Phoenix-Mesa-Scottsdale, AZ CBSA

MARKET REPORT Phoenix-Mesa-Scottsdale, AZ CBSA New tax reform is expected to drive positive economic growth in 218, with many companies already earmarking their tax savings for employee wages or expansion, leading to the creation of new jobs. An increase in discretionary income is expected to propel consumer confidence, boding well for the Valley s housing market. Still, concerns of reduced buying power following recent mortgage rate increases and the loss of homeowner tax breaks remain on the periphery. Affordability remains an issue, but more homebuilders are adapting with diversified product. Demand for apartments keeping pace. Over 8,8 rental units came to market during 217, many in Southeast Valley cities like Gilbert and Tempe, while vacancy was down 1 basis points at year-end compared to 216. Resale inventory remains problematic. January was the 15th straight month of inventory declines, down 1.7% YOY to 21,226 units. Sales of existing homes were up just under 3% to nearly 6,2 units, making it the 3rd best January since before the recession. East Valley primed for growth. The Greater Phoenix metro area is projected to reach a population of 7.75M people in 25, with the East Valley expected to experience an increase of 1M people, with the addition of 4, new jobs. MEYERS INDEX EMPLOYMENT SUMMARY 673 CBSA 559 AZ 598 USA 2.6% 52,7 jobs added YOY 4.1% Unemployment 2.2% 54,72 jobs to be added YOY 3.6% Unemployment 2,59,4 total jobs 2,13,77 total jobs July 211 Nov. 217 Jan. 218 219F SUPPLY TYPE PROJECTS REMAINING UNITS PERMITS YOY CHANGE PEAK PERMITS Single-Family 638 53,635 2,73 12.2% 6,926 Multifamily 111 4,271 9,469-1.% 37,924 Totals: 749 57,96 3,199 11.2% 98,85 TOP CITIES Active New Home Projects 12 Phoenix 61 Mesa 49 Peoria 47 Buckeye 44 Scottsdale 1

Economy JOB GROWTH year over year Summary Jan. 218 Job Growth: 52,7 new jobs 172,92 115,28 57,64-57,64-115,28-172,92-23,56 1991 1995 1999 23 218 Job Forecast: 54,72 new jobs 27 211 215 219F Total nonfarm employment in the Phoenix- Mesa-Scottsdale, AZ metropolitan statistical area increased 2.6% from the same period last year to 2,59,4 payrolls in January 218. There are approximately 52,7 more jobs than January of last year. The local unemployment rate increased to 4.1% in January 218 compared to 3.8% in the previous month. January s jobless rate is lower than it was this time last year when it stood at 4.2%. Forecasts from Moody s Analytics show that the region s unemployment rate will finish the year at 3.6%. UNEMPLOYMENT RATE Jan. 218 Unemployment: 4.1% 12. 1. 8. 6. 4. 2.. Moody's Analytic 218 Forecast: 3.6% 199 1994 1998 22 26 21 214 219F Key Highlights Salt Lake City-based Nikola Motor Co. is relocating its HQ and manufacturing plant to Buckeye, a move that is expected to create 2, jobs and a $1B capital investment. In return, the company is eligible to receive up to $46.5M in grants and tax credits. Nikola, which manufactures hydrogen-electric trucks, is expected to be operational in 219. Nearly 2, jobs will be coming to Chandler in 218 following expansion announcements by Liberty Mutual Insurance and Wells Fargo. Liberty will be opening a new Chandler Airpark office this year with 75 jobs, while Wells Fargo plans to add 1,2 jobs to its expanded Price Rd corridor space. 2

EMPLOYMENT BY SECTOR Key Highlights JOBS BY SECTOR (YEAR-OVER-YEAR) 17, 13,6 1,2 6,8 3,4 5.6% 15.1% 9.% 11.7% 11.3% 1.7% 6.1% 3.% 17.2%.2% 19.2% Construction (CON) Education & Health (EH) Finance (F) Government (G) Hospitality (H) Information (I) Manufacturing (M) Other (O) Professional & Business Services (PBS) Natural Resource Mining (NRM) Trade, Transport & Utilities (TTU) Phoenix ranks 11th for expected tech hiring growth during the first six months of 218 according to Robert Half s latest IT Hiring Forecast & Local Trend Report. The Valley has positioned itself as an emerging tech hub, with industry jobs growing by 48 % over the last five years. Colliers International has named Phoenix a top 1 emerging industrial market for 218, driven by relatively low rental rates compared to other regional markets and its logistical advantage in accessing major markets across the US and Mexico. Co+Hoots will be anchoring the upcoming $59M mixed-use project The Grid in downtown Mesa, with a 13,5-square foot space that is expected to house hundreds of entrepreneurs and companies. The location is expected to open in late 219. The company currently has a downtown Phoenix location. The light rail has spurred substantial investment and growth along its transit lines since opening in 28. Tempe has reaped its rewards, capturing 27% of the Valley s office absorption since 214, with only 8.4% of the region s inventory. Demand has pushed rental rates to $45/SF in the city compared to $25/SF in the CBSA. -3,4 CON EH F G H I M O PBS NRM TTU 3

Community POPULATION GROWTH Summary 218E Population Growth: 1.8% 4,998,89 4,614,36 4,229,83 3,845,3 YYYY Population Growth: There are approximately 1,755,39 households in the region which is up 1.6% year-over-year. Forecasts show that household formation is expected to increase by an annual growth rate of 1.8% for 218. Median household income in the area increased 1.4% from the previous year to $59,843. Incomes are forecasted to increase 1.4% for the year in 218. 3,46,77 3,76,24 2,691,71 2 21 218E POPULATION BY AGE Key Highlights 218 Median Age: 36 year 1,93,125 874,5 655,875 437,25 218,625 9 ETHNICITY month Under 15 15 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75 to 84 1.2% Others 3.1% Two Plus 2.% American Indian.2% Pacific Islander 3.1% Asian 4.3% Black 53.7% White 23.6% Hispanic 85+ Raza Development Fund and JPMorgan have created a $1.1M lending program for small businesses in Phoenix s South Central Ave corridor. The fund is designed to help underserved entrepreneurs gain access to capital to sustain and grow businesses, especially when construction on the light rail extension begins in 219. An Arizona Senate panel is proposing a bill that would freeze the minimum wage hike and eliminate mandatory paid sick time approved by voters in 216. Heightened investor and developer interest in downtown Mesa is expected to spur revitalization in the area following the recent purchase of several downtown buildings. New retail and office concepts could bring about a renaissance like that seen in the downtowns of Gilbert and Tempe. 4

HOUSEHOLD INCOME 218E Median Household Income: $59,843 64,5 6,24 56,475 52,71 48,945 45,18 41,415 2 218E Key Highlights Chandler is ranked as the No. 1 best city in the US (of 18 ranked) to find in a new WalletHub survey based on 26 job market and socioeconomic indicators. The city s school system, low cost of living, and growing technology industry are prime drivers. Banner Health is investing heavily in health centers across Arizona with 58 quick care facilities across the state. One of the newest will be the $1M, 3, square-foot health clinic located across the Desert Ridge Corporate Center in North Phoenix. HOUSEHOLD GROWTH 218E Household Growth: 1.8% 1,962,8 1,822,6 1,682,4 1,542,2 1,42, 1,261,8 1,121,6 2 21 218E 5

Supply PERMITS 218LTM Total Building Permits: 3,199 Single-family 48,925 39,14 29,355 19,57 9,785 27 E/P RATIO E/P Ratio: 1.5 Total Permits/Job Growth - 14,637 69,758 34,879-34,879-69,758-14,637-139,516-174,395-29,274-244,153-279,32-313,911 29 29 211 213 213 215 Total Permits Non-Farm Annual Growth E/P Ratio 211 215 218F Multifamily 218LTM 6 4 2-2 -4-6 -8-1 -12-14 -16-18 E/P Ratio HIGHLIGHTS In the Phoenix-Mesa-Scottsdale, AZ region, total residential building permit activity increased 7.7% year-over-year to an annualized rate of 3,199 units in January. In the twelve-month period ending January, single-family building permit issuance increased 12.2% to 2,73 units while multifamily permit issuance decreased 1.% to Communities Southwest was recently granted preliminary approval by the city of Casa Grande to subdivide 372 acres in the undeveloped portion of the Villago MPC into 1,198 lots. In November, K. Hovnanian received approval to build 142 homes in the developed portion of the community. NexMetro Communities recently closed on a $1M construction lending agreement with Canadian company Trez Capital for its planned subdivisions targeted this year in Phoenix, Dallas, and Denver. Meritage Homes will be building 197 homes in Palm Valley in Goodyear on land that once housed a portion of the Palm Valley golf course. The builder will feature of mix of SFR and duplex/triplex units near Litchfield Rd and Palm Valley Blvd. NUMBER OF LISTINGS DAYS ON MARKET Jan. 218 # of Listings: 19,524 Dec. 217 Days on Market: 72 days 48,925 39,14 29,355 19,57 9,785 21 212 214 216 218CM 135 12 15 9 75 6 45 21 212 214 217 6

NUMBER OF ACTIVE PROJECTS Total 565 Detached 481 Attached 84 Total Number Of Projects 675 54 45 27 135 Jan. 215 Mar. 215 May 215 July 215 Sep. 215 Nov. 215 Jan. 216 Mar. 216 May 216 July 216 Sep. 216 Nov. 216 Jan. 217 Mar. 217 May 217 July 217 Sep. 217 Nov. 217 Jan. 218 Mar. 218 ACTIVE BUILDERS top 15 results RANK BUILDER # OF YTD SALES % MARKET SHARE # OF PROJECTS AVG PRICE AVG SALES 1 Lennar 388 1.44% 56 $37,738 3.19 2 D.R. Horton, Inc. 359 9.66% 23 $256,87 6.14 3 PulteGroup Inc. 275 7.4% 27 $389,54 4.97 4 Taylor Morrison 212 5.7% 27 $446,987 3.68 5 Meritage Homes 19 5.11% 3 $358,644 3.44 6 Fulton Homes 165 4.44% 15 $345,648 5.24 7 Richmond American Homes 155 4.17% 3 $354,435 2.18 8 K. Hovnanian Homes 147 3.95% 14 $4,54 4.24 9 Shea Homes 132 3.55% 25 $485,53 3.9 1 Garrett Walker Homes 112 3.1% 1 $25,14 4.56 11 Mattamy Homes 17 2.88% 15 $383,517 3.77 12 TRI Pointe Group 15 2.82% 14 $411,485 4.9 13 Robson Resort Communities 15 2.82% 5 $355,55 1.47 14 Beazer Homes 14 2.8% 11 $276,547 3.56 15 KB Home 13 2.77% 16 $267,855 3.87 7

Sales NEW HOME MARKET ANNUALIZED Change from Previous Year: -1.9% Total Home Closings: 17,33 71,65 57,32 42,99 28,66 14,33 Feb. 218 Detached: 15,922 EXISTING HOME MARKET ANNUALIZED Change from Previous Year: -.7% 31-year Historical Average: 19,93sales Feb. 218 Attached: 1,381 24 26 28 21 212 214 216 218LTM Total Home Closings: 18,39 2,675 16,54 12,45 8,27 4,135 Feb. 218 Detached: 9,431 31-year Historical Average: 8,373 sales Feb. 218 Attached: 17,878 24 26 28 21 212 214 216 218LTM Summary New home closings in the Phoenix-Mesa- Scottsdale, AZ metropolitan area experienced a 1.9% year-over-year decrease to an annualized rate of 17,33 units in February. Of those home closings over the past 12 months, 1,381 were attached closings and 15,922 were detached closings. Existing home closings for the same period posted a year-over-year loss of.7% to an annualized rate of 18,39 units. Of those home closings over the past 12 months, 17,878 were attached and 9,431 were detached. Key Highlights Robson Ranch in Eloy recently reached a milestone, closing on its 1,th home. Since opening in 25, the community has averaged about 7.65 sales per month. The Ranch is planned for 4,6 homes at build-out. Phoenix resale activity started 218 with a strong performance in January, up 2.8% YOY despite a continued downtrend (1.7%) in inventory. Home buyers are displaying a willingness to drive to the outer fringes of the Valley if the price is right. Tartesso by Express Homes (a D.R. Horton brand) has been averaging 2 to 3 sales over the last few months, drawing entry-level and first-time buyers with pricing ranging from $175,99 to $237,99. 8

Prices NEW HOME NEW DETACHED MEDIAN HOME PRICE Change from Previous Year: -.9% Feb. 218 Median Detached Closing Home Price: $34,352 321,86 292,6 263,34 234,8 24,82 175,56 146,3 NEW ATTACHED MEDIAN HOME PRICE Change from Previous Year: -18.2% 31-year Historical Average: $187,77 24 26 28 21 212 214 216 218LTM Feb. 218 Median Attached Closing Home Price: $34,32 341,55 33,6 265,65 227,7 189,75 151,8 113,85 31-year Historical Average: $164,153 24 26 28 21 212 214 216 218LTM Summary The median closing price for a new detached home in the Phoenix-Mesa-Scottsdale, AZ region decreased.9% year-over-year to $34,352 in February while the median closing price for a new attached home decreased 18.2% from the same year-ago period to $34,32. Homes priced between $24, and $32, experienced the most closing activity over the past year. The new home affordability ratio for a detached home reached 51.% in February. Key Highlights Phoenix ranks among one of the most difficult markets in the US for singles to purchase a new home. A new Zillow study indicates the average Phoenix single is taking more than 11 ½ years to save for a down payment for a typical Valley home. With an average income of $38, per year, the market for singles is about $194,9, which represents about a third of the homes in the region. AV Homes recently grand-opened Sunleya, its 85-lot community on the border of West Sun City. Floorplans will range from 1,731 to 2,474 square feet with pricing from $239,9 to $279,9. Taylor Morrison Homes is looking to capture first-time and entry-level buyers at its new 42- lot Greer Ranch community with prices between $239,99 to $266,99. Floorplans will range from 1,573 to 2,121 square feet. 9

NEW HOME CLOSINGS BY PRICE RANGE Detached Attached 6,625 5,3 3,975 2,65 1,325-8K 8K-16K 16K-24K 24K-32K 32K-4K 4K-48K 48K-56K 56K-64K 64K-4.7M DETACHED AFFORDABILITY New Existing 88. 8. 72. 64. 56. 48. 4. 29 21 211 212 213 214 215 216 217 218 1

EXISTING HOME EXISTING DETACHED MEDIAN HOME PRICE Change from Previous Year: 5.5% 272,25 242, 211,75 181,5 151,25 121, 9,75 Feb. 218 Median Detached Closing Home Price: $241,684 31-year Historical Average: $152,54 24 26 28 21 212 214 216 218LTM Summary The median closing price for an existing detached home in the Phoenix-Mesa- Scottsdale, AZ region increased 5.5% yearover-year to $241,684 in February while the median closing price for an existing attached home increased 2.8% from the same year-ago period to $17,577. Homes priced between $16, and $24, experienced the most activity over the past year. The existing home affordability ratio reached 59.9% in February. EXISTING ATTACHED MEDIAN HOME PRICE Change from Previous Year: 2.8% Feb. 218 Median Attached Closing Home Price: $17,577 23, 21,25 172,5 143,75 115, 86,25 57,5 31-year Historical Average: $111,64 24 26 28 21 212 214 216 218LTM Key Highlights Phoenix home values were up 5.6% YOY in December, according to the Case-Shiller index, placing the MSA in the bottom half of the top 2 US markets. Among the eight Mountain and Western markets on the index, Phoenix ranks at the bottom, trailing Portland at 6.8%. Scottsdale startup FsboTech LLC is offering a low-cost listing service that could save sellers dollars in commissions. Launched in May 217, the automated service guides FSBO sellers through the home-selling process, including title and escrow. Savings can amount to $9, on a $3, home. 11

EXISTING CLOSINGS BY PRICE RANGE Detached Attached 44,95 35,96 Median Attached New Home Price: 26,97 17,98 8,99-8K 8K-16K 16K-24K 24K-32K 32K-4K 4K-48K 48K-56K 56K-5M DETACHED AFFORDABILITY New Existing 88. 8. 72. 64. 56. 48. 4. 29 21 211 212 213 214 215 216 217 218 12

Distress HOUSING TRANSACTION VOLUME BY TYPE Summary 133,95 17,16 8,37 New Existing Foreclosure Sale Foreclosure NOD Foreclosures in the Phoenix-Mesa-Scottsdale, AZ area have declined over the past year. There were 8,877 notices of default sent out in the region in the twelve-month period ending February which is a 3% decrease year-overyear. The region experienced 215 foreclosures in February. Over the past twelve months, there have been 3,359 foreclosures in the area which is lower than it was this time last year. 53,58 26,79 216 217 218LTM NOTICES OF DEFAULT & FORECLOSURE Feb. 218 Total Foreclosures: 3,359 15,55 13,29 11,75 8,86 6,645 Feb. 218 Notices of Default: 8,877 Key Highlights Foreclosure sales remain low across the metro area, accounting for only 2.7% of overall resale activity in January. This is the 1th consecutive month this sales segment has been under 3%. PHH Mortage Corp is doling out $45M after reaching a settlement with 28 states over bad foreclosure practices. Over 2, Arizona homeowners who had homes foreclosed by PHH between 29 and 212 are eligible to participate in the settlement. 4,43 2,215 214 215 216 217 218LTM 13

Market Health ECONOMY 215 216 217 1 YR AGO FEB. 218 % CHANGE Job Growth (12-Month) 62,3 64,66 55,62 55,1 52,7 2.6% Unemployment Rate 5.1 4.5 4.2 4.2 4.1 - COMMUNITY Median Age - - - - 36.9 - Median Household Income 56,498 57,335 58,171 59,7 59,843 1.4% SUPPLY Days on Market 73 72 66 76 N/A N/A E/P Ratio 2.8 2.3 1.5 1.5 3.4% Number of Listings 21,234 21,39 19,756 21,56 19,524-9.2% Total Permits 22,42 28,583 28,51 3,199 7.7% SALES Attached Existing 14,157 15,589 17,869 15,958 17,878 12.% Attached New 941 1,152 1,45 1,286 1,381 7.4% Detached Existing 75,959 82,59 91,171 84,197 9,431 7.4% Detached New 11,96 15,248 16,188 15,581 15,922 2.2% Total Investor Sales 2,71 2,511 1,975 2,43 1,834-23.7% 14

PRICES 215 216 217 1 YR AGO FEB. 218 % CHANGE Affordability (%) 64.9 63.9 6.7 62.8 59.9-4.6% Attached Existing Median $144, $155, $169, $166, $17,577 2.8% Attached New Median $268,212 $281,137 $38,964 $371,782 $34,32-18.2% Detached Existing Median $214, $226,5 $239,9 $229, $241,684 5.5% Detached New Median $292,945 $299,258 $35, $37,96 $34,352 -.9% DISTRESS Foreclosures 5,917 4,756 3,569 4,543 3,359-26.1% Notices of Default 1,825 9,523 8,751 9,196 8,877-3.5% *Current year-over-year job growth and unemployment rate are as of Jan. 218. 15

Appendix ABOUT Meyers Research, a Kennedy Wilson Company, combines experienced real estate and technology advisors with leading data to provide our clients with a clear perspective and a strategic path forward. Based in Beverly Hills, we are home to 8 experts in 1 offices across the country. DEFINITIONS AND METHODOLOGY All information presented involved the assembly of data sources that we consider to be reliable, including the Bureau of Labor Statistics, CBRE- EA, Nielsen Claritas, Public Record Data, Moody's Analytics, Great Schools, U.S. Bureau of the Census, Zillow, various regional Multiple Listing Service providers, Meyers Research and Zonda. We do not guarantee any data accuracy as all information is subject to human errors, omissions, and/or changes. to interpret the strength of the market. Such metrics include price appreciation, sales activity, permit activity, demographic growth, household income levels, school scores, and affordability. Definitions CM - Current Month E - Estimated F - Forecast LTM - Last 12 Months Meyers Index The Meyers Index is a proprietary index that produces a score ranging from to 1, for a geographic area. A higher index score captures the desirability of housing development for the selected area and is calculated using specific data sets weighted An international real estate investment and services firm with a success proven legacy. Experienced real estate and technology advisors. A comprehensive research platform with real-time information all in one place. www.kennedywilson.com www.meyersresearchllc.com www.zonda.co zonda@meyersresearchllc.com (877) 966-321 16