PACIFIC NORTHWEST RETAIL INVESTMENT REPORT

2017 FIRST QUARTER PACIFIC NORTHWEST RETAIL INVESTMENT REPORT 2017 First Quarter Paul Sleeth Billy Sleeth Mattie Tonseth 206-518-9624 Aubrey Williamson 206-518-9604 1

PACIFIC NORTHWEST RETAIL 1Q17 INVESTMENT REPORT The following is the Pacific Northwest retail investment report for the first quarter of 2017. The report includes analysis of total sales volumes, cap rates and financing as well as a list of all retail investment transactions above $2 million. First-Quarter Retail Investment Report Summary First-quarter retail investment sales in Washington totaled approximately $200 million (1.6 million SF). There were 30 traansactions that included two malls, two grocery-anchored centers and 16 single-tenant properties. Two regional malls represented roughly 40% of the total volume (The Commons at Federal Way, which sold for $49.5 million, and Cascade Mall, which sold for $26.6 million) First-quarter retail investment sales in Oregon totaled approximately $152 million (918,000 SF) There were nine transactions that included one power center, two single-tenant grocers, five unanchored centers and one single-tenant deal. The sale of The Shoppes at Gateway ($107 million) represented over 70% of the total volume. Cap Rates Historical 10-Year Treasury Rate The lack of supply and aggressive appetite of institutional investors has kept cap rates compressed for core assets. Pricing discovery continues for non-core unanchored centers. The spread between core and non-core assets continues to widen with investors achieving attractive yields on Class B and Class C assets for the perceived risk. 10.00% 8.00% 6.00% 4.00% 2.00% Cap rates for Class A grocery anchored product are 5% +/-. Cap rates for Class A un-anchored product are 6% +/-. 0.00% Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Cap rates for Class B centers are 7%+. 10-Year Treasury Rate TRAILING 10-YEAR AVERAGE Sub-$10 million credit single-tenant cap rates are 5% +/-. TRAILING 30-YEAR AVERAGE Financing The 10-year treasury rate had settled to 2.23% at press time (4/15/17), down from 2.40% at the start of the year. Lending spreads remain around 200 basis points for 10-year money on Class A product providing low 4% interest rates. Spreads compress for lower loan-to-value ratios and three, five or 10-year debt. Debt for Class B product is available but at lower LTVs, with larger reserves, and the borrower must be strong. 2

1Q17 WASHINGTON STATE RETAIL SALE TRANSACTIONS SALE DATE PROPERTY NAME LOCATION SALE PRICE BUILDING SF CAP RATE PRICE/SF Mar-17 The Commons at Federal Way Federal Way, WA $49,500,000 618,000 N/A $80 Regional Mall Anchored by Target, Kohl's, Century Theaters, Macy's, Dick's Sporting Goods, Sears (NAP). Cascade Mall Burlington, WA $26,684,729 523,754 N/A $51 Included Cascade Mall and Crosscourt Plaza; 87% occupancy; Crosscourt shadow anchored by Target. Part of two property portfolio; Other asset was in California. Walgreens & Key Bank Bainbridge Island, WA $15,045,537 15,411 N/A $976 Freestanding Walgreens & Key Bank Pad. Built in 2015. Silverdale Best Buy Silverdale, WA $10,500,000 66,775 N/A $157 Best Buy & 20K sf box vacancy (former Old Navy); Buyer is in process of leasing the 20k sf vacancy and adding GLA on a pad. Cooper Point Village Bldgs. 5 & 6 Olympia, WA $10,450,000 26,880 6.73% $389 Free Standing Rite Aid (20,118 SF) and retail pad building (6,762 SF). Retail strip was 96% occupied. Edmonds PCC Edmonds, WA $8,600,000 35,459 6.62% (blended) $243 Transaction consisted of two purchases to collapse a leasehold/ ground lease. Purchased the land (ground lease in-place) and the leasehold position from a separate party. The cap rate reflects an overall blended cap rate. Single Tenant PCC. Walgreens Vancouver, WA $6,400,000 14,820 5.39% $432 Single tenant Walgreens with 14 years remaining on lease. Mar-17 Walgreens Burien, WA $5,500,000 13,905 6.18% $396 Single Tenant Walgreens with 11 years remaining on lease. East Hill Plaza Kent, WA $5,150,000 21,998 7.00% $234 Tenants include Big 5 and other local retailers. TOTAL TRANSACTIONS OVER $5M: $137,830,266 1,337,002 221 Building Everett, WA $4,600,000 29,500 6.58% $156 97% strip center with local tenants. Mar-17 Bartell Drugs Seattle, WA $4,100,000 12,480 6.60% $329 Single tenant Bartell Drugs; 10 years remaining on lease. Big Fish Grill Kirkland, WA $3,900,000 6,518 N/A $598 Single Tenant Big Fish Grill Restaurant. Browns Point Town Center Browns Point, WA $3,820,000 39,111 7.13% $98 7.13% as-is cap rate; 68% occupied; unanchored retail center. Andresen Square Retail Vancouver, WA $3,700,000 7,117 N/A $520 100% occupied by Costa Vida Fresh Mexican Grill and a nail salon. Bothell Court Bothell, WA $3,500,000 6,036 N/A $580 Two tenant 100% lease building; Home Appliance and Hair Express Salon. O'Reilly Auto Parts Everett, WA $3,250,000 14,976 5.50% $217 Single tenant O'Reilly Auto Parts. Lake Stevens Marketplace Pads Lake Stevens, WA $3,000,000 11,264 6.70% $266 Two free-standing pad buildings; Jiffy Lube & Auto Zone; Approximately 4 and 8 years left on leases. K-Mart Pacific Commons Spanaway, WA $2,800,000 55,552 N/A $50 Sale leaseback with tenant - K Mart; Purchaser owns balance of shopping center. Jack in the Box Yelm, WA $2,725,000 2,036 5.56% $1,338 Single tenant Jack in the Box. North Spokane Center Spokane, WA $2,600,000 12,168 6.80% $214 Tenants include Game Stop on other local retailers. Tolt Town Center Carnation, WA $2,510,000 28,540 8.00% $88 IGA Market, Starbucks, and other local retailers; 100% occupied; all-cash deal. Jan-16 Lynnwood Retail Site Lynnwood,WA $2,500,000 10,235 3.5% (see notes) $244 Free-standing Chase Bank with 5 years left on lease and a 5,070 SF retail building which can be re-leased; Stabilized cap rate low 7%. Ballard Property Seattle, WA $2,399,500 5,481 4.00% $438 Mar-17 Sherwin Williams Poulsbo, WA $2,290,000 4,000 4.87% $573 Tenants include Fenro LP, The Quilting Loft, One by One, and Firehouse Coffee. Single Tenant Sherwin Williams, new construction, new 10 year lease Division Street Pad Spokane, WA $2,287,000 4,011 6.75% $570 Sleep Number & Metro PCS. Mar-17 Taco Bell Shoreline, WA $2,205,000 3,355 N/A $657 Single tenant Taco Bell. Mar-17 Kent Hill Scholotzsky's Kent, WA $2,181,000 3,085 5.25% $707 Single tenant Scholotzsky's, new construction. Umpqua Bank Liberty Lake, WA $2,180,000 4,282 N/A $509 Single tenant Umpqua Bank; Year 1 cap rate was 8.3%; Amortized TIs deduct from the base rent in 2026 resulting in 4.5% cap rate on 2026 NOI. Mar-17 Midway Lowe's Shopping Center Kent, WA $2,030,000 6,012 N/A $338 Retail strip pad building in front of Lowe's. Denny's Seatac, WA $2,000,000 4,504 N/A $444 Single Tenant Denny's TOTAL TRANSACTIONS $2M - $5M: $60,577,500 270,263 Q1 2017 TOTAL RETAIL SALES VOLUMES: $198,407,766 1,607,265 3

PACIFIC NORTHWEST RETAIL 1Q17 INVESTMENT REPORT 1Q17 Oregon State Retail Sale Transactions SALE DATE PROPERTY NAME LOCATION SALE PRICE BUILDING SF CAP RATE PRICE/SF Mar-17 The Shoppes at Gateway Springfield, OR $107,500,000 707,951 7.60% $152 97% occupied at closing. Center just completed $43m remodel/re-purpose. Anchored by Target (Shadow), Walmart Neighborhood Market, Cabela's, Kohl's, Cinemark and Sears. Other major tenants include Marshalls, Ross, Petco, Ulta, Hobby Lobby, Ashley Furniture and a number of fast casual restaurants. Martinazzi Square Tualatin, OR $16,304,000 51,060 7.00% $319 Tenants include Dickiejo's Burgers, Sushi Train, Tualatin Martial Arts, Orangetheory Fitness, Dotty's, Taco Bell, Starbucks, Shari's, Subway, The Stoller Group, and others. QFC Foods Portland, OR $8,240,100 24,804 5.95% $332 Single tenant NNN QFC. Two parcels totaling 1.31 acres. Marketplace West Eugene, OR $6,450,000 41,244 N/A $156 Lake Oswego Retail Lake Oswego, OR $4,800,000 13,926 N/A $345 Goodwill Clackamas, OR $3,100,000 12,000 N/A $258 Single Tenant Goodwill. Tenants include Pet Time, Boost Mobile, Sport Clips, Jalisco's, Oregon Community Credit Union, and others. Tenants include Device Doctors, Gray Law, Lake Oswego Liquor Store. Ray's Food Place Eagle Point, OR $2,250,000 35,260 8.16% $64 Rays Food Place, new 20 year absolute net lease. Coaster Village Retail Center Cannon Beach, OR $2,050,000 5,778 6.40% $355 Clausen Center Bend, OR $2,050,000 26,329 6.44% $78 Tom's Fish and Chips Classic Burgers, Cannon Beach Bakery, Osburn's Ice Creamery, Butler Did It Antiques. Tenants include Chinnook, the Drum and Guitar Shop, Aura Waterfalls, Dovetails Furniture, Elite Forklift Services, Cascade Credit Consulting, Beads and Pieces, Get a Move On and Oregon Fusion. Q1 2017 TOTAL RETAIL SALES VOLUMES: $152,744,100 $918,352 1Q17 Idaho State Retail Sale Transactions SALE DATE PROPERTY NAME LOCATION SALE PRICE BUILDING SF CAP RATE PRICE/SF Lowe's Home Improvement Karcher Crossing Nampa, ID $9,050,000 150,000 5.25% $60 NNN Lowe's Home Improvement. Mar-17 Overland Plaza Boise, ID $2,650,000 16,515 7.10% $160 Broadway Freddy's Pinon Square Tenants include Mathnasium, Idaho Guns, Planet Beach, #1 Mongolian BBQ, and others. Boise, ID $2,451,000 3,435 5.10% $714 Single tenant Freddy's Frozen Custard & Steakburgers. Q1 2017 TOTAL RETAIL SALES VOLUMES: $14,151,000 169,950 4 Paul Sleeth Billy Sleeth Mattie Tonseth 206-518-9624 Aubrey Williamson 206-518-9604

2017 FIRST QUARTER Q1 Retailers On The Move Competition, Expansion, And Movement In The Natural Grocer Space Continues: Construction commenced on the New Seasons in Ballard. Metropolitan Market opened in the Village at Sammamish in Sammamish. A new, 16-story mixed-use project anchored by Whole Foods at the corner of Broadway and Madison is under construction and scheduled to open in late 2018. Whole Foods will anchor the new Village at Totem Lake, which is still under construction. PCC announced new stores in Burien and Madison Valley. It was announced that Whole Foods will not open in West Seattle. Safeway is under construction on Snoqualmie Ridge, scheduled to open this summer. Seattle Economy The tech boom is driving the Seattle region s economy. Thousands of people are moving to the area, and the unemployment rate continues to drop. The Seattle area is the ninth-fastest growing metro in the nation, gaining about 1,100 residents per week. Population growth in Seattle is projected to remain at nearly twice the national rate. Amazon is growing rapidly, with over 24,000 employees in the Seattle Area, approximately 10 million squarefeet of office space, and plans for two million additional square-feet. Microsoft and Boeing continue to be major employers in the area as well, with roughly 45,000 and 75,000 local employees respectively. Seattle had more construction cranes in operation than any other city in the country in 2016. Seattle had more cranes than New York and San Francisco combined. Amazon debuted a new AmazonFresh Pickup concept (a drive-in-type grocery store) and announced plans to open two locations in SoDo and Ballard. In 2016, Seattle s median household income increased by nearly $10,000 the biggest increase among the 50 most populous U.S. cities. Drug Store Happenings: CVS and Bartell Drugs have continued expansion efforts throughout the Puget Sound region. Bartell Drugs is under construction on Snoqualmie Ridge, scheduled to open this summer. The Rite Aid/Walgreens merger remains a question mark, as the FTC analyses the merger and Fred Pharmacy s possible purchase of 865 Rite Aid stores. Store Closures: Macy s closures in Washington include Everett & Kelso. Sears closures in Washington include Lynnwood. JC Penney closures in Washington include Snohomish. Seattle retail vacancy rate is 3.6%. Portland Economy Portland is experiencing one of the nation s strongest economies. Intel and Nike continue to lead the charge with tech and health care industries growing rapidly. Oregon s economy has grown by nearly 60% since 2001. Portland led the nation in home price increases in 2016. Seattle s retail environment will remain strong with continued employment and population growth, political and geographical barriers to entry and the Urban Growth Boundary. Portland was second only to Seattle in terms of residential rent increases. Kmart closures in Washington include Tacoma. Portland s retail vacancy rate is 4.1%. Payless ShoeSource filed Chapter 11 bankruptcy; closures in Washington include Marysville, Burlington, Poulsbo and Kelso. Portland s retail environment will remain strong with continued employment and population growth, political and geographical barriers to entry and the Urban Growth Boundary. 5

PACIFIC NORTHWEST RETAIL 1Q17 INVESTMENT REPORT PACIFIC NORTHWEST RETAIL INVESTMENT REPORT 2017 First Quarter Paul Sleeth Billy Sleeth Mattie Tonseth 206-518-9624 Aubrey Williamson 206-518-9604 Note: Due to changes in the processing of the monthly employment data by the U.S. Bureau of Labor Statistics, the county level information will be available at 10 a.m., August 23, 2016. The publication schedule for 2016 can be found at: https://esd.wa.gov/labormarketinfo/monthly-employment-report. The Employment Security Department is an equal-opportunity employer and provider of programs and services. Auxiliary aids and services are available upon request to people with disabilities. Washington Relay Service: 800-833-6384. This workforce product was funded by a grant awarded by the U.S. Department of Labor s Employment and Training Administration. The product was created by the recipient and does not necessarily reflect the official position of the U.S. Department of Labor. The Department of Labor makes no guarantees, warranties, or assur-ances of any kind, expressed or implied, with respect to such information, including any information on linked sites and including, but not limited to, accuracy of the information or its completeness, timeliness, usefulness, adequacy, continued availability or ownership. 6