North Andover Mills Offering Memorandum Secure

NORTH ANDOVER, MASSACHUSETTS

Confidential Offering Memorandum

495

WEST MILL

EAST MILL

NORTH ANDOVER, MASSACHUSETTS

Executive Summary 4

Investment Highlights 6

Property Overview & Investment Strategies 12

Market Overview 18

Existing Owner Biography 30

Ideal Partner 33

Selection Process 34

THE AVISON YOUNG CAPITAL MARKETS TEAM:

Michael Smith Scott Jamieson David Eyzenberg
Principal Principal Principal
617.575.2830 617.575.2831 212.729.4329
[email protected] [email protected] [email protected]

Brandon Dickason Derek Opert FOR LEASING GUIDANCE, PLEASE CONTACT:

Vice President Financial Analyst Keith Gurtler
Principal
617.575.2832 617.758.8263 617.275.4424
[email protected]
[email protected] [email protected]

EXECUTIVE SUMMARY

Avison Young, as exclusive advisor to RCG North Andover Mills LLC and RCG West Mill NA LLC, is pleased to
offer, on a select basis, a 50% to 80% equity interest in a partnership in the North Andover Mills.
RCG North Andover Mills LLC (Owner of“East Mill”) and RCG West Mill NA LLC (Owner of“West Mill”), are each
a single-purpose investment affiliate of RCG LLC, a Massachusetts limited liability company that manages
over 500 residential units and nearly one million SF of commercial space for its affiliate owners. The current
market value of the North Andover Mills is $60 million, not including existing working capital cash. The
current debt on the assets is $25.4 million, resulting in current equity of approximately $34.6 million. The
current equity investment offered is between $17.3 million and $27.7 million based on a range
of 50% to 80% of equity. The new Partner would also be expected to provide sufficient funds to pay for
its share of the future equity needs of the North Andover Mills. The future equity needs include multiple
value creation strategies including improvements of the existing buildings and ground-up development of
multi-unit housing or commercial buildings, including parking garages. At the time a Partner closes on its
investment, the Owners of East and West Mills will consolidate their holdings into a single LLC. The current
Owners expect to close the equity transaction with the new Partner (Partner Transaction) during the second
quarter of 2015.

4 | EXECUTIVE SUMMARY

Overview

East Mill and West Mill, collectively the North Andover the parcels into a single Property at the time of the
Mills, are two (2) mixed-use mill campuses located closing of the Partner Transaction.
across from each other on the east and west sides
of High Street in North Andover, MA. The historic In aggregate, the North Andover Mills include
brick & beam mill buildings have been (East Mill) and approximately 39.3 acres of land and currently 618,000
are being (West Mill) fully re-developed into first- gross SF of historic mill buildings. Primarily converted
class office, retail and residential space that feature to modern office space, the properties also include a
extraordinary ceiling heights, exposed duct work and number of wellness businesses and eateries as well
efficient floor plans. With buildings dating back to the as 27 loft-style residential apartments, 1,500 parking
1860’s, the Mills were the home of the Davis & Furber spaces, and preliminary permits to build 137 additional
Machine Shop during the height of the wool industry residential units in new buildings. In addition, the
from the late 1800’s until the 1980’s. Originally a single Owners plan to acquire permits for the demolition
property, the Mills were split during the 1990’s into of some obsolete existing space and construction of
two (2) parcels and sold to two (2) different owners. apartments in existing and new buildings that could
It is the intent of the current Owners to combine include as many as 346 residential additional units.

PROPERTY TYPE ADDRESS YEAR BUILT/RENOVATED

Mixed-Use Brick & Beam Office, 1 & 21 High Street Built between 1860-1992
North Andover, MA
Retail, Restaurants, Residential Renovated between 1985-2014

SITE SIZE PARKING SPACES
39.3 ACRES APPROXIMATELY

1,500 SPACES

ZONING

Primarily Industrial S District with some R-4 Residential and
General Business. Also subject to Downtown Overlay, Planned
Development District Overlay, and Machine Shop Village
Neighborhood Conservation District

EXECUTIVE SUMMARY |5

INVESTMENT HIGHLIGHTS

CASH FLOW WITH SIGNIFICANT UPSIDE
EXPANDING DEVELOPMENT POTENTIAL
HIGHLY SOUGHT RENOVATED BRICK & BEAM
STRATEGIC LOCATION
EXPERIENCED & SUCCESSFUL OPERATOR

6 | INVESTMENT HIGHLIGHTS

INVESTMENT HIGHLIGHTS |7

INVESTMENT HIGHLIGHTS

At the time of the closing of the Partner Transaction, for the 12-month period beginning July 1, 2015, the
Owners estimate that the East Mill will have a Net Operating Income (NOI) of approximately $1.9 million (the
current NOI is approximately $1.8 million) and the West Mill will have a pro-forma NOI loss of approximately
$194,000, for an aggregate property NOI of approximately $1.7 million. For the 12-month period beginning
July 1, 2016, the Owners estimate the East Mill will have a slightly higher NOI of $2.0 million and the West
Mill, with approximately 200,000 to 220,000 SF rented (including 42 loft style apartments), will have a NOI
of approximately $1.3 million, for a total NOI of $3.3 million. For the 12-month period beginning July 1,
2017, the Owners estimate the East Mill NOI will increase to $2.2 million and the West Mill, with nearly all
340,000 SF rented, will have an NOI of $3.4 million, for a total aggregate property NOI of $5.6 million.

In addition to the current preliminary permits to build
137 new residential units on the East Mill campus (in
addition to 27 units existing already), the Owners are
actively seeking permits on the West Mill campus for
additional mixed-uses and as many as another 304
residential units beyond the planned 42 redeveloped
units in the West Mill discussed on the previous page,

for a future total of 510 residential units at
the North Andover Mills. The Owners anticipate

having these permits in place at the time of the closing of
the Partner Transaction. It is probable that the units will
be built in 2-4 phases to minimize equity requirements
and match market demand.

8 | INVESTMENT HIGHLIGHTS

HIGHLY SOUGHT RENOVATED
BRICK & BEAM

With the belief that creative environments foster The North Andover Mills are the former home of
innovative thinking and increased productivity, the the Davis & Furber Machine Shops, the company
demand for brick & beam office space has surged which put North Andover on the map as the
in the Boston area over the past decade. Driving leading supplier of looms and spinning equipment
the demand are not just innovation companies and to the textile industry during the 1800’s. Davis &
technology firms thriving in the current economy, Furber was founded in 1828 and later moved to the
but also traditionally stable firms like insurance North Andover Mills next to Cochichewick River in
companies and law practices that are seeking North Andover’s downtown. After over 150 years of
this open, innovative, and creative space with operations, Davis & Furber closed its doors in the
“character.” The escalating appetite for this sought- 1980’s and the North Andover Mills were converted
after product type has been one of the key drivers to offices for a series of high technology companies.
behind the recent success of areas such as the RCG acquired the East Mill in 2007 and managed a
Innovation District of Boston and Kendall Square comprehensive renovation that achieved federal
in Cambridge, where vacancy rates have been cut historic preservation accreditation and filled the
in half over recent years and rents in some cases largely empty campus with small businesses,
are eclipsing those of Class “A” towers. While there restaurants and apartments. RCG acquired the
is significant Brick & Beam product in Boston and West Mill campus in early 2014 after the previous
Cambridge, there are only a limited number of high- owners failed to renew leases with their major
end suburban mill buildings like the North Andover tenants--Schneider Electric and Converse.
Mills that feature this highly coveted product type.

1924 Aerial Photo of Davis & Fuber Machine Shop |9

INVESTMENT HIGHLIGHTS

Approximately one (1) mile from Interstate 495 Massachusetts and Southern New Hampshire
and 1.7 miles from the Lawrence Commuter Rail while escaping the high costs of doing business
Stop, the North Andover Mills property is well in Downtown Boston or on the busy Route 128
positioned to capitalize on an improving market beltway. Local amenities are numerous including
as North Andover and the 495 North submarket lodging alternatives, restaurants, and shopping.
strengthen. With both Route 495 and Interstate North Andover retail centers in close proximity to
93 as transportation backbones, the region has the North Andover Mills include the Eaglewood
excellent transportation access and the ability to Shops, North Andover Mall, and the First & Main
draw from the highly-educated workforces of both Marketplace.

SALEM, NH 495

10 MILES

LAWRENCE MUNICIPAL AIRPORT

93

4 MILES

downtown
north andover

BOSTON

27 MILES

10 | INVESTMENT HIGHLIGHTS

The current operator and affiliate of the Owners, management and approximately $10 million
RCG LLC, manages over 500 residential units in capital investment in the Mills, commercial
and nearly one million SF of commercial space, occupancy in the East Mill buildings has
mostly in the Greater Boston area, for its affiliate increased from 25 to 90 percent since acquisition.
owners. The portfolio of RCG properties currently The Owners also are actively attempting to re-
has a market value of approximately $220 million lease the former Schneider space that become
with $117 million in equity. The Owner purchased available in the second quarter of 2014 and the
the North Andover Mills after having previously prospective Converse space that will become
achieved success redeveloping mill buildings available in the second quarter of 2015.
elsewhere in Massachusetts. As a result of shrewd

INVESTMENT HIGHLIGHTS | 11

PROPERTY OVERVIEW & INVESTMENT STRATEGIES

Located at 21 High Street, East Mill is situated on earned out as of March 31, 2015. The acquisition and
an approximately 23 acre site and is improved with construction was financed by Wells Fargo Bank. In
235,000 SF in mill buildings that feature newly February 2014, East Mill was refinanced for $18 million
renovated brick & beam office, retail and residential by Belmont Savings Bank.
space. On January 18, 2007, RCG North Andover Mills
LLC acquired East Mill for $9 million, which at the time In summary, East Mill is a stabilized and diversified
of purchase was approximately 75% vacant.The Owner mixed-use asset with approximately 50 commercial
worked closely with Town of North Andover officials to and 27 residential tenants and a pro-forma net
develop a market-based mixed-use plan and received operating income (NOI) of approximately $1.8 million
permits that allowed it to reposition the property. currently, and $1.9 million projected for the 12-month
The Owner made expenditures of approximately period beginning July 1, 2015. The Owner’s current
$10 million to upgrade the buildings, change the plan is to continue value-add opportunities: seeking
use from industrial/office to a combination of office, higher rents upon turnover of existing leases, many
retail, restaurant (currently three) and residential uses, of which were signed during the recession period
and decreased the mill’s vacancy to less than 5% by of 2008 to 2010, and developing 137 units in new
early 2014. The Owner has also received Federal and structures that have been preliminarily permitted.
State historic renovation tax credits that will be fully

12 | PROPERTY OVERVIEW

ADDRESS

21 High Street
North Andover, MA

YEAR BUILT/RENOVATED

1860-1918/2007-2014

PROPERTY TYPE
Mixed-Use Brick & Beam Office,

Retail and Residential

SQUARE FEET OFFICE

171,805 (73%)

SQUARE FEET RETAIL&RESTAURANTS

36,470 (16%)

SQUARE FEETRESIDENTIAL

26,725 (11%)

TOTAL SQUARE FEET

235,000 SF

COMMERCIAL TENANTS OCCUPANCY
RESIDENTIAL UNITS OCCUPANCY

FIVE STORIES
22.6 ACRES

ZONING

Industrial S District & R-4 Residential

(Also in Downtown Overlay, PDD Overlay,
and Machine Shop Village Neighborhood
Conservation District)

PROPERTY OVERVIEW | 13

PROPERTY OVERVIEW & INVESTMENT STRATEGIES

Located on the west side of High Street at 1 High uses, including small and mid-size offices, retail,
Street, West Mill sits on approximately 17 acres of restaurants and residential (42 loft-style apartments
land and is improved with a 383,000 SF brick & beam are currently being permitted). Concurrent with
mill building. RCG West Mill NA LLC acquired the mill repurposing the former Schneider space, the Owner
campus for $15 million on February 4, 2014. The is seeking smaller tenants of approximately 20,000
Owner secured acquisition financing from Rockland square feet each, larger tenants, or even a single
Trust in the amount of $7.5 million. At the time of the tenant, for the 155,000 square feet now occupied by
purchase, West Mill was 100% occupied by Schneider Converse. Finally, the Owner plans to develop about
Electric and Converse. However, it was known prior 346 residential units on the West Mill property in
to the purchase that both tenants’ departures were existing and new structures. The Owner is working
imminent--Schneider at the end of March 2014 to closely with officials from the town of North Andover
a new US corporate headquarters in Andover and to finalize and execute its mixed-use plan.
Converse at the end of March 2015 to a new corporate
headquarters in Boston. The Owner’s current plan, The Owner estimates that approximately 60,000 to
similar to the work done at East Mill, is to repurpose 100,000 square feet will be rented; that about 17
the existing Schneider buildings into mixed- apartments in the Schneider buildings will be near

14 | PROPERTY OVERVIEW

completion and available for rental by September 1, ADDRESS
2015; and that there will be a pro-forma NOI loss of
about $194,000 for the 12-month period beginning 1 High Street
July 1, 2015. The Owner also estimates that North Andover, MA
approximately 200,000 to 220,000 square feet will
be rented (including the 42 loft-style apartments) YEAR BUILT/RENOVATED
with a pro-forma positive NOI of about $1.3 million
for the 12-month period beginning July 1, 2016. 1885-1990/1985-2014
In addition, the Owner estimates that nearly all
340,000 square feet of the remaining existing PROPERTY TYPE
buildings will be rented (including the 42 loft- Mixed-Use Brick & Beam Office,
style apartments) with a stabilized pro-forma NOI
gain of about $3.4 million for the 12-month period R&D, Manufacturing
beginning July 1, 2017. The capital costs related to
leasehold improvements, brokers’ fees and capital SQUARE FEET OFFICE
improvements related to this repositioning of space
in the existing buildings are estimated to be about 383,000 (100%)
$11.1 million. These projections do not include any
revenues associated with new construction. SQUARE FEET RETAIL&RESTAURANTS

FUTURE DEVELOPMENTPOTENTIAL 0 (0%)

In addition to the 42 loft-style apartments being SQUARE FEETRESIDENTIAL
converted from existing office space, ownership
is expecting to have special permit rights to build 0 (0%)
up to 304 new construction residential units on
the West Mill campus at the time of the Partner TOTAL SQUARE FEET
Transaction, for a total of 346 new units on the
West Mill campus. By combining the parcels into a 383,000 SF
single Property, the Owners can eliminate the cross-
easements on the parcels, particularly at West Mill, FIVE STORIES
which have previously been an obstacle for new
development. Ownership has not yet estimated 16.7 ACRES
the investment costs and pro-forma income related
to the approximately 483 new residential units that ZONING
they expect to permit and build on both campuses
during the course of the Project and are shown on Primarily Industrial S District with some R-4
the following page. Residential and General Business. Also subject to
Downtown Overlay, Planned Development District
Overlay, and Machine Shop Village Neighborhood
Conservation District

PROPERTY OVERVIEW | 15

DAVIS & FURBER MASTER PLAN – 10/8/14 Closing – Summer 2015 Future Development
Existing – Fall 2014 • 40+/- acres total land area
• 40+/- acres total land area • 575,000+/- sq. ft. existing buildings*
• 618,000+/- sq. ft. existing buildings* • 27 loft-style apartments
• 27 loft-style apartments • 17 loft-style apartments near completion
Proposed Final Build Out • 25 loft-style apartments permitted or
• 1,013,000 sq. ft. proposed buildings*
• 510 dwelling units under construction

* Does not include parking structures

Green

Parking
Behind

42 Loft-Style Apts. Apartments Parking Parking
over garage Behind Behind

Future Retail East Mill (existing PDD)
• 235,000 sq. ft. existing mixed-use
West Mill
buildings
Green Mixed-use • 27 existing loft-style apartments
Building • 137 new DU permitted
West Mill (Parcel 1)
Existing Retail • 340,000 sq. ft. existing buildings to

East Mill remain
• 425 new parking spaces (surface and
27 Loft-Style Apts.
garage)
137 dwelling units approved • 42 new loft-style apartments
under prior PDD • 60 new mid-rise apartments over

garage
• 4 new townhouses
Future Development
• 39 new townhouses
• 51 new apartments over

commercial/mixed use
• 150 new multifamily apartments

16 | PROPERTY OVERVIEW

Residential Summary

Existing Units East Mill West Mill Total

27 0 27
485
Proposed Units to be Developed 137* 346** 510

Proposed Future Total Units 164 346

* Preliminary permits for the 137 future East Mill units have already been obtained
** 42 of the future West Mill units will be converted from existing office space

PROPERTY OVERVIEW | 17

MARKET OVERVIEW

DEMOGRAPHIC DRIVERS NORTH ANDOVER MASSACHUSETTS

POPULATION 28,352 6,547,629

POPULATIONCHANGESINCE2000 4.2% 3.1%

MEDIAN HOUSEHOLD INCOME $95,730 $65,339

UNEMPLOYED 5.2% 5.6%

AVERAGE AGE 40.1 YEARS 39.2 YEARS

BACHELORSDEGREEORHIGHER 50.3% 39.0%

GREAT LOCATION

The North Andover Mills are strategically located on Water and High Streets next to the Osgood Pond
and Cochichewick River. The location boasts easy access to Interstate 495 and is just blocks from
Main Street in North Andover. The property is nearly equidistant between Downtown Boston and
Manchester, New Hampshire only twenty seven and thirty one miles away, respectively. Within the 495/
North market, this location provides businesses with a peaceful suburban setting in close proximity to
the thriving Boston economy. The business-friendly environment of the Central Merrimack Valley and
its highly educated and diverse labor force have attracted a vast array of companies to the area, putting
successful startup, spin-off, and non-traditional businesses alongside corporate giants such as Cisco
Systems, IBM, Hewlett-Packard, Raytheon, Philips Health Care, and Pfizer.

18 | MARKET OVERVIEW

STRATEGIC ADVANTAGES 495 93

Professionals enjoy both working and living TRANSPORTATION ACCESS
in the desirable suburban atmosphere that
North Andover provides. With a population With both Route 495 and Interstate 93 as
of 28,352 in 2010 according to the US Census, transportation backbones, the region has
North Andover has increased its population excellent transportation access and the
over 4.2% since 2000. The town is home to a ability to draw from the highly-educated
young, highly educated labor force, with over labor forces of both Massachusetts and New
50.3% of its residents holding a college degree Hampshire while escaping the high costs of
or higher. North Andover’s school system is doing business in Boston or the busy 128
ranked among the best statewide and the beltway. Interstate 495 is accessed via exit
area’s median family income of $95,730 per 44 from Merrimack Street, less than one
household tracks significantly above the (1) mile from the North Andover Mills. The
state’s average of $65,339 per household.With region’s excellent air and rail services provide
over 52 colleges and universities, the Greater convenient business travel to and from the
Boston area is a world renowned center for area. The North Andover Mills’ location can
research and higher learning, graduating over draw upon two of the largest airports in New
300,000 of the best and brightest students England, Manchester International Airport
each year. Harvard University, MIT, Tufts and Boston’s Logan International Airport. In
College, Boston College, Boston University, addition, the Lawrence Municipal Airport,
Brandeis University, Bentley College, and which is actually located in North Andover
Merrimack College are a few of the institutions just a mile north of the North Andover
that contribute to the prestige of the region, Mills, averages over 200 flights a day from
and their graduates are commonly retained small aviation operators and private planes.
within Boston’s economy providing area Approximately 1.7 miles away, commuter rail
businesses with a highly-educated workforce. service is accessed via the Lawrence Station
on the MBTA’s Haverhill/Reading Commuter
Rail, which provides direct access to Boston’s
North Station in under an hour.

MARKET OVERVIEW | 19

AMENITIES NEW HAMPSHIRE

Located in one of the more desirable 93
suburban communities in Greater Boston,
the North Andover Mills enjoy a wide 495
assortment of amenities that appeal
to both businesses and residents. The LAWRENCE STATION
Merrimack Valley provides many cultural and
recreational opportunities, featuring movie downtown GLOBAL BANKING & MARKETS
theatres, performing arts groups, public and north andover FOUND FROM BEST BRADS
private golf courses, and its own ski resort, RECREATED PMS
Nashoba Valley. In addition to the locational
advantages, area businesses, residents, and
visitors of North Andover enjoy a variety
of amenities and conveniences. The North
Andover Mills are located in the downtown
section of North Andover, and are within
minutes of numerous retail centers such as
the Eaglewood Shops, the North Andover
Mall, and the First & Main Marketplace, as well
as countless restaurants.

FIRST & MAIN MARKET PLACE

CHAMA
GRILL

EAGLEWOOD SHOPS
NORTH ANDOVER MALL

20 | MARKET OVERVIEW

TO BOSTON,MA
27 MILES
33 MINUTES

TO SALEM,NH
10 MILES
15 MINUTES

LAWRENCE MUNICIPAL AIRPORT

BOSTON

MARKET OVERVIEW | 21

Robust demand from the region’s technology and of 5 trophy-quality inventory has seen vacancy
innovation occupier base contributed to a sixth plummet from 11.2% to 7.1%. The driver of this,
consecutive quarter of positive absorption in the along with an accelerating urbanization trend,
Greater Boston commercial office market for the continues to be demand for, and low unemployment
third quarter ending September 30, 2014. During among, the economy’s key knowledge workers,
this stretch, absorption has averaged 712,000 SF which have demonstrated preferences for
per quarter with tenants demonstrating a strong contemporary, high-quality creative and innovative
preference for quality – the region’s 13.7 million SF work settings.

22 | MARKET OVERVIEW

The 495 North submarket is a principal constituent of As of the third quarter of 2014, the 495 North
the 495 Belt around Greater Boston, an internationally submarket contained 8.5 million SF of commercial
famous center of commerce and technology. It is office inventory. At 22.3%, vacancy has decreased
also credited with many important founding events from a recent high of 25.8% observed in the
of the American Industrial Revolution, a time that third quarter of 2010, with the area having seen
has in turn sped the acceleration of business and occupancy increase 355,000 SF since, an average of
technology around the world to present time. In 22,000 SF net absorption per quarter. With demand
addition to the area’s proximity to Boston and having substantially lowered choices closer in to
alignment with the 495 Belt, the area also enjoys Boston and along the 128 Belt, increasing velocity in
the region’s accessibility to New Hampshire, offering 495 North and commensurate upward pressure on
businesses and workers a lifestyle choice and lease rates appear likely in coming quarters.
alternative taxing arrangements less reachable to
those outside the area.

vacancy 22.3% absorption +41k

495 north Q3 13 Q3 14 495 north Q3 13 Q3 14

vacancy % absorption sf in thousands

30% 400

25% 300

20% 200

15% 100

10% 0

-100

5% -200

0% Q3 10 Q3 11 Q3 12 -300 Q3 10 Q3 11 Q3 12
Q3 09 Q3 09

asking rents $18.23 contiguous choices
495 north
495 north Q3 13 Q3 14 by  classification sf size groups in thousands

average 3 asking rent per sf per year Total 5 4 3 2

$18.60 20 0 1 15 4

$18.40 5 to 10k

$18.20 10 to 20k 26 1 3 18 4

$18.00

$17.80 20 to 50k 24 1 3 15 5

$17.60 10 0 2 6 2

$17.40 50 to 100k

$17.20 8 0 2 5 1100 to 200k

$17.00

$16.80 Q3 10 Q3 11 Q3 12 200k + 1 0 0 1 0
Q3 09

MARKET OVERVIEW | 23

Over the past decade, the demand for brick & beam of Boston and Kendall Square in Cambridge, where
space has surged dramatically in Greater Boston vacancy rates have been cut in half over recent years
and it is now the most sought after product type for and rent in some cases are now eclipsing those of
innovation companies and technology firms seeking Class “A” towers.
“space with character.” These firms, which generally
employ a youthful staff, are looking for open, With only a limited number of high-end newly
innovative and collaborative space that renovated renovated mill buildings like the North Andover Mills,
mill buildings with brick & beam infrastructure which are easily accessible and feature this unique
typically affords. The desire for creative space has type of space, brick & beam has become one of the
been one of the key drivers behind the recent most sought after product types in the suburbs.
successes of areas such as the Innovation District In recent years, suburban brick & beam space has
significantly outperformed typical competitive
product type in terms of both rental rates and
absorption, with rents typically 10% to 30% higher
than their competitors. With high demand and
limited supply, this trend is expected to continue.

24 | MARKET OVERVIEW

A unique and defining characteristic of the 495 North submarket is the high concentration
of manufacturing buildings from the 1800s, commonly referred to as “mill buildings,” as
many are located near and once drew their operating power from the Merrimack River.
Lawrence and Lowell, and to a lesser extent Andover, North Andover and Haverhill,
constituted the center of worldwide textile production in the late 1800s and these mill
buildings durability has not only enabled them to remain functional, but their high
ceilings and brick & beam infrastructures are viewed as differentiators and attractive
to many office users today. As of the third quarter of 2014, the “mill” inventory in the
Merrimack Valley that has been converted to contemporary office use is 16.7% vacant,
thereby exhibiting higher occupancy levels than other product.

Suburban Brick&Beam Properties are Outperforming their competitors:

NAME LOCATION SF YEAR RENOVATED OCCUPANCY ASKING COMPETITIVE PERCENTAGE
BUILT RENT MARKET RENT HIGHER

River Works Watertown 115,500 1919 2012 89% $28.00 $25.00 12.00%
2000 100% 24.00%
The Arsenal Watertown 356,400 1816 2009 100% $31.00 $25.00 20.37%
1996 80% 11.54%
Waltham Watch Factory Waltham 382,667 1900 2013 96% $32.50 $27.00 7.69%
2005 100% 7.69%
156 Oak Street Newton 172,652 1870 2012 90% $29.00 $26.00 12.50%
1997 84% 9.52%
Chapel Bridge Park Newton 266,962 1905 $28.00 $26.00
13.91%
1210-1230 Washington Street Newton 152,225 1930 $28.00 $26.00

Riverwalk Lawrence 1,300,000 1906 $18.00 $16.00

Harvard Mills Wakefield 229,757 1895 $23.00 $21.00

Weighted Average:

MARKET OVERVIEW | 25

MULTI-FAMILY OVERVIEW

With a total of 203,785 units, the Boston Metropolitan the Boston Metro has been adding apartments at a
Apartment Market is comprised of nine (9) distinct healthy clip in recent quarters. 2,316 new units have
submarkets according to research firm REIS’s Q2 been constructed year-to-date, more than double the
2014 report. Those markets range in size from the typical annual total. The Metro Boston vacancy rate is
Boston City submarket with 14,534 units to the North currently sitting at 4.0%, up only 40 basis points from
Shore/Merrimack River Valley submarket with 32,655 a year earlier, a reasonable increase considering the
units. As the economy surges and the demand for new supply of units that have entered the market.
good quality apartments has continued to increase,

SUBMARKET "INVENTORY "INVENTORY "ASKING RENT VACANCY % "FREE RENT EXPENSES %
(BUILDINGS)" (UNITS)" (PER MONTH)" (MONTHS)"
CENTRAL CITY/BACK BAY
Cambridge/Waltham/Watertown 137 23,376 $3,032 4.5% 0.51 40.7%
BROOKLINE/BRIGHTON 174 29,697 $2,459 3.9% 0.32 41.0%
BOSTON CITY 118 18,021 $2,057 2.4% 0.48 41.9%
WEST/NW SUBURBAN 53 14,534 $1,749 3.9% 0.57 41.0%
SOUTH SHORE/RT128 SOUTH 98 20,010 $1,643 5.2% 0.69 42.6%
NORTH SHORE/Merrimack River Valley 121 23,332 $1,629 3.3% 0.56 41.8%
MYSTIC RIVER N/RT128
SOUTH/SE SUBURBAN 178 32,655 $1,574 3.5% 0.47 41.8%
METRO BOSTON
157 27,112 $1,574 4.6% 0.49 40.7%
Source: REIS Q2 2014 Report 97
1,133 15,048 $1,366 4.4% 0.56 41.8%

203,785 $1,923 4.0% 0.50 41.5%

26 | MARKET OVERVIEW

Following ten (10) consecutive quarters of of Q2 2014. Year-over-year, average asking rents
apartment rent growth, Metro Boston has have increased by 3.9%, which marks the largest
experienced the fastest growth in the northeast increase since 2006 and the second largest since
of the U.S. out of 15 regional metros and the 2000. During that same period, Class “A” rents
fifth fastest growth in the nation out of 82 U.S. have increased at an even faster rate, growing by
metros. During that period, average asking rents 4.4% to an average monthly asking rent of $2,387.
have increased by 8.5% to $1,923 per month as

Metro Boston has experienced the fastest growth

in the northeast of the U.S. out of 15 regional metros

Class "A"Asking Rent Growth

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Q2
2014

MARKET OVERVIEW | 27

Class "A" Asking Rent Growth Trends
Across Classes

3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

As categorized by REIS, North Andover is located Accounting for 16.0% of the total metro
in the North Shore/Merrimack River Valley multi- inventory, the North Shore/Merrimack River Valley
family submarket of Boston which is made up of submarket is the largest of the nine (9) geographic
towns and cities north of I-95 and east of Route 3 concentrations that form the Boston Metro
including Andover, Billerica, Chelmsford, Danvers apartment market. In the last ten (10) years, the
Haverhill, Ipswich, Lawrence, Lowell, Methuen, net inventory has increased by 5,627 units, which
Newburyport, North Andover, North Reading equates to an annualized inventory growth rate
and Tewksbury, among others. These areas are of 1.9%, exceeding the metro growth rate of 1.4%
distinctly attractive from a residential perspective during that same period. As vacancy decreased
due to their proximity to both Boston and Southern over the last quarter, asking rents rose by 0.9% to
New Hampshire, ease of accessibility by major an average of $1,574 per unit. REIS estimates that
roadways, strong education systems, attractive asking rent growth will accelerate to an annualized
amenity bases, recreational activities, and nearby average of 3.0% during 2015 and 2016 and reach
business centers. a level of $1,708 per unit. Class A properties, which
currently average an asking rent of $1,854 per unit,
North Shore/Merrimack River Valley 3.5% Vacant are expected to increase to $2,014 during that
same period.
Metro Boston 4.0% Vacant

28 | MARKET OVERVIEW

Property # of Occ. Comparable Units Min unit asking rents p.s.f
Units Unit Type Per Type Avg. SF
EAST MILL LOFTS 100% $1,150 max unit median $2.05
(SUBJECT) 27 Studio 6 624 $1,400 $2.04
120 Water St and 45 High St. 1 BR 10 735 $1,800 $1,350 $1,279 $1.81
North Andover, MA 2 BR 11 1057 $1,750 $1,500
$2,125 $1,916 $1.28
$1.23
1 MONARCH LOFTS Studio 34 868 $1,025 $1,200 $1,113 $1.20
220 Merrimack St 1 BR $1,475 $1,475
Lawrence, MA 199 96% 2 BR 116 1201 $1,475 $1,818 $1,818 $2.12
$1.66
59 1518 $1,818
$2.00
2 ADDISONATANDOVER PARK 240 99% 1 BR 144 780 $1,230 $2,080 $1,655 $1.63
100 Hawthorne Way 174 98% 2 BR $1.58
South Lawrence, MA 222 99% 96 1150 $1,525 $2,295 $1,910
220 95% 1 BR $2.20
3 RIVERPOINTE 193 98% 2 BR 94 756 $1,185 $1,844 $1,515 $1.55
AT DEN ROCK PARK 3 BR $1.35
1 River Pointe Way 66 1082 $1,475 $2,049 $1,762
Lawrence, MA Studio $2.38
1 BR 12 1359 $1,943 $2,341 $2,142 $1.92
4 SAUNDERSCROSSING 2 BR $1.70
11 Diamond St 7 400 $870 $890 $880 $1.86
Lawrence, MA Studio 47 694 $1,010 $1,160 $1,074
1 BR 168 913 $1,200 $1,275 $1,235 $1.95
5 ANDOVERPLACE 2 BR $1.82
650 Bulfinch Dr 3 BR 2 518 $1,235 $1235 $1235 $1.62
Andover, MA
1 BR 132 694 $1,285 $1,375 $1,330 $1.72
6 HAMILTON GREEN 2 BR $1.86
AT ANDOVER 3 BR 74 957 $1,570 $1,675 $1,623 $1.88
311 Lowell St
Andover, MA 12 1223 $2,088 $2455 $2272

75 896 $1,625 $1,875 $1,750

96 1202 $2,075 $2,300 $2,188

9 1702 $2,650 $2,850 $2,750

7 AVALONANDOVER 1 BR 45 961 $1,600 $1,700 $1,650
460 River Road 2 BR
Andover, MA 115 97% 3 BR 55 1342 $2,300 $2,700 $2,500

15 1539 $2,800 $3,000 $2,900

SUBJECT 2 46

13 57

MARKET OVERVIEW | 29

EXISTING OWNER BIOGRAPHY

The existing Owners are the principals of RCG LLC (RCG), and their families and friends, organized in
two separate investment affiliates. RCG is an operations and development service company with a
headquarters in Somerville, MA. It owns no properties itself, but is affiliated with over 50 single-purpose
investment entities. RCG has six principals in the Greater Boston region and one in the Asheville, NC
region: the Managing Principal, Matthew Picarsic; its founders, Alex Steinbergh and Stan Bowden; and
Andrew McNerney, David Steinbergh and Obadiah Arthur; plus Nick Bayne in the Asheville market.
Although RCG itself was founded in 2002, its predecessor companies of Resource Capital Group
and Resource Development Company date back respectively to their founding in 1982 and 1979 in
Cambridge, MA. Its principals are highly experienced in the acquisition, financing, development,
management and sales of apartments and mixed-use properties. As important, most have worked as a
team over a long period of time.
RCG currently manages over 500 residential units and more than one million SF of commercial space,
mostly in the Greater Boston area, for its affiliate owners. The firm currently has approximately 45
employees based in offices located in Somerville, North Andover, Lynn, Salem and Brevard, NC to serve
its customers and investors. The portfolio of RCG properties under management currently has a market
value of approximately $220 million with about $117 million in equity. RCG seeks to continue to identify
profitable projects and equity investment to fund such projects.

30 | EXISTING OWNER BIOGRAPHY

Matthew Picarsic, Managing Principal Alex M. Steinbergh, Principal

Matt has been with RCG since 2002 and has been a Alex co-founded RCG in 2002 and, with Stan Bowden, RCG’s
Principal since 2006. As Managing Principal, he has primary predecessor organization in 1982. In conjunction with
responsibility for company oversight, strategy, planning, Matt, he leads the firm’s acquisitions team and co-chairs
and organizational initiatives. In conjunction with Alex, he its investment committee. Between 1992 and 1998, Alex
co-chairs the firm’s investment committee and manages the also worked for Hagler Bailly, where he led HC Capital, its
identification, negotiation, investigation and purchase of investment banking affiliate. Between 1979 and 1982, he
new properties. For more than five years of his tenure, he was was Principal and CEO of Resource Development Corp., a
the Principal-in-Charge of the firm’s affiliated investments real estate development firm based in Cambridge MA and
in residential, commercial and mixed-use properties in Lynn Hartford CT. Between 1972 and 1979, he was a Principal
and Salem, MA. Matt also has direct experience managing of RPA and he directed its Cambridge, MA office and its
the entire development cycle—from planning and financing energy development practice. Between 1965 and 1972,
to selling finished projects. Matt previously worked at the Alex worked for Republic Steel and Carling Brewing as
Parthenon Group, a strategic advisory and consulting firm. Director of Operations Research and with McKinsey &
Company’s Cleveland office as a management consultant.
Matt received his Bachelor of Arts in Economics from Harvard
University where he was co-captain of the wrestling team, an Alex graduated from Cornell University with a Bachelor
EIWA Champion, and an NCAA Academic All-American. Matt of Arts in Economics, received an MBA from Harvard
also received the Francis Burr Scholarship prize, a college-wide University, and a Master of Arts in Economics from Western
award given to the senior who best combines the qualities of Reserve University.
character, leadership, scholarship, and athletic ability.
Andrew P. McNerney,
R. Stanley Bowden, Principal Principal & Chief Financial Officer

Stan co-founded RCG in 2002 and RCG’s predecessor firm in Andy has been with RCG’s predecessor firm since 1987 and
1982. He participates in the investment committee where all became a Principal of RCG in 2003. He serves as the firm’s
investment decisions are made. Stan also actively reviews the CFO where he leads the firm’s finance and accounting
firm’s risk management practices and advises on all strategic department. Andy also is the Principal-in-Charge of
issues facing the organization. Stan previously led the RCG’s small project team that has successfully acquired
company’s income property management business. Between and repositioned a portfolio of more than 60 residential
1992 and 1999, Stan worked for Hagler Bailly and, between units (often in increments of one, two or three units at
1980 and 1982, he was Principal and CEO of Resource a time) from distressed sellers between 2009 and 2014.
Consulting Group, a management consulting firm specializing From 1988 to 1996, Andy directed the firm’s Washington,
in electric and gas utility strategy and management. Between DC office. From 1983 to 1986, he was a partner in Peerless
1974 and 1979, Stan held successive management positions Property Services, a Cambridge, MA based real estate
and became a Principal of RPA, where he led the firm’s electric management firm.
utility consulting group. Prior to 1974, he worked for Alcoa in
production planning. Andy received a Bachelor of Arts in Physics from Harvard
University, where he was also an All-American wrestler.
Stan graduated with a Bachelor of Science in Industrial
Management from the University of Tennessee and received
an MBA from Harvard University.

EXISTING OWNER BIOGRAPHY | 31

David S. Steinbergh, Principal J. Nicholas Bayne, Principal

David joined RCG on a full-time basis in June 2000 and Nick joined RCG in 2006 as a Principal to manage and lead
became a Principal in 2007, one year after his return from RCG’s investments in the southeastern United States, with
business school. David is the Principal-in-Charge of the North a particular focus on the Greater Asheville, NC market. He
Andover Mills complex and personally led the transformation is the Principal-in-Charge of RCG’s regional office that is
of the East Mill from a nearly empty office complex into a located in Brevard, NC. Nick has managed a diverse range
bustling mixed-use center. His work at North Andover Mills of real estate projects in the region ranging including:
includes conceptualizing the optimal mix and location of a repositioning a 216 unit garden-style apartment complex;
variety of uses on campus; handling (in conjunction with acquiring from foreclosing lenders and then successfully
local counsel) all permitting; securing nearly every current completing multiple in-process development projects;
tenant at the complex; and overseeing all construction-- and planning, permitting and constructing a single-family
for office and retail fit-out; residential conversion; parking; subdivision.
and infrastructure upgrades. In addition to his work in
North Andover, David has extensive experience managing Prior to joining RCG, Mr. Bayne served as President & CEO of
the permitting, design, development, construction, leasing Maine & Maritimes, Corporation, a publicly traded holding
and operations of residential and mixed-use complexes in company with utility, sustainable facilities engineering, real
Brookline, Lynn, Salem, Danvers, Cambridge, Somerville estate development, and sustainable software subsidiaries.
and Allston/Brighton. David previously worked with He also served as Senior Vice President for Duke Energy’s
PriceWaterhouseCoopers in its Operations and Systems North American retail energy solutions subsidiary, as well
Risk Management division in Boston, first as an Associate as CEO of Aspect LP, a venture-based commodities analytics
and then as a Senior Associate. He also interned in Harvard software company wholly owned by Koch Ventures. From
Management Company’s real estate investment group while 1983 to 1997, Mr. Bayne led statewide and multi-state
attending business school. economic and community development efforts for Carolina
Power & Light Company (Progress Energy) and MEAG Power
David earned his Bachelor of Arts in Economics with High in North Carolina, South Carolina, and Georgia, and served as
Distinction from the University of Michigan. He received President of BIDCO, a regional public/private development
an MBA from the Wharton School of the University of corporation headquartered in Charleston, West Virginia.
Pennsylvania.
Mr. Bayne received a Bachelor’s degree in interdisciplinary
Obadiah J. Arthur, Principal studies with concentrations in economics and physical
geography from the University of Southern Carolina, and
Obie joined RCG’s Income Property Group in 2002 and has also holds an Associate of Science Degree in Environmental
been a Principal in the firm since 2007. He is the Principal- Science from Southwestern Community College.
in-Charge of most of the company’s affiliated investments in
Brookline, Cambridge, Somerville, and Waltham. In addition
to handling the daily management requirements of a
large property portfolio, Obie has managed the extensive
renovation of hundreds of residential dwelling units in RCG’s
portfolio. From 1999 to 2001 Obie developed and operated
the real estate marketing firm ZeroFeeApts.com. From 1997
to 1999, he worked at The Learning Company, Inc. where he
specialized in software testing and licensing.

Obadiah earned his Bachelor of Science in Computer Science
with High Distinction from Newbury College. Obie has been
a Licensed Massachusetts Real Estate Agent since 2003.

32 | EXISTING OWNER BIOGRAPHY

The Owners of East Mill and West Mill wish to find a Capital Partner that will provide capital to allow them
to monetize 50 to 80 percent of their existing holdings and provide a proportionate share of the capital
needed to fund value-add opportunities going ahead from July 1, 2015. Ownership believes July 1, 2015
is the appropriate time to begin a new partnership for a variety of reasons related to tax events, expected
permitting dates, and leasing valuation. It is possible that this date could be accelerated, or more likely,
delayed a few months, based on due diligence and permitting requirements.

The ideal Partner is one with available capital of $25 to $50 million to fund the project and seeks a skilled
development and operating partner in the Greater Boston area. The ideal Partner may play an active or
passive role in the Project, with the exact role to be negotiated between the partners.

The Owners believe that the current valuation of $60 million is fair based on the current market and the
Owners’ progress in value-add to-date. They are willing to “lock-in” this valuation in the near future, but
reserve the right to change the valuation at any time after that based on market and value-add results.

IDEAL PARTNER & SELECTION PROCESS | 33

Avison Young has been engaged to identify, screen and evaluate interest from possible partners based
on their reaction to this Marketing Memorandum. The Owners will make themselves available, in a timely
manner, to meet with qualified prospective partners and analyze the fit between the parties. If both
parties wish to proceed further by signing a negotiated letter of intent (LOI), the Owners will provide the
prospective Partner with up to a 60-day due diligence period. At the time of signing the LOI, the Owners
will provide the Partner with due diligence data including detailed space plans, stacking plans, existing
and pro-forma rent rolls, operating expenses, a schedule of capital needs, expected debt financing rates
and terms, pro-forma financial estimates, permitting plans, title information, and other reasonable data
requests. If the Partner is satisfied with its due diligence, the Owners will submit a proposed LLC operating
agreement and RCG will provide a suggested management contract for the Project.

34 | IDEAL PARTNER & SELECTION PROCESS

CONFIDENTIAL INFORMATION & disclaimer

Avison Young (“Agent”) has been engaged by Ownership (“Existing Owner”) as the exclusive agent for the procurement of a Partner
in the North Andover Mills, located at 1 & 21 High Street North Andover, MA (“the Property”).
A Partnership interest in the Property is being offered for sale in an “as-is, where-is” condition and Existing Owner and Agent make
no representations or warranties as to the accuracy of the information contained in this Offering Memorandum. The enclosed
materials include highly confidential information and are being furnished solely for the purpose of review by prospective purchasers
of the interest described herein. Neither the enclosed materials nor any information contained herein is to be used for any other
purpose or made available to any other person without the express written consent of the Existing Owner. Each recipient, as a
prerequisite to receiving the enclosed, should be registered with Avison Young as a “Registered Potential Investor” or as “Buyer’s
Agent” for an identified “Registered Potential Investor”. The use of this Offering Memorandum and the information provided herein
is subject to the terms, provisions and limitations of the confidentiality agreement furnished by Agent prior to delivery of this
Offering Memorandum.
The enclosed materials are being provided solely to facilitate the prospective investor’s own due diligence, for which it shall be
fully and solely responsible. The material contained herein is based on information and sources deemed to be reliable, but no
representation or warranty, express or implied, is being made by Agent or Existing Owner or any of their respective representatives,
affiliates, officers, employees, shareholders, partners and directors, as to the accuracy or completeness of the information contained
herein. Summaries contained herein of any legal or other 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. Neither the Agent nor the
Existing Owner shall have any liability whatsoever for the accuracy or completeness of the information contained herein or any
other written or oral communication or information transmitted or made available or any action taken or decision made by the
recipient with respect to the Property. Interested parties are to make their own investigations, projections and conclusions without
reliance upon the material contained herein.
The Existing Owner reserves the right, at its sole and absolute discretion, to withdraw the Property from being marketed for sale
at any time and for any reason. Existing Owner and Agent each expressly reserves the right at their sole and absolute discretion,
to reject any and all expressions of interest or offers regarding the Property and/or to terminate discussions with any entity at any
time, with or without notice. This offering is made subject to omissions, correction of errors, change of price or other terms, prior
sale or withdrawal from the market without notice. Agent is not authorized to make any representations or agreements on behalf
of Existing Owner. Existing Owner shall have no legal commitment or obligation to any interested party reviewing the enclosed
materials, performing additional investigation and/or making an offer to purchase the Property unless and until a binding written
agreement for the purchase of the Property has been fully executed, delivered, and approved by owner and any conditions to
owner’s obligations there under have been satisfied or waived.
By taking possession of and reviewing the information contained herein, the recipient agrees that (a) the enclosed materials and
their contents are of a highly confidential nature and will be held and treated in a strictest confidence and shall be returned to Agent
or Existing Owner promptly upon request; and (b) the recipient shall not contact employees or tenants of the Property directly or
indirectly regarding any aspect of the enclosed materials or the Property without the prior written approval of the Existing Owner or
Agent; and (c) no portion of the enclosed materials may be copied or otherwise reproduced without the prior written authorization
of Existing Owner or Agent or as otherwise provided in the Confidentiality and/or Registration Agreement executed and delivered
by the recipient(s) to Avison Young. Existing Owner will be responsible for any commission due to Agent in Connection with the
procuring of a Partner for the Property. Each prospective Partner will be responsible for any claims for commissions by any other
broker or agent in connection with a sale of a partnership interest in the Property if such claims arise from acts of such prospective
Partner or its broker/agent’s authority to act on its behalf. If you have no interest in the property at this time, please return this
Offering Memorandum immediately to:
Avison Young
200 State Street, 7th Floor
Boston, MA 02109
Attn: Michael Smith, Principal
617.575.2830
[email protected]
The information contained herein was obtained from sources believed reliable; however, Avison Young makes no guarantees,
warranties or representations as to the completeness or accuracy thereof. The presentation of this property is submitted subject to
errors, omissions, change of price or conditions, prior to sale or lease, or withdrawal without notice.

| 35

NORTH ANDOVER, MASSACHUSETTS

Confidential Offering Memorandum

THE AVISON YOUNG CAPITAL MARKETS TEAM:

Michael Smith Scott Jamieson David Eyzenberg
Principal Principal Principal
617.575.2830 617.575.2831 212.729.4329
[email protected] [email protected] [email protected]

Brandon Dickason Derek Opert FOR LEASING GUIDANCE, PLEASE CONTACT:
Keith Gurtler
Vice President Financial Analyst Principal
617.275.4424
617.575.2832 617.758.8263 [email protected]

[email protected] [email protected]

avisonyoung.com

©2014 Avison Young (New England) LLC
All rights reserved.