Dear Valued Clients and Friends,

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2 JJLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At year-end 2016, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 77,000. As of December 31, 2016, LaSalle Investment Management has $60.1 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit JLL.com

3 Dear Valued Clients and Friends, As we reflect on 2016 we are pleased to have experienced another strong year across the Pacific Northwest. With the sustained strength of the economy we saw many commercial developer s dreams and plans spring to life. As we witnessed the long anticipated pipeline of new projects begin to break ground we also watched those that were already underway climb further and further into the sky. Over the year, demand continued to outpace supply on the industrial front and we welcomed many new retailers into our storefronts and suburban malls. Housing demand has hit an all-time high, as we expect to deliver more than 10,000 new apartment units in Although our skylines have changed over the last year, our market fundamentals have not. New development, population growth, quality of life, a highly educated workforce, demand, absorption, pre-leasing activity and rising rents are all testaments to the overall attractiveness of the Pacific Northwest region from an investment standpoint. We were fortunate to complete several successful acquisitions in the past year and add several key members to our team, helping to further strengthen our position as a market leader in Seattle, Bellevue and Portland. In addition, we expanded our local Investor Services Platform with the addition of a highly regarded finance team. The launch of our new brand, Achieve Ambitions, was another evolutionary step for us and we are enjoying the very positive feedback we are receiving from across the globe. As we share our views of 2016 and turn the corner into 2017 please join us as we celebrate our 14th Annual State of the Market Event. We are honored to welcome so many familiar faces and look forward to forging strong relationships with those of you who may be joining us for the first time this year. Thank you for your continued partnerships and we look forward to a dynamic and prosperous Your JLL Pacific Northwest Investment Team

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5 CAPITAL MARKETS TEAM

6 JLL Capital Markets team Seattle Multifamily Stuart Williams Managing Director David Young Managing Director Lori Hill Managing Director Corey Marx Managing Director Dawn Brandenburg Vice President Matt Kemper Vice President Mark Thygesen Retail Associate Don Flanigan Vice President Bellevue Ann Chamberlin Managing Director

7 Portland PNW Finance Northern California Finance Buzz Ellis Managing Director Ray Allen Managing Director John Manning Managing Director Paige Morgan Executive Vice President Seth Heikkila Senior Vice President Alex Witt Executive Vice President Adam Taylor Associate Zach Goodwin Senior Associate Drew Heitstuman Associate SEATTLE WAS RANKED THE TOP MARKET IN TERMS OF LOCAL INVESTOR DEMAND AND THE SECOND BEST MARKET FOR INVESTMENT POTENTIAL Seattle & Portland 2016 Investment Overview 7

8 JLL Capital Markets group Leverage the expertise of a global leader Devised from comprehensive research, pervasive market knowledge, ethical practice and superior professionalism, the JLL Capital Markets team is focused on the unique requirements of our investor clients. Our in-depth local market and global investor knowledge delivers best-in-class solutions for clients whether a sale, financing, repositioning, advisory or recapitalization execution. With a diverse, unified platform of shared expertise through a single point-of-entry, we help you achieve your priority capital objectives: Investment Sales Benefit from sales advisory services grounded in solid market analysis, sophisticated portfolio structuring support, complex valuation, thorough underwriting capabilities, reliable investor intelligence and practical marketing expertise. Real Estate Investment Banking Gain direct, strategic access to global money centers and real estate investment banking professionals who manage debt and equity financing across all asset types and scenarios. Finance Access an unmatched combination of expertise in finance, lease accounting, tax and transaction structuring with global access to capital that helps real estate occupiers and net lease investors make the best financial decisions to optimize transaction economics and maximize asset value. Special Asset Services Obtain transaction execution, valuation and advisory services for non-performing and sub-performing real estate assets concerning financial institutions and special servicers. 8

9 JLL Finance group Navigate capital solutions As a trusted business advisor, our Finance team helps you navigate the capital markets to obtain the best capital solutions for your particular requirements. With billions of dollars in debt and equity transaction experience and deep insights into capital flows and trends around the world, we are well-qualified to advise on creative structures and innovative solutions. Clients seeking direct access to global capital also benefit from our on-the-ground access and contacts in every money center around the world. We provide access to the lowest cost of capital on the best terms via a competitive auction process and creative structuring. Through our broad array of relationships and a proprietary database that contains hundreds of lending and equity sources both domestic and foreign we provide a link between our clients and opportunity, finding appropriate, prequalified groups of capital providers and investors and creating a competitive market to get the best possible pricing and deal structure. Because we don t align with any specific capital source, we deliver objective advice and focus exclusively on your needs. Your project receives senior-level attention the top leaders of our group are always involved on a day-today basis. Our Finance professionals devise capitalization strategies and manage debt and equity placements across all asset types. Acquisition and permanent financing Bridge and mezzanine financing Construction financing Multifamily lending platform that includes Fannie Mae, Freddie Mac and HUD/GNMA Performing note sales Recapitalization strategies Asset advisory Seattle & Portland 2016 Investment Overview 9

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11 SEATTLE

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13 Seattle Office Industrial Retail Multifamily

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15 2016 Seattle office sales ($10M+) overview Sales volume declines slightly in 2016, but market record for pricing is eclipsed once again More than $4.3 billion in office sales closed in 2016, nearly matching 2015 s total and far exceeding the 10-year historical average. In total, the market saw 55 transactions over $10 million, which makes 2016 the most active year for office investment sales since A new market record for pricing was achieved in the fourth quarter, when KOMO Plaza was purchased by GI Partners for $276.0 million, or $940 per square foot. This is a 72.5 percent price increase from when Hines purchased the building for $160 million just five years ago. Prior to 2016, the region had not seen an office building trade above $800 per square foot. Urban Union, a 12-story Trophy tower that delivered in Q3, went under contract in Q4 for $268.9 million, or $924 per square foot. The largest transaction of the year occurred in Q2, when GLL and Vestas Investment Management acquired Safeco Plaza for $387.0 million, or $488 per square foot. The 50-story Seattle CBD building, which was recently renovated and 68 percent occupied by the eponymous insurance company at the time of sale, previously traded for $163.5 million in mid-2005, so the current sale represents an increase in value of more than 136 percent. Overall, the most active submarkets for sales in 2016 were Lake Union, Seattle CBD and Bellevue CBD, with total volumes of $1.3 billion, $873.8 million and $595.0 million, respectively. Global interest in Seattle real estate has perhaps never been stronger. Seattle surpassed San Francisco and Washington D.C. in this year s AFIRE Foreign Investment Survey. It is now the fourth most favored U.S. market amoung foreign commercial real estate investors saw three out of the five largest office transactions Safeco Plaza, West 8th and Amazon Phase VIII include foreign buyers. German company Deutsche Asset Management purchased West 8th for $370.0 million, or $716 per square foot. Mirae Asset Global Investments, a South Korean-based group, along with Metzler, acquired Amazon Phase VIII for $246.8 million, or $777 per square foot. According to ULI and PwC s Emerging Trends in Real Estate 2017 report, Seattle was ranked the top market in terms of local investor demand and the second best market for investment potential. The fourth quarter was by far the most active quarter in 2016, with more than $1.7 billion in office assets trading, comprising 39.8 percent of the total sales volume. This was partially due to the largest local portfolio sale of the year. Blackstone acquired the Laguna Office Complex, Daytona Office Campus and the 5th & Bell Buildings for $300.0 million. The properties within that portfolio, along with Civica Office Commons and KOMO Plaza, traded for $766.0 million, positioning Hines as the most active seller in Though the total volume didn t quite reach 2015 s total of $4.5 billion, the average price per square foot was up 18.7 percent yearover-year, and 48.5 percent greater than the 10-year average. Market conditions will continue to favor landlords in 2017, as they remain in position to hold properties and collect steadily increasing rents or capitalize on pricing that has hit an all-time high in the market THE MOST ACTIVE YEAR FOR OFFICE INVESTMENT SALES SINCE 2007 Seattle & Portland 2016 Investment Overview 15

16 Seattle office leasing New inventory is disappearing quickly, as flight to quality trend intensifies among tech tenants Ten office buildings were delivered in the Seattle-Bellevue region in 2016, adding 2.3 million square feet of Class A inventory to the market percent of the space was leased at the time of completion. 5.9 million square feet of product is currently under construction, with 4.6 million square feet scheduled to deliver in 2017, 51.2 percent of which has been accounted for. This would make 2017 the most active year for deliveries since According to Rider Levett THE TECH INDUSTRY ACCOUNTED FOR MORE THAN 60 PERCENT OF ALL OFFICE LEASING IN THE YEAR Bucknall s North American Crane Index, Seattle s skyline leads the nation for most construction cranes in the central business district. Nearly 50 percent of all cranes currently in use in North America are in Seattle, Chicago and Toronto. Average asking rents for new construction space in Puget Sound are being marketed at $48.40 per square foot, representing a 17.1 percent premium over existing Class A space. Six of the 10 largest leases signed in 2016 involved new construction buildings, all of which were executed by tech tenants, including Google at Lakefront Blocks, Facebook at Arbor Blocks and Valve at 400 Lincoln Square. The 10 largest leases signed were all executed by tech tenants. All told, the tech industry accounted for more than 60 percent of all office leasing in the year. For the last five years, the sector has been responsible for approximately 45 percent of leasing annually. Office space can be a key differentiator for companies competing fiercely for local talent, and tech tenants are willing to pay the premium for new, creative space. Average asking rates in the market increased 2.7 percent year-over-year to $34.90 per square foot, full service. While this is slightly above the national average, it is less than half the average cost of space being marketed in San Francisco. Class A asking rents stand at $41.33, a 6.0 percent increase year-over-year. At 5.3 percentage points below the national average, Seattle-Bellevue is the fourth tightest market in the country, with a single-digit vacancy rate of 9.2 percent. Only Nashville, Salt Lake City and San Francisco currently have lower vacancy percentages. For the fourth consecutive year the market experienced more than 2.0 million square feet of positive net absorption, as nearly 2.5 million square feet of space was taken down in This impressive run should continue in 2017, as tenants take occupancy in several impending Class A deliveries. While the majority of recent leasing activity has taken place in the Lake Union and Seattle CBD submarkets, Pioneer Square/Waterfront and Bellevue CBD are also experiencing a lot of attention. Weyerhaeuser, an agricultural manufacturer that is the seventh-largest company in the state by revenue, relocated its headquarters to an 180,000 square foot build-to-suit development in Pioneer Square, becoming a new anchor tenant in the neighborhood. 450 Alaskan and Hawk Tower are other significant projects in the submarket set to deliver in the next months, with 59.8 percent of their combined space preleased. The Bellevue CBD is gaining two Trophy towers; Centre 425 was completed in the fourth quarter of 2016 and is fully leased by a single-user tech tenant, and 400 Lincoln Square is 71.7 percent leased and expected to deliver in early The flight to quality trend in the market has intensified and buildings are expected to continue delivering with limited available space. Tech employment in the region has grown by 77.7 percent since 2001, the fourth highest growth rate in the country. Bloomberg s 2016 U.S. Innovation Index ranked Washington as having the third most innovative economy for the second consecutive year, behind only Massachusetts and California. This was largely due to the state s placement as number one in STEM concentration and number two in total science and engineering degree holders. Seattle-Bellevue, offering the second highest concentration of highly-educated millennials in the country and a relatively low cost of living, was also named a top-five city for business and careers. According to American City Business Journals, Seattle-Bellevue will become the 14th largest metro area by 2040 due to a population increase of 38 percent. Seattle remains one of the most desirable markets for millennials to live, and will continue to be a place that tech companies establish and expand their presence. 16

17 Seattle office sales & statistics Office market statistics Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption RSF Downtown Seattle 51,796, % $ ,858,364 Eastside 26,452, % $ ,900 Northend 7,634, % $ ,124 Southend 8,645, % $ , Total Market 94,529, % $ ,476, Total Market 91,830, % $ ,461,440 Sales matrix (over $10 million) Number of Sales Price/SF Highest $531 $425 $397 $548 $557 $642 $745 $755 $792 $940 CAP Rate Average 5.2% 6.2% 9.5% 7.2% 6.8% 5.5% 6.1% 6.2% 6.0% 6.2% Sales Volume $9.6B $0.4B $0.4B $1.2B $1.7B $4.9B $2.8B $1.8B $4.5B $4.4B Office market statistics include Class A and B office buildings over 30,000 sf, excluding owner-occupied, medical, and government-owned buildings. Seattle & Portland 2016 Investment Overview 17

18 Seattle office sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Safeco Plaza th Ave 7/14/16 793, / $387,000,000 $ % GLL Real Estate Partners / Vestas Investment Management CalPERS / CommonWealth Partners 98% leased at time of sale 68% occupied by Safeco West 8th th Ave 2/24/16 516, $370,000,000 $ % Deutsche Asset Management AEW 98% leased at time of sale 62% occupied by Amazon KOMO Plaza 12/20/16 293,727 $276,000, % GI Partners 90% leased at time of sale th Ave N 2000 $940 Hines Amazon Phase VIII 325 9th Ave N 7/8/16 317, $246,800,000 $ % Metzler / Mirae Asset Global Investments Vulcan 100% leased to Amazon for 16 years Amazon Phase VII 11/17/16 317,189 $244,000, % Tristar Capital / RFR Realty 100% leased to Amazon for 16 years 400 9th Ave N 2015 $769 Vulcan 901 Fifth 6/29/16 540,589 $223,300, % Schnitzer West / Investcorp 90% leased at time of sale 901 5th Ave 1973 / $413 Deutsche Asset Management Major tenants: Cray, Milliman, PitchBook One Twelfth 12/13/16 480,389 $217,000, % Gemini Rosemont 98% leased at time of sale th Ave NE Bellevue, WA 2001 $452 Principal Three property portfolio sale Properties were previously acquired for $136.4M in July 2004 Civica Office Commons 11/14/16 305,835 $193,000, % AEW / Unico 97% leased at time of sale th Ave NE Bellevue, WA 2001 $631 Hines Two building portfolio sale Previously acquired for $205.1M in February

19 Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments 1st Hill Medical Pavilion 1/14/16 227,628 $192,341, % Heitman / NexCore Group Medical office building 1124 Columbia St 1976 / 2015 $845 Trammell Crow / Washington Capital Management Major tenants: Swedish Health Services, CellNetix, Theraclone Symetra Center th Ave NE Bellevue, WA 5/6/16 450, / 2015 $185,000,000 $ % Sterling Realty Organization Walton Street Capital 89% leased at time of sale Hill Stewart St 10/7/16 285, $179,822,000 $ % Hudson Pacific Properties / CPPIB Touchstone / Principal 80% leased at time of sale Major tenants: Redfin, HBO Complex includes a 222-room Hilton Garden Inn, which was not included in this transaction Sunset North 3/31/16 464,062 $155,193, % M-M Properties 98% leased at time of sale th Ave SE Bellevue, WA $334 Beacon Capital Partners Three building portfolio sale Alley 24 2/10/16 215,402 $129,400, % MetLife 85% leased at time of sale 223 Yale Ave N 2006 $601 Vulcan WestPark 5/10/16 778,472 $128,000, % KBS Realty Advisors 82% leased at time of sale th Ave NE Redmond, WA $164 Bentall Kennedy 21 property portfolio sale includes office, industrial and flex product Seattle & Portland 2016 Investment Overview 19

20 Seattle office sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Portfolio Sale Laguna Office Complex 11/11/16 465,000 $109,991,000 Blackstone NE 36th St Redmond, WA 1998 $527 Hines Property includes 6 buildings Part of a 20-property portfolio sale including Daytona Office Campus in Redmond and 5th & Bell Building in Seattle Major tenants: Microsoft, Honeywell Daytona Office Campus 11/11/16 251,000 $94,000,000 Blackstone NE 31st Cir Redmond, WA 2002 $444 Hines Property includes 3 buildings Part of a 20-property portfolio sale including Laguna Office Complex in Redmond and 5th & Bell Building in Seattle Major tenant: Microsoft 5th & Bell Building 11/11/16 197,136 $92,959,000 Blackstone th Ave 2002 $472 HInes Part of a 20-property portfolio sale including Daytona Office Campus and Laguna Office Complex in Redmond Major tenant: Amazon 110 Atrium th Ave NE Bellevue, WA 11/16/16 243, $81,500,000 $ % Lionstone Investments / Talon Walton Street Capital 87% leased at time of sale Lincoln Executive Center th Pl SE, SE Eastgate Way Bellevue, WA 10/6/16 292, $80,500,000 $ % Urban Renaissance Group / Miller Global Properties Beacon Capital Partners 97% leased at time of sale Five building portfolio sale Eastgate Office Park 4/13/16 295,413 $74,725, % Kennedy Wilson Four building portfolio sale SE 30th Pl Bellevue, WA 1985 $253 Beacon Capital Partners 92% leased at time of sale - Building 1 was 95% leased - Building 2 was 100% leased - Building 3 was 94% leased - Building 4 was 86% leased 20

21 Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Time Square SW 39th St Renton, WA 12/14/16 324, / 2004 $54,500,000 $ % Greenbridge Investment Partners LBA Realty 95% leased at time of sale Five building portfolio sale Alderwood Business Center th St SW Lynnwood, WA 12/31/16 198, $42,050,000 $ % Alaska Electrical Pension Fund Embarcadero Capital Partners 91% leased at time of sale Two property portfolio sale 101 Elliott Building 2/10/16 101,738 $40,400, % Credit Suisse 93% leased at time of sale 101 Elliott Ave W 1986 / 2008 $397 SteelWave Meridian Medical Center 3/31/16 69,700 $38,300, % Healthcare Realty Trust Medical office building Meridian Ave N 2006 $550 First Western Development Redmond Woods 6/21/16 145,221 $36,985, % Hayman Properties th Ave NE Redmond, WA 1982 $255 Clarion Partners Three building portfolio sale The Offices at Riverpark 3/16/16 106,281 $36,900, % Colony Realty Partners Bear Creek Pky NE Redmond, WA 2008 $347 JMA Ventures Bay Vista Office Tower nd Ave 7/21/16 119, $33,645,000 $ % Madison Marquette / Saradar Carlyle Group 91% leased at time of sale George F. Russell Jr. Hall 9/29/16 62,500 $30,685, % Meriwether Partners 1414 NE 42nd St 2009 $491 Unico Property consists of 44,000 sf of office space, street-level retail and two floors of apartment units Redmond Technology Center Redmond Way Redmond, WA 5/24/16 100, $30,250,000 $ % Ascentis Real Estate Partners Menlo Equities 92% leased at time of sale 34% occupied by Pushpay Previously acquired for $15.9M in June 2012 Seattle & Portland 2016 Investment Overview 21

22 Seattle office sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments 1411 Fourth 4/21/16 123,430 $29,725, % Onni Group 87% leased at time of sale th Ave 1929 / 2008 $241 Mack Real Estate Group One Newport 1/22/16 89,850 $29,075,000 N/A AAA Washington nd Ave SE Bellevue, WA 1985 $324 Ivanhoe Cambridge Owner-user purchase Creeksides at Centerpoint 1/13/16 218,585 $26,500, % Menashe Properties 90% leased at time of sale nd Ave S Kent, WA 1984 $121 Unico Three building portfolio sale Quadrant Willows - Building C and E Willows Rd NE Redmond, WA 3/3/16 130, / 2007 $25,650,000 $ % Equus Capital Partners SteelWave Two building portfolio sale Building C was 76% leased at time of sale Building E was 88% leased at time of sale Broadacres Building 10/14/16 123,108 $25,400, % LBA Realty 69% leased at time of sale nd Ave 1907 $206 Principal Taylor Edwards Building 10/19/16 69,248 $25,000,000 N/A WSA Properties st Ave S 1918 / 1998 $361 Henbart Sale included a vacant lot Springbrook Business Park 12/16/16 185,022 $23,500, % Stockbridge 93% leased at time of sale S 180th St Kent, WA $127 Metzler Four building portfolio sale Weyerhaeuser Campus 2/9/16 343,535 $22,762,000 N/A Industrial Realty Group Part of portfolio sale (Office + R&D Building) Weyerhaeuser Way S Federal Way, WA 1971 $66 Weyerhaeuser Company IRG plans to redevelop and lease or sell parts of the property for office or industrial use Riverview Plaza 9/16/16 171,260 $22,150, % Talon 94% leased at time of sale Christensen Rd Tukwila, WA 1981 $129 Broadreach Capital Partners Three building portfolio sale 22

23 Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Valley Medical Center 4/29/16 46,600 $21,600, % Healthcare Realty Trust Medical office building 3915 Talbot Rd S Renton, WA 1983 $464 Valley Medical Center Sammamish Park Place - Building A & B SE 51st St Issaquah, WA 5/2/16 202, $21,100,000 $104 N/A Onward Investors Midland RE Services / PNC Bank Two building portfolio sale Both buildings were 0% leased at time of sale REO sale Delta Dental Building th Ave NE 11/16/16 87, / 2002 $20,275,000 $ % Salal Credit Union Washington Dental Service 97% occupied with Delta Dental vacating its space in mid-2017 Included a 6-story garage with 308 stalls Watermark Tower 9/16/16 71,150 $20,250, % Martin Smith 96% leased at time of sale st Ave 1983 $295 Razore Enterprise Sale included the commercial portion only (7 stories), the condominiums (15 stories) were not part of the offering University District Building 7/21/16 72,000 $19,900, % Nicola Crosby 1107 NE 45th St 1981 / 1995 $276 Cypress Wealth Advisors University of Washington occupies approximately 2/3 of the building Q-13 Building 1813 Westlake Ave N 7/8/16 65, $19,500,000 $ % CBRE Global Investors (Allstate) Tribune Media Company 100% leased to Tribune Broadcasting Company Gateway Two 1/11/16 68,776 $18,280, % Swift Real Estate Partners 50% leased at time of sale th Ave SE Bellevue, WA 1988 $266 Walton Street Capital 1550 Building 5/18/16 51,550 $18,000, % Spire General Partner US 550 4th Ave S 1974 / 2005 $349 Bruce Raskin Delphi Building 7/15/16 69,980 $17,400, % Swift Real Estate Partners th Pl SE Bellevue, WA 1981 $249 Sun Life Assurance Company Seattle & Portland 2016 Investment Overview 23

24 Seattle office sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Quadrant I-5 Corporate Park - Building A th St SW Everett, WA 6/30/16 74, $14,200,000 $ % Shelby Company Washington Capital Management 89% leased at time of sale Off-market transaction Building (Bellevue Community College) Northup Way Bellevue, WA 9/15/16 62, $13,411,000 $214 N/A Robert Rothe Walton Street Capital 38% leased at time of sale Fairway Center 6/16/16 82,537 $12,800, % Shelby Company 95% leased at time of sale Interurban Ave S Tukwila, WA 1990 $155 Schuster Group 15 Lake Bellevue 3/29/16 35,200 $12,600, % Costacos Family LP 15 Lake Bellevue Dr Bellevue, WA 1999 $358 Taylor Development Franciscan Medical Pavilion th St SE Auburn, WA 5/12/16 37, $12,089,000 $ % Ling Long / Chris Wang Donovan Brothers Commercial Construction Medical office building 95% leased at time of sale David Evans & Associates 6/22/16 24,497 $10,800, % Aegis Living th Ave SE Bellevue, WA 1991 $441 Macadam Forbes 1031 exchange Puyallup Executive Park 3/9/16 64,382 $10,700, % Matthew Eldridge 90% leased at time of sale E Main Ave Puyallup, WA $166 Steven Brown Seattle Veterinary Specialists th Ave NE Kirkland, WA 3/4/16 19, $10,400,000 $ % Michael Kinney Puget Sound Center for Veterinary Medicine Seller was the anchor tenant and a 14-year sale leaseback was completed Koll Bellefield 6/24/16 66,376 $10,250,000 N/A Onward Investors 0% leased at time of sale th Ave SE Bellevue, WA 1983 $154 AAA Washington 1031 exchange 24

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27 Seattle Office Industrial Retail Multifamily

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29 Seattle industrial sales ($10M+) overview Sales volume increases, surpassing $1.2 billion in 2016 Industrial market fundamentals continue to adapt to rapidly improving economic conditions throughout the region. Reduced vacancy rates combined with high job and population growth are contributing to the current market situation, where developers are initiating projects at record levels. The Ports of Seattle and Tacoma have remained strong economic drivers, strengthening imports and exports in the region and helping to drive the local industrial market primarily in the Aerospace, Food/Beverage and Logistics industries. The Puget Sound area continues to be one of the top markets in the nation and industrial properties are attracting investors as well as retailers, e-commerce and food and beverage companies seeking to expand their real estate footprint. There continues to be a lack of available inventory and limited new product to satiate the demand in the market. A flurry of industrial sales closed in 2016 as institutional investors took notice of the region s strengthening market fundamentals. 33 transactions over $10 million closed during the year, totaling nearly 9.0 million square feet and $1.2 billion, representing a 9.0 percent increase in volume compared to More than half of the transactions were portfolio sales of more than two properties, with cap rates ranging from 4.0 percent to 7.0 percent, and nearly 80 percent of the deals occurred in the Southend. Furthermore, average pricing on a per-square-foot basis increased 30 percent year-over-year to $144, and cap rates declined 20 basis points to an average of 5.5 percent. The cap rate compression in the market has been significant, as it s currently 370 basis points below the high of 9.2 percent in There were three deals that exceeded $100 million in Two of which occurred in the fourth quarter. Prologis purchased Unified Grocers Site in Seattle from Sabey Corporation. The eight property portfolio totaling 1.0 million square feet, traded for $136.0 million, or $133 per square foot. Clarion Partners purchased Cornerstone s portfolio of approximately 980,000 square feet in Tukwila and Kent for $143 per square foot at an incredibly low 3.8 percent cap rate. Several other buyers including KBS Realty Advisors, LBA Realty, BKM Capital Partners, and Industrial Property Trust participated in transactions in the market that led to solid investment activity in Though quality product is becoming increasingly limited, transaction volume and activity in the Seattle- Bellevue region continues to be strong. Puget Sound remained a top-10 market nationally for institutional grade investments, according to PWC and ULI s recently released Emerging Trends in Real Estate 2017 report. In the West Coast, Seattle was ranked second in terms of investment prospects for the industrial sector, behind only Portland. Institutional investors have clearly taken notice of the strong market fundamentals over the last three years and have been aggressive in acquiring both existing product, typically through unsolicited offers, as well as land in order to develop new product in the near-mid-term. Given strong demand from users along diminishing available space and increasing rental rates, some owners are looking at taking advantage of current market conditions and are evaluating selling their property at relatively high prices. With the local economy continuing to strengthen, the outlook for the Puget Sound industrial market is positive. Moving into 2017, we expect the industrial market to continue to perform well, both in terms of demand from tenants and interest from institutional investors. Seattle & Portland 2016 Investment Overview 29

30 Seattle industrial leasing Year-end activity signaling continued growth in marked another strong year for leasing activity in the Puget Sound industrial market. Vacancy in the region dropped 90 basis points year-over-year to its current rate of 2.7 percent, down 550 basis points since Every cluster in the region has seen vacancy drop in the last 12 months, with rates ranging from 4.3 percent in Pierce County down to 1.5 percent in the Seattle cluster. Though 2.8 million square feet of speculative development is underway, THE DEMAND FOR INDUSTRIAL SPACE IS SIGNIFICANTLY OUTPACING THE INCREASE IN INVENTORY and more is planned to start, the demand for industrial space is significantly outpacing the increase in inventory, with about 16.0 million square feet of active tenant requirements in the market. The growth in tenant demand and the market s limited inventory will continue to compress vacancies and availabilities in the region. The pace of absorption and leasing activity in the Puget Sound industrial market remained strong throughout More than 6.4 million square feet of space was absorbed, the highest total since 2007, and a 3.0 percent increase over This activity was focused predominantly in the Kent Valley and Pierce County clusters, which recorded 2.4 million square feet and 2.5 million square feet of total absorption, respectively. Tenant demand, from both small and large users, has contributed to robust net absorption totals. There are currently more than 50 companies in the market seeking space options larger than 100,000 square feet and nearly 100 tenants seeking less than 100,000 square feet. With limited available product and continued strong absorption each quarter, landlords are comfortable posting high asking rates, leaving tenants with limited options such as early renewals, and accepting smaller free rent and tenant improvement allowance packages. More than 4.4 million square feet of new product was added to the market in With limited supply of available quality space in the region, newly-delivered product is being leased and absorbed at a strong pace. There were a total of 26 leases signed in 2016 that exceeded 100,000 square feet. All but three of these major leases took place in the Southend, where the demand and shortage of supply is notably high. The largest transaction of 2016 was Serta Simmons lease of 272,834 square feet at IAC Port 167 in Puyallup/Sumner submarket. Other notable transactions include Stryder Logistics s 249,269 square foot lease at Prologis Park Kent, Amerisource s 229,918 square foot lease at Des Moines Creek Business Park, and Regal Logistics 225,972 square foot lease at LogistiCenter at 167 in Fife. Given continued demand for space, coupled with the scarcity of quality available options, it is likely that absorption will remain positive and vacancy rates remain tight in the coming quarters. Even with limited land available in the region, developers are continuing to capitalize on the Seattle market. The largest current project is Prologis 770,195 square foot project in the Port of Tacoma/Fife submarket. Given the escalating land prices, rising construction costs, and shortage of big-box space, the majority of developments have been projects over 100,000 square foot. Construction activity is expected to ramp up as there are additional 7 million square feet of planned and proposed projects that sit in the pipeline slated for

31 Seattle industrial sales & statistics Industrial market statistics Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption RSF Seattle 47,085, % $ ,327 Kent Valley 110,980, % $0.69 2,457,690 Pierce County 62,923, % $0.58 2,530,579 Eastside 32,199, % $ ,926 Northend 28,551, % $ , Total Market 281,739, % $0.79 6,407, Total Market 277,314, % $0.71 6,209,388 Industrial market statistics include industrial and flex inventory over 10,000 sf, single-tenant, multi-tenant and owner-occupied. Sales matrix (over $10 million) Number of Sales Price/SF Highest (ind) $140 $164 $151 $100 $115 $187 $125 $288 $198 $194 $312 CAP Rate Average 6.8% 5.9% 6.6% 9.2% 7.4% 7.2% 6.5% 6.3% 6.4% 5.7% 5.5% Price/SF Highest (flex) $206 $237 $199 $207 $156 $257 $180 $190 $122 $171 $229 Sales Volume $0.6B $0.7B $0.4B $0.2B $0.2B $0.3B $0.7B $0.8B $0.4B $1.1B $1.2B Seattle & Portland 2016 Investment Overview 31

32 Port of Seattle and Port of Tacoma historical total TEU s 2016 TEU container volume Seattle* Tacoma* * In 2014 Port of Seattle and Port of Tacoma began combining their statistics 4,500,000 4,000,000 3,500,000 3,000,000 Total TEU s 2,500,000 2,000,000 1,500,000 1,000, , * Seattle 1,973,504 1,704,492 1,584,596 2,153,685 2,049,733 1,885,680 1,592,753 * * * Tacoma 1,924,929 1,861,358 1,545,853 1,412,869 1,443,550 1,678,778 1,863,408 * * * Total TEU s ,393,522 3,529,441 3,615,752 32

33 Seattle industrial sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Boeing Field Site 11/30/16 1,029,011 $136,000, % Prologis 3301 S Norfolk St 952 $132 Sabey Corporation Eight property portfolio sale including two office & six industrial buildings Southcenter S Industrial Park / Green River Corporate Park Olympic Ave S Kent, WA 12/21/16 930, $132,697,000 $ % Clarion Partners Cornerstone Real Estate Advisers 11 property portfolio sale WestPark 5/10/16 778,472 $128,000, % KBS Realty Advisors 82% leased at time of sale th Ave NE Redmond, WA $170 Bentall Kennedy 21 property portfolio sale includes Office, Industrial and Flex product Gateway Corporate Center 12/21/16 371,163 $78,000, % BECU 87% leased at time of sale Gateway Dr Tukwila, WA 1986 $210 RREEF America Eight property portfolio sale Des Moines Creek Business Park Phase I 2231 S 208th St Des Moines, WA 12/15/16 547, $68,000,000 $ % LaSalle Investment Management Panattoni Three property portfolio sale Apollo / Titan Building 6/14/16 428,109 $48,050, % LBA Realty nd Ave E Sumner, WA 2014 $112 LaSalle Investment Management Two property portfolio sale Weyerhaeuser Campus nd Ave S Federal Way, WA 2/9/16 461, $47,738,000 $103 N/A Industrial Realty Group Weyerhaeuser Company Sale represents Industrial/Flex portion of two property portfolio sale Tukwila Commerce Center 8/8/16 475,517 $45,200, % BKM Capital Partners 88% leased at time of sale Industry Dr Tukwila, WA 1976 $95 Global Logistic Properties 27 property portfolio sale Springbrook 188 Distribution Center - Building S 188th St Kent, WA 11/18/16 365, $40,302,000 $ % Blackstone LBA Realty Sales represent allocated sales price Part of 49 property bulk sale Seattle & Portland 2016 Investment Overview 33

34 Seattle industrial sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments 711 E 11th St 11/30/16 60,000 $32,376,000 N/A Industrial Property Trust Industrial building was unused by seller 711 E 11th St Tacoma, WA 1983 $540 Interfor Sale includes 10K SF of office - 0% leased at time of sale Sale was based on land value Westview 522 4/6/16 184,260 $32,200, % Pine Forest Properties th St SE Woodinville, WA 2008 $175 Onward Investors Portfolio sale include 4.96 acre pad site available for future development Occidental Ave S 9/21/16 145,069 $32,000,000 N/A WSA Properties Occidental Ave S 1941 $221 Apollonia Kwan Two property porfolio sale Buyer intends to build a basketball arena Kent Industrial Portfolio 3/30/16 266,000 $31,602, % Industrial Property Trust nd Ave S Kent, WA $119 Prologis Three building portfolio sale Ranch Associates Buildings 8/31/16 250,000 $30,000, % Puget Sound Energy th Ave S Kent, WA 1968 $115 Hill Raaum Pietromonaco Totem Lake Commerce Center th Ln NE Kirkland, WA 6/23/16 171, $28,012,000 $ % NWB Totem Lake LLC Benaroya Company Sea King Industrial Park 9/22/16 195,800 $27,000, % RREEF America th Pl S 1975 $138 Int l Airport Centers Six property portfolio sale Former Safeway Bakery Building th Ave NE Bellevue, WA 11/15/16 102, $26,500,000 $258 N/A Bellevue School District No. 405 Safeway Prior owner/occupant closed plant upon sale Purchased for use as future elementary school The Steele Building 6/30/16 206,463 $24,000, % Bixby Land Company 1565 Fryar Ave Sumner, WA 2015 $116 MetLife / Panattoni All cash deal 34

35 Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments East Valley Distribution Center th Ave S Kent, WA 9/22/16 228, $23,900,000 $ % RREEF America Int l Airport Centers Springbrook Business Park S 180th St Kent, WA 12/16/16 185, $23,200,000 $ % Stockbridge Capital Group Metzler Four property portfolio sale Opus Park 167 4/15/16 170,815 $22,000, % Industrial Property Trust th St SW Auburn, WA $129 Beaverbrook Enterprises Three building portfolio sale Emerald Corporate Park - Building E C St NE Auburn, WA 2/19/16 152, $21,900,000 $ % CenterPoint Properties Shelby Company Sale included acquisition of a 1.4 AC parcel on Auburn Way N for $2.5M that will be paved and fenced for additional parking for the tenant FedEx Redmond Heights Tech Center NE 87th St Redmond, WA 5/26/16 126, $20,400,000 $ % Wakefield Properties Deutsche Asset Management Five building portfolio sale Andover Executive Park 10/25/16 171,723 $19,800, % BKM Capital Partners 83% occupied at time of sale Industry Dr Tukwila, WA 1972 $115 ScanlanKemperBard Companies 10 property portfolio sale Everett Commerce Center 11/18/16 217,700 $17,981, % Blackstone 6617 Associates Blvd Everett, WA 2008 $83 LBA Realty Sales represents allocated sale price Part of 102 property bulk sale Quadrant Parkside Office Park th Ave NE Bothell, WA 11/18/16 77, $17,800,000 $ % Hill Family III LLC Embarcadero Capital Partners 94% leased at time of sale Three property portfolio sale Buyer simultaneously sold a fourth building in the complex to a church Span Alaska Transporation 3/21/16 51,250 $16,000, % Realterm Global 3815 W Valley Hwy N Auburn, WA 2007 $312 Span-Alaska Transportation Seattle & Portland 2016 Investment Overview 35

36 Seattle industrial sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Riverfront Business Park Woodinville Redmond Rd NE Woodinville, WA 2/12/16 137, $15,450,000 $ % Harsch Investment Properties Western America Equities Four property portfolio sale Kirkland 118 3/10/16 77,072 $13,916, % Par 5 Park 118 LLC th Ave NE Kirkland, WA 1998 $181 Expert Drywall Two building portfolio sale Airport Business Center 10/7/16 150,046 $12,550, % Vaupell Industrial Plastics 85% leased at time of sale th Ave W Everett, WA 1986 $84 Puget Sound Properties Owner/user sale Kent 212 Building 10/19/16 126,656 $12,412,000 N/A Bule Origins th Ave S Kent, WA 1974 $98 John & Cynthia Baumann Owner/user sale; buyer to occupy Buyer intends to occupy the building Red Dot Building 5/27/16 113,980 $12,300, % LBA Realty 745 Andover Park E Tukwila, WA 1974 $108 Red Dot Corporation Sumner West 10/18/16 117,870 $12,120,000 N/A John Larsen 0% leased at time of sale 2719 W Valley Hwy E Sumner, WA 2016 $103 Columbia Pacific Owner/user sale; buyer to occupy Kirkland Business Center 5/23/16 109,180 $11,150, % Razone Enterprise NE 116th St Kirkland, WA 1962 $102 TA Realty Owl Transfer Building 6/14/16 73,335 $10,600, % John & Diane Ching 99% leased at time of sale th Ave S 1961 $145 American Life Tri-Land Industrial Park - Dania Building 1251 Andover Park W Tukwila, WA 2/26/16 100, $10,000,000 $100 N/A Interline International / Scandinavian Design Tri-Land Corporation Owner/user sale; buyer was the tenant 36

37 Seattle & Portland 2016 Investment Overview 37

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39 Seattle Office Industrial Retail Multifamily

40 2016 Seattle retail sales ($10M+) overview Sales volume continues to decline, but a new record for pricing is achieved 2016 was another highly active year for retail investment sales throughout the Seattle region with 22 transactions over $10 million. Much like 2015, the flurry of activity didn t translate to higher sales volume, with only $548.9 million in assets trading hands, a drop of 15.0 percent year-over-year and the lowest level since Investors are transferring their focus to periphery markets, as approximately 75 percent of all transactions and 64 percent of total sales volume for 2016 came from outside of the Seattle-Bellevue core. We are starting to see the focus shift from the core to lower cost, longterm investments in secondary and tertiary markets. Tacoma was a particularly active segment of the market, with three of the 10 largest transactions of the year and total sales volume of $97.5 million, second only to Seattle. Tacoma also lays claim to the largest transaction of the year south of Seattle, with the purchase of the Tacoma South Shopping Center by Retail Properties of America from Sterling Realty. The 230,657 square foot neighborhood center is anchored by Bass Pro Shop and LA Fitness and was 97 percent leased at the time of the $39.4 million sale. The largest transaction of the year occurred in the first quarter, when Vulcan Real Estate sold 2200 Westlake to Weingarten Realty Investors for $66.2 million, or $897 per square foot. The 100 percent leased, Whole Foods-anchored retail portion of 2201 Westlake in Seattle traded at a cap rate of 5.8 percent, the second lowest of the year. Seattle also saw a new market record for pricing occur when the Liberty Building, home to Hard Rock Café, sold for $1,297 per square foot. With the highest average price per square foot of $833, and the highest volume of any submarket at $131.6 million, Seattle is still the most desirable location for investment throughout the Puget Sound region. Seattle was ranked as the 3rd most desirable market in the U.S. for investment in the retail sector, up 17 spots from last year, according to PWV and ULI s Emerging Trends in Real Estate 2017 report. 43 percent of respondents to the Emerging Trends in Real Estate survey placed a buy rating on retail property in Seattle. Look for further exploration of peripheral markets in 2017 as a variety of traditional anchor tenants are closing stores in shopping centers throughout the region. SEATTLE WAS RANKED AS THE 3RD MOST DESIRABLE MARKET IN THE U.S. FOR INVESTMENT IN THE RETAIL SECTOR 40

41 Seattle retail leasing Market tightens further, putting landlords in the driver s seat 2016 was a banner year for the Puget Sound retail market. Vacancy continued its rapid decline, ending the year at 3.6 percent, a drop of 50 basis points year-over-year and the lowest level in more than a decade. Subsequently, rental rates continued on the upward trajectory, finishing at $18.80 per square foot, an increase of 7.0 percent year-over-year and the highest rate since As the RENTAL RATES CONTINUED ON THE UPWARD TRAJECTORY market tightens even further and population density continues to increase, we have seen a number of national retailers moving to the market, including la Marzocco, Whole Foods 365, New Seasons, Filson, and Warby Parker. Net absorption for all submarkets Downtown Seattle, Eastside, Northend, Southend, and Tacoma was overwhelming positive, with 1.1 million square feet of space taken down in the year. The Downtown Seattle submarket remained the tightest, as vacancy dropped 50 basis points to 1.7 percent. Rental rates increased 8.1 percent year-over-year to an average of $ Tacoma posted another impressive year, accounting for 62 percent of total market absorption, with rental rates increasing to a respectable $15.98, and vacancy down a staggering 36 percent to 4.7 percent overall. Development activity was minimal in 2016, with just 391,629 square feet of inventory added to the market. 588,018 square feet of space remains under construction heading into As in 2015, technology advancement was emphasized across the retail spectrum in With delivery concepts continuing to expand their offerings in Seattle, traditional brick and mortar retailers are using a number of approaches to drive traffic or take advantage of the emerging delivery market. Amazon Prime Now made a big splash in the Seattle market last year with guaranteed 2-hour delivery on select items sold directly from Amazon. A number of local grocers, including Uwajimaya and PCC Natural Markets, have tapped into the established delivery network this year to offer their in-store offerings in 2 hours or less. Orders are filled by personal shoppers and delivered using the existing Prime Now delivery network. Fresh off of their Amazon Books store opening in 2015, Amazon expanded their brick and mortar offerings to include Amazon Go in South Lake Union. The store incorporates a number of sensors, so unlike traditional retailers, no check stands are present and customers simply grab food from the shelves and walk out. While many traditional grocers and restaurants become congested at checkout during the lunch and after work rush, Amazon Go stores identify your Amazon account information upon entry and track each item you grab from the shelf so your account can be charged when you leave. With the tourism sector expanding in Seattle, SeaTac International Airport announced a plan for expansion to accommodate the growing number of domestic and international visitors. The $636 million renovation will transform the existing retail and dining hub into a more modern facility that will include eight new gates, improved Wi-Fi connectivity, and 46,000 square feet of retail and dining options; more than double the existing retail space. The project aims to improve the overall traveling experience, enhance the quality of retail offerings, and fix a number of operational inefficiencies. The project is expected to break ground in early 2017, with a targeted completion sometime in Seattle & Portland 2016 Investment Overview 41

42 Seattle retail sales & statistics Retail market statistics Submarket Size (RSF) Vacancy Avg. Rental Rate (NNN) Net Absorption RSF Downtown Seattle 26,365, % $ ,889 Eastside 28,036, % $ ,349 Northend 47,084, % $ ,132 Southend 31,230, % $ ,396 Tacoma 41,416, % $ , Total Market 174,134, % $ ,077, Total Market 173,174, % $ ,445,654 Sales matrix (over $10 million) Number of Sales Price/SF Highest $518 $467 $380 $404 $305 $387 $512 $509 $849 $701 $1,297 CAP Rate Average 6.4% 5.9% 7.2% 8.8% N/A 7.0% 6.4% 6.4% 6.0% 6.3% 6.4% Sales Volume $0.5B $0.4B $0.1B $0.1B $0.1B $0.4B $0.9B $1.1B $0.8B $0.6B $0.5B 42

43 Seattle retail sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments 2200 Westlake - Whole Foods Market Westlake Ave 2/29/16 73, $66,210,000 $ % Weingarten Realty Investors / Bouwinvest Vulcan Retail portion of 2201 Westlake 412 parking stalls included in the sale Bellevue Plaza 5/3/16 60,844 $45,350,000 N/A Vulcan 75% leased at time of sale th Ave NE Bellevue, WA 1962 $745 UDR Planned redevelopment Alderwood Plaza 5/11/16 178,734 $40,747, % Merlone Geier Partners 98% leased at time of sale rd Ave W Lynnwood, WA 1980 / 2003 $228 Barclay s Realty Major tenants: Rite Aid, Big 5 Sporting Goods, Ross, HomeGoods, Buffalo Wild Wings Tacoma South Shopping Center S Hosmer St Tacoma, WA 5/5/16 230, $39,400,000 $ % Retail Properties of America Sterling Realty 97% leased at time of sale Major tenants: Bass Pro Shop, LA Fitness Klahanie Shopping Center 7/15/16 66,895 $35,988, % Regency Centers 93% leased at time of sale Klahanie Dr SE Issaquah, WA 1998 / 2000 $538 Gerrity Group The shopping center s anchor, QFC, was not part of the sale Previously acquired for $22.0M in November 2011 Bridle Trails Shopping Center nd Ave NE Kirkland, WA 10/17/16 106, $32,800,000 $ % ROIC Urban Renaissance Group 99% leased at time of sale Major tenants: Bartell Drugs, Red Apple Market, Ace Hardware James Center 1/13/16 128,264 $31,400, % Vestar Development 91% leased at time of sale 6901 S 19th St Tacoma, WA $245 InvenTrust Properties Major tenants: Fred Meyer, Rite Aid, and FedEx Office Promenade 23 2/17/16 96,660 $30,900,000 N/A Vulcan 83% leased at time of sale 2301 S Jackson St 1997 $320 Weingarten Realty Partial redevelopment project that could have approximately 570 apartments, with construction starting in mid-to-late-2017 Seattle & Portland 2016 Investment Overview 43

44 Seattle retail sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Lincoln Plaza Shopping Center S 38th St Tacoma, WA 4/29/16 80, / 2007 $26,718,000 $ % MK Property Services PASSCO Companies 95% leased at time of sale Major tenants: Big 5 Sporting Goods, Mens Wearhouse, Summit Salon Academy Top Foods Grocery Store 1/15/16 70,575 $21,000,000 N/A Intracorp Real Estate Vacant at time of sale NE 15th St Bellevue, WA 2001 $298 Merlone Geier Partners Mixed-use redevelopment project The Liberty Building (Hard Rock Café) 114 Pike St 5/17/16 16, / 2009 $20,750,000 $1, % KLM Equities Urban Visions 100% leased to Hard Rock Café through early-2029 Previously acquired for $3.3M in September 2006 La Plaza Midway 5/10/16 75,830 $19,200, % Da Li Properties 99% leased at time of sale Pacific Hwy S Kent, WA 1993 $253 Tourmaline Capital Major tenants: Market at Plaza, Goodwill, and Sprint Lake Stevens Marketplace 6/16/16 96,341 $17,500, % Gerrity Group 98% leased at time of sale st Ave NE Lake Stevens, WA 1993 $182 Cimco Enterprises Major tenants: Ace Hardware, Rite Aid, Dollar Tree Meeker Square 6/27/16 137,138 $17,000, % Raskin Family 86% leased at time of sale W Meeker St Kent, WA 1966 / 2004 $124 Prium Companies Planned redevelopment Transaction resolved a troubled situation Renton Highlands Safeway Plaza NE 4th St Renton, WA 4/14/16 54, $16,900,000 $ % Washington Investment Henry Buys / Bart Kooyman Major tenants: Safeway, 24Hour Fitness, Petco Midway Lowe s Shopping Center Pacific Hwy S Kent, WA 11/8/16 135, $14,116,000 $ % Guardian Capital Management Robertson Properties Group to Lowe s Home Improvement Ivar s 12/15/16 16,767 $13,725, % Fana Northlake LLC 401 NE Northlake Way 1970 $819 Ivar s 20-year single tenant net leased to Ivar s 44

45 Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments 901 Building 4/28/16 21,968 $13,400,000 N/A Lakha Investments 905 Bellevue Way NE Bellevue, WA 1946 / 1999 $610 Greenbaum Family Mixed-use property that includes approximately 12,000 sf of office space 1031 exchange Brien Motors 12/6/16 34,672 $13,000,000 N/A Swickard Corp Evergreen Way Everett, WA 1965 $375 P & S Properties Buyer intends to occupy the building Woodinville Athletic Center Woodinville Snohomish Rd NE Woodinville, WA 2/12/16 59, $11,970,000 $ % Maverick Investments Goodman Real Estate Major tenants: Gold s Gym, Home Court White River Junction Center A St SE Auburn, WA 1/14/16 52, $10,600,000 $ % Da Li Development Hung Nguyen 89% leased at time of sale Major tenants: Albertsons, Bartell Drugs Twin Lakes Shopping Center SW 336th St Federal Way, WA 6/30/16 33, / 2007 $10,200,000 $ % Frank Au Gold Investment 88% leased at time of sale 1031 exchange Seattle & Portland 2016 Investment Overview 45

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47 Seattle Office Industrial Retail Multifamily

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49 2016 Seattle multifamily sales ($10M+) overview More than $5 billion in sales closed in 2016, setting a new market record Seattle s strength as a multifamily market derives from unprecedented job growth, overwhelming in-migration and consistent demand in spite of record high supply. In 2016, the Seattle metro area set a new peak for sales volume, with $5.1 billion in transactions closing, significantly more than the average of $3.5 billion between 2012 and 2016, and $1.2 billion between 2007 and Investors continue to capitalize on the robust Seattle market because of its proven longevity and remarkable growth opportunities. Seattle is home to many Fortune 500 companies that have a long term commitment to Puget Sound. For this reason, it continues to lead the country in year-over-year job growth with 3.8 percent, compared to the national average of 2.1 percent. For the past seven years, an average of 61,000 jobs have been added to the Seattle market annually. In addition to the large companies that call Seattle home, like Amazon, Microsoft and Boeing, many Bay Area tech giants have grown substantially in the area, such as Facebook, Google, and Salesforce. RENT GROWTH IN 2016 OUTPACED THE NATIONAL AVERAGE AT 7.5 PERCENT YEAR-OVER-YEAR Rent growth in 2016 outpaced the national average at 7.5 percent year-over-year. The Northend saw an increase of 9.3 percent, and the Southend was even more impressive, at 10.7 percent. In 2016, Seattle was the only city ranked in the top ten for both rent growth and rental price. While rents have grown rapidly in each of the last five years, the Seattle area is still a significant discount to San Francisco. Only the San Francisco Bay Area has a tighter housing market than Seattle. It is more costly than ever to own a home in Seattle, as prices have climbed 60 percent in the last five years. In 2016, a record-low number of homes went on the market, with only 1,600 homes for sale in King County compared to 7,400 homes at the same period in Supply is dwindling at a time when demand has never been higher. Seattle s inventory dropped 13.4 percent last year, which is the third largest decrease among the top 20 markets. Washington saw substantial net migration in 2016, as 87,100 people moved to the state, representing 71 percent of the total population growth. This is the third consecutive year that net migration exceeded 45,000, which is the average for the previous decade. In 2017, there will be significant multifamily unit deliveries, with 13,496 currently under construction. In 2016, a remarkable 10,387 units were delivered. This is a large increase in supply when compared to an average of 8,308 units delivered per year between 2012 and 2016, and an average of 3,436 units delivered per year between 2007 and This considerable supply is accompanied by substantial demand, as 11,639 units were absorbed in the last 12 months. The LIV Bel-Red apartments on the Eastside achieved the largest sales price of 2016, selling for $172.0 million. The largest suburban trade was Bridges at Northcreek in Bothell, which sold for $145.0 million. Tivalli was the largest new construction suburban sale, trading for $94.3 million. Cap rates remained relatively flat throughout the year, averaging 4.4 percent for new construction core assets. The overall Puget Sound average for sales larger than $10 million was approximately 5.0 percent. With underlying fundamentals remaining strong, the outlook for 2017 and beyond remains optimistic. As home to many noteworthy companies headquarters and satellite locations, Seattle s economic drivers continue to fuel a healthy market, with robust employment growth, exponential population gain, and limited supply. Seattle & Portland 2016 Investment Overview 49

50 Seattle multifamily sales & statistics Sales matrix ($10M+) Number of Sales Highest Price/Unit $285,965 $407,083 $417,391 $211,957 $321,078 $350,000 $509,800 $690,583 $606,383 $636,192 $554,745 CAP Rate Average 5.4% 5.1% 5.8% 6.4% 6.4% 5.8% 5.5% 5.1% 5.2% 4.9% 5.0% Sales Volume $2.0B $2.9B $1.6B $0.4B $0.9B $1.5B $2.7B $2.0B $2.8B $3.9B $5.1B INVESTORS CONTINUE TO CAPITALIZE ON THE ROBUST SEATTLE MARKET BECAUSE OF ITS PROVEN LONGEVITY AND REMARKABLE GROWTH OPPORTUNITIES. 50

51 Seattle multifamily sales ($10M+) Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller LIV Bel-Red 9/13/16 $172,000, % Kennedy Wilson 2170 Bel-Red Rd Bellevue, WA $381,375 $ Goodman Real Estate Juxt 9/30/16 $151,400, % Blackstone 810 Dexter Ave N $415,175 $ Holland Partner Group Bridges at Northcreek 10/12/16 $145,000, % Griffis Residential Bothell Everett Hwy Bothell, WA $276,718 $ Grosvenor Avalon Brandemoor 10/18/16 $132,000, % Greystar th St SW Lynnwood, WA $260,870 $ AvalonBay Communities Overlook at Lakemont 5/26/16 $122,000, % Security Properties 5305 Lakemont Blvd SE Bellevue, WA $305,000 $ Heitman Campbell Run 9/30/16 $98,000, % Acacia Capital NE 171st St Woodinville, WA $272,222 $ Grosvenor Carriages at Fairwood Downs 12/16/16 $98,000, % Sequoia Equities SE 179th St Renton, WA $245,000 $ TruAmerica Multifamily 77 Central 4/22/16 $96,831, % TIAA th Ave SE Mercer Island, WA $519,936 $ Seco Development Tivalli 3/9/16 $94,250, % Kennedy Wilson Ash Way Lynnwood, WA $246,084 $ Goodman Real Estate Seattle & Portland 2016 Investment Overview 51

52 Seattle multifamily sales ($10M+) Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Berkshires on Elliott 1/20/16 $90,750, % Griffis Residential 2400 Elliott Ave $386,516 $ Berkshire Property Advisors Equinox 10/11/16 $90,250, % Kennedy Wilson / LeFrak 1520 Eastlake Ave E $433,946 $ JP Morgan Chase Glen Park 10/13/16 $85,000, % Prime Group 952 SW Campus Dr Federal Way, WA $183,190 $ Fairfield Residential Belara at Lakeland 7/12/16 $80,500, % Kennedy Wilson 6170 Terrace View Ln Auburn, WA $187,209 $ ColRich The Heights at Bear Creek 12/8/16 $78,750, % Security Properties NE 90th St Redmond, WA $346,916 $ OHSTRS Walton Lofts 8/8/16 $76,000, % Clarion Partners 75 Vine St $554,745 $ The Schuster Group Huntington Park 2/22/16 $75,000, % Starwood Capital Group 9009 W Mall Dr Everett, WA $197,368 $ Equity Residential Millington at Merrill Creek 6/22/16 $74,500, % Prime Residential 1401 Merrill Creek Pkwy Everett, WA $216,570 $ Security Properties Woodlake 1/26/16 $74,211, % Starwood Capital Group NE 132nd St Kirkland, WA $257,675 $ Equity Residential 52

53 Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller The Lodge at Peasley Canyon 9/21/16 $70,172, % Avanath Affordable Housing Military Rd S Federal Way, WA $206,997 $ UBS Realty Advisors Bella Terra 2/22/16 $70,000, % Starwood Capital Group Greenhaven Mukilteo, WA $297,872 $ Equity Residential MileHouse 11/9/16 $69,300, % UDR th Ave NE Redmond, WA $385,806 $ Legacy Partners Arcadia Townhomes 11/18/16 $68,500, % Priderock Capital Partners 1300 SW Campus Drive Federal Way, WA $221,683 $ TruAmerica Multifamily On the Green at Harbour Pointe 6/9/16 $65,250, % Intercontinental Real Estate Harbour Pointe Blvd Mukilteo, WA $221,939 $ Security Properties Solara 12/19/16 $65,200, % Sares Regis Group Lake City Way NE $267,347 $ Simpson Housing Olin Fields 11/1/16 $64,700, % Standard Property Holly Dr Everett, WA $183,807 $ Lowe Enterprises The Reserve 9/27/16 $63,800, % ConAm 125 SW Campus Dr Federal Way, WA $159,102 $ Kennedy Wilson Village at Seeley Lake 10/5/16 $62,600, % Blackstone th Ave SW Lakewood, WA $119,923 $ Bridge Investment Group Partners Seattle & Portland 2016 Investment Overview 53

54 Seattle multifamily sales ($10M+) Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Grammercy 6/30/16 $61,250, % Fairfield Residential th Ln SE Renton, WA $160,340 $ Fowler Property Acquisitions Reunion at Redmond Ridge 1/26/16 $60,496, % Starwood Capital Group Trilogy Pkwy NE Redmond, WA $188,460 $ Equity Residential Waters Edge 11/30/16 $56,600, % Jackson Square Properties 6305 S 238th Pl Kent, WA $186,184 $ Security Properties Surprise Lake Village 10/5/16 $55,300, % Blackstone 2800 Queens Way Milton, WA $163,609 $ Bridge Investment Group Partners Rivet 7/27/16 $55,000, % Capital Valley 1201 Mercer St $419,847 $ Holland Partner Group Heronfield Apartments 1/26/16 $53,182, % Starwood Capital Group NE 123rd Ln Kirkland, WA $263,277 $ Equity Residential Chandler s Bay 10/5/16 $52,550, % Blackstone 1020 Central Ave N Kent, WA $179,352 $ Bridge Investment Group Partners Mosaic Hills 8/9/16 $51,575, % MG Properties SE 239th St Kent, WA $140,915 $ PASSCO Real Estate Burien 1/29/16 $51,450, % Fowler Property Acquisitions th Ave SW Burien, WA $94,751 $ Laramar Group 54

55 Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Ballard Public Lofts 12/21/16 $47,500, % TA Associates th Ave NW $445,773 $ William Parks East Howe Steps 11/21/16 $47,500, % Bender Development 1923 Eastlake Ave E $476,455 $ Daly Partners Northpoint at Creekside 10/19/16 $47,200, % Goodman Real Estate 5601 N 37th St Tacoma, WA $117,413 $ Hamilton Zanze Alara at Harbour Pointe 2/29/16 $46,500, % Kennedy Wilson 4500 Harbour Pointe Blvd Mukilteo, WA $202,174 $ American Realty Advisors Landing at Dash Point 1/27/16 $46,000, % Fowler Property Acquisitions th Pl SW Federal Way, WA $118,557 $ Bridge Investment Group Partners Soren 8/1/16 $45,553, % PrivatePortfolio Group th Ave NW $385,630 $ Pryde Johnson Waterford 10/12/16 $43,200, % Investment Property Group 2020 Lake Heights Dr Everett, WA $216,000 $ Carmel Partners North Creek 7/21/16 $42,000, % Priderock Capital Partners rd Ave SE Everett, WA $159,091 $ Lowe Enterprises Retreat at Maple Hill 10/26/16 $42,000, % Fairfield Residential 1901 SW 320th St Federal Way, WA $140,000 $ Hamilton Zanze Seattle & Portland 2016 Investment Overview 55

56 Seattle multifamily sales ($10M+) Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Venue 6/7/16 $41,500, % New Standard Equities 4455 NE 12th St Renton, WA $146,127 $ Fowler Property Acquisitions Artesia by the Lake 12/15/16 $40,500, % Rise Properties th Ave SE Everett, WA $210,938 $ Fairfield Residential Capri 8/3/16 $40,200, % Calfox Real Estate Investment 324 Central Way Kirkland, WA $497,863 $ Continental Properties Cue 8/12/16 $39,633, % TIAA 1525 Harvard Ave $394,513 $ Denny Onslow Pacifica 1/29/16 $36,250, % Green Leaf Partners 4275 S Pine St Tacoma, WA $204,802 $ Rush Companies Canterbury 11/17/16 $36,100, % Investment Property Group Meridian Ave E Puyallup, WA $200,556 $ Ray & Deanna Dally Alderra 9/8/16 $35,300, % Actus Capital Partners E 99th Ave Puyallup, WA $176,500 $ AllianceBernstein Anthem on 12th 9/6/16 $34,700, % CWS Capital Partners th Ave $274,740 $ Spectrum Development Solution Sunset View 11/30/16 $33,600, % Legacy Group Captial 2101 SW Sunset Blvd Renton, WA $140,000 $ Investors Management Group 56

57 Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Hamptons 10/5/16 $33,300, % Blackstone 2541 Meridian St Puyallup, WA $144,783 $ Bridge Investment Group Partners Clock Tower Village 2/19/16 $33,000, % Security Properties 1584 McNeil St DuPont, WA $175,532 $ Carino and Associates Creekside Village 2/10/16 $33,000, % Daryl Connell 1600 Sequalitchew Dr Dupont, WA $206,250 $ Walt Miles & Eric Cederstrand The Park at Northgate 8/5/16 $33,000, % Wallace Properties Roosevelt Way NE $226,027 $ MG Properties Group Green Leaf at Lakewood 8/31/16 $32,950, % Green Leaf Partners nd SW Tacoma, WA $142,641 $ Thayer Manca Bradley Park 10/5/16 $31,000, % Blackstone th St SE Puyallup, WA $200,000 $ Bridge Investment Group Partners Altitude 12/6/16 $30,300, % FSC Realty 1620 Benson Rd S Renton, WA $261,207 $ Christopher Koruga Cornelius 3/16/16 $29,650, % Pillar Communities 306 Blanchard St $216,423 $ MG Properties Group Vue 25 2/5/16 $28,650, % ColRich 2368 Yakima Ave Tacoma, WA $175,767 $ CenterSquare Investment Management Seattle & Portland 2016 Investment Overview 57

58 Seattle multifamily sales ($10M+) Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Cambridge 1/22/16 $27,000, % Grosvenor th St SW Lynnwood, WA $160,714 $ PASSCO Real Estate The Q 12/30/16 $26,550, % Acme Realty 1321 Queen Anne Ave N $305,172 $ Acacia Capital Packard Building 2/29/16 $25,866, % Equity Residential th Ave $321,344 $ Ederer Investment Company Pacific Pointe 6/6/16 $24,050, % Triad Investments Co Inc N Pacific St $340,197 $ Lani, Robert and Michael Cochran Sage 2/22/16 $22,000, % Starwood Capital Group th St SW Everett, WA $178,862 $ Equity Residential Chesnut Hills 10/5/16 $21,800, % Blackstone st Ave SW Puyallup, WA $138,854 $ Bridge Investment Group Partners Trillium 8/1/16 $21,800, % Pacific Development Partners th St SW Edmonds, WA $242,222 $ Goodman Real Estate Martine 1/26/16 $21,247, % Starwood Capital Group NE 8th St Bellevue, WA $317,126 $ Equity Residential Union 18 9/14/16 $20,800, % Pacific Development Partners th Ave $364,912 $ Goodman Real Estate 58

59 Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Gilman Terrace 5/31/16 $20,155, % Tim McHugh 2572 Gilman Dr W $280,609 $ Gilman Terrace Holdings LLC 80 Main 11/22/16 $20,100, % Borracchini Family 80 S Main St $446,667 $ Goodman Real Estate Court 17 7/29/16 $20,000, % The University of Washington 1717 Market St Tacoma, WA $156,250 $ Lorig Associates Orchard Ridge 2/22/16 $20,000, % Starwood Capital Group th St SW Lynnwood, WA $192,308 $ Equity Residential Highland Village 8/31/16 $19,400, % King County Housing Authority NE 7th St Bellevue, WA $255,263 $ Intracorp Brightwater 11/7/16 $18,800, % FSC Realty th Ave S Federal Way, WA $138,235 $ Daniel Lim Whitworth 7/22/16 $18,230, % Peter Goldman 1619 E John St $337,593 $ Cadence Capital LLC Serene Village 7/21/16 $17,925, % Williams Investments Admiralty Way Lynnwood, WA $148,140 $ Pacific Coast Capital Partners / Fowler Property Acquisitions The Summit 12/30/16 $17,000, % Acme Realty 733 Summit Ave E $326,923 $ Acacia Capital Seattle & Portland 2016 Investment Overview 59

60 Seattle multifamily sales ($10M+) Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Rainier Meadows 4/20/16 $16,921, % Thayer Manca Military Rd S Federal Way, WA $126,276 $ Residential Investco Crystal Pointe 10/6/16 $15,900, % CIM Group th Ave SW Federal Way, WA $151,429 $ Pacific Coast Capital Partners Shoreside Village 12/20/16 $15,400, % Williams Investments th St SE Everett, WA $129,412 $ Tae-Kae Kai Heather Ridge 9/7/16 $15,350, % Hsiao Lin & Yu Lo Sun th Ave W Lynnwood, WA $143,458 $ Apex Properties Group Madison Gate 2501 E Madison St 11/30/16 $14,475,000 $361,875 $ % Ron Danz / Morris Groberman / Andrew Person Munehiro Tanaka Studio 7 6/30/16 $14,450, % Eric Anderson th Ave NE $192,667 $ Triad Development Wilshire Cove 2/9/16 $14,300, % DH&G th Ave W Lynnwood, WA $121,186 $ Williams Investments Meridian Glen 12/5/16 $14,100, % Priderock Capital Partners Meridian Ave S Everett, WA $163,953 $ Randolph Street Realty Capital Yardhouse 2/1/16 $13,897, % Jerry Costacos 1406 E Republican St $397,071 $ Revolve Development 60

61 Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Crystal Bay 1/29/16 $13,730, % Auctus Capital Partner 1605 S 235th Pl Des Moines, WA $122,589 $ Pacific Living Properties Arterra 1/11/16 $13,350, % Jackson Square Properties 711 W Casino Rd Everett, WA $111,250 $ Holland Partners Parkside Village 1/13/16 $13,350, % Weidner Investment Services 9612 SE 252nd St Kent, WA $136,224 $ RedHill Realty Investments Aros & Voss 1/29/16 $12,975, % Suhrco Residential Properties 2251 NW 59th St $341,447 $ Coast Equity Partner Portofino 4/15/16 $12,450, % Peter Goldman 3815 Woodland Park Ave N $355,889 $ Gerry Pigotti Springhaven Village 4/29/16 $11,592, % Goodman Real Estate 9210 S Hosmer St Tacoma, WA $92,000 $ Pacific Living Properties Springfield 4/29/16 $11,312, % Armand Tiberio th Ave SE Renton, WA $176,750 $ Thomas Propst Chameleon 7/26/16 $11,250, % Bob Cryan 3031 NE 137th St $165,441 $ SR Investment Group Clover Lake Park 11/10/16 $11,000, % Fowler Property Acquisitions rd St Sw Lakewood, WA $76,389 $ Charles Diesing Seattle & Portland 2016 Investment Overview 61

62 Seattle multifamily sales ($10M+) Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Emerald Park 11/10/16 $11,000, % Fowler Property Acquisitions rd St E Fife, WA $88,000 $ Charles Diesing The Park 1205 Queen Anne Ave N 12/30/16 $10,700,000 $314,706 $ % Colin Hagstrom / Curran Hagstrom / Giovanni Napoli / Ryan Dinius Acacia Capital Waverly Farms 4/29/16 $10,672, % Goodman Real Estate 9314 S Ash St Tacoma, WA $92,000 $ Pacific Living Properties Lynnview 12/15/16 $10,500, % Madison Residential th St SW Lynnwood, WA $172,131 $ Williams Investments Northgate Manor 9/29/16 $10,500, % Paul & Krista Lin 818 NE 106th St $187,500 $ Jennifer Murphy Queen Anne Flats 7/22/16 $10,500, % Ken Williams 521 2nd Ave W $318,182 $ Isola Homes Forest Park Estates 10/27/16 $10,350, % Meter at 4632 Fowler LLC 4632 Fowler Ct Everett, WA $96,729 $ Johnson Investment Company (Receiver) Sheridan Beach Terrace Bothell Way NE 4/8/16 $10,270,000 $201,373 $ % Steven Lazoff / Jeremy Gustavel / Kurt Fisher Dr. Anastasia Deliganis Stonecreek 1/12/16 $10,000, % RedHill Realty Investment th Pl S Kent, WA $142,857 $ Weidner Investment Services 62

63 PORTLAND

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65 Portland Office Industrial Retail Multifamily

66 Title right 66

67 2016 Portland office sales ($10M+) overview Strong sales volume in the CBD pushes total to new cycle high The number of sales in the metro climbed to 27 transactions above $10 million in 2016, totaling over $1.15 billion with an average price per square foot of $255, a 6.8 percent increase over the $1.1 billion recorded in Of the $1.15 billion, $822 million or 71 percent were assets located in the CBD (Institutional ownership has increased over 50 percent since 2005, with many investors viewing Portland as the leading transitional market that bridges the gap between traditional primary markets and secondary markets.) The end of year sale of Pacwest center from GEPT/Ashforth to LPC Realty Advisors for $170 million was the largest sale of the year and traded at a price per square foot of $312. The 29-year-old building was only 76 percent leased at the time of sale and new owners have pledged significant investment to upgrade the building s lobby and common areas. The sale marks one of two Portland trophy assets that traded hands in 2016, the other being the sale of Pioneer Tower from General Growth Properties to LaSalle for $ million. Pioneer Tower set the year s highwater mark at $411 per square foot and registered the lowest ever cap rate for a core CBD Class A building at 4.8 percent, signaling that investors are placing more value on Portland s core assets and expecting more rent growth. The nod to Portland as a credible alternative to primary markets has been characterized by sharply declining cap rates in recent years, with 2016 reaching a new low; averaging 5.2 percent for core assets in the CBD. Much of the new ownership has pledged significant investment in renovations and upgrades in an effort to modernize their newly acquired assets and fetch higher rents. Buildings such as KOIN Tower and Sixth at Yamhill underwent significant renovations in 2016 and recent acquisitions such as Pacwest, CDK Plaza, Power & Light Building and Macy s will all be undergoing significant renovations to their lobbies and common areas in an effort to attract creative tenants. The sale of the Evergreen Corporate Center was the most significant suburban sale of the year, trading for $45.5 million in the second quarter. The sale consisted of four buildings totaling 266,000 square feet. Following closely was the sale of South Center and the Tanasbourne Commerce Center for $44.25 million and $31.1 million respectively. These high profile suburban trades show that suburban assets are proving attractive to large institutional investors. Office sales should remain brisk through 2017, with a number of high profile properties on the market spilling over from 2016 and institutional owners continuing to look for value and quality in less volatile markets such as Portland. Buildings set to undergo renovations in the market are evaluating their options. These investments will continue to drive rent growth in the CBD. INSTITUTIONAL OWNERSHIP HAS INCREASED...WITH MANY INVESTORS VIEWING PORTLAND AS THE LEADING TRANSITIONAL MARKET... Seattle & Portland 2016 Investment Overview 67

68 Portland office leasing Record development pushes market vacancy and rents up Demand for office space remains strong, with 634,140 square feet being absorbed in Class A absorption in the CBD experienced its best yearly performance since 2000, with 321,062 square feet absorbed in A large part of the positive absorption was due to leases commencing in newly delivered buildings, indicating that tenants are increasingly taking advantage of all the quality space being brought to the market. The rest of the close-in urban submarkets also experienced strong absorption in 2016, with the Lloyd District and Close-In Eastside Class A buildings experiencing 172,652 square feet of positive absorption between the two submarkets. For the first time in six years, supply has outpaced demand; with 1,176,643 square feet delivered in 2016 and a further 1,434,651 square feet currently under construction. After a five year construction hiatus due to the 2008 recession, the eventual delivery of Park Avenue West was the largest addition to Portland s skyline in six years at 220,889 square feet. Together with Pearl West and 1320 Broadway, the three largest speculative developments above 100,000 square feet all delivered around 90 percent leased. Other notable deliveries included the new headquarters of Banfield Pet Hospital in Vancouver, Ankrom Moison in Block 8L and Simple in Clay Creative, which added 206,000, 91,000 and 72,000 square feet respectively. The trend of the urban core spreading out of the CBD accelerated in 2016 with new projects such as Field Office, Leland James Center and other mid-sized developments on the East Side breaking ground. Of the 1.4 million square feet currently under construction, 98.8 percent are located within the urban core. Massive developments such as Zidell Yards and further expansion into the North Waterfront and Slabtown micromarkets are also planned in the near future and will further contribute to the densification of close-in urban submarkets. Portland has had a sub 10 percent office vacancy for the past three years, and continues to be one of the top five tightest markets in the nation, evidenced by over 85.9 percent of new deliveries in 2016 being leased at delivery. New construction rates are shattering previous records, with rents routinely being quoted above $40.00 per square foot and some as high as $ This newer, higher quality product is pushing rents up significantly in the metro area, which are up 13.0 percent year-on-year, to $27.56 full service, predominantly led by CBD Class A buildings, now averaging $ While the information and technology sector continues to be the largest group of tenants looking for space in the metro area, the dominance in leasing activity is waning and being replaced by more traditional tenants looking for space in creative buildings. Demand for creative space is increasing among these non-creative companies, producing an environment where Class B and C office rents are escalating rapidly. A landscape has been formed where creative Class B office space, in specific buildings, can bring in higher rents than traditional office space in Class A buildings. Driven by the high price of new construction, expect rental rates to continue their ascent as properties deliver to the market. Vacancy will likely bump up slightly when deliveries hit the market, but is not expected to rise beyond 10 percent for the metro area, with the CBD likely seeing vacancy modestly higher. Institutional investment in the market will continue to drive the trend of re-positioning buildings; particularly for Class A buildings with vacant space, as new owners try to capture creative demand. This will further push rental rate growth in the market. 68

69 Portland office sales & statistics Office market statistics Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption RSF Central City 26,050, % $ ,951 Eastside 6,495, % $ ,929 Westside 20,741, % $ ,284 Vancouver Suburbs 6,537, % $ , Total Market 59,824, % $ , Total Market 58,699, % $ ,626 Sales matrix (over $10 million) Number of Sales Price/SF Highest $442 $271 $159 $197 $356 $443 $399 $460 $496 $497 CAP Rate Average 6.7% 7.1% 7.6% 8.4% 7.4% 8.3% 7.3% 7.2% 5.6% 5.8% Sales Volume $1.8B $518M $180M $200M $282M $247M $437M $638M $1.1B $1.15B Seattle & Portland 2016 Investment Overview 69

70 Portland office sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Pacwest Center 12/21/16 545,000 $170,000,000 N/A LPC Realty Advisors 76% leased at time of sale 1211 SW 5th Ave 1988 $312 GEPT/Ashforth Company 413 parking stalls Bought for repositioning. Lobby and common areas to be renovated Major tenants: Schwabe, Williamson & Wyatt, Merrill Lynch and Key Bank Pioneer Tower 6/30/16 296,239 $121,750, % LaSalle 95% leased at time of sale 888 SW 5th Ave 1990 $411 GGP 188 Parking stalls Major tenants: Tonkin Torp, Geffen Mesher, Bullivant Houser Bailey Park Square Campus 11/8/16 295,767 $94,350, % CBRE Global Investors 2 property portfolio 100 SW Market St 1969 / 2014 $319 CalSTRS 97% leased at time of sale 212 parking stalls Major tenants: Regence, Oregon DoJ, Ecova Public Service Building 9/15/16 233,607 Master Lease N/A Beacon Capital Partners Off market transaction 920 SW 6th Ave 1927 / 1999 N/A Downtown Development Group Beacon took ownership of master lease 95% leased at time of sale Parking ratio: 2/1,000 Major tenant vacating in 2017 USPS 715 NW Hoyt Street 8/2/16 402, $88,000,000 $218 N/A Portland Development Commission USPS Site will be redeveloped as part of Broadway Corridor Master Plan Purchased for land value USPS (single tenant will relocate to new development in NE Columbia Corridor) 70

71 Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Commonwealth Building 6/16/16 218,499 $69,000, % KBS Realty Advisors 94% leased at time of sale 421 SW 6th Ave 1948 / 2015 $316 Unico Properties Macy s Building 11/22/16 195,470 $54,150,000 N/A KBS Realty Advisors Redevelopment from retail to creative office 621 SW 5th Ave 1908 $277 Macy s Department Stores Macy s will exit the building in Q Evergreen Corporate Center NW Evergreen Pky 6/16/16 266, $45,500,000 $ % Griffin Capital Washington Real Estate Holdings Rent will increase dramatically in 1.5 years Major tenants: Nike South Center I-IV 4/14/16 342,316 $44,250, % Westport Capital 83% leased at time of sale SW Mohawk St 1991 $129 UBS Realty Investors 10 buildings Proforma cap rate: 7.7% RiverEast Center 1515 SE Water Ave 3/16/16 99, /2006 $33,500,000 $ % ASB Real Estate Investments RiversEast LLC In place rents estimated 50% below market 176 parking stalls Major tenants: Mackenzie, Viewpoint Construction Software CDK Plaza 12/8/16 185,729 $33,400,000 N/A Bixby Land Co. 2 building campus and plaza 2525 SW 1st Ave 1981 / 1991 $180 KBS REIT 99% leased at time of sale Major lobby and plaza renovations to take place totaling $7.5m Major tenant: CDK Global (will vacate 20,000 SF in Q1 2017) Fremont Place I & II 7/29/16 121,506 $31,500, % Lincoln 88% leased at time of sale 1750 NW Naito Pkwy 1987 $259 TA Realty 385 parking stalls Major tenants: Harris Group, Legacy Health Seattle & Portland 2016 Investment Overview 71

72 Portland office sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Tanasbourne Commerce Center 3188 NW Aloclek Hillsboro, OR 3/1/16 183, / 2001 $31,100,000 $ % Westport Capital Partners Meriwether Partners 4 buildings 804 parking stalls Major tenants: Nike, Kaiser Permanente, Norm Thompson, Grass Valley Hanna Andersson Building 3/16/16 119,948 $31,000, % Mapleton Investments 92% leased at time of sale 541 NE 20th Ave 1930 / 2015 $259 ScanlanKemperBard 195 parking stalls Renovated in 2015 Major tenant: Hanna Andersson The Round 2/25/16 146,028 $29,325, % SKB/Independencia 2 buildings and parking garage 4145 SW Watson Beaverton, OR 2003 $201 SKB 99% leased at time of sale Parking stalls: 665 stalls Major tenants: 24 Hour Fitness, Exterro Rock Creek Corporate Center 3400 NW John Olsen Pl Hillsboro, OR 1/15/16 142, $23,000,000 $161 N/A Lone Star Funds Blackstone Part of 17 building portfolio sale price is allocation 84% leased at time of sale 4/1000 Parking Major tenants: Fiserv, GE Healthcare Sunset Corporate Park NW Bennett St Hillsboro, OR 1/15/16 133, $22,000,000 $165 N/A Lone Star Funds Blackstone Part of 17 building portfolio sale price is allocation 79% leased at time of sale 160 parking stalls (4/1000 Parking) Major tenant: Volkswagen Board of Trade 9/30/16 88,797 $18,000,000 N/A Kensington Management 65% leased at time of sale SW 4th Ave 1908 $203 New Urban Properties No parking WALT less than 1 year, most tenants on month-to-month 72 72

73 Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments NW Center For Orthopedics & Rehabilitation 1515 NW 18th Ave 8/5/16 33, $16,530,573 $ % Olympus Ventures Acorn NW Real Estate Fund Office/medical use building Major tenants: Pettygrove Physical Therapy & Sports Rehabilitation, Northwest ASC, The Orthopedic and Sports Medicine Center of Oregon ODS Plaza 5/16/16 50,800 $15,231, % Columbia Investments SE 17th Ave Milwaukie, OR 2001 $300 Oregon Dental Service Possible lease-back 150 Parking stalls Major tenant: ODS 1500 Plaza 12/2/16 72,572 $14,575, % Second City 95% leased at time of sale 1500 NE Irving St 1964 / 2013 $201 Swift 158 stalls (2.3/1,000) Ballou & Wright Building 1010 NW Flanders St 1/8/16 55, / 1997 $14,000,000 $252 N/A ASB Real Estate Investments/Specht Evan Denhart 8% leased at time of sale Will be redeveloped into creative office Waterfront 2/4/16 49,222 $12,600, % Roscoe Nelson Off market transaction 811 SW Naito Pkwy 1982 $256 Swift Realty Partners 91% leased at time of sale 45 parking stalls Major tenants: Ensequence, Marquam Group, CompanionLink Software Sharp Electronic Building 6/29/16 55,000 $12,500,000 N/A Camas School District 0% leased at time of sale 5750 NW Pacific Rim Camas, WA 1990 $227 Sharp Electronics Corp Owner-user purchase Includes 30 acres of land for future development Seattle & Portland 2016 Investment Overview 73

74 Portland office sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Swift Portfolio Merchant Hotel Building Captain Couch s Square Norton House Bldg 12/29/15 90, / 1994 $12,188,000 $ $6,110,267 $3,290, % Swift Real Estate Partners Fountain Village Development Co 3 historic buildings 95% leased at time of sale Will be redeveloped to creative Renovated in 1990, 1998, 1998 $2,787,284 Onder Portfolio 915 SW 2nd Ave 3/10/16 56, $12,125,000 $213 N/A Onder Development House Of Gold 3 building sale consisting of office and retail buildings Property will be redeveloped into Hotel tower and office building - land value Lovejoy Medical Building 6/30/16 40,000 $10,000, % Killian Pacific 83% leased at time of sale 2525 NW Lovejoy St 1965 $250 Ifits Equity Office/medical use building 1031 exchange Major tenant: Retina Northwest 74

75 Seattle & Portland 2016 Investment Overview 75

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77 Portland Office Industrial Retail Multifamily

78 2016 Portland industrial sales ($10M+) overview Sales velocity accelerates as institutional investors take advantage of strong tenant demand The absence of large multimarket portfolio sales that included multiple Portland properties left 2016 industrial sales down 24 percent from 2015 s alltime high of $615 million, to $467 million. However, this is the second highest total on record and interest in Portland assets remains high with the number of deals above $10 million increasing to 16, double 2015 s velocity. Sales continue to be focused in the NE Columbia Corridor with 40 percent of sales concentrated in that submarket. Deliveries of new product remain strong and delivered 83 percent leased in 2016, 20 percent higher than 2015 and higher than any year on record WAS ANOTHER RECORD YEAR FOR INDUSTRIAL SALES IN PORTLAND Increased demand and competition for Portland industrial assets continues to compress cap rates with the average cap rate dropping from 2015 to 6.1 percent. With record low vacancy and surging rents, investors who own quality assets are reluctant to sell and the lack of Class A sales was noticeable, with only four Class A buildings sold in 2016 at an average cap rate of 5.3 percent. One of those sales was Rivergate Logistics Center from Principal Real Estate Investors to Dermody Properties at a cap rate of 4.7 percent, the lowest in The building was also the largest individual building sold at 527,934 square feet. Developers are also taking advantage of Portland s hot industrial market. The newly built PDX Logistics Center, Buildings 1, 2 and 3, sold to Clarion Partners for a total of $82.8 million or $98 per square foot, with a cap rate of 5.7 percent for Buildings 1 and 2 and 5.4 percent for Building 3. The project was fully leased before delivery and had weighted average lease terms of 8.9 and 6.4 years respectively. The crowding out of local investors and owner/users by institutional investors continued in 2016 with only one transaction above $10 million going to an owner/user and just two transactions by regional investors. By far the largest sale of the year occurred late in fourth quarter when the Commerce Parks Portfolio sold to Lincoln Property Company for $112.3 million at a cap rate of 6.0 percent. The portfolio consisted of five commerce parks totaling 1.4 million square feet and almost 70 acres of land. Flex sales activity in 2016 was subdued at $124 million and was largely dominated by sales of Nike-occupied buildings. Of the six flex transactions in 2016, three of them were Nike-occupied totaling 522,680 square feet. The largest sale of the year was the nine property portfolio of Beaverton Creek Business Park that sold to Artemis/Cruzan for $41.55 million at a cap rate of 4.8 percent. In addition to the nine properties that Specht sold to Artemis/ Cruzan, two other buildings in the business park were sold by Specht to KM Paige Associates in a separate transaction for $9.5 million, bringing the total sales price of the Beaverton Creek Business Park to $51.05 million Taking both industrial and flex sales into account, total sales for 2016 amounted to over $591 million. The number of sales above $10 million was the most ever seen and if multimarket portfolio sales are excluded, 2016 was another record year for industrial sales in Portland. A burgeoning population and economy are the catalysts for this growth and the metro is attracting larger and higher profile tenants that are snapping up any and all larger developments in the metro. As these users continue to move to Portland, sustained pressure on vacancy rates and increasing rents will continue and attract further interest from institutional investment. 78

79 Portland industrial leasing E-commerce propels strong 2016 and is expected to continue through 2017 As Portland s population continues to balloon, large e-commerce and distribution companies have expanded into new locations to service their growing customer base saw 19 leases above 100,000 square feet, among the most notable were Amazon and DB Schenker signing 303,360 and 137,920-square-foot leases in the Sunset Corridor s latest development, the Majestic Brookwood Business Park, indicating that the population in Portland s western suburbs has reached a critical mass as companies move to service their customers in the traditionally underserved west. On the Eastside, UPS and Cummins both signed and moved into 234,960 and 119,993 square feet respectively at PDX Logistic Center s Building 3, with UPS signing for another 60,000 square feet at Rivergate Logistics Center as 2016 drew to a close. The delivery of Subaru s new 600,000-square-foot distribution center and Amazon s 303,360-square-foot sortation center took the absorption total to 2,971,267 square feet for While absorption is down 31.5 percent from 2015, large expansions in the fourth quarter by Bunzl, USA Warehousing and Logistics and Aosom meant Portland saw a third year in a row where absorption was above the 10-year average of 2.2 million square feet. This sustained demand in the market drove vacancy down 40 basis points year-over-year to a record low of 3.4 percent and Portland experienced its largest 12-month rent increase on record during 2016, growing 18 percent to $0.59 per square foot. Asking rents for new construction are now firmly being quoted at $0.55 with office surcharges quoted up to $0.90 per square foot, on a triple-net basis. Deliveries in 2016 were sizeable, with over 2.4 million square feet added to the Portland metro. While completed construction was down 520,000 square feet year-over-year, industrial development remains elevated with 2.5 million square feet under construction, of which 70 percent is speculative, a sign that developers remain bullish on Portland s industrial future. Leasing at delivery for 2016 was 83 percent, over 20 percent higher than The metro s largest developments such as PDX Logistics Center, Vista Logistics Park Subaru Distribution Center, Majestic Brookwood Business Park and Clackamas Distribution Center were all 100 percent leased before they were completed. In addition to larger developments, Portland is experiencing a boom in small to medium size developments of infill sites closer to the urban core. These developments are targeted as regional distribution centers with high volumes, and these buildings are pushing rents up faster than any other period in Portland s history. Vacancy remains at a 25-year low, fueled by strong population and job growth in the metro area. Demand has exceeded supply for the last six years, further strengthening Portland s industrial market fundamentals. Less desirable product on the market is benefitting from the new construction, pushing rents to new highs. While there is a decent amount of new supply expected to deliver in 2017, demand remains high and vacancy is expected to remain at record lows with rents continuing to push upwards. PORTLAND IS EXPERIENCING A BOOM IN SMALL TO MEDIUM SIZE DEVELOPMENTS OF INFILL SITES CLOSER TO THE URBAN CORE Seattle & Portland 2016 Investment Overview 79

80 Portland industrial sales & statistics Industrial market statistics Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption (RSF) Eastside 92,306, % $0.65 2,117,090 Westside 62,545, % $ ,832 Clark County 16,385, % $ , Total Market 171,236, % $0.59 2,971, Total Market 167,491, % $0.50 4,339,260 Sales matrix (over $10 million) Number of Sales Price/SF Highest $156 $112 $52 $59 $44 $63 $95 $133 $153 $231 CAP Rate Average 6.9% 7.0% 9.5% 9.2% N/A 7.4% 7.4% 7.1% 6.2% 6.1% Sales Volume $377M $84M $40M $28M $32M $173M $103M $320M $732M $591M 80

81 Portland industrial sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Commerce Park & Park I-84 Portfolio SE Johnson Rd 12/9/16 1,392, $112,315,000 $ % Lincoln Property Group Washington Real Estate Holdings Five property portfolio 69.7 Acres Wilsonville Business Center SW 95th Ave 9025 SW Hillman Ct SW Hillman Ct Wilsonville, OR 7/1/16 530, $51,400,000 $ % LBA Realty BIT/PNC Nine building portfolio 90% leased at time of sale 21% office Major tenants: Owens & Minor, Laminations PDX Logistics Center (2 buildings) NE Alderwood Rd 3/18/16 491, $46,600,000 $ % Clarion Partners and LIT-Acquisitions Capstone Partners/PCCP Major Tenant: KeHE Wilsonville Logistics Center SW 95th Ave Wilsonville, OR 10/4/16 508, / 1989 $43,100,000 $ % Lexington Realty Trust CBRE Global Investors Major tenant: Pacific Foods (single user) Beaverton Creek Business Park SW 153rd Ter 3005 SW 154th Ter SW Beaverton Creek Ct 9/15/16 311, $41,550,000 $ % Artemis / Cruzan Specht/ASB Nine property portfolio Major tenant: Nike Flex property Under market rents SW Milikan Way Beaverton, OR Beaverton Creek Business Park SW Millikan Way Beaverton, OR 8/29/16 68, $9,500,000 $ % KM Paige Associates Specht/ASB Two property portfolio Major tenant: Nike Flex property Under-market rents Seattle & Portland 2016 Investment Overview 81

82 Portland industrial sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments PDX Logistics Center - Phase II Bldg NE Alderwood Rd 10/31/16 355, $36,200,000 $ % Clarion Partners Capstone Partners/PCCP 100% leased Major tenants: UPS, Cummins Rivergate Logistics Center 5/4/16 527,934 $36,000, % Dermody Properties 82% leased at time of sale 8929 N Ramsey Blvd 1999 $68 Principal Real Estate Investors Property has significant lease roll in near term Major tenants: Ford, Terminal Transfer, Aaron Rents SunTech Corporate Park & Tanasbourne Corporate Park I 3445 NW 211th Ter NW Tanasbourne Dr Hillsboro, OR 10/7/16 142, $23,275,000 $ % Winkler LBA Realty Two property portfolio Year 1 cap rate: 7.45% Major tenant: Nike Flex property Halsey Business Center 3/17/16 423,300 $22,300, % DRA Advisors NE Halsey St 1960 / 1983 $53 STAG Industrial Major Tenant: Unisource Worldwide Crosswhite Industrial Park 9/30/16 267,000 $20,000, % Watumull Properties Off-market transaction 6461 SE Crosswhite Way 1980 $75 Crosswhite Enterprises 17 property portfolio 1031 exchange for buyer Major Tenant: Precision Castparts Ronler Corporate Center 5/4/16 159,701 $17,325,000 N/A SWIFT 33% leased at time of sale NW Evergreen Pky $108 Broadreach Capital Partners Pro-forma Cap Rate listed at 8.5% (after stabilization) Flex property Navistar Building NE Townsend Way Fairview, OR 9/22/16 210, $17,200,000 $82 N/A RREEF Management International Airport Centers Part of 19 property/35 building multimarket portfolio Major tenant: CTDI (single user) 82

83 Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Twin Oaks Business Park 9/29/16 162,543 $17,150, % PNW Properties 10 Property portfolio NW 169th Pl Beaverton, OR $103 Graham Salisbury Approximately 92% leased at time of sale Bought for renovation Dawson Creek Corporate Park NE Dawson Creek Dr Hillsboro, OR 9/23/16 126, $15,350,000 $ % Thomas Garnier Leavitt / Wolff Co. 2 Property portfolio Major tenants: Radisys Corp, Genentech Southwest Industrial Park Bldg D Lot SW Myslony St Tualatin, OR 1/31/16 145, $14,520,000 $ % Lincoln Property Co. Trammell Crow Major Tenant: Wineshipping.com IMP Building 9/28/16 157,038 $12,000,000 N/A DW Fritz Owner-user 9600 SW Boeckman Rd Wilsonville, OR 978/1989 $76 Inland Pacific Properties Sunrise Business Center 6/9/16 160,707 $11,660, % Killian Pacific SE 130th Ave Clackamas, OR 1981 $73 BLT Enterprises & Majestic Asset Management 25% mezzanine office build out 1031 Exchange Development piece in site Major tenants: Labrix, Cornell Pump Company Rockwood Corporate Center NE San Rafael St 2/12/16 131, $11,250,000 $86 N/A Prologis Allegro Corporation Off market transaction 1031 Exchange Sale-Leaseback Hayden Island Business Park N Hayden Island Dr 10/31/16 98, $11,125,000 $ % Sixteen Segment BKM Capital Partners 4 property portfolio Seattle & Portland 2016 Investment Overview 83

84 Portland industrial sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Cummins NW Building 6/30/16 47,883 $11,067, % Alta Home Properties 4711 N Basin Ave 1985 $231 Swan Island Capital Possible 1031 Major tenant: Cummins NW E.J. Bartells Building 7/28/16 110,000 $10,473, % Industrial Property Trust Two Property multimarket portfolio NE Portal Way 1999 $95 Billings Development Portfolio cap rate 5.5% Major tenantt: EJ Bartels (single user) 84

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87 Portland Office Industrial Retail Multifamily Seattle & Portland 2016 Investment Overview 87

88 2016 Portland retail sales ($10M+) overview Investment sales decline as super-mall sales dry up After 2015 s stellar retail sales performance, the lack of super regional mall sales weighed down sales in 2016, which fell 58 percent to $438 million. Investors are still finding value in small neighborhood centers as cap rates compressed further in 2016, averaging 5.8 percent. The largest deal of 2016 was the sale of Progress Ridge Town Square by Gramor Development to Donahue Schriber for $95.2 million at a price per square foot of $445. Gramor is focusing its efforts on their Vancouver waterfront development. The new development, which broke ground in 2016 on its first phase, reconnects 35 acres along the Columbia River to the city s historic core and will include up to 3,300 housing units, 10 park acres, 1.25 million square feet of office space and 250,000 square feet of retail and hospitality space. While Progress Ridge Town Square s sale was the largest of the year, the most notable sale came from Macy s 68 store closures. Macy s owned the first 5 floors of the old Meier & Frank Building which total 195,470 square feet, the other 9 floors are occupied by The Nines Hotel owned by Pebblebrook Hotel Trust. Macy s sold their portion of the building to KBS Realty Advisors for $54.15 million at $277 per square foot, and KBS plans to redevelop the building into creative office once Macy s vacates in the spring of This shift in retail footprints is a national trend, not specific to Portland. Traditional department stores, midprice specialty and apparel retailers are undergoing a radical shift in consumer demand. Shoppers are either flocking to discount department stores like Target and Walmart or luxury retailers. This is been especially hard on traditional department stores, which are also perceived as old-fashioned by millennial and generation Z shoppers. Some will be redeveloped with new tenants focused on experiences, like food and entertainment. Others will be redeveloped with more of a focus on discount shopping, attracting retailers that might have traditionally been in a Power Center, like discount department stores and grocers. INVESTORS ARE STILL FINDING VALUE IN SMALL NEIGHBORHOOD CENTERS AS CAP RATES COMPRESSED FURTHER IN 2016, AVERAGING 5.8 PERCENT. 88

89 Portland retail leasing Portland retail fundamentals are strong Portland s economy remains a top performer nationally, spurring confidence in the metro s retail sector. The metro maintains solid economic drivers; above-average population growth, job gains and household formation. These factors have resulted in strong demand and thus declining vacancy, but rent growth is still average. Moderate net operating income growth should not support outsized returns but Portland s strong demographics make it one of the better opportunities in the region, and retail cap rates are the highest among the West Coast metros. However, the hardships afflicting large national department chains have not evaded Portland. Macy s announced that it will close its downtown location in spring 2017 as part of a nationwide 68-store closure following a slowdown in sales. In 2015, Nordstrom vacated both its Lloyd Center and Vancouver Mall locations. Management attributed underperforming sales to the Lloyd Center s lack of appeal to the typical Nordstrom shopper. Demand in 2016 was strong with 773,961 square feet being absorbed, pushing Portland s retail vacancy down to 3.9 percent, 40 basis points lower than in 2015 and significantly below the national average won t provide much relief, with just 431,573 square feet of retail space currently under construction and already 82.9 percent preleased. Over half of the current construction is general freestanding retail buildings with an average building size of 23,946 square feet, meaning minimal new options for larger stores. The largest project currently under construction is the 129,000 square foot expansion of Cedar Hills Crossing II in Beaverton. The addition is expected to deliver in the fourth quarter of 2017 with the bowling alley, Sunset Lanes, already signing a 44,446 square foot lease. Other large leases in the metro area include supermarket chain Fred Meyer moving into 143,000 square feet as the anchor tenant in the newly opened Happy Valley Crossroads shopping center in Clackamas/ Milwaukie. Walmart also signed 48,000 square feet at Sequoia Village in the Sunset Corridor. Big spending from a growing population contributes to strong demand. Population, employment growth and home price appreciation are well above the national average, meaning more residents with stable paychecks are purchasing goods and services in the metro area. Portland offers robust job prospects, and its reputation for high-quality yet relatively affordable living appeals to young families ready to settle down. Retail sales have been strong, but online sales could hurt demand for brick-and-mortar locations, especially in a metro that is increasingly tech-centric. PORTLAND S RETAIL VACANCY IS DOWN TO 3.9 PERCENT, 40 BASIS POINTS LOWER THAN IN 2015 AND SIGNIFICANTLY BELOW THE NATIONAL AVERAGE Seattle & Portland 2016 Investment Overview 89

90 Portland retail sales & statistics Retail market statistics Submarket Size (RSF) Vacancy Avg. Rental Rate Net Absorption RSF CBD 4,820, % $ ,404 Clark County 18,766, % $ ,058 I-5 Corridor 10,935, % $21.50 (47,628) Lloyd District 5,564, % $ ,903 Northeast 20,401, % $ ,192 Northwest 1,826, % $22.40 (2,736) Southeast 22,822, % $ ,300 Southwest 13,701, % $18.60 (4,687) Westside 9,637, % $ , Total Market 108,477, % $ , Total Market 107,318, % $ ,712 Sales matrix (over $10 million) Number of Sales Price/SF Highest $633 $636 $173 $328 $209 $533 $405 $564 $643 $1,180 CAP Rate Average 6.5% 6.6% 8.5% 7.9% 9.7% 6.4% 7.4% 7.3% 6.6% 5.1% Total sales volume ($ in millions) $383M $93M $89M $311M $70M $151M $677M $668M $1.0B $437M 90

91 Portland retail sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Multi-Property Sale Progress Ridge TownSquare SW Horizon Blvd Beaverton, OR 8/19/16 213, $95,197,000 $ % Donahue Schriber Commercial Real Estate Gramor Development 10 property portfolio 98% leased at time of sale Major tenants: New Seasons, Ace Hardware, Cinetopia, Umpqua Gresham Station Shopping Center 1135 NW Civic Dr Gresham, OR 9/27/16 341, $86,300,000 $253 N/A DDR Westlake Realty Group 90% leased at time of sale Major tenants: Bed Bath & Beyond, Best Buy, Old Navy Evergreen & Andresen Marketplace Portfolio NE 63rd St 3307 NE 32nd St 3307 Evergreen Way Vancouver & Washougal, WA 4/22/16 184, $43,000,000 $ % Giustina Resources Killian Pacific Eight property portfolio 90% leased at time of sale Cap rate for Andresen Marketplace was 5.6% Major tenants: Safeway, Rite-Aid Multi-Property Sale Timberland Shopping Center NW Barnes Rd 10/4/16 91, $42,600,000 $ % LaSalle Investment Management Gramor Development WALT: 14.1 years Major tenants: Market of Choice, H&R Block, Pharmaca Toyota 8/22/16 30,924 $36,500,000 N/A Nhi-reit of Oregon LLC 3142 NE Doran Dr McMinnville, OR $1,180 Peg LLC Single tenant: Toyota Columbia Gorge Premium Outlets 450 NW 257th Way Troutdale, OR 1/7/16 164, /1998 $28,425,000 $173 N/A Time Equities Simon Property Group 90% leased at time of sale Major tenants: Gap, Adidas, Bass, Carters, Guess Lovejoy Square Portfolio 7/8/16 46,412 $19,750, % Killian Pacific 93% leased at time of sale 930 NW 14th Ave 1325 NW Kearney St 1978 $426 Metro Holdings North 1031 Exchange Major tenants: Office Max, Harley Davidson Outlet, On Deck Sports Bar Seattle & Portland 2016 Investment Overview 91

92 Portland retail sales ($10M+) Property Closing Date Total SF Year Built Sale Price $ Per SF Cap Rate Buyer Seller Comments Kitchen Kaboodle 404 NW 23rd St 2/2/16 30, $13,000,000 $ % Urban Development Partners Alta Home Properties, LLC Major tenant: Kitchen Kaboodle Arney Retail Center 3/1/16 38,390 $12,870, % Giustina Resources Major tenants: TJ Maxx, Panera, Red Robin Sprague Ln Woodburn, OR 2015 $331 Deacon Development Group Rose City Center 6901 NE Sandy Blvd 7037 NE Sandy Blvd 9/14/16 59, $12,750,000 $214 N/A Retail Opportunity Investments, Corp. Estate of Earl M. Chiles Major tenants: Safeway, Raymond James Financial Services, Starbucks Town & Country Chrysler/ Mitsubishi SE Mcloughlin Blvd Milwaukie, OR 4/12/16 38, $12,650,000 $332 M/A Bett Investments Moorenouri li Major tenants: Dodge, Hyundai, Chrysler, Jeep Tigard Towne Square 4/1/16 48,330 $11,775,000 N/A Heslin Holdings Former Alerbertson s SW Pacific Hwy 2000 $244 Spirit Realty Capital Sears 1260 Lloyd Ctr 8/17/16 111, $11,500,000 $103 N/A Capref Lloyd Center East LLC Sears Roebuck & Co Single tenant: Sears New Seasons Market 6300 N Lombard St 3/1/16 25, $10,620,000 $ % Ram Property Development Deacon Development Group Single tenant: New Seasons 92

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95 Portland Office Industrial Retail Multifamily

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97 2016 Portland multifamily sales ($10M+) overview Portland s robust multifamily demand is driven by the recent influx of millennials and new employers Portland s multifamily strength stems from the continual increase in population and the notably high levels of employment. Portland currently has an inventory of 173,735 units, with an overall 2016 vacancy rate hovering around 4.9 percent. The average Portland rent sits at $1,297, which is a 10.2 percent rent increase from last year. Oregon is one of the top moving destinations according to migration studies. The average income in Portland is $81,160 and the total population is 2,372,802. The Portland City Council predicts that around 260,000 more people will be living in Portland by An impressive 40.9 percent of the total population earns over $75,000. Currently, unemployment levels in Portland are 5.0 percent and the city ranks ninth in the nation for total employment increase at 5.0 percent in the last 12 months. According to apartment search website, Abodo, Portland was voted as the fourtht most desirable city for millennials. Portland is on the cutting edge of the evolution of the local food and drink scene, which includes 895 local food trucks and 69 craft breweries. Portland has the highest concentration of athletic and outdoor companies in the nation. Millennial growth in Portland is anticipated to be 5.2 percent over the next five years, predominately in the downtown area. Investors continue to capitalize on the robust demand in the Portland market multifamily sales dwarfed all previous years with 66 deals exceeding $10 million, totaling 13,757 units for $2.8 billion, $1.0 billion more than last year. The largest sale of the year occurred in the fourth quarter when Invesco Real Estate and Holland Partner Group purchased the 566-unit LaSalle Apartments in Beaverton for $140 million. By far the most headlinegrabbing transaction was the new high-water mark for Portland s eastside, which was set by the sale of The Yard to a Bangkok-based investment firm Land and Houses Public Company Limited of Thailand. The 284-unit apartment building sold at just over 50 percent occupied for $446,126 per unit and $551 per square foot, totaling just under $127.0 million. The average cap rate in 2016 was 5.1 percent for all transactions over $10 million, and 4.7 percent for new construction. The market wide range for multifamily cap rates was between 3.8 and 6.1 percent. The City of Portland recently passed new inclusionary zoning which calls for developments with 20 or more units to set aside 20 percent of those units for households making less than 80 percent of the median household income. In response to this new zoning, the city saw a surge in permit applications at the end of 2016 Looking into 2017, economic indicators point toward continued strength within the Portland metro area. The high levels of renting demand are largely due to the substantial job and population growth. Developers are anticipating a strong increase in demand for rental units as the millennial population grows. In 2016, 5,353 units delivered with 3,584 units absorbed. 5,506 units are scheduled to deliver in Portland is one of the most affordable West Coast cities that is able to draw international employee talent. In 2017, the Portland multifamily market will remain strong and experience moderate growth in rents. The supporting demographics will keep demand high and provide plenty of opportunity for development. Seattle & Portland 2016 Investment Overview 97

98 Portland multifamily sales & statistics Sales matrix ($10M+) Total # of Sales Highest Price Per Unit $146,610 $294,077 $455,340 $184,659 $285,149 $395,000 $267,241 $343,017 $456, ,000 $466,126 Cap Rate Average 6.1% 5.2% 5.4% 7.2% 5.9% 5.7% 5.7% 5.6% 5.6% 5.3% 5.1% Total Sales Volume ($ in millions) $458M $1.1B $688M $266M $485M $690M $660M $702M $1.2B $1.7B $2.8B 2016 MULTIFAMILY SALES DWARFED ALL PREVIOUS YEARS WITH 66 DEALS EXCEEDING $10 MILLION, TOTALING 13,757 UNITS FOR $2.8 BILLION, $1.0 BILLION MORE THAN LAST YEAR. 98

99 Portland multifamily sales ($10M+) Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller LaSalle 11/14/16 $141,750, % Holland Partners SW Millikan Way $255, Waterton Residential Beaverton, OR $239 Yard 12/14/16 $126,600, % Land & Houses 22 NE 2nd Avenue $409, Guardian Real Estate Services $600 Eddyline Bridgeport 11/18/16 $118,100, % Sequoia Equities SW Lower Boones Ferry Road $303, Mill Creek Residential Trust Tigard, OR $349 Seven West at the Trails 11/30/16 $96,000, % LaSalle Investment Management SW Scholls Ferry Road $226, Holland Partners Beaverton, OR $288 Waterline 3/31/16 $94,000, % Greystar 2080 NW Front Avenue $385, The Carlyle Group $484 Alara Hedges Creek 12/1/16 $93,000, % Kennedy Wilson 8900 SW Sweek Drive $227, American Realty Advisors Tualatin, OR $274 Breckenridge 5/20/16 $81,500, % Resource Real Estate 8150 SW Barnes Road $228, Holland Partners $299 The Terraces 12/2/16 $78,340, % Blackstone NW Evergreen Pkwy $210, Alecta Real Estate Investment Hillsboro, OR $215 Seattle & Portland 2016 Investment Overview 99

100 Portland multifamily sales ($10M+) Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller One Jefferson Parkway 10/14/16 $78,000, % Security Properties 1 Jefferson Pkwy $224, Friedkin Realty Group Lake Oswego, OR $211 Riverwalk at Happy Valley 9/29/16 $76,000, % MG Properties Group 8640 SE Causey Avenue $194, Green Leaf Partners Happy Valley, OR $217 The Club 12/2/16 $72,980, % Blackstone 2323 NW 188th Avenue $207, Alecta Real Estate Investment Hillsboro, OR $244 Cook Street 5/17/16 $69,000, % Berkshire Property Advisors 107 North Cook Street $304, Lake Union Partners $453 Vue 7/12/16 $63,950, % JRK Property Holdings 1717 SW Park Avenue $200, ColRich Group $278 Russellville Commons 3/1/16 $57,850, % MG Properties Group SE Pine Street $204, The Reliant Group $233 Sofi at Cedar Mill 10/11/16 $55,000, % Pacific Urban Residential NW Timberview Lane $231, Security Properties $240 Evergreen Park 9/29/16 $54,200, % Abacus Capital Group 4619 NE 112th Avenue $146, Lone Star Funds Vancouver, WA $

101 Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Rowlock 10/4/16 $70,000, % Blackstone 6380 NE Cherry Dr $256, Holland Partners Hillsboro, OR $347 Vector 10/4/16 $62,000, % Blackstone 967 NE Orenco Station Pkwy $260, Holland Partners Hillsboro, OR $365 Vista at 23 10/5/16 $53,300, % LivCor 3181 NE 23rd Road $191, Bridge Investment Group Partners Gresham, OR $188 Camden Place 12/9/16 $49,500, % Jackson Square Properties 4701 NE 72nd Avenue $167, Security Properties Vancouver, WA $165 Madison Park 10/5/16 $46,350, % LivCor NE 28th Street $137, Bridge Investment Group Partners Vancouver, WA $165 Platform 14 2/10/16 $45,000, % Investco Real Estate 1030 NE Orenco Station Pkwy $226, Holland Partners Hillsboro, OR $287 Sunfield Lakes 10/31/16 $43,100, % Brookline Investment Group SW Century Drive $215, Berkshire Property Advisors Sherwood, OR $206 Park 19 3/18/16 $42,500, % Greystar 522 NW 19th Ave $410, TIAA $514 Seattle & Portland 2016 Investment Overview 101

102 Portland multifamily sales ($10M+) Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Powell Valley Farms 10/28/16 $39,500, % Gelt 1500 SW Pleasant View Drive $173, Jackson Square Properties Gresham, OR $202 The Linden 12/8/16 $39,000, % Grand Peaks Properties 1250 E Burnside St $272, The Foursquare Church $428 Sofi at Forest Heights 12/15/16 $37,500, % Pacific Urban Residential 1940 NW Miller Road $234, Security Properties $241 Parkside 8/23/16 $37,250, % Sage Apartment Communities 2831 SE Palmquist Road $165, Kohlberg Kravis Roberts & Company Gresham, OR $184 Rock Creek Commons 9/29/16 $37,000, % Hamilton Zanze & Company NE 124th Avenue $154, Timberland Framing Vancouver, WA $167 The Meadows at Cascade Park 1/29/16 $35,250, % Jackson Square Properties SE 19th Street $178, Belkorp Holdings Vancouver, WA $177 Hub 9 10/4/16 $33,500, % Blackstone 980 NE Orenco Station Loop $236, Holland Partners Hillsboro, OR $327 Townfair 5/9/16 $31,000, % Sage Apartment Communities 1167 NW Wallula Avenue $116, Tokola Properties Gresham, OR $

103 Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller The Gables at Mountain Park 12/22/16 $29,080, % LaSalle Investment Management 2 Jefferson Pkwy $225, Sares-Regis Group Lake Oswego, OR $233 Oak Hill 8/30/16 $29,000, % Sage Apartment Communities NW West Union Road $176, Tokola Properties $212 Carriage House 12/9/16 $26,500, % Jackson Square Properties 4714 NE 72nd Avenue $165, Security Properties Vancouver, WA $163 The Wilmore 10/1/16 $24,900, % Robert Johnson LT 4357 N Williams Ave $296, Anctil Enterprises LLC $438 The Emery 5/24/16 $24,660, % Front Avenue Corporation 3155 SW Moody Ave $184, ZRZ Realty Co $343 Golfside Village 12/15/16 $24,250, % Aukum Management 7700 NE 72nd Avenue $171, Belkorp Holdings Vancouver, WA $175 The Cameron 10/6/16 $23,450, % Grand Peaks Properties 1500 SW 12th Avenue $282, Summit Real Estate $439 Terra at Murray Hill 3/11/16 $23,350, % Pacific Urban Residential SW Sexton Mountain Drive $169, Hamilton Zanze & Company Beaverton, OR $197 Seattle & Portland 2016 Investment Overview 103

104 Portland multifamily sales ($10M+) Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Village at Van Mall 12/9/16 $22,000, % Jackson Square Properties 5000 NE 72nd Avenue $171, Security Properties Vancouver, WA $173 The Preserve 6/13/16 $21,500, % Priderock Capital Partners Hwy 213 $159, OpenPath Investments Oregon City, OR $182 Chinook Way 8/24/16 $19,900, % Piedmont Properties Group NE Chinook Way $160, PTLA Fairview, OR $166 Maybeck at The Bend 4/1/16 $18,530, % Waldman Management Group SW Chinn Ln $154, Hamilton Zanze & Company $179 Lower Burnside Lofts 2/1/16 $18,500, % Berkshire Property Advisors 60 SE 10th Avenue $284, Urban Asset Advisors $506 Town Center Park 9/1/16 $18,500, % Curtis Capital Group SW Parkway Court $166, Summit Real Estate Wilsonville, OR $175 Boulder Gardens 5/12/16 $18,000, % Kleinbub, Fredrick & Angelina SE 82nd Drive $116, Schaaf, Steven Ron Clackamas, OR $170 The Park at Fox Pointe 1/11/16 $16,250, % NFN Investments 3009 NE 57th Avenue $81, Diesing, Charles F. Vancouver, WA $

105 Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Waverly Gardens 1/15/16 $16,230, % Sage Apartment Communities SE Stark Street $110, Gallegly, John R. $130 Mississippi Avenue Lofts 4/13/16 $14,048, % Landbank Investments, LLC 4216 N Mississippi Ave $439, Winkler Development Corporation $331 Parkview 10/31/16 $13,875, % Transpacific Investments 7806 NE 12th St $133, Foam Street Investments Vancouver, WA $160 Crown Plaza 2/24/16 $13,600, % Realvest NE 9th Avenue $113, Dernbach, Dave Vancouver, WA $145 The Crossings 6/7/16 $13,450, % Gallegly, John R SE 82nd Drive $140, Sunnyside Construction & Development Clackamas, OR $153 City View 1/8/16 $13,250, % Kleinbub, Fredrick & Angelina 3050 SW 10th Avenue $152, Matteson Companies $310 Village 185 3/14/16 $13,100, % Aukum Management NW Heritage Pkwy $140, Kurilo, Paul Beaverton, OR $163 Sterling Park 12/7/16 $10,950, % Michael Kilroy SE Powell Blvd $150, Gordon Irvine $139 Seattle & Portland 2016 Investment Overview 105

106 Portland multifamily sales ($10M+) Property Closing Date Sale Price $ Per Unit $ Per SF Units Year Built Cap Rate Buyer Seller Hogan Woods 5/2/16 $10,820, % Sage Apartment Communities 1645 NE 20th Street $108, McNutt, Robert Gresham, OR $149 Royal Greens 5/31/16 $10,500, % Waldman Management Group 2000 NE 19th Street $116, Guardian Real Estate Services Gresham, OR $