Keegan & Coppin Company, Inc. ONCOR International. 3rd QUARTER 2015 SONOMA COUNTY SUBMARKETS QUARTERLY NEWSLETTER

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1 Keegan & Coppin Company, Inc. ONCOR International SONOMA COUNTY SUBMARKETS QUARTERLY NEWSLETTER 3rd QUARTER INSIDE THIS ISSUE: Market Highlights Notable Transactions Vacancy Trends Business Parks Petaluma Rohnert Park/Cotati Santa Rosa North Corridor (Airport Area/Windsor) 127 & 145 Third Street OFFICE LOCATIONS: Santa Rosa 1355 North Dutton Avenue Santa Rosa, CA (707) Petaluma 1201 N. McDowell Blvd. Petaluma, CA (707) Larkspur 101 Larkspur Landing Circle Larkspur, CA (415) Lakewood Drive Napa 477 Devlin Road #104 Napa, CA (707) North McDowell Boulevard O N C O R I N T E R N A T I O N A L The above information, while not guaranteed, has been secured from sources we believe to be reliable. Submitted subject to error, change or withdrawal. An interested party should verify the status of the property and the information herein.

2 PETALUMA 1364 North McDowell Blvd. SOLD Petaluma Blvd. South, 9,200 sf Industrial Investment to Frank Dostal LEASED Redwood Way, Suite C, 3,925 sf Industrial Space to ABM Onsite Services West, Inc. LEASED N. McDowell Blvd., Suites 25 & 26, 3,000 sf Industrial Space to Shabby Restore LEASED N. McDowell Blvd., Suites 56 & 7, 3,250 sf Industrial Space to Pacific Coast Cutters, Inc. Activity continues in the Petaluma real estate market, with many businesses expanding in the last several months. Sonoma County-based businesses such as Friedman s Home Improvement, Clover- Stornetta and Amy s Kitchen, along with new companies, such as Allianz-Fireman s Fund and Red Bull, are occupying both office and industrial space in several key locations. Friedman s is moving its head office into the city, bringing 60 employees from its four stores to the 17,500 sf ground floor of 1385 N. McDowell Blvd. Clover- Stornetta will move to about 9,000 sf on the first floor of 1800 S. McDowell Blvd., with plans to expand into 65,000 sf in one of three distribution warehouses planned for Cader Corporate Center. Allianz, formerly called Fireman s Fund Insurance Co., has 700,000 sf in north Novato to 85,000 sf located at 1465 N. McDowell Blvd. The company has been in the Novato location since Industrial vacancy rates were 5.5% for the third quarter, slowly coming down from 5.7% in the second quarter of. Industrial rental rates during this period ranged from $.83 to $.99 Office vacancy rates for the third quarter were 14.0%, jumping up from 12.9% in the second quarter. Rental rates were approximately $1.00 for Petaluma held steady for the third quarter at 3.8%. There is slow, steady growth in Petaluma, and companies focusing on expansion from Marin County are looking to the city for its reasonable rent rates. PETALUMA - INDUSTRIAL PETALUMA - OFFICE 7.50% 7.20% 5.90% 5.70% 5.50% 0.50% % 15.70% 15.50% 12.80% % 0.10% 0.10% 0.10%

3 ROHNERT PARK/COTATI 6591 Commerce Boulevard LEASED Commerce Blvd., 15,000 sf Retail Space to Spirit Halloween LEASED Blodgett Street, Suites 2 & 3, 10,200 sf Industrial Space to Weldon Exhibits, LLC The Rohnert Park Health Center recently held their grand opening at its new location on the second floor of 5900 State Farm Drive. The 38,000 sf space under went $5 million in renovations and is projected to accommodate 100,000 patient visits annually within three years. Much needed services such as dental, vision, medical and wellness programs will be offered, as well as adding 100 new jobs this year and will continue to hire for open positions throughout the next few months. Rohnert Park is also gearing up for new lodging options, with the ground breaking for the $200 million expansion at the Graton Casino. The 342,000 sf resort addition will be six-stories and include a 200-room hotel, a spa and pool area, as well as expanded convention and meeting room space. Approximately 1,000 tradespeople and nearly 100 California companies will be part of the construction of the hotel, which will employ more than 100 new full-time workers when complete. Commercial space vacancy rates moved upward with Industrial rates in the 3rd quarter at 9.6%, up from the first part of. Rental rates ranged from $.62 to $.85 Office vacancy rates for the 3rd quarter were 31.3%, up from 30.5% in both the first and second quarters of. Rental rates ranged from $.85 to $.93 were 6.4% for the third quarter. Retail rates ranged from $1.38 to $1.75 psf, triple net; to $.91 ROHNERT PARK - INDUSTRIAL % 9.20% 7.20% 7.30% 7.70% 8.90% 0.80% 0.80% 0.80% 0.80% 0.80% ROHNERT PARK - OFFICE 33.10% 27.90% 28.30% 28.30% 29.10% 2.10% 2.20% 2.20% 2.20% 2.20%

4 SANTA ROSA 1111 Sonoma Avenue LEASED Sonoma Avenue, Lower Level & Suite 308, 10,384 sf of Office Space to Santa Rosa Memorial Hospital SOLD & 145 3rd Street, 15,568 sf Retail Investment to Sole Desire, LLC SOLD Sonoma Avenue, 0.92 Acres Office Land Investment to Sonoma Ave., LLC SOLD Coffey Lane, 7,260 sf Industrial Investment to Gilles Estines Trust The economic outlook is looking good in the North Bay, with the jobless rate low, tourism soaring, and increased activity in commercial real estate continuing to improve. Office vacancy rates were 16.0% for the 3rd quarter, continuing a slow drop from 16.1% in the second quarter, and 16.4% in the first quarter of. Office rental rates ranged from $1.22 to $2.25 psf, gross; to $1.35 to $2.35 psf, for full service. Santa Rosa Memorial Hospital added to their office space, leasing out 10,384 square feet at 1111 Sonoma Avenue. Industrial vacancy rates also continued to drop down 8.0%, down from 8.7% in the second quarter and 8.8% in the first quarter. Rent rates ranged from $.82 to $1.08 Sole Desire, LLC recently purchased the former Sonoma Outfitters building located at 127 & 145 Third Street. The high visibility, 15,568 square foot retail space sold for $3,150,000. were 3.4% for the 3rd quarter, rising just slightly from the 3.3% rate in the 2nd quarter. Rental rates for retail space in Santa Rosa ranged from $.90 psf, gross; to $1.25 to $1.50 psf, triple net. The next two years continue to look positive for the North Bay. As real estate rates continue to rise around San Francisco and Silicon Valley, more companies will start to look for new space in outlying areas, such as Sonoma County. SANTA ROSA - INDUSTRIAL SANTA ROSA - OFFICE % 9.50% 8.70% 7.90% 7.80% 7.80% 0.90% 0.90% 0.90% 0.90% 0.20% % 15.30% % 15.10% 0.90% 0.90%

5 NORTH CORRIDOR (AIRPORT AREA & WINDSOR) 1550 Airport Boulevard LEASED Airport Boulevard, Suites 101 & 120, Santa Rosa, 6,938 sf of Office Space to Dry Creek Rancheria Band of Pomo Indians SOLD , 1555 & 1575 Grove Street, Healdsburg, 3.02 Acres Industrial Land Investment to MBL & J, LLC SOLD Aviation Boulevard, Santa Rosa, 31,286 sf Office Investment to Jackson Family Wines SOLD Lakewood Drive, Windsor, 31,213 sf Office Investment to KLYPE, LLC The North Corridor activity has been busy through the third quarter. Construction continues on the new Bell Village mixed-use project in downtown Windsor which includes 387 apartments and 83,500 square feet of commercial space, including Oliver s Market, offices, and a restaurant. The 34,000-square-foot Oliver s is part of the first phase of Bell Village, one of the largest mixeduse, residential-commercial projects to be approved in Windsor. Estimated opening date for the market is late summer Jackson Family Wines is expanding their operations with the purchase of the 31,285 square foot office building at 420 Aviation Boulevard. They also leased about 13,641 sf in Oak Valley and 13,345 in Harvest - both in the airport area. Current plans are to occupy about onethird of the square footage at 420 Aviation and lease out the remaining two-thirds. Klype, LLC has purchased a 31,213 square foot investment building at 8911 Lakewood Drive, in Windsor. The professional/medical building sold for $5,500,000. North Corridor office vacancy rates for the third quarter were 10.4%, down significantly from 15.1% in the second quarter. Rent rates for office space ranged from $1.55 to $1.95 psf, full service. Industrial vacancy rates for the third quarter were 2.6%, down from 3.9% in the second quarter, and 4.6% in the first quarter of. Rent rates for industrial space was approximately $.95 psf gross for transactions closing during this time period. continued through the third quarter at 4.6%. Retail rental rates ranged from $2.35 to $2.50 NORTH CORRIDOR - INDUSTRIAL NORTH CORRIDOR - OFFICE 5.10% 4.90% 4.50% 3.80% 2.50% 0.10% 0.10% 0.10% 0.10% 0.10% % 13.40% 14.10% 13.40% 8.80% 2.10% 2.20% 1.70% 1.70% 1.60%