UNCLE JULIO’S ABSOLUTE NNN LEASE LOMBARD, ILLINOIS THE OFFERING TH E O FFERI NG Jones Lang LaSalle is pleased to offer for sale the fee simple interest in an Uncle Julio’s Mexican Restaurant (the “Property” or “Asset”), a freestanding single-tenant, triple net (“NNN”) leased property located in Lombard, Illinois. Situated in DuPage County, one of the nation’s most affluent counties, the Village of Lombard is located approximately 20 miles west of the City of Chicago and is convenient to both O’Hare and Midway Airports. Developed for Uncle Julio’s (the “Company” or the “Tenant”) in 2003, the Property features a NNN lease with over eightyears of remaining lease term and two-five year renewal option periods with 8% rental escalations every five years during the primary term and renewal option periods. In addition to being located on one of the area’s highest profile retail thoroughfares, the Property benefits from an immediate surrounding area that is home to an abundance of residential neighborhoods and numerous national retailers as well as Yorktown Center, a 1,300,000 square foot regional mall, containing over 150 stores, 20 restaurants and an 18-screen movie theatre. This offering represents a unique opportunity to acquire an Uncle Julio’s Mexican Restaurant, a triple net leased property located in one of the most desirable retail corridors in the Chicagoland area. 2 UNCLE JULIO’S - OFFERING MEMORANDUM I N VEST M ENT HI GHLI GHTS STRONG RETAIL LOCATION The Property benefits from excellent access and visibility on a heavily traveled thoroughfare with over 52,000 vehicles passing per day. In addition to being surrounded by numerous national retailers, the Property is proximate to Yorktown Center Mall, a regional shopping destination that drives customer traffic to the area. PROPERTY SUMMARY Location: 2360 Fountain Square Drive Lombard, IL 60148 Purchase Price $7,875,000 Cap Rate 6.25% Home to approximately 920,000 residents, DuPage County is the second most populous county in Illinois after Cook County. The affluent communities within the county boast an average household income of $105,000. NOI $492,221 Building Size 10,682 SF Year Built 2003 DESIRABLE LEASE STRUCTURE Parking +/- 200 spaces Triple net lease structure with favorable rental escalations throughout the primary term as well as the renewal option periods. Type of Ownership Fee-Simple Tenant Uncle Julio's of Illinois, Inc. STRONG STORE PERFORMANCE Guarantor Uncle Julio's Corporation Lease Type NNN Lease Term 20 years Lease Expiration 3/31/2023 Renewal Options Two, 5-Year Options SURROUNDING DEMOGRAPHICS The Property features attractive credit metrics as exemplified by strong store sales year after year. In 2014, the Property had a rent to sales ratio of approximately 8%. STRONG RETAIL MARKET FUNDAMENTALS The Property is situated within the East/West Corridor submarket, a densely populated segment of the Chicago retail market with a vacancy rate of 6.9% on approximately 31 million square feet of general retail as of 4Q2014. RENT ROLL PERIOD MONTHLY RENT ANNUAL RENT ANNUAL RENT PSF 4/1/03-3/31/08 $35,166.67 $422,000 $39.51 4/1/08-3/31/13 $37,980.00 $455,760 $42.67 4/1/13-3/31/18* $41,018.42 $492,221 $46.08 4/1/18-3/31/23 $44,299.83 $531,598 $49.77 OPTION PERIODS 4/1/23-3/31/28 $47,843.83 $574,126 $53.75 4/1/28-3/31/33 $51,671.33 $620,056 $58.05 *Current Rent UNCLE JULIO’S - OFFERING MEMORANDUM 3 MARKET OVERVIEW CH IC A GO GENERAL RETA I L MA R K E T The Property sits inside the Chicago retail market (“general retail”). The market is comprised of 11 submarkets totaling 30,866 buildings and over 273 million square feet. Chicago retail market conditions remain strong and continue to thrive. The vacancy rate improved 40 basis points, going from 7.0% in 3Q2014 to 6.6% in 4Q2014, the lowest it has been in the last 28 consecutive quarters. Year-to-date net absorption as of 4Q2014 was positive 3,541,000 square feet. 19 buildings totaling 240,000 square feet were delivered to the market in 4Q2014, with 43 buildings totaling 668,000 square feet still under construction. E A ST /W EST CORRI DOR Comprised of 3,210 buildings totaling nearly 31 million square feet, the East/West Corridor retail submarket is one of Chicago’s largest and most stable submarkets. With a vacancy rate of 6.9% and absorption of 430,000 square feet as of 4Q2014, the submarket has continued to prosper in recent quarters. Located on the highest profile retail corridor in the area along Butterfield Road (Route 56), Uncle Julio’s is well positioned with high visibility from major roads. The Property is adjacent to a major interchange for I-88 and less than one mile from I-355, offering superior accessibility to customers. Lombard serves as a major shopping and dining destination for DuPage County. The Property is proximate to numerous national retailers and restaurants including, but not limited to Target, Starbucks, Dick’s Sporting Goods, Weber Grill, P.F. Changs, McCormick and Schmick’s Seafood, Arhaus Furniture, and DMK Burger Bar. In addition to the numerous national retailers in the area, Yorktown Center Mall, a regional shopping destination, offers over 150 stores, 20 restaurants and a movie theatre, driving customer traffic to the area. GENERAL RETAIL MARKET STATISTICS (AS OF 4Q2014) Total Inventory (SF) Total Vacancy YTD Net Absorption (SF) Quated Rental Rate MARKET SUBMARKET CHICAGO EAST/WEST CORRIDOR 273,000,000 31,000,000 6.60% 6.90% 3,541,000 430,000 $16.69 $13.64 Source: CoStar Major corporations with corporate headquarters in the Easter East/West Corridor include: McDonald’s Corporation, Blistex, Inc., Advocate Healthcare, Dominick’s, GTE Airfone, Swift-Eckridge Meats, Nalco Chemical, Ace Hardware, ServiceMaster, and Federal Signal. 4 UNCLE JULIO’S - OFFERING MEMORANDUM 22nd Street South Highland Avenue 0 ,50 52 rﬁ e utt B ve I-88 Meyers Road I-88 d oa R eld ute o -R 56 sp le hic MALL ay d er UNCLE JULIO’S - OFFERING MEMORANDUM 5 LOCATION OVERVIEW VILLAGE OF LOMBARD OVERVIEW Just a few miles from Chicago, the communities of DuPage County combine the excitement of one of the country’s top metropolitan areas with the comfort, convenience and value of Chicago’s western suburbs. Home to approximately 920,000 residents, DuPage County is the second most populous county in Illinois after Cook County, which borders it to the north and east. Together, DuPage and Cook County account for half of the state’s population. DuPage includes 39 municipalities, 20 of which lie entirely within county limits. One of the nation’s most affluent counties, DuPage is rich in many types of commerce and is second only to Cook in tourism revenue. 6 UNCLE JULIO’S - OFFERING MEMORANDUM LOCATION HIGHLIGHTS • Situated approximately 20 miles west from the City of Chicago, the Property is located in DuPage County, the second most populous county in Illinois after Cook County, which borders it to the north and east. DuPage County is one of the nation’s most affluent counties, boasting an average household income of $105,000. • Located on the highest profile retail corridor in the area, Butterfield Road (Route 56), Uncle Julio’s is well positioned with high visibility from major roads and has nearly 53,000 cars passing by daily. The Property is adjacent to a major interchange for I-88 and less than one mile from I-355, offering superior accessibility to customers. • The Property is situated in a prime retail center, comprised of national retail tenants including Dick’s Sporting Goods, Starbucks, P.F. Changs, Weber Grill and a Hyatt Place Hotel consisting of 150 rooms. • The Asset is adjacent to Yorktown Center Mall, a regional shopping destination, which offers over 150 stores, 20 restaurants and a movie theatre, driving customer traffic to the area. Furthermore, the Property is adjacent to The Westin Lombard Yorktown Center, a 20- story, 500 room full service, green certified hotel. DEMOGRAPHICS 1-MILE RADIUS 3-MILE RADIUS 5-MILE RADIUS 2019 Projection 9,080 87,109 261,987 2014 Estimate 8,774 85,867 257,820 2014 Number of Households 3,985 34,958 99,437 2014-2019 Projected Growth 3.5% 1.4% 1.6% Age 0 - 14 15.4% 16.7% 19.2% Age 15 - 24 9.9% 11.2% 12.2% Age 25 - 44 29.3% 25.3% 23.6% Age 45 - 64 26.3% 27.8% 29.2% Age 65+ 19.1% 19.0% 15.9% Less than $35,000 22.8% 21.7% 20.7% $35,000 - $49,999 14.8% 11.1% 10.3% $50,000 - $74,999 20.4% 18.0% 15.9% $75,000 - $99,999 9.9% 13.5% 12.8% More than $100,000 32.2% 35.6% 40.3% Average Estimated HH Income $89,772 $96,187 $108,582 Median HH Income $62,839 $73,239 $79,976 POPULATION ESTIMATED HH INCOME UNCLE JULIO’S - OFFERING MEMORANDUM 7 LOCATION OVERVIEW CH IC A GO OVER VI EW Often considered the capital of the Midwest, Chicago is the third largest city in the United States with a population of approximately 9.8 million people in the metropolitan area, a population that has grown by nearly 10 percent since 2000. Approximately 84 million people, equivalent to 27 percent of the total population of the United States, live within 500 miles of Chicago. With its central location, diverse economy, cultural and entertainment attractions, top institutions of higher education, professional and amateur sports, and numerous recreational activities, Chicago is one of the most important and influential cities in the world. In many ways Chicago is a microcosm of the Unites States, offering everything that one looks for in cosmopolitan living, along with a hardworking, diverse population in a variety of culture-rich communities. The beautiful city’s economic base is broad, home to more than 400 corporate headquarters, Chicago’s abundance of well-educated human capital EMPLOYMENT BY SECTOR and quality of labor set it apart. The city and its surrounding metro area benefits from the second largest labor pool in the United States 2% 24.8% with approximately 4.3 million workers. It Information Finance/Insurance/ is this dominant and highly educated labor Real Estate 15.2% force that has attracted businesses and Trade fueled the growth of many of Chicago’s leading industries, such as manufacturing, 4.8% 29.4% technology, transportation, health care, Transportation/Utilities Services education and telecommunications to name 8.4% Manufacturing a few. Chicago is a known center for business 12.3% 3.2% and finance, ranked by FORBES as #6 on Government Construction/Mining the list of world’s top financial centers. 8 UNCLE JULIO’S - OFFERING MEMORANDUM CH IC A GO E CONOMY The city of Chicago has one of the world’s largest, most diversified economies, with 4.3 million employees and a gross regional product of nearly $500 billion. The city is widely recognized as one of the most important industrial, financial and cultural centers in the United States, with a strong economic base ranging from capital goods to consumer nondurables to business services. Chicago is home to over 400 major corporate headquarters, including 28 FORTUNE 500 companies and two major global financial exchanges, second only to New York. The city’s extensive urban infrastructure and proximity to suppliers and customers make for an ideal business environment. Chicago has one of the most diverse economies in the United States, which insulates the local markets from economic downturns in any one sector. The city is considered the industrial capital of the Midwest, with a well-established manufacturing sector. Chicago banks hold 40 percent of the total assets in the Midwest, making Chicago the financial center for the central region of the United States. Much of the world’s commodity trade takes place at the multiple exchanges in Chicago. With the merger of the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME), the City is home to the most diverse and extensive global derivatives exchange in the world. Chicago is the global capital of futures trading, illustrating the city’s position as an integral link to international capital markets. Chicago’s economy thrives on a combination of mature and emerging industries. The city consistently ranks in the top five for gross regional product among 350+ U.S. metro areas in the following industries: Business & Financial Services, Manufacturing and Transportation & Distribution. Chicago is also a leader in a number of emerging industries including Biotech, Information Technology and Green Energy. TR AN SP O R TATI ON & ACCE SS The Chicago metropolitan area has a variety of transportation options that allow residents, workers, and visitors to come and go with ease. The Chicago Transit Authority, or CTA, operates the second largest public transportation system in the United States (to New York’s Metropolitan Transportation Authority) and covers the City of Chicago and 40 surrounding suburbs. The CTA operates 24 hours a day and on an average weekday has over 1.6 million riders. When traveling by car, Chicago has a vast system of major highways that connect all suburban communities with downtown Chicago and the surrounding region. Chicago’s train lines, neighborhood bus stops, convenient local roadways, and easy access to major highways provides for an exceptional travel experience throughout the region. QU ALIT Y OF LI FE Chicago is a smart, dynamic city that offers a quality of life unparalleled by any other major metropolis, providing a true community with world class amenities for businesses and people. Described as an “urban value,” Chicago’s cost of living is lower than leading cities including New York, San Francisco, Los Angeles, Washington, D.C., Boston and Philadelphia. Chicago’s wide variety of places to live — from downtown high-rise condos, to traditional bungalows, to row homes — are conveniently linked to business opportunities by a 3,700-square mile public transit system serving over 700 million passengers annually. The city’s unique character can be attributed to its people, its location/infrastructure, its collaborative business and government community and an unprecedented array of cultural activities and destinations. TOP EMPLOYERS COMPANY EMPLOYEES Advocate Health Care System 16,710 JPMorgan Chase & Co. 15,103 University of Chicago 15,029 Walgreen Co. 14,528 AT&T 14,000 Abbot Laboratories 13,000 United Continental Holdings, Inc. 13,000 Wal-Mart Stores, Inc. 12,500 Presence Health 12,159 University of Illinois 9,800 American Airlines 9,264 Northwestern University 9,122 Chicago Transit Authority 8,900 Jewel-Osco Stores 8,900 Archdiocese of Chicago 7,900 Allstate Insurance Co. 7,826 Source: Moody’s UNCLE JULIO’S - OFFERING MEMORANDUM 9 COMPANY OVERVIEW INVESTMENT MODEL J . H . WH IT NEY & CO. OVER VI E W Uncle Julio’s is a current portfolio company of J.H. Whitney and Co. (“JHW”). Established in 1946, J.H. Whitney & Co. was one of the first U.S. firms to pioneer the development of the private equity industry. Today, J.H. Whitney remains privately owned and its main activity is to provide private equity capital for small and middle market companies. J.H. Whitney is currently investing its seventh private equity fund, whose investors include major endowments, leading foundations, pension funds, and high net-worth families. Investment activities are focused on small and middle market buyouts of market leading companies that are poised for growth in a number of industries including consumer products and retail, healthcare services, specialty manufacturing and business services. I N VEST M ENTS JHW invests principally in small and middle market buyouts and recapitalizations of growth-oriented companies based in the U.S. Primarily, JHW seeks companies that have attractive long term growth and profitability characteristics. This investment focus has guided their activities for decades, and JHW believes their dedication to this market niche enhances their ability to generate superior riskadjusted returns for their investors. Target Company Revenue: $50 - $100 million Target Transaction Size: $40 - $500 million Target Equity Investment: $20 - $125 million JHW’s investments include, but are not limited to the following: CONSUMER CAbi Igloo Products Ignite Restaurant Group Pure Fishing SPECIALTY MANUFACTURING Arrowcast, Inc. CJ Foods Stevens Manufacturing Wellman Plastics Manufacturing HEALTHCARE TIDI Products Precision for Medicine United BioSource U.S. Bioservices Corporation BUSINESS SERVICES Authentix FNF Construction EMC Holdings Stauber Performance Ingredients 10 UNCLE JULIO’S - OFFERING MEMORANDUM U N C LE JU LI O’S OV ER V IEW Founded in 1986, Uncle Julio’s is a polished casual dining concept offering high quality border-style Mexican food made from scratch with fresh ingredients. The popularity of Uncle Julio’s grew rapidly, and with it came an instant craze for a drink Uncle Julio’s named The Swirl, a frozen concoction of margarita layered with home-made sangria. Uncle Julio’s is committed to providing the freshest and highest-quality, border-style Mexican food. Using a distinctive hacienda decorating style, Uncle Julio’s created a unique restaurant concept around original recipes that demand only the freshest ingredients. Since its founding, Uncle Julio’s has grown to 21 locations in seven states, positioned around major metropolitan areas including Dallas, Atlanta, Austin, Chicago, Dallas and Washington D.C. The Chicago locations include Chicago (Lincoln Park neighborhood), Lombard/Oakbrook, Skokie (Westfield Old Orchard) and Orland Park. Uncle Julio’s is led by Tom Vogel, who has served as President and CEO since 2013. Vogel, former CEO of Logan’s Roadhouse, has more than 25 years of restaurant industry experience. Under Vogel’s lead, Logan’s Roadhouse expanded from 96 locations to 228, growing the company’s revenues from $275 million to $648 million (source: Dallas Business Journal). Vogel also worked for Orlando-based Darden restaurants for 12 years, serving several senior positions, including senior vice president of operations and vice president of food and beverage. COMPANY INFORMATION Founded in 1986 Headquartered in Irving, TX 21 Restaurants in seven states: Texas, Georgia, Illinois, Maryland, Virginia, Florida and Pennsylvania UNCLE JULIO’S - OFFERING MEMORANDUM 11 PRIMARY SALES CONTACTS: Matthew Berres +1 213 239 6174 [email protected] Dwight Stephenson +1 312 228 2014 [email protected] Daniel Ahlering +1 312 228 3762 [email protected] FINANCING CONTACTS: Brion Haist +1 212 812 6492 [email protected] JONES LANG LASALLE AMERICAS, INC. 515 South Flower Street Suite 1300 Los Angeles, CA 90071 Your Resource for NNN Lease Investment Offerings http://www.jllexchange.com/property/uncle-julios Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof. The material in this Offering Memorandum is conﬁdential, furnished solely for the purpose of considering the “AS IS” acquisition of Uncle Julio’s (the “Property” or “Asset”) located in the State of Illinois. The information is not to be used for any other purpose or to be made available to any other person without the express written consent of Agent on behalf of Owner. The material is based, in part, upon information supplied by Owner and, in part, upon information obtained by Agent from sources they deem to be reliable. Summaries contained herein of any legal documents are not intended to be comprehensive statements of the terms of such documents, but rather only outlines of some of the principal provisions contained therein. No warranty or representation, expressed or implied, is made by Owner, Agent or any of their respective related agents or entities as to the accuracy or completeness of the information contained herein. Prospective investors should make their own investigations, projections and conclusions regarding the Asset. It is expected that prospective investors will conduct their own independent due diligence concerning the Property, including such engineering and environmental inspections as they deem necessary to determine the condition of the Asset and the existence or absence of any potentially hazardous materials used in the construction or maintenance of the Property. No representations, expressed or implied, are made as to the foregoing matters by the Owner, Agent or any of their respective ofﬁcers, employees, afﬁliates and/or agents. Jones Lang LaSalle America, Inc.