Xcelience HQ 4910 Savarese Circle, Tampa, FL

Offering Memorandum

KGK Commercial Real Estate Group

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E x e c u t i v e S u m m a r y

THIS IS A CONFIDENTIAL MEMORANDUM intended solely for your own limited use to determine

whether you wish to express any further interest in the Property.

This confidential memorandum contains brief, selected information pertaining to the business and

affairs of the Property and has been prepared by KGK Commercial Real Estate Group LLC, primarily

from information supplied by the Owner. Although this confidential memorandum has been reviewed

by representatives of the Owner, it does not propose to be all-inclusive, nor does it contain all the

information which a prospective purchaser may require or desire.

Neither the Owner, nor any of its officers, directors, employees or agents, nor KGK Commercial Real

Estate Group, LLC , makes any representation or warranty, expressed or implied, as to the accuracy

or completeness of this confidential memorandum or any of its contents, and no legal liability is

assumed or is to be implied by any of the aforementioned with respect thereto.

Prospective offerors are advised to verify the information independently. The Owner reserves the

right to change the price or any information in this Memorandum, or to withdraw the Property from the

market at any time, without notice.

This confidential memorandum shall not be deemed an indication of the state of affairs of the Property

or the Owner, nor shall it constitute an indication that there has been no change in the business or

affairs of the Property or the Owner since the date of preparation of this memorandum.

By your receipt of this confidential memorandum, you agree that the information contained herein is of

a confidential nature and you will not disclose this memorandum or any part of the contents to any

other person, firm or entity without prior authorization from KGK Commercial Real Estate Group,

LLC .

OFFERING PROCEDURE

Offers should be submitted in the form of a non-binding Letter of Intent and must specify the following:

Price Length of Inspection Period Length of Closing Period Any contingencies Amount of earnest money deposit at execution of a Purchase and Sale Contract, and Amount of additional deposit upon expiration of Inspection Period

For further information please contact:

KGK Commercial Real Estate Group LLC

13801 N Dale Mabry Hwy Suite 250

Tampa, Fl 33618 (813) 968-2700

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E x e c u t i v e S u m m a r y

THE OFFERING

KGK Commercial Real Estate Group LLC is pleased to offer the opportunity to acquire a single

tenant, 71,150 SF office / technology building, fully leased to Xcelience, one of the Country's

fastest growing CDMO biotech companies.

Xcelience was recently acquired by Capsugel and is poised for IPO by its parent, global invest-

ment firm KKR. This will position the company for continued growth in the rapidly expanding

biotech and pharmaceutical industry within Tampa’s burgeoning technology hub.

INVESTMENT HIGHLIGHTS

11+ years of remaining lease term Triple Net lease type Capsugel “parent company” lease guarantee (2015 revenues $1B) Building extensively renovated in 2015 ($3M of Tenant Paid TI’s in 2015) Company staffing has grown 100% in two years One of the leading US firms in the CDMO industry +7.5% stabilized, unlevered cash on cash return

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X c e l i e n t P r o f i l e

XCELIENCE COMPANY PROFILE

“Xcelience delivers efficient, cost-effective and innovative scientific solutions to pharmaceutical

and biotech companies around the world.”

Xcelience, founded in 2006, operates as an international, end-to-end CDMO (contract

development and manufacturing organization), a company contracted by major biotech and

pharmaceutical companies to provide comprehensive services like drug development and

manufacturing.

Xcelience has been recognized as one of the top ten CMO companies in the US. During 2013

the company recorded a 25% increase in staff, followed in 2014 by adding another 100 jobs

and a regional investment of $9M, increasing the capacity of its Florida facilities.

On the heels of this growth, Xcelience was acquired by Capsugel in 2015, the New Jersey-

based drug capsule manufacturer owned by global investment firm Kohlberg Kravis Roberts

(KKR). The guarantor Capsugel ’s EBITDA has gone from a reported $200M in 2011 to $400M

in 2016

Xcelience has five facilities globally, with four located in the Tampa, Florida area and one in

Staffordshire UK.

Global demographics, industry strength and company growth put Xcelience and its parent Co

Capsugel squarely at the intersection of long-term growth prospects and short-term cash flow

protection.

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X c e l i e n t P r o f i l e

INDUSTRY OVERVIEW

The pharmaceutical manufacturing market is growing at an annual rate of 7.5% as of 2015, a

sign of both the overall biotech and pharmaceutical market’s growth, but also their reliance on

3rd party companies like Xcelience to meet their growing needs without deploying their own

resources.

As much as 75% of the market expects their companies to increase expenditures on

contract services (research and manufacturing) over the next five years. According to

PharmSource, only 30 CDMO’s account for more than 50% of the entire industries revenues.

The merger / acquisition and IPO trends experienced throughout the industry is a signal of its

continued growth. During July 2016, Amsterdam-based CDMO Patheon filed for a $625M IPO.

This was two years after it acquired Gallus BioPharmaceuticals and four years after it paid

$255M for softgel manufacturer Banner Pharmacaps in 2012.

Of greater importance is KKR’s (Capsugel’s parent company) consideration of taking the

company to the public markets. After doubling earnings to $400M since 2011, KKR has been

rumored to be exploring a $5B IPO for Xcelience’s parent company.

This industry growth and company consolidation as a sign of strength that support both the

short– and long-term viability of the $1.8 trillion industry and one of the fastest growing, top-

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X c e l i e n t P r o f i l e

INDUSTRY OVERVIEW A LEADING INDICATOR OF FUTURE DEMAND FOR OFFICE

AND TECH/LAB SPACE IS THE FDA DRUG APPROVAL PIPELINE. “FOR EXAMPLE,

RECENTLY BOSTON SAW AN INCREASE IN SPACE DEMAND AS THE FDC APPROVED

SEVEN NEW PRODUCTS FOR MASSACHUSETTS-BASED PHARMACEUTICAL FIRMS.”

An estimated $140B was spent on formulation, development and manufacturing in 2014, of which $40B was outsourced to CDMO like Xcelience. Xcelience is well positioned to capitalize on multiple trends, not the least of which is the consistent growth of the pharmaceutical market driven by global demographics.

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X c e l i e n t P r o f i l e

STRATEGIC ACQUISITIONS

Capsugel, a KKR portfolio company, completed it’s acquisition of Xcelience during January 2016 for an undisclosed amount. This acquisition was completed along with the purchase of Powersize. Combined, this gives Capsugel, a manufacturer and distributor of drug capsules, a complete end-to-end service line, allowing the company to deliver pharmaceuticals to market faster and According to Xcelience CEO Derek Hennecke at the time of acquisition, "By integrating with Powdersize, we will be able to do more in fewer steps," Mr. Hennecke adds. That means faster time to clinic…”. This is followed up by Capsugel Head of Corporate Communications Frank Briamonte, “When combined with Capsugel’s wide array of industry-leading hard capsule technologies, the expanded capabilities of Capsugel Dosage Form Solutions make the company better positioned than ever to partner with customers to deliver innovative, patient-centric dosage forms and solutions.” The Capsugel / Xcelience is one of many firms experiencing strong M&A activity in the industry, a signal of the growth and value prospects of the industry:

In 2015, Piramal Enterprises Limited invested $30.65 million toward acquiring Coldstream Laboratories Inc., a CDMO focused on the development and manufacturing of sterile injectable products and based in Lexington, Kentucky

In 2014, Recipharm completed its acquisition of Milan­based Corvette Pharmaceutical Services Group from the Italian private equity Group LBO Italia Investimenti s.r.l. for EUR 120 million ($160 million)

Recipharm later acquired Flamel Technologies SA facility located in Pessac, France and Lusomedicamenta, a CDMO based in Lisbon, Portugal during 2014

Also in 2014, Siegfried Group agreed to acquire Hameln Pharma, consisting of Hameln Pharmaceuticals GmbH and Hameln RDS GmbH, for approximately CHF 60 million ($62 million)

Consort Medical acquired the CDMO Aesica Pharmaceuticals Limited for £230 million ($373 million) during November 2014

This M&A activity supports the claim that the demand and growth prospects for the industry remain strong and the Capsugel / Xcelience are poised to follow the market trend over the long-term.

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In-place Lease Abstract

Lease Type: Triple Net; exclusive of roof and structure

Start Date: February 2015

End Date: October 2027

Lease Term: 12 years 8 months

Rentable Area: 71,150 SF

Rent Schedule:

* Owner will subsidize the annualized rent to $520,000/yr. until Feb 2018

Escalations: 2.5% annually

Renewal Rent: Greater of $9.41 PSF or 95% of market rent

Renewal Options: Two 5-year extensions with 270 days notice

Notable Clauses: Capsugel (2015 revenues $1B) Lease Guarantee

X c e l i e n c e L e a s e

Year Rent Due $PSF Start

Year 1 140,000 3.94 Feb-15

Year 2* 520,000 7.30 Feb-16

Year 3* 520,000 7.30 Feb-17

Year 4 536,345 7.54 Feb-18

Year 5 549,754 7.73 Feb-19

Year 6 563,498 7.92 Feb-20

Year 7 577,583 8.12 Feb-21

Year 8 592,025 8.32 Feb-22

Year 9 606,826 8.53 Feb-23

Year 10 621,996 8.74 Feb-24

Year 11 637,546 8.96 Feb-25

Year 12 653,485 9.18 Feb-26

Year 13 446,548 9.41 Feb-27

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4910 Savarese Circle, Tampa, FL

Property Type: Office / Technology

Property Tenancy: 100%, single tenant

Property Size: 71,150 SF

Property Office Space: 45,000 SF

Property Tech Space: 26,150 SF

Property Year Built: 1982, complete retrofit in 2005 & 2015

Property Stories: 1

Property Parking Spaces: 110 existing with approved expansion to 232 (3.26 per thousand)

Property Ceiling Height: 15 feet

X c e l i e n t H e a d q u a r t e r s

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4910 Savarese Circle, Tampa, FL

X c e l i e n t H e a d q u a r t e r s

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4910 Savarese Circle, Tampa, FL

Headquarters Floor Plan

X c e l i e n t H e a d q u a r t e r s

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M a r k e t A n a l y s i s

CLOSED SALES COMPARABLES

A survey of closed sales of single-tenant Research and Development, Technology and Engineering

facilities across the United States since January 2014 was performed. Results were segmented into

three categories, based on geography, ranked by date sold. The purpose of the survey was to establish

the cap rate range used to estimate the value of the lease income stream.

CLOSED SALES—FLORIDA

Comp Company Name City, State Building SF Date Sold Cap Rate

1 Gulf Controls Tampa, FL 54,000 Jul-16 8.60%

2 Milner Deerfield Beach, FL 407,616 Dec-14 6.39%

3 Toshiba Fort Lauderdale, FL 46,538 Nov-14 8.17%

4 Parker-Hannifin Naples, FL 131,997 Sep-14 6.74%

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M a r k e t A n a l y s i s

MED/TECH NNN CLOSED SALES—SE US

Comp Company Name City, State Building SF Date Sold Cap Rate

1 Stratix Corporation Norcross, GA 57,995 Feb-16 8.42%

2 Wyle CAS Group Huntsville, AL 120,000 Jul-14 7.70%

3 Charlotte Data Center Charlotte, NC 61,446 Apr-14 7.54%

4 Physicians Choice Lab Svc Rock Hill, SC 103,400 Mar-14 7.10%

5 Reichhold Durham, NC 112,340 Mar-14 8.00%

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M a r k e t A n a l y s i s

CLOSED SALES—US

Comp Company Name City, State Building SF Date Sold Cap Rate

1 Alliant Techsystems Minneapolis, MN 191,336 Nov-14 6.83%

2 Fujirebio Malvern, PA 190,597 Jul-14 7.50%

3 Cobham Electronic Systems San Jose, CA 160,000 Apr-15 7.50%

4 Intermolecular Inc San Jose, CA 146,159 May-15 7.50%

5 Alliant Techsystems Dayton, OH 123,200 Jan-14 7.18%

6 The Scripps Research Institute San Diego, CA 116,556 Jan-14 7.20%

7 Alta Devices Sunnyvale, CA 115,000 Nov-15 5.49%

8 Steward Norwood Hospital Westwood, MA 101,060 Oct-15 7.77%

9 Northrop Grumman Annapolis Junction, MD 97,272 Nov-14 7.60%

10 Del Monte Research Center Walnut Creek, CA 90,268 Jan-15 7.00%

11 Curtiss-Wright Gilbert, AZ 88,065 Oct-15 5.82%

12 Axsys Technologies Nashua, NH 78,000 Jun-15 7.47%

13 Prana Carlsbad, CA 74,774 Apr-15 5.36%

14 Tintri Mountain View Mountain View, CA 67,000 Jul-14 7.22%

15 Morpho Detection Andover, MA 64,200 Jul-15 6.42%

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I n c o m e - B a s e d Va l u a t i o n

5 Year Pro Forma Valuation

In order to estimate the value range for the property, multiple income-based valuations were

performed. The first method to estimating the income-based value of the property is to perform

a discounted cash flow analysis. This analysis entails estimating the future cash flows associ-

ated with the prospective purchase of the property over a specified period of time.

A five year analysis was performed estimating the operating and resale cash flows. Assump-

tions were made regarding vacancy allowance (0.0%), management fee (3.0% of total income)

and market discount rates for single-tenant, specialty properties (9.0%).

Period 1 2 3 4 5 6

Year 2017 2018 2019 2020 2021 2022

Potential Gross Income

Base Rent 394,700 525,357 548,637 562,353 576,410 590,821

Reimbursements 61,297 62,829 64,400 66,010 67,660 69,351

Total Income 455,996 588,187 613,036 628,362 644,070 660,173

Market Vacancy 0 0 0 0 0 0

Effective Gross Income 455,996 588,187 613,036 628,362 644,070 660,173

Operating Expenses

Reimbursable Expenses 61,297 62,829 64,400 66,010 67,660 69,351

Non-Reimbursable Ep 13,680 17,646 18,391 18,851 19,322 19,805

Total Expenses 74,977 80,475 82,791 84,861 86,982 89,157

Net Operating Income 381,020 507,712 530,246 543,502 557,087 571,016

Capitalized Value 7,613,550

Annual Cash Flows 381,020 507,712 530,246 543,502 8,170,638

Estimated Value 6,880,000

Value $PSF 97

Unlevered Cash on Cash % 5.54% 7.38% 7.71% 7.90% 8.10%

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I n c o m e - B a s e d Va l u a t i o n

Disclaimer

Disclaimer: The information contained herein has been garnered from what is deemed to be reliable

sources. However all information and financial data should be independently verified. KGK Commercial

Real Estate Group LLC makes no representations expressed or implied as to the specific accuracy of

the information contained herein.