15 Marconi IRVINE, CALIFORNIA Table of Contents Exclusive Agents

FOR SALE ±18,177 SQUARE FEET Newly Refurbished Multi-Tenant Industrial Building Owner-User Opportunity 50% Leased / 50% Vacant

Property Jeff Carr CBRE, Inc. Images Lic. 01009600 +1 949 725 8631 Financials [email protected] Market

Gregg Haly CBRE, Inc. Lic. 00937913 +1 949 725 8632 Irvine Center Drive [email protected]

3501 Jamboree Road Suite 100 Newport Beach, CA 92660

www.cbre.com

© 2017 CBRE, Inc. This information has been obtained from sources believed reliable. We have not verified it and make no guarantee, warranty or representation about it. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the property. You and your advisors should conduct a careful, independent investigation of the property to determine to your satisfaction the suitability of the property for your needs. CBRE and the CBRE logo are service marks of CBRE, Inc. and/or its affiliated or related companies in the United States and other countries. All other marks displayed on this document are the property of their respective owners. Barranca Parkway 15 Marconi IRVINE, CALIFORNIA

Alton Parkway

Jeronimo

Marconi Bake Parkway Muirlands Irvine Center Drive

Research Scientific Way

Rockfield Blvd.

Lake Forest Drive

Property Summary

Purchase Price $4,888,000.00

Price Per SF $269.00

Total Building Size 18,177 SF

Address 15 Marconi Irvine, CA 92618

Property Description 15 Marconi is a stand-alone, multi-tenant (2 tenants) building located minutes from the Intersection of the 5/405, Irvine Entertainment Center and The Great Park

Exterior Renovations Freshly power washed, exterior lighting enhancements and new slurry and striping

Interior Creative Renovations New paint, carpeting and flooring were just installed in both halves of the building

Parking Surface parking reserved for each side of the building, approximately 2 stalls per 1,000 square feet. Freshly re-slurried and striped.

Asset Highlights

Convenient South Orange County location. 15 Marconi enjoys easy access to the 5/405 freeways and the 133 Freeway.

The building is only minutes from numerous amenities including restaurants, shoppping and movie theaters in the world reknown Irvine Entertainment Center.

Attractively priced. Recent sale comps demonstrate that 15 Marconi is priced to sell. Now is the time to lock in occupancy costs before market vacancy continues to fall and values rise even further.

Owner-user opportunity with income in-place. A lease was recently completed for 9,057 square feet with a solid company through September 2022. The monthly rental rate is $1.08/SF/NNN ($9,782.00). This leaves 50% of the building available for a user to occupy or an Investor to lease out.

Low After Tax Ownership. Based on the income in place, an owner/user’s monthly cost after tax, could be as low as $0.30 to $0.40 per square foot, per month.

Images

Aerial - Parcel Number

Mason

APN: 590-032-04

Marconi

Faraday

Wrigley

Rockfield Blvd.

Bake Parkway Autry Barranca Parkway

Irvine Center Drive

Research Alton Parkway 15 Marconi IRVINE, CALIFORNIA

Jeronimo

Muirlands

Bake Parkway

Marconi

Rockfield Blvd. Area Amenities

Irvine Spectrum Entertainment Center Restaurants

• P.F. Chang’s China Bistro • Yard House • California Pizza Kitchen • Johnny Rockets • Ruby’s Diner • Chipotle Mexican Grill • Cucina Enoteca • Veggie Grill • Javier’s Cantina & Grill • Red Robin • Paul Martin’s American Grill • Wahoo’s Fish Tacos • The Cheesecake Factory • Corner Bakery Cafe’ • Izakaya Wasa • Capital Seafood • Subway

Surrounding Restaurants Surrounding Hotels

• Pei Wei Asian Diner • Comfort Inn at Irvine Spectrum • Daphne’s California Greek • Courtyard Laguna Hills 405 Toledo Way • Olive Garden • Best Western Plus Irvine • Mother’s Market • Holiday Inn Irvine South 15 MARCONI • In-N-Out • Quality Inn & Suites Irvine • Pita Pit • Candlewood Suites Tesla • Coco’s Bakery • Candlewood Suites Irvine East • Solomon’s Bakery • Residence Inn Irvine Spectrum • Peppino’s Italian Restaurant • Nory’s Restaurant • Dellcias Peruanas • Tasty Thai • Habit Burger • Cafe Matinee

Floor Plan

OPEN TO BELOW BONUS MEZZANINE MARCONI

OPEN TO BELOW

Second Floor

First Floor Ownership Analysis Samples

Ownership Analysis

Sample with 10% Down

Square Feet 18,177 Price/SF $ 269.00 Purchase Price $ 4,888,000.00 Percentage Down 10% Down Payment $ 488,800.00 Loan Amount $ 4,399,200.00 Interest Rate 4.75% Amortization (in years) 25 Total Monthly Loan Payment $ 25,080.60

Tax Bracket 40% Depreciation Base $ 1,955,200.00 Depreciation Monthly $ 4,177.78 Property Tax 1.1% Monthly Property Tax Payment $ 4,480.67 Monthly Interest Expense $ 22,572.54 Potential Deductible Items $ 31,230.99 Potential After Tax Savings $ 12,492.39 Potential After Tax Cost $ 18,738.59

Potential After Tax Per SF NNN Rate $ 1.03

Rental Income from Suite A $ 11,755.00

Potential Net Ownership Cost After Rent and OPEX $ 6,983.59 Potential Per SF Cost of Ownership $ 0.38

*Numbers should be verified with your tax advisor

jcarr/misc/Ownership Analysis Form-10% Down (002).xlsx Ownership Analysis

Sample with 25% Down

Square Feet 18,177 Price/SF $ 269.00 Purchase Price $ 4,888,000.00 Percentage Down 25% Down Payment $ 1,222,000.00 Loan Amount $ 3,666,000.00 Interest Rate 4.75% Amortization (in years) 25 Total Monthly Loan Payment $ 20,900.50

Tax Bracket 40% Depreciation Base $ 1,955,200.00 Depreciation Monthly $ 4,177.78 Property Tax 1.1% Monthly Property Tax Payment $ 4,480.67 Monthly Interest Expense $ 18,810.45 Potential Deductible Items $ 27,468.90 Potential After Tax Savings $ 10,987.56 Potential After Tax Cost $ 16,481.34

Potential After Tax Per SF NNN Rate $ 0.91

Rental Income from Suite A $ 11,755.00

Potential Cost After Tenant's Rent and OPEX $ 4,726.34 Potential Per SF Cost of Ownership $ 0.26

*Numbers should be verified with your tax advisor

jcarr/misc/Ownership Analysis Form-25% Down.xlsx Loan Illustration - SBA Financing Options

Purchase Price $4,888,000.00

SBA 504 SBA 7a LOAN PROGRAM LOAN PROGRAM

FIXED FIXED FIXED

WELLS FARGO SBA

Down Payment $488,800.00 $488,800.00

Combined LTV% 90% 90%

Loan Amount $2,444,000.00 $1,955,200.00 $4,399,200.00

Financed Fee $44,537.00 $124,733.00

Rate (%) 4.45% 4.57% 4.85%

Amortization 30 20 25

Term (Years) 10 20 25

1st & 2nd TD Payments $12,311.00 $12,727.00

Total Monthly Loan Payments $25,038.00 $26,053.00

Builidng Income (per broker) $11,775

Total Monthly less building income $13,263.00 $14,278.00 Tax benefits of depreciation

Assume a business owner or Trust personally purchases 15 Marconi and leases it to his/her business at a market rate (this is allowable under the SBA program). Cash flow and taxable income of the business are not affected. However, this owner’s personal financial situation would benefit from depreciation of the building. In terms of this scenario, depreciation is the spreading of cost over the useful life of an asset. The Internal Revenue Service allows for a tax deduction of commercial property improvements depreciation based on a 39-year life. Simply stated, a portion of the cost of the building (excluding land) reduces taxable income, and thus tax liability, for a period of up to 39 years.

In this scenario, let us assume the following facts:

Purchase Price: $4,888,000.00

Building Size: 18,177 Square Feet ($269/SF)

Percentage of Building to Land: 45% / 55%

Owner’s personal income tax bracket: 33%

The amount subject to depreciation, in this example, is 45% of $4,888,000.00, or approximately $2,200,080.00. Spread over the IRS’ mandated 39 years, the deduction per year is approximately $56,400.00. At a tax rate of 33%, the tax savings due to depreciation is $18,612.00 per year of ownership.

If you are considering this on a monthly per-square-foot basis consistent with the example on the previous page, this tax savings equates to an additional ownership benefit of nearly $0.09/sf per month.

As time progresses, the cost basis of the building is being reduced by depreciation accumulated since purchase. Should the owner decide to sell, the depreciation is recaptured and taxed, but it is at a standard 25% as opposed to the 33% ordinary income rate used when the deduction was realized. This yields an overall tax benefit during the building ownership period, especially if the building is kept and passed down to future generations.

It is important to note that this example may differ from your situation. Please consult with your tax advisor. Orange County, California

Known for its luxurious suburban lifestyle and its spectacular coastline, Orange County continues to benefit from a well-diversified economy, high quality labor force, direct access to major airport facilities and its strategic location along the Pacific Ocean. The vibrant economy, along with the area’s tremen- dous residential desirability, strong educational institutions, and various recreational and cultural options, provide an excellent location for commercial properties.

The mid and long-term picture for Orange County is bright, due to the following: •Diverse economy with a wide range of industries

•Continually growing population given the unparalleled quality of life with low crime, temperate weather, abundant housing and coastal cities

•Convenient and improving transportation infrastructure including the toll road system, Metrolink stations and the renewed Measure M providing over $15 billion in additional investment through 2041

•Relatively low rental rates compared to other metropolitan areas both regionally and globally

•World-class golf facilities including Pelican Hill GC, Tustin Ranch GC, Talega GC, Big Canyon CC and Shady Canyon CC

•Top-notch medical facilities led by UCI Medical Center, Children’s Hospital of Orange County and Hoag Hospital

•Strong educational institutions with the University of California, Irvine (UCI), Chapman University and Soka University

•Wide range of excellent entertainment options and cultural traditions such as the Orange County Performing Arts Center, South Coast Repertory Theatre, Segerstrom Concert Hall, Laguna Festival of the Arts, Pacific Symphony and Disney Resorts Transportation

Orange County’s large freeway network provides convenient access throughout the county as well as to the four neighboring counties of Los Angeles, San Diego, Riverside and San Bernardino. The Orange County Transportation Authority oversees eight different freeways, totaling over 192 lane miles that are continually being improved. Renewed in 2006 for a 30-year extension by voters, Measure M will continue its goal of reducing traffic congestion through freeway improvements, local street and road improvements, and rail and transit programs. The measure is funded by increasing the county’s sales tax by one-half cent through 2041. The extension of the measure will bring over $15 billion in transportation related investments to Orange County over the next 30 years. 43 percent of the increased revenue will be allocated to freeways, 32 percent to streets and 25 percent to transit. Upcoming improvements include two projects that would invest $800 million in widening the Santa Ana Freeway (I-5) through the southern part of the county.

John Wayne Airport, located just a few miles from the Property, is the largest airport in Orange County. The airport is served by eleven commercial airlines, one commuter airline and two freight carriers, as well as private and corporate flights. The airport features a 5,700-foot main runway and a 2,887-foot general aviation runway. In 2013, the airport served over 9.1 million passengers. As of April 2014, airport traffic was up 2.2 percent in total passengers over the same period in 2013. General aviation activity, which accounted for 69% of the total aircraft operations during April 2014, increased 12.8% compared to April 2013.

Municipal bus service is provided by the Orange County Transportation Authority (OCTA). OCTA’s bus system offers 76 different routes and nearly 6,200 bus stops throughout the county.

Metrolink operates three commuter rail lines in the county and also maintains Rail-to-Rail service with parallel Amtrak service. The three lines combine for approximately 15,000 boardings per day. The county is currently exploring adding a monorail line and a streetcar line to its offerings.

Neighboring ports in Los Angeles and Long Beach provide quick access to deep-water shipping. Orange County, California

Luxury shopping

Orange County is considered by many to be a shopping “Mecca” due to the retail synergy created by South Coast Plaza in Costa Mesa and Fashion Island in Newport Beach. South Coast Plaza, one of the nation’s premier shopping destinations, offers roughly 2.7 million square feet of luxury retail shops and seven anchor department stores including Bloomingdale’s, Macy’s, Nordstrom, Saks Fifth Avenue and Sears. Fashion Island, located just 7.2 miles south of South Coast Plaza, includes another 1.3 million square feet of retail shops and four anchor department stores including Bloomingdale’s, Macy’s, Nordstrom and Neiman Marcus. The in-line shops at these two properties are a virtual “who’s who” of luxury retail.

World-class destination resorts

Orange County has no shortage of world-class hotels and features several of the country’s top destination resorts, including the Monarch Beach Resort and The Ritz Carlton Laguna Niguel, both located in Dana Point, The Montage Laguna Beach and the new resort Pelican Hill, located in Newport Coast. Beyond these incredible five-star resorts, there is an endless selection of three-and four-star hotels located throughout Orange County to meet the large demand from both business travelers and tourists. Arts and Entertainment

The Segerstrom Center for the Arts, located in the City of Costa Mesa, is the cultural center of Orange County. As the County’s largest non-profit arts or- ganization, Segerstrom Center for the Arts owns and operates the 3,000-seat Segerstom Hall, intimate 250-seat Founders Hall (opened in 1986), the 2,000 seat Renee and Henry Segerstrom Concert Hall (opened in 2006) which also houses the 500-seat Samueli Theater, the Lawrence and Kristina Dodge Educa- tion Center’s studio performance space and Boeing Education Lab.

These state-of-the-art facilities offer a wide variety of the most significant national and international productions of music, dance and theater. The campus includes all of Segerstrom Center’s own venues, the adjacent Tony Award-winning South Coast Repertory, and a site designated as the new home of the Orange County Museum of Art. Laguna Beach, which is home to a vast array of private galleries, draws thousands of art lovers each summer to various art-themed events including the Festival of the Arts, Pageant of the Masters, Art-A-Fair and the Sawdust Festival. Featuring everything from outdoor art exhibits to “living” depictions of master paintings, these festivals draw serious buyers and admirers from around the globe.

Outdoor recreation

Orange County offers myriad of recreational opportunities. With rolling hills, rugged canyons and 42 miles of coastline, the area is often referred to as the “Gold Coast”. Orange County is a surfer’s paradise with well-known beaches such as Seal, Huntington, Newport and Laguna. From Newport Harbor you can catch a high-speed boat to Catalina Island for hiking, camping, scuba-diving or snorkeling.

The Newport Harbor contains approximately 9,000 boat slips and moorings, making it the largest pleasure boat harbor in the Western United States. In addition to Newport Harbor, there are countless marinas for boating, sailing, sea kayaking or fishing. Some of California’s most stunning and prestigious golf courses are located in Orange County. The County is home to 38 public courses which include the stunning ocean view courses at Monarch Bay and Pelican Hill to the more challenging slopes of Anaheim Hills. Orange County’s rolling hills are perfect for a hike, a nature walk or a horseback ride. The County has 17 regional parks and wilderness preserves which offer designated hiking and horse trails. Orange CountyOrange Great County Park Great Park

Located in the city of Irvine, the Great Park spans over 1,300 Boulevard. In addition to the 688-acre parkland plan, the City Located in the acrescity of of Irvine, the former the Great Marine Park Corps spans Air over Station 1,300 El Toroacres and of theis easily former Marineof Irvine Corps approved Air Station the Eldevelopment Toro and is easily of a Veteran’s accessible Memorial to millions of Southern Californiaaccessible residents. to millions The of Great Southern Park Californiaembraces residents.recreation, The competitive Great sportsCemetery and parkland,and a Cultural the environment Terrace. and honors the site's military history. There arePark nearly embraces 200 acres recreation, of existing competitive amenities sports with and an approvedparkland, fiveyearthe expansion, totaling 688 acres of parkland under way. FivePoint Communities has approval to build a total of 9,500 environment and honors the site's military history. There are residential units. Thus far, Pavilion Park and Beacon Park are The parkland expansionnearly 200 will acres include of existing a 175-acre amenities Sports with Park an to approved complement five- the already existing North and South Lawn Sports Park. The Sports Park will the two communities available to the public, with a combined comprise of 18year new expansion, soccer and totaling multiuse 688 fields, acres 25of tennisparkland courts, under 4 way.sports courts, 12 baseball/softball fields, and 5 volleyball courts. A 188-acre golf course is also planned for Parkland which will include a golf practice facility and clubtotal house. of 1,755 Filling residential the remaining units. Within325 acres Pavilion of Parkland and Beacon are plans Park for a 178-acre WildlifeThe Corridor, parkland a expansion 71-acre agriculture will include component, a 175-acre Sportsa 40-acre Park Bosque to whichcommunities will include arean adventure two schools playground (opening forin 2016), children, and andaccess a 36-acre to Upper Bee Canyoncomplement area and theimprovement already existing that will North connect and Souththe Great Lawn Park Sports to Irvine Boulevard.pools, club In houses, addition an to outdoor the 688-acre kitchen, parkland multiple plan, playgrounds, the City of Irvine approvedPark. the The development Sports Park willof a compriseVeteran’s of Memorial 18 new soccer Cemetery and and multi- a Culturaland Terrace. 5 miles of walkable and bike friendly streets and trails. use fields, 25 tennis courts, 4 sports courts, 12 baseball/softball When completed, the Great Park will be the largest municipal fields, and 5 volleyball courts. A 188-acre golf course is also FivePoint Communities has approval to build a total of 9,500 residential units. Thus far,park Pavilion in Orange Park County. and Beacon It will Parkalso beare larger the two than communities New York’s avail- planned for Parkland which will include a golf practice facility able to the public, with a combined total of 1,755 residential units. Within Pavilion andGrand Beacon Central Park Park, communities San Francisco’s are two Golden schools Gate (opening Park, andin 2016), San and and club house. Filling the remaining 325 acres of Parkland access to pools, club houses, an outdoor kitchen, multiple playgrounds, and 5 miles ofDiego’s walkable Balboa and Park. bike friendly streets and trails. are plans for a 178-acre Wildlife Corridor, a 71-acre agriculture component, a 40-acre Bosque which will include an adventure When completed, the Great Park will be the largest municipal park in Orange County. It will also be larger than New York’s Grand Central Park, San playground for children, and a 36-acre Upper Bee Canyon area Francisco’s Goldenand improvement Gate Park, and that San will Diego’s connect Balboa the GreatPark. Park to Irvine

688 acres 175-acre Largest golf course 122 acre of parkland Sports Park in Orange County Cultural Terrace

60-70 acre Great Park Balloon Three-mile long Veteran’s Memorial Botanical Garden Ride & Carousel Wildlife Corridor including the Great Park Air Museum Orange County Great Park

Located in the city of Irvine, the Great Park spans over 1,300 Boulevard. In addition to the 688-acre parkland plan, the City acres of the former Marine Corps Air Station El Toro and is easily of Irvine approved the development of a Veteran’s Memorial accessible to millions of Southern California residents. The Great Cemetery and a Cultural Terrace. Park embraces recreation, competitive sports and parkland, the FivePoint Communities has approval to build a total of 9,500 environment and honors the site's military history. There are residential units. Thus far, Pavilion Park and Beacon Park are nearly 200 acres of existing amenities with an approved five- the two communities available to the public, with a combined year expansion, totaling 688 acres of parkland under way. total of 1,755 residential units. Within Pavilion and Beacon Park The parkland expansion will include a 175-acre Sports Park to communities are two schools (opening in 2016), and access to complement the already existing North and South Lawn Sports pools, club houses, an outdoor kitchen, multiple playgrounds, Park. The Sports Park will comprise of 18 new soccer and multi- and 5 miles of walkable and bike friendly streets and trails. use fields, 25 tennis courts, 4 sports courts, 12 baseball/softball When completed, the Great Park will be the largest municipal fields, and 5 volleyball courts. A 188-acre golf course is also park in Orange County. It will also be larger than New York’s planned for Parkland which will include a golf practice facility Grand Central Park, San Francisco’s Golden Gate Park, and San and club house. Filling the remaining 325 acres of Parkland Diego’s Balboa Park. are plans for a 178-acre Wildlife Corridor, a 71-acre agriculture component, a 40-acre Bosque which will include an adventure playground for children, and a 36-acre Upper Bee Canyon area and improvement that will connect the Great Park to Irvine

688 acres 175-acre Largest golf course 122 acre of parkland Sports Park in Orange County Cultural Terrace

60-70 acre Great Park Balloon Three-mile long Veteran’s Memorial Botanical Garden Ride & Carousel Wildlife Corridor including the Great Park Air Museum MARKETVIEW ORANGE COUNTY INDUSTRIAL

Page 2 – Figure 2: Unemployment (%) UNEMPLOYMENT Figure Source:2: Unemployment U.S. Bureau Rate (%) of Labor Statistics, Q3 2017. The unemployment rate in OC was 4.2% as of OC CA U.S. August, unchanged since July. In the same time span, 10 1,400 jobs were added in the county, which brought the region’s total of non-farm employment to 8 1,574,200. Year over year, 900 jobs were added with 6 construction and leisure and hospitality MARKETVIEW ORANGE COUNTY INDUSTRIALOrange4 CountyMARKETVIEW Industrial Insight ORANGE COUNTY INDUSTRIAL contributing the most, increasing overall jobs by 0.1%. Conversely, manufacturing and trade, 2 transportation and utilities, government, and heath MARKETVIEW ORANGE COUNTY INDUSTRIAL Page 3 – Figure 6: Overall Vacancy (%) Page 2 – Figure 2: Unemployment (%) Source: CBRE Research, Q3 2017. UNEMPLOYMENTservices lost 11,700 jobs. Industrial employment for Figure Source:1:2:Q3 2013 UnemploymentQ4 2013 consecutiveQ1 2014 U.S.Q2 2014 BureauQ3 2014 RateQ4 2014 (%) quartersofQ1 2015 LaborQ2 2015 Q3 2015 Statistics, butQ4 2015 Q1 2016 withQ2 2016 Q3developmentQ3 2016 2017.Q4 2016 Q1 2017 Q2 2017 Q3 2017 activity Figure 2:6: Overall Vacancy Rate (%) distribution and manufacturing totaled 92,800 Source: U.S. Bureau of Labor Statistics, Q3 2017. The unemployment rate in OC was 4.2% as of picking up it can be expectedOC thatCA availabilityU.S. will Page 3 – Figure 6: Overall Vacancy (%) workers and 155,100 workers, respectively. According Page 2 – Figure 3: Year-Over-Year Job Growth (%) 5 August, unchanged since July. In the same time span, 10 rise above 4.0% by year end. Source: CBRE Research, Q3 2017. 1,400to CBRE jobs Econometric were added Advisorsin the county, (CBRE which EA), overbrought the Figure Source:3: Year-Over-Yearconsecutive U.S. Bureau Job Growth quartersof Labor (%) Statistics, but with Q3development 2017. activity Figure4 6: Overall Vacancy Rate (%) thelast region’s12 months, total distribution of non-farm employment employment grew to by 8 GROSSpicking upACTIVITY it can be & expected NET ABSORPTION that availability will 35 1,574,200.2.3% while Year manufacturing over year, 900 employment jobs were added declined with by 46 Despiterise above negative 4.0% by net year absorption end. in Q3 2017, gross construction0.8%. and leisure and hospitality activity outperformed the previous quarter slightly 24 34 GROSS ACTIVITY & NET ABSORPTION contributing the most, increasing overall jobs by reaching 7.8 million sq. ft. year to date. North 13 LEASE RATE ANALYSIS 0.1%. Conversely, manufacturing and trade, 22 OrangeDespite Countynegative accounted net absorption for 58.0% in Q3 of 2017, the gross gross The slide in occupancy gains resulted in lease rates activity outperformed the previous quarter slightly 2 transportation and utilities, government, and heath 1 activity. During Q3 2017 there was no dominate Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 servicesending Q3 lost 2017 11,700 at $0.87 jobs. per. Industrial sq. ft., employmenta decrease of for Q3 2013 Q4 2013 industryreachingQ1 2014 Q2 2014 Q3 2014 that7.8Q4 2014 millionQ1 2015 ledQ2 2015 theQ3 2015 sq.way;Q4 2015 ft.Q1 2016 however, Q2 2016 yearQ3 2016 toQ4 2016 renewalsdate.Q1 2017 Q2 2017 NorthQ3 2017 picked 1 0 Source: CBRE Research, Q3 2017. distribution$0.01 since Q2 and 0217. manufacturing Year over year, totaled however, 92,800 lease Source: U.S. BureauupOrange fromof Labor County companiesStatistics, Q3accounted 2017. occupying for 58.0% smaller of industrialthe gross workersrates increased and 155,100 by 3.6% workers, due to respectively. steady demand According and Page 2 spacesactivity.– Figure (under 3:During Year -100,000Over Q3 2017-Year sq. thereJob ft.). Growth wasShrinking no (%) dominate available Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Page 3 – Figure 7: Availability Rate (%) tenants outbidding each other to secure a lease. The Source:industry U.S. Bureau that of led Labor the Statistics,way; however, Q3 2017. renewals picked to CBRE Econometric Advisors (CBRE EA), over the Figure 3: Year-Over-Yearsupply and Job Growth the need (%) to remain in the OC region Source:Figure 7:CBRE Availability Research,Source: RateQ3 2017. CBRE (%) Research, Q3 2017. lastsense 12 among months, many distribution professionals employment and landlords grew by is Source: U.S. Bureaupromptedup fromof Labor companiesStatistics, the wave Q3 2017. ofoccupying renewals smaller during theindustrial quarter. that perhaps rents have peaked. As a result, spaces (under 100,000 sq. ft.). Shrinking available M&W R&D ALL 2.3% while manufacturing employment declined by 4 Page 2 –LargerFigure 4: transactions Asking Lease were Rate dominated($PSF/MO/NNN) by e-commerce Page 3 – Figure 7: Availability Rate (%) landlords are looking to buyout weaker tenants with supply and the need to remain in the OC region 10 0.8%. Figure 3:4: Avg. andAskingSource: 3PLs Lease CBRE company’s Rate Research,($PSF/MO/NNN) eager Q3 2017. to solidify their last mile Figure 2:7: AvailabilitySource: Rate CBRE (%) Research, Q3 2017. leases longer than three years to lock in stronger 3 prompted the wave of renewals during the quarter. presence in the market. Key transactions included a 8 M&W R&D ALL LEASErates. SomeRATE ANALYSIS options have included allowing bought- 2 Larger transactions were dominated by e-commerce $0.90 very prominent e-commerce giant leasing over 106 Theout tenantsslide in oneoccupancy year to vacate,gains resulted using that in lease time ratesto 235,000and 3PLs sq. company’s ft. in Buena eager Park, to solidify while Shaw their Industries, last mile 1 8 endingmarket Q3the 2017 property at $0.87 in hopes per. sq. of ft.,bringing a decrease in a new of $0.80 thepresence world’s in largestthe market. carpet Key manufacturer, transactions leased included a 4 tenant at a higher rent in 12 months. Sale prices, 0 very prominent e-commerce giant leasing over $0.01 since Q2 0217. Year over year, however, lease $0.70 230,000 sq. ft. in Cypress. Moving forward it is 26 ratesunlike increased rents, reached by 3.6% new due heights to steady closing demand Q3 2017 and at expected235,000 sq. that ft. occupancy in Buena gainsPark, willwhile increase Shaw Industries, due to a $0.60 4 $206.24 per sq. ft., an increase of 3.4% since Q1 Q3 2013 Q4 2013 theQ1 2014 world’sQ2 2014 Q3 2014 Q4 2014 largestQ1 2015 Q2 2015 Q3 2015 carpetQ4 2015 Q1 2016 manufacturer,Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 leasedQ3 2017 tenants outbidding each other to secure a lease. The pool of tenants eager to occupy the increased Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 2017. Year over year, sale prices increased 6.9% with 230,000 sq. ft. in Cypress. Moving forward it is sense among many professionals and landlords is Source:$0.50 U.S. Bureauavailable of Labor Statistics, space. Q3 2017. Source:2 CBRE Research, Q3 2017. thateach perhaps deal surpassing rents have the peaked. last. As a result, expected that occupancy gains will increase due to a Page 2 – Figure 4: Asking Lease Rate ($PSF/MO/NNN) Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 landlords are looking to buyout weaker tenants with DEVELOPMENTpool of tenants eager to occupy the increased Q3 2013 Q4 2013 PageQ1 2014 Q2 2014 3 –Q3 2014 FigureQ4 2014 Q1 2015 8: Q2 2015 GrossQ3 2015 Q4 2015 ActivityQ1 2016 Q2 2016 (SF)Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 VACANCY & AVAILABILITY Figure 4: Avg. AskingSource: Lease CBRE Rate Research,($PSF/MO/NNN) Q3 2017. Figure 8: Gross ActivitySource: (SF) CBRE Research, Q3 2017. leases longer than three years to lock in stronger Source: CBRE Research,Developmentavailable Q3 2017. space. activity gained needed momentum Source: CBRE Research, Q3 2017. rates.Unlike Some the first options half haveof the included year, vacancy allowing and bought- with several projects breaking ground in Q3 2017, (000’s) M&W R&D Rolling Q4 Avg Page 2 – Figure 5: Year-Over-Year Rent Growth (%) Page 3 – Figure 8: Gross Activity (SF) availability both increased. The vacancy rate closed $0.90 DEVELOPMENT 10,000 out tenants one year to vacate, using that time to Figure 5: Year-Over-YeartheSource: majority Rent CBRE Growth of Research, which (%) were Q3 2017. in North Orange County. Figure 8: Gross ActivitySource: (SF) CBRE Research, Q3 2017. marketQ3 2017 the at 1.4%,property up 20in hopesbasis points of bringing (bps) insince a new Q2 $0.80 TheDevelopment lack of construction activity gained activity needed had momentumbeen an issue 8,000 with several projects breaking ground in Q3 2017, (000’s) M&W R&D Rolling Q4 Avg tenant2017 and at aunchanged higher rent year in 12 over months. year. Several Sale prices, large for the OC region for the past year, but as Q3 2017 6,000 industrial spaces vacated including one that came as $0.7015 the majority of which were in North Orange County. 10,000 unlike rents, reached new heights closing Q3 2017 at development activity reached 1.1 million sq. ft. 4,000 a shock to many. Royalty Carpet Mills, which closed $0.6010 The lack of construction activity had been an issue 8,000 $206.24 per sq. ft., an increase of 3.4% since Q1 Activity at these new developments remained high 2,000 their business at the end of June, left over 400,000 withfor the Rosendin OC region Electric for the pre-leasing past year, but170,000 as Q3 sq. 2017 ft. in 6,000 2017. Year over year, sale prices increased 6.9% with $0.505 0 eachsq. ft. deal vacant. surpassing Besides the other last. small move-outs, newly Anaheim.development The activity remaining reached 970,000 1.1 millionsq. ft. in sq. Fullerton ft. 4,000 completed product in North Orange County added 0 Activity at these new developments remained high Q3 2013 isQ4 2013 expectedQ1 2014 Q2 2014 Q3 2014 Q4 2014 to drawQ1 2015 Q2 2015 additionalQ3 2015 Q4 2015 Q1 2016 Q2 2016 interestQ3 2016 Q4 2016 Q1 2017 fromQ2 2017 Q3 2017 users 2,000 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 VACANCYadditional & available AVAILABILITY space to the market. The oncewith Rosendinmore details Electric about pre-leasing divisibility 170,000 become sq. clear ft. asin Source:(5) CBRE Research, Q3 2017. Source:0 CBRE Research, Q3 2017. Unlikeavailability the first rate closedhalf of Q3the 2017year, atvacancy 3.8%, upand 60 bps theAnaheim. completion The remaining date nears. 970,000 There aresq. ft.several in Fullerton projects since Q1 2017 and 80 bps year over year. Despite an Page 2 –isFigure expected 5: Year to -drawOver- additionalYear Rent Growth interest (%) from users Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 availability both increased. The vacancy rate closed in the pipeline, but most won’t commence until next PageQ3 2013 Q4 2013 3 –Q1 2014 FigureQ2 2014 Q3 2014 9:Q4 2014 UnderQ1 2015 Q2 2015 ConstructionQ3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 (SF)Q4 2016 Q1 2017 Q2 2017 Q3 2017 increase, availability remained below 4.0% for seven Figure 5: Year-Over-YearonceSource: more Rent CBRE details Growth Research, (%) about Q3 divisibility 2017. become clear as Figure 9: Under Source:Construction CBRE (SF) Research, Q3 2017. Q3 2017 at 1.4%, up 20 basis points (bps) since Q2 Source: CBRE Research,year. Q3 2017. Source: CBRE Research, Q3 2017. 2017 and unchanged year over year. Several large the completion date nears. There are several projects (000’s) Page 3 – Figure 9: Under Construction (SF) industrial spaces vacated including one that came as 15 in the pipeline, but most won’t commence until next 1,600 Figure 9: Under Source:Construction CBRE (SF) Research, Q3 2017. a shock to many. Royalty Carpet Mills, which closed year. 10 1,200 Q3their 2017 business CBRE Researchat the end of June, left over 400,000 © 2017 CBRE, Inc. | 2 (000’s) 5 sq. ft. vacant. Besides other small move-outs, newly 1,600800 completed product in North Orange County added 0 1,200400 additional available space to the market. The (5) 8000 availability rate closed Q3 2017 at 3.8%, up 60 bps since Q1 2017 and 80 bps year over year. Despite an 400 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 increase, availability remained below 4.0% for seven Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Source: CBRE Research, Q3 2017. Source:0 CBRE Research, Q3 2017. Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Source: CBRE Research, Q3 2017. Q3 2017 CBRE Research Q3 2017 CBRE Research © 2017 CBRE, Inc. | 2 © 2017 CBRE, Inc. | 3

Figure 10: Market Statistics

Overall Overall Current Net Current Under Construction Avg Asking Vacancy Availability Absorption Gross Activity Construction Deliveries Lease Rate Submarket Bldg Sq. Ft. (%) (%) Sq. Ft. Sq. Ft. Sq. Ft. Sq. Ft. ($)

North Orange County 113,130,233 0.9 3.1 470,813 1,428,812 1,146,754 181,069 0.87

West Orange County 41,446,265 0.6 2.8 (3,680) 385,749 0 0 0.81

Greater Airport Area 67,927,141 2.7 5.2 (828,756) 406,346 0 0 0.83

South Orange County 33,606,857 1.7 4.4 (132,042) 191,722 0 0 1.03

Orange County 256,110,496 1.4 3.8 (493,665) 2,412,629 181,069 181,069 0.87

Source: CBRE Research, Q3 2017. MARKETVIEW ORANGE COUNTY INDUSTRIAL

Figure 11: Key Transactions Figure 10:5: Market Statistics Occupier Industry Sector Location Total Sq. Ft. Overall Overall Current Net Current Under Construction Avg Asking Confidential E-Commerce Vacancy AvailabilityNorth OrangeAbsorption County Gross Activity Construction238,270 Deliveries Lease Rate Submarket Bldg Sq. Ft. (%) (%) Sq. Ft. Sq. Ft. Sq. Ft. Sq. Ft. ($) Shaw Industries Home Improvement West Orange County 234,763 North Orange County 113,130,233 0.9 3.1 470,813 1,428,812 1,146,754 181,069 0.87 Exemplis* Manufacturing North Orange County 218,640 West Orange County 41,446,265 0.6 2.8 (3,680) 385,749 0 0 0.81 Primary Colors Business Services West Orange County 187,465 Greater Airport Area 67,927,141 2.7 5.2 (828,756) 406,346 0 0 0.83 Daisy Nails/Cali Nails Market Wholesale North Orange County 132,231 South Orange County 33,606,857 1.7 4.4 (132,042) 191,722 0 0 1.03 *Indicates Renewal Orange County 256,110,496 1.4 3.8 (493,665) 2,412,629 181,069 181,069 0.87 Source: CBRE Research, Q3 2017. Source: CBRE Research, Q3 2017.

Figure 11: Key Transactions

Figure 12: Market Outlook Occupier Industry Sector Location Total Sq. Ft. Confidential E-Commerce North Orange County 238,270 Page 4 – Figure 12: Market Outlook/12-Month Forecast The Orange County industrialShaw market's Industries Home Improvement West Orange County 234,763 12-MonthSource: Forecast CBRE Econometric Advisors, Q3 2017. historically low vacancy andExemplis* availability Manufacturing North Orange County 218,640 Availability Rate (%) Availability Rate ( L ) Lease Rate ( R ) Asking Rate ($/SF) remained consistent during the current cycle Primary Colors 6 Business Services West Orange County 1.00 187,465 due to strong tenant demand, despite CBRE Daisy Nails/Cali Nails Market Wholesale North Orange County 0.80 132,231 EA forecasting a significant increase in 5 *Indicates Renewal availability over the next 12 to 24 months. The 0.60 Source: CBRE Research, Q3 2017. 4 development activity is expected to pick up as 0.40 3 the year ends, providing needed available 0.20 space for tenants looking to locate in the 2 0.00 region. Lease rates are forecasted to climb further, increasing by 6.5% over the next two Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Figure 12: Market Outlook years. Source: CBRE Econometric Advisors, Q3 2017. Page 4 – Figure 12: Market Outlook/12-Month Forecast The Orange County industrial market's 12-MonthSource: Forecast CBRE Econometric Advisors, Q3 2017. historically low vacancy and availability Availability Rate (%) Availability Rate ( L ) Lease Rate ( R ) Asking Rate ($/SF) remained consistent during the current cycle 6 1.00 due to strong tenant demand, despite CBRE 0.80 Q3 2017 CBRE Research EA forecasting a significant increase in 5 © 2017 CBRE, Inc. | 4 0.60 availability over the next 12 to 24 months. The 4 development activity is expected to pick up as 0.40 3 the year ends, providing needed available 0.20 space for tenants looking to locate in the 2 0.00 region. Lease rates are forecasted to climb

further, increasing by 6.5% over the next two Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 years. Source: CBRE Econometric Advisors, Q3 2017.

Jeff Carr CBRE, Inc. Lic. 01009600 +1 949 725 8631 [email protected]

Gregg Haly CBRE, Inc. Lic. 00937913 +1 949 725 8632 [email protected]

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