Red Lobster Offering Memorandum - Real Estate Designer Lobster- 7404 Zac... · Property Name Red Lobster Location 7404 Zac Lentz Pkwy Victoria, TX 77904 ... This Red Lobster is subject

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OFFERING MEMORANDUM

Representative Photo

R e d L o b s t e r7 4 0 4 Z a c L e n t z P a r k w a y V i c t o r i a , T e x a s 7 7 9 0 4

Marcus & Millichap hereby advises all prospectivepurchasers of Net Leased property as follows:

The information contained in this Marketing Brochure hasbeen obtained from sources we believe to be reliable.However, Marcus & Millichap has not and will not verifyany of this information, nor has Marcus & Millichapconducted any investigation regarding these matters.Marcus & Millichap makes no guarantee, warranty orrepresentation whatsoever about the accuracy orcompleteness of any information provided.

As the Buyer of a net leased property, it is the Buyer’sresponsibility to independently confirm the accuracy andcompleteness of all material information beforecompleting any purchase. This Marketing Brochure is nota substitute for your thorough due diligence investigationof this investment opportunity. Marcus & Millichapexpressly denies any obligation to conduct a due diligenceexamination of this Property for Buyer.

Any projections, opinions, assumptions or estimates usedin this Marketing Brochure are for example only and donot represent the current or future performance of thisproperty. The value of a net leased property to youdepends on factors that should be evaluated by you andyour tax, financial and legal advisors.

Buyer and Buyer’s tax, financial, legal, and constructionadvisors should conduct a careful, independentinvestigation of any net leased property to determine toyour satisfaction with the suitability of the property foryour needs.

Like all real estate investments, this investment carriessignificant risks. Buyer and Buyer’s legal and financialadvisors must request and carefully review all legal andfinancial documents related to the property and tenant.While the tenant’s past performance at this or otherlocations is an important consideration, it is not aguarantee of future success. Similarly, the lease rate for

some properties, including newly-constructed facilities ornewly-acquired locations, may be set based on a tenant’sprojected sales with little or no record of actualperformance, or comparable rents for the area. Returnsare not guaranteed; the tenant and any guarantors mayfail to pay the lease rent or property taxes, or may fail tocomply with other material terms of the lease; cash flowmay be interrupted in part or in whole due to market,economic, environmental or other conditions. Regardlessof tenant history and lease guarantees, Buyer isresponsible for conducting his/her own investigation of allmatters affecting the intrinsic value of the property andthe value of any long-term lease, including the likelihoodof locating a replacement tenant if the current tenantshould default or abandon the property, and the leaseterms that Buyer may be able to negotiate with apotential replacement tenant considering the location ofthe property, and Buyer’s legal ability to make alternateuse of the property.

By accepting this Marketing Brochure you agree to releaseMarcus & Millichap Real Estate Investment Services andhold it harmless from any kind of claim, cost, expense, orliability arising out of your investigation and/or purchaseof this net leased property.

CONFIDENTIALITY AND DISCLAIMER

The information contained in the following MarketingBrochure is proprietary and strictly confidential. It isintended to be reviewed only by the party receiving itfrom Marcus & Millichap and should not be made availableto any other person or entity without the written consentof Marcus & Millichap. This Marketing Brochure has beenprepared to provide summary, unverified information toprospective purchasers, and to establish only a preliminarylevel of interest in the subject property. The informationcontained herein is not a substitute for a thorough duediligence investigation. Marcus & Millichap has not madeany investigation, and makes no warranty orrepresentation, with respect to the income or expenses for

the subject property, the future projected financialperformance of the property, the size and square footageof the property and improvements, the presence orabsence of contaminating substances, PCB’s or asbestos,the compliance with State and Federal regulations, thephysical condition of the improvements thereon, or thefinancial condition or business prospects of any tenant, orany tenant’s plans or intentions to continue its occupancyof the subject property. The information contained in thisMarketing Brochure has been obtained from sources webelieve to be reliable; however, Marcus & Millichap hasnot verified, and will not verify, any of the informationcontained herein, nor has Marcus & Millichap conductedany investigation regarding these matters and makes nowarranty or representation whatsoever regarding theaccuracy or completeness of the information provided. Allpotential buyers must take appropriate measures to verifyall of the information set forth herein.

NON-ENDORSEMENT NOTICE

Marcus & Millichap Real Estate Investment Services, Inc.(“M&M”) is not affiliated with, sponsored by, or endorsedby any commercial tenant or lessee identified in thismarketing package. The presence of any corporation’slogo or name is not intended to indicate or implyaffiliation with, or sponsorship or endorsement by, saidcorporation of M&M, its affiliates or subsidiaries, or anyagent, product, service, or commercial listing of M&M,and is solely included for the purpose of providing tenantlessee information about this listing to prospectivecustomers.

ALL PROPERTY SHOWINGS ARE BY APPOINTMENTONLY. PLEASE CONSULT YOUR MARCUS & MILLICHAPAGENT FOR MORE DETAILS.

CONFIDENTIALITY AND DISCLAIMER

INFORMATION ABOUT BROKERAGE SERVICES

Table of Contents

I. Investment Overview II. Pricing and Financial Analysis III. Property Overview IV. DemographicsInvestment Overview Financial Overview Location Overview Demographic Report

Tenant Overview Aerial Photo

Property Photo

Surrounding Property Photos

Local Map

Regional Map

TABLE OF CONTENTS

Property Name Red Lobster

Location7404 Zac Lentz Pkwy Victoria,

TX 77904

Price $4,303,540

CAP Rate 5.85%

NOI $251,757*

Price Per SF $551

Building Size 7,809 sq ft

Lot Size 1.18 acres

Date of Remodel July-2012

*Priced off of 2017 Rent Increase

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 theinformation 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 InvestmentServices is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2013 Marcus & Millichap 5

Long-Term Triple-Net Lease | Above Market Lease Term

This Red Lobster is subject to a brand new 25-year absolute triple-net(NNN) lease, with 22 years remaining.

Corporate Guarantor | 704 Locations in the US & Canada

The lease is subject to a corporate guarantee, adding additional securitythroughout the term of the lease, through 704 corporate locations.

Attractive Rental Increases & Renewal Options

The rent will increase by two percent annually, including through the four,five year tenant renewal options, providing investors with a stronginflation hedge.

Executive Summary | Investment Highlights

Marcus & Millichap is pleased to present the exclusive listing for RedLobster located at 7404 Zac Lentz Parkway in Victoria, Texas. Theproperty is roughly 7,809 square feet and is situated on approximately1.18 acres of land.

This Red Lobster is subject to a 25-year triple-net (NNN) lease, withroughly 22 years remaining on the lease. Current annual rent is$251,757. The rent is scheduled to increase by two percent annually,including through the four, five year tenant renewal options.

Red Lobster is the largest seafood restaurant concept in the world andis an iconic full service brand with broad demographic appeal andsignificant advertising budget. Red Lobster is led by an experiencedmanagement team with a history of success leading the brand(average27+ years experience across executive team). The company generates$2.5 billion in revenue and is the 5th largest causal dining concept inNorth America. Red Lobster was recently acquired by Golden GateCapital.

Investment Overview

6

Executive Summary

Tenant Overview

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 theinformation 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 InvestmentServices is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2013 Marcus & Millichap

• Red Lobster is the largest seafood restaurant concept in theworld and is an iconic full service brand with broaddemographic appeal and a significant advertising budget (2nd

largest in casual dining).

• The Company was founded in 1968 and currently operates704 restaurants throughout the United States and Canadaand has 43 franchised restaurants in international markets.

• Red Lobster is led by an experienced management team witha history of success leading the brand (average 27+ yearsexperience across executive team).

• The company generates $2.5B in revenue and is the 6th

largest casual dining concept in North America.

• On July 28th, 2014, Golden Gate Capital (“GGC”) acquiredRed Lobster from Darden Restaurants.

• Red Lobster is now an independently owned company,completely separate from Darden Restaurants.

• Red Lobster is well capitalized with >$200M net worth and>$200M of liquidity.

• Golden Gate Capital has a long, successful track record andsignificant experience with multi-unit restaurant and retailbusinesses.

The Transaction

7

Executive Summary

Tenant Overview


OUR HISTORY

FRESH IS IN OUR FOOD

Each day, you’ll find an updated selection of fresh fish onour Today’s Fresh Fish menu, not to mention live Mainelobster, freshly baked Cheddar Bay Biscuits™, crisp saladsand a host of fresh seafood recipes waiting to beexplored.

FRESH IS IN OUR KNOWLEDGE

No one knows seafood better than we do. As globalseafood buyers, we have employees stationedthroughout the world who inspect our seafood themoment it comes out of the water. They ensure it meetsstandards that are second to none. Then, the renownedchefs at our culinary center deliver the fresh expertisethat turns it all into something truly special.

FRESH IS IN OUR DEDICATION

We hold ourselves to the highest standards for service,quality and a welcoming atmosphere. And we’re focusedon doing what’s right – for our employees, in ourcommunities and in the world.

FRESH IS IN OUR COMMITMENT

You deserve the freshest food and thinking. So every timeyou visit one of our seafood restaurants or our onlineseafood store, you’ll find an uncommon commitment todeliver the best of the sea with fresh energy and freshideas that we hope will make you want to come backagain and again.

We invite you to come in and experience our commitment to quality for yourself. Whether it’s choosing your favorite fresh fish from our “Today’s

Fresh Fish” menu, or selecting your favorite seafood to be prepared over our wood-fired grill, Red Lobster is the place you can enjoy fresh, delicious

seafood now and for generations.

8

Executive Summary

Tenant Overview


Red Lobster Timeline 1968

Bill Darden opens the first Red Lobster in Lakeland, Florida1970

General Mills acquires Red Lobster and rapidly expands nationally 1983

Our 1st Canadian restaurant opens in Ontario

Out Lobsterfest® promotion begins, giving guests the best variety of lobster anywhere

1984

We introduce our famous and delicious Cheddar Bay Biscuits®

1988

1989

We operate 450 US and 55 Canadian restaurants

We introduce "Walt's Favorite Shrimp", named after one of our earliest employees

1996

2003

We celebrate our 35th anniversary of serving fresh, delicious seafood 2004

Endless Shrimp® is introduced, and becomes an annual guest-favorite promotion2006

"Today's Fresh Fish" gives guests a daily selection of national and local fresh fish favorites 2008

We introduce Wood-Fire Grills and Certified Grill Masters in every restaurant2013

We celebrate our 45th anniversary and operate more than 700 locations worldwide 2014

Acquisition by Golden Gate Capital (“GGC”)

9

Executive Summary

Tenant Overview


Strong Market Position Significant Scale With Broad Geographic Reach

~50% Share in Seafood Casual Dining 6th Largest Casual Dining Concept in the US

• Red Lobster is the largest seafood restaurant concept in the world with over $2.5 billion in annual sales and 704 restaurants.

- $2.5B LTM Sales.

- $3.5M AUV.

• The Company is the category killer in the seafood casual dining space, holding almost 50% market share.

- Largest share of any restaurant concept in any segment.

• 6th largest overall casual dining concept in the US.

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Sales

10

Executive Summary

Tenant Overview


Before After

Iconic Brand With Unparalleled Customer Loyalty

Indispensability vs. Peers

• Red Lobster has strong consumer appeal and broad usage across multiple dining out occasions, including high-crave, healthier “good for you” and special meal occasions.

• The brand has a strong foundation of loyal guests, who visit 1-2 times per month and account for more than 50% of sales.

• Red Lobster is the clear leader in casual dining seafood, and the most indispensable brand among major casual dining concepts, further indicating strong consumer loyalty.

• Over $320 million invested in remodels covering >90% of restaurants over the past 7 years.

• $1.4 billion in overall capital expenditure investment over the past 10 years.

• New Bar Harbor format has strong appeal across customer base.

• 100% of restaurants are cash flow positive.

Indispensability (How difficult it would be for me to ‘give up’ ever going there again ) - % very difficult (10 out of 10) shown

Healthy and Recently Remodeled Restaurant Base

New Bar Harbor Format

11

Executive Summary

Tenant Overview


Red Lobster is led by an experienced management team with prior success leading the company.

Name

Title

Industry Tenure

(Darden)Biography

Kim

Lopdrup

CEO

29

(13)

• Recently served as President of Specialty Restaurant Group and New Business – high growth area of strong brands for Darden

• Served as President of Red Lobster from 2005 to 2011, a period of rapidly-rising guest satisfaction and record profitability

• Prior to joining Darden, served as EVP and COO of North America for Burger King and CEO of the International Division of Dunkin’ Brands

• BBA degree, College of William and Mary; MBA with distinction, Harvard University

Salli Setta

President

26

(26)

• Became President of Red Lobster in July 2013

• Prior to becoming President, served as Red Lobster’s EVP of Marketing for 8 years

• From 1990 to 2005, held various management positions at Olive Garden, during which time she was instrumental to the brand’s turnaround

• Named Restaurant Business’ “Menu Strategist of the Year” in 2003

• Bachelor’s degree, University of Central Florida; MBA, Florida Institute of Technology

Bill Lambert

Chief

Financial

Officer

10

(10)

• Bill served as CFO of LongHorn Steakhouse since 2010

• Prior to leading LongHorn, Bill served as CFO of Red Lobster from 2006 through 2010

• Previously, Bill spent 21 years with Macy’s

• BS, Duke University; MBA, University of Michigan

Chip Wade

EVP,

Operations

28

(14)

• Served as EVP of Operations for Red Lobster since 2012

• Served as COO of Legal Sea Foods from 2004-2006

• Bachelor’s degree, Widener University; MBA, University of Texas

Tom Gathers

Chief People Officer

36

(27)

• Recently served as SVP HR for Specialty Restaurant Group and LongHorn Steakhouse

• Served as EVP of HR for RARE Hospitality International from 1998 to 2007

• Bachelor’s degree, Indiana University of Pennsylvania; Master’s degree, University of Miami

Horace Dawson

EVP,

General Counsel

19

(12)

• Recently served as VP and Division General Counsel Employment and Litigation of Darden

• Bachelor’s degree, JD and MBA, Harvard University

12

Executive Summary

Private Equity Sponsor


Select Restaurant and Retail Investments

• Golden Gate Capital (GGC) is a San Francisco-based Private Equity firm with over $15 billion of capital under management.

• GGC has been one of the most active acquirers of multi-unit restaurant and retail companies.

- Over the past 10 years, GGC has invested in restaurant and retail companies with annual revenues in excess of $15 billion.

• GGC’s investors include leading educational endowments, non-profit foundations, and selected entrepreneurs and managers.

• Investment approach is to partner with strong management teams to acquire strong, established brands with an opportunity to grow earnings through better execution, productivity improvements and unit growth.

• Excellent track record with acquiring and growing divisions of corporations.

13

Annualized Operating Data

Financial Analysis

Financial Offering Summary


Property Name Red Lobster

Property Type Net Leased Restaurant

Ownership Private

Private Equity Sponsor

Tenant Red Lobster Hospitality, LLC

Guarantor Red Lobster Intermediate Holdings, LLC

Lease Term 25 Years

Lease Commencement 7/28/2014

Lease Expiration 7/31/2039

Lease Term Remaining 22 Years

Lease Type Triple-Net (NNN)

Roof & Structure Tenant Responsible

Options to Renew Four, Five Year Option Periods

Rental Increases Two Percent Annually

Rent Increases Annual Rent Monthly Rent

Year 4 $251,757 $20,980

Year 5 $256,792 $21,399

Year 6 $261,928 $21,827

Year 7 $267,167 $22,264

Year 8 $272,510 $22,709

Year 9 $277,960 $23,163

Year 10 $283,519 $23,627

Year 11 $289,190 $24,099

Year 12 $294,974 $24,581

Year 13 $300,873 $25,073

Year 14 $306,890 $25,574

Year 15 $313,028 $26,086

Year 16 $319,289 $26,607

Year 17 $325,675 $27,140

Year 18 $332,188 $27,682

Year 19 $338,832 $28,236

Year 20 $345,609 $28,801

Year 21 $352,521 $29,377

Year 22 $359,571 $29,964

Year 23 $366,763 $30,564

Year 24 $374,098 $31,175

Year 25 $381,580 $31,798

Annual Rent $251,757*

CAP Rate 5.85%

Price $4,303,540

*Priced off of 2017 Rent Increase

This Red Lobster property is located at 7404 Zac Lentz Parkway inVictoria, Texas. Victoria is located 30 miles inland from the Gulf ofMexico. The city is a regional hub for a seven-county area known as the"Golden Crescent", and serves a retail trade area of over 250,000 people.Victoria is known as "The Crossroads" because of its location within atwo-hour drive of Corpus Christi, Houston, San Antonio, and Austin.

Victoria is a densely populated City. There are approximately 35,442people within a three-mile radius of this property and more than 61,768people within a five-mile radius. The population in the area is stable. In2014, the median household income in the area was $51,033 ,which is insync with the Entire US average of $51,972.The property is situated onZac Lentz Parkway, which experience an average daily count of 18,231vehicles. North Navarro Street is adjacent to Zac Lentz Parkway andbrings in an additional 28,567 vehicles to the area.

The subject property is situated in an ideal location. It is within walkingdistance from the Victoria Mall. This mall contains over 70 stores and isanchored by Sears, JCPenney, Dillard’s and Bealls. There are also otherNationally recognized retailers in the immediate area. These includeWalmart, Target, The Home Depot, Kohl’s, Lowe’s and Sam’s Club. Foodretailers are also very strong in the area. Some nationally recognizedfood retailers located in close proximity to this Red Lobster site includeBuffalo Wild Wings, Chick-fil-A, Olive Garden and Taco Bell amongstothers. The area also has a strong presence of hotel accommodationbusinesses including Super 8, Best Western, Days Inn, Hampton Inn, LaQuinta and Marriot Courtyard amongst others.

Victoria's economy is a mix of education, health, retail, agriculture, andindustry. Its access to major highways, the Victoria Regional Airport,railway terminals, the shallow draft Port of Victoria, and the deep waterPort of Port Lavaca-Point Comfort help to sustain a healthyenvironment for business. Major industrial employers in the regioninclude Formosa Plastics Corp, Inteplast Group, Dow, Invista, and Alcoa.

❖ Strong Traffic Counts in the Area: Zac Lentz Parkway and N.

Navarro St. | 18,231 and 28,567 Vehicles Daily.

❖ Dense Retail Corridor with Major National Brands: Walmart,

Sears, Lowe’s, Target, JCPenney

❖ Dense Population: 35,442 People Within Three Miles and 61,768

Within Five Miles of Property

❖ Victoria is Within a Two-Hour Drive of Corpus Christi, Houston,

San Antonio and Austin

14

Property Overview

Location Highlights | Property Description


ADTC 18,231

ADTC 28,567

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Aerial Photo | Surrounding Area


Property Overview

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Property Overview

Property Photo


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Property Overview

Surrounding Area Photos


18

Property Overview

Local Map


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Property Overview

Regional Map


PopulationIn 2014, the population in your selected geography is 61,767. The population haschanged by 9.75% since 2000. It is estimated that the population in your area will be63,081 five years from now, which represents a change of 2.12% from the current year.The current population is 48.11% male and 51.88% female. The median age of thepopulation in your area is 34.9, compare this to the Entire US average which is 37.3. Thepopulation density in your area is 787.18 people per square mile.

IncomeIn 2014, the median household income for your selected geography is $51,033,compare this to the Entire US average which is currently $51,972. The medianhousehold income for your area has changed by 31.93% since 2000. It is estimated thatthe median household income in your area will be $61,172 five years from now, whichrepresents a change of 19.86% from the current year.

The current year per capita income in your area is $26,316, compare this to the EntireUS average, which is $28,599. The current year average household income in your areais $68,488, compare this to the Entire US average which is $74,533.

EmploymentIn 2014, there are 27,360 employees in your selected area, this is also known as thedaytime population. The 2000 Census revealed that 58.99% of employees are employedin white-collar occupations in this geography, and 40.96% are employed in blue-collaroccupations. In 2014, unemployment in this area is 4.75%. In 2000, the average timetraveled to work was 20.8 minutes.

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Demographics

Demographic Summary Report


1-Mile 3-Mile 5-Mile

2010 5,355 34,025 58,810

2014 5,414 35,442 61,768

2019 5,664 36,573 63,081

POPULATION

1-Mile 3-Mile 5-Mile

Average $89,630 $76,777 $68,488

Median $65,857 $59,240 $51,033

2014 HOUSEHOLD INCOMES

Employer #Of Employees

Formosa Plastics Group 2,595

Victoria ISD 2,163

The Inteplast Group 2,300

TOP EMPLOYERS IN VICTORIA

Offering Memorandum | 7404 Zac Lentz Parkway, Victoria, TX 77904

Documents

Red Lobster Offering Memorandum - Real Estate Designer Lobster- 7404 Zac... · Property Name Red Lobster Location 7404 Zac Lentz Pkwy Victoria, TX 77904 ... This Red Lobster is subject