 + $130.00 = $4,607.00 $4,477.00 + $310.00 = $4,787.00 $4,477.00 + $326.66 = $4,803.66 $4,493.00 + $140.00 = $4,633.00 $4,493.00 + $39.66 = $4,532.66 $4,493.00 + $396.93 = $4,889.93 $4,493.00 + $674.48 = $5,167.48 $4,493.00 + $93.09 = $4,586.09

- - - - - -

- - - - - -

- - - - - -

July 2018

$9,570.79 + $40.00 = $9,610.79 $9,570.00 + $10.00 = $9,580.00 $9,570.79 + $0.00 = $9,570.79 $9,570.79 + $10.00 = $9,580.79 $9,570.79 + $0.00 = $9,570.79 $9,570.79 + $0.00 = $9,610.79

August 2018

September 2018 October 2018 November 2018 December 2018

$56,298.15 $4,691.51 (Average/Month)

$57,483.96 $9,580.66 (Average/Month)

TOTAL $53,804.00 $2,494.15

TOTAL

$57,423.95

$60.00

TOTAL AFTER HOURS HVAC INCOME

$4,691.51 $9,580.66 $14,272.17 $171,266.04

SUITE 300 AVERAGE SUITE 320 AVERAGE

TOTAL MONTHLY AVERAGE

TOTAL ANNUAL LESS 5% VACANCY

$162,702.74 ESTIMATED ANNUAL HVAC REIMBURSEMENT

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OFFERING MEMORANDUM

F L O O R P L A N TENANT FLOOR PLAN

SUITE 300 20,230 RSF

* After-Hours HVAC Equipment

*

INFUSION BAY

*

CT

*

PROCEDURE

EXAM

PHARMACY

MAIN RECEPTION & GUEST LOBBY

RESEARCH

EXAM

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1811 ASTON AVENUE | CARLSBAD

INFUSION CENTER

NURSE STATION

CCARE CORRIDOR

17

OFFERING MEMORANDUM

18

CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

SITE

19

OFFERING MEMORANDUM

S I T E BUILDING AERIAL & SITE PLAN

Nordahl Medical Centre 838 NORDAHL RD., SAN MARCOS

Palomar Medical Center ESCONDIDO, CA

cCARE 838 NORDAHL RD., SUITE 300, SAN MARCOS

NORDAHL ROAD

NORDAHL MEDICAL CENTRE

NORDAHL ROAD

20

1811 ASTON AVENUE | CARLSBAD

S I T E

PARCEL MAP | APN 228-120-41

Nordahl Medical Centre 838 NORDAHL RD., SAN MARCOS

21

OFFERING MEMORANDUM

S I T E DISTANCE & TRANSPORTATION AERIAL

cCARE 838 NORDAHL RD., SUITE 300, SAN MARCOS

78

Palomar Medical Center ESCONDIDO, CA

Cal State San Marcos SAN MARCOS, CA

SAN MARCOS

ESCONDIDO

DISTANCE Palomar Medical Center - Escondido (1.5 miles) Tri-City Medical Center (12.5 miles) Palomar Medical Center - Poway (11.7 miles) Scripps Memoral Encinitas (16.2 miles)

Inland Rail Trail (East & West) Highway 78 (East & West) Interstate 15 (North & South) Bus Stop (nearest 3 blocks) Sprinter Station (0.7 miles)

Downtown Carlsbad (17.6 miles) Downtown San Diego (32 miles) Orange County (68 miles) Los Angeles (113 miles)

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1811 ASTON AVENUE | CARLSBAD

79 MAP LOCATOR

CAMP PENDLETON NORTH

BONSALL

15

VALLEY CENTER

CAMP PENDLETON SOUTH

HIDDEN MEADOWS

OCEANSIDE

VISTA

SAN DIEGO COUNTY

78

5

ESCONDIDO

SAN MARCOS

CARLSBAD

LAKE SAN MARCOS

cCARE 838 NORDAHL RD., SUITE 300, SAN MARCOS

78

ENCINITAS

RAMONA

15

RANCHO SANTA FE

SAN DIEGO COUNTRY ESTATES

POWAY

SOLANA BEACH

FAIRBANKS RANCH

56

DEL MAR

SAN DIEGO



5

SANTEE

52

8

LAKESIDE

NORTH SAN DIEGO COUNTY, CA

ALPINE

67

HARBISON CANYON

163

BOSTONIA

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OFFERING MEMORANDUM

15

CREST

125

EL CAJON

B U I L D I N G

BUILDING SUMMARY

Project Name

Nordahl Medical Centre

Address

838 Nordahl Road, San Marcos, CA 92069

Building Size

57,333 RSF

Building Type

Class A Medical Office

Construction Type

Concrete tilt-up

Year Built

2009

APN

228-120-41

Parking

5.0/1,000 RSF (covered parking available)

Building Availability

1,000 - 20,084 RSF

$2.75/SF NNN (NNN’s = $0.34/SF) Includes $50/SF Tenant Improvement Allowance)

Availability Lease Rate

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CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

B U I L D I N G

FIRST FLOOR CONDO OWNERS / AVAILABILITY

FIRST FLOOR

SUITE 150 ORTHODONTIST

SUITE 145 PEDIATRIC DENTIST

SUITE 125 1,057 r.s.f.

THE SITE

Situated on Nordahl Road with unobstructed visibility Pleasant hillside setting with attractive landscape

Parking and entrance doors on all four sides of building:

287 full sized parking spaces Covered parking available

NORDAHL MEDICAL CENTRE

SUITE 175 5,164 r.s.f.*

SUITE 100 DENTIST

SUITE 100 3,574 r.s.f.

UNDER CONTRACT

*Suites 150-175 are contiguous to 9,374 RSF

SECOND FLOOR CONDO OWNERS / AVAILABILITY

Core factor of approximately 16.25% *Suites 150-195 are contiguous to 9,158 r.s.f.

SECOND FLOOR

SUITE 270 PHYSICIAN

SUITE 260 DENTIST

SUITE 250 DERMATOLOGIST

SUITE 200 1,000 - 14,920 r.s.f.

Suites range from 1,000 - 14,920 RSF

Core factor of approximately 16.25%

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OFFERING MEMORANDUM

B U I L D I N G

NORDAHL MEDICAL CENTRE

OUTDOOR PATIO SEATING

Nordahl Medical Centre creates a pleasant & health-inspiring environment

EXECUTIVE COVERED PARKING

LUSH LANDSCAPING WITH KOI PONDS

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CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

B U I L D I N G

• Outdoor patio with lunch seating area • Resort quality restrooms, with floor-to-ceiling enclosed stalls

• Separate shower and locker rooms • 24-hour card key access system

• Elegant building common area finishes with timeless materials • Central lobby with seating areas and water to enhance patient relaxation • Lush tropical landscaping throughout • Views of Palomar Medical Center to the South and natural hillside and open space to the East • Two-high speed elevators • Utility cost savings by ‘SDG&E Savings By Design’ • Designer light fixtures with energy savings lighting control program • Dual-pane, high-performance glass which reduce noise & heat transfer, therefore reducing HVAC costs

BUILDING ENTRANCE

CENTRAL BUILDING LOBBY

BUILDING ENTRANCE

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OFFERING MEMORANDUM

S I T E NEARBY RETAIL AMENITIES

cCARE 838 NORDAHL RD., SUITE 300, SAN MARCOS

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1811 ASTON AVENUE | CARLSBAD

S I T E NEARBY MEDICAL FACILITIES

BONSALL

15

VALLEY CENTER

CAMP PENDLETON SOUTH

HIDDEN MEADOWS

OCEANSIDE TRI-CITY HOSPITAL

SCRIPPS COASTAL MEDICAL

UC SAN DIEGO

VISTA

SAN

cCARE 838 NORDAHL RD., SUITE 300, SAN MARCOS

78

RADY’S CHILDREN

5

NORTH COUNTY HEALTH

ESCONDIDO

KAISER PERMANANTE ESCONDIDO MEDICAL

SAN MARCOS

CHILDREN’S MEDICAL

CARLSBAD

LAKE SAN MARCOS

KAISER PERMANANTE

PALOMAR MEDICAL CENTER

SCRIPPS MEMORIAL HOSPITAL

RADY’S CHILDREN

ENCINITAS

RAM

15

RANCHO SANTA FE

KAISER PERMANANTE

POWAY

SOLANA BEACH

FAIRBANKS RANCH

POMERADO HOSPITAL

56

DEL MAR

NORTH SAN DIEGO COUNTY, CA

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OFFERING MEMORANDUM

cCARE 838 NORDAHL RD., SUITE 300, SAN MARCOS

Palomar Medical Center ESCONDIDO, CA

78

SAN MARCOS

30

CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

MARKET

ESCONDIDO

31

OFFERING MEMORANDUM

M A R K E T

SALE COMPARABLES

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

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CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

M A R K E T

SALE COMPARABLES

Property Name Property Address

Type / Class Class A Medical Office Class B Medical Office Class B Medical Office Class B Medical Office Class B Medical Office Class B Medical Office Class A Medical Office Class A Medical Office Class B Medical Office Class B Medical Office

Size Year Built

Price Price/SF

Cap Rate

Sold Date

Buyer Seller

Comments

Undisclosed (Estimated to be

Palomar Health Outpatient I 2125 Citracado Parkway Escondido, CA North Coast Medical Plaza 6010 Hidden Valley Parkway Carlsbad, CA Davita Dialysis 1951 Citracado Parkway Escondido, CA Coast Medical Center 3444 Kearny Villa Road San Diego, CA Tri-City Medical Plaza 145 Thunder Drive Oceanside, CA Park Terrace Health Center 17140 Bernardo Center Drive San Diego, CA Torrey Hills Medical Plaza 4765 Carmel Mountain Road San Diego, CA Citracado Medical Plaza 625 W. Citracado Parkway Escondido, CA Doctors Park at Eastlake 955 Lane Avenue Chula Vista, CA 3905 Waring Road Oceanside, CA

Harrison Street Capital

New construction on-campus. 100% leased to Palomar Health with 14 years remaining on lease term. Multi-tenant MOB 91% leased at sale with +/-7 years WALT. Part of a portfolio transaction which negatively impacted pricing (ask broker for details). New construction adjacent to campus. STNL investment with 15-yr term. Build-to- Suit for Davita Dialysis. Multi-tenant MOB 90% leased at sale with +/-8 years WALT. Off-campus anchored by surgery center. STNL investment with 6 years term. 100% Leased to United Health Group. Inferior location and real estate to subject property. STNL investment with 5 years term. 100% Leased to local orthopedic group. Inferior location, credit and real estate to subject property. Multi-tenant MOB 78% leased at sale with +/-5 years WALT. Off-campus anchored by Kaiser Permanente. Multi-tenant MOB 92% leased at sale. Off-campus location in an affluent neighborhood that commands higher rents. Multi-tenant MOB 100% leased at sale. Off-campus location anchored by Rady Children’s Hospital with near-term rollover risk. Freestanding, multi-tenant MOB 100% leased at sale anchored by surgery center. Located within medical office condo park.

75,000 SF 2018

1.

5.5% 2/27/19

$48,200,000 $642.66/SF)

JRMC Real Estate, Inc.

MBRE Healthcare

49,580 SF 2002

$29,500,000 $595.00/SF

2.

5.75% 10/15/18

Montecito Medical

Pure Harbor Investments

15,000 SF 2017

$10,325,000 $688.33/SF

3.

4.6% 5/11/18

Centres Escondido LLC

MBRE Healthcare

$20,000,000 $517.26/SF

38,665 SF 1985

4.

6.0% 4/25/18

Genesis Healthcare Prts.

Moss Group

16,486 SF 1984

$7,570,000 $459.18/SF

5.

6.72% 3/9/18

Lomas Santa Fe Group

Cardiff Investments LLC

$4,550,000 $445.29/SF

10,218 SF 1986

6.

6.73% 2/6/18

Tri-City Orthopedic

MBRE Healthcare

$37,100,000 $451.57/SF

82,157 SF 1999

7.

5.4% 12/29/18

Shopcore Properties

Coast Income Properties

44,165 SF 2005

$28,500,000 $645.44/SF

8.

6.1% 6/3/17

SD Pain Management

Anchor Health Prop.

$21,850,000 $458.51/SF

47,654 SF 2007

9.

5.8% 8/8/17

Physician Mgmnt. Grp.

Anchor Health Prop.

19,939 SF 2006

$10,300,000 $516.58/SF

10.

6.6% 3/2/17

Otay Lakes Partners, LLC.

AVERAGE $21,789,500 $546.28/SF

5.92%

33

OFFERING MEMORANDUM

M A R K E T

LEASE COMPARABLES

1.

2.

3.

4.

5.

6.

7.

8.

34

CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

M A R K E T

LEASE COMPARABLES

Start Rent Effective Rent

Term (Mos) Free Months Rent Escalations Sublease (Yes/No) Space Build Out

TI Allowance Tenant TI Load Factor Previous Location Industry Type $0.00 $0.00 6.00 Renewal Health Care $82.50 $0.00 13.00 New to Market Health Care $70.00 $0.00 - New Health Care $0.00 $0.00 - New Health Care $70.00 $0.00 - New Location Health Care $10.00 $0.00 17.60 Escondido Health Care

Property Name Address City State Zip Submarket

Class Date Leased Deal Type Floor

Leased SF Lease Start Lease Expiration

Tenant Landlord

Rent Type Base Year Op. Ex. or NNNs Total Consideration

$4.04 $4.04 FS 2019 $0.00 $902,309 $3.55 $3.71 +U+J 2019 $0.00 $6,304,376

24 0.0 0% No Second 126 6.0 3.00% No Second 63 4.0 3.00% No Second

B 05/08/2018 Renewal 1

17190 Bernardo Center Dr. San Diego, CA 92128 Rancho Bernardo

9,306 05/01/2019 04/30/2021

Surgical Care Affiliates The Blackstone Group LP

1.

Excel Centre at Park Terrace 17140 Bernardo Center Dr., Ste. 300 San Diego, CA 92128 Rancho Bernardo

A 09/30/2018 New 3

Rogers Behavioral Health Kayne Anderson Real Estate Advisors

13,489 04/01/2019 09/30/2029

2.

$2.83 $2.84 NNN (0.70/SF) -- $10,267,872 $3.47 $3.55 NNN ($0.95/SF) 2018 $0.75 $211,954 $2.95 $3.47 NNN ($1.00/SF) 2019 - $46,825,652 $3.00 $3.00 NNN ($0.70/SF) 2017 $0.91 $662,070 $3.00 $3.09 NNN ($0.70/SF) - $0.70 $223,265 $3.15 $3.15 NNN ($1.00/SF) - $0.00 $175,996

UCSD 16950 Via Tazon San Diego, CA 92127 Rancho Bernardo

B 12/31/2017 New 1

57,420 09/01/2018 11/30/2023

UCSD The Granum Family Trust

3.

30 0.0

4S Health Center 16918 Dove Canyon Rd., Ste. 102 San Diego, CA 92127 Rancho Bernardo

A 07/01/2018 New Lease 1

1,988 08/01/2018 01/31/2021

PeakLogic, Inc. Finest City Real Estate

4.

3% No Second

180 7.5 2.75% No New

Palomar Health Outpatient Center - Phase I 2125 Citracado Parkway Escondido, CA 92029

Palomar Health ERTC Medical Office Development I, LP, a California LP

A 01/30/2017 New 1

75,000 1/1/2018 12/31/2033

5.

60 0.0

B 11/01/2017 New Lease 3

Makena Medical Center 1955 Citracado Pkwy, Ste. 301 Escondido, CA 92029

3,464 12/01/2017 11/30/2023

Hidden Valley Eye Associates Douglas E Barnhart

6.

3% No Second 60 2.0 3.00% No Second 36 0.0 0.00% No Second

$18.00 $0.00 10.00

A 07/12/2017 New 2

Garden View Court 700 Garden View Ct., Ste. 204 Encinitas, CA 92024

1,206 09/01/2017 08/31/2022

TMS Centers of America Grace Partners

7.

New Office Health Care

$0.00 $0.00 12.90 Renewal Health Care

Los Coches Village Medical 3257 Camino de los Coches Ste. 201 Carlsbad, CA 92009

A 08/24/2017 Renewal 2

Quest Diagnostics Peter Splinter Family Holdings, Inc.

1,552 07/11/2017 07/10/2020

8.

35

OFFERING MEMORANDUM

M A R K E T SAN DIEGO MEDICAL OFFICE SNAPSHOT 4Q 2018 ECONOMY

• The San Diego employment market continued to record job growth, adding 28,400 jobs (+1.9%) year-over-year through December 2018.1 During the same time period, the unemployment rate decreased 10 basis points (bps), dropping to 3.2%. Also worth noting, the current rate is 270 bps below the 28-year average of 5.9%. • All employment sectors are expected to grow at a combined growth rate of 1.3% in 2019. San Diego’s economy of $231.8 billion2 as measured by gross regional product is forecasted to grow an additional 3.1% in 2019, above its 10-year average of 2.7%. MARKET OVERVIEW • Positive absorption of medical office continued throughout the county, totaling 148,000 sf in Q4 2018, which equates to 1.2% of total inventory. As every submarket enters 2019 with single-digit vacancy rates, the demand for new development or conversion of office buildings to medical office buildings continues. • Direct net absorption countywide totaled 148,000 sf in Q4 2018, but only 140,000 sf in 2018, indicating a year of flat absorption outside of Q4. The significant positive absorption was found in the I-15 Corridor, driven by UCSD and Rogers Behavioral Health, and throughout the North County.

6.4% OVERALL VACANCY 390 TOTAL # OF PROJECTS

139,606 YTD NET ABSORPTION SF 364,330 SF YTD LEASING ACTIVITY $3.15/SF AVERAGE ASKING RENT (FSG) 12,622,755 SF TOTAL INVENTORY 3.2% SAN DIEGO UNEMPLOYMENT RATE

PALOMAR MEDICAL CENTER ESCONDIDO

36

CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

San Diego Q4 2018

Direct Net Absorption (sf) Under Construction (sf)

19k

148k

221k $3.17

98k

$3.15 M A R K E T

Average Asking Rent

SAN DIEGO MEDICAL OFFICE SNAPSHOT 4Q 2018

*Rental rates reflect full service (FS) asking $psf/month.

SAN DIEGO MEDICAL OFFICE

Economic Indicators

Direct Net Absorption/Direct Asking Rent 4-QTR TRAILING AVERAGE

Q4 17

Q4 18 12-Month Forecast

San Diego Employment San Diego Unemployment

1.53M 1.57M 3.3% 3.2% 4.1% 3.9%

80

$3.20

U.S. Unemployment

60

December 2017/2018 used to represent Q4 for San Diego.

$3.00

0 Thousands of SF 20 40

Market Indicators

Q4 17

Q4 18 12-Month Forecast

$2.80

Vacancy

7.3% 6.4%

Direct Net Absorption (sf) Under Construction (sf)

19k

148k

$2.60

-20

221k $3.17

98k

2011 2012 2013 2014 2015 2016 2017 2018

Average Asking Rent

$3.15

*Rental rates reflect full service (FS) asking $psf/month.

Net Absorption SF

Asking Rent, $ PSF

Direct Net Absorption/Direct Asking Rent 4-QTR TRAILING AVERAGE

Overall Vacancy

12%

Historical Quarterly Average = 9.5%

80

$3.20

10%

60

$3.00

0 Thousands of SF 20 40

8%

$2.80

6%

$2.60

-20

4%

2011 2012 2013 2014 2015 2016 2017 2018

2012 2013 2014 2015 2016 2017 2018

Net Absorption SF

Asking Rent, $ PSF

Overall Vacancy

37

OFFERING MEMORANDUM

12%

Historical Quarterly Average = 9.5%

HEALTHCARE ADVISORY PRACTICE

M A R K E T HEALTHCARE ADVISORY GROUP Medical Office Report Office QX 2016 Medical Office Report San Diego Q4 2018

SAN DIEGO MEDICAL OFFICE SNAPSHOT 4Q 2018

OVERALL AVERAGE ASKING RENT

CURRENT DIRECT NET ABSORPTION (SF)

YTD DIRECT NET ABSORPTION (SF)

YTD LEASING ACTIVITY (SF)

UNDER CNSTR (SF)

SUBLET VACANT (SF)

DIRECT VACANT (SF)

OVERALL VACANCY RATE

SUBMARKET INVENTORY (SF)

North County 3,252,980 7,732 288,566 9.1%

72,236

72,044

66,280

68,000 $3.14

Mid City

2,295,270 20,553 144,870 7.2%

29,221

981

43,163

30,000 $3.42

I-15 Corridor

1,021,293 24,864 45,583 6.9%

3,596

63,328

95,894

0

$3.33

Central Suburban

3,480,858 2,694 134,176 3.9% 35,854

-469

87,735

0

$3.20

East County

1,082,195 1,600 69,787 6.6%

-3,437

-8,953

13,754

0

$2.82

South County

1,490,159 7,679 61,609 4.6% 10,306

12,675

57,504

0

$2.69

On Campus

4,568,749 26,040 279,758 6.7%

98,091

78,731

73,906

68,000 $3.07

Off Campus

8,054,006 39,082 464,833 6.3% 49,685

60,875

290,424

30,000 $3.20

Single Tenant

4,071,287

0 18,039 0.4%

-3,179

39,381

72,780

68,000 $3.08

Multi Tenant

8,551,468 65,122 726,552 9.3% 150,955

100,225

291,550

30,000 $3.15

12,622,755 65,122 744,591

6.4% 147,776

139,606 364,330

98,000

$3.15

TOTAL

*Rental rates reflect full service (FS) asking $psf/month. Vacancy rate includes direct and sublease. Net absorption excludes sublease. Key Lease Transactions Q4 2018

TRANSACTION TYPE

PROPERTY

SF

TENANT

LANDLORD

SUBMARKET

Pacific Highland Ranch

16,350

UCSD

Coast Income Properties

New

Mid City

38

CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

Park Terrace Health Center 13,583 Rogers Behavioral Health

MBRE Healthcare

New

Mid City

39

OFFERING MEMORANDUM

M A R K E T

NORDAHL MEDICAL CENTRE SOUTH TOWARDS PALOMAR MEDICAL CENTER

Palomar Medical Center ESCONDIDO, CA

cCARE 838 NORDAHL RD., SUITE 300, SAN MARCOS

Nordahl Medical Centre 838 NORDAHL RD., SAN MARCOS

NORDAHL ROAD

40

CCARE | 838 NORDAHL ROAD, SUITE 300, SAN MARCOS

M A R K E T

PALOMAR HEALTH is the first California healthcare district to earn the prestigious certification as a CERTIFIED HEALTHCARE DISTRICT BY THE ASSOCIATION OF CALIFORNIA HEALTHCARE DISTRICTS (ACHD). Palomar Health is the largest public healthcare district in California, and operates hospitals and a variety of community health services in an 850 square mile region. The hospitals include Palomar Medical Center and Palomar Health Downtown Campus in Escondido, as well as Pomerado Hospital in Poway. Palomar Health’s trauma center serves more than 2,200 SQUARE MILES of South Riverside and North San Diego counties.

PALOMAR MEDICAL CENTER NORDAHL MEDICAL CENTRE TO THE NORTH

cCARE 838 NORDAHL RD., SUITE 300, SAN MARCOS

Palomar Medical Center ESCONDIDO, CA

C I T R A C A D O P A R K W A Y

Palomar Outpatient | Phase 2 75,000 SF MOB / 100% PRE-LEASED TO PALOMAR HEALTH / DELIVERS IN 2020

Planned Parking Structure 1,900 STALLS TO REPLACE TEMP PARKING LOT ACROSS CITRACADO PARKWAY / PALOMAR PHASE 2

Future | Kindred Hospital 52 BED INPATIENT REHABILITATION FACILITIES

Palomar Outpatient | Phase 1 75,000 SF MOB / 100% PRE-LEASED TO PALOMAR HEALTH / DELIVERED IN 2019

Palomar Outpatient | Phase 3 75,000 SF MOB / 100% PRE-LEASED TO PALOMAR HEALTH / PROPOSED

Palomar Medical Center | The centerpiece of North County San Diego’s health care system Palomar Medical Center ranked by Healthgrades as one of the top 250 hospitals in the U.S., and accredited by The Joint Commission. The 740,000- FOOT 11-STORY HOSPITAL facility opened in 2012. The medical center features 288 PRIVATE SINGLE-PATIENT ROOMS , 44 EMERGENCY AND TRAU- MA ROOMS and 11 OPERATING ROOMS . The 56-ACRE CAMPUS will expand in phases - up to double its current size - to meet the developing needs of North San Diego County's growing community. As one of the country’s largest hospital construction projects and the first new North County San Diego hospital in 30 years, the new campus has already captured the attention of health care professionals worldwide for its use of nature, light and space -- all designed to speed healing. Among the natural features is our 1.5-acre green roof that sits atop the second floor, lush with drought-resistant vegetation with a beautiful view for south-facing patients.

41

OFFERING MEMORANDUM

M A R K E T SAN MARCOS, CA

• With a population of 94,042, San Marcos has the smallest yet fastest growing population along the 78 Corridor. The city’s population has grown by more than 11 percent since 2010, outpacing the other four cities along the Corridor by at least four percent and growing 1.8 times faster than the San Diego region. It is the location of the Corridor’s only public university – California State University San Marcos. Because of this, San Marcos has one of the highest concentrations of STEM degrees. Of those holding a Bachelor’s degree, more than 45 percent have their first degree in a science, technology, engineering or mathematics field of study. • San Marcos is the birthplace of San Diego’s most iconic craft beer company, Stone Brewing Co., as well as home to North County’s only University, CSU San Marcos. There are many amenities that provide a high quality of life to its residents. San Marcos Unified School District ranks highly within the county, across multiple categories, including number one in safety and number one in athletics. The city also has ample public space, including 16 community parks and 18 mini parks. It also offers hundreds of dining options, like those found in North City, which features the 21,000 square foot Urge Gastropub and bowling alley, as well as student housing and luxury apartments. • The city also boasts a strong manufacturing economy, home to some of the region’s most internationally engaged businesses. Hunter Industries, a manufacturer of irrigation equipment, sells its products around the world – chief among these is supplying Buckingham Palace with its sprinkler system. • San Marcos is home to a talented, diverse and well-educated workforce. Educational attainment in the city exceeded 33 percent in 2015, four percentage points shy of the San Diego region and second among the five 78 Corridor cities. • San Marcos boasts a robust and diverse economic base. With nearly 40,000 jobs, more than 4,000 businesses, and annual GDP totaling $7.9 billion, San Marcos is an economic powerhouse and major player in North County’s economic landscape. • Claiming an impressive average unemployment rate of 3.7 percent in 2016, San Marcos is a stabilizing presence in North County. The city weathered the Great Recession better than the region, state, and nation; even during the depths of the recession, San Marcos’ unemployment rate never exceeded ten percent - a remarkable claim for any California locality

90,402 TOTAL POPULATION 11% POPULATION GROWTH SINCE 2010 $66,300 MEDIAN HOUSEHOLD INCOME 33.2% BACHELOR’S DEGREE OR HIGHER 3.7 UNEMPLOYMENT RATE 4,075 TOTAL NUMBER OF BUSINESSES 5.2m UNEMPLOYMENT RATE

42

1811 ASTON AVENUE | CARLSBAD

DISCOVER LIFE’S POSSIBILITIES San Marcos is the birthplace of San Diego’s most iconic craft beer company, Stone Brewing Co., as well as home to North County’s only University, CSU San Marcos. There are many amenities that provide a high quality of life to its residents. San Marcos Unified School District ranks highly within the county, across multiple categories, including number one in safety and number one in athletics. The city also has ample public space, including 16 community parks and 18 mini parks. It also offers hundreds of dining options, like those found in North City, which features the 21,000 square foot Urge Gastropub and bowling alley, as well as student housing and luxury apartments.

M A R K E T SAN MARCOS, CA

ACRES OF PARK SPACE 300+ 16 Community Parks 18 Mini Parks 300 + ACRES OF PARK SPACE 16 COMMUNITY PARKS 19 MINI PARKS

Source: City of San Marcos, 2017

MILES OF MULTI-USE TRAILS 72 MILES F MULTI-USE TRAILS

Source: City of San Marcos, 2017

BREWERIES 8 600+ Beers on Tap BRE ERIES WITH 600+ BEERS ON TAP

Source: Untappd, 2017

RESTAURANT ESTABLISHMENTS 240+ + RESTA RANT ESTABLISHMENTS

Source: County of San Diego, 2017

SAN MARCOS UNIFIED SCHOOL DISTRICT RANKS SAN MAR S UNIFIED SCHOOL DISTRICT

IN THE COUNTY 5 th RANKS 5TH IN THE COUNTRY

Source: Niche K-12 rankings, 2017

43

OFFERING MEMORANDUM

SAN MARCOS REGIONAL PROFILE | 11

M A R K E T

PROPERTY DEMOGRAPHICS (1-3-5)

POPULATION

1 MILE

3 MILE

5 MILE

Total Population 2017

11,630

125,909

240,300

WITHIN A 5-MILE RADIUS OF THE PROPERTY

Total Population 2023 Population Growth 2018-2023

12,171

131,617

251,129

4.65%

4.53%

4.51%

$81,167 AVERAGE INCOME

Median Age

36.8

35.9

36.1

240,300 TOTAL POPULATION $464,994 MEDIAN HOME VALUE

HOUSING

1 MILE

3 MILE

5 MILE

Total Housing Units 2017

3,945

41,179

77,225

HH Growth 2018-2023

4.89%

4.69%

4.64%

Avg. Household Size

2.9

3

3.1

Median Home Value

$419,926

$437,500 $464,994

INCOME

1 MILE

3 MILE

5 MILE $81,167

Average HH Income 2018 $78,585

$74,692

44

1811 ASTON AVENUE | CARLSBAD

C O N TA C T S

PRIVATE CLIENT INVESTMENT ADVISORY

MARK AVILLA Senior Director +1 760 431 4223 mark.avilla@cushwake.com CA License 01104562

HEALTHCARE INVESTMENT ADVISORY PRACTICE

TRAVIS IVES Senior Director +1 858 334 4041 travis.ives@cushwake.com CA License 1889097

1000 Aviara Parkway, Suite 100, Carlsbad, CA 92011 T 760.431.4200 | F 760.454.3869 www.cushmanwakefield.com www.cushwakeprivateclient.com