South Bay Experiences Slow and Steady Market Activity

OFFICE SOUTH BAY MARKET REPORT South Bay Experiences Slow and Steady Market Activity MARKET OVERVIEW MARKET INDICATORS - VACANCY 21.4% NET ABSORPTION -68,500 CONSTRUCTION 210,000 RENTAL RATE $2.08 FSG The South Bay office market saw total vacancy slightly increase during the third quarter of 2014. The vacancy rate increased by 20 basis points to 21.4%. Demand for space was negative and translated to -68,500 square feet of net absorption. Direct weighted average asking rents increased to $2.08 per square foot (P), per month Full Service Gross (FSG) from $2.05 P FSG last quarter. The South Bay office market experienced a slow third quarter in terms of sales activity, however there are a handful of office buildings currently pending sales. The significant sales transaction recorded was GPG Pine LLC acquiring 130 Pine Ave in Long Beach; a 29,000 building for $3,000,000 ($106 P) from Jerico Development. Office buildings currently pending for sale are as follows: 2780 Skypark Dr in Torrance and 2220 & 2250 E Maple Ave in El Segundo. UNEMPLOYMENT 8.1% MARKET TRENDS - >> Total vacancy rate increases to 21.4% from 21.2% HISTORICAL VACANCY VS RENTS Q3 2010 - HISTORICAL NET ABSORPTION & CONSTRUCTION COMPLETIONS Q3 2010 - >> Weighted average asking rental rate records at $2.08 FSG >> Leasing activity increases to 55424,058 >> There was negative absorption of -68,500 $ P FSG PER MONTH (WEIGHTED) $2.40 $2.30 $2.20 $2.10 $2.00 $1.90 $1.80 $1.70 RENTS VACANCY 25% 20% 15% 10% 5% % VACANT (TOTAL) 400,000 300,000 200,000 0 () (200,000) (300,000) (400,000) NET ABSORPTION CONSTRUCTION COMPLETIONS >> Construction activity at 210,000 $1.60 3Q10 3Q11 3Q12 3Q13 3Q14 0% (500,000) 3Q10 3Q11 3Q12 3Q13 3Q14 1 Colliers International continuously refines its database. As a result, data reflected in this report may not be consistent with data reported in previous quarters. www.colliers.com/losangeles

MARKET REPORT OFFICE SOUTH BAY LOS ANGELES DEMOGRAPHICS >> POPULATION: 10,063,995 (2014 Estimate) 10,423,669 (2019 Projection) 3.57% (Growth 2014-2019) >> HOUSEHOLD INCOME: $75,972 (Average) $53,125 (Median) >> JOB GROWTH: 2.7% (past 12 months) >> UNEMPLOYMENT RATE: 8.1% (as of August 2014) VACANCY The total vacancy rate, including sublet space increased to 21.4%, up 20 basis points from 21.2% reported last quarter. A longer historical perspective of the total vacancy rate shows that the vacancy rate a year ago stood at 21.8%. Total vacancy rates continued to be highest in the LAX/Los Angeles/Westchester submarket at 39.2% The submarket that recorded the lowest total vacancy rate was Central Torrance, at a rate of 13.7%. rates were highest for Class B space (25.0%) and lowest for Class A space (16.5%) with Class C space in-between at 20.2%. NET ABSORPTION Net absorption was -68,500 in the third quarter of 2014, largely due to the negative net absorption experienced in the El Segundo/Beach Cities submarket which experienced -176,900 of net absorption. Chevron Corporation vacated the 17th & 18th floors at 200 N Sepulveda Blvd in El Segundo giving back 33,891. Chevron Corporation still occupies the top two (19th & 20th) floors. All submarkets in the South Bay market experience positive net absorption except for El Segundo/Beach Cities recording at -176,900 and Downtown Long Beach recording at -52,000. UNEMPLOYMENT August 2014 figures for nonfarm employment in Los Angeles County showed a recovering job market. Over the past 12 months, Los Angeles County has gained 69,100 jobs for an increase of 2.7%. This gain in employment led to the unemployment lowering to 8.1% compared to 10.2% one year ago. Year-over-year job gains were most significant in professional and business services (+31,800) and administrative and support services (+12,600). VACANCY BY SUBMARKET NET ABSORPTION BY SUBMARKET % VACANT 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 0.9% 38.3% DIRECT VACANCY 0.4% 24.0% 0.3% 20.8% SUBLEASE VACANCY 0.2% 0.1% 18.4% 15.2% 0.2% 13.5% 200,000 150,000 50,000 0 (50,000) () (150,000) (200,000) 109,500 39,900 6,200 4,800 (52,000) (176,900) P. 2 COLLIERS INTERNATIONAL

MARKET REPORT OFFICE SOUTH BAY OFFICE OVERVIEW EXISTING PROPERTIES VACANCY ACTIVITY ABSORPTION CONSTRUCTION RENTS Submarket/ Class Bldgs Total Inventory Direct Sublease Total Total Prior Qtr Leasing Activity Current Qtr Leasing Activity YTD Net Absorption Current Qtr Net Absorption YTD Completions Current Qtr Under Construction Weighted Avg Asking Lease Rate BUILDING CLASS/SIZE A 10,000-24,999 - - - - - - - - - - - - - 25,000 + 58 12,353,642 16.1% 0.3% 16.5% 18.2% 213,055 500,455 218,200 244,500 0 0 $2.37 SUBTOTAL 58 12,353,642 16.1% 0.3% 16.5% 18.2% 213,055 500,455 218,200 244,500 0 0 $2.37 B 10,000-24,999 85 1,364,035 12.5% 0.0% 12.5% 12.1% 5,676 25,676 (6,700) (29,800) 0 0 $1.97 25,000 + 178 15,404,185 25.7% 0.4% 26.1% 25.0% 176,475 620,275 (175,800) (198,900) 0 210,000 $1.91 SUBTOTAL 263 16,768,220 24.7% 0.3% 25.0% 23.9% 182,151 645,951 (182,500) (228,700) 0 210,000 $1.91 C 10,000-24,999 73 1,157,172 9.4% 0.0% 9.4% 9.9% 12,921 29,621 5,900 (4,400) 0 0 $1.66 25,000 + 36 2,276,699 25.7% 0.0% 25.7% 24.6% 15,921 32,621 (23,600) (33,900) 0 0 $1.51 SUBTOTAL 109 3,433,871 20.2% 0.0% 20.2% 19.6% 28,842 62,242 (17,700) (38,300) 0 0 $1.53 SUBMARKET/BUILDING SIZE 10,000-24,999 10 162,500 21.5% 0.0% 21.5% 22.8% 3,521 5,121 2,200 2,500 0 0 $1.82 25,000 + 25 4,186,774 39.0% 0.9% 39.9% 40.8% 35,000 108,300 37,700 38,000 0 0 $1.54 SUBTOTAL 35 4,349,274 38.3% 0.9% 39.2% 40.1% 38,521 113,421 39,900 40,500 0 0 $1.55 10,000-24,999 39 555,745 8.1% 0.0% 8.1% 7.1% 3,746 14,846 (5,400) 16,200 0 0 $2.46 25,000 + 76 10,155,517 19.0% 0.2% 19.2% 17.5% 119,429 520,429 (171,500) (151,300) 0 210,000 $2.61 SUBTOTAL 115 10,711,262 18.4% 0.2% 18.6% 16.9% 123,175 535,275 (176,900) (135,100) 0 210,000 $2.61 10,000-24,999 58 1,004,997 11.5% 0.0% 11.5% 10.7% 7,701 23,601 (7,700) (8,800) 0 0 $1.77 25,000 + 52 3,231,297 14.1% 0.2% 14.4% 14.7% 72,016 149,916 12,500 17,500 0 0 $2.23 SUBTOTAL 110 4,236,294 13.5% 0.2% 13.7% 13.8% 79,717 173,517 4,800 8,700 0 0 $2.14 10,000-24,999 12 177,982 6.4% 0.0% 6.4% 5.8% 425 4,825 (1,100) 12,500 0 0 $1.63 25,000 + 35 3,373,878 21.5% 0.3% 21.9% 22.1% 38,537 138,537 7,300 11,600 0 0 $1.97 SUBTOTAL 47 3,551,860 20.8% 0.3% 21.1% 21.2% 38,962 143,362 6,200 24,100 0 0 $1.96 10,000-24,999 25 397,361 12.6% 0.0% 12.6% 13.2% 3,204 6,004 2,500 (15,500) 0 0 $1.32 25,000 + 51 4,254,039 15.5% 0.1% 15.6% 18.1% 65,129 108,029 107,000 169,100 0 0 $1.89 SUBTOTAL 76 4,651,400 15.2% 0.1% 15.3% 17.7% 68,333 114,033 109,500 153,600 0 0 $1.85 10,000-24,999 14 22,665 101.3% 0.0% 101.3% 9.0% 0 800 (20,900) (40,600) 0 0 $1.84 25,000 + 33 4,833,021 23.6% 0.4% 24.0% 23.4% 75,350 146,350 (31,100) (24,600) 0 0 $2.14 SUBTOTAL 47 4,855,686 24.0% 0.4% 24.4% 22.7% 75,350 147,150 (52,000) (65,200) 0 0 $2.13 MARKET TOTAL TOTAL 430 32,355,776 21.1% 0.3% 21.4% 21.2% 424,058 1,226,758 (68,500) 26,600 0 210,000 $2.08 COLLIERS INTERNATIONAL P. 3

MARKET REPORT OFFICE SOUTH BAY CONSTRUCTION No new projects were delivered to the market in the third quarter of 2014. There is currently 210,000 of office space under construction in the South Bay market. The project is the Elevon At Campus in El Segundo, which is a fifteen building office campus complemented by 13,500 of high-end retails shops and restaurants. The campus is expected to by completed by second quarter of 2015. RENTAL RATES The weighted average asking rent for direct space increased to $2.08 P from $2.05 P last quarter. The number of conversions to creative office space occurring in the El Segundo submarket may result in an increase in asking rents. Within the overall South Bay market, the flat rent trend is expected to continue throughout 2014, given the elevated level of vacant space on the market. >> The South Bay market continues to experience positive investment sale activity. >> Currently 210,000 of office space under construction >> The average asking rates in El Segundo were $2.42 P in Q2 2013 and reached $2.60 P in Q2 2014 ACTIVITY New leasing activity during third quarter totaled 424,058 compared to 416,900 in the second quarter of 2014, an increase of 2%. The El Segundo/Beach Cities submarket continues to lead the South Bay market in terms of leasing activity, recording 29% of the leasing activity in the third quarter of 2014. Leasing activity this quarter included: Elements Behavioral Health leasing 17,601 at 5000 Airport Plaza Drive in Long Beach, Jalux Americas, Inc renewed for 10,200 at 390 North Sepulveda Blvd in El Segundo, and ESPN subleasing 10,196 at 6033 W Century Blvd in LAX. Average asking rents remained highest in the El Segundo/Beach Cities submarket ($2.61 P), and lowest in the LAX/Los Angeles/Westchester submarket ($1.55 P). The South Bay market remains a tenant market due to the concessions landlords continue to offer and the large amount of available office space. WEIGHTED AVERAGE ASKING LEASE RATES BY SUBMARKET LEASING ACTIVITY BY SUBMARKET $ P PER MONTH (FSG) $2.80 $2.60 $2.40 $2.20 $2.00 $1.80 $1.60 $1.40 $1.20 $1.00 $1.56 $1.85 $1.96 $2.14 $2.13 $2.61 140,000 120,000 80,000 60,000 40,000 20,000 0 68,333 75,350 38,521 79,717 38,962 123,175 P. 4 COLLIERS INTERNATIONAL

MARKET REPORT OFFICE SOUTH BAY OUTLOOK As there is still a large variation of vacancy rates between micro markets, however, the overall South Bay market remains stable. The El Segundo submarket real estate fundamentals will continue to lead the South Bay market activity. El Segundo is expected to record strong leasing activity throughout 2014 and into 2015 as the market demand is growing from media and technology companies desiring the conversion of traditional office space to creative space. Downtown Long Beach continues on its path to recovery as vacancy rates remain in the high teens rate range. MARKET DESCRIPTION The South Bay office market is comprised of 32.6 million square feet, representing 9% of the total office space in buildings 30,000 square feet and greater in the Los Angeles Basin. Most of the space (64%) was built in the 1980s, and only 8% was built 1990 current. Nearly half (49%) of its space is contained within mid-rise buildings (5 13 stories), followed by 32 percent in low-rise buildings and 19% in high-rise. It has a large concentration of firms in aerospace (although much less than in the 1980s), automotive, telecommunications, information technology, healthcare, and business services, and is served by a highly educated labor force. HISTORICAL LEASING ACTIVITY Q3 2010 - UNEMPLOYMENT RATE United States, California & Los Angeles County August 2014 1, 1,000,000 9% 8% 7.4% 8.1% 900,000 800,000 7% 6% 6.2% 700,000 600,000 500,000 5% 4% 400,000 3% 300,000 2% 200,000 1% 3Q10 3Q11 3Q12 3Q13 3Q14 0% UNITED STATES CALIFORNIA LOS ANGELES COUNTY RECENT TRANSACTIONS & MAJOR DEVELOPMENTS SALES ACTIVITY PROPERTY ADDRESS SIZE SALE PRICE PRICE P BUYER SELLER 130 Pine Ave, Long Beach 29,000 $3,010,000 $103 P GPG Pine LLC Jerico Development LEASING ACTIVITY PROPERTY ADDRESS LEASED LEASE TYPE BLDG TYPE LESSEE LESSOR 5000 Airport Plaza Dr, Long Beach 17,601 New A Elements Behavioral Health Legacy Partners 390 N Sepulveda Blvd, El Segundo 10,200 Renewal A Jalux Americas, Inc. DivcoWest 6033 W Century Blvd, Los Angeles 10,196 Sublease A ESPN Equity Office 3440 W Carson St, Torrance 6,100 New B Century 21 Norma Sarao, MD MAJOR DEVELOPMENTS PROJECT DEVELOPER SIZE SUBMARKET STATUS ESTIMATED COMPLETION Elevon At Campus, El Segundo Continental Development 210,000 El Segundo/Beach Under Construction Q2 2015 Utah Ave Campus, El Segundo NSB Associates, Inc. 195,680 El Segundo/Beach Renovation Completed COLLIERS INTERNATIONAL P. 5

MARKET REPORT OFFICE SOUTH BAY DEFINITIONS OF KEY TERMS USED IN THIS REPORT Total Rentable Square Feet: Office space in buildings with 10,000 or more of speculative office space. Includes competitive space in Class A, B and C single-tenant and multi-tenant buildings. Excludes noncompetitive owner-occupied buildings, buildings that include 30% or greater of medical or retail space, and space that is under-construction, under-renovation or off-market. Net Absorption: Net change in occupied square feet from one period to the next (includes the impact of change in vacant space available for sublease). Leasing Activity: Square feet leased from all known transactions completed during the quarter. Excludes lease renewals. 485 offices in 63 countries on 6 continents United States: 140 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85 >> $2.1 billion in annual revenue >> 1.46 billion square feet under management >> Over 15,800 professionals Class A Space: Space that an image-conscious company would lease for its headquarters. Typically, this space has a very high level of finish and an excellent location, and commands the highest rents in the market. Class B Space: Highly functional, attractive space, but less prestigious than Class A Space, and commanding lower rental rates. Class C Space: Functional, competitive space, but with a lower level of finish and/or a less desirable location than with Class B Space, and commanding lower rental rates. Low-Rise: Buildings with a total of 4 floors or less. Mid-Rise: Buildings with a total of 5 to 13 floors. High-Rise: Buildings with 14 or more floors. Direct : Space in existing buildings that is vacant and immediately available during the quarter for direct lease, plus space that is vacant but not available for direct lease or sublease (for example, that is being held for a future commitment). Total : Space in existing buildings that is vacant and immediately available during the quarter for direct lease or for sublease, plus space that is vacant but not available for direct lease or sublease. Weighted Average Asking Rental Rates: Weighted by the total square feet available for direct lease. Data is based on Full Service Gross rents, and includes all costs associated with occupying the space, including taxes, insurance, maintenance, janitorial service and utilities. Reported on a monthly, per basis. Space Added (Net): Total square feet added during the quarter via construction completions, including renovated space returned to market, less total square feet taken off-market due to demolitions or conversions. Under-Construction/Renovation: Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy. Also includes buildings that are under going substantial renovation. Technical Note Colliers International is continuously refining its database. The data shown in the historical tables and graphics in this report have been adjusted to take into account these changes in the database. This report has been prepared by Colliers International for general information only. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers International does not guarantee, warrant or represent that the information contained in this document is correct. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This report and other research materials may be found on our website at www.colliers.com/greaterlosangeles. UNITED STATES: South Bay Office License No. 01908231 2050 West 190th Street, Suite 101 Torrance, CA 90504 TEL +1 310 787 1000 FAX +1 310 381 2500 BRAWN, DOUGLAS Vice President CRAMER, STEVE Senior Vice President GOODWIN, THACHER Associate HOLLINGSWORTH, JOHN Executive Managing Director LASTITION, ERIC Senior Executive Vice President LUDWIG, GEOFFREY Senior Vice President MATTESON, CAITLIN. Research Manager Research Services PUTNAM, RICHARD Managing Director Western Region Capital Markets WALSH, GREGORY T. Senior Fice President Accelerating success. P. 6 COLLIERS INTERNATIONAL www.colliers.com/marketname