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OFFERING MEMORANDUMFranklinSt.com

SLEEP NUMBER18440 I-45 S., Shenandoah (Houston), TX 77384

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SLEEP NUMBER I SHENANDOAH, TX SLEEP NUMBER I SHENANDOAH, TX

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CONTENTSExecutive Summary

Investment HighlightsProperty Pictures

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Property/Area OverviewSite Plan

AerialLocal/Regional MapsDemographics

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Financial AnalysisPricingIncome & ExpensesRent Roll

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About Franklin Street 20

CONFIDENTIALITY AGREEMENTThis is a confidential Memorandum intended solely for your limited use and benefit in determining whether you desire to express further interest into the acquisition of the Subject Property.

This Memorandum contains selected information pertaining to the Property and does not purport to be a representation of state of affairs of the Owner or the Property, 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 or Franklin Street Real Estate Services, LLC. 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 all interested and qualified prospective purchasers. Neither the Owner or Franklin Street Real Estate Services, LLC. , nor any of their respective directors, officers, affiliates or representatives are making 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 own investigations and inspections of the Property in evaluating a possible purchase of the real property.

The Owner expressly reserves the right, at its sole discretion, to reject any or all expressions of interest or offers to purchase 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 obligations therein have been satisfied or waived.

By receipt of the 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 the Franklin Street Real Estate Services, LLC. Furthermore, you agree not to use this Memorandum or any of its contents in a manner detrimental to the interest of the Owner or Franklin Street Real Estate Services, LLC.

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 so advised and expected to review all such summaries and other documents of whatever nature independently and not to rely on the contents of this Memorandum in any manner.

ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY. PLEASE CONSULT YOUR FRANKLIN STREET REAL ESTATE SERVICES, LLC AGENT FOR MORE DETAILS.

PRESENTED BY:

Oliver [email protected]

Bryan BelkSenior [email protected]

John TennantSenior [email protected]

mailto:Oliver.Oldacre%40FranklinSt.com%20?subject=

4,000 Square Feet

18440 I-45 South Shenandoah, TX 77384

Franklin Street is pleased to present to you this newly constructed Sleep Number by Select Comfort, located in the highly touted Shenandoah/Woodlands area of Houston, Texas.

SLEEP NUMBER

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6 INVESTMENT OVERVIEW | AREA OVERVIEW | FINANCIAL ANALYSIS | COMPARABLES | ABOUT FRANKLIN STREET INVESTMENT OVERVIEW | AREA OVERVIEW | FINANCIAL ANALYSIS | COMPARABLES | ABOUT FRANKLIN STREET

PROPERTY DESCRIPTION

Sleep Number has signed a new 10-year NN lease and will commence paying rent upon the completion of construction. The building is currently scheduled to be completed in December 2017 as a built to suit. Hedging against inflation, this lease offers 10% rent increases every 5 years including each option. The lease is very landlord friendly as the tenant reimburses 100% for CAM, taxes, and insurance.

The Shenandoah/Woodlands area is in Montgomery County, Texas. Between 2000 and 2010, Montgomery County’s population grew by 55%, the 24th-fastest rate of growth of any county in the United States. It is part of the Houston-The Woodlands-Sugar Land, Texas Metropolitan Statistical Area. About 60 percent of the City’s revenue is from sales tax, which has allowed officials to lower the property tax rates to the lowest in Montgomery County. City staff provide a high standard of service to its residents, and maintain facilities and infrastructure to meet the demands of growth.

The Shenandoah/Woodlands area is THE premier trade area in all of the greater Houston area based on income levels, growth, etc. The Woodlands is 43.9 square miles and is comprised of upscale retail, residential and commercial uses including lake front homes and office and retail called Hughes Landing--a 66-acre mixed use development on Lake Woodlands, whose current tenant mix includes Whole Foods, Pier 1, Fleet Street Sports, etc. Other developments include Lake Woodlands Crossing, a 62,565 SF outdoor shopping plaza across from Market Street, Waterway Square, Woodlands Mall, Lakeland Village, Village Center, Parkland Village Center, College Park North, Creekside Park Village Green, and Research Crossing.

Houston metropolitan area’s population now stands at 6.6 million. At its current rate of growth, Houston could replace Chicago as the nation’s third-largest city by 2030. Since 2000, no major metro region in America except for archrival Dallas-Fort Worth has created more jobs and attracted more people. Houston’s job base has expanded 36.5%; in comparison, New York employment is up 16.6%, the Bay Area 11.8%, and Chicago a measly 5.1%. Since 2010 alone, one half million jobs have been added. Only New York City is home to more large public companies.

KEY PROPERTY HIGHLIGHTS

• New 2017 construction located in Shenandoah/Woodlands

• 4th largest Metro in the U.S.

• Highly visible to over 179,160+ VPD on I-45

• Sleep Number has no corporate debt

• Ranked #6 nationally in sales PSF for all retailers, just

behind Coach, Tiffany’s, and Lulu Lemon

• Rapidly growing area: Over 4% annual population growth, well

above the national average

PROPERTY DESCRIPTION & KEY HIGHLIGHTS

SITE DETAIL

AREA

Sleep Number18440 I-45 South

Shenandoah, TX 77384

Year Built: 2017

Rentable Sq Feet: 4,000

Lot Size (Acres): 1.02

Occupancy: Under Construction

PARCEL ID: C088-0002-012

PROPERTY INFORMATION

179,160 VPDTRAVEL DAILY ALONG I-45 DIRECTLY

PASSING THE SITE

$147,000+AVERAGE HOUSEHOLD INCOMES

WITHIN 1 MILE OF THE SITE

2017NEW CONSTRUCTION

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GuarantorCorporate

Demised Premises4,000 SF

Lease Term10-Year NN Lease which will commence onDecember 1, 2017

Remaining Renewal Option(s)Two, 5-year renewals

Increases10% increases in year 5 and each option period

Annual Base Rent12/1/2017 to 11/30/2022 $222,000

12/1/2022 to 11/30/2027 $244,200

Option Rent12/1/2027 to 11/30/2032 $268,240

12/1/2032 to 11/30/2037 $295,520

Select Comfort Corporation, together with its subsidiaries, provides sleep solutions and services in the United States. It designs, manufactures, markets, retails, and services beds and bedding accessories, such as mattresses, adjustable bases, pillows, sheets, and other bedding products. The company sells its products directly to consumers through retail, online, and phone, as well as through wholesale. As of December 31, 2016, it operated approximately 540 retail stores. The company was founded in 1987 and is headquartered in Minneapolis, Minnesota.

Thirty years ago, Sleep Number transformed the mattress industry with the idea that ‘one size does not fit all’ when it comes to sleep. Today, Sleep Number is the leader in sleep innovation and is ranked “Highest in Customer Satisfaction with Mattresses” by J.D. Power in 2015 and 2016. Sleep Number’s investments over the past five years have further differentiated the brand and strengthened the three competitive advantages: proprietary innovations that provide meaningful sleep benefits for the customers; ongoing customer relationships that are enabled by the direct-to-consumer business model; and exclusive distribution that is highly productive and fueled by the mission-driven sales teams. Sleep Number’s business model enables them to stay focused on what is relevant to the customer while building life-long relationships with the brand. Sleep Number’s team of 3,800 brand ambassadors is dedicated to the mission of improving lives by individualizing sleep experiences. Sleep Number is driven to improve well-being through better quality sleep.

Company Structure: Public (NASDAQ: SCSS)Headquarters: Minneapolis, MinnesotaLocations: 540+Number of Employees: 3,800+Revenue: $1.31 billionWebsite: www.sleepnumber.com

INVESTMENT OVERVIEW | AREA OVERVIEW | FINANCIAL ANALYSIS | COMPARABLES | ABOUT FRANKLIN STREET INVESTMENT OVERVIEW | AREA OVERVIEW | FINANCIAL ANALYSIS | COMPARABLES | ABOUT FRANKLIN STREET

TENANT OVERVIEW & LEASE ABSTRACT

PROPERTY DESCRIPTION

Property Name: Sleep Number

Street Address: 18440 I-45 S

City, State, Zip: Shenandoah, TX. 77384

County: Montgomery

Parcel ID: C088-0002-012

Year Built: 2017

Lot Size (Acres): 1.02 Acres

Rentable Square Feet: 4,000

Current Occupancy: Under Construction

Lease Type: NN

Type of Ownership: Fee Simple

Traffic Counts: 179,160 VPD

PRICING

Price $3,700,000

Net Operating Income $222,000

Cap Rate 6.00%

PRICING SUMMARY

http://www.sleepnumber.com

PROPERTY/AREAOVERVIEW

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SLEEP NUMBER I SHENANDOAH, TX

INVESTMENT OVERVIEW | AREA OVERVIEW | FINANCIAL ANALYSIS | COMPARABLES | ABOUT FRANKLIN STREET

REGIONAL MAP

Image Landsat / Copernicus



Woodforest Bank Stadium ~10,000 Seats

CHI St. Luke's Health - The Woodland Hospital

The Woodlands College Park High School

Lone Star College

Gerald D Irons Junior High

179,160 VPD

53,000+ VPD49,000+ VPD

38,000+ VPD

63,000+ VPD

The Woodlands Mall

Market Street

SHENANDOAH, TX

SEARCH GOOGLE MAPS

DIRECTIONSSHENANDOAH

Houston Methodist The Woodlands Hospital

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SITE HIGHLIGHTS

The subject site is part of the Shenandoah/Woodlands area, which is THE premier trade area in all of the greater Houston area based on income levels, growth, etc. The site benefits from unobstructed visibility to roughly 180,000+ vehicles per day on Interstate 45. Dense residential neighborhoods surround the site, which boast an average income of $147,000+. Sleep Number will be surrounded by almost every Big Box retailer in the country (Costco, Walmart, Sam’s Club, Kohl’s, Target, Home Depot, etc.) as well as many furniture retailers.

The Houston metropolitan area has seen huge population growth, which now stands at 6.6 million people. At its current rate of growth, Houston could replace Chicago as the nation’s third-largest city by 2030. Much of this growth has occurred in the Shenandoah/Woodlands area which has seen a 12+% growth in households from 2000-2017.

Sleep Number will neighbor a recently developed Ethan Allen as well as a new construction Starbucks which will be delivered later this year. Directly behind the site is a proposed 8.0+ acre mixed use development. The development plan for the project includes a mix of retail, restaurant, hotel and medical office. Exxon Mobil is developing a new 360 acre North American corporate campus off of Interstate 45 on the southern border of the Woodlands approximately 4 miles directly south of the Sleep Number site.

KEY SITE HIGHLIGHTS

• Highly visible to over 180,000+ VPD

• Over $147,000 Average Household Income

• Over 12% Household Growth since the year 2000

• Brand New 2017 Construction

• Surrounded by New Development

• Surrounded by Dense Residential Neighborhoods

• Strategically located next to Ethan Allen and a multitude

of Big Box Retailers

SLEEP NUMBER SITE OVERVIEW

179,160 VPD

HealthSouth HospitalCity of Shenandoah Municipal Complex

Downtown Woodlands

Memorial Hermann The Woodlands Hospital

351 Beds

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THE WOODLANDS TOWNSHIP

The Woodlands is a 28,000-acre award-winning master planned community just north of downtown Houston. According to The Woodlands Development Company, the population was 107,769 as of a January 2014 estimate, an increase of 93.7% over its population of 55,649 at the 2000 census. It is no surprise that the combination of excellent housing options, great schools, an abundance of parks and retail shopping combine to make The Woodlands an attractive place to live.

The Woodlands is home to several corporate campuses, most notably Chevron Phillips, Anadarko Petroleum Corporation, Huntsman Corporation, Woodforest National Bank, Baker Hughes, CB&I, McKesson Corporation, Aon plc, Maersk Line, Safmarine, GeoSouthern Energy, ExxonMobil, Halliburton and SWN or Southwestern Energy Company. The Woodlands won a Special Award for Excellence in 1994 from the Urban Land Institute.

The Woodlands also offers some of the best retail stores available in the Houston area. A few of the upscale shopping destinations include: The Woodlands Mall, Market Street, or in the boutique shoppes in Town Center and surrounding areas.

The excellent schools located in The Woodlands also attract young families to this area. Whether you are looking for superior preschool options or have school age children, a great education is waiting for children growing up in The Woodlands community. Based on the most recent (2009) SAT Subject Performance Comparisons Conroe ISD ranks far above both Texas and national standards.

The Woodlands also has a host of entertainment venues throughout town, most notably with The Cynthia Woods Mitchell Pavilion. The Pavilion is a concert amphitheater which caters to both performing art and contemporary musical artists. Top name performers regularly include The Pavilion on the concert tour schedules. In addition to the Pavilion, The Woodlands has a host of small entertainment and event venues.

KEY AREA HIGHLIGHTS

• Business: Over 21 million square feet of office and industrial

space with over 63,000 employees in The Woodlands

• Upscale Shopping: Market Street, The Woodlands Mall,

Hughes Landing

• Entertainment: Cynthia Woods Mitchell Pavilion, Insperity Golf

Championship, Hughes Landing, Waterway Square

• Dining: Approximately 200 specialty and family restaurants,

Restaurant Row at Hughes Landing

THE WOODLANDS AREA OVERVIEW

Market street - the woodlands is an award winning Mixed-used town center featuring retail, restaurant, cineMa, office and hotel in one of the nation’s top Master-planned coMMunities. retailers include tiffany & co, brooks brothers, and Michael kors. a 70-rooM boutique hyatt centric hotel Make Market street a preMier shopping, dining and entertainMent destination. Market street is bound by lake woodlands drive, lake robbins drive, crogan’s Mill road and six pines drive.

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1 MILE 3 MILES 5 MILES

POPULATION2010 Census 2,571 35,321 115,924

2017 Population 3,351 45,186 140,183

2022 Projection 3,939 53,136 164,927

Growth 2000 to 2010 8.5% 4.4% 3.1%

Growth 2010 to 2017 4.3% 4.0% 3.0%

Growth 2017 to 2022 3.5% 3.5% 3.5%

HOUSEHOLD INCOME2017 Average $147,097 $132,308 $120,711

2017 Median $117,788 $104,839 $98,888

>$100,000 53.3% 49.6% 46.1%

HOUSEHOLDS2017 Households 1,528 18,964 57,309

2017 Average HH Size 2.3 2.5 2.5

2022 Total Households 1,695 21,131 64,0077

2000 to 2017 Annual Rate 12.5% 6.8% 4.6%

2017 to 2022 Annual Rate 2.9% 3.0% 3.0%

2017 Average Household Net Worth $1,242,821 $1,048,588 $964,189

HOUSING VALUEMedian Housing Value $316,596 $274,674 $257,880

>$150,000 88.0% 87.3% 86.2%

DEMOGRAPHICS

1 MILE 3 MILES 5 MILES

POPULATION2017 Population 3,351 45,186 140,183

2022 Population 3,939 53,136 164,927

2000 to 2010 Annual Rate 8.5% 4.4% 3.1%

2010 to 2017 Annual Rate 4.3% 4.0% 3.0%

2017 to 2022 Annual Rate 3.5% 3.5% 3.5%

2017 Male Population 49.5% 49.0% 48.8%

2017 Female Population 50.5% 51.0% 51.2%

2017 Median Age 41.7 40.5 38.7

RACE AND ETHINICITY2017 White Alone 83.6% 83.5% 83.1%

2017 Black Alone 4.5% 4.6% 4.8%

2017 American Indian/Alaska Native 0.4% 0.5% 0.5%

2017 Asian Alone 6.8% 5.1% 4.7%

2017 Pacific Islander Alone 0.0% 0.1% 0.1%

2017 Other Race 2.6% 33.8% 4.1%

2017 Two or More Races 2.1% 2.5 2.7%

2017 Hispanic Origin (Any race) 15.5% 16.8% 17.6%

DRIVETIME DEMOGRAPHICS5 MINS 10 MINS 15 MINS

DRIVETIMES2017 Estimated Total Population 49,443 209,823 484,266

Population Growth 2000 to 2010 6.3% 3.8% 5.8%

Population Growth 2010 to 2017 3.4% 2.6% 3.5%

Projected Population 2022 58,232 245,922 555,041

2017 Households 21,167 80,687 176,832

Growth 2000 to 2017 7.8% 4.5% 5.8%Source: REGis Pro 2017

TRAFFIC COUNTS

179,160I-45

WOODLANDS PKWY

COLLEGE PARK DR

63,000

53,000

5 MIN RADIUS

10 MIN RADIUS

15 MIN RADIUS

ABOUT FRANKLIN STREET

23



COLLABORATIVE REAL ESTATE PLATFORMFranklin Street is family of full-service real estate companies focused on delivering value-added solutions to meet the evolving needs of our clients.

STRATEGIC PLANNING AND ADVISORY SERVICESBeginning with an understanding of your business goals and objectives, Franklin Street Real Estate Services formulates and delivers focused and customized solutions designed specifically for you. Our process is straightforward: validating your need, formulating solutions, and providing a program for implementation.Acquisitions and Dispositions

Franklin Street will work with you throughout your property acquisition and disposition periods ensuring that optimal financial results are achieved. By incorporating financial analysis with the latest and most accurate valuation methods, our research team will provide you with data that is essential to your investment decisions. Our success is based on in-depth market knowledge, creative marketing strategies, an extensive client database, and current technology applications that simplify the process and increase speed to market.

TRANSACTION MANAGEMENTEffective transactions reduce acquisition and operating expenses, establish a competitive advantage, and provide necessary flexibility. Our methodology includes a comprehensive examination of the transaction at hand followed by a detailed analysis; providing our clients with up-front strategies that will yield the greatest financial and operational results with the fewest hassles.

INVESTMENT SALES ACQUISITION

LEASING LANDLORDREPRESENTATION

INSURANCE PLACEMENT

TECHNICAL DUE DILIGENCE

INVESTMENT SALESDISPOSITION

APPRAISAL / DEBT & EQUITY PLACEMENT

RESEARCH / OPPORTUNITYIDENTIFICATION

PROPERTY MANAGEMENT TENANTPROPERTY MANAGEMENT LANDLORD

PROJECT MANAGEMENT LANDLORD

PROJECT MANAGEMENT TENANT

LEASING TENANT REPRESENTATION

INVESTOR / OCCUPIER

CLIENT

ABOUT USAchieving Results Through Collaboration

2011 2012 2013 2014 2015 2016

YEAR

TRANSACTION VOLUME

TRANSACTION VOLUME

E

ATLANTA

MIAMI

FT.LAUDERDAL

JACKSONVILLE

TAMPA

ORLANDO

Caribbean

FTE

Closed Transactions: Investment Sales, Insurance

Franklin Street Offices

Clients Represented: Tenant, Landlord, Management, and Valuation

MultifamilyRetailIndustrialOffice

MARKET EXPERTISE

30 MILLION SFOF COMMERCIAL PROPERTY

REPRESENTATION OF70 RETAILERS IN 9 STATES

LOCAL, REGIONAL, AND NATIONAL CLIENTS

MORE THAN $500 MILLIONIN LOAN ORIGINATIONS

2016 TENANT TRANSACTIONS TOTALING $42+ MILLION OFFICE AND INDUSTRIAL


PROPERTY MANAGEMENT 7.8 MILLION SQUARE FEET

ALL ASSET TYPES THROUGHOUT THE U.S.

$10+ BILLION IN VALUATIONS6,500 ASSIGNMENTS COMPLETED

LANDLORD REPRESENTATION13 MILLION SQUARE FEET


$507,084,512

E

ATLANTA

MIAMI

FT.LAUDERDAL

JACKSONVILLE

TAMPA

ORLANDO

Caribbean

FTE

FAST FACTS

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24 INVESTMENT OVERVIEW | AREA OVERVIEW | FINANCIAL ANALYSIS | COMPARABLES | ABOUT FRANKLIN STREET

JACKSONVILLE7751 Belfort ParkwaySuite 110Jacksonville, FL 32256

Phone: 904.271.4120Fax: 904.899.5890

TAMPA600 N Westshore Blvd. Suite 600Tampa, FL 33609Phone: 813.839.7300Fax: 813.839.7330

FT. LAUDERDALE900 S Pine Island RoadSuite 310Plantation, FL 33324 Phone: 954.640.1100Fax: 954.640.1101

MIAMI6205 Blue Lagoon DriveSuite 280Miami, FL 33126

Phone: 786.292.3188Fax: 786.269.2318

ORLANDO390 N Orange AvenueSuite 2300Orlando FL, 32801

Phone: 407.458.5400Fax: 407.264.8160

[email protected]

Phone: 404.832.1250Fax: 404.842.1755

ATLANTA 3384 Peachtree Road NE Suite 650

Atlanta, GA 30326

OUR LOCATIONS

ACHIEVING RESULTS THROUGH

COLLABORATION

OUR SERVICES

LANDLORD REPRESENTATION

We increase value for investor clients by first creating a strategic leasing plan that matches the investment strategy for the asset, then proactively implementing it by engaging the market and actively sourcing tenants.

INSURANCE SERVICES

Our insurance division supports clients with an in-depth knowledge of the property and casualty challenges and opportunities faced by property owners today.

MANAGEMENT SERVICES

We maximize asset value through comprehensive management and accounting operations for office, industrial, retail and multifamily product types. By integrating this platform at the local market level, we also deliver seamless one-stop services for mixed-use projects.

INVESTMENT SALES

Through expert knowledge of specific real estate and capital markets, our investment sales division is able to generate effective results impacting income-producing assets, all designed to increase value and deliver maximum results for the owner.

VALUATION ADVISORY

We provide valuation, consultation, litigation and expert witness services for all property types, specializing in commercial real estate. Our clients value our extensive market knowledge, long-term relationships with key market participants and superior analytics.

TENANT REPRESENTATION

Our group partners closely with clients to create, implement, and deliver a strategic plan for space development and optimal market positioning.

CAPITAL ADVISORY

Our capital division specializes in debt and equity placement through established partnerships with Banks, CMBS, Life Companies, Agency, Bridge, Mezzanine, and JV Equity Investors.

FranklinSt.com

Joseph W. [email protected]

Matthew [email protected]

Todd MitchellAssociate404.832.1250 Ext. [email protected]

RETAIL INVESTMENT SALES TEAM

Bryan BelkSenior Director404.832.1250 Ext: 400 [email protected]

Justin SpillerAssociate Director904.899.0317 Ext: [email protected]

Robert J GrandaDirector, Investment [email protected]

Chad AtwoodDirector904.271.4120 Ext: [email protected]

John TennantSenior Director404.832.1250 Ext: 409 [email protected]

Jordan WeanDirector407.458.5400 Ext: [email protected]

Oliver OldacreAssociate404.832.1250 Ext: 437 [email protected]

Greg MatusSr. Vice President, Investment [email protected]

https://franklinst.com/our-services/business-lines/investment-sales/our-team

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