Marcus & Millichap

OFFERING MEMORANDUM

Oceanfront Villas & Retail

Ocean City, MD

The information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Marcus & Millichap and should not be made available to any other person or entity without the written consent of Marcus & Millichap. This Marketing Brochure has been prepared to provide summary, unverified information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough due diligence investigation. Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, the future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB’s or asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any tenant’s plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable; however, Marcus & Millichap has not verified, and will not verify, any of the information contained herein, nor has Marcus & Millichap conducted any investigation regarding these matters and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures to verify all of the information set forth herein. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved.

Non-Endorsement NoticeMarcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation’s logo or name is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, or commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers.

ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY. PLEASE CONTACT THE MARCUS & MILLICHAP AGENT FOR MORE DETAILS.

Confidentiality Agreement

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. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap Real Estate Investment Services is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2017 Marcus & Millichap

MD BOR: Bryn Merrey - 646476Activity ID: Y0270814

Marcus & Millichap

Executive SummaryExecutive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3

Financial AnalysisRent Roll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Income & Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Property DescriptionRegional Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Aerial Photographs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9Condo Photos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-12

Market OverviewDemographic Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14-15

EXCLUSIVELY LISTED BY:

TABLE OF CONTENTS

Dean ZangSenior Managing DirectorNational Retail Group

WASHINGTON, D .C .

Tel: (202) 536-3754Fax: (202) 536-3710dean .zang@marcusmillichap .com Licenses: PA RS228992 DE RS0019120 MD 665335

Chris BurnhamSenior AssociateNational Retail Group

BALTIMORE, MD

Tel: (443) 703-5020Fax: (443) 703-5010cburnham@marcusmillichap .com Licenses: MD 646938

Terell HutchinsAssociateNational Multi Housing Group

WASHINGTON, D .C .

Tel: (202) 536-3700Fax: (202) 536-3710terell .hutchins@marcusmillichap .com Licenses: MD 666492

Stacey MilamSenior Vice PresidentNational Multi Housing Group

WASHINGTON, D .C .

Tel: (202) 536-3705Fax: (202) 536-3710stacey .milam@marcusmillichap .com Licenses: MD 526147 DC SP1010423 VA 0225077593

JESSICA BALSAMAssociateNational Multi Housing Group

WASHINGTON, D .C .

Tel: (202) 536-3700Fax: (202) 536-3710jessica .balsam@marcusmillichap .com Licenses: MD 663123

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Demographics 1-Miles 3-Miles 5-Miles

Population 1,047 7,307 14,678

Households 503 3,155 6,962

Average HH Income $91,230 $94,386 $89,957

Median HH Income $54,762 $66,117 $63,952

Per Capita Income $44,022 $40,832 $42,712

Traffic Counts 24,476 VPD

1 N. Division StreetOcean City, MD 21842

The Offering

Price Open Bid

Net Operating Income $740,259

Total GLA 44,946 SF

Occupancy 100%

Lot Size 0.53 Acres

Year Built 1989

EXECUTIVE SUMMARY

Oceanfront Villas & Retail

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Marcus & Millichap, on behalf of ownership, is pleased to exclusively offer for sale 1 N Division Street located in the town of Ocean City, Worcester County, Maryland. 1 N Division Street is conveniently located at the main entrance of the boardwalk. The building is 44,936-square-feet occupied by five retail tenants on the ground level, three ocean front leased con-dos, and a studio apartment. The retail tenants consist of Quiet Storm Surf Shop, Glitter & Gold, Dimensions, Auntie Anne’s/Cinnabon, and Sign Craft.

Ocean City is a unique market in the sense that retail space, especially on the Boardwalk, is in high demand. Landlords have been known to receive “key” money prior to tenants executing leases which is an additional rent payment to Landlord above and beyond their rent to secure a retail suite. This type of competitive leasing market can also be found in downtown New York City in which key money is very common. The anchor tenant, Quiet Storm Surf Shop, has been in business since 1984 and focuses on surf, skate, lacrosse and other sports apparel and equipment. Quiet Storm now has over five locations in the Mid-Atlantic region, and the lease guarantor at the Subject Property has three locations under opera-tion. All tenants are responsible for utilities, maintenance of the building (including all plate glass), HVAC, and warehouse material lift.

Ocean City is a resort town in the state of Maryland between the Atlantic Ocean and Isle of Wight Bay. It features miles of beach and a wood-en boardwalk lined with restaurants, shops and hotels. During summer weekends the city hosts between 320,000 and 345,000 vacationers, and up to eight million visitors annually. During the summer, Ocean City becomes the second most populated municipality in Maryland, after Bal-timore. Ocean City has three miles of award-winning boardwalk attrac-tions, many of them are open year-round. It has more than 10 miles of beach, spanning from the iconic Inlet to the quieter, more reserved North Ocean City beaches. At the boardwalk’s southern end, Trimpers Rides has hosted theme-park attractions for decades. The surrounding waters are active with kayaks and tour boats, some of which journey to popular nearby Assateague Island.

This offering gives an investor the opportunity to acquire an exception-ally well-located property with historically high occupancy levels, and safe returns from day one. The barriers to entry are extremely high in this submarket and transaction velocity is near zero. This is a once in a lifetime opportunity to acquire a piece of history.

Investment Highlights ■ Trophy, Ocean Front Mixed Use Property Featuring Well-Known

Retail Names

■ Irreplaceable Location at the Entrance to the Boardwalk in Ocean City

■ Three Like-New Condo Units, One Apartment, Five Retail Spaces

INVESTMENT OVERVIEW

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Unit Tenant SF GLA % Lease Start

Lease Expire

Base Rent

Rent/SF

Increase Date

Increase Amount

Increase PSF Lease Type Options

1st/2nd Floor Retail

1 Quiet Storm 32,327 72% 12/31/2009 12/31/2019 $530,450 $16.41 3%/year $546,364 $16.90 Gross + Util 2x5 Year

2 Dimensions 1,247 3% 11/1/2006 10/31/2022 $82,000 $65.76 10/31/2017 $85,000 $68.16 Gross + Util None

3 Glitter & Gold 731 2% 11/1/2006 10/31/2022 $82,000 $112.18 10/31/2017 $85,000 $116.28 Gross + Util None

4 Cinnabon / Auntie Anne's 931 2% 11/30/2015 11/30/2025 $80,000 $85.93 1/1/2019 $85,000 $91.30 Gross + Util None

5 Sign Craft 100 0% 12/31/2009 12/31/2017 $14,000 $140.00 n/a n/a n/a Gross + Util None

TOTAL RETAIL SF 35,336 $788,450

3rd/4th Floor Condo/Apartments

1 Condo 103/ 4 Bedroom; 3 Bathroom

2,975 7% Annual Annual $49,915 $16.78 n/a n/a n/a n/a n/a

2 Condo 105/ 3 Bedroom; 3 Bathroom

3,635 8% Annual Annual $61,520 $16.92 n/a n/a n/a n/a n/a

3 Condo 109 / 3 Bedroom; 3 Bathroom

2,297 5% Annual Annual $41,965 $18.27 n/a n/a n/a n/a n/a

4 Apartment 101 / Effi-ciency

703 2% Annual Annual $5,500 $7.82 n/a n/a n/a n/a n/a

TOTAL CONDO/APT SF 9,610 $158,900

TOTALS 44,946 100% $947,350

RENT ROLL

Notes:(1) Rent roll is as of 10/1/2017(2) Base Rent in our underwriting has been taken from a January 1, 2018-December 31, 2018 forcasted income calcualtion

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INCOME AND EXPENSES

JANUARY 2018

Income

Scheduled Base Rental Revenue (1) $969,263

Expense Reimbursement Revenue (2) $0

General Vacancy (3) $48,463 5% of Base Revenue

EFFECTIVE GROSS REVENUE $920,800

Operating Expenses (4)

Real Estate Taxes $94,824

Insurance $19,929

Repairs & Maintenance $4,000

Personal Property Tax $1,247

Licenses and Permits $2,180

Janitorial $5,600

Cable TV $6,019

Pest Control $138

Electric $7,177

Gas $2,866

Management Fee (5) $27,624 3% of EGR

Water $8,937

Total Operating Expenses $180,541

NOI $740,259

NOTES:

1)

2) Expense Reimbursement Revenue-According to owner provided P&L Statements, there is no direct reimbursement revenue at the subject property.

3) General Vacancy-We have inserted a market vacancy factor of 5% of the base rental revenue.

4) Operating Expenses-Have been taken from owner provided 2016 annual expenses and 2016 profit & loss statement

Note: We have removed Commissions and Advertising as an expense because this is a non-reoccurring expense and new owner any handle rentals themselves.

We have also inserted a normalized repairs and maintenance expense of $4,000/year

5) Management Fee-We have inserted a market management fee of 3% of EGR.

Quiet Storm Sales and Percent Rent PaidYear Sales % Rent Paid

2010 $2,894,736 $-

2011 $3,847,321 $84,732

2012 $4,628,353 $150,268

2013 $4,097,460 $107,797

2014 $4,733,165 $76,199

2015 $5,069,340 $5,547

2016 $4,981,972 $-

Scheduled Base Rental Revenue-Base Rent in our underwriting has been taken from a January 1, 2018-December 31, 2018 forecasted income calculation

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REGIONAL MAP

Within a 5-mile radius, the population is expected to grow

by 7.25% over the next 5 years to 96,3000

>8MMore than 8 Million people vacation in Ocean City, MD

throughout the year.

2:30Less than a 2 and a half hour

drive to downtown Washington, D.C.

X7.25%

DOVER

Oceanfront Villas & Retail

WASHINGTON, D.C

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Oceanfront Villas & Retail

N DIVISION ST .

Sunset Marina

Morning Star Marina

Tanger Outlets

Food Lion Center

24,475 VPD

Oceanfront Villas & Retail

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PHILADELPHIA AVE .

BALTIMORE AVE .

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White Marlin Marina

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CONDO UNIT 103

CONDO UNIT 103

4 Bedroom; 3 Bathroom2,975 SF

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CONDO UNIT 105

CONDO UNIT 105

3 Bedroom; 3 Bathroom3,635 SF

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CONDO UNIT 109

CONDO UNIT 109

3 Bedroom; 3 Bathroom2,297 SF

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DEMOGRAPHIC SUMMARY

INCOME 1 MILES 3 MILES 5 MILES

2016 Housing Income

$150,000 or More 10.91% 10.15% 9.63%

$100,000 - $149,000 16.39% 16.00% 14.55%

$75,000 - $99,999 6.06% 11.48% 12.82%

$50,000 - $74,999 15.30% 19.58% 20.60%

$35,000 - $49,999 9.65% 10.24% 13.25%

Under $35,000 38.29% 29.02% 26.29%

Average Household Income $91,230 $94,386 $89,957

Median Household Income $54,762 $66,117 $63,952

Per Capita Income $44,022 $40,832 $42,712

POPULATION 1 MILES 3 MILES 5 MILES

2021 Projection 1,043 7,820 15,927

2016 Estimate 1,047 7,307 14,678

2010 Census 1,049 7,180 14,506

2000 Census 1,109 5,711 11,412

Current Daytime Population 2,313 10,808 17,316

HOUSEHOLDS 1 MILES 3 MILES 5 MILES

2021 Projection 504 3,363 7,590

2016 Estimate 503 3,155 6,962

2010 Census 503 3,096 6,873

2000 Census 532 2,573 5,436

POPULATION PROFILE 1 MILES 3 MILES 5 MILES

Population By Age

2016 Estimate Total Population 1,047 7,307 14,678

Under 20 13.54% 19.07% 16.95%

20 to 34 Years 23.90% 17.63% 14.56%

35 to 39 Years 5.43% 5.06% 4.55%

40 to 49 Years 11.58% 12.92% 11.17%

50 to 64 Years 24.87% 23.48% 23.64%

Age 65+ 20.68% 21.86% 29.13%

Median Age 46.34 46.80 51.96

Population 25+ by Education Level

2016 Estimate Population Age 25+ 828 5,489 11,494

Elementary (0-8) 1.87% 2.26% 1.50%

Some High School (9-11) 5.12% 5.01% 4.75%

High School Graduate (12) 25.52% 31.05% 29.31%

Some College (13-15) 20.46% 18.48% 20.39%

Associate Degree Only 9.60% 8.84% 8.92%

Bachelors Degree Only 24.71% 22.27% 22.01%

Graduate Degree 12.46% 11.89% 12.89%

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DEMOGRAPHIC SUMMARY

PopulationIn 2016, the population is 14,678. The population has changed by 28.62% since 2000. It is estimated that the population will be 15,927 five years from now, which represents a change of 8.51% from the current year. The current population is 49.50% male and 50.50% female. The median age of the population is 51.96, compared to the US average, which is 37.68. The population density is 186.67 people per square mile.

Households There are currently 6,962 households in the geography. The number of households has changed by 28.07% since 2000. It is estimated that the number of households will be 7,590 five years from now, which represents a change of 9.02% from the current year. The average household size is 2.16 persons.

Income In 2016, the median household income is $63,952, compared to the US average, which is currently $54,505. The median household income has changed by 45.43% since 2000. It is estimated that the median household income will be $73,363 five years from now, which represents a change of 14.72% from the current year.

The current year per capita income is $42,712, compared to the US average, which is $29,962. The current year average household income is $89,957, compared to the US average, which is $78,425.

Race and Ethnicity The current year racial makeup is as follows: 91.74% White, 3.05% Black, 0.06% Native American and 1.65% Asian/Pacific Islander. Compare these to US averages, which are: 70.77% White, 12.80% Black, 0.19% Native American and 5.36% Asian/Pacific Islander. People of Hispanic origin are counted independently of race and make up 3.99% of the current year population. Compared to the US average of 17.65%.

Housing The median housing value was $299,934 in 2016, compared to the US average of $187,181. In 2000, there were 4,149 owner occupied housing units and there were 1,287 renter occupied housing units. The median rent at the time was $549/month.

Employment In 2016, there are 13,815 employees, this is also known as the daytime population. The 2000 Census revealed that 62.50% of employees are employed in white-collar occupations, and 36.51% are employed in blue-collar occupations. In 2016, unemployment is 10.94%. In 2000, the average time traveled to work was 24 minutes.

Geography: 5 Miles

Source: © 2016 Experian

Marcus & Millichap

OFFERING MEMORANDUM

Oceanfront Villas & Retail

Ocean City, MD