Related Commercial Portfolio Ltd. RE: Value Appraisals

Robert S. Nardella, MAI, MRICS Executive Managing Director V&A Regional Manager

1290 Avenue of the Americas New York, NY 10104 Direct +1 212 841 5048 Fax +1 212 479 1878 [email protected] cushmanwakefield.com

November 18, 2015

To: Related Commercial Portfolio Ltd.

RE: Value Appraisals – Consent to include within Financial Statements

We hereby give our full consent to Related Commercial Portfolio Ltd. (the "Company") to the inclusion of our Appraisal Report dated June 29, 2015 (Effective date – June 10, 2015) regarding Gateway Center at Bronx Terminal, 658 River Avenue, Bronx, New York in its entirety, within the Company's Financial Statements for September 30, 2015, to be published by the Company no later than November 30, 2015, and any ensuing financial statements, and within any other filing to be filed and/or disclosed by the Company to the Israel Securities Authority and/or to be published by the Company.

In addition, we hereby give our full consent to the inclusion of a copy of this letter within the Company's Financial Statements and other filings as aforesaid.

Yours sincerely, Cushman & Wakefield, Inc.

Robert S. Nardella, MAI, MRICS Executive Managing Director

RSN:pl

No warranty or representation, expressed or implied, is made as to the accuracy of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions, imposed by our principals.

APPRAISAL OF REAL PROPERTY

Gateway Center at Bronx Terminal Market 4-Story Retail Power Center 658 River Avenue The Bronx, Bronx County, NY 10451

IN AN APPRAISAL REPORT As of June 10, 2015

Prepared For: Related Commercial Portfolio, Ltd. c/o Related Companies 60 Columbus Circle New York, NY 10005

Prepared By: Cushman & Wakefield, Inc. Valuation & Advisory 1290 Avenue of the Americas, 9th Floor New York, NY 10104-6178 C&W File ID: 15-12002-901504

CUSHMAN & WAKEFIELD, INC. 1290 AVENUE OF THE AMERICAS, 9TH FLOOR NEW YORK, NY 10104-6178

Gateway Center at Bronx Terminal Market 658 River Avenue The Bronx, Bronx County, NY 10451

CUSHMAN & WAKEFIELD, INC. 1290 AVENUE OF THE AMERICAS, 9TH FLOOR NEW YORK, NEW YORK 10019

June 29, 2015

Mr. David Zussman Related Commercial Portfolio, Ltd. c/o Related Companies 60 Columbus Circle New York, NY 10023

Re: Appraisal of Real Property In an Appraisal Report

Gateway Center at Bronx Terminal Market 4-Story Retail Power Center 658 River Avenue The Bronx, Bronx County, NY 10451

C&W File ID: 15-12002-901504

Dear Mr. Zussman:

In fulfillment of our agreement as outlined in the Letter of Engagement, we are pleased to transmit our appraisal of the above property in an appraisal report dated June 29, 2015. The effective date of value is June 10, 2015.

Gateway Center at Bronx Terminal Market is a 4-story retail power center that contains a total of 912,333 square feet of gross leasable area (GLA) retail space and a 6-level parking garage with 2,575 spaces. The subject property also includes two 1-story retail/commercial buildings. The subject improvements are situated on a 16.8- acre site. The subject retail center is anchored by Target, BJ’s Wholesale Club, and Home Depot, which have leased 443,500 square feet or 48.6 percent of the property on a long-term basis.

The subject property has been ground leased on a net basis for a base term of 49 years through September 13, 2055. In addition, the ground lease can be extended for five additional ten years renewal terms extending the lease through September 13, 2105.

This report was prepared for Related Commercial Portfolio, LTD. c/o Related Companies and/or affiliates and is intended only for their specified use. It may not be distributed to or relied upon by any other persons or entities without the written permission of Cushman & Wakefield, Inc.

This appraisal report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), including the Competency Provision.

MR. DAVID ZUSSMAN CUSHMAN & WAKEFIELD, INC. RELATED COMMERCIAL PORTFOLIO, LTD. C/O RELATED COMPANIES JUNE 29, 2015 PAGE 3

MARKET VALUE AS IS Based on the agreed to Scope of Work, and as outlined in the report, we developed an opinion that the Market Value of the Leasehold estate of the above property, after adjusting for the Transaction Payment via Net Sale Proceeds to be paid by the landlord as per the ground lease, subject to the assumptions and limiting conditions, certifications, extraordinary assumptions and hypothetical conditions, if any, and definitions, “As-Is” on June 10, 2015, was: SIX HUNDRED THIRTEEN MILLION DOLLARS

$613,000,000

The value opinion reported above assumes a sale of the subject property as of the date of value. The value considers the 7.5 percent Transaction Cost deduction based on the Net Sales Proceeds.

EXTRAORDINARY ASSUMPTIONS For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions.

This appraisal employs the following extraordinary assumptions: 1) The subject site is ground leased until September 13, 2055, with 5 consecutive 10 year renewal options by BTM Development Partners LLC (c/o Related Companies) from the City of New York. As per Section 12.1 of the ground lease, the tenant is responsible for transaction payments in the event of a sale or financing. Since our market value estimate assumes a sale of the property as of the date of value, we have adjusted our market value estimate by the defined 7.5 percent of net sale proceeds obligated to be distributed to the landlord (New York City). We have been provided with the information which details the anticipated transactions costs related to a potential sale of the subject property. Some of the deductions defined in the ground lease in calculating the transaction payment apply to both refinancing or a sale. Therefore, we have utilized the applicable deductions which were made available by the ownership in calculating the Net Sale Proceeds and the Transaction Payment. We have assumed that the information provided by the owner regarding the allowable deductions is accurate. If the provided information is not accurate, we reserve the right to amend our value conclusion. Please refer to the complete list of assumptions and limiting conditions included in the Income Approach of this report

HYPOTHETICAL CONDITIONS For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions.

This appraisal does not employ any hypothetical condition.

MR. DAVID ZUSSMAN CUSHMAN & WAKEFIELD, INC. RELATED COMMERCIAL PORTFOLIO, LTD. C/O RELATED COMPANIES JUNE 29, 2015 PAGE 4

This letter is invalid as an opinion of value if detached from the report, which contains the text, exhibits, and Addenda.

Respectfully submitted,

CUSHMAN & WAKEFIELD, INC.

John A. Katinos, MAI James P. Stuckey, Jr. Senior Director Associate Director NY Certified General Appraiser NY State Certified Appraiser Assistant License No. 46000028780 License No. 48000049048 [email protected] [email protected] (212) 841-5061 Office Direct (212) 689-5633 Office Direct (212) 479-1820 Fax (212) 479-1687 Fax

GATEWAY CENTER AT BRONX TERMINAL MARKET EXECUTIVE SUMMARY V

EXECUTIVE SUMMARY Location: Gateway Center at Bronx Terminal Market 4-Story Retail Power Center 658 River Avenue The Bronx, Bronx County, NY 10451

The subject site is generally bounded by 149th Street to the south, the Metro-North Rail Road tracks to the north, River Avenue to the west, and Exterior Street to the east, across the Harlem River and adjacent to the Major Deegan Expressway (I-87).

Property Description: Gateway Center at Bronx Terminal Market is a 4-story retail power center that contains a total of 912,333 square feet of gross leasable area (GLA) retail space and a 6-level parking garage with 2,575 spaces in the Bronx, adjacent to Yankee Stadium. The subject property also includes two 1-story commercial buildings. The subject site comprises, a total of 16.80 acres or, 731,769 square feet of land area.

The subject property is anchored by Target, BJ’s Wholesale Club, and Home Depot, which lease a total of 443,500 square feet or 48.6 percent of the property. It should be noted that the majority of the subject property is net leased long term at below current market rent levels. Moreover, 53.1 percent of the subject retail space (484,324 SF) is net leased to credit tenants.

The subject property is ground leased for an initial 49 year base term through September 13, 2055. Thereafter, the tenant possesses five consecutive 10-year renewal options, which could extend the lease through September 13, 2105.

Assessor's Parcel Number: Block 2356; Lots 20 and 25 & Block 2357; Lots 35, 40, 42, and 45

Interest Appraised: Leasehold Interest

Date of Value: June 10, 2015

Date of Inspection: June 10, 2015

Ownership:

Fee: City of New York

Leaseholder: BTM Development Partners LLC in care of Related Companies

GATEWAY CENTER AT BRONX TERMINAL MARKET EXECUTIVE SUMMARY VI

Highest and Best Use

If Vacant: A multi-level retail power center with a parking garage developed to the highest density feasible.

As Improved: As currently improved.

Site & Improvements

Land Area: 16.80 acres; 731,769 square feet

Zoning: C4-4; General Central Commercial District

Number of Stories: 4-level retail power center building and 6-level parking garage.

Year Built: 2009

Gross Building Area (GBA):

Retail Building: 969,019 square feet

Parking Garage: 945,048 square feet

Total GBA: 1,914,067 square feet (Per Tax Assessor)

Gross Leasable Area (GLA): RETAIL GLA SUMMARY Component Area Total Target 188,446 SF 20.7% BJ's Wholesale Club 130,099 SF 14.3% Home Depot 124,955 SF 13.7% Total Anchor GLA 443,500 SF 48.6% Junior Anchor 379,956 SF 41.6% Retail B/D 10,634 SF 1.2% Retail C 21,817 SF 2.4% Retail E 10,131 SF 1.1% Retail F 25,944 SF 2.8% Prow Building 20,351 SF 2.2% Total Non-Anchor GLA 468,833 SF 51.4% Total Center GLA 912,333 SF 100.0%

Parking Type: 6-Level parking garage

Number of Parking spaces: 2,575 total parking spaces

GATEWAY CENTER AT BRONX TERMINAL MARKET EXECUTIVE SUMMARY VII

VALUE INDICATORS LAND VALUE: Indicated Land Value: $73,000,000 Per Square Foot of Land Area: $99.76 SALES COMPARISON APPROACH: Indicated Value, Rounded: $605,000,000 Adjusted for Net Sale Proceeds Per Square Foot (GLA): $663.14 INCOME CAPITALIZATION APPROACH DISCOUNTED CASH FLOW Projection Period: 12 years Holding Period: 11 years Terminal Capitalization Rate: 5.25% Internal Rate of Return: 6.25% Indicated Value: $625,000,000

Per Square Foot of GLA: $685.06

DIRECT CAPITALIZATION METHOD Net Operating Income: $31,340,953 Capitalization Rate: 5.00%

Indicated Value, rounded $625,000,000 Per Square Foot (NRA): $685.06

INCOME CAPITALIZATION APPROACH CONCLUSION Indicated As Is Value: $613,000,000 Adjusted for Net Sale Proceeds Per Square Foot (GLA): $671.90

FINAL VALUE CONCLUSION Market Value As-Is Leasehold: $613,000,000 Adjusted for Net Sale Proceeds Per Square Foot (GLA): $671.90

Implied Capitalization Rate 5.11% Exposure Time: 9 months Marketing Time: 9 months

GATEWAY CENTER AT BRONX TERMINAL MARKET EXECUTIVE SUMMARY VIII

EXTRAORDINARY ASSUMPTIONS For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions.

HYPOTHETICAL CONDITIONS For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions.

This appraisal does not employ any hypothetical condition.

GATEWAY CENTER AT BRONX TERMINAL MARKET SUBJECT PHOTOGRAPHS IX

VIEW OF THE SUBJECT ALONG RIVER AVENUE.

ALTERNATE VIEW OF THE SUBJECT ACROSS RIVER AVENUE.

GATEWAY CENTER AT BRONX TERMINAL MARKET SUBJECT PHOTOGRAPHS X

VIEW OF BEST BUY RETAIL SPACE.

VIEW OF COSTCO RETAIL SPACE.

GATEWAY CENTER AT BRONX TERMINAL MARKET SUBJECT PHOTOGRAPHS XI

VIEW OF CHUCK E CHEESE’S RETAIL SPACE.

VIEW OF BURLINGTON COAT FACTORY RETAIL SPACE.

GATEWAY CENTER AT BRONX TERMINAL MARKET SUBJECT PHOTOGRAPHS XII

VIEW OF THE T-MOBILE RETAIL SPACE.

VIEW OF THE TARGET RETAIL SPACE.

GATEWAY CENTER AT BRONX TERMINAL MARKET SUBJECT PHOTOGRAPHS XIII

A VIEW OF THE ENTRANCE TO THE SUBJECT PARKING AREA.

VIEW OF THE PARKING GARAGE WITHIN THE SUBJECT.

GATEWAY CENTER AT BRONX TERMINAL MARKET SUBJECT PHOTOGRAPHS XIV

VIEW LOOKING NORTH ALONG RIVER STREET.

VIEW LOOKING NORTH ALONG EXTERIOR STREET.

GATEWAY CENTER AT BRONX TERMINAL MARKET TABLE OF CONTENTS

TABLE OF CONTENTS

INTRODUCTION ------1 NEW YORK CITY REGIONAL ANALYSIS ------5 LOCAL AREA ANALYSIS ------20 NATIONAL RETAIL MARKET ANALYSIS ------23 RETAIL MARKET AND TRADE AREA OVERVIEW ------34 TENANT PROFILES ------39 SITE DESCRIPTION ------61 IMPROVEMENTS DESCRIPTION ------63 REAL PROPERTY TAXES AND ASSESSMENTS ------72 ZONING ------76 HIGHEST AND BEST USE ------79 VALUATION PROCESS ------81 GROUND LEASE ANALYSIS AND LAND VALUATION ------83 SALES COMPARISON APPROACH ------96 INCOME CAPITALIZATION APPROACH ------107 RECONCILIATION AND FINAL VALUE OPINION ------148 ASSUMPTIONS AND LIMITING CONDITIONS ------149 CERTIFICATION OF APPRAISAL ------151 GLOSSARY OF TERMS & DEFINITIONS ------152 ADDENDA CONTENTS ------158

GATEWAY CENTER AT BRONX TERMINAL MARKET INTRODUCTION 1

INTRODUCTION

SCOPE OF WORK This appraisal report is intended to comply with the reporting requirements outlined under the USPAP for an appraisal report. The report was also prepared to comply with the requirements of the Code of Professional Ethics of the Appraisal Institute and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), Title XI Regulations.

Cushman & Wakefield, Inc. has an internal Quality Control Oversight Program. This Program mandates a “second read” of all appraisals. Assignments prepared and signed solely by designated members (MAIs) are read by another MAI who is not participating in the assignment. Assignments prepared, in whole or in part, by non- designated appraisers require MAI participation, Quality Control Oversight, and signature.

In the process of preparing this appraisal, we:

 Inspected the subject property and site improvements.  Reviewed leasing policy, concessions, tenant build-out allowances, and history of recent rental rates and occupancy with several leasing and investment sales brokers, and market research analysts.  Conducted market research of occupancies, asking rents, concessions and operating expenses at competing buildings, which involved interviews with on-site managers and a review of our own data base from previous appraisal files.  Prepared an opinion of stabilized income and expense (for capitalization purposes).  Conducted market inquiries into recent sales of similar land parcels to ascertain sales price per square foot of land area. This process involved primary research, telephone interviews with sellers, buyers and/or participating brokers.  Conducted market inquiries into recent sales of similar retail centers to ascertain sales price per square foot, effective gross income multipliers and capitalization rates. This process involved telephone interviews with sellers, buyers and/or participating brokers.  This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that the Sales Comparison Approach and the Income Capitalization Approach would be considered meaningful and applicable in developing a credible value conclusion. Investors do not typically rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not relied upon the Cost Approach to develop an opinion of market value.  The scope of this analysis, and the analysis contained herein, is reflective of “the type and extent of research and analyses in an assignment” (2014-15 USPAP).

GATEWAY CENTER AT BRONX TERMINAL MARKET INTRODUCTION 2

 Describes the real estate and/or personal property that is the subject of the appraisal, including physical, economic, and other characteristics that are relevant  States the type and definition of value and its source  Describes the Scope of Work used to develop the appraisal  Describes the information analyzed, the appraisal methods used, and the reasoning supporting the analyses and opinions; explains the exclusion of any valuation approaches  States the use of the property as of the valuation date  Describes the rationale for the Highest and Best Use opinion

IDENTIFICATION OF PROPERTY Common Property Name: Gateway Center at Bronx Terminal Market

Location: 658 River Avenue The Bronx, Bronx County, NY 10451 The subject site is generally bounded by 149th Street to the south, the Metro-North Rail Road tracks to the north, River Avenue to the west, and Exterior Street to the east, across the Harlem River and adjacent to the Major Deegan Expressway (I-87)..

Assessor's Parcel Block 2356; Lots 20 and 25 & Block 2357; Lots 35, 40, 42, and 45 Number:

GATEWAY CENTER AT BRONX TERMINAL MARKET INTRODUCTION 3

PROPERTY OWNERSHIP AND RECENT HISTORY Current Ownership: The fee interest in the subject site is owned by the City of New York. The subject site is ground leased to BTM Development Partners LLC in care of the Related Companies by the City of New York. The 49-year ground lease expires on September 13, 2055, with five consecutive 10-year renewal options which could extend the ground lease to September 13, 2105.

Sale History: To the best of our knowledge, the property has not transferred within the past three years.

Current Disposition: To the best of our knowledge, the property is not under contract of sale nor is it being marketed for sale.

DATES OF INSPECTION AND VALUATION Date of Valuation: June 10, 2015

Date of Inspection: June 10, 2015

Property inspection was performed by: John A. Katinos, MAI, James P. Stuckey Jr. and Charles R. Looney

CLIENT, INTENDED USE AND USERS OF THE APPRAISAL Client: Related Commercial Portfolio, Ltd. c/o Related Companies

Intended Use: This appraisal is intended to provide an opinion of the Market Value of the Leasehold interest in the property for internal business decisions by the client. All other uses are unintended, unless specifically stated in the letter of transmittal. All other uses and users are unintended.

Intended User: This appraisal report was prepared for the exclusive use of Related Commercial Portfolio, Ltd. c/o Related Companies and/or its affiliates. All other uses and users are unintended.

GATEWAY CENTER AT BRONX TERMINAL MARKET INTRODUCTION 4

EXTRAORDINARY ASSUMPTIONS For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions.

HYPOTHETICAL CONDITIONS For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions.

This appraisal does not employ any hypothetical condition.

GATEWAY CENTER AT BRONX TERMINAL MARKET NEW YORK CITY REGIONAL ANALYSIS 5

NEW YORK CITY REGIONAL ANALYSIS REGIONAL MAP

GATEWAY CENTER AT BRONX TERMINAL MARKET NEW YORK CITY REGIONAL ANALYSIS 6

INTRODUCTION

MARKET DEFINITION New York City consists of five counties at the mouth of the Hudson River in the southeast area of New York State. The borough of Manhattan, also referred to as New York County, forms the political, financial and cultural core of the city. It is the economic growth engine of the Greater New York Region. The city’s other boroughs are Brooklyn, Queens, Staten Island, and the Bronx, otherwise known as Kings, Queens, Richmond, and Bronx counties, respectively. The area’s vast mass transit infrastructure connects the five boroughs as well as the surrounding suburban areas, forming the Greater New York Region. This region covers 21 counties in the southeastern section of New York State, southwestern corner of Connecticut, and Central and Northern New Jersey.

The following are notable points about New York City:

 The city is home to the two largest stock exchanges in the world, the New York Stock Exchange and the NASDAQ.  New York houses many large financial institutions, including Citigroup, JP Morgan Chase, Goldman Sachs, Barclay’s and Bank of America.  New York City is home to the headquarters of 48 companies on the 2014 Fortune 500 list.

The following map highlights the Metropolitan Statistical Area (MSA) of New York, NY: NEW YORK CITY COUNTIES

Source: Claritas, Inc., Cushman & Wakefield Valuation & Advisory

CURRENT TRENDS New York City’s economy is growing modestly on the strength of steady employment gains over the past few years. The city has recovered all of the jobs lost during the great recession, well ahead of most cities in the nation, and total employment recently reached an all-time high. The recent job gains have come in many sectors, and the city’s employment diversity has helped weather the finance industry’s struggles. A major source of recent

GATEWAY CENTER AT BRONX TERMINAL MARKET NEW YORK CITY REGIONAL ANALYSIS 7

economic growth has been the city’s tourism industry. NYC & Company, the city’s tourism bureau, estimates that New York City had a record 56.4 million visitors in 2014, up from 54.3 million in 2013. They created $61.3 billion in economic impact and sustained 359,000 tourism-related jobs paying $21.0 billion in wages. This boom in the industry explains the city’s expansion in related employment sectors, and will continue to help the local economy.

A huge boom in tourism has subsequently enabled hotel occupancy rates to keep up with room boom beyond Manhattan. A growing number of independent and brand-name hotels have been lining the city’s outer boroughs. In fact, between January and November 2014, outer-borough occupancy rates ran as high as 81.0 percent, according to STR, a hospitality-industry research firm. Most hotel markets operate at 65.0 occupancy, while Manhattan is pushing 83.0 percent. Many hoteliers have turned to the outer boroughs to accommodate tourists who cannot get a reservation in Manhattan’s tight hotel market or think it is too pricey. More than 100 hotels are scheduled to open across Brooklyn, Queens, Staten Island and the Bronx over the next 36 months. Queens is on pace to add nearly 50 properties in the next four years, 23 of which will be in Long Island City. Meanwhile, Brooklyn added two new hotels last year, bringing its total to 50, and occupancy to 81.1 percent. STR projected that by the end of 2017, Brooklyn will have a total of 70 hotels, a 150.0 percent increase from the 28 properties the borough had in 2008.

Another source of New York City’s economic prosperity comes from the construction of cultural institutions. A new study from the New York Building Congress found that cultural institutions accounted for $1.3 billion in new construction spending for the five years ended in 2014. Notable projects such as the $422.0 million Whitney Museum, the $65.0 million renovation of the Met Museum’s fountains, the $81.3 million renovation of the Cooper Hewitt Smithsonian Design Museum, and the expansion of the Queens Museum created 10,000 jobs during the five-year period. While the cultural projects represent only a tiny portion of the $32.0 billion in annual construction spending (industries like health care and education outrank cultural construction spending), the sector is vital to the city’s economy as it attracts tourists from around the world.

Last year, the Independent Budget Office (IBO) released its annual assessment of the city’s economy. The IBO predicts that the city will show a gain of 413,000 jobs in the current expansion, which is the largest for any comparable period since the record-keeping started in 1950. Employment increases will continue for the next two years, and more importantly, the IBO forecasts that wages will finally rise for most workers, not just the wealthy. While in 2013 household income stagnated in places throughout the U.S., it rose more than 3.0 percent in New York City. These gains are expected to broaden out when the latest numbers come in. Further, the IBO estimates the city will generate $6.0 billion more in revenue than the forecast made by the de Blasio administration over the next four years.

New York City has created more jobs over the past five years than during any five-year period in the last half century. This spurt of employment growth did not come from Wall Street, however. The big investment banks and brokerage firms used to form the powerful engine that pulled New York’s economy out of recessions. During the boom years of the 1990’s, the high-paying securities industry accounted for more than 10.0 percent of all the jobs added in the city’s private sector. This time around, it has contributed less than 1.0 percent. This proves that New York City can grow at a rapid pace without leaning on Wall Street. About 425,000 jobs were added since the end of 2009, bringing total employment to 4.1 million jobs. Although many of these jobs are in lower-paying businesses, such as hotels and restaurants, fast-growing and well-paying tech companies like Google, Facebook and BuzzFeed are adding jobs at a fast pace. These major companies have been joined by small startups throughout the city in creating a thriving tech ecosystem. According to a 2013 study presented at the Bloomberg Technology Summit, the city’s tech boom has been responsible for roughly one-third of its private sector job creation since 2007. New York City’s government is helping to nurture the growth with economic development

GATEWAY CENTER AT BRONX TERMINAL MARKET NEW YORK CITY REGIONAL ANALYSIS 8

and education initiatives. As a result, Cornell, NYU, Columbia, and Carnegie Mellon are all opening or expanding tech-oriented campuses in the city, in an effort to meet the need for highly educated workers.

Another 2015 report, issued by the Center for an Urban Future, found that nearly 88.0 percent of all the state’s job growth was in New York City. Between 2004 and 2014, the city added almost 530,000 jobs, while the rest of the state gained about 70,000. Over the same time period, private sector jobs in the city jumped 17.3 percent, whereas they only grew 3.5 percent statewide. The city’s gain was powered by the retail, health care, technology and creative services sectors. In 2014 alone, health care added 20,900 jobs, retail added 9,700 jobs, and the creative industry added 7,000 jobs.

Further considerations are as follows:

 A report from 2014, which was commissioned by the Association for a Better New York, found that New York’s growing technology industry generates more than a half-million jobs, almost $125.0 billion in annual output, and $5.6 billion in tax revenues.  Media giant Viacom is laying off 264 employees in New York City to save $250.0 million. The company is in the midst of a corporate restructuring that will combine its Comedy Central and Spike channels with MTV and VH1.  MetLife is quadrupling its space at 200 Park Avenue, and will consolidate all of its New York City employees to its namesake tower in Midtown. The new lease covers about 550,000 square feet, which is approximately 430,000 square feet more than its current lease. The company expects to complete all the moves by the first half of 2017.  Domestic merchandise and home furnishings retailer Bed Bath & Beyond signed a lease in January to take more than 100,000 square feet of space at Liberty View Industrial Plaza in Sunset Park, Brooklyn. The deal happened as Brooklyn continues to gain popularity as a place to live and work among tech tenants.  A 2014 CPEX retail report identified 43 additional retail corridors in Brooklyn, bringing the total number to 88. Of those 88 retail districts, 10 corridors had retail rents over $100.0 per square foot compared with just two corridors five years ago.  California-based real estate brokerage Marcus & Millichap aims to double its New York footprint by looking to take 40,000 square feet of office space. The company, whose current office is located at 270 Madison Avenue, said that the new office could accommodate up to 250 staffers.  Facebook continues to expand its footprint at 770 Broadway in Midtown South. The social media giant will add 80,000 square feet of space, bringing its total to 270,000 square feet. The additional space will have nearly tripled its size at the property since it first occupied the building two years ago. Rents are believed to be more than $100.0 per square foot for the new space occupying the entire 15th floor.  Test-prep company Kaplan is subleasing 80,000 square feet of space from Condé Nast at 750 Third Avenue in Midtown. Kaplan will dispose of its current space of roughly 140,000 square feet at 395 Hudson Street by subleasing it to WebMD.  Media conglomerate Bloomberg LP is expanding its footprint onto Third Avenue, taking roughly 150,000 square feet at 919 Third Avenue. The company becomes one of the latest in a growing line of companies to lease big blocks of space on Third Avenue, which is considered midtown’s street of bargains.  Furniture and home-décor retailer Design Within Reach signed a lease for 40,000 square feet at Industry City industrial complex in Sunset Park. It will also include a repair facility, a design studio and showroom. It is expected to be operational in late spring and will bring 25 jobs to the site.

GATEWAY CENTER AT BRONX TERMINAL MARKET NEW YORK CITY REGIONAL ANALYSIS 9

 Office-suite provider Regus signed a deal to take about 34,000 square feet at the Falchi Building in Long Island City, Queens. Regus and its rival, WeWork, have rapidly expanded across the city to meet an uptick in demand for office suites.  York Studios is set to bring Film & Television back to the Bronx with the construction of 3 buildings totaling about 300,000 square feet. The company currently operates out of a 40,000 square foot facility in Queens. Construction is scheduled to begin this summer and be completed by summer 2016.  Simone Development Companies is in a process of completing a $16.0 million deal that would allow construction of a 1.9 million square foot mixed-use office, academic and medical complex on a 33-acre site at 1500 Waters Place in the east Bronx. Simone plans to construct two one-story retail buildings, totaling 40,000 square feet; and four 10-story buildings of 250,000 square feet each. Plans will also include a hotel and 100,000 square feet of space for high education. Several thousand permanent jobs are expected to be created through the development.  Los Angeles-based Estate Four plans to build a 1.2 million square foot project that will include a mixed-use of offices, shops, performance spaces and a promenade in the Red Hook industrial neighborhood of Brooklyn. The new development, called the Red Hook Innovation District, would be built over five years at a cost of $400.0 million.  In March 2015, a partnership of developers between Jamestown, Belvedere Capital and Angelo Gordon unveiled a massive redevelopment plan for Brooklyn’s Industry City. The plan calls for a $1.0 billion investment over the next 12 years and 13,300 jobs at Industry City, including the ones currently there. The developers estimate that another 5,800 jobs would be created throughout the city as a result of the project. The planned expansion, however, cannot go forward without Mayor de Blasio’s administration’s approval for the creation of a “special innovation zoning district.”  Jones New York, the women’s clothing brand owned by Sycamore Partners, will close all of its 127 outlet stores throughout 2015. The company will also discontinue its wholesale business as it seeks strategic alternatives. The Jones New York brand, which is sold in mid-priced department stores like Macy’s, has struggled in recent years as retailers ramped up their exclusive-label goods to draw shoppers.  Cornell University broke ground on its Roosevelt Island tech campus in January 2014. The $2.0 billion project, which won the city’s “Applied Sciences NYC” competition, will add some 2.0 million square feet of academic, residential, and commercial space over the next two decades. Slated to open in 2017, the new campus will house approximately 2,000 students and 280 faculty members, and create 8,000 permanent jobs by 2037. The project more recently received $50.0 million from Verizon to develop an executive education center.  An October 2014 report from the New York Building Congress forecasts overall construction spending in 2014 to be $32.9 billion, an increase of 17.0 percent from the previous year. A majority of the non-infrastructure construction spending will be from new residential projects. Despite the optimistic forecast, the New York Building Congress reported in January 2015 that construction costs increased by 5.0 percent in 2014 after a nearly 5.0 percent increase in previous year.  Mayor Bill de Blasio and his administration are in the early stage of formulating a rezoning plan for a 57-block- long corridor along Jerome Avenue that would bring more housing and new businesses to the South Bronx area. The first step is completion of the Cromwell-Jerome Neighborhood Study, which is expected to be ready by the end of the year.  Square, a San Francisco based mobile payment devices and software maker, expanded its size by moving into its brand new 40,000 square foot SoHo office space in October 2014. The company plans to increase its New York based staff to 385 employees. As of October 2014, the company employed a total of 75 employees.

GATEWAY CENTER AT BRONX TERMINAL MARKET NEW YORK CITY REGIONAL ANALYSIS 10

 Amazon received $5.0 million in tax credits from New York state at the end of 2014. The company expects to use the money to bring 500 jobs to New York City at a property in Herald Square shopping district.  Samsung Electronics is looking to purchase as much as 1.0 million square feet of new or existing office space in Manhattan. According to the Wall Street Journal, offices of that size generally could hold between 5,000 and 7,000 employees. The purchase (if the deal is reached) would be one of largest corporate expansions in the city in years.  General Motors is reorganizing its Cadillac brand into a separate business unit and relocating the new company’s headquarters to New York City at the beginning of June 2015. Cadillac expects about 130 to 140 people to be working for Cadillac in New York by the end of the year; many will be new hires. It also expects that number to double to about 300 in the next three years.  The New York Times began its layoff process in December 2014 as the newspaper company did not receive enough voluntary buyouts to cover newsroom budget cuts. The company expects to cut more than 100 newsroom jobs.  The State University of New York reached an agreement with the Fortis Property Group to build out NYU Langone Medical Center at a former site of Long Island College Hospital in Cobble Hill, Brooklyn. Expected to be completed by 2018, the 125,000 square foot complex, will have 70 doctors and a total staff of 400. NYU Langone planned to invest $175.0 million to build out the facility.  Rockefeller University is planning a two acre campus extension over the FDR Drive. The project will involve building a platform over the highway to support four new buildings, and is estimated to cost between $425.0 million and $450.0 million. It is expected to break ground in the second half of 2015, and construction is expected to be finished in four years.  Online grocer FreshDirect broke ground in December 2014 on its 500,000 square foot corporate headquarters in Mott Haven, South Bronx. The company reached a deal with the city in 2012 to relocate to the Bronx (as opposed to New Jersey), keeping its 3,000 jobs in the city. In addition, the relocation is expected to create 1,000 new jobs for Bronx residents.  New York City is investing $140.0 million to expand manufacturing and create 3,000 jobs at the Brooklyn Navy Yard. The project, which was announced by Mayor Bill de Blasio in November 2014, will build on earlier city plans for what is known as Building 77. The building is scheduled to open by mid to late 2016. In addition to Building 77, The New Lab, a high-tech manufacturing consortium, is expected to expand to 84,000 square feet, from its current 8,000 square foot space, when it moves into the new Green Manufacturing Center, a 250,000 square foot facility under construction at the Navy Yard.  Numerous high-profile redevelopment projects in various stages of the development pipeline will contribute to New York City construction spending well into the future. Notable among these include Hudson Yards, Pacific Park (formerly known as Atlantic Yards), the World Trade Center site, Flushing Commons, Greenpoint Landing, Domino Sugar Factory, the Staten Island ferris wheel and outlet mall, Willets Point, City Point, Hallets Point, and Seward Park.  Broadway Stages, a Brooklyn-based studio, has plans to build a $20.0 million film production complex on Staten Island. The plan will generate 800 jobs over the next two years and as many as 1,500 jobs over the next five years.  IBM announced that it will be investing $1.0 billion in its new Watson supercomputer division, which will be headquartered in 51 Astor Place in Manhattan. The money will be partially invested in startup companies and the hiring of several hundred employees at the new headquarters location.

GATEWAY CENTER AT BRONX TERMINAL MARKET NEW YORK CITY REGIONAL ANALYSIS 11

DEMOGRAPHIC TRENDS

DEMOGRAPHIC CHARACTERISTICS New York City exceeds the national average in household income at both the top and bottom of the spectrum. As a result, the city’s middle income brackets are relatively small. The high cost of living in New York City pushes out many of those who are not poor enough to qualify for subsidized rents or wealthy enough to afford market-rate housing. A 2012 study from the Center for Housing Policy found that for the decade ended in 2010, housing and transportation costs in New York City rose 55.0 percent. Over the same time period, income in the area only grew by 31.0 percent.

The city also has a gap in educational attainment. A higher percentage of New York City residents are without a high school diploma than the national population, and likewise for residents with at least a bachelor’s degree.

Further considerations are as follows:

 The median person in New York City is 36 years old, one year younger than the national median.  New York City’s average household income ($78,499) is significantly higher than the country’s ($71,318). When looking at median household income, however, the roles are reversed. Median income in New York is $50,493, while the country’s median household income is $51,352. Medians are typically a better measure of central tendency, as means are more easily influenced by outliers. As discussed above, New York is full of outliers at the upper and lower ends of the income scale.  A survey set released by the U.S. Census in September 2013 revealed that in 2011, 21.2 percent of New York City residents were under the poverty line, compared to only 15.9 percent for the nation as a whole. This marked the fourth straight year that the percentage increased. The stat seems to suggest that much of the region’s recent job growth has been in industries with low wages.  New York City bests the national average in residents with at least a bachelor’s degree by 5.5 percentage points. The city boasts a large number of institutions of higher learning, along with industries that require such education. The educated labor pool makes New York City an attractive destination for many businesses. The following table compares the demographic characteristics of New York City with those of the United States:

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POPULATION According to Moody’s Analytics, the current population of New York City is estimated at over 8.4 million. Rapid population growth is and always will be a challenge for New York City, as the densely populated metro area has little room for growth. The recent trend of redeveloping former industrial and office buildings into residential buildings could help, but the city will likely never grow as quickly as the rest of the country. Of all the boroughs, Brooklyn is expected to grow the most quickly in the near future, as its current renaissance continues. According to Moody’s Analytics, the borough is forecast to grow by an average annual rate of 0.7 percent through 2019.

Further considerations are as follows:

 From 2004 through 2014, New York City had average annual population growth of 0.5 percent. Over the same time frame, however, the nation grew at an average annual rate of 0.9 percent.  Population growth for the next five years will continue to be relatively low in New York. The average annual rate is forecast at 0.5 percent, lower than the nation’s forecast annual growth of 0.8 percent.  People typically follow jobs, so the recent trend of private sector job growth is a likely driver behind New York’s population growth since the recession. The city’s annual growth rate peaked at roughly 1.1 percent in 2011. The following chart compares historical and projected population growth between New York City and the United States as a whole:

GATEWAY CENTER AT BRONX TERMINAL MARKET NEW YORK CITY REGIONAL ANALYSIS 13

POPULATION GROWTH BY YEAR New York City vs. United States, 2004-2019 1.3% United States New York City Forecast 1.0%

0.7%

0.4%

0.1%

-0.2% Annual Percent Change Percent Annual -0.5% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory Note: Shaded bars indicate periods of recession

The following table shows New York City’s annualized population growth by county:

HOUSEHOLDS Much like population growth, New York City continually lags the country in household formation. This is largely due to issues endemic to New York City. For example, the extremely high cost of living discourages household formation, especially as young residents group together in apartments to live more affordably. It is not uncommon for living rooms to be converted into extra bedrooms. Indeed, recent census data show that New York City leads the nation in nonfamily households, with almost two-thirds of households having members with no familial relationship.

Further considerations are as follows:

 From 2004 to 2014, the number of households in the city grew at an average annual rate of 0.3 percent, lower than the national rate of 0.9 percent per year.  Over the next five years, the city’s average growth rate is expected to be 1.0 percent per year, while the rest of the nation is forecast to have an average growth rate of 1.4 percent. The chart below compares historical and projected household formation growth between New York City and the United States as a whole:

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HOUSEHOLD FORMATION BY YEAR New York City vs. United States, 2004-2019 2.0% United States New York City Forecast

1.5%

1.0%

0.5% Annual Percent Change Percent Annual 0.0% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory Note: Shaded bars indicate periods of recession

ECONOMIC TRENDS

GROSS METRO PRODUCT As discussed earlier, one of the city’s biggest new growth drivers since the recession has been the tech industry. Giants like Microsoft, eBay, Yahoo!, Google, Facebook, Twitter, and LinkedIn have been expanding, while smaller tech firms and startups are popping up in “Silicon Alley” and other areas of the city. Notable among these are Etsy, Shutterstock, Kickstarter, MongoDB, Gilt Groupe, and Tumblr. The industry has also been one of the biggest consumers of office space in the city in recent quarters. Expansion is expected to continue as Cornell University’s proposed $2.0 billion high-tech graduate school on Roosevelt Island begins to come to fruition. It may take some time before new jobs and businesses arise from the initiative, but the industry will continue to own a growing share of the city’s economic output.

According to Moody’s Analytics, the city’s economy grew by 1.4 percent by in 2014, lower than the nation’s growth of 2.4 percent. The city’s growth is expected accelerate this year and will surpass the nation’s growth. The city’s economy is well diversified now, and growth will further intensify when financial companies return to expansion.

Further considerations are as follows:

 For the purpose of comparing the economies of New York City and the United States, we use Gross Metro Product (GMP) and Gross Domestic Product (GDP), respectively. The measures are analogous in what they attempt to capture, but GDP is on a much larger scale than GMP.  From 2004 through 2014, New York City averaged 2.2 percent annual GMP growth, moderately better than the nation’s annual GDP growth of 1.6 percent over the same time period.  The city’s GMP growth is expected to very slightly lag the nation’s GDP growth over the next five years, growing by an annual average rate of 2.6 percent. The nation’s GDP is forecast to have 2.7 percent annual growth. The following chart compares historical and projected GMP growth by year for New York City and GDP growth for the United States:

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REAL GROSS PRODUCT GROWTH BY YEAR New York City vs. United States, 2004-2019

8.0% United States New York City Forecast

5.0%

2.0%

-1.0% Annual Percent Change Percent Annual

-4.0% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory Note: Shaded bars indicate periods of recession

EMPLOYMENT DISTRIBUTION New York City is heavily weighted in office-using employment sectors, which comprise 31.6 percent of jobs compared to 24.4 percent for the nation. This helps to explain the high wages and job growth found in the metro area. Furthermore, the city’s abundance of service jobs has shielded it from the gradual decay in manufacturing employment across the nation.

Further considerations are as follows:

 More New York City workers are employed in education/health services than in any other sector, comprising 20.5 percent of the workforce. The national representation for this sector is currently at 15.5 percent.  The sector with the lowest employment representation in the city is manufacturing, which accounts for only 1.8 percent of the workforce. By contrast, the sector accounts for 8.7 percent of national employment. This is a reflection of the service-heavy orientation of New York City, the high cost of land, and the lack of space for large manufacturing facilities.  The percentage of New York City jobs in the financial activities sector is nearly double that of the national proportion, with 10.7 percent of total employment. This is not surprising, as New York City is the financial capital of the United States and home to Wall Street.  The area also has more than two times the information sector representation than the rest of the country. Recent growth in this sector is a result of the tech boom. The following chart compares non-farm employment sectors for New York City and the United States as a whole:

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EMPLOYMENT BY SECTOR New York City vs. United States 2015 Estimates

Construction Manufacturing Trade, Transportation & Utilities Information United States Financial Activities New York City Professional & Business Services Education & Health Services Leisure & Hospitality Other Services (except Govt.) Government 0% 4% 8% 12% 16% 20% 24%

Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory

MAJOR EMPLOYERS New York City’s major employers are a good reflection of the city’s employment distribution. Just as many New York City jobs are in education/health services and financial activities, many of the largest employers are found in those sectors. Of the ten largest private employers in the city, five work in healthcare, three are banks, one is in communications, and one is a major retailer.

Further considerations are as follows:

 JP Morgan Chase & Co., Citibank NA, and Bank of America are the three largest banks in the city, employing more than 81,000 people combined. Their appearance on this list is not surprising, given New York’s status in the financial world.  As previously stated, the education/health services sector is the largest in the city, and the rest of the list reflects this. The five largest hospital systems (North Shore-Long Island Jewish Health System, Mount Sinai Health System, New York-Presbyterian, Continuum Health Partners, and Montefiore Medical Center) employ nearly 140,000 New Yorkers.

The following table lists New York City’s largest private employers:

GATEWAY CENTER AT BRONX TERMINAL MARKET NEW YORK CITY REGIONAL ANALYSIS 17

EMPLOYMENT GROWTH Employment growth in New York City remains steady, and has now outpaced the nation’s job growth over much of the past decade. New York City has long since recovered all of the jobs lost during the great recession and is now in a period of sustained expansion.

According to the New York State Department of Labor, total employment in the city grew by 2.9 percent during the 12 month period ending in January 2015, adding 115,600 jobs. Private sector job growth in New York City was even more pronounced, increasing by 3.3 percent from the same time last year, which outpaced both the state’s growth rate (2.0 percent) and the nation’s growth rate (2.8 percent).

Job growth continues to be broad-based, with almost all major private sectors posting year-over-year gains. The city’s employment growth over the past year has been led by the following sectors: education/health services (which grew by 40,800 jobs, representing the fastest growth rate at 4.9 percent growth rate), professional/business services (which added 24,800 jobs, a 3.8 percent growth rate), leisure/hospitality (which added 14,400 additional jobs, representing growth rate of 3.8 percent). trade/transportation/utilities (adding 13,700 positions, a 2.2 percent increase), financial activities (which added 8,300 jobs, a 1.9 percent growth rate), and information (which added 2,900 jobs, a 1.6 percent growth rate).

Every sector except manufacturing (which contracted by 1,600 jobs) added jobs for the 12-month period ending January 2015. Government employment, which has seen constant contraction in recent months, rose by 3,300 jobs (a 0.6 percent increase) over the past year. The city’s important securities industry has begun to pick up the pace and will continue to steady after a double-dip contraction, but growth will remain modest. While the industry payrolls have rebounded to their highest level in more than two years, some concerns still remain. For instance, Citigroup’s fourth quarter profits were nearly offset by its $3.5 billion legal expenses, while legal costs and disappointing trading revenue hurt JPMorgan Chase and Bank of America. This wave of bad news will likely have a consequential impact on future hiring and, combined with ongoing efforts to adapt to tight regulation, keep financial services in check.

Additional considerations for employment growth are as follows:

 Between 2004 and 2014, New York City’s total non-farm employment grew by an annual average of 1.3 percent. This was much better than the nation’s 0.5 percent annual average job growth over the same time period.

GATEWAY CENTER AT BRONX TERMINAL MARKET NEW YORK CITY REGIONAL ANALYSIS 18

 Over the next five years, the city’s total non-farm employment is forecast to grow by an annual average of 1.1 percent, slightly below the nation’s 1.3 percent annual growth. The following chart illustrates total non-farm employment growth per year for New York City and the United States:

TOTAL EMPLOYMENT GROWTH BY YEAR New York City vs. United States, 2004-2019 4.0% United States New York City Forecast 2.0%

0.0%

-2.0%

-4.0% Annual Percent Change Percent Annual

-6.0% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory Note: Shaded bars indicate periods of recession

UNEMPLOYMENT According to the New York State Department of Labor, New York City’s seasonally adjusted unemployment rate in January 2015 was 6.5 percent, reaching its lowest level since October 2008. Year over year, the current unemployment rate represents a 1.5 percentage point improvement from January 2014. The rate remains above the state (5.8 percent) and national (5.7 percent) rates, however. This paradox of a high unemployment rate combined with steady job growth is partly a result of discouraged workers returning to the city’s labor force as job prospects improve.

Further considerations are as follows:

 New York City’s unemployment rate averaged 6.8 percent between 2004 and 2014, falling in line with the nation’s average rate, but slightly higher than the state’s average rate of 6.7 percent. During the early 2000s the city had a much higher unemployment rate than the nation, a trend which returned in 2012.  Over the next five years, Moody’s Analytics forecasts that New York City’s unemployment rate will average 4.5 percent, lower than the nation’s 5.1 percent average rate. The city’s unemployment rate will dip below 5.0 percent in 2016. The following graph compares historical and projected unemployment rates for New York City, the state of New York, and the United States as a whole:

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UNEMPLOYMENT RATE BY YEAR New York City vs. New York vs. United States, 2004-2019

11% United States New York New York City Forecast

3% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory Note: Shaded bars indicate periods of recession

CONCLUSION New York City has fared well in the past few years and expansion is firmly in place. The city has experienced moderate economic growth and employment gains that have outpaced the nation’s. Economic expansion is expected to accelerate in 2015 as the tech industry drives employment and financial services begins to recover.

Additional items to consider for New York City:

 New York City has had steady private sector job growth since 2011, record tourism numbers, and features a well-diversified economy that is no longer dependent on Wall Street. As the tech and tourism industries grow further, New York City will continue to see economic growth in line with the rest of the country.  New York City’s unemployment rate has been trending downward and will experience steady improvement over the next several years.  Affordability will continue to be a problem in the near term for New York City’s middle class, sustaining the trend of “a city of extremes”. The shifting employment composition could exacerbate this problem.

GATEWAY CENTER AT BRONX TERMINAL MARKET LOCAL AREA MAP 20

LOCAL AREA ANALYSIS

GATEWAY CENTER AT BRONX TERMINAL MARKET LOCAL AREA ANALYSIS 21

LOCATION The subject site is bounded by 149th street to the south, the Metro-North Rail Road tracks to the north, River Avenue to the east, and Exterior Street to the west in the Bronxchester neighborhood of the Bronx. The subject is also located across from the Harlem River, and adjacent to the Major Deegan Expressway (Interstate 87). Local area accessibility is good, relying on St. Ann’s Avenue to east, Willis Avenue and Melrose Avenue to the west, East 149th street to the south and East 161st to the north. Bronxchester is generally bound by Melrose to the east, Highbridge to north, the Harlem River to the East and Manhattan to the south. NEARBY AND ADJACENT USES Bronxchester has experienced a growing change as there has been significant development activity in the area. The subject property is located in an area once renowned as a major retail district but due to persistent neglect has, until recently, fallen to blight. The City of New York has undertaken multiple initiatives to revitalize the area. The subject is immediately surrounded by retail/commercial uses, residential uses to the west, and various recreational and community facility facilities. The new Yankee Stadium was completed in 2009 along with four new public ball fields, 8,000 new trees, a skating park, 18 new tennis courts and a new esplanade providing access from the new Yankee Stadium to the Gateway Center. Immediately to the east of the subject property’s is the 2-acre public park on the Harlem River waterfront owned and operated by the City of New York as open space for the public’s enjoyment. The park connects to adjacent waterfront recreational facilities and additional open space yet to be developed. Several parks surround the subject’s immediate area including Heritage Field, Macomb’s Dam Park, Franz Sigel Park, Joyce Kimer Park and Mullaly Park. The immediate area is also comprised of the Bronx County Courthouses and Lincoln Hospital

In addition to the subject, the Hub and Concourse Plaza are two shopping centers located within close proximity at the intersections of 149th Street and Third Avenue and 161st Street and Morris Avenue, respectively. There are also several local and regional retailers that operate along Third Avenue, River Avenue, 149th Street and 161st Street. Other uses in the area include commercial buildings, office buildings, bank branches, service stations, and fast food and sit-down restaurants. The influx of new residential buildings north of the subject has increased over the last few years. The recently completed Via Verde (Green Way), a $99 million mixed-income rental and home ownership building in the Bronxchester neighborhood of the Bronx, is now 100 percent sold. The award winning designed building comprises townhouses and a 20-story building and includes 150 low-income rental units, 71 affordable cooperative residential units, along designated areas for community and recreational activity. Finally, the proposed renovation of the former Bronx Detention Center into the Bronx Children’s Museum represents a New York City’s commitment to revitalizing the subject’s surrounding area.

LOCAL AREA CHARACTERISTICS The subject is located just south of Yankee Stadium underneath the Major Deegan Expressway. Like many neighborhoods throughout New York City Bronxchester is a self-contained community. The side avenues and streets are generally one-way with the main and commercial roads being bi-directed. The streets are improved with mainly lower to middle income residential housing types, including multi-tenant rentals, cooperative apartment and condominium buildings. Retail and commercial districts are located on River Avenue, 149th Street, Grand Concourse Boulevard and Third Avenue. These major retail corridors primarily serve the local and surrounding neighborhoods and have always been considered strong retail districts.

GATEWAY CENTER AT BRONX TERMINAL MARKET LOCAL AREA ANALYSIS 22

ACCESS Local area accessibility is good, relying on St. Ann’s Avenue to east, Willis Avenue and Melrose Avenue to the west, East 149th street to the south and East 161st to the north. The area is also served by the 2, 4 and 5 subway lines at the Grand Concourse station three blocks to the east of the subject and the 4, B and D lines at the 161st Street-Yankee Stadium station 8 blocks to the north of the subject. The area is also served by 12 bus routes and the new Metro North station just north of the subject at 161st Street. Regional access is available via the Cross Bronx Expressway, Sheridan Parkway, Bruckner Expressway, and Major Deegan Expressway. The subject is directly accessible via exits 4 and 6 from the Major Deegan Expressway. Based on the City of New York EDC information the pedestrian traffic exceeds 250,000 people per day and more than 36,000 vehicles drive in and out of The Hub each day.

SPECIAL HAZARDS OR ADVERSE INFLUENCES We observed no detrimental influences in the local market area, such as landfills, flood areas, noisy or air polluting industrial plants, or chemical factories.

CONCLUSION Bronxchester is established neighborhood that is densely populated and concentrated with residential and retail/commercial development in the area. The development and growth of the neighborhood over the past few years has enhanced the desirability of the subject area. Overall, we anticipate overall growth over the long-term given the demand drivers in the local area.

GATEWAY CENTER AT BRONX TERMINAL MARKET NATIONAL RETAIL MARKET ANALYSIS 23

NATIONAL RETAIL MARKET ANALYSIS INTRODUCTION The year 2015 is expected to be the strongest year for the U.S. economy since at least 2005. Real gross domestic product (GDP) is forecast to increase at a 3.3 percent rate, roughly 50 percent faster than the 2.2 percent average since the recovery began in mid-2009. The drivers of growth are consumer spending, business investment and, to a lesser extent, housing. Additionally, declining oil prices are a net positive for the economy, boosting the income available for discretionary purchases and reducing costs in a wide range of industries. This anticipated acceleration will have a strong positive impact on the U.S. commercial real estate sector, leading to higher demand in all major sectors: office, industrial, retail, multifamily and hospitality.

The strength of the economy at the end of the year was evident in a wide range of indicators, from employment to manufacturing to consumer spending. Virtually every measure of the health of the labor market improved substantially during 2014. Perhaps the most important shift of the past year has been in hiring. Businesses are now looking for more people and creating more jobs than at any time since the 1990s. There were 2.95 million more jobs in the U.S. than at the end of 2013. That’s more job growth in 12 months than in any full year since 1999. The pace of job growth accelerated notably in 2014. In addition, the number of job openings in the U.S. is at the highest level since 2001, indicating that job growth is likely to remain strong in the next several quarters.

As job growth has accelerated and income has increased, households have begun to spend more on durable goods, making purchases they have put off for the past several years. The best example of this is motor vehicle purchases. In 2014, U.S. motor vehicle sales totaled 16.4 million units, the highest volume since 2006. Sales of autos are one of the best indicators of the health of consumers. When auto sales are strong, households are confident about the future and their financial situation, and U.S. motor vehicle sales are expected to remain strong throughout 2015. In addition, the expectation is that spending on other consumer durable goods, like furniture and appliances, are expected to increase in the coming year as more households look to replace worn-out goods.

Another important and positive development that bodes well is the steady improvement in the housing sector. The housing sector is continuing to grow at a moderate pace. New construction and sales of houses are not booming, but, on balance they are increasing. In the six months to November, new home construction has run at an annual rate of 1.01 million units, the strongest level of activity since mid-2008. With the latest increase, home prices are now up over 4.0 percent over the past year. This slow but steady growth will continue to generate greater employment in the construction sector, as well as to increase consumer spending on everything from furniture and appliances to utilities and financial services.

For the retail sector, the combination of solid income and employment growth and a return to more seasonal weather boosted retail sales. Adjusted for inflation, retail sales grew at a 3.3 percent annual rate in January 2015. The gains were widespread, with auto sales up at a 10.7 percent annual rate, and GAFO sales up at an estimated 2.9 percent annual pace. Over the last couple years, retail industry sales have grown at a rate faster than many other industries. Through December 2014, preliminary estimates from the U.S. Census Bureau indicate retail sales totaled over $5.3 trillion, a 4.0 percent increase over the same time-period in 2013. This proliferation marks 47 consecutive quarters of growth. Given the improving market, increased wages, and strong job growth, we remain confident that consumers will continue to increase spending at a healthy clip, which will boost the need for both retail and industrial space in the coming year.

GATEWAY CENTER AT BRONX TERMINAL MARKET NATIONAL RETAIL MARKET ANALYSIS 24

NATIONAL RETAIL INVESTMENT SALES MARKET

RETAIL TRANSACTION ACTIVITY As the economy continues to improve, retail transaction volumes are beginning to rebound. Real Capital Analytics reported that year-end 2013 retail transaction volumes reached $60.8 billion, surpassing the 12-month totals for the previous consecutive five years. Still, the 2013 totals remain 24.0 percent below peak levels of the $80.2 billion recorded in 2007. These increased volumes are, nevertheless, a strong indication that investors feel there is growth potential in the retail market.

Through year-end 2014, pricing metrics have strengthened for retail properties with per-square-foot prices rising, average cap rates for primary assets falling and the Commercial Property Price Index reaching its highest post recession level. Year-end 2014 data available from Real Capital Analytics indicates that retail transactions have totaled over $83.6 billion, already a 32.9 percent increase over the $62.9 billion in transactions recorded in the previous year.

The following graph displays annual retail transaction volume since 2001:

$90 $83.6 $81.6 $80 $63.9 $70 $62.9 $61.1 $58.0 $60 $57.1

$50 $44.6

$40 $36.2 $28.6 $25.5

$30 $22.1 $16.3 $20 $14.0 $10 $0

RETAIL CAPITALIZATION RATES As the credit markets continue to loosen, transaction activity is on the rise. Investors have increasingly focused on real assets, such as commercial real estate, as a hedge against inflation in the wake of previous economic uncertainty. Capitalization rates (OARs) are compressing as demand increases. The PwC Real Estate Investor Survey reports that national power center and strip shopping center OARs at their lowest levels bottomed in the third quarter of 2007 at an average of 7.0 percent and 7.2 percent, respectively, while regional mall cap rates reached a low of 6.7 percent in the first quarter of 2008. Average rates for all three property types peaked in the first quarter of 2010 at nearly 8.5 percent.

Through year-end 2014, capitalization rates continue to strengthen. Power center OARs averaged 6.6 percent, while regional mall and strip shopping center OARs averaged 6.2 and 7.1 percent, respectively. In the current market, investors are viewing higher-quality assets in primary urban and first-tier suburban markets most favorably. However, with significant investor interest in the most dominate markets, capitalization rates have compressed notably among much of the most desirable product. As such, secondary markets are beginning to gather more attention as sources of opportunity. It should also be noted that the combination of relatively low

GATEWAY CENTER AT BRONX TERMINAL MARKET NATIONAL RETAIL MARKET ANALYSIS 25

interest rates and increasing loan-to-value ratios are driving many investors to turn to real estate as an alternative investment vehicle. The added demand should continue to lead to an increase in real estate values and the subsequent compression of cap rates.

The following graph depicts quarterly national retail capitalization rates by property type since 2008:

National Retail Cap

9.0%

8.5%

8.0%

7.5%

7.0%

6.5%

6.0%

National Power Center National Regional Mall National Strip Shopping Center

Source: PwC Real Estate Investor Survey

CMBS MARKET The availability of debt including the gradual resurgence of Commercial Mortgage Backed Securities (CMBS) has contributed to the increase in transaction activity. At its peak in 2007, CMBS issuance totaled nearly $230.0 billion in the United States, and retail assets accounted for approximately one-third of total CMBS volume. During the financial crisis that began in late 2008, funding dramatically plunged. Total CMBS issuance in 2008 dropped to just $12.0 billion, followed by a nearly non-existent $2.7 billion in 2009. Issuance rebounded in 2010, reaching $11.7 billion as investors began returning to the market, but the European debt crisis, coupled with the slow U.S. economic recovery and admissions from Standard & Poor’s that it had “potentially conflicting methods” in how it was rating securitizations, caused bond buyers to become very conservative in their underwriting and pricing. To that end, many “balance sheet lenders,” such as local savings and loan banks and life insurance companies, saw notable increases in lending activity. According to Commercial Mortgage Alert, CMBS issuance still managed to total nearly $33.0 billion and $48.2 billion, respectively, in 2011 and 2012. Demand doubled in 2013, due in part to low rates, improving economic conditions and an increased appetite from bond buyers. As such, in 2013 CMBS issuance totaled $86.1 billion.

According to Trepp LLC, after falling below 6.0 percent and hitting its lowest level in five years in November, the delinquency rate fell five basis points in December 2014. The delinquency rate for US commercial real estate loans in CMBS is now 5.75 percent, down 168 basis points from 7.43 percent in December 2013. The CMBS market heads into the new year with a lot of momentum. For most of 2014, issuance levels lagged behind most experts’ opinions. A surge in the second half of the year helped the market reach almost $100.0 billion in deals, leading many lenders to predict that issuance will exceed that barrier in 2015.

GATEWAY CENTER AT BRONX TERMINAL MARKET NATIONAL RETAIL MARKET ANALYSIS 26

The following table compares annual CMBS volume over the last eight years:

U.S. CMBS ISSUANCE (IN BILLIONS)

2007 2008 2009 2010 2011 2012 2013 2014

TOTALS $228.6 $12.1 $2.7 $11.6 $32.7 $48.2 $86.1 $94.1 Source: Commercial Mortgage Alert Five years after the financial crisis that caused $72.1 billion loans to default in the retail sector, a third of that total remains outstanding. However, lenders are making steady progress reducing distress levels, and while distressed sales will continue for some time, distress is no longer a significant factor weighing on the marketplace.

The following graphic shows recorded and estimated commercial real estate loan maturities by investor type through 2020:

GATEWAY CENTER AT BRONX TERMINAL MARKET NATIONAL RETAIL MARKET ANALYSIS 27

COMMERCIAL PROPERTY PRICE INDEX The Moody’s/RCA Commercial Property Price Index (CPPI) is a periodic same price change index of U.S. commercial investment properties. The Moody’s/RCA CPPI uses advanced repeat-sale regression analytics to measure price changes in U.S. commercial real estate.

As of October 2014, the most recent figures published, Moody’s/RCA CPPI for all properties measured an increase of 14.2 percent year-over-year. Currently at 185.2, the index is now near its peak of 186.06 measured in the December 2007. For retail properties, CPPI figures reported by Moody’s/RCA have indicated growth at 4.8 percent during the year-ending December 2014. The current Moody’s/RCA CPPI figure for retail properties is 160.56, or 16.9 percent off the index peak of 190.8 witnessed in September 2007.

The following graph displays the CPPI Index between January 2001 and December 2014:

Commercial Property Price Index Comparison

200 460

180 410 160 360 140 310 120

100 260

80 210 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Moody's National - All Property (left axis) Moody's National Retail (left axis) NCREIF National Aggregate (right axis)

Similarly, the National Council of Real Estate Investment Fiduciaries (NCREIF) also compiles a property price index based on a large pool of individual commercial real estate properties. The NCREIF Property Price Index is a quarterly time series composite total rate of return measure of investment performance of said commercial real estate properties acquired in the private market for investment purposes only. Based on data from NCREIF, the property price index peaked in the first quarter of 2008 at 419.88 before falling 29.3 percent to 296.81 in the first quarter of 2010. Since bottoming, the NCREIF Property Price Index has climbed to near its pre-recession levels, standing at 428.43 as of third quarter 2014 (most recent data available), reflecting the increase in commercial real estate values over recent quarters.

GATEWAY CENTER AT BRONX TERMINAL MARKET NATIONAL RETAIL MARKET ANALYSIS 28

RETAIL MARKET CONDITIONS

RETAIL CONSTRUCTION ACTIVITY Despite improving fundamentals in the retail real estate market, developers are still concerned about investing in new construction projects. The exception being outlet center development and projects located in the highest- performing markets with strong tenant mixes possibly including grocery retailers, drug stores or similar net leased properties that have shown notable strength in the current market. According to data from the CoStar Group, retail construction starts peaked at 66.0 million square feet in the second quarter of 2006. Given the collapse of credit markets and consumer demand during the recent recession, construction starts have fallen significantly over the last few years. Recently, retail construction starts totaled just 5.9 million square feet in the fourth quarter of 2014.

The following graph shows retail construction starts from the second quarter of 2006 through the fourth quarter of 2014:

Retail Construction Starts (SFin Millions)

70.0 Retail Construction Starts Peaked at66.0 Million Square Feet in Q2 2006

60.0

50.0

40.0

30.0

20.0 Just 5.9 Million Square Feet Commenced in Q42014

SQUAREFEET IN MILLIONS 10.0 11.6 66.0 64.2 36.2 54.0 52.2 55.1 28.6 40.4 33.2 26.2 18.9 15.4 13.4 12.8 9.7 10.3 8.9 10.6 7.0 9.3 13.1 10.9 9.2 14.0 13.5 11.6 18.8 15.2 15.8 10.0 11.1 11.2 8.5 5.9 0.0

Source: CoStar Group

Looking forward, new construction activity is expected to remain tepid until the industry works through the large amounts of debt maturities scheduled to come due between now and 2017. At the moment there continues to be a significant amounts of available space for retailers to choose from. We expect retail construction starts to remain tepid moderate through 2015.

RETAIL PRICE PER SQUARE FOOT Following the decline in sales volume, pricing levels achieved by shopping centers and other retail properties trended downward rapidly before rising in recent quarters. Between 2003 and 2008, a time from when the market had picked up after the last recession, up until the most recent market fall-out, the average price per square foot for retail assets increased by 50.8 percent to a peak of $187 per square foot in 2008. However, in 2010, the average price per square foot for all retail property would sharply decline to a low of $142 per square foot. Not

GATEWAY CENTER AT BRONX TERMINAL MARKET NATIONAL RETAIL MARKET ANALYSIS 29

until late 2010/early 2011 did the price per square foot begin to recover, and in 2012 it jumped to $182 per square foot, a 28.1 percent increase over 2010.

Year-to-date, or fourth quarter data, continued to indicate strength. Total retail property sales are averaging $203 per square foot. The 2014 average has surpassed the recent the 2008 peak, and baring some shift in fundamentals should continue to set new highs for the foreseeable future. We would note that RCA reports that there is a widening gap between unit prices paid in primary markets vs. secondary and tertiary markets. A flight to quality is prevalent in all of the major CRE market groups, including retail.

The following graph depicts the historical average price per square foot for retail assets as surveyed by RCA through fourth quarter 2014:

$325 $297 $300 $275 $250 $225 $203 $200 $175 $153 $150 $125 $100 $75

Mall & Other Strip Total Retail

VACANCY AND RENTAL RATES The graph below shows the severity of the last recession in terms of declining absorption and rising vacancy rates. In 2008, retail absorption was negative for the first time since Reis began collecting data in 1986. Mirroring the rebound in other commercial property sectors, leasing and occupancy of U.S. malls and shopping centers saw improved fundamentals through 2014. According to Reis, the low amount of new supply of retail space should reflect as a decline in retail vacancy rates through 2019. Between 2015 and 2019, Reis data forecasts absorption in the retail market to average approximately 21.2 million square feet per year while construction completions average approximately 15.1 million square feet per year. Given this forecast, overall vacancy rates in the national retail market are projected to fall approximately 180 basis points to 8.4 percent from their current reading near 10.2 percent.

GATEWAY CENTER AT BRONX TERMINAL MARKET NATIONAL RETAIL MARKET ANALYSIS 30

The subsequent graph depicts annual market conditions within retail markets across the U.S.:

Annual Retail Market Conditions

50 12% 40 10% 30 8% 20

10 6% 0 4% -10 FORECAST 2% -20 RENT GROWTH PERCENTAGE -30 0%

COMPLETIONS NET ABSORPTION VACANCY RATE

Source: Reis, Inc.

During 2014, falling vacancy rates and rising demand in the retail market has brought the start of meaningful rent growth for landlords in major U.S. retail markets. According to Reis data, prior to the latest economic recession, annual effective retail rental rates grew at an average rate of 2.4 percent. Following nearly four years of negative rent growth during the economic fallout from 2008 to 2011, effective retail rental rate growth figures are now averaging about 1.0 percent.

The following graph shows a composite of asking and effective annual rent growth within retail markets across the U.S.:

GATEWAY CENTER AT BRONX TERMINAL MARKET NATIONAL RETAIL MARKET ANALYSIS 31

Annual Retail Rent Growth 5% 4% 3% 2% 1% 0% -1% -2% FORECAST

Rent Growth Percentage Growth Rent -3% -4%

ASKING RENT % CHANGE EFFECTIVE RENT % CHANGE Source: Reis, Inc.

STORE CLOSINGS According to the most recent annual data collected by the International Council of Shopping Centers (ICSC), retailers and restaurateurs announced that nearly 5,500 establishments closed in 2014. The annual closing totals are more than double the previous years. The majority of retailers announcing store closings are mall-based tenants which has proven very problematic for mall owners with class-B and class–C properties.

The following is a list of space closed by segment:

ANNUAL STORE CLOSINGS 1ST HALF-YEAR 2ND HALF-YEAR

2014 4,403 1,080

2013 1,310 1,282

2012 3,511 953

2011 2,329 1,743

2010 4,396 1,176

2009 2,917 1,894

2008 3,272 3,641

2007 3,081 1,522

2006 2,749 1,981

2005 1,897 2,372

2004 3,750 2,553

2003 2,972 2,001

2002 3,227 2,723

2001 4,149 2,892

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Source: ICSC

GATEWAY CENTER AT BRONX TERMINAL MARKET NATIONAL RETAIL MARKET ANALYSIS 32

Discount department store retailers announced that they will close over 2.6 million square feet. In addition, traditional department stores, such as Sears and Saks Fifth Avenue announced their plans to reduce space by 2.3 million square feet over the coming years. Additionally, retailers Staples and Radio Shack recently announced the closing of 225 and 1,100 stores, respectively. For Staples and Radio Shack, the closures reflect both struggling sales totals, as well as a shift away from brick-and-mortar business to online retail.

While declining sales have forced many retailer chains to pare down their number of outlets, other retailers are closing due to shifts in the marketplace. As such, many struggling retailers have been forced to reinvent how they reach customers.

E-COMMERCE In the age of Amazon.com, stores are trying to reinvent themselves, generally using one of two strategies: deliver products more quickly than and nearly as inexpensively as online sellers, or offer shopping experiences that entice people to visit their establishment and buy something. With the rise of online purchasing and increased price-sensitivity from consumers, retailers without a notable e-commerce platform will suffer while online-sales and sales from smartphones continue to grow at a quicker pace than brick-and-mortar sales.

Forrester Research estimates that by 2017, 60.0 percent of all U.S. retail sales will involve the internet in some way, either as a direct e-commerce transaction or as part of a shopper’s research on a laptop or mobile device. Additionally, Forrester Research forecasts that approximately 11.0 percent of total retail sales in the U.S. in 2018 will be online purchases. In contrast, e-commerce sales were 5.2 percent of retail sales in 2013.

The following chart tracks e-commerce sales in 2012 and 2013 as well as sales from 2014 thru 2018, as forecasted by InternetRetailer.com:

E-Commerce Sales: 2012 - 2018 $530

$480

$430

$380

$330

$280 E-COMMERCE SALES BILLIONS) (IN SALES E-COMMERCE

$230 $225 $263 $304 $347 $338 $440 $492 $180 2012 2013 2014 2015 2016 2017 2018

Source: InternetRetailer.com, Forrester Inc.

Additionally, many retailers are beginning to realize that rather than close stores, they can sustain them by giving them a much-needed facelift. Reinventing the store involves a thorough rework that often includes creating a "brand story" to engage and involve a consumer in the shopping experience.

GATEWAY CENTER AT BRONX TERMINAL MARKET NATIONAL RETAIL MARKET ANALYSIS 33

traditional mall tenants are not currently in growth mode, malls continue to outperform all shopping center types, and record the lowest vacancy levels.

Overall, the U.S. economy has taken off and is in a period of strong growth that we expect to last through 2015 and into 2016. Employment, income and output will all grow strongly and reach new highs. We believe the risks to this outlook are modest. The result should be the best year for the commercial real estate sector since at least 2007.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 34

RETAIL MARKET AND TRADE AREA OVERVIEW A retail center's trade area contains people who are likely to patronize that particular center, and its ability to draw these people comes from the strength of the anchor tenants, complemented by regional and local tenants. Customers are drawn by a given class of goods and services, and a successful combination of these elements creates a destination for customers seeking both variety and the comfort and convenience of an integrated shopping environment.

To define and analyze the market potential for Gateway Center at Bronx Terminal Market, we must first establish the boundaries of the trade area from which customers will be drawn. In some cases, defining the trade area may be complicated by the existence of other retail facilities on main thoroughfares within trade areas that are not clearly defined or whose trade areas overlap with that of the subject.

As an urban retail power center facility, the subject will serve almost a dual purpose in the community. That is to say that it acts as both a convenience center for those residents living in the immediate neighborhood area, as well as a destination center by virtue of its unique size, and tenant mix.

SCOPE OF TRADE AREA Traditionally, a retail center's sales are principally generated from within its primary trade area, which is typically within reasonably close geographic proximity to the center itself. Generally, between 55 and 65 percent of a center's sales are generated within its primary trade area. The secondary trade area generally refers to more outlying areas which provide less frequent customers to the center. Residents within the secondary trade area would be more likely to shop closer to home due to time and travel constraints. Typically, an additional 20 to 25 percent of a center's sales will be generated from within the secondary area. For centers that have above average regional accessibility, this percentage can sometimes be greater. The tertiary or peripheral trade area refers to more distant areas from which occasional customers to the retail center reside. These residents may be drawn to the center by a particular service or store that is not found locally. Industry experience shows that between 10 and 15 percent of a center's sales are derived from customers residing outside of the trade area. This potential is commonly referred to as inflow.

Before the trade area can be defined, it is necessary that we thoroughly review the retail market and the competitive structure of the general marketplace, with consideration given as to the subject's position therein.

COMPETITIVE RETAIL STRUCTURE To examine the subject property in its proper context we must also examine its most direct competition and give consideration to the potential for new competition via proposed centers. The subject, Gateway Center at Bronx Terminal Market, is a 4-level retail power center that contains 912,333 square feet of gross leasable area (GLA) retail space and a 6-level parking garage and on-site parking for 2,575 spaces.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 35

The subject property contains several national and credit tenants. Additionally, the subject property boasts bringing many national retailers to the Bronx for the first time including: the first combined Toys ‘R Us / Babies ‘R Us in New York State, BJ’s Wholesale Club, and Bed Bath and Beyond.

The potential trade area for the subject is defined by the location and drawing power of surrounding retail centers. With its existing tenant mix, the subject’s most direct competitors are the larger retail centers with the market. The following chart presents the competitive retail centers as primary (most directly competitive) or secondary competition. In addition, we have also highlighted the proposed competition with the subject property. The map shows the relative location of these centers.

COMPETITIVE RETAIL PROPERTIES Distance No. Property Description Anchor Tenants Occ. to Subject PRIMARY COMPETITION 1 Bay Plaxa Power Center Center Type: Community Center Total GLA: 492,857 Toys "R" Us 97% 2136 -22 Batow Avenue Year Built: 1988 Anchor GLA: 140,000 Pathmark 9.7 miles Bronx, New York Renovation: N/A Anchor Ratio: 28% Raymour and Flannigan N Marshalls 2 River Plaza Center Type: Regional Center Total GLA: 235,000 Target 97% West 225th Street, Major Deegan Expressway Year Built: 2004 Anchor GLA: 164,638 Best Buy 4.2 miles Bronx, New York Renovation: N/A Anchor Ratio: 70% Marshall's NE

3 East River Plaza Center Type: Power Center Total GLA: 524,498 Costco 97% FDR Drive & East 116th Street Year Built: 2010 Anchor GLA: 401,515 Target 2.4 miles Bronx, New York Renovation: N/A Anchor Ratio: 77% Burlington Coat Factory SE Marshalls 4 Bruckner Plaza Shopping Center Center Type: Community Center Total GLA: 449,941 Kmart 96% 1998 Bruckner Boulevard Year Built: 1965 Anchor GLA: 186,584 Toys "R" Us 6.35 miles Bronx, New York Renovation: 1989 Anchor Ratio: 41% Marshall's E Old Navy 5 Throggs Neck Shopping Center Center Type: Power Center Total GLA: 291,795 Target 90% 815 Hutchinson River Parkway Year Built: 2014 Anchor GLA: 207,437 Petco 4.9 miles Bronx, New York Renovation: N/A Anchor Ratio: 71% TJ Maxx N

SECONDARY COMPETITION 6 Concourse Plaza Center Type: Community Center Total GLA: 228,638 National Amusements Theaters 220 East 161st Street Year Built: 1990 Anchor GLA: 106,680 Waldbaums Supermarket 83% 0.1 miles Bronx, New York Renovation: N/A Anchor Ratio: N/A NE

7 Mall at Bay Plaza Center Type: Regional Mall Total GLA: 1,300,000 JC Penny's 55% 200 Baychester Avenue Year Built: 2014 Anchor GLA: 323,645 Macy's 9.7 miles Bronx, New York Renovation: N/A Anchor Ratio: 25% AMC Theaters N Raymour & Flanagan 8 Parkchester Retail District Center Type: Neighborhood Center Total GLA: 358,234 Macy's 98% 1441 Metropolitan Avenue Year Built: 1988 Anchor GLA: 231,385 Marshall's 5.3 miles Bronx, New York Renovation: N/A Anchor Ratio: 65% Rainbow NE Blink Fitness 9 Riverdale Crossings Center Type: Power Center Total GLA: 159,037 BJ's Wholsesale Club 97% 184-190 West 237th Street Year Built: 2014 Anchor GLA: 118,423 4.9 miles Bronx, New York Renovation: N/A Anchor Ratio: 74% N

Survey Total GLA 3,064,670 Survey Minimum 228,638 55% Survey Maximum 1,300,000 100% Survey Average 510,778 88% Compiled by Cushman & Wakefield, Inc.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 36

COMPETITION The subject’s primary competition is from the major retail properties within Upper Manhattan and the Bronx. The South Bronx is defined as the southwestern portion of the Bronx made up of Tremont, University Heights, Highbridge, Morrisania, Soundview, Hunt’s Point and Castle Hill. The subject is located just south of Yankee Stadium, west of Morrisania, east of the Harlem River and north of Manhattan. In addition, the MLS soccer stadium that is proposed to be constructed just north of the subject site is considered to be an added draw if it were to come to fruition. The area benefits from good access to the Major Deegan Expressway (I-87), Cross Bronx Expressway (I-95), Bruckner Expressway (I-278), Sheridan Expressway (I-895) Triborough Bridge and Grand Concourse. The subject is also within three blocks of the 2, 3, 4, B and D subway lines as well as, the Metro North station located at East 153rd Street. The neighborhood benefits from dense population of over 1.2 million people within 3 miles.

We have profiled the primary and secondary competitive retail properties below. Thereafter, we have examined any properties that are proposed or currently under construction that may serve as future competition to the subject property. We have indentified the following competitive retail centers for the subject property:

Primary Competition

Bay Plaza Retail Center The Bay Plaza Shopping Center is located at 220-2210 Bartow Avenue in the Bronx. This center contains 492,857 square feet of retail space with 140,000 square feet occupied by the anchors. The center was built in 1988 and is anchored by Toys “R” Us, Marshall’s, Raymour and Flannigan and Pathmark. The center is 97 percent occupied. There is parking available as an amenity to shoppers. The property is located 3.1 miles west of the subject.

River Plaza The River Plaza is located at 40 West 225th Street, in the Bronx. The subject consists of a two-story multi-tenant shopping center and is 98 percent leased with 235,000 square feet. The center was built in 2004 and contains 16 stores. River Plaza is anchored by a 129,638 square foot Target Store (the first in the Bronx), Macy’s Furniture Store, and Marshalls. Other tenants include Applebee’s Neighborhood Grill & Bar, Starbucks Coffee, and Payless Shoe Source. River Plaza is located in a densely populated residential area. The center contains a 2-story parking facility with 809 parking spaces. The parking is free for all shoppers. River Plaza is situated on the northern Manhattan/Bronx border. The property is located 7.5 miles northwest of the subject.

East River Plaza The East River Plaza power center is located along the FDR Drive between East 116th and 119th Streets within the East Harlem neighborhood of Manhattan. The center is located 2.4 miles from the subject property and was completed in early 2010. East River Plaza is a 5-level retail power center contains 524,498 square feet of gross leasable area (GLA) retail space and a 7-level attached parking garage with 1,248 spaces. The property is 97 percent leased and anchored by Target, Costco, Burlington Coat Factory, and Marshalls.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 37

Bruckner Plaza Shopping Center The Bruckner Shopping Plaza is located at 1998 Bruckner Boulevard. The Bruckner Plaza Shopping Center contains 449,941 square feet of retail along with 50,000 square feet of office space. The mall was built in 1964, with a recent expansion in 1991. The center is 96 percent leased and anchored by Big Kmart, Toys R Us, Conway, Old Navy and a Marshalls. Other tenants include Modell’s, Casual Male Big and Tall, and Radio Shack. The property is located 1.2 miles west of the subject. Throggs Neck Shopping Center The recently completed Throggs Neck Shopping Center is located at 815 Hutchinson River Parkway and is sub- divided into two retail condominium units totaling 291,795 square feet of gross leasable area. The center is anchored by Target which occupies the entire lower level of the property or 168,462 square feet. The remainder of the center is located on the ground level and comprises 123,333 square feet of gross leasable area within four buildings. The property is 90.0 percent leased by 21 tenants and anchored by Target (168,462 SF), TJ Maxx (28,417 SF) and Petco (10,538 SF). The center is located 4.9 miles north of the subject.

Secondary Competition

Concourse Plaza Concourse Plaza is a 2-story multi-tenant community retail center located at 200 Baychester Avenue that is 83 percent leased and contains 228,638 square feet. The property is located 4.4 miles east from the subject property at 220 East 161st Street. This retail property contains approximately 36 stores, and is anchored by a National Amusements Cinema multiplex and a Waldbaum’s supermarket. Other tenants include Petland Discounts, and CVS Drugs. Concourse Plaza provides on-site parking to shoppers. Concourse Plaza is located within a densely populated area and is within close proximity to several municipal offices such as the Bronx Borough President’s office and Bronx County Courthouse, situated across the street.

Mall at Bay Plaza The Mall at Bay Plaza was recently completed and is immediately adjacent to the Bay Plaza retail center. The project took just over 2 years and $300.0 million to complete. The mall comprises of a 3-story enclosed regional mall totaling over 1.3 million square feet. The subject is anchored by JC Penney (163,645 SF) and Macy’s (160,000 SF). The anchor tenants signed long term ground leases. In addition, the subject contains two parking garages with a total of 1,661 spaces and a 21,634 square foot outparcel. The JC Penney department store was completed in 1995, and is connected to the enclosed mall building. The mall benefits from its excellent highway access and close proximity to Co-op City, one of the largest residential housing complexes in New York City. The property is located 3.1 miles north of the subject. Parkchester Retail District The Parkchester retail district is a 10 block area generally located between Metropolitan and Westchester Avenues within the Parkchester housing complex. This retail district is approximately 5.3 miles from the subject. The Parkchester retail district contains approximately 400,000 square feet and is anchored by a Macy’s department store. Marshall’s signed a lease and is opened there store September of 2014. Additional tenants include The Children’s Place, Starbucks, and Payless Shoe Source.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 38

RIVERDALE CROSSINGS Riverdale Crossing is a newly completed 2-story, plus lower level, two building retail center located at 184-190 West 237th Street. The property contains 159,037 square feet of gross leasable area (GLA). The site as formerly improved with the Stella D’oro Bakery which was razed for the Riverdale Crossings retail center development. The center is anchored by BJ’s Wholesale Club, which has leased 118,423 square feet, or 74.5 percent of the subject property and contains its own 2-story, plus lower level building with rooftop parking. The majority of the BJ’s Warehouse Club retail space is located below grade. The remaining 40,714 square feet of in-line retail space is comprised within the “northern building” and contains ground and second floor retail space along with rooftop parking. The subject property is currently 100.0 percent leased to 9 tenants inclusive of BJ’s Wholesale Club, Bank of America, Chipotle, Smashburger, T-Mobile, Subway, Buffalo Wild Wings and CityMD. The property is located 5.3 miles northwest of the subject.

TYPICAL MARKET LEASE TERMS

TYPICAL LEASE TERM Our survey of market participants has included a broad cross section of retail center owner/ developers and leasing agents. Typical lease terms in region for local tenants vary from 5 to 10 years, with larger regional and national tenants commanding longer terms of 10 to upwards of 20 years. Major/anchor leases typically run a range of 15 to 30 years, with 20 years being typical. Inline tenant leases range between 10 to 15 years in duration.

EXPENSE REIMBURSEMENT Typically, retail leases in retail centers are structured on a net basis, with tenants responsible for a full pro-rata share of taxes and common area maintenance (CAM) expenses. Common area maintenance recoveries will typically have an administrative surcharge of 5.0 to 15.0 percent in addition to the pro-rata pass-through. Periodically, the management fee may be recovered in lieu of this structure.

OVERAGE RENT In addition to the minimum base rent, many retail tenants contract to pay a percentage of their gross annual sales over a pre-established base amount as overage rent. Most leases in the market appear to have a natural breakpoint. The average overage percentage for small space retail tenants is in a range of 4.0 to 6.0 percent. Anchor tenants typically have the lowest percentage clauses, with ranges of 1.0 to 3.0 percent being most common. Given the nature of the proposed project, we have not projected any percentage rent in our analysis.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 39

CONCESSIONS Concessions will vary considerably by property and tenant type. The level of rent that tenants are willing to pay is often influenced by the magnitude of the build-out offered, as well as the amount, if any, of free rent granted.

Anchor tenants are generally in a better negotiating position to extract concessions in the form of free rent or improvement allowances. However, if an anchor is strongly motivated to be in a particular market or center, it is not unusual for an owner to be able to maintain a firm bargaining position, yielding little or no concessions.

We typically see tenant allowances ranging from $0.00 to as high as $40.00 per square foot for national retail tenants with above average build-outs. Free rent concessions may range from 3 to 9 months.

LEASING COMMISSIONS Leasing commissions have been based upon the generally accepted standard schedule. The standard schedule quoted by Cushman & Wakefield, Inc. depends upon the length of the lease: 5 percent for year 1; 4 percent for year 2; 3.5 percent for years 3 through 5; 2.5 percent for years 6 through 10; 2 percent for years 11 through 20. This schedule results in the following percentages of the first year's base rent (excluding an override described below):

LEASING COMMISSIONS 5-Year: 19.5% or 3.90% per year

10-Year: 32.0% or 3.20% per year

15-Year: 42.0% or 2.80% per year

20-Year: 52.0% or 2.60% per year

Leasing commissions are typically higher for new tenants than renewal tenants. A new tenant typically causes a full commission to be paid, whereas a renewing tenant typically results in a half commission. We have incorporated this standard assumption in our cash flow projection:

TENANT PROFILES The subject is anchored by Home Depot, Target, and BJ’s Wholesale Club which occupy 48.6 percent of the subject. Furthermore, approximately 53.0 percent of the subject is leased to nine credit tenants inclusive of the aforementioned Target and Home Depot, along with Marshall’s (TJX Companies), Bed Bath & Beyond, Toys R Us, Michaels, JP Morgan Chase, AT&T, Best Buy Inc. and Staples. We have provided a profile of the credit and larger national tenants in order analyze the tenant quality of the subject property.

STAPLES, INC. TENANT PROFILE Staples, Inc. is the world's largest office supply retailer. The company sells office products, furniture, computers, and other merchandise through 2,169 retail stores in the United States, Canada, Europe, Asia, and South America. The U.S. accounts for over 70.0 percent of total locations and 85.0 percent of net sales. In addition to its core brick and mortar retail business, Staples sells office products over the Internet and through direct mail. In- store retail accounts for 60.0 percent of Staple’s domestic revenue, with business-to-business sales and catalogue retailing contribute the remaining 40.0 percent

Staples two main competitors in the US, Office Depot and OfficeMax, merged in late 2013 to create a combined company with about $17.0 billion in annual sales, an amount that while impressive is still substantially below the $24.0 billion Staples recorded in fiscal 2013. Most recently, Staples Inc and Office Depot Inc are now in advanced

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talks to merge. Staples has a market value of about $11.0 billion, while Office Depot has a market value of about $4.1 billion. A merger would help fend off intense competition from online retailers such as Amazon.com and big- box chains such as Wal-Mart Stores that sell the same core office supplies, such as paper and ink toner, for less.

In July 2014, Staples acquired Vancouver-based PNI Digital Media, whose technology enables retailers to offer on-demand personalized products, including business cards, invitations, and photo books, for about $67 million. In October 2013, the company purchased San Mateo-based Runa, a software company that helps online retailers increase sales by personalizing the shopping experience.

In a move that significantly enlarged its footprint in Europe, Staples acquired Netherlands-based business supply wholesaler Corporate Express NV after a hard-fought deal valued at about $2.7 billion. Corporate Express is a major office products wholesaler, with more than half of its sales generated in the US through Corporate Express US. The acquisition also established Staples's contract business in Canada. The integration of Corporate Express has taken several years, but is nearly complete. Staples is still in the process of transitioning all legacy Corporate Express customers to its contract ordering website, StaplesAdvantage.com.

CREDIT RATINGS Staple’s is rated investment grade by Moody’s, Fitch, and Standard & Poor’s.

CREDIT RATINGS Issuer/ Long-Term Agency Rating Last Rating Date Outlook Moody's Baa2 May-14 Possible Downgrade Fitch BBB- Feb-15 Negative S&P BBB- Feb-15 Watch - Negative Source: Moody's, Fitch, S&P

ANNUAL FILING DATA Staple’s total sales in fiscal 2013 dropped by 5.2 percent from the prior year to $23.1 billion. In addition, the company recorded a net loss of $620.1 million for the year, a significant decrease from fiscal 2012 and 2011. In fiscal 2013, North American comparable store sales figures dropped 4.0 percent. Declining sales of computers, technology accessories, and software were partially offset by growth in facilities and breakroom supplies, tablets and other mobile technology, and copy and print services.

The following is a profile of Staples’ annual financial performance:

STAPLES, INC. FINANCIAL OVERVIEW FY 2013 FY 2012 FY 2011 FY 2010 FY 2009 Sales (in millions) $23,114 $24,381 $24,664 $24,135 $23,806 Sales Growth -5.2% -1.1% 2.2% 1.4% 4.8% Net Income (in millions) -$620.1 -$210.7 $984.7 $881.9 $738.7 Same Store Revenue Change -4.0% -2.0% 0.0% -1.0% -2.0% Gross Leasable Area* (SF in millions) 43.4 44.3 45.9 45.6 44.9 Average Store Size 20,000 20,000 20,000 20,000 20,000 Number of Stores (Year End) 2,169 2,215 2,295 2,281 2,243 Net Stores Opened -46 -80 14 38 25 Number of Employees (Year End) 83,008 85,087 87,782 89,019 91,095 Source: Company filings *Estimate

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STORE OPENINGS / CLOSINGS Staples closed 46 stores net of openings in fiscal 2013 and 80 stores net of openings in fiscal 2012. Staples does not plan to open any new stores in fiscal 2014 and has taken to building smaller ones. The smaller locations are designed to target urban and other niche markets.

Additionally, Staples announced it will close 225 stores in North America by mid-2014 as the company tries to trim costs in the face of weaker sales. The store closings will come to about 12 percent of its stores in North America. The closings build upon the 40 stores it closed in the region in 2013. Staples said it is aiming to save $500 million annually through the closings and other cost cutting measures.

MICHAELS STORES, INC. TENANT PROFILE Michaels Stores, Inc. is the largest arts and crafts retailer in the United States. The company operates Michaels Stores and Aaron Brothers locations in 49 states and Canada. Michaels sells art and hobby supplies, décor, frames, needlecraft kits, party supplies, seasonal products, and silk and dried flowers. Aaron Brother’s stores, located mostly on the West Coast and in Texas, offer framing and art supplies. Additional company subsidiaries include Star Decorators Wholesale stores, which offer wholesale merchandise to design professionals; and Artistree, a manufacturer of frames and molding for Michaels and Aaron Brother’s stores.

In October 2006 Michaels was taken private by Bain Capital Partners and the Blackstone Group for $6.0 billion. The company’s management acquired a minority stake and continued to file regular reports with the SEC through 2012.

In April 2012, Michaels filed for a $500 million initial public offering (IPO), but it was put on hold due to the chief executive's illness. Michaels CEO John Menzer suffered a stroke and resigned in July of 2012. In 2013, the company chose Chuck Rubin from Ulta Beauty as its president and CEO. Into 2014, Michaels is again pursuing the opportunity to go public through a newly reissued IPO effort.

CREDIT RATINGS Michael’s is rated below investment grade by Moody’s.

CREDIT RATINGS Issuer/ Long- Last Rating Agency Term Rating Affirmation Outlook Moody's B3 Dec-13 Possible Upgrade Fitch - - - S&P - - - Source: Moody's, Fitch, S&P

ANNUAL FILING DATA Michaels’ net sales in fiscal 2013 grew by 3.7 percent from the prior year to $4.6 billion. Michaels’ fiscal 2013 performance marks the fifth straight year of revenue growth for the company. As well, Michaels’ net income for the year was $264.0 million, compared to $200.0 million in fiscal 2012. Comparable stores sales in fiscal 2013 increased by 2.9 percent.

A profile of Michaels sales and income performance is shown below:

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MICHAELS STORES, INC. OPERATIONAL OVERVIEW FY 2013 FY 2012 FY 2011 FY 2010 FY 2009 Net Sales (in millions) $4,570 $4,408 $4,210 $4,031 $3,888 Net Sales Growth 3.7% 4.7% 4.4% 3.7% 1.9% Net Income (in millions) $264.0 $200.0 $157.0 $103.0 $103.0 Same Store Revenue Change 2.9% 1.5% 3.2% 2.5% 0.2% Gross Leasable Area (SF in millions) 21.1 20.6 20.1 19.9 19.6 Sales Per Square Foot $218 $215 $212 $205 $201 Number of Stores (Year End) 1,257 1,224 1,198 1,182 1,175 Number of Employees (Year End) 50,600 48,900 45,300 40,500 38,000 Source: Company filings

STORE OPENINGS / CLOSINGS Michaels currently operates 1,257 stores in the United States and Canada and believes future growth will come from the addition of new stores and the sale of products to customers who already engage with the brand online, according to a filing with the Securities and Exchange Commission. In 2014, the company expects to open between 40 and 50 new stores. Ultimately, the company believes the combined United States and Canadian markets can support a total of 1,400 to 1,600 Michael’s stores.

BEST BUY CO., INC. TENANT PROFILE Best Buy is a specialty retailer of consumer electronics, home-office products, entertainment software, appliances and related services. Best Buy operates more than 1,400 stores in the United States and more than 200 internationally. The company was founded by Dick Schulze with the “Sound of Music” store in 1966. Mr. Schulze gradually broadened the Company’s product selection to appeal to a wider demographic. In 1983, Schulze changed the company name to “Best Buy” and began opening larger format superstores. Best Buy is currently the largest consumer electronics retailer in the United States with approximately one-third of total electronics, appliance, and computer store sales according to the Census Bureau.

In August 2012, founder Richard Schulze, who is the company's largest shareholder with a 20.0 percent stake, offered to buy the electronics retailer for as much as $8.8 billion but failed to line up financing to take the company private.

In April 2013, Best Buy announced it was selling its European business after just five years. Best Buy sold its 50 percent stake to joint venture partner Carphone Warehouse for about $775.0 million in cash and shares. The joint venture operates 2,400 stores across eight European countries and trades under the Carphone Warehouse and Phone House brands.

CREDIT RATINGS Best Buy is currently rated investment grade by Moody’s and below investment grade by Fitch and Standard & Poor’s:

CREDIT RATINGS

Agency Rating Last Rating Action Outlook Moody's Baa2 Jul-14 Stable Fitch BB Apr-15 Stable S&P BB Aug-13 Stable Source: Moody's, Fitch, S&P

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ANNUAL FILING DATA On November 2, 2011, Best Buy’s board approved a change in their fiscal year-end from the Saturday nearest the end of February to the Saturday nearest the end of January, effective beginning with their fiscal year 2013. As a result of this change, fiscal year 2013 transition period was 11 months and ended on February 2, 2013.

Best Buy’s total revenue was $40.34 billion in fiscal 2014, a 4.9 percent decrease from the previous year. The company’s net income, however, increased 131.8 percent from $532.00 million to $1.23 billion in 2014. A summary of the company’s annual financial performance is provided in the table below:

TOYS “R” US TENANT PROFILE Toys "R" Us is among the world’s largest retailers of toys, baby products and children's apparel. The company operates 1,577 stores around the world under the Toys “R” Us, and Babies "R" Us banners, including over 870 stores in the United States. Founder Charles Lazarus created the category-killer store model when he opened the first company store in 1948. Toys "R" Us was acquired by affiliates of KKR, Bain Capital, and Vornado Realty Trust for $6.6 billion in July 2005.

In February 2009, the company acquired eToys.com for $2.15 million from its parent company which had entered bankruptcy proceedings in December 2008. The transaction also included BabyUniverse.com and ePregnancy.com and is expected to add approximately $100.0 million in annual sales. In May 2009, the company announced it had acquired longtime rival FAO Schwarz for an undisclosed sum. Following the acquisition Toys “R” Us will continue to operate the two FAO Schwarz stores in New York City and the Forum Shops in Las Vegas, as well as FAO Schwarz catalog and e-commerce operations. In fact, Toys “R” Us’ e-commerce business recently ranked as the 29th largest in Internet Retailer’s The Top 500 Guide.

The company filed an IPO in 2010 but wild swings of the stock market and fears of a new recession prompted the company to pull the offer in March of 2013 after putting it off for a couple years. More fundamentally, the toy seller's sales growth has stalled, which hasn't helped its IPO prospects.

CREDIT RATINGS Toys “R” Us is rated non-investment grade by Moody’s, Fitch, and Standard & Poor’s.

CREDIT RATINGS Issuer/ Long- Last Rating Agency Term Rating Change Outlook Moody's B3 Apr-14 Negative Fitch CCC Jun-14 - S&P B- Dec-13 Stable Source: Moody's, Fitch, S&P

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ANNUAL FILING DATA Toys “R” Us reported net sales of $12.5 billion in fiscal 2013, a 7.4 percent decrease year-over-year. Additionally, the company’s net income for the year dropped significantly by $1,039.0 million, compared to a positive return of $38.0 million in fiscal 2012. Much of this is due to diminishing comparable store sales in the United States, which fell by 5.0 percent.

On the other hand, online sales during fiscal 2013, 2012 and 2011 for Toys “R” Us’ e-commerce business generated net sales of approximately $1.2 billion, $1.1 billion and $1.0 million, respectively.

The following is a summary of Toys “R” Us’ annual financial performance:

TOYS "R" US FINANCIAL OVERVIEW FY 2013 FY 2012 FY 2011 FY 2010 FY 2009 Net Revenue (in millions) $12,543 $13,543 $13,909 $13,864 $13,568 Change in Net Revenue -7.4% -2.6% 0.3% 2.2% -1.1% Net Income (in millions) -$1,039.0 $38.0 $149.0 $168.0 $312.0 Domestic Comparable Store Sales -5.0% -3.5% -1.7% 1.7% -3.0% Number of Stores (Year End) 1,577 1,540 1,502 1,392 1,363 Domestic Store Count 873 875 876 868 849 International Store Count 704 665 626 524 514 Net Stores Opened 37 38 110 29 13 Number of Employees (Year End) 67,000 68,000 70,000 71,000 68,000 Source: Company filings

STORE OPENINGS / CLOSINGS In fiscal 2013, Toys “R” Us operated 1,577 stores, a net increase from fiscal 2012 of 37 stores. Overall, Toys “R” Us opened 79 new stores, closed 39 stores, relocated two stores and converted one during the year. The company has not announced store development plans for fiscal 2014 and is focusing on its online offerings.

According to a recent release from Toys “R” Us, the company continues to see sales and operational benefits from the integration of their juvenile and toy offerings under one roof. The side-by-side format features a Babies “R” Us and Toys “R” Us together. As of February 2014, Toys “R” Us has converted existing stores into 283 side- by-side store formats. In addition, the company has opened 117 SBS stores (58 of which were relocations of existing stores).

THE TJX COMPANIES, INC. TENANT PROFILE TJX is a leading off-price retailer of apparel and home fashions. The company operates 2,587 stores in the United States and 808 stores in Canada and Europe. As of fiscal 2015, TJX operated 1,119 T.J. Maxx stores, 975 Marshall’s stores, 487 HomeGoods stores and six Sierra Trading Posts locations in the United States.

TJX traces its roots to the Zayre upscale discount chain incorporated in the 1950s. Zayre launched the T.J. Maxx chain in 1977. By the second half of the 1980s, T.J. Maxx’s sales accounted for more than half of Zayre’s revenue. To keep its specialty stores unhindered by its flagging Zayre stores, it established The TJX Companies as a separate entity in 1987. Based in Framingham, Massachusetts, TJX is a public company listed on the New York Stock Exchange.

CREDIT RATINGS TJX is rated above investment grade by Moody’s and Standard & Poor’s:

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CREDIT RATINGS Issuer/ Long- Last Rating Agency Term Rating Change Date Outlook Moody's A3 Sep-14 Positive Fitch - - - S&P A+ Dec-13 Stable Source: Moody's, Fitch, S&P

ANNUAL FILING TJX’s net sales in fiscal 2015 grew by 6.0 percent, to $29.1 billion. Same store sales increased 2.0 percent in fiscal 2015 over increases of 3.0 and 7.0 percent over the preceding two years. The fiscal 2015 increase was driven by an increase in customer traffic and growth in TJX’s customer base. As well, the company’s net income for the year increased to over $2.2 billion.

A profile of TJX's annual financial performance is shown below:

TJX COMPANIES, INC. FINANCIAL OVERVIEW FY 2015 FY 2014 FY 2013 FY 2012 FY 2011 Net Sales (in millions) $29,078.0 $27,423.0 $25,878.0 $23,191.5 $21,942.2 Net Sales Growth 6.0% 6.0% 11.6% 5.7% 8.2% Net Income (in millions) $2,215.0 $2,137.0 $1,907.0 $1,496.1 $1,343.1 Same Store Revenue Change 2.0% 3.0% 7.0% 4.0% 4.0% Gross Leasable Area (SF in millions) 76.5 73.2 70.0 67.2 66.0 Average Store Size 2,300 23,000 22,900 23,100 23,100 Sales Per Square Foot* $380 $375 $369 $345 $331 Number of Stores (Year End) 3,395 3,219 3,050 2,905 2,859 Number of Employees (Year End) 198,000 191,000 179,000 168,000 166,000 Source: Company filings *C&W Estimate

STORE OPENINGS / CLOSINGS TJX opened 176 stores in fiscal 2015 net of closings. The company expects a net gain of approximately 181 stores in fiscal 2015. TJX estimates that store growth potential could surpass 5,400 locations, including totals of over 3,000 T.J. Maxx and Marshall’s locations.

BED, BATH & BEYOND INC. TENANT PROFILE Bed, Bath & Beyond is the nation's #1 superstore domestics retailer with 1,496 stores throughout the US, Puerto Rico, and Canada. The stores' floor-to-ceiling shelves stock better-quality goods in two main categories: domestics and home furnishings. Bed, Bath & Beyond also operates three smaller specialty chains: Christmas Tree Shops; buybuy BABY stores; and Harmon discount health and beauty shops. In 2012, the company bought Cost Plus for $495.0 million, which operates under the World Market, Cost Plus World Market, and Cost Plus Imports banners.

Beyond the US, the domestic retailer is growing in Canada and Mexico. Bed, Bath & Beyond opened its first international store in Richmond Hill, Ontario, in 2007 and now has more than 25 stores in several Canadian provinces. It also has a joint venture with Mexican retailer Home & More. Bed Bath & Beyond anticipates the joint venture will be a springboard for future growth in Mexico.

CREDIT RATINGS Bed, Bath, & Beyond is rated investment grade by Standard & Poor’s.

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CREDIT RATINGS Last Rating Agency Issuer Rating Date Outlook Moody's - - - Fitch - - - S&P BBB+ Jun-11 Stable Source: Moody's, Fitch, S&P

ANNUAL FILING DATA Bed, Bath & Beyond’s net sales in fiscal 2013 grew by 5.4 percent to $11.5 billion. In 2013, the company’s net income totaled $1,022.3 million. Comparable stores sales in fiscal 2013 increased by 2.4 percent, lifting the company’s average sales per store to $10.6 million.

The following is a profile of Bed, Bath, & Beyond’s historical financial performance:

BED, BATH, & BEYOND INC. FINANCIAL OVERVIEW FY 2013 FY 2012 FY 2011 FY 2010 FY 2009 Net Sales (in millions) $11,504.0 $10,914.6 $9,499.9 $8,758.5 $7,828.8 Change in Net Sales 5.4% 14.9% 8.5% 11.9% 8.6% Net Income (in millions) $1,022.3 $1,037.8 $989.5 $791.3 $600.0 Same Store Revenue Change 2.4% 2.7% 5.9% 7.8% 4.4% Gross Leasable Area (SF in millions) 42.6 42.0 36.1 35.1 33.7 Comparable Store Net Sales (000's) $10,661 $9,820 $9,157 $8,339 $7,409 Average Store Size 31,000 31,000 31,000 31,000 31,000 Number of Stores (Year End) 1,496 1,471 1,173 1,139 1,100 Number of Employees (Year End) 58,000 57,000 48,000 45,000 41,000 Source: Company filings

STORE OPENINGS / CLOSINGS In the 22-year period from the beginning of fiscal 1992 to the end of fiscal 2013, the chain has grown from 34 stores to 1,496 stores plus its various websites, other interactive platforms and distribution facilities. The company’s 1,496 stores operate in all 50 states, the District of Columbia, Puerto Rico and Canada, including: 1,014 Bed, Bath & Beyond stores operating in all 50 states, the District of Columbia, Puerto Rico and Canada; 265 Cost Plus World Market stores operating in 31 states and the District of Columbia; 90 Baby stores operating in 31 states; 77 CTS stores operating in 21 states; and 50 Harmon stores operating in five states. Total store square footage grew from approximately 0.9 million square feet at the beginning of fiscal 1992 to approximately 42.6 million square feet at the end of fiscal 2013. During fiscal 2013, the Bed, Bath & Beyond opened a total of 33 new stores, including 13 Bed, Bath & Beyond stores throughout the United States and Canada and five Cost Plus World Market stores, eight Baby stores, four CTS stores and three Harmon stores throughout the United States.

TARGET CORPORATION TENANT PROFILE Target Corporation is the second largest discount retailer in the United States, and the fifth largest domestic retailer overall. The company operates 1,917 stores selling a wide variety of consumables, commodities, electronics, sporting goods, toys, apparel & accessories, home furnishings, and other general merchandise. The company’s total retail floor area would cover over eight square miles.

Target traces its history to Hudson’s department store, which first opened in 1881. The company introduced merchandise return privileges and price marking instead of bargaining. By 1977 the Target discount chain was the company’s top-earning subsidiary. More recently, Target has positioned itself as a cheap, yet chic, retailer.

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The marketing campaign has helped drive impressive revenue growth over the last several years but made the company more exposed to a decline in discretionary spending.

CREDIT RATINGS Target is rated investment grade by Moody’s, Fitch, and Standard & Poor’s.

CREDIT RATINGS Issuer/Long- Agency Term Rating Last Rating Date Outlook Moody's A2 May-14 Stable Fitch A- Sep-14 Stable S&P A Mar-14 Stable Source: Moody's, Fitch, S&P

QUARTERLY FILING DATA According to Target’s third quarter filings, sales were $17,732 million for the three months ended November 1, 2014, an increase of $474.0 million or 2.7 percent from the same period in the prior year. Additionally, third quarter U.S. Segment comparable sales grew 1.2 percent. Comparable sales reflect third quarter digital sales growth of more than 30.0 percent. Net income for the third quarter of 2014 rose 3.2 percent to $352.0 million as compared to $341.0 million recorded in the third quarter of 2013.

Considerations are as follows:

QUARTERLY REVENUE (IN MILLIONS) Segment 3Q 2014 3Q 2013 Change Total Revenue $17,732 $17,258 2.7% Net Income $352 $341 3.2% Source: Company filings

ANNUAL FILING DATA Target's retail sales declined 1.0 percent in fiscal 2013 to $72.6 billion, compared with $73.3 billion the prior year. Target's fourth quarter US same-store sales (down 2.5 percent) swung from positive to negative following the announcement on December 19, 2013 of a massive data breach. For the year, Target's same-store sales fell 0.4 percent in fiscal 2013, compared with increases of 2.7 percent and 3.0 percent in fiscal 2012 and 2011, respectively. The sale of the company's US consumer credit card operation also had a negative impact on revenue in fiscal 2013.

Target rang up $1.3 billion in sales in Canada in fiscal 2013, its first year in the market. The company opened 124 stores during the year, with approximately 55 percent of the stores opened during the first half of the year, 20 percent during the third quarter, and the remaining 25 percent opening during the fourth quarter.

A profile of Target Corp’s sales and income performance is shown below:

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TARGET CORP. ANNUAL FINANCIAL PERFORMANCE FY 2013 FY 2012 FY 2011 FY 2010 FY 2009 Revenues (in millions) $72,596 $73,301 $69,865 $67,390 $65,357 Revenue Growth -1.0% 4.9% 3.7% 3.1% 0.6% Net Income (in millions) $1,971 $2,999 $2,929 $2,920 $2,488 Comparable Store Sales Growth -0.4% 2.7% 3.0% 2.1% -2.5% Gross Leasable Area (SF in millions) 254.2 237.8 235.7 233.6 231.9 Estimated Revenue per Square Foot $286 $308 $296 $288 $282 Average Store Size 132,625 133,746 133,704 133,496 133,299 Number of Stores (Year End) 1,917 1,778 1,763 1,750 1,740 Number of Employees (Year End) 366,000 361,000 365,000 355,000 351,000 Source: Company filings

STORE OPENINGS / CLOSINGS During fiscal 2013, Target opened 15 new stores net of closings in the US. Additionally, the company opened 124 stores totaling 14.2 million square feet in Canada, marking the biggest single-year store opening cycle in the company's history and first year of international retail operations.

THE HOME DEPOT, INC. TENANT PROFILE The Home Depot, Inc. (“Home Depot”) is the world's largest home improvement retailer, and the second largest retailer in the United States. The company operates 2,263 stores, including 1,976 stores in the U.S., 180 stores in Canada, and 106 stores in Mexico. Home Depot targets both do-it-yourself and professional customers with a wide variety of home improvement products. Major product lines include lumber, floor and wall coverings, plumbing, gardening supplies, tools, paint, and appliances. Home Depot is listed on the New York Stock Exchange under the “HD” ticker.

In August, 2007, the company closed on the sale of its HD Supply business to a trio of private equity firms for $8.3 billion. Home Depot will retain a 12.5 percent equity stake in the new company and guarantee up to $1.0 billion in secured loans. In 2009, the company closed its EXPO Design Center, THD Design Center, Yardbirds, and HD Bath businesses. The liquidation of these segments resulted in 41 store closings in fiscal 2009.

As Home Depot works to boost sales in the U.S., it's also aiming to leverage itself in international markets. About 12.0 percent of the retailer's stores are located in Canada and Mexico. The company operates 180 locations in Canada. It shut its last store in China in 2012. Home Depot had hoped to capitalize on China's rapid development, but instead is struggling there. The chain is faring better in Mexico, where it is the country's #1 do-it- yourself operator.

CREDIT RATINGS The Home Depot, Inc. is rated above investment grade by Moody’s, Fitch, and Standard & Poor’s.

CREDIT RATINGS Issuer/ Long-Term Agency Rating Latest Rating Date Outlook Moody's A2 Nov-13 Stable Fitch A- Apr-14 Stable S&P A- Oct-13 Stable Source: Moody's, Fitch, S&P

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ANNUAL FILING DATA Net Sales for fiscal 2013 increased 5.4 percent to $78.8 billion from $74.8 billion for fiscal 2012. The increase in net sales for fiscal 2013 reflects the impact of positive comparable store sales for fiscal 2013, partially offset by $1.2 billion of net sales attributable to the additional week in fiscal 2012. Total comparable store sales increased 6.8 percent for fiscal 2013 compared to an increase of 4.6 percent for fiscal 2012. Comparable store sales for Home Depot’s U.S. stores increased 7.5 percent in fiscal 2013.

The following is a summary of Home Depot’s annual financial performance:

THE HOME DEPOT, INC. FINANCIAL OVERVIEW FY 2013 FY 2012 FY 2011 FY 2010 FY 2009 Net Sales (in millions) $78,812 $74,754 $70,395 $67,997 $66,176 Net Sales Growth 5.4% 6.2% 3.5% 2.8% -7.2% Net Income (in millions) $5,385 $4,535 $3,883 $3,338 $2,661 Comparable Store Sales Change 6.8% 4.6% 3.4% 2.9% -6.6% Gross Leasable Area (SF in millions) 235.0 234.5 235.9 235.5 235.2 Revenue per Square Foot $334 $319 $299 $289 $279 Average Store Size 104,000 104,000 105,000 105,000 105,000 Number of Stores (Year End) 2,263 2,256 2,252 2,248 2,244 Number of Employees (Year End) 365,000 340,000 331,000 321,000 317,000 Source: Company filings

STORE OPENINGS / CLOSINGS During fiscal 2013, Home Depot opened two new stores in the U.S. and closed one store. The company also opened six new stores in Mexico. These actions brought the total store count at the end of fiscal 2013 to 2,263.

TRADE AREA ANALYSIS We have considered several factors in defining boundaries for the subject's trade area. First, the property's location with respect to transportation provides the basis for regional access to the area. Second, competition and geographic boundaries help to define the potential size of the trade area as a measure of distance from the property. Third, the merchandising mix and anchor alignment provides the basic draw of customers that are likely to patronize the property.

Gateway Center at Bronx Terminal market benefits from good regional and local accessibility. Major roadways such as, the Major Deegan Expressway and the Harlem River Drive, are in close proximity to the subject and provide access to the regional highway network. The subject property is anchored by national retailers which provides the necessary drawing power for the property. We anticipate the combination of subject’s anchor tenants (Target, Home Depot, and BJ’s Wholesale Club) to be very successful at this location given the size and configuration of the development and the lack of direct competition and favorable access features.

As discussed, the location and accessibility of competing centers has direct bearing on the formation and make- up of the subject's potential trade area as well. The subject competes most directly with the larger retail centers within the region, although it’s merchandising mix allows it to draw from a more expanded trade area that overlaps with some of the surrounding centers. The subject will compete to some degree with other freestanding stores and power/ community centers in the region. Secondary competition is seen in other area community centers that are anchored by competing anchor tenants, namely off-price or discount.

We analyzed the subject's trade area based on the following:

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 Highway accessibility, public transportation, including area traffic patterns, geographical constraints, and nodes of residential development;  The position and nature of the area's retail structure, including the location of destination retail centers which compete with the subject and the strength and composition of the retail infill; and  The size, tenancy, and merchandising composition of the subject property's tenants. Given all of the above, we believe the subject property’s primary trade area would likely span an area encompassing about three miles around the center. The subject's secondary trade area might span up to five miles from the site given its regional accessibility and location of competitive properties.

Using these observations, we have analyzed a primary demographic profile for the subject based on a radius of approximately three miles from the property. To add perspective to this analysis, we have segregated our survey into one mile, three miles, and five miles concentric circles with a comparison to Bronx County, New York City, and United States. This data is presented on the following page.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 51

DEMOGRAPHIC SUMMARY 1.0-mile 3.0-mile 5.0-mile Bronx New York New York Radius Radius Radius County City State POPULATION STATISTICS

2000 200,140 1,200,699 2,491,885 1,329,288 7,995,717 281,422,839 2014 214,704 1,270,969 2,618,391 1,425,490 8,447,426 318,283,904 2019 218,904 1,293,210 2,657,097 1,452,691 8,581,074 331,097,940

Compound Annual Change 2000 - 2014 0.50% 0.41% 0.35% 0.50% 0.39% 0.88% 2014 - 2019 0.39% 0.35% 0.29% 0.38% 0.31% 0.79%

HOUSEHOLD STATISTICS

2000 75,312 429,567 989,777 462,297 3,017,153 105,480,206 2014 82,670 469,532 1,050,756 502,866 3,241,645 120,696,822 2019 84,779 481,208 1,071,198 515,441 3,313,873 126,162,821

Compound Annual Change 2000 - 2014 0.67% 0.64% 0.43% 0.60% 0.51% 0.97% 2014 - 2019 0.51% 0.49% 0.39% 0.50% 0.44% 0.89%

AVERAGE HOUSEHOLD INCOME

2000 $30,927 $40,713 $64,910 $38,920 $58,507 $56,669 2014 $44,439 $56,216 $83,332 $47,259 $80,263 $75,020 2019 $51,035 $64,530 $94,287 $51,697 $89,613 $86,231

Compound Annual Change 2000 - 2014 2.62% 2.33% 1.80% 1.40% 2.28% 2.02% 2014 - 2019 2.81% 2.80% 2.50% 1.81% 2.23% 2.82%

OCCUPANCY

Owner Occupied 9.44% 11.93% 20.70% 18.52% 29.91% 64.19% Renter Occupied 90.56% 88.07% 79.30% 81.48% 70.09% 35.81%

SOURCE: Claritas, Inc.

POPULATION Having established the subject’s trade area, our analysis focuses on the trade area's population. Claritas, Inc provides historical, current and forecasted population estimates for the total trade area. Patterns of development density and migration are reflected in the current levels of population estimates.

Between 2000 and 2014, Claritas, Inc., reports that the population within the primary trade area (3.0 mile radius) increased at a compound annual rate of 0.41 percent. This trend is expected to continue into the near future albeit at a slightly slower pace. Expanding to the total trade area (5.0 mile radius), population is expected to increase 0.35 percent per annum over the next five years.

The following page contains a graphic representation of the current population distribution within the subject’s region.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 52

The graphic on the second following page illustrates the projected population growth in the trade area over the next five years (2014 - 2019). The trade area is clearly characterized by various levels of growth.

Overall, the existing population and density for the primary trade area of approximately 1,270,000 residents is a good potential market for retailers.

CURRENT POPULATION MAP

Population - 1: 59,635 - 112,940 Population - 2: 39,398 - 59,634 Population - 3: 23,464 - 39,397 Population - 4: 0 - 23,463

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 53

POPULATION GROWTH MAP

Population Growth - 1: 60,008 - 116,961 Population Growth - 2: 39,318 - 60,007 Population Growth - 3: 24,115 - 39,317 Population Growth - 4: 0 - 24,114

HOUSEHOLDS A household consists of a person or group of people occupying a single housing unit, and is not necessarily a family unit. When an individual purchases goods and services, these purchases are a reflection of the entire household’s needs and decisions, making the household a critical unit to be considered when reviewing market data and forming conclusions about the trade area as it impacts the retail center.

Figures provided by Claritas, Inc indicate that the number of households is increasing at a faster rate than the growth of the population. Several changes in the way households are being formed have caused this acceleration, specifically:

 The population is living longer on average. This results in an increase of single- and two-person households;

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 54

 Higher divorce rates have resulted in an increase in single-person households; and  Many individuals have postponed marriage, also resulting in more single-person households. According to Claritas, Inc,, the Primary Trade Area grew at a compound annual rate of 0.64 percent between 2000 and 2014. Consistent with national trends, the trade area is experiencing household changes at a rate that varies from population changes. That pace is expected to continue through 2019, and is estimated at 0.49 percent.

Correspondingly, a greater number of smaller households with fewer children generally indicate more disposable income. In 2000, there were 2.71 persons per household in the Primary Trade Area and by 2014, this number is estimated to have decreased to 2.62 persons. Through 2019, the average number of persons per household is forecasted to decline to 2.60 persons.

Overall, the existing households for the primary trade area of approximately 470,000 units provide a significantly large market from which to draw customers. Additionally, there are 12,000 new households expected in the next five years

TRADE AREA INCOME Income levels either on a per capita, per family or household basis, indicate the economic level of the residents of the trade area and form an important component of this total analysis. Average household income, when combined with the number of households, is a major determinant of an area's retail sales potential.

Trade area income figures for the subject support the profile of a broad middle-income market. According to Claritas, Inc average household income in the primary trade area in 2014 was approximately $56,216, 118.95 percent of the Bronx average ($47,259) and 70.04 percent of the New York City average ($80,263).

Further analysis shows a relatively broad-based distribution of income, although skewed toward the middle income brackets, similar to the distribution within the larger CBSA. This information is summarized as follows:

DISTRIBUTION OF HOUSEHOLD INCOME 1.0-mile 3.0-mile 5.0-mile Bronx New York New York Category Radius Radius Radius County City State $150,000 or more 3.46% 6.43% 12.68% 3.27% 11.26% 8.78% $125,000 to $149,999 1.67% 2.45% 3.75% 2.36% 4.41% 4.54% $100,000 to $124,999 2.85% 4.36% 6.21% 4.44% 7.45% 8.06% $75,000 to $99,999 5.97% 6.91% 8.86% 7.93% 10.66% 12.21% $50,000 to $74,999 12.64% 12.14% 13.78% 14.38% 15.99% 18.37% $35,000 to $49,999 13.39% 12.10% 11.69% 14.28% 12.19% 13.78% $25,000 to $34,999 11.86% 11.08% 9.63% 11.67% 9.47% 10.35% $15,000 to $24,999 15.62% 14.66% 11.84% 14.60% 10.87% 10.96% Under $15,000 32.54% 29.87% 21.55% 27.06% 17.69% 12.95% Source: Claritas, Inc. Below is a graphic presentation of the household income distribution throughout the trade area that clearly shows the area surrounding the subject to be characterized by middle income households.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 55

HOUSEHOLD INCOME MAP

Household Income - 1: $120,300 - 236,312 Household Income - 2: $73,545 - 120,299 Household Income - 3: $58,187 - 73,544 Household Income - 4: $0 - 58,186

RETAIL SALES Perhaps an even more important measure of area income retail expenditures. Retail sales potential and growth are also tracked by Claritas, Inc. At the time of the writing of this report, the total retail sale potential for the primary trade area totaled $13.65 billion and $35.63 billion for the secondary trade area. By comparison, Bronx County, New York City and the United States had potential retail sales of $16.79 billion, $116.11 billion and $5.09 trillion, respectively. Please see the exhibit below for the detailed retail potential and sales for each segment.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 56

Retail Trade Potential 1.0 mile 3.0 miles 5.0 miles Bronx County New York City or CEntire US Total Retail Demand $2,183,819,686 $13,646,508,151 $35,628,250,389 $16,787,058,039 $116,108,462,519 $5,093,204,999,974 Motor Vehicle & Parts Dealers $223,691,044 $1,655,517,736 $5,151,436,963 $2,389,232,302 $17,512,033,059 $962,354,000,000 Furniture & Home Furnishings Stores $47,879,579 $296,404,744 $798,608,599 $389,493,576 $2,621,082,879 $101,196,000,000 Electronics & Appliances Stores $45,568,818 $282,451,838 $741,521,480 $355,484,124 $2,446,618,547 $101,042,000,000 Building Material, Garden Equipment Stores $116,450,876 $769,681,138 $2,167,892,155 $1,034,876,724 $7,029,945,097 $312,404,999,969 Food & Beverage Stores $357,320,594 $2,098,611,841 $4,984,123,839 $2,377,233,044 $16,015,923,489 $652,638,000,000 Health & Personal Care Stores $114,867,004 $706,794,209 $1,742,354,024 $813,660,096 $5,611,728,451 $285,860,000,000 Gasoline Stations $235,272,298 $1,439,497,639 $3,550,485,036 $1,669,114,729 $11,531,809,887 $546,185,000,000 Clothing & Clothing Accessories Stores $138,845,574 $808,304,196 $1,989,440,868 $950,574,761 $6,405,024,659 $250,625,000,002 Sporting Goods, Hobby, Book, Music Stores $43,422,595 $259,030,511 $647,524,696 $305,506,220 $2,108,612,753 $90,225,000,000 General Merchandise Stores $304,279,660 $1,807,033,236 $4,435,629,795 $2,057,936,589 $13,977,225,700 $659,070,000,000 Miscellaneous Store Retailers $55,019,864 $343,689,312 $865,966,513 $408,450,912 $2,787,051,538 $126,599,000,003 Foodservice & Drinking Places $251,944,649 $1,626,058,481 $4,552,114,184 $2,141,864,716 $14,820,297,782 $553,008,000,000

Retail Sales 1.0 mile 3.0 miles 5.0 miles Bronx County New York City or CEntire US Total Consumer Expenditures - Including Food 2014 3,197,312,144 19,901,208,027 51,759,977,317 24,335,735,365 167,943,276,759 6,292,556,700,084 Total Consumer Expenditures - Not Including Food 2014 2,775,570,447 17,382,156,987 45,495,552,603 21,370,372,346 147,657,308,158 5,484,738,360,802 Total Consumer Expenditures - Including Food 2019 3,768,210,797 23,433,408,167 60,349,693,562 28,489,910,177 196,037,715,198 7,691,615,556,105 Total Consumer Expenditures - Not Including Food 2019 3,267,911,036 20,450,922,577 52,995,149,878 24,993,184,108 172,190,484,042 6,733,800,507,161

SUBJECT HISTORICAL SALES The ownership has provided the historical sales figures from the limited tenants that are required to report annual sales figures. The chart below exhibits the reported sales regarding fiscal years 2010 through 2013. These are the most recent reported sales figures from the reporting tenants within the subject.

TOTAL PROPERTY TENANT SALES Actual Actual Actual Actual FY 2010 FY 2011 FY 2012 FY 2013

Category Total Sq/Ft Total Sales Sales/SF Total Sq/Ft Total Sales Sales/SF Total Sq/Ft Total Sales Sales/SF Total Sq/Ft Total Sales Sales/SF Anchor BJ's Wholesale 130,099 SF $128,767 $990 130,099 SF $134,972 $1,037 130,099 SF $139,021 $1,069 130,099 SF $134,972 $1,037 Junior Anchor Toy R Us 77,638 SF $17,269 $222 77,638 SF $16,475 $212 77,638 SF $15,170 $195 77,638 SF $13,555 $175 Burlington Coat Factory N/A N/A N/A N/A N/A N/A 74,329 SF $15,531 $209 74,329 SF $17,815 $240 Marshalls 38,211 SF $8,553 $224 38,211 SF $8,709 $228 38,211 SF $9,974 $261 38,211 SF $10,230 $268 Subtotal 115,849 SF $25,822 $223 115,849 SF $25,184 $217 190,178 SF $40,675 $214 190,178 SF $41,600 $219 In-Line Skechers 8,741 SF N/A N/A 8,741 SF $1,480 $169 8,741 SF $1,553 $178 8,741 SF $1,898 $217 Applebee's 6,661 SF $3,998 $600 6,661 SF $4,340 $652 6,661 SF $4,774 $717 6,661 SF $4,987 $749 Payless Shoes 3,053 SF $445 $146 3,053 SF $437 $143 3,053 SF $408 $134 3,053 SF $407 $133 GNC 1,980 SF $349 $176 1,980 SF $470 $237 1,980 SF $543 $274 1,980 SF $569 $287 Subtotal 20,435 SF $4,792 $410 20,435 SF $6,727 $329 20,435 SF $7,278 $356 20,435 SF $7,861 $385 Total 266,383 SF $159,381 $598 266,383 SF $166,883 $626 340,712 SF $186,974 $549 340,712 SF $184,433 $541 We have been supplied with the sales figures from several of the tenants within the subject property who have reported sales over the last four years. The anchor, BJ’s Wholesale Club, reported sales figures ranging from $128.76 million ($990/SF) in FY 2011 to $139.02 in FY 2012. The most recent sales were $134.97 million as of FY 2013, which represents a 2.99 percent decrease year-over-year. However, the anchors sales have generally improved over the analysis period and is one of BJ’s highest performing stores within the chain.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 57

The subject contains four junior anchor tenants who reported sales including: Toys R Us, Burlington Coat Factory, Marshall’s, and Michael’s. Michael’s is currently dark based on exercising a cotenancy agreement. However, ownership indicated they will be operational again within the 3rd quarter 2015. As such, we have removed their sales figures from our analysis. Toys R Us exhibited sales ranging from $13.55 million ($175/SF) in FY 2014 to $17.27 million ($222/SF) in FY 2010. The most recent sales were $13.55 million as of FY 2013, which exhibited a 10 percent decrease year-over-year. The Toys R Us decline in sales is consistent with the overall chain that has struggled over the last several years. Burlington Coat Factory exhibited sales ranging from $15.53 million ($209/SF) in FY 2014 to $17.82 million ($240/SF) in FY 2013. The most recent sales were $17.82 million as of FY 2013, which represents a 14.8 percent increase year-over-year. Marshall’s exhibited sales ranging from $8.55 million ($224/SF) in FY 2010 to $10.23 million ($268/SF) in FY 2013. The most recent sales were $10.23 million as of FY 2013, which represents a 2.7 percent increase year-over-year. Overall, the Junior anchor tenants exhibited an average of $219 per square foot, which was a 2.27 percent increase year-over-year.

The subject contains four inline tenants who reported figures sales including: Skechers, AppleBee’s, Payless Shoes and GNC. Skecher’s exhibited sales ranging from $1.48 million ($169/SF) in FY 2011 to $1.89 million ($217/SF) in FY 2013. The most recent sales were $1.89 million as of FY 2013, Which represents 21.9 percent increase year-over-year. AppleBee’s exhibited sales ranging from $3.98 million ($600/SF) in FY 2010 to $4.98 million ($749/SF) in FY 2013. The most recent sales were $4.98 million as of fiscal year 2013, which represents a 4.5 percent increase year-over-year. Payless Shoes exhibited sales ranging from $4.07 ($133/SF) in FY 2013 to $4.45 million ($146/SF) in FY 2010. The most recent sales were $4.07 million as of fiscal year 2013, which represents a 2.5 percent increase year-over-year. GNC exhibited sales ranging from $3.49 ($176/SF) in FY 2010 to $5.69 million ($287/SF) in FY 2013. The most recent sales were $5.69 million as of FY 2013, which represents a 4.7 percent increase year-over-year. Overall, the reporting inline tenants exhibited average sales of $385 per square foot, which was a 8.01 percent increase year over year. Overall, the subject property exhibited average sales of $541 per square foot as of FY 2013, which was a slight (1.36 percent) decrease year over year. The slight decrease was attributed mainly to the poor performance of Toys R Us. Overall, the ownership expects sales to continue to improve as the overall economy and retail market continues to improve.

SUBJECT SALES PROJECTION We have considered that competitive centers in the primary trade area are generally achieving sales levels between $550 and $650 per square foot. These sales levels are critical in analyzing the achievable rents at the subject through an occupancy cost analysis. Moreover, the limited in-line tenants who have reported average sales in excess of $600 per square foot. While a more detailed analysis will be shown in the Income Capitalization section in the report, we have concluded that the subject’s in-line tenants will only need to achieve sales levels of approximately $475 to $500 per square foot to be an attractive center to national tenants.

Our forecasted sales figure of $550 per square foot for the subject property is within the range of the comparable New York City retail properties as can been seen from the following chart.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 58

COMPARABLE NEW YORK CITY RETAIL CENTERS (SALES PER SQUARE FOOT) NAME / LOCATION SIZE (SF) SALES/PSF

Gateway Center 638,0000 SF $700/SF

Brooklyn, New York

Bay Plaza Retail Center 900,000 SF $500/SF Bronx, New York

Kings Plaza Mall 1.0 million SF $625/SF Brooklyn, NY

Atlantic Center 396,000 SF $570/SF Brooklyn, New York

Rego Park Center 342,000 SF $550/SF Queens, New York

Rego Park II 615,000 SF $500/SF Queens New York

Queens Place 450,000 SF $425/SF Queens, New York

Queens Center Mall 922,000 SF $990/SF Queens, New York

Bay Terrace Shopping Center 312,000 SF $500/SF Queens, New York

Bruckner Plaza 450,000 SF $550/SF Bronx, New York

East River Plaza 525,000 SF $600/SF Upper Manhattan, New York

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 59

We have considered that competitive centers in the primary trade area are generally achieving sales levels between $500 and $600 per square foot for junior anchor and in-line leases. These sales levels are critical in analyzing the achievable rents at the subject through an occupancy cost analysis.

CONCLUSION We have analyzed the retail trade history, profile of the subject's region and primary trade area as well as, the subject’s tenant profiles in order to make reasonable assumptions regarding the continued performance of the property.

A metropolitan and locational overview was presented which highlighted important points about the trade area. Demographic and economic data specific to the trade area were also presented. Marketing information relating to these sectors was presented and analyzed in order to determine patterns of change and growth as it impacts Gateway Center at Bronx Terminal Market. The data quantifies the dimensions of the total trade area, while our comments provide qualitative insight into this market. A compilation of this data forms the basis for our projections and forecasts for the subject property. The following are our key conclusions.

 The subject is situated on 16.80 acres located along River Avenue and the Major Deegan Expressway with excellent frontage, visibility and access. The subject has good accessibility via the network of major and local arterials that provide linkages throughout this area of the Bronx. There is bus and subway service available within close proximity to the site. The subject has good accessibility via the network of major and local arterials that provide linkages throughout this area of the Bronx. The subject benefits from subway transportation located less than 3 blocks from the site by way of local service on the 2, 4, 5, B and D lines, as well as the 153rd Street Metro-North Station. There is also bus service available to the site, via lines BXM1, BXM2, BXM3, BXM18, BX 11 and BX 13 located at along River Avenue and the Major Deegan Expressway. Lastly, the subject provides good accessibility by car and excellent visibility from the Major Deegan Expressway. The property is accessed by either River Avenue or Queens Major Deegan Expressway, which is the major commercial thoroughfare of the Bronx.  The existing trade area structure is characterized by a mix of large and medium sized urban centers, and secondary retail properties that are located along the major commercial arterials. The subject is clearly a unique retail center within the market area given its size, layout, anchor, major, and specialty tenants.  The anchor tenants, BJ’s Wholesale Club, Target and Home Depot, are part of national/regional store chains which offer wide cohesive merchandising mixes. The subject features Marshall’s, Best Buy, Toys ‘R Us/Babies ’R Us (The first of these combined stores in the nation), Bed Bath & Beyond, Conway’s, Raymour and Flanagan and Applebee’s as junior anchor tenants. Shoppers have become more cost conscience and will travel to seek out "big box" stores carrying discounted items. Furthermore, there are only a limited number of smaller local and regional retailers that will directly compete with the subject stores in the trade area. Larger regional/national chains have the benefit of stronger advertising budgets and are more familiar to shoppers which generally results in higher sales levels.  The addition of CUNY to the subject’s tenant roster bodes well for the retailers within the subject property as there is a built-in pool of potential shoppers that are on-site for several hours per day.

GATEWAY CENTER AT BRONX TERMINAL MARKET RETAIL MARKET AND TRADE AREA ANALYSIS 60

 As such we believe the property serves a market encompassing a radius of 3.0 miles to 5.0 miles. Over the next five years, both the population and number of households in the subject’s trade area are projected to remain fairly stable. Household income levels in the area are lower than the state or CBSA both significantly above national levels.  The subject has good accessibility via the regional Interstate network and local arterials that provide linkages throughout the New York CBSA.  The subject property possesses a 25-year tax abatement via the PILOT program. As the subject’s leases are net leases the tenants directly benefit from the abatement which subsequently lowers the occupancy costs of the tenants during the abatement period.  The combination of the demographic and competitive characteristics of the trade area creates an environment where the subject property should flourish due to the subject’s trade area and tenant mix. The subject is a unique urban shopping center within the market area given its size, quality, tenant mix, location, and transportation access. The subject is 99.3 percent leased as of the date of valuation. Clearly the forces of supply and demand that exist in the current market indicate that the subject power center is a successful project that will maintain an occupancy level above 95 percent, and achieve sales levels north of $550 per square foot.

GATEWAY CENTER AT BRONX TERMINAL MARKET SITE DESCRIPTION 61

SITE DESCRIPTION

Location: Gateway Center at Bronx Terminal Market 658 River Avenue The Bronx, Bronx County, NY 10451 The subject site is generally bounded by 149th Street to the south, the Metro-North Rail Road tracks to the north, River Avenue to the west, and Exterior Street to the east, across the Harlem River and adjacent to the Major Deegan Expressway (I-87).

Shape: Irregular

Topography: Slightly sloping

Land Area: 731,769 square feet; 16.80 acres

Frontage, Access The site has frontage on River Avenue and Exterior Street. Access and visibility of and Visibility: the site is considered to be good. Furthermore, the subject has excellent visibility from the Major Deegan Expressway.

Soil Conditions: We were not given a soil report to review. However, we assume that the soil's load- bearing capacity is sufficient to support existing and/or proposed structure(s). We did not observe any evidence to the contrary during our physical inspection of the property. Drainage appears to be adequate.

Utilities: Utility providers for the subject property are as follows: Water & Sewer City of New York Electricity & Gas Consolidated Edison Telephone Verizon Communications and others

Site Improvements: The site improvements include asphalt paved parking areas, curbing, signage, landscaping, yard lighting and drainage.

Land Use We were not given a title report to review. We do not know of any easements, Restrictions: encroachments, or restrictions that would adversely affect the site's use. However, we recommend a title search to determine whether any adverse conditions exist.

Flood Zone The subject property is located in flood zone X500 (Areas determined to be Description: inundated by the 500 year flood plain) as indicated by FEMA Map 360497 0091F, dated September 5, 2007.

Wetlands: We were not given a wetlands survey to review. If subsequent engineering data reveal the presence of regulated wetlands, it could materially affect property value. We recommend a wetlands survey by a professional engineer with expertise in this field.

Hazardous We observed no evidence of toxic or hazardous substances during our inspection of Substances: the site. However, we are not trained to perform technical environmental inspections and recommend the hiring of a professional engineer with expertise in this field.

Overall Site Utility: The subject site is functional for its proposed use.

Location Rating: Good

GATEWAY CENTER AT BRONX TERMINAL MARKET SITE DESCRIPTION 62

SUBJECT TAX MAP

GATEWAY CENTER AT BRONX TERMINAL MARKET IMPROVEMENTS DESCRIPTION 63

IMPROVEMENTS DESCRIPTION The following description of improvements is based on our physical inspection of the improvements and our discussions with the subject property’s building manager.

GENERAL DESCRIPTION Year Built: 2009

Number of Buildings: 4

Number of Stories: 4-story retail center, two 1-story retail buildings, and a 6-level parking structure.

Gross Building Area (GBA):

Retail Building: 969,019 square feet

Parking Garage: 945,048 square feet

Total GBA: 1,914,067 square feet (Per Tax Assessor)

Foundation: Reinforced concrete column pads and reinforced concrete spread footings.

Framing: Structural steel and masonry.

Floors: Reinforced concrete slab.

Exterior Walls: Brick

Roof Type: Flat with parapet walls.

Roof Cover: The roof cover is a rubber membrane roof system.

Windows: Storefront windows in aluminum frames.

GATEWAY CENTER AT BRONX TERMINAL MARKET IMPROVEMENTS DESCRIPTION 64

Pedestrian Doors: Glass in aluminum frames.

MECHANICAL DETAIL Heat / Cooling: Each tenant space is furnished with package HVAC units for its heating and cooling.

Plumbing: The plumbing system is assumed to be adequate for existing use and in compliance with local law and building codes. The plumbing system is typical of other retail properties in the area with a combination of PVC, steel, copper and cast iron piping throughout the building. Adequate restrooms for men and women are situated throughout the building.

Electrical Service: The electrical service is assumed to be adequate for the existing use and in compliance with local law and building codes.

Emergency Power The subject contains 3 emergency generators.

Fire Protection: 100% sprinklered

Security: The subject is under 24/7 security monitoring by security guards along with exterior monitors situated along the building’s perimeter and the parking garage.

INTERIOR DETAIL Layout: The project consists of two 4-level retail buildings on the north and south end of the site with a 6-level parking structure in between which services the retail project. The buildings are wrapped by at grade retail space along River Avenue and Exterior Street. These retail buildings function as one, and each level of the garage corresponds to one level of retail.

Floor Covering: Ceramic tile, carpet or resilient tile.

Walls: Painted or wallpapered sheetrock.

Ceilings: Open ceilings with slab to slab heights ranging between 18 and 20 feet

Lighting: A mixture of fluorescent and incandescent light fixtures.

Restrooms: The property features adequate restrooms for men and women.

SITE IMPROVEMENTS Parking: The subject possesses a 6-level parking structure with 2,575 parking spaces.

Other: Other site improvements consist of concrete and asphalt paving, curbing, lighting, and tenant signage.

PERSONAL PROPERTY Personal property was excluded from our valuation.

SUMMARY Condition: Excellent

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Quality: Excellent

Property Rating: After considering all of the physical characteristics of the subject, we have concluded that this property has an overall rating that is excellent, when measured against other properties in this marketplace.

Roof & Mechanical We did not inspect the roof nor did we make a detailed inspection of the Inspections: mechanical systems. The appraisers are not qualified to render an opinion regarding the adequacy or condition of these components. The client is urged to retain an expert in this field if detailed information is needed.

Design and Functionality Overall, the subject property is considered a well-designed destination retail power center. The configuration of the center provides good customer flow and allows for various points of ingress/egress. The layout and design of the center creates covered parking for each retail level which is a strong attraction along with the anchor and major tenants at the subject.

Actual Age: 6 Years

Effective Age: 5 Years

Expected Economic Life: 50 Years

Remaining Economic Life: 45 Years

CAPITAL EXPENDITURES Known Costs: We are not aware of any planned capital expenditures would have an impact on the subject property.

FUNCTIONAL OBSOLESCENCE Description: There is no apparent functional obsolescence present at the subject property.

AMERICANS WITH DISABILITIES ACT The Americans With Disabilities Act (ADA) became effective January 26, 1992. We have not made, nor are we qualified to make a compliance survey of this property to determine whether or not it is in conformity with the requirements of the ADA. It is possible that a compliance survey could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have not been provided with the results of a survey, we did not analyze the results of possible non-compliance.

HAZARDOUS SUBSTANCES We are not aware of any potentially hazardous materials (such as formaldehyde foam insulation, asbestos insulation, radon gas emitting materials, or other potentially hazardous materials) which may have been used in the construction of the improvements. However, we are not qualified to detect such materials and urge the client to employ an expert in the field to determine if such hazardous materials exist.

GATEWAY CENTER AT BRONX TERMINAL MARKET FLOOR PLANS 66

RIVER AVENUE GRADE LEVEL 1 / GARAGE G2

GATEWAY CENTER AT BRONX TERMINAL MARKET FLOOR PLANS 67

EXTERIOR STREET GRADE LEVEL 1 / GARAGE G1

GATEWAY CENTER AT BRONX TERMINAL MARKET FLOOR PLANS 68

RIVER AVENUE GRADE LEVEL 2 / GARAGE 3

GATEWAY CENTER AT BRONX TERMINAL MARKET FLOOR PLANS 69

1 ST LEVEL ABOVE GRADE / GARAGE AG1

GATEWAY CENTER AT BRONX TERMINAL MARKET FLOOR PLANS 70

2 ND LEVEL ABOVE GRADE / GARAGE AG2

GATEWAY CENTER AT BRONX TERMINAL MARKET FLOOR PLANS 71

3RD LEVEL ABOVE GRADE / GARAGE AG3

GATEWAY CENTER AT BRONX TERMINAL MARKET REAL PROPERTY TAXES AND ASSESSMENTS 72

REAL PROPERTY TAXES AND ASSESSMENTS

CURRENT PROPERTY TAXES The subject property is located in the taxing jurisdiction of City of New York- Bronx County Tax Assessor’s Office. The assessor’s parcel identification number is Block 2356; Lots 20 and 25 & Block 2357; Lots 35, 40, 42, and 45.. Assessments for the current and prior years are as follows:

NEW YORK CITY ASSESSMENT AND TAX ANALYSIS Block 2356; Lot 20 ASSESSMENT INFORMATION 2014/15 2015/16 Actual Transitional Actual Transitional Assessed Value Land: $436,500 $398,880 $436,500 $417,690 Improvements: 619,650 1,650,601 651,150 1,329,481 Total: $1,056,150 $2,049,481 $1,087,650 $1,747,171 Block 2356; Lot 25 ASSESSMENT INFORMATION 2014/15 2015/16 Actual Transitional Actual Transitional Assessed Value Land: $315,000 $417,337 $315,000 $400,580 Improvements: 35,100 112,182 226,350 272,740 Total: $350,100 $529,519 $541,350 $673,320 Block 2357; Lot 35 ASSESSMENT INFORMATION 2014/15 2015/16 Actual Transitional Actual Transitional Assessed Value Land: $4,508,100 $4,378,561 $4,508,100 $4,444,480 Improvements: 44,844,300 25,137,782 43,454,250 32,129,420 Total: $49,352,400 $29,516,343 $47,962,350 $36,573,900 Block 2357; Lot 40 ASSESSMENT INFORMATION 2014/15 2015/16 Actual Transitional Actual Transitional Assessed Value Land: $4,500,000 $3,802,626 $4,500,000 $4,151,888 Improvements: 12,641,400 16,286,756 13,867,200 14,791,601 Total: $17,141,400 $20,089,382 $18,367,200 $18,943,489

GATEWAY CENTER AT BRONX TERMINAL MARKET REAL PROPERTY TAXES AND ASSESSMENTS 73

NEW YORK CITY ASSESSMENT AND TAX ANALYSIS Block 2357; Lot 42 ASSESSMENT INFORMATION 2014/15 2015/16 Actual Transitional Actual Transitional Assessed Value Land: $117,000 $94,198 $117,000 $105,597 Improvements: 35,100 27,528 45,450 32,707 Total: $152,100 $121,726 $162,450 $138,304 Block 2357; Lot 45 ASSESSMENT INFORMATION 2014/15 2015/16 Actual Transitional Actual Transitional Assessed Value Land: $5,328,000 $3,815,000 $5,328,000 $4,571,500 Improvements: 36,912,500 24,981,387 37,912,500 30,713,618 Total: $42,240,500 $28,796,387 $43,240,500 $35,285,118 Total: ASSESSMENT INFORMATION 2014/15 2015/16 Actual Transitional Actual Transitional Assessed Value Land: $10,704,600 $9,103,976 $10,704,600 $14,091,735 Improvements: 99,588,050 71,998,862 100,656,900 79,269,567 Total: $110,292,650 $81,102,838 $111,361,500 $93,361,302 $76,982,106 $91,993,522 Tax Rate 10.684% 10.791% Calendar Year Taxes: $8,224,768 $10,074,469

Compiled by Cushman & Wakefield, Inc. Real estate taxes in New York City are normally the product of the transitional assessed value times the tax rate, for the fiscal year July 1 through June 30 (payable July 1 and January 1). The transitional assessed value is based on a five-year phase-in of actual assessed value. If the actual assessed value is lower than the transitional assessed value for that year, the actual assessed value is multiplied by the tax rate to determine the tax.

The 2014/15 Class 4 tax rate is 10.684 percent per $100 of assessed valuation. The 2014/15 Class 4 tax rate reflects a 3.50 percent increase from the 2013/14 Class 4 tax rate of 10.323 percent per $100 of assessed valuation. We have projected a 1.0 percent increase from the 2015/16 tax rate which reflects a tax rate of 10.791 per $100 of assessed valuation.

TAX COMPARISONS Based on current tax assessments, it appears that the subject property is assessed below market levels and comparable properties. Therefore, we researched comparable retail centers to estimate market level assessment for the subject property. Listed below is a summary chart of the 2015/16 assessments for several properties considered to have varying degrees of comparability to the subject property.

GATEWAY CENTER AT BRONX TERMINAL MARKET REAL PROPERTY TAXES AND ASSESSMENTS 74

REAL ESTATE TAX COMPARABLES Building Year No. Property Name & Location Parcel No. Area (SF) Built Assessment Assess/SF Total Taxes Taxes/SF 1 East River Plaza 1715-22 1,124,327 2010 $90,585,286 $80.57 $9,775,058 $8.69 2 Harlem USA 1951-22 310,000 1998 $31,871,427 $102.81 $3,439,246 $11.09 3 Triangle Junction 7576-1001 665,111 2006 $58,141,458 $87.42 $6,274,045 $9.43 4 Gotham Plaza 1774-30 122,944 2001 $9,593,550 $78.03 $1,035,240 $8.42 5 Rego Park Center 2084-101 860,000 2009 $55,714,950 $64.78 $6,012,200 $6.99 STATISTICS Low: 122,944 1998 $9,593,550 $64.78 $1,035,240 $6.99 High: 1,124,327 2010 $90,585,286 $102.81 $9,775,058 $11.09 Average: 616,476 2005 $49,181,334 $82.72 $5,307,158 $8.93 Compiled by Cushman & Wakefield, Inc. The comparable urban multi-level retail power centers reflect assessment’s ranging from $64.78 to $102.81 per square foot with an average of $82.72 per square foot of gross building area. Our survey of comparable retail properties indicates taxes ranging from $6.99 to $11.09 per square foot of gross building area (GBA). The average tax of the comparable properties is $8.93 per square foot. As mentioned earlier, the subject property is currently abated under PILOT program that will be discussed in the following section. The subject’s unabated fiscal year taxes are 9927021, or $5.21 per square foot, which is considered slightly below comparable properties.

PILOT PROGRAM The subject property as a commercial urban renewal project on New York City owned land has qualified for the New York City 25-year, Payment in Lieu of Taxes (PILOT) program. Taxes are payable on the subject land based on current assessments; however, the improvements are exempt from real estate taxes for 15 years. The chart on the following chart simulates the PILOT exemption program utilizing the actual and improvement assessments and growth estimates for the subject’s land and improvements. The building assessment is 100 percent exempt for the first 16 years of the program. Taxes on the improvements are then phased in at 10 percent increments from year 16 through year 25 when the exemption ends. The current 2014/15 tax rate is assumed to increase 1.0 percent throughout the projection.

The abated PILOT taxes have been used in the cash flow presented later in the Income Capitalization Approach. The present value of the tax savings attributable to the PILOT (exhibited in the chart presented on the following page) reflects $81,000,000. As the subject’s tenants have net leases, the tax savings from the PILOT tax abatement is directly correlative with lower occupancy costs. This serves as a benefit to the tenants and a draw for the subject property as the tenants will have subsidized occupancy costs through the expiration of the abatement program in tax year 2031/32.

GATEWAY CENTER AT BRONX TERMINAL MARKET REAL PROPERTY TAXES AND ASSESSMENTS 75

PILOT TAX PROJECTION GATEWAY CENTER @ BRONX TERMINAL MARKET BRONX, NEW YORK ICIP CY FY ANALYSIS ICIP TAX PAYABLE ACTUAL/EST. TOTAL/EST. BENEFIT EXEMPT % PAYABLE TAX FY TAXES FY TAXES CY TAXES TAXES PSF CY TAXES TAXES PSF TAX PERIOD PERIOD YEAR LAND AV BUILDING AV AV BASE AMOUNT EXEMPT AV RATE W/O ICIP W/ ICIP W/O ICIP W/O ICIP W/ ICIP W/ ICIP SAVINGS 1 10 2015/16 $14,373,077 $77,620,445 $91,993,522 $77,620,445 $77,620,445 100% $14,373,077 10.791 $9,927,021 $1,550,999 $4,963,510 $2.60 $775,499 $0.41 $4,188,011 2 11 2016/17 $14,660,539 $79,172,854 $93,833,392 $79,172,854 $79,172,854 100% $14,660,539 10.899 $10,226,817 $1,597,839 $10,076,919 $5.29 $1,574,419 $0.83 $8,502,500 3 12 2017/18 $14,953,749 $80,756,311 $95,710,060 $80,756,311 $80,756,311 100% $14,953,749 11.008 $10,535,667 $1,646,094 $10,381,242 $5.45 $1,621,966 $0.85 $8,759,276 4 13 2018/19 $15,252,824 $82,371,437 $97,624,261 $82,371,437 $82,371,437 100% $15,252,824 11.118 $10,853,844 $1,695,806 $10,694,755 $5.61 $1,670,950 $0.88 $9,023,806 5 14 2019/20 $15,557,881 $84,018,866 $99,576,747 $84,018,866 $84,018,866 100% $15,557,881 11.229 $11,181,630 $1,747,019 $11,017,737 $5.78 $1,721,412 $0.90 $9,296,325 6 15 2020/21 $15,869,038 $85,699,243 $101,568,282 $85,699,243 $85,699,243 100% $15,869,038 11.341 $11,519,315 $1,799,779 $11,350,473 $5.96 $1,773,399 $0.93 $9,577,074 7 16 2021/22 $16,186,419 $87,413,228 $103,599,647 $87,413,228 $87,413,228 100% $16,186,419 11.455 $11,867,199 $1,854,132 $11,693,257 $6.14 $1,826,956 $0.96 $9,866,301 8 17 2022/23 $16,510,148 $89,161,493 $105,671,640 $89,161,493 $80,245,343 90% $25,426,297 11.569 $12,225,588 $2,941,673 $12,046,393 $6.32 $2,397,903 $1.26 $9,648,491 9 18 2023/24 $16,840,351 $90,944,723 $107,785,073 $90,944,723 $72,755,778 80% $35,029,295 11.685 $12,594,801 $4,093,211 $12,410,194 $6.51 $3,517,442 $1.85 $8,892,753 10 19 2024/25 $17,177,158 $92,763,617 $109,940,775 $92,763,617 $64,934,532 70% $45,006,243 11.802 $12,975,164 $5,311,618 $12,784,982 $6.71 $4,702,414 $2.47 $8,082,568 11 20 2025/26 $17,520,701 $94,618,889 $112,139,590 $94,618,889 $56,771,334 60% $55,368,256 11.920 $13,367,014 $6,599,884 $13,171,089 $6.91 $5,955,751 $3.13 $7,215,338 12 21 2026/27 $17,871,115 $96,511,267 $114,382,382 $96,511,267 $48,255,634 50% $66,126,748 12.039 $13,770,698 $7,961,116 $13,568,856 $7.12 $7,280,500 $3.82 $6,288,356 13 22 2027/28 $18,228,537 $98,441,492 $116,670,029 $98,441,492 $39,376,597 40% $77,293,432 12.160 $14,186,573 $9,398,548 $13,978,635 $7.34 $8,679,832 $4.56 $5,298,803 14 23 2028/29 $18,593,108 $100,410,322 $119,003,430 $100,410,322 $30,123,097 30% $88,880,333 12.281 $14,615,007 $10,915,540 $14,400,790 $7.56 $10,157,044 $5.33 $4,243,746 15 24 2029/30 $18,964,970 $102,418,529 $121,383,499 $102,418,529 $20,483,706 20% $100,899,793 12.404 $15,056,380 $12,515,586 $14,835,694 $7.79 $11,715,563 $6.15 $3,120,131 16 25 2030/31 $19,344,269 $104,466,899 $123,811,169 $104,466,899 $10,446,690 10% $113,364,479 12.528 $15,511,083 $14,202,320 $15,283,732 $8.02 $13,358,953 $7.01 $1,924,778 17 26 2031/32 $19,731,155 $106,556,237 $126,287,392 $106,556,237 $0 0% $126,287,392 12.653 $15,979,518 $15,979,518 $15,745,300 $8.26 $15,090,919 $7.92 $654,381 18 27 2032/33 $20,125,778 $108,687,362 $128,813,140 $108,687,362 $0 0% $128,813,140 12.780 $16,462,099 $16,462,099 $16,220,808 $8.51 $16,220,808 $8.51 $0 $127,274,059 $30,838,052 $120,590,552 $27,538,110 $93,052,442

ASSUMPTIONS PRESENT VALUE OF THE TAX SAVINGS 2015/2016 Land AV $14,373,077 @ 5.0 PERCENT (FY 2015-2033) $80,699,993 2015/16 Improved AV $77,620,445 PV of Tax Savings Rounded-As Is: $81,000,000 2015/16 Total AV $91,993,522 Current GBA: 1,905,417 2014/15 Tax Rate: 10.684% Proposed 2015/16 Tax Rate: 10.791% Land & Building AV Growth Rate 2.00% Tax Rate Growth 1.00%

GATEWAY CENTER AT BRONX TERMINAL MARKET ZONING 76

ZONING

Map 6a of the Zoning Resolution of the City of The Bronx indicates that the subject property is situated in the following zoning district: C4 General Central Commercial District. The City of New York indicates that the subject property is zoned as follows:

ZONING C4-4; GENERAL CENTRAL COMMERCIAL DISTRICT DESIGNATION Definition These districts comprise the City’s major secondary shopping centers, which provide for occasional family shopping needs and for essential services to business establishments over a wide area, and which have a substantial number of large stores generating considerable traffic. The district regulations are designed to promote convenient shopping and the stability of retail development by encouraging continuous retail frontage and by prohibiting service and manufacturing establishments that tend to break up such continuity.

ZONING COMPLIANCE Property value is affected by whether or not an existing or proposed improvement complies to zoning regulations, as discussed below.

COMPLYING USES An existing or proposed use that complies to zoning regulations implies that there is no legal risk and that the existing improvements could be replaced “as-of-right.”

PRE-EXISTING, NON-COMPLYING USES In many areas, existing buildings pre-date the current zoning regulations. When this is the case, it is possible for an existing building that represents a non-complying use to still be considered a legal use of the property. Whether or not the rights of continued use of the building exist depends on local laws. Local laws will also determine if the existing building may be replicated in the event of loss or damage.

NON-COMPLYING USES A proposed non-complying use to an existing building might remain legal via variance or special use permit. When appraising a property that has such a non-complying use, it is important to understand the local laws governing this use.

According to the New York City Department of City Planning, there was a zoning change effective February 1, 2006, that changed the zoning on the subject site from M2-1 to a C4-4. In addition, there was a number of special permits filed with New York City to permit the development of the subject property. Some of the items are listed below:

 Zoning Resolution (ZR) Section 73-743 for bulk modifications for height and setback waivers along River Avenue and Exterior Street, and distribution of floor area within the general large-scale district;  A special permit under ZR section 74-744 for signs not permitted under the Zoning Resolution;  A special permit under ZR section 62-736 for bulk waivers on waterfront blocks;  Authorization under ZR section 62-722 for modification of public access and visual corridors  Certification for a zoning lot subdivision under ZR Section 62-712;  A special permit pursuant to ZR section 74-512 to permit a public parking garage in excess of 150 spaces

GATEWAY CENTER AT BRONX TERMINAL MARKET ZONING 77

SUBJECT PROPERTY CONFORMANCE The C4-4 designation permits a maximum as-of-right floor area ratio (FAR) of 3.4 times the lot area for commercial and residential buildings, along with 6.50 times the lot area for community use facilities. In the Property Description section of the report, we estimated the subject site contains 731,769 square feet. Therefore, the maximum permitted commercial/retail zoning floor area (ZFA) as-of-right that could be constructed on the site is 2,448,014 square feet.

The retail improvements consist of 945,048 square feet of above grade gross building area (GBA). In addition, the parking garage consists of 969,019 square feet of above grade, gross building area (GBA) for a total above grade gross building area of 1,914,067 square feet for the retail and parking garage components. We have been provided with a zoning and requirements analysis prepared by The Planning and Resource Corporation dated February 3, 2014. According to the analysis, the subject’s improvements represent a legal and complying use.

In addition, the analysis indicates that the subject property possesses 2,575 parking spaces (inclusive of 131 handicapped spaces) which complies with the parking requirement of 914 parking spaces, or one parking space for every 1,000 square feet. From our review of public records the subject’s retail component possesses 969,019 square feet of Gross Building Area, requiring 969 parking spaces. Therefore, the subject property possesses well more than the legal number of parking spaces required.

The subject property is currently under improved. Based on current market conditions and the speculative nature of utilizing the subject’s excess development rights, we do not believe that a buyer in the marketplace would pay a premium or ascribe any additional value to the subject property based on its excess development rights. However, we have considered this in our selected investment rates.

OTHER RESTRICTIONS We know of no deed restrictions, private or public, that further limit the subject property's use. The research required to determine whether or not such restrictions exist is beyond the scope of this appraisal assignment. Deed restrictions are a legal matter and only a title examination by an attorney or title company can usually uncover such restrictive covenants. We recommend a title examination to determine if any such restrictions exist.

ZONING CONCLUSIONS Detailed zoning studies are typically performed by a zoning or land use expert, including attorneys, land use planners, or architects. The depth of our study correlates directly with the scope of this assignment, and it considers all pertinent issues that have been discovered through our due diligence.

We are not experts in the interpretation of complex zoning ordinances but we have analyzed the zoning requirements in relation to the subject property, and considered the compliance of the existing use as well as reviewed the findings from the zoning analysis prepared by the Planning Resource Corporation (Dated February 3, 2014) and provided by the ownership. We are not experts in the interpretation of complex zoning ordinances but based on our review of public information, the subject property is a complying use.

We note that this appraisal is not intended to be a detailed determination of compliance, as that determination is beyond the scope of this real estate appraisal assignment. Exhibited below is a zoning map for the subject property.

GATEWAY CENTER AT BRONX TERMINAL MARKET ZONING 78

ZONING MAP

GATEWAY CENTER AT BRONX TERMINAL MARKET HIGHEST AND BEST USE 79

HIGHEST AND BEST USE

HIGHEST AND BEST USE DEFINITION The Dictionary of Real Estate Appraisal, Fifth Edition (2014), a publication of the Appraisal Institute, defines the highest and best use as:

The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability.

To determine the highest and best use we typically evaluate the subject site under two scenarios: as if vacant land and as presently improved. In both cases, the property’s highest and best use must meet the four criteria described above.

HIGHEST AND BEST USE OF PROPERTY AS IF VACANT

LEGALLY PERMISSIBLE The zoning regulations in effect at the time of the appraisal determine the legal permissibility of a potential use of the subject site. As described in the Zoning section, the subject site is zoned C4-4; General Central Commercial District by the City of New York. Permitted uses within this district include office, retail, residential, community service and various commercial uses. We are not aware of any further legal restrictions that limit the potential uses of the subject.

PHYSICALLY POSSIBLE The physical possibility of a use is dictated by the size, shape, topography, availability of utilities, and any other physical aspects of the site. The subject site contains 16.80 acres, or 731,769 square feet. The site is irregular and slightly sloping. It has excellent frontage, good access, and good visibility. All public utilities are available to the site including public water and sewer, gas, electric and telephone. Overall, the site is considered adequate to accommodate most permitted development possibilities.

FINANCIALLY FEASIBLE AND MAXIMALLY PRODUCTIVE In order to be seriously considered, a use must have the potential to provide a sufficient return to attract investment capital over alternative forms of investment. A positive net income or acceptable rate of return would indicate that a use is financially feasible. Financially feasible uses are those uses that can generate a profit over and above the cost of acquiring the site, and constructing the improvements. Of the uses that are permitted, possible, and financially feasible, the one that will result in the maximum value for the property is considered the highest and best use.

CONCLUSION The entire subject site comprises a total of 16.80 acres, or 731,769 square feet, in the Bronxchester neighborhood of the Bronx, adjacent to the Major Deegan Expressway (Interstate 87), and across the Harlem River. The subject site is a unique parcel in The Bronx, and New York City based on its size, utility, frontage and visibility from the Major Deegan Expressway. Several features of the subject property indicate that a retail development is the highest and best use of the site. Furthermore, the subject site is a large unique site that is difficult to replicate in New York City.

GATEWAY CENTER AT BRONX TERMINAL MARKET HIGHEST AND BEST USE 80

HIGHEST AND BEST USE OF PROPERTY AS IMPROVED The Dictionary of Real Estate Appraisal defines highest and best use of the property as improved as:

The use that should be made of a property as it exists. An existing improvement should be renovated or retained “as is” so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one.

LEGALLY PERMISSIBLE As described in the Zoning Analysis section of this report, the subject site is zoned C4-4; General Central Commercial District. The site is improved with a multi-tenant retail power center and a 6-level parking garage containing a total of 969,019 square feet of gross building area. In the Zoning section of this appraisal, we determined that the existing improvements represent a legal complying use.

PHYSICALLY POSSIBLE The subject improvements were constructed in 2009 and are in excellent condition. We know of no current or pending municipal actions or covenants that would require a change to the current improvements.

FINANCIALLY FEASIBLE AND MAXIMALLY PRODUCTIVE In our opinion, the improvements contribute significantly to the value of the site. It is likely that no alternate use would result in a higher return.

CONCLUSION It is our opinion, the existing improvements add value to the site as if vacant, therefore dictating a continuation of its current use. In conclusion, it is our opinion that the Highest and Best Use of the subject property as improved is as currently improved.

GATEWAY CENTER AT BRONX TERMINAL MARKET VALUATION PROCESS 81

VALUATION PROCESS

METHODOLOGY There are three generally accepted approaches to developing an opinion of value: Cost, Sales Comparison and Income Capitalization. We considered each in this appraisal to develop an opinion of the market value of the subject property. In appraisal practice, an approach to value is included or eliminated based on its applicability to the property type being valued and the quality of information available. The reliability of each approach depends on the availability and comparability of market data as well as the motivation and thinking of purchasers.

The valuation process is concluded by analyzing each approach to value used in the appraisal. When more than one approach is used, each approach is judged based on its applicability, reliability, and the quantity and quality of its data. A final value opinion is chosen that either corresponds to one of the approaches to value, or is a correlation of all the approaches used in the appraisal.

We considered each approach in developing our opinion of the market value of the subject property. We discuss each approach below and conclude with a summary of their applicability to the subject property.

COST APPROACH The Cost Approach is based on the proposition that an informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the Highest and Best Use of the land; or when relatively unique or specialized improvements are located on the site for which there are few improved sales or leases of comparable properties.

SALES COMPARISON APPROACH In the Sales Comparison Approach, sales of comparable properties are adjusted for differences to estimate a value for the subject property. A unit of comparison such as price per square foot of building area or effective gross income multiplier is typically used to value the property. When developing an opinion of land value the analysis is based on recent sales of sites of comparable zoning and utility, and the typical units of comparison are price per square foot of land, price per acre, price per unit, or price per square foot of potential building area. In both cases, adjustments are applied to the unit of comparison from an analysis of comparable sales, and the adjusted unit of comparison is then used to derive an opinion of value for the subject property.

INCOME CAPITALIZATION APPROACH In the Income Capitalization Approach the income-producing capacity of a property is estimated by using contract rents on existing leases and by estimating market rent from rental activity at competing properties for the vacant space. Deductions are then made for vacancy and collection loss and operating expenses. The resulting net operating income is divided by an overall capitalization rate to derive an opinion of value for the subject property. The capitalization rate represents the relationship between net operating income and value. This method is referred to as Direct Capitalization.

GATEWAY CENTER AT BRONX TERMINAL MARKET VALUATION PROCESS 82

Related to the Direct Capitalization Method is the Discounted Cash Flow Method. In this method periodic cash flows (which consist of net operating income less capital costs) and a reversionary value are developed and discounted to a present value using an internal rate of return that is determined by analyzing current investor yield requirements for similar investments.

SUMMARY This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that the Sales Comparison Approach and the Income Capitalization Approach would be considered meaningful and applicable in developing a credible value conclusion. Investors do not typically rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not relied upon the Cost Approach to develop an opinion of market value.

GATEWAY CENTER AT BRONX TERMINAL MARKET GROUND LEASE ANALYSIS AND LAND VALUATION 83

GROUND LEASE ANALYSIS AND LAND VALUATION The subject site is encumbered by a 49 year ground lease, and includes five 10 year renewal options which could extend the ground lease term to 99 years. The ground lease has been summarized and analyzed as follows:

Ground Lessor City of New York (Landlord):

Ground Lessee BTM Development Partners LLC c/o Related Companies (Tenant):

Land Area: 731,769 square feet; 16.80 acres

Lease Date: September 14, 2006

Rent Commencement September 1, 2016 Date:

Initial Expiration Date: September 13, 2055

Lease Term: The subject property is ground leased for an initial 49 year base term, with 5 consecutive 10 year renewal options.

Ground Rent (i) During the interim period, the ground rent shall be $170,591. Commencing Payments: on the day after the Interim Period (the “Step Up Date”) and continuing for five (5) years, an amount per annum equal to the greater of (a) Three Hundred Forty One Thousand One Hundred Eighty Two and 52/100 Dollars ($341,182.52) (the “Initial Base Amount”) or (b) two percent (2%) of Gross Revenue. (ii) Commencing on the fifth (5th) anniversary of the Step Up Date, and for five years thereafter, an amount per annum equal to the greater of (a) 105% of the Initial Base Amount (such adjusted Initial Base Amount, as hereafter further adjusted, the “Adjusted Base Amount”) and (b) 3% of Gross Revenue. (iii) Commencing on the tenth (10th) anniversary of the Step Up Date, and for five years thereafter, an amount per annum equal to the greater of (a) 105% of the immediately preceding Adjusted Base Amount and (b) 4% of Gross Revenue. Commencing on the fifteenth (15th) anniversary of the Step UP Date, and for five years thereafter and every fifth anniversary of the Step Up Date thereafter and for each five year period thereafter, Base Rent shall be an amount per annum equal to the greater of (a) 105% percent of the Adjusted Base Amount immediately preceding each such five year anniversary of the Step Up Date, and (b) 5% of Gross Revenue.

Ground Rent Payments Years 50 to 99: For each 10-year renewal period, ground rent shall be greater (Continued): of (1) 105% of prior rent for each 5-year period or (2) 5% of Gross Revenue.

GATEWAY CENTER AT BRONX TERMINAL MARKET GROUND LEASE ANALYSIS AND LAND VALUATION 84

Potential Gross As per the ground lease agreement, the ground rent equals the greater of the Revenue Calculation: fixed amount ($341,183 in years 1-5) or 2.0% of gross revenue (based on the specific formula calculating gross revenues). Based on the subject's projected gross revenues (as defined in the ground lease), the ground rent will be calculated based on the percentage of gross revenues less allowable deductions such as management fee (3% of PGI) and on-site personnel costs. As per the ground lease, the projected gross revenue of the subject includes all the tenant base and percentage rent, along with the imputed annual gross revenue from Target, which is considered the only buy down tenant, since it paid the developer $46,394,000 for prepaid rent. The imputed annual rent for the Target was calculated to be $3,150,153 by multiplying the Target buy down amount by the buy down constant (defined as the mortgage constant equal to the Moody’s Baa Corporate Rate at the time the lease was executed which was 6.79%). We have detailed our projected calculation of the ground rent for the entire holding period in a chart within the Addenda of this report. The current ground rent has been estimated at $622,789 which equates to $0.68 per square foot of GLA, excluding the ground rent credit. After deducting the current ground rent credit ($200,000), the adjusted ground rent is $422,789, which equates to $0.46 per square foot of GLA.

Ground Rent Credit: Ground Rent shall be reduced by the amounts set forth below for each respective Lease Year:

Annual Rent Year Credit

Year 1 $200,000

Year 2 $200,000

Year 3 $200,000

Year 4 $200,000

Year 5 $200,000

Year 6 $400,000

Year 7 $400,000

Year 8 $425,000

Year 9 $425,000

Year 10 $450,000

Year 11 $475,000

Year 12 $475,000

Year 13 $500,000

Year 14 $500,000

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Transaction Payment: According to the Section 12.1 of the ground lease, a “Transaction Payment” is warranted for any potential refinancing or sale of the subject property. For a potential sale or refinance of the subject property after, Substantial Completion and on or prior to the expiration of the initial term, a 7.5 percent “Transaction Payment” shall be paid to the Landlord (City of New York) in the event of the sale or refinance of the subject property. In the case of a sale or refinancing which occurs after the expiration of the initial term, a “Transaction Payment” of 15 percent shall be paid to the Landlord (City of New York) in the event of the sale or refinancing of the subject property. The calculation of the respective “Transaction Payments” are further defined below in the following sections:

Net Financing “Net Finance Proceeds” means the cash proceeds received by Tenant in Proceeds: connection a Financing, deducting there from (without duplication) (A) (1) original principal indebtedness and then-outstanding interest and other sums accrued thereon of the Project Loan satisfied, purchased or assigned to a new lender in connection with such Financing, or, thereafter, (2) original principal balance, and then outstanding interest and other sums accrued thereon, of the then current Mortgage(s), (B) any Mortgage proceeds required to be escrowed and/or applied for a specific purpose (for example, the establishment of a working capital fund or repair or renovation of the Premises), (C) any Financing proceeds used or intended to be used for construction work, (D) Financing proceeds used to reimburse or pay for operating losses accrued after the Commencement Date, (E) any expenses incurred in effecting such Financing, (F) an amount equal to Net Financing Proceeds upon which a prior Transaction Payment was made, (G) all cash equity of Tenant invested in the Premises and (H) a developer's fee equal to 3% of Tenant’s development costs for the Project. In calculating Net Financing Proceeds there shall in no event be deducted from gross financing proceeds any amount paid as a recapture or penalty in connection with any benefits for the Project provided by the City or State of New York or any agency or instrumentality thereof. (Lease § 12.1).

Net Sales Proceeds “Net Sales Proceeds” means, in the case of a Sale, the following amounts, computed as of the closing date of such Sale, received by Tenant or the seller of equity interests in Tenant as, or deemed to be, consideration for the Sale, including, but not limited to: (A) all cash proceeds, (B) the fair market value of any property, other than cash or debt obligations, (C) the principal amount of any Mortgages assumed by the purchaser at such Sale or to which the Sale is made subject, or a proportionate share of such Mortgage in the case of a Sale affecting only a portion of the leasehold estate, (D) the face amount of any purchase money note or debt obligation payable to Tenant or the seller of the equity interests as of the closing date made in connection with such Sale and (E) in the case of a Major Sublease, the difference between (x) all rental payments received by Tenant under such Major Sublease and (y) the Rental payable by Tenant allocable to that part of the Premises subleased for the term of the Major Sublease as of the closing date, deducting from the amounts set

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forth in clauses (A) through (E) above (without duplication) (1) the amounts due under any Mortgage, or proportionate share thereof, satisfied with the proceeds of Sale or assigned or purchased by a new lender or assumed or to which the estate conveyed in such Sale is taken subject by the purchaser at such Sale, (2) operating losses accrued after the Commencement Date, (3) any reasonable or customary expenses incurred in effecting such Sale, (4) in the event that in connection with any foreclosure of a Mortgage or an Assignment, transfer of equity interests in Tenant, or Major Sublease in lieu of a foreclosure of a Mortgage, a Mortgagee or any Control Affiliate (as defined in the Lease) or nominee of a Mortgagee shall become Tenant hereunder and all or any portion of the indebtedness secured by such Mortgage shall have been discharged or reduced without full payment of such indebtedness, an amount equal to the amount of the indebtedness so discharged or reduced, together with interest and other charges which would have accrued with respect thereto through the date of the Sale, absent such discharge or reduction, (5) an amount equal to Net Sales Proceeds upon which a prior Transaction Payment was made, (6) all cash equity of Tenant invested in the Premises and (7) a developer's fee equal to 3% of Tenant’s development costs for the Project. Notwithstanding the foregoing, in the case of any Sale involving consideration described in (D) and/or (E) above, "Net Sales Proceeds" as of the closing on the Sale shall be deemed to include only that consideration actually received as of that date, but each time a subsequent payment of principal on the note or debt obligation or payment of rental on the Major Sublease is received, it shall be treated as a separate Sale (without regard to any minimum thresholds which may be imposed elsewhere in Article 12 of the Lease for a transaction to constitute a Sale), and a Transaction Payment shall be payable based on such payment. For Sales of equity interests in Tenant, there shall be deducted from the consideration described in (A) through (D) above the amount paid by the Transferor to acquire such equity interest. For purposes of determining ''Net Sales Proceeds" in the case of a Sale described in (D) or (E) above, deductions from each installment of sales proceeds described in (1) through (7) above, determined as of the closing date, shall be proportionate installment of sales proceeds received by Tenant. In calculating Net Sales Proceeds there shall in no event be deducted from sales proceeds any amount paid as a recapture or penalty in connection with any benefits for the Project provided by the City or State of New York or any agency or instrumentality thereof. (Lease § 12.1).

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LAND VALUATION

METHODOLOGY Using the Sales Comparison Approach, we developed an opinion of land value by comparing the subject site to similar, recently sold properties in the surrounding or competing area. This approach relies on the principle of substitution, which holds that when a property is replaceable in the market, its value tends to be set at the cost of acquiring an equally desirable substitute property, assuming that no costly delay is encountered in making the substitution.

By analyzing sales that qualify as arm’s-length transactions between willing and knowledgeable buyers and sellers, we can identify value and price trends. The basic steps of this approach are:

 Research recent, relevant property sales and current offerings in the competitive area;

 Select and analyze properties that are similar to the subject property, analyzing changes in economic conditions that may have occurred between the sale date and the date of value, and other physical, functional, or locational factors;

 Identify sales that include favorable financing and calculate the cash equivalent price;

 Reduce the sale prices to a common unit of comparison such as price per land area (SF);

 Make appropriate comparative adjustments to the prices of the comparable properties to relate them to the subject property; and

 Interpret the adjusted sales data and draw a logical value conclusion.

We used the Sales Comparison Approach to develop an opinion of land value for the subject site. In this method, we analyzed prices buyers have recently paid for similar sites in the market, as well as examined current offerings. In making comparisons, we adjusted the sale prices for differences between this site and the comparable sites. If the comparable was superior to the subject, a downward adjustment was made to the comparable sale. If inferior, an upward adjustment was made. We present on the following pages a summary of pertinent details of sites recently sold that we compared to the subject site.

In the valuation of the subject site’s land value, the Sales Comparison Approach has been used to establish prices being paid for comparably zoned land. The most widely used and market oriented unit of comparison for properties with characteristics similar to those of the subject is the sale price per square foot of land area. All transactions used in this analysis are analyzed on this basis.

The subject property is a 731,769 square feet, or 16.80 acres, commercially zoned parcel located within the Bronxchester neighborhood of the Bronx. The majority of the subject site is improved with a 4-story retail power center and a 6-level parking garage. At the outset of our investigation we searched for recent transactions in the immediate area, which involved the sale of large commercial sites available for development. We found, however, that there has been limited activity for development sites in Bronx County. Therefore, we have researched the entire New York City market for recent land sales. We have cited five land sales, albeit significantly smaller and inferior and adjusted them accordingly.

The major elements of comparison used to value the subject site include the property rights conveyed, the financial terms incorporated into the transaction, the conditions or motivations surrounding the sale, changes in market conditions since the sale, the location of the real estate, its utility and the physical characteristics of the property. The chart on the following page details the land transactions that we have utilized in our analysis.

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SUMMARY OF LAND SALES PROPERTY INFORMATION TRANSACTION INFORMATION

Max Potential No. Location Land Area (sf) FAR Building Area Zoning Grantor Grantee Sale Date Sale Price $/Land Area COMMENTS 1 402-422 Snediker Avenue 45,741 1.00 45,741 M1-1 Hopkins Trading C.P Confidential Mar-15 $4,256,000 $93.05 This is the contract of sale for an irregular shaped through block development site located B/w Dumon & Livonia Avenues along Snediker Avenue between Dumont and Livonia Avenues within the Brownsville Brownsville, Brooklyn neighborhood of Brooklyn. At the time of contract, the property was improved with five industrial buildings totaling 30,245 square feet of gross building area. The selling broker has indicated that the site is proposed for redevelopment. We have estimated demolition costs of $756,000, rounded ($25/GBA) for the existing improvements. Overall, the total consideration is $4,256,000 or $93.05 per square foot of land area.

2 191-231 Moore Street 101,447 1.68 170,000 M1-1 / M1-2 Cooper Tank & Welding Heritage Equity Dec-14 $29,423,000 $290.03 This is the sale of an irregular shaped through block development located along the south side B/w Bushwick Avenue and White Street Corp. Partners of Siegel Street and the north side of Moore Street between White Street and Bushwick East Williamsburg, Brooklyn Avenue within the East Williamsburg neighborhood of Brooklyn. At the time of sale, the property was improved with five industrial buildings totaling 46,900 square feet of gross building area. The selling broker has indicated that the site is proposed for redevelopment. We have estimated demolition costs of $1,173,000, rounded ($25/GBA) for the existing improvements. Overall, the total consideration is $29,423,000 or $290.03 per land area.

3 44-62 Ferris Street 50,007 2.00 100,014 M2-1 1989 Realty Corp. Kenmare E4 LLC Dec-14 $6,000,000 $119.98 This is the sale of a rectangular shaped, vacant, through block development site located along B/w Wolcott & Sullivan Streets Ferris Street between Wolcott and Sullivan Streets within the Red Hook neighborhood of Red Hook, Brooklyn Brooklyn. There are no proposed plans at this time.

4 225 Pennsylvania Avenue 42,250 2.00 84,500 C8-2 Cumberland Farms KLCC Investments Aug-14 $5,035,000 $119.17 This is the sale of a rectangular shaped vacant development site located along Pennsylvania N/E/C Pitkin Avenues LLC Avenue at the northeast corner of Pitkin Avenue within the East New York neighborhood of East New York, Brooklyn Brooklyn. There are no proposed plans at this time.

5 164 West Canal Street 9,175 2.00 18,350 M1-4 Tld Deegan Realty LLC Vertu Hospitality Sep-14 $1,325,000 $144.41 This is the sale of a rectangular shaped, vacant, corner development site located along West N/W/C 135th Street LLC Canal Street at the northwest corner of Canal Street and 135th Street within the Bronxchester Bronxchester, Bronx neighborhood of the Bronx. There are no proposed plans at this time.

6 809 Neptune Avenue 133,407 2.00 266,814 M1-2 New York City Economic 809 Neptune Jul-13 $15,000,000 $112.44 This is the sale of an irregular shaped vacant development site located along Neptune Avenue B/w Shell & Stillwell Avenues Development Corp. Avenue LLC between Shell and Stillwell Avenues within the Coney Island neighborhood of Brooklyn. Coney Island, Brooklyn According to the selling broker, the site shares a parking lot with a currently under construction Storage Deluxe. The site is proposed to be completed with a retail neighborhood center comprising approximately 35,000 square feet. The site will possess nearly 600 feet of frontage along Neptune Avenue and have prime frontage along the Belt Parkway.

7 171 West 230th Street 79,501 3.40 270,303 C4-4 New York City Economic Equity One Inc. Jun-12 $7,500,000 $94.34 This is the sale of irregular shaped development site located along West 230th Street between B/w Major Deegan Expressway & Broadway Development Corp. Broadway and the Major Deegan Expressway within the Kingsbridge neighborhood of the Kingsbridge, Bronx Bronx. The buyer redeveloped the site with a shopping center now known as Broadway Plaza that was completed in October of 2014. The center comprises approximately 115,000 square feet of gross leasable area (GLA), and is anchored down by a Sports Authority, occupying 30,000 square feet and T.J. Maxx, occupying 24,000 square feet. Additional tenants located within Broadway Plaza include Aldi Food Market, occupying 18,000 square feet and Party City, occupying 9,000 square feet. The center has approximately 140 parking spaces.

STATISTICS Low 9,175 1.00 18,350 Jun-12 $1,325,000 $93.05 High 133,407 3.40 270,303 Mar-15 $29,423,000 $290.03 Average 65,933 2.01 136,532 Apr-14 $9,791,286 $139.06 Compiled by Cushman & Wakefield, Inc.

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LAND SALE ADJUSTMENT GRID Economic Adjustments (Cumulative) Property Characteristic Adjustments (Additive)

Property Adj. Price/Land Area Rights Conditions Market(1) PSF/ Land Price/ Land No & Date Conveyed of Sale Conditions Area Subtotal Location Size (Land Area) Zoning Utility(2) Configuration Other Area 1 $93.05 Fee Simple Arm's-Length Inferior $94.35 Similar Smaller Similar Inferior Inferior Similar $89.63 3/15 0.0% 0.0% 1.4% 1.4% 0.0% -30.0% 0.0% 15.0% 10.0% 0.0% -5.0% 2 $290.03 Fee Simple Arm's-Length Inferior $297.57 Superior Smaller Similar Similar Superior Similar $119.03 12/14 0.0% 0.0% 2.6% 2.6% -25.0% -25.0% 0.0% 0.0% -10.0% 0.0% -60.0% 3 $119.98 Fee Simple Arm's-Length Inferior $123.10 Superior Smaller Similar Inferior Inferior Similar $92.33 12/14 0.0% 0.0% 2.6% 2.6% -20.0% -30.0% 0.0% 15.0% 10.0% 0.0% -25.0% 4 $119.17 Fee Simple Arm's-Length Inferior $124.30 Superior Smaller Similar Inferior Inferior Similar $99.44 8/14 0.0% 0.0% 4.3% 4.3% -15.0% -30.0% 0.0% 15.0% 10.0% 0.0% -20.0% 5 $144.41 Fee Simple Arm's-Length Inferior $149.90 Similar Smaller Similar Inferior Inferior Similar $134.91 9/14 0.0% 0.0% 3.8% 3.8% 0.0% -35.0% 0.0% 15.0% 10.0% 0.0% -10.0% 6 $112.44 Fee Simple Arm's-Length Inferior $123.57 Superior Smaller Similar Inferior Inferior Similar $105.03 7/13 0.0% 0.0% 9.9% 9.9% -5.0% -25.0% 0.0% 5.0% 10.0% 0.0% -15.0% 7 $94.34 Fee Simple Arm's-Length Inferior $109.34 Superior Smaller Similar Inferior Inferior Similar $98.40 6/12 0.0% 0.0% 15.9% 15.9% -5.0% -25.0% 0.0% 10.0% 10.0% 0.0% -10.0% STATISTICS $93.05 - Low Low - $89.63 $290.03 - High High - $134.91 $139.06 - Average Average - $105.54 Compiled by Cushman & Wakefield, Inc. (1) Market Conditions Adjustment Footnote (2) Utility Footnote Compound annual change in market conditions: 5.00% Utility includes s access, frontage, and visibility. Date of Value (for adjustment calculations): 6/10/15

As Is Market Value-50 East 153rd Street Land Value per SF of Land Area $100.00 Land Area (SF) x 731,769 Indicated Land Value: $73,176,900 Indicated Value, Rounded $73,000,000 Inflection Point 2 (IP2): 7/19/2013 Per Square Foot of Land Area: $99.76

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LAND SALE LOCATION MAP

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PERCENTAGE ADJUSTMENT METHOD

ADJUSTMENT PROCESS The sales we have used were the best available comparables to the subject property. The major points of comparison for this type of analysis include the property rights conveyed, the financial terms incorporated into the transaction, the conditions or motivations surrounding the sale, changes in market conditions since the sale, the location of the real estate, its physical traits and the economic characteristics of the property.

The first adjustment made to the market data takes into account differences between the subject property and the comparable property sales with regard to the legal interest transferred. Advantageous financing terms or atypical conditions of sale are then adjusted to reflect a normal market transaction. Next, changes in market conditions are accounted for, creating a time adjusted price. Lastly, adjustments for location, physical traits and the economic characteristics of the market data are made in order to generate the final adjusted unit rate for the subject property.

We have made a downward adjustment to those comparables considered superior to the subject and an upward adjustment to those comparables considered inferior.

PROPERTY RIGHTS CONVEYED The property rights conveyed in a transaction typically have an impact on the sale price of a property. Acquiring the fee simple interest implies that the buyer is acquiring the full bundle of rights. Acquiring a leased fee interest typically means that the property being acquired is encumbered by at least one lease, which is a binding agreement transferring rights of use and occupancy to the tenant. A leasehold interest involves the acquisition of a lease, which conveys the rights to use and occupy the property to the buyer for a finite period of time. At the end of the lease term, there is typically no reversionary value to the leasehold interest. Since we are valuing the fee simple interest as reflected by each of the comparables, no adjustment for property rights was required.

FINANCIAL TERMS The financial terms of a transaction can have an impact on the sale price of a property. A buyer who purchases an asset with favorable financing might pay a higher price, as the reduced cost of debt creates a favorable debt coverage ratio. A transaction involving above-market debt will typically involve a lower purchase price tied to the lower equity returns after debt service. We analyzed all of the transactions to account for atypical financing terms. To the best of our knowledge, all of the sales used in this analysis were accomplished with cash or market- oriented financing. Therefore, no adjustments were required.

CONDITIONS OF SALE Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. In many situations the conditions of sale may significantly affect transaction prices. However, all sales used in this analysis are considered to be "arms-length" market transactions between both knowledgeable buyers and sellers on the open market. Therefore, no adjustments were required.

MARKET CONDITIONS The sales that are included in this analysis occurred between June 2012 and March 2015. We have made a positive adjustment for the improving market conditions at a rate of 5.0 percent per annum.

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LOCATION An adjustment for location is required when the locational characteristics of a comparable property differ from those of the subject property. Location adjustments were intended to reflect differences with regard to the character of the avenue or street, proximity to transportation, desirability with regard to location (reputation of the surrounding buildings), and trends in future growth or decline. We have made a negative adjustment to those comparables considered superior in location versus the subject. Conversely, a positive adjustment was made to those comparables considered inferior. Each comparable was adjusted accordingly.

SIZE (LAND AREA) The adjustment for size generally reflects the inverse relationship between unit price and lot size. Smaller lots tend to sell for higher unit prices than larger lots, and vice versa. This adjustment is based on the physical site area and not the maximum zoning floor area. Positive adjustments are made to sites that yield a larger floor area, and downward adjustments are made to sites that yield a smaller amount of land area. Each comparable was adjusted accordingly.

ZONING Many factors of zoning dictate the resultant use, density and design of a development. Density regulations are determined not only by Floor Area Ratios, but by height limitations, mandatory street wall setbacks, rear yard setbacks and requirements for retail continuity or pedestrian access. The zoning adjustment also considers features, such as setback regulations, height restrictions, open space requirements, lot coverage requirements, and the potential use groups available for a particular site. Each comparable was adjusted accordingly.

UTILITY The adjustment for utility is intended to reflect differences in a plot’s development potential in regard to access, frontage, and visibility. Mid-block sites and sites within areas with height limitations have inferior utility. Utility adjustments consider soil/sub-soil conditions to the extent known. Given its overall physical characteristics and zoning, the subject site is considered adequate to accommodate most permitted development possibilities. We have considered all of these factors in our adjustment process and made adjustments as appropriate. Each comparable was adjusted accordingly.

CONFIGURATION An adjustment for configuration was intended to reflect differences with regard to plots, which were more irregular in shape versus plots which were more square or rectangular. It also considers frontage to depth ratios and perimeter areas. Configuration affects the shape of the prospective building’s floor plate and is an important factor for developers and investors. Given the size and shape of the of the subject site, it offers a developer a good level of flexibility in design features. Each comparable was adjusted accordingly.

OTHER This category accounts for any other adjustments not previously discussed. Examples include soil or slope conditions, restrictive zoning, easements, wetlands or external influences. No adjustments were required.

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DISCUSSION OF COMPARABLE LAND SALES

COMPARABLE LAND SALE NO. 1 This is the contract of sale for an irregular shaped through block development site located at 402-422 Snediker Avenue between Dumont and Livonia Avenues within the Brownsville neighborhood of Brooklyn. A confidential buyer is under contract to purchase the property from Hopkins Trading CP in March 2015 for $4,256,000, inclusive of estimated demolition costs. The site contains 45,741 square feet of land and a maximum zoning floor area of 45,741 square feet. At the time of contract, the property was improved with five industrial buildings totaling 30,245 square feet of gross building area. The site is proposed to be redeveloped according to the selling broker. We have estimated demolition costs of $756,000, rounded ($25/GBA) for the existing improvements. The sale price develops a unit price of $93.05 per square foot of land area. After all adjustments, this sale indicated an adjusted unit price of $89.63 per square foot of land area.

COMPARABLE LAND SALE NO. 2 This is the sale of an irregular shaped through block development located at 191-231 Moore Street along the south side of Siegel Street and the north side of Moore Street between White Street and Bushwick Avenue within the East Williamsburg neighborhood of Brooklyn. Heritage Equity Partners purchased the property from Cooper Tank & Welding Corp. in December 2014 for $28,250,000, inclusive of estimated demolition costs. At the time of sale, the property was improved with five industrial buildings totaling 46,900 square feet of gross building area. The site is proposed to be redeveloped according to the selling broker. We have estimated demolition costs of $1,173,000, rounded ($25/GBA) for the existing improvements. The sale price develops a unit price of $290.03 per square foot of land area. After all adjustments, this sale indicated an adjusted unit price of $119.03 per square foot of land area.

COMPARABLE LAND SALE NO. 3 This is the sale of a rectangular shaped, vacant, through block development site located at 44-62 Ferris Street between Wolcott and Sullivan Streets within the Red Hook neighborhood of Brooklyn. Kenmare E4 LLC purchased the property from 1989 Realty Corp. for $6,000,000 in December 2014. The parcel contains 50,007 square feet of land area and a maximum zoning floor area of 100,014 square feet. The sale price develops a unit price of $119.98 per square foot of land area. After all adjustments, this sale indicated an adjusted unit price of $92.33 per square foot of land area.

COMPARABLE LAND SALE NO. 4 This is the sale of a rectangular shaped development site located at 225 Pennsylvania Avenue at the northeast corner of Pitkin Avenue within the East New York neighborhood of Brooklyn. KLCC Investments LLC purchased the property from Cumberland Farms in August 2014 for $5,035,000, inclusive of estimated demolition costs. The rectangular shaped corner parcel contains 42,250 square feet of land area and possesses frontage along Pennsylvania and Pitkin Avenues. The site contains a maximum zoning floor area of 84,500 square feet. The property was purchased by an owner-user who intends to develop the site with a 60,000 square feet storage facility. The site was formerly utilized as a gas station and contained 1,300 square feet of gross building area. We have estimated demolition costs at $35,000 ($25/GBA), rounded. The sale price develops a unit price of $119.17 per square foot of land area. After all adjustments, this sale indicated an adjusted unit price of $99.44 per square foot of land area.

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COMPARABLE LAND SALE NO. 5 This is the sale of a rectangular shaped, vacant, corner development site located along at the northwest corner of West Canal Street and 135th Street within the Bronxchester neighborhood of the Bronx. Vertu Hospitality LLC purchased the property from Tld Deegan Realty LLC for $1,325,000 in September 2014. This site contains a land area of 9,175 square feet with a maximum zoning floor area of 18,350 square feet. The sale price develops a unit price of $144.41 per square foot of land area. After all adjustments, this sale indicated an adjusted unit price of $134.91 per square foot of land area.

COMPARABLE LAND SALE NO. 6 This is the sale of irregular shaped development site located at 809 Neptune Avenue between Shell and Stillwell Avenues within the Coney Island neighborhood of Brooklyn. The property sold from Brooklyn Union Gas to 809 Neptune Avenue LLC for $16,000,000. This irregular shaped corner parcel contains 3.06 acres (133,407 SF) with frontage along Neptune Avenue and Shell Road. The site permits a maximum zoning floor area of 266,814 square feet. According to the selling broker, the site shares a parking lot with a currently under construction Storage Deluxe. The site is proposed to be completed with a retail neighborhood center comprising approximately 35,000 square feet. The sale price develops a unit price of $56.22 per square foot of land area. After all adjustments, this sale indicated an adjusted unit price of $105.03 per square foot of land area.

COMPARABLE LAND SALE NO. 7 This is the sale of irregular shaped development site located at 171 West 230th Street between Broadway and the Major Deegan Expressway within the Kingsbridge neighborhood of the Bronx. The New York City Economic Development (NYCEDC) Corporation sold the property to Equity One (Northeast Portfolio) Inc. in June 2012 for $7,500,000. This irregular shaped block through parcel contains 1.83 acres (79,501 SF) with frontage along West 230th Street and Verveelen Place. The site permits a maximum zoning floor area of 270,303 square feet. The buyer has redeveloped the site with a shopping center, known as Broadway Plaza. The center comprises approximately 115,000 square feet of gross leasable area (GLA), and is anchored down by a Sports Authority, occupying 30,000 square feet and T.J. Maxx, occupying 24,000 square feet. Additional tenants within the shopping center to have signed leases are Aldi Food Market, occupying 18,000 square feet and Party City, occupying 9,000 square feet. The center has approximately 140 parking spaces. The sale price develops a unit price of $94.34 per square foot of land area. After all adjustments, this sale indicated an adjusted unit price of $98.40 per square foot of land area.

CONCLUSION OF SITE VALUE The entire subject site comprises a total of 16.80 acres in the Bronxchester neighborhood of the Bronx, adjacent to the Major Deegan Expressway (Interstate 87), and across the Harlem River. As mentioned above, the majority of the subject site is improved with a 4-story retail power center and a 6-level parking garage.

Based on the subject parcel’s size, location, and utility, we have considered that the subject site is unique in the marketplace. The subject parcel represents a unique site that is difficult to duplicate in terms of size, access, development potential, and visibility within The Bronx and New York City. However, based on its significantly large size, the subject site has a limited number of potential investors that could develop the property.

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As noted by the summary of comparables, the sales reflect a range of unadjusted price per square foot between $93.05 and $290.03 per square foot of land area, with an average unadjusted price per square foot of $139.06 per square foot of land area. The sales occurred between June 2012 and March 2015. After adjustments, the comparable improved sales reflect unit prices ranging from $89.63 to $134.91 per square foot of land area, with an average adjusted price per square foot of $105.54 per square foot of land area. We have placed most reliance on Sale Nos. 1, 6 and 7 based on their comparable locations and physical characteristics. These comparables reflected a range in unit priced from $89.63 to $105.03 per square foot, with an average $97.69 per square foot.

After considering all of the available market data in comparison with the characteristics of the subject parcel, it is our opinion that the proper unit value to apply to the subject site is $100.00 per square foot of land area. We conclude that the indicated land value of the subject site, by the Sales Comparison Approach is as follows:

PERCENT ADJUSTMENT METHOD SUMMARY LAND VALUE-AS VACANT: Subject Site Land Area (SF): 731,769

Concluded Price Per SF of Land Area : x $100.00

Indicated Land Value: $73,176,900

Rounded: $73,000,000

Per SF of Land Area: $99.76

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SALES COMPARISON APPROACH

METHODOLOGY Using the Sales Comparison Approach, we developed an opinion of value by comparing the subject property to similar, recently sold properties in the surrounding or competing area. This approach relies on the principle of substitution, which holds that when a property is replaceable in the market, its value tends to be set at the cost of acquiring an equally desirable substitute property, assuming that no costly delay is encountered in making the substitution.

By analyzing sales that qualify as arm’s-length transactions between willing and knowledgeable buyers and sellers, we can identify value and price trends. The basic steps of this approach are:

 Research recent, relevant property sales and current offerings in the competitive area;  Select and analyze properties that are similar to the subject property, analyzing changes in economic conditions that may have occurred between the sale date and the date of value, and other physical, functional, or locational factors;  Identify sales that include favorable financing and calculate the cash equivalent price;  Reduce the sale prices to a common unit of comparison such as price per square foot of Gross Leasable Area or effective gross income multiplier;  Make appropriate comparative adjustments to the prices of the comparable properties to relate them to the subject property; and  Interpret the adjusted sales data and draw a logical value conclusion.

ANALYSIS OF RETAIL SALES We have researched the market for sales of comparable retail power centers within New York City. However, based on the lack of comparable retail sales located in New York City, we have included sales of retail power centers throughout the United States. In addition, we have also included the recent contract of the Kings Plaza Mall in Brooklyn, New York. Based on the limited sales activity of large retail properties within New York City, we wanted to include this sale, albeit a mall transaction, to indicate the premium paid by investors for well located irreplaceable retail properties in major urban markets like New York City.

Due to the nature of the subject property and the level of detail available for the comparable data, we have elected to analyze the comparables through application of a traditional adjustment grid using percentage adjustments

We have presented a summary of several transactions involving retail centers from which price trends may be identified for the extraction of value parameters. These transactions have been segregated by year of acquisition so as to lend additional perspective on our analysis. Comparability in both physical and economic characteristics are the most important criteria for analyzing sales in relation to the subject property. However, it is also important to recognize the fact that retail centers are distinct entities by virtue of age and design, visibility and accessibility, the market segmentation created by anchor stores and tenant mix, the size and purchasing power of the particular trade area, and competency of management. Thus, the Sales Comparison Approach, when applied to a property such as the subject can, at best, only outline the parameters in which the typical investor operates. The sales deemed most comparable to the subject property are presented in the following table. The following pages contain a summary of the improved properties that we compared to the subject property, and the adjustment process.

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SUMMARY OF COMPARABLE IMPROVED SALES PROPERTY INFORMATION TRANSACTION INFORMATION

Price/ Property Name Total Center Sold No. Address, City, State Property Sub-Type GLA Sold GLA Anchors Year Built Grantor Grantee Sale Date Sale Price GLA NOI/SF OAR Occup. 1 Riverdale Crossings Retail Center 159,037 159,037 BJ’s Wholesale Club 2014 Confidential Confidential Jan-2015 $125,000,000 $785.98 $40.16 5.11% 100.00% 184-190 West 237th Street Contract Bronx, New York

2 74-17 74-25 Grand Avenue Retail Center 99,986 99,986 Stop and Shop 1997 CPT Grand Shops at Grand Oct-14 $56,000,000 $560.08 $28.00 5.00% 100.00% N/E/C 74th Street Avenue LLC Avenue LLC Queens, New York

3 2856 Steinway Street Retail Center 51,079 51,079 Duane Reade and New 1920 2856 Astoria 2856 Steinway Aug-14 $32,000,000 $626.48 $28.94 4.62% 100.00% N/E/C 28th Avenue York Sports Club Boulevard Street-Millbridge Queens, New York LLC

4 Waldbaums Shopping Center Neighborhood Center 62,000 62,000 Waldbaum's 1930 Whitestone Feil Whitestone Jan-14 $23,903,127 $385.53 $21.20 5.50% 100.00% 152-59 10th Avenue, Grocery LLC Queens, New York Shopping Center LLC

5 Pelham Manor Shopping Plaza Power Center 228,883 228,883 BJ's Wholesale 2007 Acadia Realty Retail Properties Jan-14 $58,529,960 $255.72 $14.95 5.85% 98.00% 2 Penn Place Trust of America, Inc. Leasehold Pelham Manor, New York

6 Canarsie Plaza Neighborhood Center 277,907 277,907 BJ’s Wholesale Club, 2011 Cole Real Estate Acadia Realty Dec-12 $124,000,000 $446.19 $27.66 6.20% 100.00% 8925 Avenue D Michael’s, PetSmart, Investments Brooklyn, New York Five Below, Chase Bank

7Clocktower Plaza Neighborhood Center 78,820 78,820 BJ's Wholesale 1985 Winstanley Equity One, Inc. Sep-12 $56,000,000 $710.48 $42.63 6.00% 100.00% 9210 Atlantic Avenue Enterprises, Inc. Queens, New York

8 Lake Grove Commons Retail Center 141,382 141,382 Whole Food's 2008 Lake Grove Regency Centers Jan-12 $72,500,000 $512.80 $28.72 5.60% 100.00% 110 - 150 New Moriches Road LA Fitness Enterprises LLC Lake Grove, New York

STATISTICS Low 51,079 51,079 1920 Jan-12 $23,903,127 $255.72 $14.95 4.62% 98% High 277,907 277,907 2014 Oct-14 $125,000,000 $785.98 $42.63 6.20% 100% Mean 137,387 137,387 1984 Jul-13 $69,914,732 $535.41 $29.03 5.48% 100% Compiled by Cushman & Wakefield, Inc.

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IMPROVED SALE ADJUSTMENT GRID ECONOMIC ADJUSTMENTS (CUMULATIVE) PROPERTY CHARACTERISTIC ADJUSTMENTS (ADDITIVE) Property Adj. Price PSF & Rights Conditions Market (1) Age, Quality Price No. Date Conveyed of Sale Conditions Subtotal Location Size & Condition Economics Other PSF 1 $785.98 Leased Fee Arm's-Length Inferior $722.95 Superior Smaller Inferior Inferior Similar $686.80 1/15 -10.0% 0.0% 2.2% -8.0% -5.0% -20.0% 15.0% 5.0% 0.0% -5.0% 2 $560.08 Leased Fee Arm's-Length Inferior $521.21 Inferior Smaller Inferior Inferior Similar $651.51 10/14 -10.0% 0.0% 3.4% -6.9% 15.0% -25.0% 20.0% 15.0% 0.0% 25.0% 3 $626.48 Leased Fee Arm's-Length Inferior $588.08 Inferior Smaller Inferior Inferior Similar $676.29 8/14 -10.0% 0.0% 4.3% -6.1% 15.0% -30.0% 20.0% 10.0% 0.0% 15.0% 4 $385.53 Leased Fee Arm's-Length Inferior $372.31 Inferior Smaller Inferior Inferior Similar $521.23 1/14 -10.0% 0.0% 7.3% -3.4% 15.0% -30.0% 30.0% 25.0% 0.0% 40.0% 5 $255.72 Leasehold Arm's-Length Inferior $274.39 Inferior Smaller Inferior Inferior Similar $466.46 1/14 0.0% 0.0% 7.3% 7.30% 25.0% -15.0% 25.0% 35.0% 0.0% 70.0% 6 $446.19 Leased Fee Arm's-Length Inferior $454.18 Inferior Smaller Inferior Inferior Similar $613.14 12/12 -10.0% 0.0% 13.1% 1.8% 5.0% -15.0% 20.0% 25.0% 0.0% 35.0% 7 $710.48 Leased Fee Arm's-Length Inferior $732.15 Inferior Smaller Inferior Inferior Similar $695.54 9/12 -10.0% 0.0% 14.5% 3.0% 5.0% -25.0% 10.0% 5.0% 0.0% -5.0% 8 $512.80 Leased Fee Arm's-Length Inferior $545.97 Inferior Smaller Inferior Inferior Similar $682.47 1/12 -10.0% 0.0% 18.3% 6.5% 20.0% -20.0% 10.0% 15.0% 0.0% 25.0% STATISTICS $255.72 - Low Low - $466.46 $785.98 - High High - $695.54 $535.41 - Average Average - $624.18 Compiled by Cushman & Wakefield, Inc.

(1) Market Conditions Adjustment PERCENT ADJUSTMENT METHOD SUMMARY Compound annual change in market conditions: 5.00% Market Value As-Is Date of Value (for adjustment calculations): 6/10/15 Indicated Value Per GLA $675.00 Subject GLA x 912,333 Indicated Value $615,824,775 Rounded $616,000,000 Per square foot $675.19 Compiled by Cushman & Wakefield, Inc.

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IMPROVED SALE LOCATION MAP

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PERCENTAGE ADJUSTMENT METHOD

We have made a downward adjustment to those comparables considered superior to the subject and an upward adjustment to those comparables considered inferior.

PROPERTY RIGHTS CONVEYED The property rights conveyed in a transaction typically have an impact on the price that is paid. Acquiring the fee simple interest implies that the buyer is acquiring the full bundle of rights. Acquiring a leased fee interest typically means that the property being acquired is encumbered by at least one lease, which is a binding agreement transferring rights of use and occupancy to the tenant. A leasehold interest involves the acquisition of a lease, which conveys the rights to use and occupy the property to the buyer for a finite period of time. At the end of the lease term, there is typically no reversionary value to the leasehold interest. The subject property is ground leased through September 13, 2015. We have made a 10 percent downward adjustment to all of the leased fee sales, which excludes Sale No. 5 which is also the sale of the leasehold interest.

FINANCIAL TERMS The financial terms of a transaction can have an impact on the sale price of a property. A buyer who purchases an asset with favorable financing might pay a higher price, as the reduced cost of debt creates a favorable debt coverage ratio. A transaction involving above-market debt will typically involve a lower purchase price tied to the lower equity returns after debt service. We have analyzed all of the transactions to account for atypical financing terms. To the best of our knowledge, all of the sales used in this analysis were accomplished with cash or market- oriented financing.

MARKET CONDITIONS The sales that are included in this analysis occurred between January 2012 and January 2015. As the market has improved over this time period, we have made a positive adjustment for the improving market conditions at a rate of 5.0 percent per annum.

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LOCATION An adjustment for location is required when the locational characteristics of a comparable property differ from those of the subject property. Each comparable was adjusted accordingly.

PHYSICAL TRAITS Each property has various physical traits that determine its appeal. These traits include size, age, condition, quality, and utility. Each comparable was adjusted accordingly.

ECONOMIC CHARACTERISTICS The economic characteristics of a property include its occupancy levels, operating expense ratios, tenant quality, and other items not covered under prior adjustments that would have an economic impact on the transaction. Each comparable was adjusted accordingly.

OTHER This category accounts for any other adjustments not previously discussed. Based on our analysis of these sales, none required any additional adjustment.

DISCUSSION OF COMPARABLE RETAIL SALES

COMPARABLE SALE NO. 1 This is the contract of sale for a recently completed retail power center known as Riverdale Crossings, located at 184-190 West 237th Street within the Kingsbridge neighborhood of the Bronx. The property is being acquired by a confidential buyer from AG-Metropolitan Riverdale Crossing, L.L.C. for a reported price of $125,000,000 or $785.98 per square foot. The property was formerly improved with the Stella D’oro Bakery which was razed for the development of Riverdale Crossings. The center is anchored by BJ’s Wholesale Club, which has leased 118,423 square feet (74.5%) of the subject property and contains its own 2-story, plus lower level building with rooftop parking. The majority of the BJ’s Warehouse Club retail space is located below grade. The remaining 40,714 square feet of in-line retail space contains ground and second floor retail space along with rooftop parking. The property was 100 percent leased to 9 tenants inclusive of BJ’s Wholesale Club, Bank of America, Chipotle, Smashburger, TMobile, Subway, Buffalo Wild Wings and CityMD. The property is being purchased based upon an overall capitalization rate of 5.11 percent. After all adjustments, this comparable indicated an adjusted unit value of $686.80 per square foot.

COMPARABLE SALE NO. 2 This is the sale of the Shops at Grand Avenue retail center located at 74-17 74-25 Grand Avenue, at the northeast corner of 74th Street within the Maspeth neighborhood of Queens. Shops at Grand Avenue LLC purchased the property from CPT Grand Avenue LLC in October 2014 for $56,000,000. The property comprises a total of 99,986 square feet of gross leasable area. At the time of sale, the property was anchored by a Stop and Shop supermarket and six inline tenants inclusive of: NY Physical Therapy & Wellness, Party City, Premier Medical Care, Ridgewood Savings, Sally Beauty and Sleep's. The property was purchased based on an overall capitalization rate of 5.00 percent. The property was 100 percent leased at the time of sale. The sale price equates to a unit price of $560.08 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $651.51 per square foot.

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COMPARABLE SALE NO. 3 This is the sale of 2856 Steinway Street, a 3-story retail center on the northwest corner of 30th Avenue within the Astoria neighborhood of Queens. 2856 Steinway Street-Millbridge LLC purchased the property from 2856 Astoria LLC in August 2014 for $32,000,000. The property contains 51,079 square feet of gross leasable area. At the time of sale, the property was 100 percent leased on a long term basis to three national tenants: Duane Reade (10,990 SF), Chase Bank (4,549 SF), and New York Sports Clubs (35,540 SF). The property was purchased based on an overall capitalization rate of 4.62 percent. The sale price equates to a unit price of $626.48 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $676.29 per square foot

COMPARABLE SALE NO. 4 This is the sale of a neighborhood shopping center located at 152-59 – 15301 10th Avenue in the Whitestone neighborhood of Queens. Whitestone Shopping Grocery Shopping Center LLC sold the property to Feil Whitestone LLC in January 2014 for $23,903,127. The property was 100 percent net leased to Waldbaum’s through February 2024 and possess several renewal options. Waldbaum’s occupies approximately 56,000 square feet (90.3%) and leases the remainder of the property to several retail tenants. The property was purchased based on an overall capitalization rate of 5.50 percent. The property was previously purchased in December 2011 for $17,050,000, or $275 per square foot. The sale price equates to a unit price of $385.53 per square foot. After all adjustments, this comparable indicated an adjusted unit value of $521.23 per square foot.

COMPARABLE SALE NO. 5 This is the sale of the leasehold interest in the Pelham Manor Shopping Center located at 2 Penn Place within the Pelham Manor neighborhood of Westchester. Acadia Realty Trust sold the property to Retail Properties of America for $58,529,960 or $255.72 per square foot in November 2013. This power center comprises 228,883 square feet of gross leasable area. The property was 98 percent leased to BJ’s Wholesale Club, Michael’s PetSmart, Five Below, Chase Bank and a self-storage tenant. The initial term of the ground lease extends through 2039, and possesses 60 years of renewal options thereafter. The property was purchased based upon an overall capitalization rate of 5.85 percent. After all adjustments, this comparable indicated an adjusted unit value of $466.46 per square foot.

COMPARABLE SALE NO. 6 This is the sale of a neighborhood shopping center known as Canarsie Plaza. The property is located at 8925 Avenue D in the Canarsie neighborhood of Brooklyn. The property contains a total gross leasable area (GLA) of 277,907 square feet. In December 2012, Canarsie Plaza LLC sold this property to Cole MT Brooklyn NY, LLC for $124,000,000, or $446.19 per square foot. The center was anchored by BJ's Wholesale Club (177,135 SF), and other tenants included Planet Fitness (15,000 SF), Petsmart (13,574 SF) and Dollar Tree (10,018 SF). BJ's occupies 64 percent of the center's GLA and is leased through 2030, with 8 percent increases in 2015 and 2020, and a 10 percent increase in 2025. It sits adjacent the Brooklyn Terminal Market. The property was purchased based on an overall capitalization rate of 6.20 percent. After all adjustments, this comparable indicated an adjusted unit price of $613.14 per square foot.

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COMPARABLE SALE NO. 7 This is the sale of the Clocktower Shopping Center, located along Atlantic Avenue within the Ozone Park neighborhood of Queens. Equity One purchased the property from Winstanley Enterprises Inc in September 2012 for $56,000,000, or $710.48 per square foot. This neighborhood center comprises 78,820 square feet of gross leasable area. The property was 100 percent leased to Pathmark (62,668 SF), Fashion Bug (5,068 SF), a Burger King (2,996 SF) and several small in-line tenants (totaling 8,088 SF). Pathmark occupies 80 percent of the shopping center and is leased through 2023, with 5 percent increases every 5 years. Pathmark, Burger King and Fashion Bug have exhibited successful annual sales of $56.1 mm, $1.4 mm and $1.3 mm, respectively. The property was purchased based upon an overall capitalization rate of 6.00 percent. After all adjustments, this comparable indicated an adjusted unit value of $695.54 per square foot.

COMPARABLE SALE NO. 8 This is the sale of Lake Grove Commons located at 110-150 New Moriches Road in Lake Grove, New York. Regency Centers purchased the property from Lake Grove Enterprises in January 2012 for $75,200,000, or $512.80 per square foot. The retail center contains 141,382 square feet of gross leasable area inclusive of anchor tenants Whole Foods and LA Fitness. The center was 100.00 percent occupied. The property was constructed in 2010 and exhibits good quality and condition. At the time of sale, tenants at this shopping center included Petco, Jared Jewlers, T-Mobile, and a Fidelity Investments. The overall capitalization rate at the time of sale was 5.60 percent. According to the seller, the property commanded substantial buyer interest and competitive bidding. After all adjustments, this comparable indicated an adjusted value of $682.47 per square foot. Summary of Percentage

ADJUSTMENT METHOD The subject property is a multi-level urban power retail center comprising 912,333 square feet of gross leasable area (GLA) with an attached 6-level parking garage totaling 2,575 spaces. The property is 99.3 percent leased and is anchored by Target, BJ’s Wholesale Club, Home Depot, Bed, Bath & Beyond, and Toys R Us/Babies R Us on a 16.8 acre site in Bronxchester section of The Bronx, adjacent to the Major Deegan Expressway (Interstate 87), and Yankee Stadium. We have also considered the subject’s significant parking component in our analysis.

Prior to adjustments the sales reflected a range of price per square foot of $255.72 to $785.98 per square foot. After adjustments, the sales reflect a range of price per square foot from $466.46 to $695.54 per square foot. The average price per square foot exhibited by the comparables after all adjustments is $624.18 per square foot. We have placed greatest reliance on Sale Nos. 1, 2, 7 and 8 as they are sales of retail shopping centers with similar characteristics, tenancies and economic profiles as the subject property. These sales demonstrated adjusted unit values ranging from $651.51 to $695.54 per square foot with an average of $679.08 per square foot. Therefore, the As Is Market Value conclusion via the Sales Comparison Approach is as follows:

PERCENT ADJUSTMENT METHOD SUMMARY MARKET VALUE AS IS: Subject Gross Leasable Area: 912,333

Concluded Price Per GLA: x $660.00

Indicated Value: $615,824,775

Rounded: $616,000,000

Per Square Foot of GLA: $675.19

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However, as detailed in the Ground Lease Analysis and Land Valuation section of this report, the leaseholder is obligated for various future transaction payments in the event of a property sale, refinance or equity disposition. Since our market value estimate in our valuation assumes a sale of the property as of the date of value, and based on the defined Net Sale Proceeds calculation within Section 12.1b (vi) of the subject ground lease, we have adjusted our preliminary market value by the defined 7.5 percent of net proceeds obligated to be distributed to the landlord (New York City) by the lessee. Therefore, our reconciled overall market value of the leasehold interest in the subject property is as follows: Overall, we have estimated the market value of the subject property to be $616,000,000 as detailed in the previous analysis within the Sales Comparison Approach section of this report. According to the Section 12.1b (vi) of the ground lease, the Net Sale Proceeds are defined as the Gross Sale Proceeds (market value of the subject property) less the following deductions: (1) the amount of any Mortgage (including accrued interest and other sums), or proportionate share thereof, satisfied with the proceeds of Sale or assigned or purchased by a new lender or assumed or to which the estate conveyed in such Sale is taken subject by the purchaser at such Sale,

(2) accrued Operating Losses,

(3) any reasonable or customary expenses incurred in effecting such Sale, including, but not limited to, brokerage commissions, attorneys' fees, transfer and transfer gains taxes, prepayment premiums, the costs of any repairs or restorations required in connection with such Sale and title insurance premiums, provided however, that with respect to any such expenses paid to Affiliates, such amounts shall be no more than would have been paid to an unrelated party in an arm's length transaction,

(4) in the event that in connection with any foreclosure of a Mortgage or an Assignment, Transfer or Major Sublease in lieu of a foreclosure of a Mortgage, a Mortgagee or any Control Affiliate or nominee of a Mortgagee shall become Tenant hereunder and all or any portion of the indebtedness secured by such Mortgage shall have been discharged or reduced without full payment of such indebtedness, an amount equal to the amount of the indebtedness so discharged or reduced, together with interest and other charges which would have accrued with respect thereto through the date of the Sale, absent such discharge or reduction,

(5) an amount equal to Net Sales Proceeds upon which a prior Transaction Payment was made,

(6) all cash equity of Tenant invested in the Premises and

(7) a developer’s fee equal to 3% of Development Costs.

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We have reviewed a letter dated January 16, 2014, from the ground lessee (BTM Development Partners, LLC ) to the City of New York (fee owner) which details the anticipated transaction costs related to the recent $380,000,000 refinancing of the subject property. According to the ownership, the economics of the refinancing are consistent with the current deductions. The letter, which is exhibited in the Addenda, details the allowable deductions from the Gross Loan Proceeds and the calculation of the Net Cash Proceeds. Some of the deductions defined in the ground lease used in calculating the transaction payment apply to both a refinancing or a sale transaction. However, based on the pending $380,000,000 mortgage, we have utilized this amount as the mortgage amount in the calculation of Net Sale Proceeds. Therefore, we have utilized the applicable deductions (Nos. 1, 3, 6 & 7 referenced above) which total $466,726,757 which were detailed by the lessee while calculating the Net Cash Proceeds from a refinance. In addition, we have also estimated transactions costs of 4.0 percent of the sales price ($616,000,000) or $24,640,000 regarding sales commissions, sales transfer tax, legal, title, professional fees, and other miscellaneous costs. Overall, our estimated deductions totaled $466,726,757. As a result, our Net Sale Proceeds reflected $149,273,243. Based on the defined 7.5 percent formula in the ground lease, the transaction payment due the landlord was calculated to be $11,195,493. We have rounded the transaction payment to $11,000,000 for the income approach.

Exhibited below is our calculation of the actual “Net Sales Proceeds” and the Transaction Payment of 7.5 percent of net proceeds:

CALCULATION OF THE TRANSACTION PAYMENT FROM SALE Preliminary Market Value-Leasehold: $616,000,000

Less: Deductions Per Ground Lease

1: Mortgage Amount: $380,000,000

2: Operating Losses: N/A

3: Sale Costs @ 4% (sales commissions, transfer tax, legal, title, etc.) $24,640,000

4: Adjustment of any indebtedness discharged or reduced N/A

5: Adjustment for prior Transaction Payment: N/A

6: All cash equity of Tenant invested in the subject $40,500,000

7: Developer fee equal to 3% of development costs $13,960,734

Total Deductions: $466,726,757

Net Sale Proceeds from Sale $149,273,243

Transaction Payment due @7.5% from Sale $11,195,493

Rounded: $11,000,000

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Therefore, our opinion of As Is market value via the Sales Comparison Approach is as follows.

SALES COMPARISON APPROACH- CAPITALIZATION CONCLUSION-AFTER NET SALE PROCEEDS Preliminary As Is Market Value: $616,000,000

Less: Net Sale Proceeds Obligation $ 11,000,000

As Is Market Value, rounded, $605,000,000

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 107

INCOME CAPITALIZATION APPROACH

METHODOLOGY The Income Capitalization Approach determines the value of a property based on the anticipated economic benefits. The principle of “anticipation” is essential to this approach, which recognizes the relationship between an asset’s potential future income and its value. To value the anticipated economic benefits of a property, potential income and expenses must be projected, and the most appropriate capitalization method must be selected.

The most common methods of converting net income into value are Direct Capitalization and Discounted Cash Flow. In direct capitalization, net operating income is divided by an overall capitalization rate to indicate an opinion of market value. In the discounted cash flow method, anticipated future cash flows and a reversionary value are discounted to an opinion of net present value at a chosen yield rate (internal rate of return).

Investors acquiring this type of asset will typically look at year one returns but must also consider long-term strategies. Hence, depending on certain factors, each of the income approach methods has merit. Considering all of the aspects that would influence an investment decision in the subject property, we conclude that discounted cash flow method is the most appropriate in this assignment.

POTENTIAL GROSS INCOME Potential gross income (income before operating and fixed expenses) is determined by existing contract rents as well as economic rents obtainable for the subject property’s vacant space and space at lease turnover. This income is estimated by forecasting the earning potential of the property under prevailing and foreseeable market conditions. Appropriate allowances for vacancy and operating expenses, based on market conditions, are then deducted from the potential gross income or gross earnings. This process results in an estimate of net monetary benefits to ownership, which can then be capitalized into value.

The total potential gross revenues generated by a retail property are composed of a number of distinct elements: minimum rent determined by lease agreement; additional overage rent based upon a percentage of retail sales; reimbursement of certain expenses incurred in the ownership and operation of the real estate; and other miscellaneous revenues. Minimum base rent represents a legal contract establishing a return to investors in the real estate, while the passing-on of certain expenses to tenants serves to maintain this return in an era of continually rising costs of operation. Additional rent based upon a percentage of retail sales at the subject serves to preserve the purchasing power of the residual income to an equity investor over time. Finally, parking income adds an additional source of revenue in the complete operation of the subject property.

MINIMUM RENT Minimum rents produced by the subject property are derived from that paid by the various tenant types. The projection utilized in this analysis is based upon the existing roll and our projected leasing schedule in-place as of the date of appraisal, together with our assumptions as to the absorption of the vacant space, market rent growth, and renewal/turnover probability.

The rental income that an asset such as the subject property will generate for an investor is analyzed as to its quality, quantity, and durability. The quality and probable duration of income will affect the amount of risk that an informed investor may expect over the property's useful life. Segregation of the income stream along these lines allows us to control the variables related to the center's forecasted performance with greater accuracy. Each tenant type lends itself to a specific weighting of these variables as the risk associated with each varies.

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Minimum rents forecasted at the subject property are essentially derived from various tenant categories, namely specialty tenant revenues consisting of anchor, junior anchor, and in-line space, etc. In our investigation and analysis of the marketplace, we have surveyed, and ascertained where possible, rent levels being commanded by competing centers. However, it should be recognized that large retail centers are generally considered to be separate entities by virtue of age and design, accessibility, visibility, tenant mix, and the size and purchasing power of their trade area. Consequently, the best measure of minimum rental income is its actual rent roll leasing schedule. As such, our analysis of recently negotiated leases for tenants at the subject provides important insight into perceived market rent levels for the property. Inasmuch as a tenant's ability to pay rent is based upon expected sales achievement, the level of negotiated rents is directly related to the individual tenant's perception of their expected performance at the center.

SUBJECT TENANCY The subject property is demised for multi-tenant occupancy. On the following pages we will discuss the subject's occupancy, lease structure and rent levels, and we will contrast this information against comparable properties in the market.

SPACE SUMMARY & LEASED STATUS The following is a summary of the leased and vacant space within the subject property. The subject property contains 912,333 square feet of space, of which 906,270 square feet is leased.

SPACE SUMMARY & OCCUPANCY STATUS SPACE SUMMARY Tenant Category Occ. SF Vct. SF Total SF Occupancy Retail C 21,817 - 21,817 100.0% River Ave-B 10,634 - 10,634 100.0% Retail F 19,881 6,063 25,944 76.6% Retail E 10,131 - 10,131 100.0% Retail P 20,351 - 20,351 100.0% Anchor 443,500 - 443,500 100.0% Junior Anchor 379,956 - 379,956 100.0% Total 906,270 6,063 912,333 99.3%

Compiled by Cushman & Wakefield, Inc. There are a total of 30 tenant spaces, of which 29 spaces are leased and 1 is vacant. The chart summarizes the leased level based on the leases in place as of the date of appraisal. It should be noted that the Michael’s retail space is currently dark following a period of rent abatement which expired in December 2013. According to the ownership, the tenant is currently paying rent and is expected to open in the third quarter 2015.

Minimum rents forecasted at the subject property are derived from various tenant categories. We have grouped the tenants into categories that enable us to make like-kind comparisons to other subject leases, which ultimately allows us to make a meaningful comparison of each tenant category to the appropriate set of comparable rents. As an aid to the reader, we preface our analysis of the subject’s leases with a discussion of their lease structure.

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 109

LEASE STRUCTURE A lease typically defines the responsibilities of landlord and tenant with regard to the payment of operating expenses. The Appraisal Institute advises that the following basic distinctions can be made:

 Gross Lease - landlord pays all operating expenses.  Modified Lease - landlord and tenant share the cost of operating expenses.  Net Lease - tenant pays all operating expenses. These terms do not always mean the same thing in all markets, and there are many variations to these common terms. As each market has different nomenclature, it is important to understand the terms that are used locally, and the resulting expense obligations that apply to both tenant and landlord.

It is essential to understand expense reimbursement clauses when determining the value of a property. Leases can include expense stops, expense caps, specific billing pools and expense exclusions. The tenant’s share of the expense can be pro-rata, derived by formula, or negotiated. Below we discuss the lease structures found in the local market, as well as the structure of the leases within the subject property.

LOCAL MARKET LEASE STRUCTURE In the subject’s market, leases for retail centers similar to the subject property type are typically written on a net basis. Under this lease structure, the tenant is obligated to pay its pro rata share of real estate taxes, and common area maintenance (CAM) charges.

Lease terms are generally between 10 and 25 years in length. Some leases were leased for 5 years, with renewal options that could extend the lease term to 10 or 15 years. Rent increase schedules vary, but typically include rent escalations of 3.0 percent per annum, or 10.0 percent every 5 years.

SUBJECT PROPERTY LEASE STRUCTURE The existing leases at the subject property are written on a net basis. Under this lease structure, the tenants are responsible for its pro rata share of real estate taxes, and common area maintenance (CAM) charges including insurance, security, and utilities.

At the subject property, lease terms are generally between 10 and 25 years in length. Generally, rent increases reflect rent steps of 10 percent every 5 years.

ATTAINED RENT SCHEDULE The attained base rent listed for each tenant equals current monthly base rent annualized, excluding any future contractual rent increases, except for the contracted leases which start after the analysis start date, where the initial monthly base rent is annualized.

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ATTAINED RENT SCHEDULE MARKET RENT COMPARISON As Of Value Date: Jun-15 Market Rent Comparison Start End Area Contract Contract Contract Rent Tenant Name Suite Date Date ( SF ) Rent/Year Rent/SF Rent/SF Annualized Versus Market Rent

Retail C AT&T C5a May-09 Aug-19 3,412 $337,788 $99.00 $100.00 $341,200 1.00% below market BTM Footwear C1 Feb-10 May-20 4,585 $220,080 $48.00 $100.00 $458,500 52.00% below market Chase C3 Nov-13 Nov-23 2,030 $130,848 $64.46 $100.00 $203,000 35.54% below market GameStop C5b Aug-09 Aug-19 1,518 $150,288 $99.00 $100.00 $151,800 1.00% below market GNC C2 Oct-09 Sep-19 1,980 $196,020 $99.00 $100.00 $198,000 1.00% below market Payless C4 Aug-09 Aug-24 3,053 $268,668 $88.00 $100.00 $305,300 12.00% below market Sprint C6 Oct-11 Nov-21 2,511 $175,776 $70.00 $100.00 $251,100 30.00% below market T-Mobile C7 May-09 Jun-19 2,728 $270,072 $99.00 $100.00 $272,800 1.00% below market Subtotal 21,817 $1,749,540 $80.19 $100.00 $2,181,700 19.81% below market

River Ave-B Sketchers D1 Jun-10 Sep-20 8,741 $218,520 $25.00 $45.00 $393,345 44.45% below market TMobile B1b Mar-11 Apr-16 1,893 $94,536 $49.94 $45.00 $85,185 10.98% above market Subtotal 10,634 $313,056 $29.44 $45.00 $478,530 34.58% below market

Retail F Applebee's F1g Mar-09 Jul-29 6,661 $512,892 $77.00 $55.00 $366,355 40.00% above market CUNY F1c May-14 Jul-27 8,145 $407,112 $49.98 $55.00 $447,975 9.12% below market Marisco Centro F1a Mar-09 Feb-20 3,700 $240,504 $65.00 $55.00 $203,500 18.18% above market Subway F1b Dec-09 Dec-19 1,375 $122,736 $89.26 $55.00 $75,625 62.30% above market Subtotal 19,881 $1,283,244 $64.55 $55.00 $1,093,455 17.36% above market

Retail E CUNY E1-3 May-14 Jul-27 10,131 $506,364 $49.98 $50.00 $506,550 0.04% below market Subtotal 10,131 $506,364 $49.98 $50.00 $506,550 0.04% below market

Retail P CUNY P1b May-12 Jul-27 8,351 $502,068 $60.12 $60.00 $501,060 0.20% above market Jaba Furniture P1a Oct-10 Sep-20 12,000 $480,000 $40.00 $60.00 $720,000 33.33% below market Subtotal 20,351 $982,068 $48.26 $60.00 $1,221,060 19.57% below market

Anchor BJ's Warehouse B1a Aug-09 Aug-29 130,099 $4,878,708 $37.50 $40.00 $5,203,960 6.25% below market Home Depot A1a Feb-09 Feb-34 124,955 $5,498,016 $44.00 $40.00 $4,998,200 10.00% above market Target A3a Oct-08 Oct-33 188,446 $1,043,988 $5.54 $40.00 $7,537,840 86.15% below market Subtotal 443,500 $11,420,712 $25.75 $40.00 $17,740,000 35.62% below market

Junior Anchor Bed, Bath & Beyond B3b Sep-09 Jan-25 33,877 $1,253,448 $37.00 $45.00 $1,524,465 17.78% below market Best Buy B3c Aug-09 Jan-20 52,086 $2,578,260 $49.50 $45.00 $2,343,870 10.00% above market Marshalls B3a Aug-09 Aug-19 37,401 $1,346,436 $36.00 $45.00 $1,683,045 20.00% below market Chuck E Cheese A23 Jul-13 Dec-28 19,834 $654,528 $33.00 $32.00 $634,688 3.13% above market Burlington Coat Factory A23 Jan-12 Jan-28 74,329 $1,932,552 $26.00 $35.00 $2,601,515 25.71% below market Michaels A2b Jan-14 Sep-21 23,204 $884,076 $38.10 $45.00 $1,044,180 15.33% below market Raymour & Flanigan B2b Apr-09 Oct-24 46,814 $2,059,812 $44.00 $45.00 $2,106,630 2.22% below market Staples A1b Jun-09 Jun-24 15,490 $775,272 $50.05 $45.00 $697,050 11.22% above market Toys/Babies R Us B2a Aug-09 Jan-20 76,921 $1,769,184 $23.00 $45.00 $3,461,445 48.89% below market Subtotal 379,956 $13,253,568 $34.88 $42.37 $16,096,888 17.66% below market

GRAND-TOTALS 29 tenants in occupancy 906,270 $29,508,552 $32.56 $43.38 $39,318,183 24.95% below market

Note: Attained rent equals current rent annualized for twelve months, and it excludes contractual rent increases Compiled by Cushman & Wakefield, Inc. A total of 29 tenants currently lease space within the property. The average rent for all of the existing tenants is $32.56 per square foot, which is below current market rent levels. It should be noted that Target paid the developer $46,394,000, which reflected a 75 percent pre-payment of their entire contract rent throughout the 25- year lease term, in addition to the rent payments detailed in the lease agreement. The grand-totals exhibited in the attained rent schedule for contract rent do not incorporate lease-up or downtime provisions. Hence, the grand- totals might differ from the projections shown later in this section.

ANALYSIS OF COMPARABLE ANCHOR TENANT RENTS The following table summarizes rental activity for comparable anchor space in competing buildings in the market.

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MAJOR ANCHOR RENT COMPARABLES PROPERTY INFORMATION LEASE INFORMATION

Property Name NO Address, City, State COMMENTS CENTER GLA YEAR BUILT TENANT NAME LEASE DATE SIZE (NRA) TERM (yrs.) INITIAL RENT/SF RENT STEPS TYPE LEASE 1 Proposed CityPoint Tower 700,000 2015 Century 21 7/15 108,855 15 $27.27 10% every 60 Net This is an anchor tenant lease within a proposed retail 1 Dekalb Avenue months center in Downtown Brooklyn. The property is expected to Brooklyn, New York be delivered in 2015.

2 Gateway Center II 598,279 2014 Burlington Coat 10/14 74,348 15 $34.00 Annual Increases Net This is an anchor tenant lease within a recently developed 339-579 Gateway drive Factory retail center in Brooklyn. Brooklyn, New York

3 Gateway Center II 598,279 2014 Shope Rite 10/14 89,782 20 $27.50 Annual Increases Net This is an anchor tenant lease within a recently developed 339-579 Gateway drive retail center in Brooklyn. Brooklyn, New York

4 Riverdale Crossings 159,037 2014 BJ Wholesale 8/13 107,000 20 $39.00 10% every 60 Net This is an anchor tenant lease within a recently developed 184-190 West 237th Street months retail center in the Bronx. Bronx, NY

5 East River Plaza 494,560 2009 Target 7/10 130,664 20 $25.38 10% every 60 Net This is an anchor tenant lease within an urban, vertical 517 East 116th Street months power center located in Harlem. Upper Manhattan, NY

6 East River Plaza 494,560 2009 Costco 11/09 110,074 20 $45.42 10% every 60 Net This is an anchor tenant lease within a urban, vertical 517 East 116th Street months power center located in Harlem. Upper Manhattan, NY

7 Rego Park Center 926,180 2010 Costco 6/09 136,451 25 $36.30 9% Every 3 Yrs Net This property is an anchor tenant lease in a multi-level retail 61-01 Junction Boulevard power center located between Queens Boulevard and the Queens, NY Long Island Expressway. 8 Rego Park Center 926,180 2010 Century 21 5/09 140,537 20 $31.08 5% Yr. 2; 3% Inc. Net This property is an anchor tenant lease in a multi-level retail 61-01 Junction Boulevard Annually power center located between Queens Boulevard and the Queens, NY Long Island Expressway. STATISTICS Low 159,037 2009 5/09 74,348 15 $25.38 High 926,180 2015 7/15 140,537 25 $45.42 Average 612,134 2012 3/12 112,214 19 $33.24 Compiled by Cushman & Wakefield, Inc.

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COMPARABLE ANCHOR RENTAL MAP

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DISCUSSION OF COMPARABLE ANCHOR TENANT RENTS We have analyzed anchor leases negotiated in competitive buildings in the marketplace. The comparables range in size from 74,348 square feet to 140,537 square feet. These are all located in multi-level retail centers similar in class to the subject, and in the subject’s competitive market. The comparable leases have terms ranging from 15 to 25 years. The comparables exhibit a range of rents from $25.38 to $45.42 per square foot, with an average of $33.24 per square foot. Rent escalation clauses vary, with most having percentage increases ranging from 5 to 10 percent every 5 years. All of these are net leases in which the tenant is required to pay pro-rata share of real estate taxes and CAM expenses.

The subject’s anchor tenant contract rents ranged between $37.50 and $40.00 per square foot, excluding the Target prepaid rent. Exclusive of the Target space, the subject’s anchor tenants are leased within current market rent levels.

CONCLUSION OF MARKET RENT FOR ANCHOR RETAIL SPACE Based on leasing activity in the marketplace and our analysis of the comparables, we have concluded the following market rents for the subject’s anchor retail tenants:

CONCLUSION OF ANCHOR SPACE MARKET RENT TENANT MARKET LEASE LEASE TYPE RENT INCREASE CATEGORY RENT TERM

Anchor $35 to $40 20 Net 10% every 5 years

ANALYSIS OF COMPARABLE JR. ANCHOR RETAIL RENTS The following table summarizes rental activity for comparable junior anchor space in competing buildings in the market.

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JUNIOR ANCHOR RETAIL RENT COMPARABLES PROPERTY INFO LEASE INFORMATION

Property Name NO. Address, City, State COMMENTS TENANT NAME LEASE DATE (NRA) SIZE (yrs.) TERM INITIAL RENT/SF RENT STEPS 1 Utopia Center TJ Maxx 2015 28,053 10 $30.00 10% every 60 This is a junior anchor within a mixed-use medical office 176-60 Union Turnpike months building that features ground floor retail space known as the Queens, New York Utopia Center 2 Gateway Center Nordstrom Rack 2014 32,792 12 $40.00 Annual Increases This is a recent lease within Gateway Center II, a recently 339-579 Gateway drive completed shopping center in the East New York Brooklyn, New York neighborhood of Brooklyn. 3 Throggs Neck Shopping Center TJ Maxx 2014 28,417 10 $30.00 Annual Increases This is a recent lease within the Thoggs Neck Shopping 815 Hutchinson River Parkway center, a recently completed shopping center in the Throggs Bronx, New York Neck neighborhood of the Bronx 4 Gateway Center The Sports 2014 33,500 12 $35.00 Annual Increases This is a recent lease within Gateway Center II, a recently 339-579 Gateway drive Authority completed shopping center in the East New York Brooklyn, New York neighborhood of Brooklyn. 5 Bay Plaza Mall Old Navy 2014 11,010 15 $78.00 10% increase This is a recent inline lease within the recently completed Bay 200 Baychester Avenue every 5 years Plaza Mall located in the Parkchester neighborhood of the Bronx, New York Bronx. 6 Gateway Center II Gap 2014 10,500 10 $75.00 10% increase This is a recent lease within Gateway Center II, a recently 339-579 Gateway drive every 5 years completed shopping center in the East New York Brooklyn, New York neighborhood of Brooklyn. 7 Bay Plaza Mall Ultra Cosmetic 2014 11,831 10 $77.00 10% increase This is a recent inline lease within the recently completed Bay 200 Baychester Avenue every 5 years Plaza Mall located in the Parkchester neighborhood of the Bronx, New York Bronx. 8 Gateway Center Raymour and 2014 31,616 13 $35.00 Annual Increases This is a recent lease within Gateway Center II, a recently 339-579 Gateway drive Flanigan completed shopping center in the East New York Brooklyn, New York neighborhood of Brooklyn. 9 Gateway Center TJ Maxx 2014 56,859 10 $40.00 10% every 60 This is a recent lease within Gateway Center II, a recently 339-579 Gateway drive months completed shopping center in the East New York Brooklyn, New York neighborhood of Brooklyn. 10 Shops at Northern Boulevard Marshalls 2014 34,108 5 $30.11 Annual Increases This is a recent lease within the Shops at Northern Boulevard, 48-18 Northern Boulevard a community center located along the prime Northern Queens, NY Boulevard. 11 Gateway Center Petco 2014 12,000 15 $62.00 10% every 60 This is a recent lease within Gateway Center II, a recently 339-579 Gateway drive months completed shopping center in the East New York Brooklyn, New York neighborhood of Brooklyn. 12 Shops at Skyview Park GNC 2013 10,093 10 $63.00 10% every 60 This is an inline tenant lease in a multi-level retail power 40-24 College Point Blvd months center located within the Shops at Skyview Park Center in Flushing, Queens Flushing Queens. STATISTICS Low 10,093 5 $30.00 High 56,859 15 $78.00 Average 25,065 11 $49.59 Compiled by Cushman & Wakefield, Inc.

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COMPARABLE JUNIOR ANCHOR RENTAL MAP

DISCUSSION OF COMPARABLE JUNIOR ANCHOR RENTS We have analyzed recent leases negotiated in competitive buildings in the marketplace. The comparables range in size from 10,093 square feet to 56,859 square feet. These are all located in retail centers similar in class to the subject, and in the subject’s competitive market. The comparable leases have terms ranging from 5 to 15 years. The comparables exhibit a range of rents from $30.00 to $78.00 per square foot, with an average of $49.59 per square foot. Rent escalation clauses vary, with most having annual percentage increases ranging from 5 to 10 percent every 5 years, or annual increases. All of these are net leases in which the tenant is required to pay pro- rata share of real estate taxes and CAM expenses. The subject junior anchor contract rents ranged between $23.00 and $49.50 per square foot, depending on the size, and location. Based on our review of the market, the average rent for the subject’s junior anchor tenants are below current market rent levels.

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CONCLUSION OF MARKET RENT FOR JUNIOR ANCHOR RETAIL SPACE

Based on recent leasing activity at the subject property and our analysis of the comparables, we have concluded the following market rents for the subject’s junior anchor retail tenants:

CONCLUSION OF MARKET RENT TENANT MARKET LEASE LEASE TYPE RENT INCREASE CATEGORY RENT TERM

Jr. Anchor $30 - $50 15 Net 10% every 5 years

ANALYSIS OF COMPARABLE IN-LINE RENTS The following table summarizes rental activity for comparable in-line retail space in competing buildings in the market.

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INLINE RETAIL RENT COMPARABLES PROPERTY INFORMATION LEASE INFORMATION

Property Name NO. Address, City, State COMMENTS TENANT NAME LEASE DATE (NRA) SIZE (yrs.) TERM INITIAL RENT/SF RENT STEPS 1 699 Morris Park Avenue, Zaid Paid Cell Phone 2015 780 10 $40.00 Annual Increases This is a recent lease of a retail tenant along Bronx, NY Morris Park Avenue within the Morris Park neighborhood of the Bronx. 2 Parkchester Condominiums Chase 2015 3,595 10 $91.16 Annual Increases This is an inline tenant lease within a strip center 1386 Metropolitan Avenue located in the Parkchester neighborhood of the Bronx, New York Bronx. 3 Jackson Heights Shopping Center Vision Works 2015 1,791 10 $90.00 Annual Increases This is an inline lease within the Jackson Heights 7507 31st Avenue Shopping Center, with the Jackson Heights Queens, New York neighborhood of Queens. 4 Jackson Heights Shopping Center Santander Bank 2014 1,470 10 $62.00 Annual Increases This is an inline tenant lease within a retail center 7507 31st Avenue in Queens. Queens, New York 5 Riverdale Crossings Petco 2014 9,566 10 $65.00 Annual Increases This is a recent inline lease within the Riverdale 180 West 237th Street Crossings a recently completed community Bronx, NY center located in the Kingsbridge neighborhood of the Bronx. 6 Riverdale Crossings Buffalo Wild Wings 2014 9,564 12 $68.00 Annual Increases This is a recent inline lease within the Riverdale 180 West 237th Street Crossings a recently completed community Bronx, NY center located in the Kingsbridge neighborhood of the Bronx. 7 Bay Plaza Mall Zinburger 2014 6,306 15 $80.00 Annual Increases This is a recent inline lease within the recently 200 Baychester Avenue completed Bay Plaza Mall located in the Bronx, New York Parkchester neighborhood of the Bronx. 8 Gateway Center II Bath & Body Works 2014 3,500 12 $85.00 10% increase every This is a recent lease within Gateway Center II, a 339-579 Gateway drive 5 years recently completed shopping center in the East Brooklyn, New York New York neighborhood of Brooklyn. 9 Atlantic Terminal, Verizon Wireless 2014 2,195 5 $101.04 Annual Increases This is a recent lease within Atlantic Center, a 139 Flatbush Avenue community center located along the prime Atlantic Brooklyn, NY Avenue within Downtown Brooklyn. 10 The Shops at Bruckner Plaza, Porta Bella Menswear 2014 5,400 5 $40.00 Annual Increases This is a recent lease within The Shops at 1910 Story Avenue Bruckner Plaza, a neighborhood center located Bronx, NY along the Story Avenue within the Parkchester neighborhood of the Bronx. 11 Atlantic Terminal, Coldstone Creamery 2014 1,090 5 $115.08 Annual Increases This is a recent lease within Atlantic Center, a 139 Flatbush Avenue community center located along the prime Atlantic Brooklyn, NY Avenue within Downtown Brooklyn. 12 Atlantic Terminal, The Children's Place 2014 5,500 5 $81.64 Annual Increases This is a recent lease within Atlantic Center, a 139 Flatbush Avenue community center located along the prime Atlantic Brooklyn, NY Avenue within Downtown Brooklyn. 13 Queens Place, Coldstone Creamery 2013 1,300 10 $89.06 Annual Increases This is a recent lease within Queens Place, a 88-01 Queens Boulevard community center located along the prime Queens, NY Queens Boulevard. 14 Queens Place, Afaze 2013 1,050 5 $95.00 Annual Increases This is a recent lease within Queens Place, a 88-01 Queens Boulevard community center located along the prime Queens, NY Queens Boulevard. 15 776 Morris Park Avenue, Promo Fight Shop 2013 780 10 $37.33 Annual Increases This is a recent lease of a retail tenant along Bronx, NY Morris Park Avenue.

STATISTICS Low 2/11 780 5 $37.33 High 7/05 9,566 15 $115.08 Average 7/05 3,592 9 $76.02 Compiled by Cushman & Wakefield, Inc.

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COMPARABLE IN-LINE RENTAL MAP

DISCUSSION OF COMPARABLE IN-LINE RENTS We have analyzed recent leases negotiated in competitive buildings in the marketplace. The comparables range in size from 780 square feet to 9,566 square feet. These are all located in retail centers similar in class to the subject, and in the subject’s competitive market. The comparable leases have terms averaging 10 years. The comparables exhibit a range of rents from $37.33 to $115.08 per square foot, with an average of $76.02 per square foot. Rent escalation clauses vary, with most having percentage increases ranging from 5 to 10 percent every 5 years, or annual increases. All of the comparable are net leases in which the tenant is required to pay pro-rata share of real estate taxes and CAM expenses.

The subject in-line tenant contract rents ranged between $25.00 and $99.00 per square foot, depending on the size, and location. Based on our review of the market, the average rent for the subject’s in-line tenants are below current market rent levels.

CONCLUSION OF MARKET RENT FOR IN-LINE RETAIL SPACE Based on recent leasing activity at the subject property and our analysis of the comparables, we have concluded the following market rents for the subject’s in-line retail tenants:

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CONCLUSION OF IN-LINE RETAIL MARKET RENT TENANT MARKET LEASE LEASE TYPE RENT INCREASE CATEGORY RENT TERM

In-line - Retail B $45.00 15 Net 10% every 5 years

In-line - Retail C $100.00 15 Net 10% every 5 years

In-line - Retail E $50.00 10 Net 10% every 5 years

In-line - Retail F $50.00 10 Net 10% every 5 years

In-line - Retail P $60.00 10 Net 10% every 5 years

CONCLUSION OF SUBJECT CONTRACT RENTS After considering all of the above, relative to the subject’s position in the market, we have developed a weighted average rental rate of approximately $39.65 per square foot (exclusive of the Target tenant space) for the entire property based upon a relative weighting of tenant space by size, location, and visibility within the center. The existing base contract rent (exclusive of the Target tenant space) reflects and average contract rent of $32.56 per square foot. Considering the subject’s construction, location, size, and condition, we are of the opinion that the existing contract rents are approximately 25 percent below current market levels as exhibited by comparable retail spaces.

When a property is acquired with leases that are at or close to market rent levels, the level of risk involved with the investment is generally low. However, the potential increase to the income stream in this scenario is typically limited, which tends to normalize the investment parameters of participants for these types of properties.

When a property has attained rent levels that are below market, the early returns are generally limited but there is greater potential for the income stream to increase as the below market leases rollover. There is less risk involved with tenants with below market leases, as they have a greater ability to pay the lower rent than they would market level rent. Buyers of properties with below market leases are often entering a lower risk investment with greater upside to their eventual income earning potential, resulting in overall rates that tend to be lower than normal.

Properties that are encumbered by leases with average rents that are significantly above market have increased risk in several key areas. When a property has an average rent that is above market, there is increased risk of default, slow payment or lack of payment by those tenants in that category. In addition, at some point, the above market leases will expire, at which time the spaces will be re-leased at market levels. When this occurs, there is a decline in rental revenue for the property, which many times leads to a declining net income stream. When this is the case, investors will require a higher initial return to offset the declining income stream, and to guard against the heightened risk of tenant defaults.

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OCCUPANCY COST - TEST OF REASONABLENESS In further support of our forecast for market rent levels, we undertook a comparison of minimum rent-to-sales and total occupancy costs-to-sales ratios. Generally, our research and experience with other urban centers shows that the ratio of minimum rent-to-sales falls within the 7.0 to 10.0 percent range in the initial year of the lease, with 7.5 percent to 8.5 percent being most typical. By adding additional costs to the tenant, such as real estate tax and common area maintenance recoveries, a total occupancy cost may be derived. Expense recoveries and other tenant charges can add up to 100.0 percent of minimum rent and comprise the balance of total tenant costs.

The typical range for total occupancy cost-to-sales ratios falls between 11.0 and 15.0 percent. As a general rule, where sales exceed $300 per square foot, 13.0 to 14.0 percent would be a reasonable cost of occupancy. Experience and research show that most tenants will resist total occupancy costs that exceed 15.0 to 18.0 percent of sales. Obviously, this comparison will vary from tenant to tenant and property to property.

NOTE: In higher-end or dense markets, such as the subject property’s, where tenants are able to generate sales above industry averages, tenants can generally pay rents that fall toward the upper-end of the ratio range. As the subject is located in a high density area within the Bronx, higher rents and a higher occupancy cost is expected and supported. This is not uncommon in urban markets such as NYC where tenants are willing to pay a higher cost of occupancy to have a presence in the market. We see many instances of occupancy costs above 20.0 percent along comparable high density urban retail locations.

We have presented the subject’s fiscal year 2010 through 2013 retail sales. In addition, we have detailed the total occupancy costs for the reporting tenants along with the respective occupancy cost ratios.

TOTAL PROPERTY TENANT SALES AND OCCUPANCY COSTS Actual Actual Actual Actual Contract FY 2010 FY 2011 FY 2012 FY 2013 Rent Occupancy Costs CAM & Category Total Sq/Ft Total Sales Sales/SF Total Sq/Ft Total Sales Sales/SF Total Sq/Ft Total Sales Sales/SF Total Sq/Ft Total Sales Sales/SF TAXES Occ. Cost Anchor BJ's Wholesale 130,099 SF $128,767 $990 130,099 SF $134,972 $1,037 130,099 SF $139,021 $1,069 130,099 SF $134,972 $1,037 $37.50 $12.45 4.81% Junior Anchor Toy R Us 77,638 SF $17,269 $222 77,638 SF $16,475 $212 77,638 SF $15,170 $195 77,638 SF $13,555 $175 $23.00 $12.45 20.30% Burlington Coat Factory N/A N/A N/A N/A N/A N/A 74,329 SF $15,531 $209 74,329 SF $17,815 $240 $26.00 $12.45 16.04% Marshalls 38,211 SF $8,553 $224 38,211 SF $8,709 $228 38,211 SF $9,974 $261 38,211 SF $10,230 $268 $36.00 $12.45 18.10% Subtotal 115,849 SF $25,822 $223 115,849 SF $25,184 $217 190,178 SF $40,675 $214 190,178 SF $41,600 $219 $28.33 $0 18.15% In-Line Skechers 8,741 SF N/A N/A 8,741 SF $1,480 $169 8,741 SF $1,553 $178 8,741 SF $1,898 $217 $25.00 $12.45 17.25% Applebee's 6,661 SF $3,998 $600 6,661 SF $4,340 $652 6,661 SF $4,774 $717 6,661 SF $4,987 $749 $77.00 $12.45 11.95% Payless Shoes 3,053 SF $445 $146 3,053 SF $437 $143 3,053 SF $408 $134 3,053 SF $407 $133 $88.00 $12.45 75.35% GNC 1,980 SF $349 $176 1,980 SF $470 $237 1,980 SF $543 $274 1,980 SF $569 $287 $99.00 $12.45 38.78% Subtotal 20,435 SF $4,792 $410 20,435 SF $6,727 $329 20,435 SF $7,278 $356 20,435 SF $7,861 $385 $72 $12 35.83% Total 266,383 SF $159,381 $598 266,383 SF $166,883 $626 340,712 SF $186,974 $549 340,712 SF $184,433 $541 $12 The subject’s three reporting junior anchor tenants averaged a projected occupancy cost ratio of 20.5 percent, and the in-line reporting tenants exhibited an average projected occupancy cost ratio of 11.12 percent as of FY 2013. In addition, While the BJ Wholesale Club is not required to report sales we have been provided with their fiscal year 2013 sales of $134.97 million, or $1,037 per square foot. Furthermore, the ownership has stated that the majority of the non-reporting tenants have stated that they are performing well and exhibiting sales above their projected levels. Moreover, according to the ownership, Target (although not required to report sales) has indicated that they are on pace to reach $80.0 million in sales for 2014 which reflects $424.52 per square foot, and an increase of 14.0 percent above 2012 sales.

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Our weighted average rent can next be tested against total occupancy costs in the center based upon the standard recoveries for new retail tenants. A total built-up occupancy cost can be derived by taking the weighted average rent and adding projected occupancy costs for all tenants, excluding anchor tenants in the property. This total can then be tested against the average sales for retail tenants. Our occupancy cost analysis can be found on the following chart.

OCCUPANCY COST ANALYSIS- IN LINE & JR. ANCHORS

Estimated Tenant Cost $/SqFt Economic Base Rent Weighted Average Rent - Excluding Anchors $39.29

Occupancy Costs CAM $11.60 Real Estate Taxes-Inclusive of PILOT $0.85 Total Tenant Costs $51.74

Projected Average Sales $550.00 Rent-to-Sales Ratio 7.14% Cost of Occupancy Ratio 9.41%

Our concluded average market rent equates to a rent to sales ratio of 7.14 percent and a total occupancy cost of 9.41 percent of average sales, which is within the low end of the range of comparable retail centers. These rates are considered reasonable based on the subject’s caliber as one of the prime retail centers in the Bronx. It should be noted that the subject property possesses a 25-year real estate tax abatement through the PILOT exemption period. As the subject’s leases are net leases the tenants directly benefit from the lower occupancy costs.

In our opinion, a sales projection of $550 per square foot for the subject property is reasonable based upon the subject’s location, historical sales and market parameters. Based upon the market analysis presented earlier, this level of sales should be achievable by the subject property. Based on our sales projection, the subject tenant’s projected occupancy cost ratio is 9.41 percent, which is reasonable based upon the subject’s location and market parameters.

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Our forecasted sales figure of $550 per square foot for the subject property is within the range of the market parameters of comparable New York City retail properties as can been seen from the following chart. It should be noted that comparable retail centers do not typically publish their sales figures per square foot. The chart below represents the most updated information that we have been able to ascertain.

COMPARABLE NEW YORK CITY RETAIL CENTERS (SALES PER SQUARE FOOT) NAME / LOCATION SIZE (SF) SALES/PSF Queens Center Mall 921,500 SF $990/SF Queens, New York

Bruckner Plaza 450,000 SF $550/SF Bronx, New York

Atlantic Terminal 371,000 SF $500/SF Brooklyn, New York

Kings Plaza Mall 1.0 million SF $625/SF Brooklyn, New York

Cross County Mall 1.0 million SF $600/SF Yonkers, New York

East River Plaza 525,000 SF $600/SF Upper Manhattan, New York

Bay Plaza Retail Center 900,000 SF $500/SF Bronx, New York

Rego Park Center 343,248 SF $550/SF Queens, New York

According to discussions with leasing brokers and market participants, the occupancy costs for the above referenced retail centers range between 12 and 20 percent, and are reflective of their high-density urban retail locations.

ABSORPTION OF VACANT SPACE There is one vacant tenant space totaling 6,063 square feet available for lease. In our analysis, we have assumed that the 6,063 square feet of vacant space is leased by October 2015.

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ABSORPTION SCHEDULE Tenant Market Vacant Space Name GLA Date Category Rent (1) Annual VACANT Ff 6,063 Oct-15 Retail F $55.00 $333,465 Total 6,063 $55.00 $333,465 (1) Reflects current market rent, which will grow at our forecasted growth rate discussed herein. ABSORPTION STATISTICS Analysis Start Date 07/01/15 Absorption Commencement 10/01/15 Absorption Completion 10/01/15 Total Absorption Period (Months) 3 Absorption Per Month (SF) 2,005 Compiled by Cushman & Wakefield, Inc. Lease Expirations (ALL TERMS)

The lease expiration schedule is an important investment consideration. As leases rollover, the landlord will be required to negotiate a renewal lease with the existing tenant, or to secure a new tenant for the space. The following graphic projects the lease expiration schedule for this property incorporating all projected lease expirations forecast during the analysis period.

As noted earlier, the majority of the subject property is net leased long term at below current market rent levels. Less than one percent of the subject’s net rentable area (0.37 percent) is scheduled to expire within the first five years of the projected holding period. Extending to ten years approximately 26 percent of the subject’s leases are scheduled to expire. However, the majority (85%) of these tenants have below market renewal options which we have projected will be exercised, and significantly reduces any near term rollover.

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LEASE EXPIRATION SCHEDULE

Square Year Feet Percent of Cumulative Cumulative Expiring Property Sq Ft Percent 1 1,893 0.21% 1,893 0.21% 2 0 0.00% 1,893 0.21% 3 0 0.00% 1,893 0.21% 4 2,728 0.30% 4,621 0.51% 5 182,978 20.06% 187,599 20.56% 6 20,741 2.27% 208,340 22.84% 7 25,715 2.82% 234,055 25.65% 8 0 0.00% 234,055 25.65% 9 17,520 1.92% 251,575 27.57% 10 265,204 29.07% 516,779 56.64% 11 26,804 2.94% 543,583 59.58%

Lease Expiration Schedule S 600,000 Q U A 500,000 R E 400,000 F E 300,000 E T 200,000

100,000

0 1234567891011

ANALYSIS YEAR

Cumulative Square Feet Square Feet Per Year

LEASE EXPIRATION ANALYSIS Total GLA of Subject Property (SF) 912,333 100.00% Year of Peak Expiration 10 SF Expiring in Peak Year 265,204 29.07% Five Year Cumulative Expirations (SF) 187,599 20.56% Ten Year Cumulative Expirations (SF) 516,779 56.64% Compiled by Cushman & Wakefield, Inc. Based on the lease turnover in Year 10 and 11, we have extended our projection period to 12 years, to reflect a stabilized reversion.

REVENUE & EXPENSE ANALYSIS We have developed an opinion of the property’s annual income and operating expenses after reviewing the historical expenses and the budget provided by ownership and the operating performance of similar properties. We analyzed each item of expense and developed an opinion regarding what an informed investor would consider typical. The historical revenue and expenses along with developer’s budget for the current year and our opinion of the subject’s income and expenses are presented on the following chart, followed by an analysis of subject property’s revenue and expenses.

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SUMMARY OF INCOME & EXPENSE ANALYSIS

Actual 2013 Actual 2014 2015 Budget 2015 C&W Forecast

Total Per SF Total Per SF Total Per SF Total Per SF POTENTIAL GROSS REVENUE Rental Income $26,597,777 $29.15 $29,846,092 $32.71 $30,287,606 $33.20 $29,690,632 $32.54 Additional Rent Income $67,080 $0.07 $53,880 $0.06 $53,880 $0.06 $0 $0.00 Percentage Rent Income $17,662 $0.02 $7,382 $0.01 $15,300 $0.02 $0 $0.00 CAM Income $8,144,989 $8.93 $8,616,696 $9.44 $8,696,586 $9.53 $8,352,712 $9.16 Utility Income $757,263 $0.83 $503,576 $0.55 $477,028 $0.52 $930,999 $1.02 Parking $4,049,272 $4.44 $4,116,966 $4.51 $4,208,029 $4.61 $4,200,000 $4.60 Other Miscellaneous Income $306,190 $0.34 $215,907 $0.24 $201,225 $0.22 $150,000 $0.16 Real Estate Tax Income $1,263,453 $1.38 $1,440,033 $1.58 $1,593,508 $1.75 $783,824 $0.86 TOTAL POTENTIAL GROSS REVENUE $41,203,686 $45.16 $44,800,532 $49.11 $45,533,162 $49.91 $44,108,167 $48.35 Vacancy and Collection Loss $0.00 $0.00 $0.00 $0.00 $0 $0.00 ($782,782) -$0.86 EFFECTIVE GROSS REVENUE $41,203,686 $45.16 $44,800,532 $49.11 $45,533,162 $49.91 $43,325,385 $47.49

OPERATING EXPENSES Insurance $384,071 $0.42 $461,523 $0.51 $511,273 $0.56 $500,000 $0.55 CAM $5,989,692 $6.57 $5,815,361 $6.37 $5,932,139 $6.50 $5,200,000 $5.70 Shared HVAC $398,400 $0.44 $413,926 $0.45 $360,139 $0.39 $400,000 $0.44 Direct Billed- Utilities $476,939 $0.52 $582,177 $0.64 $476,939 $0.52 $550,000 $0.60 Security $1,488,487 $1.63 $1,515,827 $1.66 $1,674,835 $1.84 $1,600,000 $1.75 General and Administrative $0 $0.00 $68,667 $0.08 $70,744 $0.08 $300,000 $0.33 Legal & Professional Fees $174,181 $0.19 $424,582 $0.47 $414,100 $0.45 $175,000 $0.19 Miscellaneous /Non Recoverable Expenses* $325,498 $0.36 $396,632 $0.43 $390,443 $0.43 $750,000 $0.82 Management Fees $1,900,692 $2.08 $1,737,873 $1.90 $1,649,834 $1.81 $1,299,762 $1.42 Subtotal $11,137,960 $12.21 $11,416,568 $12.51 $11,480,446 $12.58 $10,774,762 $11.81

Ground Rent $434,468 $0.48 $395,190 $0.43 $411,435 $0.45 $434,171 $0.48 Real Estate Taxes* $1,319,824 $1.45 $1,479,869 $1.62 $1,694,756 $1.86 $775,499 $0.85

TOTAL EXPENSES $12,892,252 $14.13 $13,291,627 $14.57 $13,586,637 $14.89 $11,984,432 $177.69

NET OPERATING INCOME $28,311,434 $31.03 $31,508,905 $34.54 $31,946,525 $35.02 $31,340,953 $464.70

* The historical and budget Real Estate Taxes provided by ownership are reflective of the ICIP abated taxes. The C&W projection is reflective of unabated taxes. *** 2013, 2014 and 2015 Non recoverable expense include signage, construction management fees and miscellaneous expenses. According to management the miscellaneous expense will be higher than historical expenses and the budget based on increasing costs related with marketing and leasing out of event media space.

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EXPENSE REIMBURSEMENTS We have analyzed the historical and budgeted reimbursement revenue, and have made a projection of the future expense reimbursement revenue based on these figures. We have also considered the contractual terms of the existing leases, together with our assumptions related to future leasing. The existing and future tenants will be responsible for their pro-rata share of real estate taxes and common area maintenance (CAM) expenses, including insurance, security, shared HVAC, direct utilities, and administrative. Based on our analysis, we have estimated total reimbursement revenue for year one at $9,269,471, which equates to $10.16 per square foot. PARKING GARAGE REVENUE Additional income to the property is provided by the 6-level parking garage which contains 2,575 spaces. Parking garages are generally operated in either under a lease agreement or a management agreement. The parking garage at the subject property is being operated under a management agreement. The parking rates at the subject property are within the range exhibited by competitive retail centers in the market. In our opinion, the existing rates not deter customers from shopping at the subject due to the cost of parking. The subject parking management agreement is with M.P. BTM, L.L.C. commenced on April 5, 2007 and initially expired on April 4, 2012. However, according to the first amendment to the agreement, the expiration date was extended to August 31, 2014.

The subject’s net parking garage income has ranged between $4,049,272 ($1,573/space) in 2013 and $4,116,966 ($1,599 /space) in 2014. The 2015 budgeted net parking garage income is projected at $4,208,029 ($1,634/space). Furthermore, we have researched several other New York City retail centers that had large multi-level parking garage components. The net parking garage revenues from the comparable are exhibited below:

COMPARABLE NEW YORK CITY RETAIL CENTERS NET PARKING GARAGE REVENUES Name/Location Center GLA Total Parking Net Revenue/Space Spaces

Rego Park Center 600,000 SF 1,265 $1,261/Space Queens, NY

Kings Plaza Mall 1,200,000 SF 3,739 $1,118/Space Queens, NY

Atlantic Center 900,000 SF 650 $3,300/Space Brooklyn, NY

East River Plaza 525,000 SF 1,248 $2,404/Space New York, NY Budget

Rego Park Plaza 565,000 SF 1,390 $975/Space Queens, NY

Average $1,812/Space

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Based on the subject property’s historical and budgeted net parking garage revenue, our analysis of the parking garage at comparable retail centers, and the specific attributes of the subject parking such as its size, condition, and location, we have concluded to a net parking revenue of $4,200,000 or $1,631 space in Year 1. Our figure is within the range of the subject’s historical, the budget and along with comparable retail properties and market parameters. We have assumed that the subject parking garage would continue to be operated under a similar management agreement to the existing one which is within market parameter, In addition, we have projected the net parking garage income to grow at 2.0 percent per annum.

MISCELLANEOUS REVENUE The subject’s miscellaneous income includes kiosk income, signage income, along with various tenant reimbursable services income. The subject’s miscellaneous income has ranged between $215,907 ($0.24/SF) in 2014 and $306,190 ($0.34/SF) in 2013. The 2015 budget reflected $201,225 ($0.22/SF) in miscellaneous income. Based on the subject property’s historical miscellaneous revenue, we have projected miscellaneous revenue of $150,000 in Year 1. Our figure is within the subject’s range of the historical figures.

VACANCY AND COLLECTION LOSS Vacancy and collection loss is a function of the interrelationship between absorption, lease expiration, renewal probability, estimated downtime between leases, and a collection loss factor based on the relative stability and credit of the subject’s tenant base. Based on the current vacancy in the market, and our perception of future market vacancy, we have projected a total vacancy and collection loss is equal to 3.0 percent.

The majority of the subject is net leased on a long term basis with limited near term rollover. Furthermore, 53.1 percent of the subject retail space (484,324 SF) is net leased to credit tenants. As a result of the subject occupancy and strong tenancy, we have excluded the collection loss factor for the anchor and credit tenants. The vacancy and collection loss is projected to be $782,782 in year 1.

CREDIT TENANT SUMMARY Due to their investment grade credit rating and low credit risk, the following credit tenants have been excluded from this collection loss deduction:

CREDIT TENANT SUMMARY Tenant Name Rating Outlook Rating Agency Size Investment Grade Tenants Home Depot A3 Stable Moody's 124,955 Bed, Bath & Beyond BBB+ Positive Standard & Poors 33,877 Marshall's (TJX Companies) A3 Stable Moody's 37,401 Best Buy, Inc Baa2 Developing Moody's 52,086 Staples Inc. Baa2 Stable Moody's 15,490 Target A2 Stable Moody's 188,446 CUNY A2 Stable Moody's 26,627 Chase A3 Stable Moody's 2,030 AT&T A3 Stable Moody's 3,412 ANALYSIS Number of Investment Grade Credit Tenants 9 Total Credit Tenant GLA 484,324 % of Total Space 53.0% Compiled by Cushman & Wakefield, Inc. The subject property has a total of 9 credit tenants occupying a total of 53 percent of the subject's space. Given this comparison, the investment rates selected will be slightly more aggressive than market indicators.

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DISCUSSION OF EXPENSES We have analyzed each expense item in making our forecast, with our conclusions summarized on the previous table. In most cases, our forecast is well supported by the historical or budget information. However, in some cases, further clarification is provided below:

SUMMARY OF OPERATING EXPENSES Property Insurance: This is the insurance expense associated with the subject property. This expense has ranged from $384,071 to $461,523 in our analysis. The 2015 budget reflected an expense of $511,273. Our forecast for this expense is $500,000 or $0.55 per square foot, which is within the range of historical expenses, the budget, comparable properties and market parameters.

Common Area Maintenance: CAM expenses include payroll, repairs and maintenance, professional services, and utilities. This expense has ranged from $5,815,361 to $5,989,692. The 2015 budget reflected an expense of $5,932,139. Our forecast for this expense is $5,200,000 or $5.70 per square foot, which is slightly below the range of historical expenses and the budget but within the range of comparable properties. According to our review of the CAM budget there are certain expenses that are above market and non-reoccurring including miscellaneous maintenance fees such as repairing ADA compliant ramps, repairing sidewalks, replacing garage leaks, gate repairs, etc.

Shared HVAC: This expense is associated with the shared HVAC facility expenses for the subject property. This expense has ranged from $398,400 to $413,726 in our analysis. The 2015 budget reflected an expense of $360,139. Our forecast for this expense is $400,000 or $0.60 per square foot, which is within the range of historical expenses, the budget, comparable properties and market parameters.

Direct Billed Utilities: This expense includes various utilities including water/steam, electricity, etc. This expense has ranged from $476,939 to $582,177 in our analysis. The 2015 budget reflected an expense of $476,939. Our forecast for this expense is $550,000 or $0.60 per square foot, which is within the range of historical expenses, the budget, comparable properties and market parameters.

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Security: This expense is associated with the security for the subject property. This expense has ranged from $1,488,487 to $1,515,827 in our analysis. The 2015 budget reflected an expense of $1,674,835. Our forecast for this expense is $1,600,000 or $1.75 per square foot, which is within the slightly above the historical expenses but within the range of the budget, comparable properties and market parameters.

General & Administrative: This expense is related to the on-going administrative expenses to operate the property. There was no expense allocated in 2013. The 2014 expense was 68,667. The 2015 budget reflected an expense of $70,744. Our forecast for this expense is $300,000 or $0.33 per square foot, which is above the historical expenses and the budget but within the within the range of comparable properties and market parameters.

Legal & Professional Fees: These costs include legal and professional fees. This expense has ranged from $174,181 to $424,582 in our analysis. According to the ownership, there were several one- time, non-reoccurring legal fees in 2014 regarding the Michaels tenant going dark. The 2015 budget reflected an expense of $414,100. The budget is inclusive of a one-time ADA legal non-compliance expense. Our forecast for this expense is $175,000 or $0.19 per square foot, which is within the range of the 2013 expense and that of comparable properties and market parameters. Moreover, our expense is in-line with the normalized property expense when excluding the one-time non-reoccurring expenses.

Miscellaneous/Non Recoverable: This expense is associated with various other expenses for the subject property. This expense has ranged from $325,498 to $396,632 in our analysis. The 2015 budget reflected an expense of $390,443. This expense is inclusive of events and media expenses, and other non recoverable expenses. According to management the miscellaneous expense will be higher than historical expenses and the budget based on increasing costs related with marketing and leasing out of event media space. Our forecast for this expense is $750,000 or $0.82 per square foot, which is above the range of the historical expenses and the budget but is considered reasonable based on the up-coming event and media expenses.

Management Fees: The subject property is managed by the ownership. This expense has ranged from $1,737,873 to $1,900,692 in our analysis. The 2015 budget reflected an expense of $1,649,834. It should be noted that management fees for comparable retail properties typically range from 2.0 to 4.0

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percent. Based on the size of the subject, and number of tenants, we have utilized a management fee of 3.0 percent, which we consider to be market oriented. Our forecast for this expense is $1,299,762 or $1.42 per square foot, which is within the range of market parameters, and comparable properties.

Ground Rent: The subject site is ground leased for a base term of 49 years, with an additional five 10-year renewal options which extend the lease term to 99 years. As per the ground lease agreement, the ground rent equals the greater of fixed amount ($341,183 in years 1-5) or 2.0% of gross revenue (based on the specific formula calculating gross revenues). Based on the subject's projected gross revenues (as defined in the ground lease), the ground rent will be calculated based on the percentage of gross revenues. A complete discussion of the ground lease is detailed in the Ground Lease section of this report. Furthermore, we have included our calculation of ground rent for the entire holding period in the Addenda of this report. The current ground rent has been estimated at $634,171 which equates to $0.70 per square foot of GLA, excluding the ground rent credit. After deducting the current ground rent credit ($200,000), the adjusted ground rent is $434,171, which equates to $0.48 per square foot of GLA.

Ground Rent Credit: The subject will receive ground rent credits based on the specific amounts detailed in the ground lease for the first 14 years (2009 to 2022). The ground rent credits range between $200,000 and $500,000 per annum. These credits are due based on an agreement with the City of New York. A complete discussion of the ground rent credit is detailed in the Ground Lease section of this report.

Real Estate Taxes-PILOT: We forecasted that the calendar year 2015 PILOT taxes, inclusive of the PILOT exemption equates to $775,499 or $0.85 per square foot of net rentable area ($0.80 per square foot of the building gross building area of 969,019 square feet, exclusive of the parking garage). A complete discussion of the taxes is included in the Real Property Taxes and Assessments section of this report.

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OPERATING EXPENSE CONCLUSION We have analyzed the subject’s historical operating expenses, the ownership’s current year budget along with the expenses of similar properties, and we used this information to make our projections. We have forecast total operating expenses for the subject property (excluding real estate taxes and ground rent) to be $10,744,762 equating to $11.81 per square foot. The operating expenses estimated for the subject property are within the range of actual operating expenses of comparable retail centers and are presented on the following chart. COMPARABLE EXPENSE ANALYSIS Comparable Number One Two Three Four Property Name East River Plaza Bay Terrace Shopping Center Coop City Retail Centers Atlantic Center Property City Upper Manhattan Bronx Bronx Brooklyn Property State NY NY NY NY Building Size 525,000 312,000 270,000 396,224 Building Age 2010 2012 2011 1995 Statement Type Actual Actual Actual Actual Year of Record 2010 2012 2012 2012 GLA (SF) GLA (SF) GLA (SF) GLA (SF) TOTAL OPERATING EXPENSES $7.88 $10.16 $11.57 $13.26 Compiled by Cushman & Wakefield, Inc. The three expense comparables reflect a range of $7.88 to $13.26 per square foot, with an average of $10.72 per square foot. These retail centers have varying degrees of similarity with the subject property in terms of age, size, tenancy and quality. In our judgment, the projection of $11.81 per square foot is considered reasonable for the subject property considering its age, size, and quality.

EXPENSE GROWTH RATE Our cash flow projections assume that operating expenses and tenant improvement costs will grow at the rate of 3.00 percent per year during the holding period. Real estate taxes are projected to increase 3.0 percent per annum after the PILOT abatement expires.

DISCOUNTED CASH FLOW ANALYSIS In the Discounted Cash Flow Method, we employed Argus for Windows software to model the income characteristics of the property and to make a variety of cash flow assumptions. We attempted to reflect the most likely investment assumptions of typical buyers and sellers in this particular market segment. The following table illustrates the assumptions used in the discounted cash flow analysis.

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LEASING ASSUMPTIONS TENANT CATEGORY Inline Anchor Junior Anchor WEIGHTED ITEMS Renewal Probability 70.00% 70.00% 70.00% Market Rent $45 - $100 $35 - $40 $30 - $50 Months Vacant 6.00 6.00 6.00 Tenant Improvements New Leases $0.00 $0.00 $0.00 Renewal Leases $0.00 $0.00 $0.00 Leasing Commissions New Leases 3.50% 3.50% 3.50% Renewal Leases 1.75% 1.75% 1.75% Free Rent New Leases 3 6 6 Renewal Leases 1 3 3

NON-WEIGHTED ITEMS Lease Term (years) 15 15 15 Lease Type (reimbursements) Gross Gross Gross Contract Rent Increase Projection 10% every 5 Yrs 10% every 5 Yrs 10% every 5 Yrs Compiled by Cushman & Wakefield, Inc. INVESTMENT CONSIDERATIONS

OVERVIEW The U.S. economic expansion hit a soft spot in the fourth quarter of 2014, a spot that carried over into first quarter 2015. The U.S. gross domestic product (GDP) slowed to a growth rate between 1.0-1.5 percent annual rate in the first quarter, down from 2.2 percent in the fourth quarter 2014. The main reason for the slowdown was a slowdown in consumer spending caused by a second consecutive year of severe winter weather. Although the economy grew at a slower pace in first quarter, we expect stronger growth for the balance of the year to boost full year GDP growth to about 3.0 percent to 3.5 percent.

The economy also benefitted from the steep drop in oil prices that began in mid-2014 but accelerated in the fourth quarter. The price of a barrel of oil remained between $40 and $50 per barrel for most of the first quarter. This is less than half the $98.57 per barrel price recorded in first quarter 2014. The Bureau of Economic Analysis estimates that the proportion of household’s after-tax income that consumers spent on energy in the first two months of 2015 was the lowest since 2002. As a result, consumers are becoming more optimistic about the economy. Through March 2015, U.S. payroll employment increased by a weaker than expected 126,000 jobs, according to the latest payroll report from the Bureau of Labor Statistics. March was the first month since February 2014 that employment growth dropped below 200,000 jobs. Although total job growth was slower than recent months, employment in key office-using sectors increased by a total of 50,000 jobs. In addition, average hourly earnings increased by 0.3 percent, the third time in the past five months that earnings have risen by 0.3 percent or more.

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CURRENT ECONOMIC CONDITIONS The evidence of a stronger economy prompted the Federal Reserve’s Open Market Committee (FOMC) to announce that the Central Bank would gradually reduce its purchases of long-term Treasury securities and mortgage backed securities widely referred to as quantitative easing. During 2014, the FOMC continued to reduce the amount of bonds purchased each month, indicating the Central Bank’s confidence that the economy does not require the additional stimulation that this policy has been providing. A statement released after the FOMC meeting in December was the clearest indication that the Central Bank will begin to raise interest rates in 2015. Strong economic growth will be the main factor pushing rates higher, and although wages are lagging many feel the jobs numbers are good enough to allow the Central Bank to stay on course in terms of adjusting policy as the economy grows.

The biggest surprise of 2014 and early 2015 has been the nearly 50.0 percent decline in oil prices, which caught many by surprise and the ramifications are just starting to be debated. The lower oil prices set the economy up for stronger growth in 2015 as it will stimulate consumer spending, cut costs in manufacturing and transportation and lower the trade deficit, all of which are likely to boost GDP even more than is currently anticipated. The U.S. will be the global growth leader in 2015.

The following graph displays historical and projected U.S. Real GDP percent change (annualized on a quarterly basis) from first quarter 2009 through first quarter 2019 (red bar highlights the most recent quarter-14Q4):

Historical and Projected U.S. Real GDP 2009Q1 - 2019Q1 7.5

5.0

2.5

0.0

-2.5

Real GDP,% Change -5.0 Forecast -7.5

Source: Historical Data Courtesy of the Bureau of Economic Analysis; Forecast Data Courtesy of Moody's Economy.com

Notable concerns regarding current economic conditions are as follows:

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 As employment continues to rise, the odds that the Federal Reserve will start to raise short term interest rates increases as well. The timing and extent of the interest rate increases will depend on how the economy performs over the next several months, but there seems to be a consensus that the Fed will start to test rate increases in the first half of 2015.  Morgan Stanley estimates $125.0 billion of private-label CMBS issuance for 2015 comprised of $80.0 billion conduit and $45.0 billion SASB (Sustainability Accounting Standards Board) and floaters. A bear case scenario where insurance companies are more competitive for larger loans is estimated to be $100.0 billion and a bull case scenario where M&A activity drives SASB and floaters is estimated to be $140.0 billion.

US REAL ESTATE MARKET IMPLICATIONS The commercial real estate market started to pick up in 2012 and continued to progress in 2013 and 2014. According to Real Capital Analytics, 23,015 properties traded hands in 2013 for a total transaction volume of approximately $338.9 billion. Commercial real estate sales volume remained strong throughout 2014, as transaction volume totaled $401.9 billion. Property prices at an aggregate level surpassed the 2007 peak and cap rates in many sectors are at all-time lows. As volume and price levels head into uncharted territory, investors are reassessing risk and took their foot off of the gas towards the end of 2014. Through first quarter 2015, 6,795 properties changed hands as volume reached $124.3 billion in the first three months of 2015. Portfolio and entity- level transactions were big components of transaction activity in first quarter, this trend will likely continue into second quarter as there were a number of deals in the works at the close of first quarter. Commercial property prices as measured by the CPPI are up for the year across all property types. Not all property types have recovered to the peak levels set prior to the Global Financial Crisis (GFC). The combination of growing volume and prices across all property sectors suggests that investors have an appetite for commercial real estate, though how they are placing capital is evolving. The big story of this quarter was the heavy activity in the portfolio and entity-level transactions. These sorts of transactions played an important role in the run-up of asset process that proceeded the calamitous fall into the GFC. Combine this activity with cap rates now at or below the precious low- water marks seen before the GFC and some investors are worried that we will face a similar downturn in the near future given the same signals.

Cap rates continued to fall in first quarter across all property types. Suburban office assets posted some of the biggest year-over-year declines with cap rates down 60 basis points from a year earlier to hit 6.8 percent. The current equity and debt spreads appear to be wide enough to absorb a fairly large near-term spike in interest rates without cap rates changing too much. Although the longer interest rates remain low, this spread will begin to erode and so will the market’s ability to absorb an interest rate increase.

The following graph compares national transaction volume by property between 2003 and first quarter 2015:

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National Transaction Volume By Property Type 600.0 Retail Office 500.0 Industrial Hotel Apartment 400.0

300.0

200.0 Volume, billions $

100.0

0.0

Source: Real Capital Analytics, Inc. Note: Hotel data not avail. until 2005,

CONCLUSIONS Despite the slower economic growth in the early part of 2014, the commercial real estate investment market did not skip a beat, an event many expect to repeat itself in 2015. Transaction volume totaled $401.9 billion in 2014, up from the same time last year, as the access to capital continues to be relatively easy for most investors. What’s more, transaction volume might have been higher, if not for the lack of quality offerings in the marketplace. Real estate markets are now in a sweet spot in the cycle. Demand is rising. Supply is beginning to increase, but is still contained. As a result, when vacancy rates continue to decline across markets and property types, it will tend to put upward pressure on rents. The next year should continue to see steady improvement in real estate markets across the U.S.

Going forward, prices for prime assets are expected to stay high, as the competition among buyers remains fierce, especially in core markets. Investors expect positive trends to continue through 2015. Even though many foresee rising interest rates, it is widely believed that the commercial real estate industry can handle the anticipated increases in rates without serious disruption to its performance, according to PricewaterhouseCoopers First Quarter 2105 Investment Survey. As a result, competition among buyers is likely to remain strong and keep prices elevated for the best properties offered.

The factors listed below have been key to our valuation of this property and will have an impact on our selection of all investor rates.

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INVESTMENT CONSIDERATIONS Attained Rents Versus Market: Overall, the subject's current contract rents (exclusive of expense contributions) are approximately 10 percent below market rent levels (exclusive of the Target's rent which was pre-paid). Given this comparison the investment rates considered would be slightly more aggressive than typical market parameters.

NOI Growth: The subject's NOI is expected to grow 1.93 percent per annum from the first year of the analysis through the holding period. This rate of growth is below levels expected in this market but reflective of the subject's long term below market leases.

Lease Expiration Exposure: Within the first five years of the analysis a total of 20.56 percent of the total net rentable area is scheduled to rollover. Extending to a ten-year period, a total of 56.64 percent of the space is scheduled to expire. It should be noted that several of the tenants have below market renewal options that are projected to be executed which diminishes the roll over exposure. This is considered a moderate rollover exposure within this market.

Real Estate Market Trends: Real estate market trends have a significant bearing on the value of real property. The real estate market in which the subject property is located is currently improving. Tenant Quality: The quality of a property's tenant base is an important factor that is scrutinized by investors prior to acquiring real property. The quality of the subject's tenant roster is considered to be good. Property Rating: After considering all of the physical characteristics of the subject, we have concluded that this property has an overall rating that is good, when measured against other properties in this marketplace.

Location Rating: After considering all of the locational aspects of the subject, including regional and local accessibility, veichular transportation, public transportation as well as overall visibility, we have concluded that the location of this property is good. The property exhibits a strong popilation base which should contribute to the potential sales potential within the subject. Overall Investment Appeal: There are many factors that are considered prior to investing in this type of property. The subject is 99.3 percent leased on a long term basis and 53.1 percent leased to credit tenants. In addition, the subject has limited turnover during the next 10 years. After considering all of these factors, we conclude that this property has good overall investment appeal.

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 137

INVESTOR SURVEY TRENDS Historic trends in real estate investment help us understand the current and future direction of the market. Investors’ return requirements are a benchmark by which real estate assets are bought and sold. The following graph shows the historic trends for the subject’s asset class spanning a period of four years as reported in the PwC Real Estate Investor Survey published by PricewaterhouseCoopers.

INVESTOR SURVEY HISTORICAL RESULTS Survey: PwC End Quarter:

Property Type: NATIONAL POWER CENTER 1Q 15

Quarter 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 1Q 15 OAR (average) 7.48% 7.50% 7.35% 7.32% 7.14% 7.04% 6.98% 6.98% 6.66% 6.71% 6.66% 6.66% 6.65% 6.65% 6.60% 6.56% Terminal OAR (average) 7.80% 7.88% 7.43% 7.52% 7.41% 7.44% 7.27% 7.19% 7.19% 7.19% 7.13% 7.17% 7.15% 7.15% 7.08% 7.02% IRR (average) 8.73% 8.73% 8.31% 8.33% 8.32% 8.29% 8.17% 8.17% 8.17% 8.17% 8.17% 8.17% 8.13% 8.13% 8.02% 7.92%

INVESTOR SURVEY HISTORICAL RESULTS

OAR (average) Terminal OAR (average) IRR (average)

8.75%

8.50%

8.25%

8.00%

7.75% RATES 7.50%

7.25%

7.00%

6.75%

6.50% 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 1Q 15 ANALYSIS PERIOD

Source: PwC Real Estate Investor Survey

LEASING ASSUMPTIONS The contract lease terms for the existing tenants were used within the Yield Capitalization analysis with market leasing assumptions applied for renewals and absorption tenants. The income and expense information that was previously presented has been used as the basis for our market leasing projections. The following chart summarizes the leasing assumptions that were used in preparing our Yield Capitalization analysis.

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 138

CAPITALIZATION RATE FROM COMPARABLE SALES The following table summarizes overall capitalization rates derived from the improved property sales.

CAPITALIZATION RATE SUMMARY Capitalization No. Name and Location Sales Date Rate 1 Riverdale Crossings Jan-2015 5.11% 184-190 West 237th Street Contract Bronx, New York 2 74-17 74-25 Grand Avenue 10/2014 5.00% N/E/C 74th Street Queens, New York 3 2856 Steinway Street 8/2014 4.62% N/E/C 28th Avenue Queens, New York 4 Waldbaums Shopping Center 1/2014 5.50% 152-59 10th Avenue, Queens, New York 5 Pelham Manor Shopping Plaza 1/2014 5.85% 2 Penn Place Pelham Manor, New York 6 Canarsie Plaza 12/2012 6.20% 8925 Avenue D Brooklyn, New York 7 Clocktower Plaza 9/2012 6.00% 9210 Atlantic Avenue Queens, New York 8 Lake Grove Commons 4/2012 5.60% 110 - 150 New Moriches Road Lake Grove, New York STATISTICS Sample Size 88 Low 1/2012 4.62% High 10/2014 6.20% Average 5/2013 5.48% Compiled by Cushman & Wakefield, Inc. CAPITALIZATION RATE FROM INVESTOR SURVEYS We have considered data extracted from the PwC Real Estate Investor Survey for competitive properties. Earlier in the report, we presented historical capitalization rates for the prior four year period. The most recent information from this survey is listed below:

CAPITALIZATION RATES Survey Date Range Average PwC First Quarter 2015 5.50% - 8.00% 6.56% PwC - Refers to National Power Center market regardless of class or occupancy Most retail properties that are considered institutional grade are existing, seasoned centers with good inflation protection that offer stability in income and are strongly positioned to the extent that they are formidable barriers to new competition. Equally important are centers which offer good upside potential after face-lifting, renovations, or expansion. With new construction down substantially, owners have accelerated renovation and re- merchandising programs. Little competition from over-building is likely in most mature markets within which these

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 139

centers are located. Environmental concerns and "no-growth" mentalities in communities are now serious impediments to new retail development. Investors have recognized that the retail landscape has been fundamentally altered by consumer lifestyles changes, industry consolidations and bankruptcies. This trend has strongly been in evidence during the past two years.

TERMINAL CAPITALIZATION RATE SELECTION We based the estimate of property value at reversion on assumed resale at the end of Year 11, using our forecast of Year 12 net operating income. The reversion value was calculated by applying a capitalization rate of 5.25 percent to the FY 2026/27 NOI and subtracting sales expenses of 4.00 percent. The net cash flows and the net reversion were discounted to net present value using a discount rate of 6.25 percent, the derivation of which is discussed below.

A terminal capitalization rate was used to develop an opinion of the market value of the property at the end of the assumed investment holding period. The rate is applied to the net operating income following year 12 before making deductions for leasing commissions, tenant improvement allowances and reserves for replacement. We have developed an opinion of an appropriate terminal capitalization rate based on indicated rates in current investor surveys.

TERMINAL CAPITALIZATION RATES (OARout) Survey Date Range Average PwC First Quarter 2015 6.00% - 9.00% 7.02% PwC - Refers to National Power Center market regardless of class or occupancy Investors will typically use a slightly more conservative overall rate when exiting an investment versus the rate that would be used going into the investment. This accounts both for the aging associated with the improvements over the course of the holding period, and for any unforeseen risks that might arise over that time period.

A premium was added to today’s rate to allow for the risk of unforeseen events or trends which might affect our estimate of net operating income during the holding period, including a possible deterioration in market conditions for the property. Investors typically add 20 to 150 basis points to the “going-in” rate to arrive at a terminal capitalization rate, according to Cushman & Wakefield’s periodic investor surveys. The difference between going- in capitalization rates and terminal capitalization rates is typically risk related due to time (market conditions).

Based on the overall characteristics of the subject property, we have applied a 5.25 percent terminal capitalization rate in our analysis. This rate is within the range demonstrated by the investor survey, and is reflective of the overall quality of the real estate, and the perceived durability of the income in Year 12. Furthermore, the selected rate reflects a premium paid by investors for well located retail properties in major urban markets like New York City. Moreover, our selected terminal rate is 24 basis points above the implied overall capitalization rate, which is considered reasonable based on the overall performance of the cash flow

DISCOUNT RATE ANALYSIS We estimated future cash flows, including property value at reversion, and discounted that income stream at an internal rate of return (yield rates) currently required by investors for similar-quality real property. The yield rate (internal rate of return or IRR) is the single rate that discounts all future equity benefits (cash flows and equity reversion) to an estimate of net present value.

PriceWaterhouseCoopers, Inc. periodically surveys national real estate investors to determine internal rates of return and overall rates considered acceptable by respondents. The most recent national market indicators published by PwC, is summarized as follows:

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 140

DISCOUNT RATES (IRR) Survey Date Range Average PwC First Quarter 2015 6.00% - 10.00% 7.92% The above table summarizes the investment parameters of some of the most prominent investors currently acquiring similar investment properties in the United States. We realize that this type of survey reflects target rather than transactional rates. Transactional rates are usually difficult to obtain in the verification process and are actually only target rates of the buyer at the time of sale. The property’s performance will ultimately determine the actual yield at the time of sale after a specific holding period.

The subject property is a multi-story urban retail power center that contains a total of 912,333 square feet of gross leasable area (GLA) retail space and a 6-level parking garage with 2,575 spaces located in The Bronx, adjacent to Yankee Stadium. The subject property also includes two 1-story commercial buildings. The subject improvements were constructed in 2009 and are situated on a 16.8-acre site. The subject is 99.3 percent leased on a long term basis and is anchored by Target, BJ’s Wholesale Club, and Home Depot which occupy 48.6 percent (443,500 SF) of the property. In addition, the subject has strong tenancy as approximately 53.1 percent (484,324 SF) of the subject is leased to credit tenants. The subject’s net operating income (NOI) is projected to increase 1.91 percent per annum through the analysis period. In addition, the subject has limited turnover during the next 10 years. Furthermore, 85 percent of the tenants with base lease terms expiring during the initial 10 years of our projection have renewal options at below market rents. The subject property also benefits from a 25- year PILOT tax abatement, which is passed directly along to the tenants since the subject is net leased.

Therefore, taking into consideration subject’s recent construction, prime New York City location, good and credit quality tenancy, long term net leases at below market level rents, parking income, long term ground lease, PILOT tax benefits, and returns expected by investors in the current market in relation to other comparable properties, we discounted our cash flow and reversionary value projections at an internal rate of return at 6.25 percent in our analysis. Our selection of discount rates is considered reasonable given the respective cash flow of the subject property. This rate is within the range of the comparable sales and investor surveys, and is reflective of the overall quality of the real estate, and perceived durability of the income We have also considered the subject significant parking income and the expiration of the PILOT tax abatement.

DISCOUNTED CASH FLOW METHOD CONCLUSION Based on the discount rate selected above, market value would be $625,000,000 rounded. The reversionary sale contributes 57.91 percent to this value estimate. The 12 year discounted cash flow summary table is presented on the following page.

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 141

ANNUAL CASH FLOW REPORT Annual GATEWAY CENTER @ BRONX TERMINAL MARKET Growth 123456789101112Year 1 - For the Years Beginning Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jul-21 Jul-22 Jul-23 Jul-24 Jul-25 Jul-26 For the Years Ending Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Jun-23 Jun-24 Jun-25 Jun-26 Jun-27 Year 11

Base Rental Revenue$ 29,788,196 $ 30,047,108 $ 30,332,304 $ 30,687,220 $ 32,345,216 $ 33,017,254 $ 33,302,989 $ 33,658,929 $ 34,052,809 $ 35,741,771 $ 36,926,841 $ 37,206,751 2.04% Absorption & Turnover Vacancy (14,198) 0 0 0 (28,475) 0 0 0 (42,859) (184,751) (375,415) (57,930) 13.64% Base Rent Abatements (83,366) (11,699) 0 0 (22,780) 0 0 0 (34,287) (107,917) (341,410) (46,344) -5.20% Scheduled Base Rental Revenue$ 29,690,632 $ 30,035,409 $ 30,332,304 $ 30,687,220 $ 32,293,961 $ 33,017,254 $ 33,302,989 $ 33,658,929 $ 33,975,663 $ 35,449,103 $ 36,210,016 $ 37,102,477 2.05%

CAM Reimbursement 9,283,711 9,615,245 9,923,549 10,241,954 10,571,601 10,907,348 11,465,998 11,907,225 12,284,288 12,659,519 13,096,627 13,607,136 3.54% RE Taxes-PILOT 783,824 1,595,681 1,643,869 1,693,515 1,744,103 1,851,563 2,478,704 3,659,690 4,890,731 6,183,957 7,550,918 9,054,100 24.91% Total Reimbursement Revenue$ 10,067,535 $ 11,210,926 $ 11,567,418 $ 11,935,469 $ 12,315,704 $ 12,758,911 $ 13,944,702 $ 15,566,915 $ 17,175,019 $ 18,843,476 $ 20,647,545 $ 22,661,236 7.65%

Net Parking Income 4,200,000 4,284,000 4,369,680 4,457,074 4,546,215 4,637,139 4,729,882 4,824,480 4,920,969 5,019,389 5,119,777 5,222,172 2.00% Miscellaneous 150,000 153,000 156,060 159,181 162,365 165,612 168,924 172,303 175,749 179,264 182,849 186,506 2.00% TOTAL GROSS REVENUE$ 44,108,167 $ 45,683,335 $ 46,425,462 $ 47,238,944 $ 49,318,245 $ 50,578,916 $ 52,146,497 $ 54,222,627 $ 56,247,400 $ 59,491,232 $ 62,160,187 $ 65,172,391 3.61%

General Vacancy (427,026) (456,833) (464,255) (472,389) (464,992) (505,789) (521,465) (542,226) (520,044) (412,009) (249,941) (594,373) 3.05% Collection Loss (355,756) (371,337) (379,064) (385,231) (397,163) (411,668) (429,687) (447,765) (461,141) (569,946) (676,372) (716,233) 6.57% EFFECTIVE GROSS REVENUE$ 43,325,385 $ 44,855,165 $ 45,582,143 $ 46,381,324 $ 48,456,090 $ 49,661,459 $ 51,195,345 $ 53,232,636 $ 55,266,215 $ 58,509,277 $ 61,233,874 $ 63,861,785 3.59%

CAM 5,200,000 5,356,000 5,516,680 5,682,180 5,852,646 6,028,225 6,209,072 6,395,344 6,587,204 6,784,821 6,988,365 7,198,016 3.00% Insurance 500,000 515,000 530,450 546,363 562,754 579,637 597,026 614,937 633,385 652,387 671,958 692,117 3.00% Security 1,600,000 1,648,000 1,697,440 1,748,363 1,800,814 1,854,839 1,910,484 1,967,798 2,026,832 2,087,637 2,150,266 2,214,774 3.00% Shared Facilities HVAC 400,000 412,000 424,360 437,091 450,204 463,710 477,621 491,950 506,708 521,909 537,567 553,694 3.00% General and Administrative 300,000 309,000 318,270 327,818 337,653 347,782 358,216 368,962 380,031 391,432 403,175 415,270 3.00% Direct Utilities 550,000 566,500 583,495 601,000 619,030 637,601 656,729 676,431 696,724 717,625 739,154 761,329 3.00% RE Taxes-PILOT 775,499 1,574,419 1,621 1,670,950 1,721,412 1,826,956 2,397,903 3,517,442 4,702,414 5,955,751 7,280,500 8,679,832 24.55% Ground Rent Credit (200,000) (400,000) (400,000) (425,000) (425,000) (450,000) (475,000) (475,000) (500,000) 0 -100.00% Management Fee 1,299,762 1,345,655 1,367,464 1,391,440 1,453,683 1,489,844 1,535,860 1,596,979 1,657,986 1,755,278 1,837,016 1,915,854 3.59% Ground Rent 634,171 961,290 969,929 980,258 1,027,014 1,048,062 1,408,473 1,422,312 1,434,602 1,491,771 1,549,107 1,559,968 8.53% Legal & Professional Fees 175,000 180,250 185,658 191,227 196,964 202,873 208,959 215,228 221,685 228,335 235,185 242,241 3.00% Miscellaneous 750,000 772,500 795,675 819,545 844,132 869,456 895,539 922,405 950,078 978,580 1,007,937 1,038,175 3.00% TOTAL OPERATING EXPENSES$ 11,984,432 $ 13,240,614 $ 11,991,042 $ 13,971,235 $ 14,441,306 $ 14,898,985 $ 16,180,882 $ 17,714,788 $ 19,297,649 $ 21,565,526 $ 23,400,230 $ 25,271,270 7.02%

NET OPERATING INCOME$ 31,340,953 $ 31,614,551 $ 33,591,101 $ 32,410,089 $ 34,014,784 $ 34,762,474 $ 35,014,463 $ 35,517,848 $ 35,968,566 $ 36,943,751 $ 37,833,644 $ 38,590,515 1.91%

Capital Reserves 136,850 140,955 145,184 149,540 154,026 158,647 163,406 168,308 173,357 178,558 183,915 189,432 3.00% Tenant Improvements60,63000000000000-100.00% Leasing Commissions 136,721 32,769 0 0 63,810 0 0 0 96,042 264,432 809,160 129,814 -0.47% TOTAL LEASING & CAPITAL COSTS $ 334,201 $ 173,724 $ 145,184 $ 149,540 $ 217,836 $ 158,647 $ 163,406 $ 168,308 $ 269,399 $ 442,990 $ 993,075 $ 319,246 -0.42%

CASH FLOW BEFORE DEBT SERVICE$ 31,006,752 $ 31,440,827 $ 33,445,917 $ 32,260,549 $ 33,796,948 $ 34,603,827 $ 34,851,057 $ 35,349,540 $ 35,699,167 $ 36,500,761 $ 36,840,569 $ 38,271,269 1.93%

Implied Overall Rate 5.01% 5.06% 5.37% 5.19% 5.44% 5.56% 5.60% 5.68% 5.75% 5.91% 6.05% Cash on Cash Return 4.96% 5.03% 5.35% 5.16% 5.41% 5.54% 5.58% 5.66% 5.71% 5.84% 5.89%

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 142

DISCOUNTED CASH FLOW MODELING ASSUMPTIONS VALUATION SCENARIO: Market Value As-Is GENERAL CASH FLOW ASSUMPTIONS GROWTH RATES Cash Flow Software: ARGUS - Version 15 Market Rent: 3.00% Cash Flow Start Date: 7/1/2015 Consumer Price Index (CPI): 3.00% Calendar or Fiscal Analysis: Fiscal Expenses: 3.00% Investment Holding Period: 11 Years Tenant Improvements: 3.00% Analysis Projection Period: 12 Years Real Estate Taxes: 3% after PILOT expires na na

VACANCY & COLLECTION LOSS RATES OF RETURN Global Vacancy: 1.00% Internal Rate of Return: (Cash Flow) 6.25% Global Collection Loss: 2.00% Internal Rate of Return: (Reversion) 6.25% Total Vacancy & Collection Loss: 3.00% Terminal Capitalization Rate: 5.25% Reversionary Sales Cost: 4.00% Basis Point Spread (OARout vs. OARin) 54 pts

VALUATION CAPITAL EXPENDITURES Market Value As-Is $625,532,651 Reserves for Replacement ($/SF): $0.15 LESS Curable Depreciation $0 Adjusted Value $625,532,651 Rounded to nearest $1,000,000 $625,000,000 Value $/SF $685.06

Compiled by Cushman & Wakefield, Inc.

$45,000,000

$40,000,000

$35,000,000

$30,000,000

$25,000,000

$20,000,000

$15,000,000

$10,000,000

$5,000,000

$- 123456789101112

Net Operating Income Cash Flow Before Debt Service

PRICING MATRIX - Market Value As-Is Terminal Discount Rate (IRR) for Cash Flow Cap Rates 5.75% 6.00% 6.25% 6.50% 6.75% 4.75%$ 692,018,262 $ 677,654,247 $ 663,661,225 $ 650,028,444 $ 636,745,488 5.00%$ 670,934,696 $ 657,111,256 $ 643,643,724 $ 630,521,802 $ 617,735,516 5.25%$ 651,859,089 $ 638,524,740 $ 625,532,651 $ 612,872,935 $ 600,536,017 5.50%$ 634,517,628 $ 621,627,907 $ 609,068,039 $ 596,828,511 $ 584,900,109 5.75%$ 618,684,120 $ 606,200,364 $ 594,035,132 $ 582,179,254 $ 570,623,845

IRR Reversion 5.75% 6.00% 6.25% 6.50% 6.75% Cost of Sale at Reversion: 4.00% Percent Residual: 57.91% Rounded: $625,000,000 $685.06

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 143

Based on the discount rate selected above, market value would be $625,000,000 rounded. The reversionary sale contributes 57.91 percent to this value estimate.

DIRECT CAPITALIZATION VALUATION METHOD In the direct capitalization method, we estimated market value by dividing stabilized net operating income by an overall rate derived from our analyses of market sales and computed by dividing the net operating income from a sold property by its sale price. We have utilized the sales exhibited in the respective Sales Comparison Approaches. The overall capitalization rates derived from the most applicable improved property sales are shown below:

CAPITALIZATION RATE SUMMARY Capitalization No. Name and Location Sales Date Rate 1 Riverdale Crossings Jan-2015 5.11% 184-190 West 237th Street Contract Bronx, New York 2 74-17 74-25 Grand Avenue 10/2014 5.00% N/E/C 74th Street Queens, New York 3 2856 Steinway Street 8/2014 4.62% N/E/C 28th Avenue Queens, New York 4 Waldbaums Shopping Center 1/2014 5.50% 152-59 10th Avenue, Queens, New York 5 Pelham Manor Shopping Plaza 1/2014 5.85% 2 Penn Place Pelham Manor, New York 6 Canarsie Plaza 12/2012 6.20% 8925 Avenue D Brooklyn, New York 7 Clocktower Plaza 9/2012 6.00% 9210 Atlantic Avenue Queens, New York 8 Lake Grove Commons 4/2012 5.60% 110 - 150 New Moriches Road Lake Grove, New York STATISTICS Sample Size 88 Low 1/2012 4.62% High 10/2014 6.20% Average 5/2013 5.48% Compiled by Cushman & Wakefield, Inc. The comparable sales vary in location but are generally located within comparable retail markets. The overall rates derived from the retail properties ranged between 4.62 and 6.20 percent, with an average of 5.48 percent. The comparable sales vary in location but are generally located within comparable retail markets. These sales are the most comparable in terms of location, tenancy and income profiles.

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 144

Gateway Center at Bronx Terminal Market is a multi-level retail urban power center that contains a total of 912,333 square feet of gross leasable area (GLA) retail space and a 6-level parking garage with 2,575 spaces located in the Bronx, adjacent to Yankee Stadium. The subject property also includes two 1-story commercial buildings. The subject improvements were constructed in 2009 and are situated on a 16.80-acre site. The subject is 99.3 percent net leased at below current market levels on a long term basis and is anchored by Target, BJ’s Wholesale Club, and Home Depot which occupy 48.6 percent (443,500 SF) of the property. In addition, the subject has a strong tenancy as 53.1 percent (484,324 SF) of the subject is leased to credit tenants. The subject net operating income (NOI) is projected to increase 1.91 percent per annum through the analysis period. In addition, the subject has limited turnover during the next 10 years. Furthermore, 85 percent of the tenants with base lease terms expiring during the initial 10 years of our projection have renewal options at below market rents.

Based on the specific characteristics of the subject property, along with our observations and analysis suggest that a going-in capitalization rate of 5.00 percent represents reasonable investor criteria under current market conditions. A summary of the direct capitalization method is shown below.

INDICATED VALUE BASED ON DIRECT CAPITALIZATION OF NOI DIRECT CAPITALIZATION METHOD Market Value As-Is NET OPERATING INCOME $31,340,953 $34.35 Sensitivity Analysis (0.25% OAR Spread) Value $/SF GLA Based on Low-Range of 4.75% $659,809,537 $723.21 Based on Most Probable Range of 5.00% $626,819,060 $687.05 Based on High-Range of 5.25% $596,970,533 $654.33 Indicated Value $626,819,060 $687.05 Rounded to nearest $1,000,000 $625,000,000 $685.06 Compiled by Cushman & Wakefield, Inc.

RECONCILIATION WITHIN INCOME CAPITALIZATION APPROACH SUMMARY OF INCOME CAPITALIZATION METHODS Value Indicated by the Discounted Cash Flow Method: $625,000,000

Value Indicated by the Direct Capitalization Method: $625,000,000

We have placed equal reliance on the Discounted Cash Flow Method and the Direct Capitalization Method. Therefore, our opinion of market value via the Income Capitalization Approach is as follows.

INCOME CAPITALIZATION CONCLUSION Market Value - Not adjusted for any Transactions Costs: $625,000,000

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 145

Overall, we have estimated the market value of the subject property to be $625,000,000 as detailed in the previous analysis within the Income Capitalization Approach section of this report. According to the Section 12.1b (vi) of the ground lease, the Net Sale Proceeds are defined as the Gross Sale Proceeds (market value of the subject property) less the following deductions:

(1) the amount of any Mortgage (including accrued interest and other sums), or proportionate share thereof, satisfied with the proceeds of Sale or assigned or purchased by a new lender or assumed or to which the estate conveyed in such Sale is taken subject by the purchaser at such Sale,

(2) accrued Operating Losses,

(5) an amount equal to Net Sales Proceeds upon which a prior Transaction Payment was made,

(6) all cash equity of Tenant invested in the Premises and

(7) a developer’s fee equal to 3% of Development Costs.

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 146

We have reviewed a letter dated January 16, 2014 from the ground lessee (BTM Development Partners, LLC ) to the City of New York (fee owner) which details the anticipated transactions costs related to the recent $380,000,000 refinancing of the subject property’s. According to the ownership, the economics of the refinancing are consistent with the current deductions. The letter, which is exhibited in the Addenda, details the allowable deductions from the Gross Loan Proceeds and the calculation of the Net Cash Proceeds. Some of the deductions defined in the ground lease used in calculating the transaction payment apply to both a refinancing or a sale transaction. However, based on the pending $380,000,000 mortgage, we have utilized this amount as the mortgage amount in the calculation of Net Sale Proceeds. Therefore, we have utilized the applicable deductions (Nos. 1, 3, 6 & 7 referenced above) which total $459,460,734 which were detailed by the lessee while calculating the Net Cash Proceeds from a refinance. In addition, we have also estimated transactions costs of 4.0 percent of the sales price ($625,000,000) or $25,000,000 regarding sales commissions, sales transfer tax, legal, title, professional fees, and other miscellaneous costs. Overall, our estimated deductions totaled $459,460,734. As a result, our Net Sale Proceeds reflected $157,913,243. Based on the defined 7.5 percent formula in the ground lease, the transaction payment due the landlord was calculated to be $11,843,493. We have rounded the transaction payment to $12,000,000 for the income approach.

Exhibited below is our calculation of the actual “Net Sales Proceeds” and the Transaction Payment of 7.5 percent of net proceeds:

CALCULATION OF THE TRANSACTION PAYMENT FROM SALE Preliminary Market Value-Leasehold: $625,000,000

Less: Deductions Per Ground Lease

1: Mortgage Amount: $380,000,000

2: Operating Losses: N/A

3: Sale Costs @ 4% (sales commissions, transfer tax, legal, title, etc.) $25,000,000

4: Adjustment of any indebtedness discharged or reduced N/A

5: Adjustment for prior Transaction Payment: N/A

6: All cash equity of Tenant invested in the subject $40,500,000

7: Developer fee equal to 3% of development costs $13,960,734

Total Deductions: $459,460,734

Net Sale Proceeds from Sale $157,913,243

Transaction Payment due @7.5% from Sale $11,843,493

Rounded: $12,000,000

GATEWAY CENTER AT BRONX TERMINAL MARKET INCOME CAPITALIZATION APPROACH 147

Therefore, our opinion of As Is market value via the Income Capitalization Approach is as follows.

INCOME CAPITALIZATION CONCLUSION-AFTER NET SALE PROCEEDS Preliminary As Is Market Value: $625,000,000

Less: Net Sale Proceeds Obligation $ 12,000,000

As Is Market Value, rounded, $613,000,000

GATEWAY CENTER AT BRONX TERMINAL MARKET RECONCILIATION AND FINAL VALUE OPINION 148

RECONCILIATION AND FINAL VALUE OPINION

VALUATION METHODOLOGY REVIEW AND RECONCILIATION This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that the Sales Comparison Approach and the Income Capitalization Approach would be considered meaningful and applicable in developing a credible value conclusion. Investors do not typically rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not relied upon the Cost Approach to develop an opinion of market value.

The applicable approaches indicated the following:

METHODOLOGY Sales Comparison Approach- Adjusted for Net Sale Proceeds: $605,000,000

Income Capitalization Approach-Adjusted for Net Sale Proceeds: $613,000,000

We have given most weight to the Income Capitalization Approach because this mirrors the methodology used by purchasers of this property type. We have also considered the Sales Comparison Approach for additional support.

MARKET VALUE AS IS Based on the agreed to Scope of Work, and as outlined in the report, we developed an opinion that the Market Value of the Leasehold estate of the above property, after adjusting for Transactions Costs via Net Sale Proceeds to be paid by the landlord as per the ground lease, subject to the assumptions and limiting conditions, certifications, extraordinary assumptions and hypothetical conditions, if any, and definitions, “As-Is” on June 10, 2015, was: SIX HUNDRED THIRTEEN MILLION DOLLARS

$613,000,000

The value opinion reported above assumes a sale of the subject property as of the date of value. The value considers the 7.5 percent Transaction Cost deduction based on the Net Sales Proceeds.

EXPOSURE TIME AND MARKETING TIME Based on our review of national investor surveys, discussions with market participants and information gathered during the sales verification process, a reasonable exposure time for the subject property at the value concluded within this report would have been approximately 9 (nine) months. This assumes an active and professional marketing plan would have been employed by the current owner.

GATEWAY CENTER AT BRONX TERMINAL MARKET ASSUMPTIONS AND LIMITING CONDITIONS 149

ASSUMPTIONS AND LIMITING CONDITIONS "Report" means the appraisal or consulting report and conclusions stated therein, to which these Assumptions and Limiting Conditions are annexed. "Property" means the subject of the Report. "C&W" means Cushman & Wakefield, Inc. or its subsidiary that issued the Report. "Appraiser(s)" means the employee(s) of C&W who prepared and signed the Report. The Report has been made subject to the following assumptions and limiting conditions:  No opinion is intended to be expressed and no responsibility is assumed for the legal description or for any matters that are legal in nature or require legal expertise or specialized knowledge beyond that of a real estate appraiser. Title to the Property is assumed to be good and marketable and the Property is assumed to be free and clear of all liens unless otherwise stated. No survey of the Property was undertaken.  The information contained in the Report or upon which the Report is based has been gathered from sources the Appraiser assumes to be reliable and accurate. The owner of the Property may have provided some of such information. Neither the Appraiser nor C&W shall be responsible for the accuracy or completeness of such information, including the correctness of estimates, opinions, dimensions, sketches, exhibits and factual matters. Any authorized user of the Report is obligated to bring to the attention of C&W any inaccuracies or errors that it believes are contained in the Report.  The opinions are only as of the date stated in the Report. Changes since that date in external and market factors or in the Property itself can significantly affect the conclusions in the Report.  The Report is to be used in whole and not in part. No part of the Report shall be used in conjunction with any other analyses. Publication of the Report or any portion thereof without the prior written consent of C&W is prohibited. Reference to the Appraisal Institute or to the MAI designation is prohibited. Except as may be otherwise stated in the letter of engagement, the Report may not be used by any person(s) other than the party(ies) to whom it is addressed or for purposes other than that for which it was prepared. No part of the Report shall be conveyed to the public through advertising, or used in any sales, promotion, offering or SEC material without C&W's prior written consent. Any authorized user(s) of this Report who provides a copy to, or permits reliance thereon by, any person or entity not authorized by C&W in writing to use or rely thereon, hereby agrees to indemnify and hold C&W, its affiliates and their respective shareholders, directors, officers and employees, harmless from and against all damages, expenses, claims and costs, including attorneys' fees, incurred in investigating and defending any claim arising from or in any way connected to the use of, or reliance upon, the Report by any such unauthorized person(s) or entity(ies).  Except as may be otherwise stated in the letter of engagement, the Appraiser shall not be required to give testimony in any court or administrative proceeding relating to the Property or the Appraisal.  The Report assumes (a) responsible ownership and competent management of the Property; (b) there are no hidden or unapparent conditions of the Property, subsoil or structures that render the Property more or less valuable (no responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them); (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws, unless noncompliance is stated, defined and considered in the Report; and (d) all required licenses, certificates of occupancy and other governmental consents have been or can be obtained and renewed for any use on which the value opinion contained in the Report is based.  The physical condition of the improvements considered by the Report is based on visual inspection by the Appraiser or other person identified in the Report. C&W assumes no responsibility for the soundness of structural components or for the condition of mechanical equipment, plumbing or electrical components.  The forecasted potential gross income referred to in the Report may be based on lease summaries provided by the owner or third parties. The Report assumes no responsibility for the authenticity or completeness of lease information provided by others. C&W recommends that legal advice be obtained regarding the interpretation of lease provisions and the contractual rights of parties.

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 The forecasts of income and expenses are not predictions of the future. Rather, they are the Appraiser's best opinions of current market thinking on future income and expenses. The Appraiser and C&W make no warranty or representation that these forecasts will materialize. The real estate market is constantly fluctuating and changing. It is not the Appraiser's task to predict or in any way warrant the conditions of a future real estate market; the Appraiser can only reflect what the investment community, as of the date of the Report, envisages for the future in terms of rental rates, expenses, and supply and demand.  Unless otherwise stated in the Report, the existence of potentially hazardous or toxic materials that may have been used in the construction or maintenance of the improvements or may be located at or about the Property was not considered in arriving at the opinion of value. These materials (such as formaldehyde foam insulation, asbestos insulation and other potentially hazardous materials) may adversely affect the value of the Property. The Appraisers are not qualified to detect such substances. C&W recommends that an environmental expert be employed to determine the impact of these matters on the opinion of value.  Unless otherwise stated in the Report, compliance with the requirements of the Americans with Disabilities Act of 1990 (ADA) has not been considered in arriving at the opinion of value. Failure to comply with the requirements of the ADA may adversely affect the value of the Property. C&W recommends that an expert in this field be employed to determine the compliance of the Property with the requirements of the ADA and the impact of these matters on the opinion of value.  If the Report is submitted to a lender or investor with the prior approval of C&W, such party should consider this Report as only one factor, together with its independent investment considerations and underwriting criteria, in its overall investment decision. Such lender or investor is specifically cautioned to understand all Extraordinary Assumptions and Hypothetical Conditions and the Assumptions and Limiting Conditions incorporated in this Report.  In the event of a claim against C&W or its affiliates or their respective officers or employees or the Appraisers in connection with or in any way relating to this Report or this engagement, the maximum damages recoverable shall be the amount of the monies actually collected by C&W or its affiliates for this Report and under no circumstances shall any claim for consequential damages be made.  If the Report is referred to or included in any offering material or prospectus, the Report shall be deemed referred to or included for informational purposes only and C&W, its employees and the Appraiser have no liability to such recipients. C&W disclaims any and all liability to any party other than the party that retained C&W to prepare the Report.  Any estimate of insurable value, if included within the agreed upon scope of work and presented within this report, is based upon figures derived from a national cost estimating service and is developed consistent with industry practices. However, actual local and regional construction costs may vary significantly from our estimate and individual insurance policies and underwriters have varied specifications, exclusions, and non-insurable items. As such, we strongly recommend that the Client obtain estimates from professionals experienced in establishing insurance coverage for replacing any structure. This analysis should not be relied upon to determine insurance coverage. Furthermore, we make no warranties regarding the accuracy of this estimate.  By use of this Report each party that uses this Report agrees to be bound by all of the Assumptions and Limiting Conditions, Hypothetical Conditions and Extraordinary Assumptions stated herein.

GATEWAY CENTER AT BRONX TERMINAL MARKET CERTIFICATION OF APPRAISAL 151

CERTIFICATION OF APPRAISAL We certify that, to the best of our knowledge and belief:  The statements of fact contained in this report are true and correct.  The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our is my personal, impartial, and unbiased professional analyses, opinions, and conclusions.  We I have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved.  We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.  Our engagement in this assignment was not contingent upon developing or reporting predetermined results.  Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.  The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice.  The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.  John A. Katinos, MAI and James P. Stuckey Jr. did make a personal inspection of the property that is the subject of this report.  We have performed prior services involving the subject property within the three-year period immediately preceding the acceptance of the assignment. The most recent services included a previous appraisal in April 2013.  No one provided significant real property appraisal assistance to the persons signing this report.  As of the date of this report, John A. Katinos, MAI, has completed the continuing education program of the Appraisal Institute.  As of the date of this report, James P. Stuckey Jr. has completed the Standards and Ethics Education Requirements for Candidates/Practicing Affiliates of the Appraisal Institute.

GATEWAY CENTER AT BRONX TERMINAL MARKET GLOSSARY OF TERMS & DEFINITIONS 152

AS IS MARKET VALUE The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date. (Proposed Interagency Appraisal and Evaluation Guidelines, OCC-4810-33-P 20%)

BAND OF INVESTMENT A technique in which the capitalization rates attributable to components of a capital investment are weighted and combined to derive a weighted-average rate attributable to the total investment.

CASH EQUIVALENCY An analytical process in which the sale price of a transaction with nonmarket financing or financing with unusual conditions or incentives is converted into a price expressed in terms of cash.

DEPRECIATION 1. In appraising, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date. 2. In accounting, an allowance made against the loss in value of an asset for a defined purpose and computed using a specified method.

ELLWOOD FORMULA A yield capitalization method that provides a formulaic solution for developing a capitalization rate for various combinations of equity yields and mortgage terms. The formula is applicable only to properties with stable or stabilized income streams and properties with income streams expected to change according to the J- or K-factor pattern. The formula is RO = [YE – M (YE + P 1/Sn¬ – RM) – ∆O 1/S n¬] / [1 + ∆I J] where RO = Overall Capitalization Rate YE = Equity Yield Rate M = Loan-to-Value Ratio P = Percentage of Loan Paid Off 1/S n¬ = Sinking Fund Factor at the Equity Yield Rate RM =Mortgage Capitalization Rate ∆O = Change in Total Property Value ∆I = Total Ratio Change in Income J = J Factor Also called mortgage-equity formula.

EXPOSURE TIME 1. The time a property remains on the market. 2. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. See also marketing time.

EXTRAORDINARY ASSUMPTION An assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s opinions or conclusions.

Comment: Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.

FEE SIMPLE ESTATE Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.

HYPOTHETICAL CONDITIONS A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.

Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.

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INSURABLE VALUE A type of value for insurance purposes.

INTENDED USE The use or uses of an appraiser’s reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment.

INTENDED USER The client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment.

LEASED FEE INTEREST A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease).

LEASEHOLD INTEREST The tenant’s possessory interest created by a lease. See also negative leasehold; positive leasehold.

MARKET RENT The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the lease agreement, including permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs).

MARKET VALUE As defined in the Agencies’ appraisal regulations, the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

 Buyer and seller are typically motivated;

 Both parties are well informed or well advised, and acting in what they consider their own best interests;

 A reasonable time is allowed for exposure in the open market;

 Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

 The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.1

MARKETING TIME An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, “Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions” address the determination of reasonable exposure and marketing time.) See also exposure time.

MORTGAGE-EQUITY ANALYSIS Capitalization and investment analysis procedures that recognize how mortgage terms and equity requirements affect the value of income-producing property.

OPERATING EXPENSES Other Taxes, Fees & Permits - Personal property taxes, sales taxes, utility taxes, fees and permit expenses. Property Insurance – Coverage for loss or damage to the property caused by the perils of fire, lightning, extended coverage perils, vandalism and malicious mischief, and additional perils. Management Fees - The sum paid for management services. Management services may be contracted for or provided by the property owner. Management expenses may include supervision, on-site offices or apartments for resident managers, telephone service, clerical help, legal or accounting services, printing and postage, and advertising. Management fees may occasionally be included among recoverable operating expenses Total Administrative Fees – Depending on the nature of the real estate, these usually include professional fees and other general administrative expenses, such as rent of offices and the services needed to operate the property. Administrative expenses can be provided either in the following expense

1 “Interagency Appraisal and Evaluation Guidelines.” Federal Register 75:237 (December 10, 2010) p. 77472.

GATEWAY CENTER AT BRONX TERMINAL MARKET GLOSSARY OF TERMS & DEFINITIONS 154

subcategories or in a bulk total. 1) Professional Fees – Fees paid for any professional services contracted for or incurred in property operation; or 2) Other Administrative – Any other general administrative expenses incurred in property operation. Heating Fuel - The cost of heating fuel purchased from outside producers. The cost of heat is generally a tenant expense in single-tenant, industrial or retail properties, and apartment projects with individual heating units. It is a major expense item shown in operating statements for office buildings and many apartment properties. The fuel consumed may be coal, oil, or public steam. Heating supplies, maintenance, and workers’ wages are included in this expense category under certain accounting methods. Electricity - The cost of electricity purchased from outside producers. Although the cost of electricity for leased space is frequently a tenant expense, and therefore not included in the operating expense statement, the owner may be responsible for lighting public areas and for the power needed to run elevators and other building equipment. Gas - The cost of gas purchased from outside producers. When used for heating and air conditioning, gas can be a major expense item that is either paid by the tenant or reflected in the rent. Water & Sewer - The cost of water consumed, including water specially treated for the circulating ice water system, or purchased for drinking purposes. The cost of water is a major consideration for industrial plants that use processes depending on water and for multifamily projects, in which the cost of sewer service usually ties to the amount of water used. It is also an important consideration for laundries, restaurants, taverns, hotels, and similar operations. Other Utilities - The cost of other utilities purchased from outside producers. Total Utilities - The cost of utilities net of energy sales to stores and others. Utilities are services rendered by public and private utility companies (e.g., electricity, gas, heating fuel, water/sewer and other utilities providers). Utility expenses can be provided either in expense subcategories or in a bulk total. Repairs & Maintenance - All expenses incurred for the general repairs and maintenance of the building, including common areas and general upkeep. Repairs and maintenance expenses include elevator, HVAC, electrical and plumbing, structural/roof, and other repairs and maintenance expense items. Repairs and Maintenance expenses can be provided either in the following expense subcategories or in a bulk total. 1) Elevator - The expense of the contract and any additional expenses for elevator repairs and maintenance. This expense item may also include escalator repairs and maintenance. 2) HVAC – The expense of the contract and any additional expenses for heating, ventilation and air-conditioning systems. 3) Electrical & Plumbing - The expense of all repairs and maintenance associated with the property’s electrical and plumbing systems. 4) Structural/Roof - The expense of all repairs and maintenance associated with the property’s building structure and roof. 5) Pest Control – The expense of insect and rodent control. 6). Other Repairs & Maintenance - The cost of any other repairs and maintenance items not specifically included in other expense categories. Common Area Maintenance - The common area is the total area within a property that is not designed for sale or rental, but is available for common use by all owners, tenants, or their invitees, e.g., parking and its appurtenances, malls, sidewalks, landscaped areas, recreation areas, public toilets, truck and service facilities. Common Area Maintenance (CAM) expenses can be entered in bulk or through the sub-categories. 1) Utilities – Cost of utilities that are included in CAM charges and passed through to tenants. 2) Repair & Maintenance – Cost of repair and maintenance items that are included in CAM charges and passed through to tenants. 3) Parking Lot Maintenance – Cost of parking lot maintenance items that are included in CAM charges and passed through to tenants. 4) Snow Removal – Cost of snow removal that are included in CAM charges and passed through to tenants. 5) Grounds Maintenance – Cost of ground maintenance items that are included in CAM charges and passed through to tenants. 6) Other CAM expenses are items that are included in CAM charges and passed through to tenants. Painting & Decorating - This expense category is relevant to residential properties where the landlord is required to prepare a dwelling unit for occupancy in between tenancies. Cleaning & Janitorial - The expenses for building cleaning and janitorial services, for both daytime and night-time cleaning and janitorial service for tenant spaces, public areas, atriums, elevators, restrooms, windows, etc. Cleaning and Janitorial expenses can be provided either in the following subcategories or entered in a bulk total. 1) Contract Services - The expense of cleaning and janitorial services contracted for with outside service providers. 2) Supplies, Materials & Misc. - The cost any cleaning materials and any other janitorial supplies required for property cleaning and janitorial services and not covered elsewhere. 3) Trash Removal - The expense of property trash and rubbish removal and related services. Sometimes this expense item includes the cost of pest control and/or snow removal .4) Other Cleaning/Janitorial - Any other cleaning and janitorial related expenses not included in other specific expense categories. Advertising & Promotion - Expenses related to advertising, promotion, sales, and publicity and all related printing, stationary, artwork, magazine space, broadcasting, and postage related to marketing. Professional Fees - All professional fees associated with property leasing activities including legal, accounting, data processing, and auditing costs to the extent necessary to satisfy tenant lease requirements and permanent lender requirements. Total Payroll - The payroll expenses for all employees involved in the ongoing operation of the property, but whose salaries and wages are not included in other expense categories. Payroll expenses can be provided either in the following subcategories or entered in a bulk total. 1) Administrative Payroll - The payroll expenses for all employees involved in on-going property administration. 2) Repair & Maintenance Payroll - The expense of all employees involved in on-going repairs and maintenance of the property. 3) Cleaning Payroll - The expense of all employees involved in providing on-going cleaning and janitorial services to the property 4) Other Payroll - The expense of any other employees involved in providing services to the property not covered in other specific categories. Security - Expenses related to the security of the Lessees and the Property. This expense item includes payroll, contract services and other security expenses not covered in other expense categories. This item also includes the expense of maintenance of security systems such as alarms and closed circuit television (CCTV), and ordinary supplies necessary to operate a security program, including batteries, control forms, access cards, and security uniforms. Roads & Grounds - The cost of maintaining the grounds and parking areas of the property. This expense can vary widely depending on the type of property and its total area. Landscaping improvements can range from none to extensive beds, gardens and trees. In addition, hard-surfaced public parking areas with drains, lights, and marked car spaces are subject to intensive wear and can be costly to maintain. Other Operating Expenses - Any other expenses incurred in the operation of the property not specifically covered elsewhere. Real Estate Taxes - The tax levied on real estate (i.e., on the land, appurtenances, improvements, structures and buildings); typically by the state, county and/or municipality in which the property is located.

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PROSPECTIVE OPINION OF VALUE A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy.

PROSPECTIVE VALUE UPON REACHING STABILIZED OCCUPANCY The value of a property as of a point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. At such point, all capital outlays for tenant improvements, leasing commissions, marketing costs and other carrying charges are assumed to have been incurred.

SPECIAL, UNUSUAL, OR EXTRAORDINARY ASSUMPTIONS Before completing the acquisition of a property, a prudent purchaser in the market typically exercises due diligence by making customary enquiries about the property. It is normal for a Valuer to make assumptions as to the most likely outcome of this due diligence process and to rely on actual information regarding such matters as provided by the client. Special, unusual, or extraordinary assumptions may be any additional assumptions relating to matters covered in the due diligence process, or may relate to other issues, such as the identity of the purchaser, the physical state of the property, the presence of environmental pollutants (e.g., ground water contamination), or the ability to redevelop the property.

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ADDENDA CONTENTS

ADDENDUM A: COMPARABLE IMPROVED SALES DATASHEETS ADDENDUM B: GROUND LEASE CALCULATION ADDENDUM C: LESSEE PROVIDED “TRANSACTION COSTS” CALCULATION ADDENDUM D: QUALIFICATIONS OF THE APPRAISERS

GATEWAY CENTER AT BRONX TERMINAL MARKET ADDENDA CONTENTS 157

ADDENDUM A: COMPARABLE IMPROVED SALES DATASHEETS

IMPROVED SALE COMPARABLE - 1

Shopping Center 184-190 West 237th Street Bronx NY MSA: N/A

Property Type: Shopping Center Property Subtype: N/A ID: 302076 APN: N/A

Included PROPERTY INFORMATION Anchors in Sale GLA Site Area (Acres): N/A BJ'S Wholesale X 118,423 Site Area (SqFt): N/A IN-Line X 40,714 L:B Ratio: N/A Parking Spaces: N/A Parking Ratio: N/A Year Built: 2014 Last Renovation: N/A Total Anchor GLA 159,137 Quality: N/A Inline GLA X N/A Condition: N/A Total GLA 159,137 Sold GLA 159,137 SALE INFORMATION Sale Status: In-Contract OAR: 5.11% Transaction Date: 1/2015 NOI: $6,387,500 Sale Price: $125,000,000 NOI per SqFt: $40.14 Price per SqFt: $785.49 Occupancy: 97.00% Value Interest: Leased Fee Expense Ratio: N/A Grantor: Confidential EGIM: N/A Grantee: Confidential Condition of Sale: None

VERIFICATION COMMENTS C&W Research

COMMENTS This is the contract of sale for a newly constructed retail power center a known as Riverdale Crossings, located at 184-190 West 237th Street within the Kingsbridge neighborhood of the Bronx. The property is being acquired by a confidential buyer from AG- Metropolitan Riverdale Crossing, L.L.C. for a reported price of $125,000,000 or $785.98 per square foot. . The property was formerly improved with the Stella D’oro Bakery which was razed for the Riverdale Crossings retail center development. The center is anchored by BJ’s Wholesale Club, which has leased 118,423 square feet (74.5%) of the subject property and contains its own 2-story, plus lower level building with rooftop parking. The majority of the BJ’s Warehouse Club retail space is located below grade. The remaining 40,714 square feet of in-line retail space is be and will contains ground and second floor retail space along with rooftop parking. The subject property is currently 96.7 percent leased to 8 tenants inclusive of BJ’s Wholesale Club, Bank of America, Chipotle, Smashburger, TMobile, Subway, Buffalo Wild Wings and CityMD. The property was purchased based upon an overall capitalization rate of 5.11 percent.

VALUATION & ADVISORY IMPROVED SALE COMPARABLE - 2

Shops at Grand Avenue 74-25 Grand Avenue Maspeth NY 11378 MSA: New York Queens County

Property Type: Shopping Center Property Subtype: Neighborhood Center ID: 167346 APN: N/A

Included PROPERTY INFORMATION Anchors in Sale GLA (SF) Site Area (Acres): 4.46 Stop & Shop Site Area (SqFt): 194,278 TJ Maxx L:B Ratio: 1.94:1 Parking Spaces: N/A Parking Ratio: N/A Year Built: N/A Last Renovation: 1997 Total Anchor GLA N/A Quality: Good Inline GLA X N/A Condition: Good Other GLA X 99,986 Total GLA 99,986 Sold GLA 99,986 SALE INFORMATION Sale Status: Recorded Sale OAR: 5.00% Transaction Date: 10/2014 NOI: $2,800,000 Sale Price: $56,000,000 NOI per SqFt: $28.00 Price per SqFt: $560.08 Occupancy: 100.00% Value Interest: Leased Fee Expense Ratio: N/A Grantor: CPT Grand Avenue LLC EGIM: N/A Grantee: Shops at Grand Avenue LLC Condition of Sale: N/A

VERIFICATION COMMENTS cw research, acris

COMMENTS This is the sale of a neighborhood center located in Queens County. The property is anchored by a Stop & Shop, TJ Maxx and features Party City, Mandees and Ridgewood Savings Bank. The property is in a predominantly residential neighborhood.

VALUATION & ADVISORY IMPROVED SALE COMPARABLE - 3

2856 Steinway Street Astoria NY 11103 MSA: New York Queens County

Property Type: Shopping Center Property Subtype: Other ID: 141352 APN: Block 662 Lot 41

Included PROPERTY INFORMATION Anchors in Sale GLA Site Area (Acres): 0.44 Duane Reade X 10,990 Site Area (SqFt): 19,041 Washington Mutual X 4,519 L:B Ratio: 0.37:1 NYSC X 35,468 Parking Spaces: N/A Parking Ratio: N/A Year Built: 1920 Last Renovation: 2002 Total Anchor GLA 50,977 Quality: Good Inline GLA X N/A Condition: Good Total GLA 50,977 Sold GLA 50,977 SALE INFORMATION Sale Status: Recorded Sale OAR: 4.62% Transaction Date: 8/2014 NOI: $1,478,400 Sale Price: $32,000,000 NOI per SqFt: $29.00 Price per SqFt: $627.73 Occupancy: 100.00% Value Interest: Leased Fee Expense Ratio: N/A Grantor: C&K Steinway LLC EGIM: N/A Grantee: 2856 Steinway Street-Millbridge LLC Condition of Sale: N/A

VERIFICATION COMMENTS CW Research

COMMENTS This is the sale of 2856 Steinway Street, a 3-story retail center on the northwest corner of 30th Avenue within the Astoria neighborhood of Queens. 2856 Steinway Street-Millbridge LLC purchased the property from 2856 Astoria LLC in August 2014 for $32,000,000. The building contains 51,079 square feet. At the time of sale, the property was leased on a long term basis to three national tenants: Duane Reade (10,990 SF), Chase Bank (4,549 SF), and New York Sports Clubs (35,540 SF). The property was purchased based on an overall capitalization rate of 4.62 percent. The sale price equates to a unit price of $626.48 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $190.58 per square foot

VALUATION & ADVISORY IMPROVED SALE COMPARABLE - 4

Waldbaum's Shopping Center 152-59 10th Avenue Whitestone NY 11357 MSA: New York Queens County

Property Type: Shopping Center Property Subtype: Neighborhood Center ID: 284943 APN: N/A

Included PROPERTY INFORMATION Anchors in Sale GLA Site Area (Acres): 4.60 Waldbaum's X 56,000 Site Area (SqFt): 200,376 L:B Ratio: 3.23:1 Parking Spaces: N/A Parking Ratio: N/A Year Built: 1930 Last Renovation: 1990 Total Anchor GLA 56,000 Quality: Average Inline GLA X 6,000 Condition: Average Total GLA 62,000 Sold GLA 62,000 SALE INFORMATION Sale Status: Recorded Sale OAR: 5.50% Transaction Date: 1/2014 NOI: $1,314,672 Sale Price: $23,903,127 NOI per SqFt: $21.20 Price per SqFt: $385.53 Occupancy: 99.00% Value Interest: Leased Fee Expense Ratio: N/A Grantor: Whitestone Grocery SC, LLC EGIM: N/A Grantee: Feil Whitestone, LLC Condition of Sale: None

VERIFICATION COMMENTS Costar, Inc. Copy of Deed

COMMENTS Sale of a 1-story retail center located along 152-59 Tenth Avenue between the Whitestone Expressway and 147th Street. At the time of sale the property was 100 percent net leased to Walbaum's. Waldbaum's has a master lease on the entire center and occupies approximately 56,000 square feet. They sublease the balance of the center to smaller inline tenants. The Waldbaum's net lease runs through February 2024. The property was purchased based on an overall capitalization rate of 5.50 percent.

VALUATION & ADVISORY IMPROVED SALE COMPARABLE - 5

Pelham Manor Shopping Plaza 2 Penn Place Pelham Manor NY MSA: New York Westchester County

Property Type: Shopping Center Property Subtype: Power Center ID: 267261 APN: N/A Ground Lease: Yes

Included PROPERTY INFORMATION Anchors in Sale GLA Site Area (Acres): 16.22 BJ's Wholesale X 129,405 Site Area (SqFt): 706,543 Michael's Crafts X 20,149 L:B Ratio: 2.22:1 PetSmart X 19,958 Parking Spaces: 911 Parking Ratio: 2.86:1,000 Year Built: 2007 Last Renovation: 2011 Total Anchor GLA 169,512 Quality: Good Inline GLA X 59,371 Condition: Good Self-Storage: 89,375 Total GLA 318,258 Sold GLA 228,883 SALE INFORMATION Sale Status: Recorded Sale OAR: 5.85% Transaction Date: 11/2013 NOI: $3,424,003 Sale Price: $58,529,960 NOI per SqFt: $14.96 Price per SqFt: $255.72 Occupancy: 98.00% Value Interest: Leasehold Expense Ratio: N/A Grantor: Acadia Realty Trust JV EGIM: N/A Grantee: Retail Properties of America, Inc. Condition of Sale: None

VERIFICATION COMMENTS Appraiser, seller, public record & broker

COMMENTS This is the sale of a BJ`s Wholesale Club-anchored power center. Other tenants include Michaels, PetSmart, Five Below, Chase, and a self storage tenant. The center is subject to a long-term ground lease with an initial term through 2039 and 60 years of renewal options. The ground rent at sale was $9.91 per GLA.

VALUATION & ADVISORY IMPROVED SALE COMPARABLE - 6

Canarsie Plaza 8925 Avenue D Brooklyn NY 11236 MSA: New York Kings (Brooklyn) County

Property Type: Shopping Center Property Subtype: Neighborhood Center ID: 238917 APN: N/A

Included PROPERTY INFORMATION Anchors in Sale GLA Site Area (Acres): 12.48 BJ's Wholesale X 177,135 Site Area (SqFt): 543,629 Planet Fitness X 15,000 L:B Ratio: 1.96:1 PetSmart X 13,574 Parking Spaces: 638 Parking Ratio: 2.30:1,000 Year Built: 2011 Last Renovation: N/A Total Anchor GLA 205,709 Quality: Good Inline GLA X N/A Condition: Good Other GLA: X 72,198 Total GLA 277,907 Sold GLA 277,907 SALE INFORMATION Sale Status: Recorded Sale OAR: 6.26% Transaction Date: 12/2012 NOI: $7,757,395 Sale Price: $124,000,000 NOI per SqFt: $27.91 Price per SqFt: $446.19 Occupancy: 96.00% Value Interest: Leased Fee Expense Ratio: 18.30% Grantor: Cole Real Estate Investments EGIM: N/A Grantee: Acadia Realty Condition of Sale: None

VERIFICATION COMMENTS Verified by HFF, selling broker and CoStar

COMMENTS The center was anchored by BJ's Wholesale Club (177,135 SF), and other tenants included Planet Fitness (15,000 SF), Petsmart (13,574 SF) and Dollar Tree (10,018 SF). BJ's occupies 64 percent of the center's NRA and is leased through 2030, with 8 percent increases in 2015 and 2020, and a 10 percent increase in 2025. The motivation for the buyer was a high-quality asset that is attractively located in the Canarsie section of Brooklyn, a vibrant and densely populated borough of New York City to add to their portfolio. Moreover, the property holds long-term leases with nationally recognized retailers who benefit from the strong retail traffic created by the location's dense population and nearby public transportation. It sits adjacent the Brooklyn Terminal Market. The property was purchased based on an overall capitalization rate of 6.26 percent.

VALUATION & ADVISORY IMPROVED SALE COMPARABLE - 7

Clocktower Plaza 9210 Atlantic Avenue Ozone Park NY 11416 MSA: New York Queens County

Property Type: Shopping Center Property Subtype: Neighborhood Center ID: 242253 APN: 9027-11, 9028-1 Ground Lease: Yes

Included PROPERTY INFORMATION Anchors in Sale GLA Site Area (Acres): 6.66 Pathmark X 62,668 Site Area (SqFt): 290,250 L:B Ratio: 3.68:1 Parking Spaces: 360 Parking Ratio: 4.57:1,000 Year Built: 1985 Last Renovation: 1995 Total Anchor GLA 62,668 Quality: Average Inline GLA X 16,152 Condition: Average Total GLA 78,820 Sold GLA 78,820 SALE INFORMATION Sale Status: Recorded Sale OAR: 6.00% Transaction Date: 9/2012 NOI: $3,360,000 Sale Price: $56,000,000 NOI per SqFt: $42.63 Price per SqFt: $710.48 Occupancy: 100.00% Value Interest: Leased Fee Expense Ratio: N/A Grantor: Winstanley Enterprises, Inc. EGIM: N/A Grantee: Equity One, Inc. Condition of Sale: None

VERIFICATION COMMENTS Verified with NYC deed

COMMENTS Sale of a Pathmark anchored neighborhood shopping center known as Clocktower Plaza along Atlantic Avenue on the northeast corner of 92nd Street and Atlantic Avenue within the Woodhaven neighborhood of Brooklyn. The property is currently 100 percent leased to Pathmark (62,668 SF), Fashion Bug (5,068 SF), a Burger King (2,996 SF) and several small in-line tenants (totaling 8,088 SF). Pathmark occupies 80 percent of the shopping center and is leased through 2023, with 5 percent increases every 5 years. Pathmark, Burger King and Fashion Bug have exhibited successful operations with annual sales of $56.1 mm, $1.4mm and $1.3mm, respectively. The property was purchased based on an overall capitalization rate of 6.00 percent.

VALUATION & ADVISORY IMPROVED SALE COMPARABLE -8

Lake Grove Commons 130 New Moriches Road Lake Grove NY MSA: Nassau-Suffolk Suffolk County

Property Type: Shopping Center Property Subtype: Power Center ID: 219642 APN: N/A

Included PROPERTY INFORMATION Anchors in Sale GLA Site Area (Acres): 15.83 Whole Foods X Site Area (SqFt): 689,555 LA Fitness X L:B Ratio: 4.88:1 Petco X Parking Spaces: 1,500 Parking Ratio: 10.61:1,000 Year Built: 2010 Last Renovation: N/A Total Anchor GLA N/A Quality: Good Inline GLA X 141,382 Condition: Good Total GLA 141,382 Sold GLA 141,382 SALE INFORMATION Sale Status: Recorded Sale OAR: 5.60% Transaction Date: 1/2012 NOI: $4,060,000 Sale Price: $72,500,000 NOI per SqFt: $28.72 Price per SqFt: $512.80 Occupancy: 100.00% Value Interest: Leased Fee Expense Ratio: N/A Grantor: Lake Grove Enterprises-Blumenfeld RE EGIM: N/A Grantee: Regency Centers Condition of Sale: None

VERIFICATION COMMENTS Broker & Appraiser

COMMENTS The center contains 141,382 square feet of gross leasable area inclusive of anchor tenants Whole Foods and LA Fitness. The center was 100.00 percent occupied. The property was constructed in 2010 and exhibits good quality and condition. At the time of sale, tenants at this shopping center included Petco, Jared Jewlers, T-Mobile, and a Fidelity Investments. The overall capitalization rate at the time of sale was 5.60 percent. According to the seller, the property commanded substantial buyer interest and competitive bidding.

VALUATION & ADVISORY GATEWAY CENTER AT BRONX TERMINAL MARKET ADDENDA CONTENTS 158

ADDENDUM B: GROUND LEASE CALCULATION

GATEWAY CENTER AT BRONX TERMINAL MARKET ADDENDA CONTENTS 159

GROUND RENT PROJECTION

GATEWAY CENTER @ BRONX TERMINAL MARKET Ground Rent Projection (Fiscal Year) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Year 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10 Year 11 Year 12 Potential Gross Revenue 29,690,632 30,035,409 30,332,304 30,687,220 32,293,961 33,017,254 33,302,254 33,658,929 33,975,663 35,449,103 36,926,841 37,206,751 Imputed Gross Revenue for Target (Buy down tenant)** $3,150,153 $3,150,153 $3,150,153 $3,150,153 $3,150,153 $3,150,153 $3,150,153 $3,150,153 $3,150,153 $3,150,153 $3,150,153 $3,150,153 $32,840,785 $33,185,562 $33,482,457 $33,837,373 $35,444,114 $36,167,407 $36,452,407 $36,809,082 $37,125,816 $38,599,256 $40,076,994 $40,356,904 Allowed Deductions Management Fee @ 3% of PGI ($985,224) ($995,567) ($1,004,474) ($1,015,121) ($1,063,323) ($1,085,022) ($1,093,572) ($1,104,272) ($1,113,774) ($1,157,978) ($1,202,310) ($1,210,707) On‐Site Costs ($147,000) ($147,000) ($147,000) ($147,000) ($147,000) ($147,000) ($147,000) ($147,000) ($147,000) ($147,000) ($147,000) ($147,000) Gross Revenue $31,708,561 $32,042,995 $32,330,983 $32,675,252 $34,233,791 $34,935,385 $35,211,835 $35,557,810 $35,865,042 $37,294,278 $38,727,684 $38,999,197 Specified Percentage @ 2.0% 3.0% 3.0% 3.0% 3.0% 3.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Ground Rent $634,171 $961,290 $969,929 $980,258 $1,027,014 $1,048,062 $1,408,473 $1,422,312 $1,434,602 $1,491,771 $1,549,107 $1,559,968

**Target Buydown amount times 6.79% (buydown constant)

GATEWAY CENTER AT BRONX TERMINAL MARKET ADDENDA CONTENTS 160

ADDENDUM C: LESSEE PROVIDED “TRANSACTION COSTS” CALCULATION

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Gross Loan Proceeds From Refinancing 380,000000

(fl Deductions Per Ground Lease: (A)Original Indebtedness (358,865,329) Tab A U (B)Required Mortgagee Escrow / Working Capital - (C)Financing Proceeds Used or Intended to Be Used For Construction Work (7,500,000) [ (0) Financing Proceeds Used to Reimburse or Pay For Accrued Operating Losses - )t) Financing Costs (7,626,023) Tab B (F)An Amount Equal to Net Financing Proceeds Upon Which a Prior Transaction Payment Was Made - )G) AllCash Equity of Tenant Invested in The Premisen (40,500,000) Tab C (H) Developer Fee Equal to 3% of Development Costs (13,960,734) Tab 0 Total Deductions (428,452,086)

Net Cash Proceeds From Refinance (48,452,086)

Transaction Payment Due to The City of New York 0

(A) Original Indebtedness TrancheA Tranche B Total

lnv#42416 lnv#41810 Total 228,350,820 91,754,693 320,105,512 31,014,509 7,745,307 38,759,817 Balance Per 11/18/13 Interest Invoice 259,365,329 99,500,000 358,865,329 Tab A

)C) Financing Proceeds Used or Intended to Be Used For Construction Work Replacement of Toys RUs 75,000sf @$100 psf 7,500,000

)E) Financing Costs Tranche A Prepayment Penalty 2,308,186 Swap Breakage Costs 1,140,000 Tranche B)QEI2) Interest Reserve: 3/1/14 - 12/18/14 888,424 Eastdil Fee 300,000 Legal 780,000 Title 718,333 Misc 100,000 MRT 1,391,079

7,626,023 Tab B

)G) Equity Invested

Tenant’s Equity 40,500,000 Tab C

)H) Developer Fee

Development Costs

Building and Tenant Improvements Cost Seg Study 394,105,970 Tab 0 Building and Tenant Improvements - Post Cost Seg Study Escel Summary 8,466,784 Tab D Ground Lease Acquisition Costs 2012 Audit Report 47,567,020 Tab 0 Financing Costs 2012 Audit Report 8,352,457 Tab 0 Leasing Costs 2012 Audit Report 6,865,575 Tab 0 465,357,806 3% 13,960,734 GATEWAY CENTER AT BRONX TERMINAL MARKET ADDENDA CONTENTS 161

ADDENDUM D: QUALIFICATIONS OF THE APPRAISERS

A PROPOSAL FOR

C&W BIOGRAPHY PROFESSIONAL QUALIFICATIONS

JOHN A. KATINOS SENIOR DIRECTOR | VALUATION & ADVISORY

CUSHMAN & WAKEFIELD, INC.

John A. Katinos is a Senior Director with Cushman & Wakefield, Inc. Valuation & Advisory. He joined Cushman & Wakefield, Inc. in August, 1989.

EXPERIENCE Appraisal and consulting assignments have included office buildings, retail centers, regional malls, vacant land, transferable development rights (TDRs), historic and preservation easements, cooperative, condominium and rental apartment buildings, feasibility and market studies, industrial properties, residential subdivisions, existing and proposed investment properties throughout the United States. Served as an arbitrator for numerous real estate maters including ground rent redetermination, office and retail space rent renewal determinations.

EDUCATION  New York University (New York, NY) − Degree: Master of Science in Real Estate – Real Estate Valuation and Analysis  Drexel University (Philadelphia, PA) − Degree: Bachelor of Science in Business Administration – Finance

MEMBERSHIPS, LICENSES AND PROFESSIONAL AFFILIATIONS  Designated Member, Appraisal Institute (MAI #12185) − As of the current date, John Katinos, MAI has completed the requirements of the continuing education program of the Appraisal Institute.  Member, Board of Directors, Metropolitan NY Chapter of the Appraisal Institute  Certified General Real Estate Appraiser in the following state: − New York – 46000028780

CUSHMAN & WAKEFIELD 1

A PROPOSAL FOR

C&W BIOGRAPHY PROFESSIONAL QUALIFICATIONS

NEW YORK

CUSHMAN & WAKEFIELD 2

A PROPOSAL FOR

C&W BIOGRAPHY PROFESSIONAL QUALIFICATIONS

JAMES P. STUCKEY JR. ASSOCIATE DIRECTOR | VALUATION & ADVISORY

CUSHMAN & WAKEFIELD, INC.

BACKGROUND James Stuckey is an appraiser with Cushman & Wakefield, Inc. Valuation & Advisory Group. He joined Cushman and Wakefield, Inc. in August 2007.

APPRAISAL EXPERIENCE Appraisal and consulting assignments have included office buildings, retail centers, regional malls, vacant land, transferable development rights (TDRs), historic and preservation easements, cooperative, condominium and rental apartment buildings, feasibility and market studies, industrial properties, residential subdivisions, existing and proposed investment properties throughout New York State.

EDUCATION  University of Scranton, Pennsylvania − Degree: Bachelors of Science in Political Science

APPRAISAL EDUCATION  Metropolitan New York Chapter of the Appraisal Institute − Basic Appraisal Principles (R1) − Fair Housing, Fair Lending and Environmental Issues (AQ1) − 15-Hour National Uniform Standards of Professional Appraisal Practice (USPAP) − Basic Appraisal Procedures (R2)

MEMBERSHIPS, LICENSES AND PROFESSIONAL AFFILIATIONS  Practicing Affiliate, Appraisal Institute – Metropolitan New York Chapter  State of New York Certified Appraiser Assistant, License No. 48000049048

CUSHMAN & WAKEFIELD 1

A PROPOSAL FOR

C&W BIOGRAPHY PROFESSIONAL QUALIFICATIONS

CHARLES R. LOONEY APPRAISER | VALUATION & ADVISORY

CUSHMAN & WAKEFIELD, INC.

Charles R. Looney is an Associate Appraiser of Valuation & Advisory for Cushman & Wakefield. He joined Cushman and Wakefield, Inc. in July, 2014.

APPRAISAL EXPERIENCE Mr. Looney has contributed to appraisal and consulting assignments involving the valuation of multiple property types, including office buildings, retail centers, cooperative, condominium and Rental apartment buildings, retail centers, regional malls, vacant land, transferable development rights (TDRs), historic and preservation easements, and existing and proposed investment properties throughout New York State. Mr. Looney works as an associate to John A. Katinos, MAI, who specializes in the valuation of various property types in all five boroughs.

EDUCATION  Marist College– Graduated 2014 − Degree: Bachelor of Science – School of Biological Sciences

CUSHMAN & WAKEFIELD 1

Robert S. Nardella, MAI, MRICS Executive Managing Director V&A Regional Manager

1290 Avenue of the Americas New York, NY 10104 Direct +1 212 841 5048 Fax +1 212 479 1878 [email protected] cushmanwakefield.com

November 18, 2015

To: Related Commercial Portfolio Ltd.

RE: Value Appraisals – Consent to include within Financial Statements

We hereby give our full consent to Related Commercial Portfolio Ltd. (the "Company") to the inclusion of our Appraisal Report dated July 13, 2015 (Effective date – June 10, 2015) regarding the retail condominium unit within One Union Square South New York, New York in its entirety, within the Company's Financial Statements for September 30, 2015, to be published by the Company no later than November 30, 2015, and any ensuing financial statements, and within any other filing to be filed and/or disclosed by the Company to the Israel Securities Authority and/or to be published by the Company.

In addition, we hereby give our full consent to the inclusion of a copy of this letter within the Company's Financial Statements and other filings as aforesaid.

Yours sincerely, Cushman & Wakefield, Inc.

Robert S. Nardella, MAI, MRICS Executive Managing Director

RSN:pl

APPRAISAL OF REAL PROPERTY

Retail Condominium Unit within One Union Square South New York, New York County, NY 10003

IN AN APPRAISAL REPORT As of June 10, 2015

Prepared For: Related Commercial Portfolio, LTD. c/o Related Companies 60 Columbus Circle New York, New York 10023

Prepared By: Cushman & Wakefield, Inc. Valuation & Advisory 1290 Avenue of the Americas, 9th Floor New York, New York 10019 C&W File ID: 15-12002-901504

CUSHMAN & WAKEFIELD, INC. 1290 AVENUE OF THE AMERICAS, 9TH FLOOR NEW YORK, NEW YORK 10019

Retail Condominium Unit within One Union Square South New York, New York County, NY 10003

CUSHMAN & WAKEFIELD, INC. 1290 AVENUE OF THE AMERICAS, 9TH FLOOR NEW YORK, NEW YORK 10019

July 13, 2015

Mr. David Zussman Vice President Related Commercial Portfolio, LTD. c/o Related Companies 60 Columbus Circle New York, New York 10023

Re: Appraisal of Real Property In An Appraisal Report

Retail Condominium Unit within One Union Square South New York, New York County, NY 10003

C&W File ID: 15-12002-901504

Dear Mr. Zussman:

In fulfillment of our agreement as outlined in the Letter of Engagement, we are pleased to transmit our appraisal of the above property in an appraisal report dated July 13, 2015. The effective date of value is June 10, 2015.

This appraisal report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), including the Competency Provision.

MR. DAVID ZUSSMAN CUSHMAN & WAKEFIELD, INC. RELATED COMMERCIAL PORTFOLIO, LTD. C/O RELATED COMPANIES JULY 13, 2015 PAGE 2

MARKET VALUE Based on the agreed to Scope of Work, and as outlined in the report, we have developed an opinion that the market value of the leasehold estate of the above property, subject to the assumptions and limiting conditions, certifications, extraordinary and hypothetical conditions, if any, and definitions on June 10, 2015, was: THREE HUNDRED EIGHTY MILLION DOLLARS

$380,000,000

The value opinion in this report is qualified by certain assumptions, limiting conditions, certifications, and definitions.

EXTRAORDINARY ASSUMPTIONS This appraisal does not employ any extraordinary assumptions. For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions.

HYPOTHETICAL CONDITIONS This appraisal does not employ any hypothetical conditions. For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions.

This letter is invalid as an opinion of value if detached from the report, which contains the text, exhibits, and Addenda.

Respectfully submitted,

CUSHMAN & WAKEFIELD, INC.

John A. Katinos, MAI James P. Stuckey, Jr. Senior Director Associate Director New York Certified General Appraiser New York Certified Appraiser Assistant License No. 46000028780 License No. 48000049048 [email protected] [email protected] (212) 841-5061 Office Direct (212) 841-7680 Office Direct (212) 479-1820 Fax (212) 479-8325 Fax

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM EXECUTIVE SUMMARY

EXECUTIVE SUMMARY GENERAL INFORMATION Location: Retail Condominium Unit within One Union Square South New York, New York County, NY 10003 The subject site is located on the entire city block bounded by Union Square South to the north, Fourth Avenue to the east, East 13th Street to the south and Broadway to the west in the Union Square neighborhood of Manhattan.

Property Description: The subject property comprises a multi-level retail condominium unit totaling 236,215 square feet of net rentable area within five levels (inclusive of one below grade level) of the luxury mixed-use development located at One Union Square South. The subject is 100.0 percent leased to seven retail tenants. The subject is anchored by Regal Cinemas, Best Buy, and Nordstrom Rack, which occupy 83.7 percent of the subject. The subject site is ground leased through December 31, 2095, with no renewal options. One Union Square South is a 22-story luxury residential building, with a 5-level retail component (subject property) containing a total gross building area of 431,677 square feet on a 48,223 square foot parcel of land. The entire mixed-use property contains approximately 240 residential rental apartment units (208,961 SF), and 236,215 square feet of multi-level retail space. The residential component of the building is not part of the subject property.

Assessor's Parcel Number: Block 565, Lot 21

Interest Appraised: Leasehold Estate

Date of Value: June 10, 2015

Date of Inspection: June 10, 2015

Ownership: The fee ownership of the site is held by First Sterling Corporation and West Realty Co. The leasehold interest in the subject site is held by Union Square Retail Trust, in care of The Related Companies, L.P.

Occupancy: The subject is 100.0 percent leased by 7 retail tenants.

Current Property Taxes

FY 2015/16 Assessment: $78,696,450

CY 2015 Property Taxes: $6,723,074

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM EXECUTIVE SUMMARY

Highest and Best Use

If Vacant: A mixed-use development comprising of residential units on the upper floors, and multi-level retail space on the lower floors.

As Improved: As currently improved.

SITE & IMPROVEMENTS Zoning: C6-4 and C6-1; Restricted Central Commercial District

Land Area: 48,223 square feet

Number of Stories:

Entire Mixed-use Development: 22 stories, plus 1 below grade level

Subject Retail Unit: 4 stories, plus 1 below grade level

Year Built: 1996

Type of Construction: Steel and masonry

Gross Building Area- Subject: 236,215 square feet (Per Tax Assessor)

Net Rentable Area- Subject: 236,215 square feet (Per Rent Roll)

VALUE INDICATORS SALES COMPARISON APPROACH: Indicated Value, Rounded: $380,000,000

Per Square Foot (NRA): $1,608.70

INCOME CAPITALIZATION APPROACH DIRECT CAPITALIZATION Net Operating Income: $17,778,083

Capitalization Rate: 4.50%

Indicated Value, Rounded: $395,000,000

Per Square Foot (NRA): $1,672.21

DISCOUNTED CASH FLOW Projection Period: 12 years

Holding Period: 11 years

Terminal Capitalization Rate: 5.00% (applied to reversion year net operating income)

Discount Rate: 6.00% (see Discount Rate Analysis)

Indicated Value, Rounded: $360,000,000

Per Square Foot (NRA): $1,524.04

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM EXECUTIVE SUMMARY

INCOME CAPITALIZATION APPROACH CONCLUSION Indicated Value: $380,000,000

Per Square Foot (NRA): $1,608.70

FINAL VALUE CONCLUSION Market Value of the Leasehold $380,000,000 Estate:

Per Square Foot (NRA): $1,608.70

Implied Capitalization Rate: 4.68%

EXPOSURE TIME Based on our review of national investor surveys, discussions with market participants and information gathered during the sales verification process, a reasonable exposure time for the subject property at the value concluded within this report would have been approximately nine (9) months. This assumes an active and professional marketing plan would have been employed by the current owner.

MARKETING TIME We believe, based on the assumptions employed in our analysis, as well as our selection of investment parameters for the subject, that our value conclusion represents a price achievable within nine (9) months.

EXTRAORDINARY ASSUMPTIONS For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions. This appraisal does not employ any extraordinary assumptions.

HYPOTHETICAL CONDITIONS For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions. This appraisal does not employ any hypothetical conditions.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM SUBJECT PHOTOGRAPHS

VIEW OF SUBJECT PROPERTY ACROSS UNION SQUARE SOUTH.

VIEW OF SUBJECT PROPERTY ALONG UNION SQUARE SOUTH.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM SUBJECT PHOTOGRAPHS

VIEW OF BEST BUY RETAIL SPACE WITHIN THE SUBJECT.

VIEW OF THE MOVIE THEATRE SPACE WITHIN THE SUBJECT.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM SUBJECT PHOTOGRAPHS

VIEW OF THE NORDSTROM’S LEVEL RETAIL SPACE WITHIN THE SUBJECT.

VIEW OF THE DUANE READE RETAIL SPACE WITHIN THE SUBJECT.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM SUBJECT PHOTOGRAPHS

VIEW LOOKING EAST ALONG UNION SQUARE SOUTH

VIEW LOOKING WEST ALONG UNION SQUARE SOUTH

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INTRODUCTION

TABLE OF CONTENTS

INTRODUCTION ------1 NEW YORK CITY REGIONAL ANALYSIS ------4 LOCAL AREA ANALYSIS ------19 NATIONAL RETAIL MARKET ANALYSIS ------21 MANHATTAN RETAIL MARKET ANALYSIS ------32 RETAIL TRADE AREA ANALYSIS ------44 MOVIE THEATER OVERVIEW ------59 PROPERTY ANALYSIS ------69 PROPERTY TAXES AND ASSESSMENTS ------76 HIGHEST AND BEST USE ------82 VALUATION PROCESS ------84 SALES COMPARISON APPROACH ------86 INCOME CAPITALIZATION APPROACH ------97 RETAIL RENT MAP ------104 MULTI-LEVEL RETAIL RENT MAP ------105 RECONCILIATION AND FINAL VALUE OPINION ------129 ASSUMPTIONS AND LIMITING CONDITIONS ------130 CERTIFICATION OF APPRAISAL ------132 GLOSSARY OF TERMS & DEFINITIONS ------133 ADDENDA CONTENTS ------136

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INTRODUCTION 1

INTRODUCTION SCOPE OF WORK This appraisal report has been prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP), including the Competency Provision.

In the process of preparing this appraisal, we:

 Inspected the exterior and interior of the building and site improvements.  Reviewed leasing policy, concessions, tenant build-out allowances, and history of recent rental rates and occupancy with several leasing and investment sales brokers and market research analysts.  We have reviewed the lease abstracts provided by the ownership.  We have review the subject 99-year ground lease dated December 13, 1996.  Conducted market research of occupancies, asking rents, concessions and operating expenses of comparable properties, which involved interviews with on-site managers and a review of our own data base from previous appraisal files.  Prepared an opinion of stabilized income and expense (for capitalization purposes).  Conducted market inquiries into recent sales of comparable retail properties to ascertain sales price per square foot and capitalization rates. This process involved telephone interviews with sellers, buyers and/or participating brokers.  This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these approaches would be considered applicable and/or necessary for market participants. Typical purchasers do not generally rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not utilized the Cost Approach to develop an opinion of market value.  The scope of this analysis, and the analysis contained herein, is reflective of “the type and extent of research and analyses in an assignment” (2014-15 USPAP).

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INTRODUCTION 2

REPORT OPTION DESCRIPTION USPAP identifies two written report options: Appraisal Report and Restricted Appraisal Report. This document is prepared as an Appraisal Report in accordance with USPAP guidelines. The terms “describe,” summarize,” and “state” connote different levels of detail, with “describe” as the most comprehensive approach and “state” as the least detailed. As such, the following provides specific descriptions about the level of detail and explanation included within the report:  Describes the real estate and/or personal property that is the subject of the appraisal, including physical, economic, and other characteristics that are relevant  States the type and definition of value and its source  Describes the Scope of Work used to develop the appraisal  Describes the information analyzed, the appraisal methods used, and the reasoning supporting the analyses and opinions; explains the exclusion of any valuation approaches  States the use of the property as of the valuation date  Describes the rationale for the Highest and Best Use opinion

IDENTIFICATION OF PROPERTY Location: Retail Condominium Unit within One Union Square South New York, New York County, NY 10003 The subject site is located on the entire city block bounded by Union Square South to the north, Fourth Avenue to the east, East 13th Street to the south and Broadway to the west in the Union Square neighborhood of Manhattan.

Assessor's Parcel Number: Block 565, Lot 21

Legal Description: We have not been provided with a metes and bounds legal description for the property. However, the property is identified on the tax maps of the City of New York as Block 565, Lot 21.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INTRODUCTION 3

PROPERTY OWNERSHIP AND RECENT HISTORY Current Ownership: The fee ownership of the site is held by First Sterling Corporation and West Realty Co. The leasehold interest in the subject site is held by Union Square Retail Trust, in care of The Related Companies, L.P.

Sale History: To the best of our knowledge, the property has not transferred within the past three years.

Current Disposition: To the best of our knowledge, the property is not under contract of sale nor is it being marketed for sale.

DATES OF INSPECTION AND VALUATION Date of Valuation: June 10, 2015

Date of Inspection: June 10, 2015

Property inspection was John A. Katinos, MAI, James P. Stuckey Jr. and Charles R. Looney performed by:

INTENDED USE AND USERS OF THE APPRAISAL Intended Use: This appraisal is intended to provide an opinion of the market value of the leasehold interest in the property for internal business decisions by the client. All other uses are unintended, unless specifically stated in the letter of transmittal. All other uses and users are unintended.

Intended User: This appraisal report was prepared for the exclusive use of Related Commercial Portfolio, LTD. c/o Related Companies and/or its affiliates. All other uses and users are unintended.

EXTRAORDINARY ASSUMPTIONS This appraisal does not employ any extraordinary assumptions.

HYPOTHETICAL CONDITIONS This appraisal does not employ any hypothetical conditions.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 4

New York City Regional Analysis REGIONAL MAP

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 5

INTRODUCTION MARKET DEFINITION New York City consists of five counties at the mouth of the Hudson River in the southeast area of New York State. The borough of Manhattan, also referred to as New York County, forms the political, financial and cultural core of the city. It is the economic growth engine of the Greater New York Region. The city’s other boroughs are Brooklyn, Queens, Staten Island, and the Bronx, otherwise known as Kings, Queens, Richmond, and Bronx counties, respectively. The area’s vast mass transit infrastructure connects the five boroughs as well as the surrounding suburban areas, forming the Greater New York Region. This region covers 21 counties in the southeastern section of New York State, southwestern corner of Connecticut, and Central and Northern New Jersey.

The following are notable points about New York City:

The following map highlights the Metropolitan Statistical Area (MSA) of New York, NY: NEW YORK CITY COUNTIES

Source: Claritas, Inc., Cushman & Wakefield Valuation & Advisory CURRENT TRENDS New York City’s economy is growing modestly on the strength of steady employment gains over the past few years. The city has recovered all of the jobs lost during the great recession, well ahead of most cities in the nation, and total employment recently reached an all-time high. The recent job gains have come in many sectors, and the city’s employment diversity has helped weather the finance industry’s struggles. A major source of recent

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 6

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 7

Further considerations are as follows:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 8

 Simone Development Companies is in a process of completing a $16.0 million deal that would allow construction of a 1.9 million square foot mixed-use office, academic and medical complex on a 33-acre site at 1500 Waters Place in the east Bronx. Simone plans to construct two one-story retail buildings, totaling 40,000 square feet; and four 10-story buildings of 250,000 square feet each. Plans will also include a hotel and 100,000 square feet of space for high education. Several thousand permanent jobs are expected to be created through the development.  Los Angeles-based Estate Four plans to build a 1.2 million square foot project that will include a mixed-use of offices, shops, performance spaces and a promenade in the Red Hook industrial neighborhood of Brooklyn. The new development, called the Red Hook Innovation District, would be built over five years at a cost of $400.0 million.  In March 2015, a partnership of developers between Jamestown, Belvedere Capital and Angelo Gordon unveiled a massive redevelopment plan for Brooklyn’s Industry City. The plan calls for a $1.0 billion investment over the next 12 years and 13,300 jobs at Industry City, including the ones currently there. The developers estimate that another 5,800 jobs would be created throughout the city as a result of the project. The planned expansion, however, cannot go forward without Mayor de Blasio’s administration’s approval for the creation of a “special innovation zoning district.”  Jones New York, the women’s clothing brand owned by Sycamore Partners, will close all of its 127 outlet stores throughout 2015. The company will also discontinue its wholesale business as it seeks strategic alternatives. The Jones New York brand, which is sold in mid-priced department stores like Macy’s, has struggled in recent years as retailers ramped up their exclusive-label goods to draw shoppers.  Cornell University broke ground on its Roosevelt Island tech campus in January 2014. The $2.0 billion project, which won the city’s “Applied Sciences NYC” competition, will add some 2.0 million square feet of academic, residential, and commercial space over the next two decades. Slated to open in 2017, the new campus will house approximately 2,000 students and 280 faculty members, and create 8,000 permanent jobs by 2037. The project more recently received $50.0 million from Verizon to develop an executive education center.  An October 2014 report from the New York Building Congress forecasts overall construction spending in 2014 to be $32.9 billion, an increase of 17.0 percent from the previous year. A majority of the non-infrastructure construction spending will be from new residential projects. Despite the optimistic forecast, the New York Building Congress reported in January 2015 that construction costs increased by 5.0 percent in 2014 after a nearly 5.0 percent increase in previous year.  Mayor Bill de Blasio and his administration are in the early stage of formulating a rezoning plan for a 57-block- long corridor along Jerome Avenue that would bring more housing and new businesses to the South Bronx area. The first step is completion of the Cromwell-Jerome Neighborhood Study, which is expected to be ready by the end of the year.  Square, a San Francisco based mobile payment devices and software maker, expanded its size by moving into its brand new 40,000 square foot SoHo office space in October 2014. The company plans to increase its New York based staff to 385 employees. As of October 2014, the company employed a total of 75 employees.  Amazon received $5.0 million in tax credits from New York state at the end of 2014. The company expects to use the money to bring 500 jobs to New York City at a property in Herald Square shopping district.  Samsung Electronics is looking to purchase as much as 1.0 million square feet of new or existing office space in Manhattan. According to the Wall Street Journal, offices of that size generally could hold between 5,000 and 7,000 employees. The purchase (if the deal is reached) would be one of largest corporate expansions in the city in years.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 9

 General Motors is reorganizing its Cadillac brand into a separate business unit and relocating the new company’s headquarters to New York City at the beginning of June 2015. Cadillac expects about 130 to 140 people to be working for Cadillac in New York by the end of the year; many will be new hires. It also expects that number to double to about 300 in the next three years.  The New York Times began its layoff process in December 2014 as the newspaper company did not receive enough voluntary buyouts to cover newsroom budget cuts. The company expects to cut more than 100 newsroom jobs.  The State University of New York reached an agreement with the Fortis Property Group to build out NYU Langone Medical Center at a former site of Long Island College Hospital in Cobble Hill, Brooklyn. Expected to be completed by 2018, the 125,000 square foot complex, will have 70 doctors and a total staff of 400. NYU Langone planned to invest $175.0 million to build out the facility.  Rockefeller University is planning a two acre campus extension over the FDR Drive. The project will involve building a platform over the highway to support four new buildings, and is estimated to cost between $425.0 million and $450.0 million. It is expected to break ground in the second half of 2015, and construction is expected to be finished in four years.  Online grocer FreshDirect broke ground in December 2014 on its 500,000 square foot corporate headquarters in Mott Haven, South Bronx. The company reached a deal with the city in 2012 to relocate to the Bronx (as opposed to New Jersey), keeping its 3,000 jobs in the city. In addition, the relocation is expected to create 1,000 new jobs for Bronx residents.  New York City is investing $140.0 million to expand manufacturing and create 3,000 jobs at the Brooklyn Navy Yard. The project, which was announced by Mayor Bill de Blasio in November 2014, will build on earlier city plans for what is known as Building 77. The building is scheduled to open by mid to late 2016. In addition to Building 77, The New Lab, a high-tech manufacturing consortium, is expected to expand to 84,000 square feet, from its current 8,000 square foot space, when it moves into the new Green Manufacturing Center, a 250,000 square foot facility under construction at the Navy Yard.  Numerous high-profile redevelopment projects in various stages of the development pipeline will contribute to New York City construction spending well into the future. Notable among these include Hudson Yards, Pacific Park (formerly known as Atlantic Yards), the World Trade Center site, Flushing Commons, Greenpoint Landing, Domino Sugar Factory, the Staten Island ferris wheel and outlet mall, Willets Point, City Point, Hallets Point, and Seward Park.  Broadway Stages, a Brooklyn-based studio, has plans to build a $20.0 million film production complex on Staten Island. The plan will generate 800 jobs over the next two years and as many as 1,500 jobs over the next five years.  IBM announced that it will be investing $1.0 billion in its new Watson supercomputer division, which will be headquartered in 51 Astor Place in Manhattan. The money will be partially invested in startup companies and the hiring of several hundred employees at the new headquarters location.

DEMOGRAPHIC TRENDS DEMOGRAPHIC CHARACTERISTICS New York City exceeds the national average in household income at both the top and bottom of the spectrum. As a result, the city’s middle income brackets are relatively small. The high cost of living in New York City pushes out many of those who are not poor enough to qualify for subsidized rents or wealthy enough to afford market-rate housing. A 2012 study from the Center for Housing Policy found that for the decade ended in 2010, housing and transportation costs in New York City rose 55.0 percent. Over the same time period, income in the area only grew by 31.0 percent.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 10

Further considerations are as follows:

Demographic Characteristics Ne w Yor k City vs . Unite d State s 2014 Estimates Ne w Yor k Unite d Characteristic City States Median Age (years) 36.0 37.0 Average Annual Household Income $78,499 $71,318 Median Annual Household Income $50,493 $51,352 Households by Annual Income Level: <$25,000 28.3% 24.4% $25,000 to $49,999 21.3% 24.4% $50,000 to $74,999 15.7% 17.9% $75,000 to $99,999 10.6% 11.9% $100,000 plus 24.1% 21.3% Education Breakdown: < High School 20.3% 14.3% High School Graduate 25.0% 28.4% College < Bachelor Degree 20.8% 29.0% Bachelor Degree 20.0% 17.8% Advanced Degree 13.9% 10.6% Source: Claritas, Inc., Cushman & Wakefield Valuation & Advisory POPULATION According to Moody’s Analytics, the current population of New York City is estimated at over 8.4 million. Rapid population growth is and always will be a challenge for New York City, as the densely populated metro area has little room for growth. The recent trend of redeveloping former industrial and office buildings into residential buildings could help, but the city will likely never grow as quickly as the rest of the country. Of all the boroughs, Brooklyn is expected to grow the most quickly in the near future, as its current renaissance continues. According to Moody’s Analytics, the borough is forecast to grow by an average annual rate of 0.7 percent through 2019.

Further considerations are as follows:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 11

POPULATION GROWTH BY YEAR New York City vs. United States, 2004-2019 1.3% United States New York City Forecast 1.0%

0.7%

0.4%

0.1%

-0.2% Annual Percent Change Percent Annual -0.5% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory Note: Shaded bars indicate periods of recession

The following table shows New York City’s annualized population growth by county:

Annualized Population Growth by County Ne w Yor k City 2004-2019 Compound Compound Annual Annual Fore cas t For e cas t Growth Rate Growth Rate Population (000’s) 2004 2014 2015 2019 04-14 15-19 United States 292,805.3 318,857.1 321,304.5 332,313.4 0.9% 0.8% New York City 8,043.4 8,469.4 8,523.9 8,698.1 0.5% 0.5% Bronx County 1,359.0 1,429.6 1,438.6 1,466.1 0.5% 0.5% Kings County 2,459.1 2,615.9 2,637.5 2,710.9 0.6% 0.7% Queens County 2,198.5 2,314.9 2,331.7 2,385.1 0.5% 0.6% Richmond County 456.8 475.0 476.7 478.4 0.4% 0.1% New York County 1,569.9 1,633.9 1,639.4 1,657.6 0.4% 0.3% Source: Data Courtesy of Moody's Analytics, Cushman & Wakefield Valuation & Advisory HOUSEHOLDS Much like population growth, New York City continually lags the country in household formation. This is largely due to issues endemic to New York City. For example, the extremely high cost of living discourages household formation, especially as young residents group together in apartments to live more affordably. It is not uncommon for living rooms to be converted into extra bedrooms. Indeed, recent census data show that New York City leads the nation in nonfamily households, with almost two-thirds of households having members with no familial relationship.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 12

Further considerations are as follows:

HOUSEHOLD FORMATION BY YEAR New York City vs. United States, 2004-2019 2.0% United States New York City Forecast

1.5%

1.0%

0.5% Annual Percent Change Percent Annual 0.0% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory Note: Shaded bars indicate periods of recession

ECONOMIC TRENDS GROSS METRO PRODUCT As discussed earlier, one of the city’s biggest new growth drivers since the recession has been the tech industry. Giants like Microsoft, eBay, Yahoo!, Google, Facebook, Twitter, and LinkedIn have been expanding, while smaller tech firms and startups are popping up in “Silicon Alley” and other areas of the city. Notable among these are Etsy, Shutterstock, Kickstarter, MongoDB, Gilt Groupe, and Tumblr. The industry has also been one of the biggest consumers of office space in the city in recent quarters. Expansion is expected to continue as Cornell University’s proposed $2.0 billion high-tech graduate school on Roosevelt Island begins to come to fruition. It may take some time before new jobs and businesses arise from the initiative, but the industry will continue to own a growing share of the city’s economic output.

Further considerations are as follows:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 13

 The city’s GMP growth is expected to very slightly lag the nation’s GDP growth over the next five years, growing by an annual average rate of 2.6 percent. The nation’s GDP is forecast to have 2.7 percent annual growth. The following chart compares historical and projected GMP growth by year for New York City and GDP growth for the United States:

REAL GROSS PRODUCT GROWTH BY YEAR New York City vs. United States, 2004-2019

8.0% United States New York City Forecast

5.0%

2.0%

-1.0% Annual Percent Change Percent Annual

-4.0% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory Note: Shaded bars indicate periods of recession

Further considerations are as follows:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 14

EMPLOYMENT BY SECTOR New York City vs. United States 2015 Estimates

Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory

Further considerations are as follows:

The following table lists New York City’s largest private employers:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 15

Largest Private Employers Ne w Yor k City, NY No. of Bus ine s s Company Employees Type North-Shore Long Island Jew ish Health System 48,650 Healthcare JPMorgan Chase & Co. 37,363 Financial Services Mount Sinai Medical Center 32,056 Healthcare Macy's Inc. 31,200 Retailer Citibank NA 24,991 Financial Services New York-Presbyterian Healthcare System 21,802 Healthcare Bank of America 19,500 Financial Services Continuum Health Partners Inc. 18,974 Healthcare Verizon Communications 18,650 Communications Montefiore Medical Center 18,030 Healthcare Source: Crain's New York Business & Cushman & Wakefield Valuation & Advisory EMPLOYMENT GROWTH Employment growth in New York City remains steady, and has now outpaced the nation’s job growth over much of the past decade. New York City has long since recovered all of the jobs lost during the great recession and is now in a period of sustained expansion.

Additional considerations for employment growth are as follows:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 16

TOTAL EMPLOYMENT GROWTH BY YEAR New York City vs. United States, 2004-2019 4.0% United States New York City Forecast 2.0%

0.0%

-2.0%

-4.0% Annual Percent Change Percent Annual

-6.0% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory Note: Shaded bars indicate periods of recession

Further considerations are as follows:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NEW YORK CITY REGIONAL ANALYSIS 17

UNEMPLOYMENT RATE BY YEAR New York City vs. New York vs. United States, 2004-2019

11% United States New York New York City Forecast

3% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Source: Data Courtesy of Moody's Analytics and Cushman & Wakefield Valuation & Advisory Note: Shaded bars indicate periods of recession

Additional items to consider for New York City:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM LOCAL AREA MAP 18

LOCAL AREA MAP LOCAL AREA MAP

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM LOCAL AREA ANALYSIS 19

Local Area Analysis LOCATION The subject site is located on the entire city block bounded by Union Square South to the north, Fourth Avenue to the east, East 13th Street to the south and Broadway to the west in the Union Square neighborhood of Manhattan. The Union Square neighborhood centers on Union Square and East 14th Street between Park and Sixth Avenues. This neighborhood borders Greenwich Village to the south, Chelsea to the west, Madison Square to the north and Gramercy Park to the east. Union Square Park is located immediately across from the subject property. NEARBY AND ADJACENT USES This immediate area is developed with a variety of retail, office, and residential properties. Immediately to the west of the subject property is the most significant use in the immediate area known as Union Square Park. The park is bound by 14th Street to the south, 17th Street to the north Union Square East to the east and Union Square west to the west. Outlying areas feature a mixture of high density retail, residential, and office uses.

The perimeter of the of the park and the surrounding area is lined with various retailers such as American Eagle, Babies R' Us, Barnes & Noble, Whole Foods, Capital One Bank, Children's Place, Diesel Jeans, DSW, Forever 21, Jamba Juice, Lucky Brand Jeans, Lululemon, Mexx, P.C. Richards, Petco, Rothmann's, Sephora, Sketchers, Staples, The Sports Authority, Subway, Trader Joe's, Nordstrom Rack, Best Buy, Vitamin Shoppe, Walgreens and Whole Foods. Immediately adjacent to the subject property, between University Place and Sixth Avenue, is a mixed-use building with multi-level retail space. The multi-level formerly occupied by Filene’s Basement (Sym’s) was marketed for just over 6 months prior to Burlington Coat Factory securing the space. Burlington Coat Factory had its grand opening in the third quarter 2012. Within the nearby area there is also W Hotel, and New York University has also developed several dormitory buildings in the area. LOCAL AREA CHARACTERISTICS Continuing to anchor the district’s employment base includes Con Edison, one of the nation’s largest investor- owned energy companies; New York University, one of the largest private universities in the United States; Beth Israel Medical Center, a distinguished voluntary teaching hospital and member of parent company, Continuum Health Partners; and The New School, a leading progressive university in New York City. These prestigious institutions are in good company with other prominent businesses such as Danny Meyer’s distinguished Union Square Hospitality Group, and Fortune 500 Company, Barnes & Noble, the world’s largest bookseller and the nation’s highest rated bookselling brand.

According to the Union Square Partnership, the leading advocate for the Union Square-14th Street community, more than 65 new retailers, eateries and companies have opened in or around Union Square over the past year.

Area retailers and eateries continue to offer a wide variety of cuisine and prices, suitable for the diverse needs of this market. With nearly 70,000 residents, over 142,000 employees and more than 40,000 students from New York University and The New School alone, Union Square remains one of the City’s most vibrant, 24/7, mixed- use neighborhoods.

For these reasons and more, retail vacancy rates in the district remain low at approximately 3 percent, and pedestrian counts remain high with an average of 188,000 pedestrians coming through Union Square each day. Further, the residential population as well as the area median income is on the rise, lending more purchasing power to the neighborhood. Ground floor rents around Union Square reflect this data with 2011 rents somewhere between $400 and $450 a square foot.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM LOCAL AREA ANALYSIS 20

ACCESS Access to the area is considered favorable as the 14th Street station at the south side of Union Square Park provides access to the L, N, Q, R, W, 4, 5, and 6 trains. Additionally, bus service is available on 14th Street and 5th and 6th Avenues. Furthermore, access to the PATH train is located two blocks to the west. Overall, access to the area is considered good. The cross-town bus can be accessed along 14th and 23rd Streets. Additionally, downtown local and express buses can be accessed along Broadway and uptown local and express buses can be accesses along Madison and Sixth Avenues. SPECIAL HAZARDS OR ADVERSE INFLUENCES We observed no detrimental influences in the local market area, such as landfills, flood areas, noisy or air polluting industrial plants, or chemical factories. CONCLUSION The strength of the economy will be an influential factor in the health of the local Manhattan real estate market for the final half of 2012. Although economic uncertainty still lingers and consumer confidence is down, New York City tends to outperform other markets and this is especially true to retail. Tourism continues to play a vital role towards the success of major retailers, and with the final half of the year predicted to exceed previous years in number of domestic and international tourists.

Union Square has developed into a thriving and desirable residential and retail/commercial area. Its residential space, retail shops, restaurants, park, and boutique hotels attract both tourists and New Yorkers. The immediate area has shown signs of stabilization and we anticipate overall growth over the long-term given the demand drivers in the local area.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NATIONAL RETAIL MARKET ANALYSIS 21

National Retail Market Analysis INTRODUCTION The year 2015 is expected to be the strongest year for the U.S. economy since at least 2005. Real gross domestic product (GDP) is forecast to increase at a 3.3 percent rate, roughly 50 percent faster than the 2.2 percent average since the recovery began in mid-2009. The drivers of growth are consumer spending, business investment and, to a lesser extent, housing. Additionally, declining oil prices are a net positive for the economy, boosting the income available for discretionary purchases and reducing costs in a wide range of industries. This anticipated acceleration will have a strong positive impact on the U.S. commercial real estate sector, leading to higher demand in all major sectors: office, industrial, retail, multifamily and hospitality.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NATIONAL RETAIL MARKET ANALYSIS 22

NATIONAL RETAIL INVESTMENT SALES MARKET Retail Transaction Activity As the economy continues to improve, retail transaction volumes are beginning to rebound. Real Capital Analytics reported that year-end 2013 retail transaction volumes reached $60.8 billion, surpassing the 12-month totals for the previous consecutive five years. Still, the 2013 totals remain 24.0 percent below peak levels of the $80.2 billion recorded in 2007. These increased volumes are, nevertheless, a strong indication that investors feel there is growth potential in the retail market.

The following graph displays annual retail transaction volume since 2001:

$90 $83.6 $81.6 $80 $63.9 $70 $62.9 $61.1 $58.0 $60 $57.1

$50 $44.6

$40 $36.2 $28.6 $25.5

$30 $22.1 $16.3 $20 $14.0 $10 $0

Retail Capitalization Rates As the credit markets continue to loosen, transaction activity is on the rise. Investors have increasingly focused on real assets, such as commercial real estate, as a hedge against inflation in the wake of previous economic uncertainty. Capitalization rates (OARs) are compressing as demand increases. The PwC Real Estate Investor Survey reports that national power center and strip shopping center OARs at their lowest levels bottomed in the third quarter of 2007 at an average of 7.0 percent and 7.2 percent, respectively, while regional mall cap rates reached a low of 6.7 percent in the first quarter of 2008. Average rates for all three property types peaked in the first quarter of 2010 at nearly 8.5 percent.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NATIONAL RETAIL MARKET ANALYSIS 23

The following graph depicts quarterly national retail capitalization rates by property type since 2008:

National Retail Cap

9.0%

8.5%

8.0%

7.5%

7.0%

6.5%

6.0%

National Power Center National Regional Mall National Strip Shopping Center

Source: PwC Real Estate Investor Survey

CMBS Market The availability of debt including the gradual resurgence of Commercial Mortgage Backed Securities (CMBS) has contributed to the increase in transaction activity. At its peak in 2007, CMBS issuance totaled nearly $230.0 billion in the United States, and retail assets accounted for approximately one-third of total CMBS volume. During the financial crisis that began in late 2008, funding dramatically plunged. Total CMBS issuance in 2008 dropped to just $12.0 billion, followed by a nearly non-existent $2.7 billion in 2009. Issuance rebounded in 2010, reaching $11.7 billion as investors began returning to the market, but the European debt crisis, coupled with the slow U.S. economic recovery and admissions from Standard & Poor’s that it had “potentially conflicting methods” in how it was rating securitizations, caused bond buyers to become very conservative in their underwriting and pricing. To that end, many “balance sheet lenders,” such as local savings and loan banks and life insurance companies, saw notable increases in lending activity. According to Commercial Mortgage Alert, CMBS issuance still managed to total nearly $33.0 billion and $48.2 billion, respectively, in 2011 and 2012. Demand doubled in 2013, due in part to low rates, improving economic conditions and an increased appetite from bond buyers. As such, in 2013 CMBS issuance totaled $86.1 billion.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NATIONAL RETAIL MARKET ANALYSIS 24

The following table compares annual CMBS volume over the last eight years:

U.S. CMBS ISSUANCE (IN BILLIONS)

2007 2008 2009 2010 2011 2012 2013 2014

The following graphic shows recorded and estimated commercial real estate loan maturities by investor type through 2020:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NATIONAL RETAIL MARKET ANALYSIS 25

Commercial Property Price Index The Moody’s/RCA Commercial Property Price Index (CPPI) is a periodic same price change index of U.S. commercial investment properties. The Moody’s/RCA CPPI uses advanced repeat-sale regression analytics to measure price changes in U.S. commercial real estate.

The following graph displays the CPPI Index between January 2001 and December 2014:

Commercial Property Price Index Comparison

200 460

180 410 160 360 140 310 120

100 260

80 210 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Moody's National - All Property (left axis) Moody's National Retail (left axis) NCREIF National Aggregate (right axis)

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NATIONAL RETAIL MARKET ANALYSIS 26

RETAIL MARKET CONDITIONS Retail Construction Activity Despite improving fundamentals in the retail real estate market, developers are still concerned about investing in new construction projects. The exception being outlet center development and projects located in the highest- performing markets with strong tenant mixes possibly including grocery retailers, drug stores or similar net leased properties that have shown notable strength in the current market. According to data from the CoStar Group, retail construction starts peaked at 66.0 million square feet in the second quarter of 2006. Given the collapse of credit markets and consumer demand during the recent recession, construction starts have fallen significantly over the last few years. Recently, retail construction starts totaled just 5.9 million square feet in the fourth quarter of 2014.

The following graph shows retail construction starts from the second quarter of 2006 through the fourth quarter of 2014:

Retail Construction Starts (SFin Millions)

70.0 Retail Construction Starts Peaked at66.0 Million Square Feet in Q2 2006

60.0

50.0

40.0

30.0

20.0 Just 5.9 Million Square Feet Commenced in Q42014

SQUARE FEET IN MILLIONS 10.0 11.6 66.0 64.2 36.2 54.0 52.2 55.1 28.6 40.4 33.2 26.2 18.9 15.4 13.4 12.8 9.7 10.3 8.9 10.6 7.0 9.3 13.1 10.9 9.2 14.0 13.5 11.6 18.8 15.2 15.8 10.0 11.1 11.2 8.5 5.9 0.0

Source: CoStar Group

Retail Price Per Square Foot Following the decline in sales volume, pricing levels achieved by shopping centers and other retail properties trended downward rapidly before rising in recent quarters. Between 2003 and 2008, a time from when the market had picked up after the last recession, up until the most recent market fall-out, the average price per square foot for retail assets increased by 50.8 percent to a peak of $187 per square foot in 2008. However, in 2010, the average price per square foot for all retail property would sharply decline to a low of $142 per square foot. Not

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NATIONAL RETAIL MARKET ANALYSIS 27

until late 2010/early 2011 did the price per square foot begin to recover, and in 2012 it jumped to $182 per square foot, a 28.1 percent increase over 2010.

The following graph depicts the historical average price per square foot for retail assets as surveyed by RCA through fourth quarter 2014:

$325 $297 $300 $275 $250 $225 $203 $200 $175 $153 $150 $125 $100 $75

Mall & Other Strip Total Retail

Vacancy And Rental Rates The graph below shows the severity of the last recession in terms of declining absorption and rising vacancy rates. In 2008, retail absorption was negative for the first time since Reis began collecting data in 1986. Mirroring the rebound in other commercial property sectors, leasing and occupancy of U.S. malls and shopping centers saw improved fundamentals through 2014. According to Reis, the low amount of new supply of retail space should reflect as a decline in retail vacancy rates through 2019. Between 2015 and 2019, Reis data forecasts absorption in the retail market to average approximately 21.2 million square feet per year while construction completions average approximately 15.1 million square feet per year. Given this forecast, overall vacancy rates in the national retail market are projected to fall approximately 180 basis points to 8.4 percent from their current reading near 10.2 percent.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NATIONAL RETAIL MARKET ANALYSIS 28

The subsequent graph depicts annual market conditions within retail markets across the U.S.:

Annual Retail Market Conditions

50 12% 40 10% 30 8% 20

10 6% 0 4% -10 FORECAST 2% -20 RENT GROWTH PERCENTAGE -30 0%

COMPLETIONS NET ABSORPTION VACANCY RATE

Source: Reis, Inc.

The following graph shows a composite of asking and effective annual rent growth within retail markets across the U.S.:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NATIONAL RETAIL MARKET ANALYSIS 29

Annual Retail Rent Growth 5% 4% 3% 2% 1% 0% -1% -2% FORECAST

Rent Growth Percentage Growth Rent -3% -4%

ASKING RENT % CHANGE EFFECTIVE RENT % CHANGE Source: Reis, Inc.

Store Closings According to the most recent annual data collected by the International Council of Shopping Centers (ICSC), retailers and restaurateurs announced that nearly 5,500 establishments closed in 2014. The annual closing totals are more than double the previous years. The majority of retailers announcing store closings are mall-based tenants which has proven very problematic for mall owners with class-B and class–C properties.

The following is a list of space closed by segment:

ANNUAL STORE CLOSINGS 1ST HALF-YEAR 2ND HALF-YEAR

2014 4,403 1,080

2013 1,310 1,282

2012 3,511 953

2011 2,329 1,743

2010 4,396 1,176

2009 2,917 1,894

2008 3,272 3,641

2007 3,081 1,522

2006 2,749 1,981

2005 1,897 2,372

2004 3,750 2,553

2003 2,972 2,001

2002 3,227 2,723

2001 4,149 2,892

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Source: ICSC

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NATIONAL RETAIL MARKET ANALYSIS 30

E-Commerce In the age of Amazon.com, stores are trying to reinvent themselves, generally using one of two strategies: deliver products more quickly than and nearly as inexpensively as online sellers, or offer shopping experiences that entice people to visit their establishment and buy something. With the rise of online purchasing and increased price-sensitivity from consumers, retailers without a notable e-commerce platform will suffer while online-sales and sales from smartphones continue to grow at a quicker pace than brick-and-mortar sales.

The following chart tracks e-commerce sales in 2012 and 2013 as well as sales from 2014 thru 2018, as forecasted by InternetRetailer.com:

E-Commerce Sales: 2012 - 2018 $530

$480

$430

$380

$330

$280 E-COMMERCE SALES (IN BILLIONS)

$230 $225 $263 $304 $347 $338 $440 $492 $180 2012 2013 2014 2015 2016 2017 2018

Source: InternetRetailer.com, Forrester Inc.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM NATIONAL RETAIL MARKET ANALYSIS 31

NATIONAL RETAIL MARKET SUMMARY Market conditions for the retail sector are improved and continue to be very optimistic. Retail sales have increased, tenant rent concessions have abated, and leasing velocity is on the rise. Furthermore, while many traditional mall tenants are not currently in growth mode, malls continue to outperform all shopping center types, and record the lowest vacancy levels.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM MANHATTAN RETAIL MARKET ANALYSIS 32

MANHATTAN RETAIL MARKET ANALYSIS INTRODUCTION CURRENT TRENDS New York City’s collection of cultural and historical landmarks positions it as the number one tourist destination in the country. Major tourist areas like Times Square, Rockefeller Center, and Central Park produce consistent foot traffic in the Times Square bowtie and along Fifth and Madison Avenues. As a result, the retail spaces in these major corridors exhibit some of the highest rents in the world. Moreover, the combination of a dense population and the steady influx of tourists enable the Manhattan retail market to withstand down markets and recessions.

New York City’s tourism and marketing group, NYC & Co. reports that tourism rose to record levels once again in 2014 with 56.4 million tourists in total, up nearly 4.0 percent from 54.3 million in 2013. This translated to more than $4.0 billion in spending at local businesses. Spending on Broadway shows alone grossed nearly $1.4 billion in 2014, the highest ever. This surge in the tourism industry coupled with improving economic conditions means positive growth in the Manhattan retail market. Rental rates will see positive growth in the foreseeable future as retailers continue to take advantage of favorable conditions.

The Manhattan retail market is considered an anomaly when compared to other metropolitan retail markets. The relative lack of available retail sites requires retailers to utilize non-traditional space layouts. The majority of the retail space within the Manhattan market is comprised of street-level suites within the base of residential and commercial buildings. The lack of available space often incentivizes retailers to maximize their space with lower or mezzanine levels. Retail space along major corridors typically will build out below-grade selling space while secondary markets utilize this space for storage.

The following list highlights the Manhattan retail market:

 Retail asking rents continue to grow with major increases for prime space. All but one submarket showed increases from a year ago.  Availabilities increased in some retail submarkets while decreasing in others over the past year. A big reason for the increase has been landlords boosting asking rents for existing tenants in the hopes of attracting flagship stores.  Toys “R” Us’ decision to vacate its 110,000 square foot flagship at 1514 Broadway and Pearl River Mart’s decision not to renew its 30,000 square foot lease at 477 Broadway are a perfect example of the aforementioned occurrence. Toys “R” Us is paying half of the current $2,500 per square foot asking price at the 150,000 square foot property. Pearl River Mart is paying a monthly rent of more than $100,000 at its SoHo location, but there have been reports that the landlord wants to raise rents to over $500,000 a month. Pearl River Mart’s lease will expire at the end of 2015, while Toys “R” Us’ lease will expire in 2016 and will vacate the property by February 2016.  During first quarter 2015, BFX Studio signed a lease at 1231 Third Avenue for 11,000 square feet. BFX will take up the entire basement as well as some space on the ground floor. BFX Studio is a gym that offers a complete multi-discipline, cross-training approach to fitness and well-being.  Dolce & Gabbana, an Italian luxury retailer, will occupy all four levels of a building located at 155 Mercer Street in SoHo. The retailer signed a lease for 15,000 square feet at the property where the company intends to create a “premier” location.  Upscale fitness club Equinox Fitness will open a new four-level center in 2016 at SL Green Realty Corp.’s 10 East 53rd Street in the Plaza District. The full-service fitness club, which operates 73 centers in the United States, London and Toronto, signed a 25-year, 32,000 square foot lease.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM MANHATTAN RETAIL MARKET ANALYSIS 33

 Some major retailers are beginning to open stores in less established retail environments in an effort to create excitement around the brand and make an impact on the new neighborhood. MARKET CHARACTERISTICS To provide the most comprehensive picture possible, this analysis uses primarily Cushman & Wakefield Research Service’s statistics, along with the latest retail statistics from the Real Estate Board of New York (REBNY) for comparison.

Cushman & Wakefield Research Services tracks 11 major retail submarkets in Manhattan:

 Upper Fifth Avenue (between 49th and 60th Streets)  Lower Fifth Avenue (between 42nd and 49th Streets)  Madison Avenue (between East 57th and East 72nd Streets)  SoHo (Broadway to West Broadway, West Houston Street to Canal Street)  Upper West Side (on Broadway between West 60th and West 86th Streets, and on Columbus between West 66th and West 72nd Streets)  Times Square (on Broadway between West 42nd and West 47th Streets)  Third Avenue (between 57th and 79th Streets)  Flatiron (on Fifth Avenue between East 14th and East 23rd Streets, and Broadway between East 17th and East 23rd Streets)  The Meatpacking District (from Gansevoort to West 16th Street and westward from Ninth Avenue)  Lower Manhattan (Broadway, Wall Street and Fulton Street)  Herald Square (West 34th Street from Fifth Avenue to Seventh Avenue)

Submarkets are the main strips of retail space with high visibility and traffic. Neighborhood space surrounds the main corridor and is often less visible. In the Manhattan retail market, most main corridor space lies along avenues, where pedestrian traffic is high. Neighborhood space is often on the streets that branch off these avenues.

The map on the following page is produced by Cushman & Wakefield Research Services and indicates the retail neighborhoods in the borough of Manhattan:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM MANHATTAN RETAIL MARKET ANALYSIS 34

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM MANHATTAN RETAIL MARKET ANALYSIS 35

SUPPLY ANALYSIS AVAILABILITY The number of available retail spaces in many submarkets fluctuated between last quarter and the first quarter of this year. In total, five submarkets (Upper Fifth Avenue, Times Square, Flatiron, Meatpacking District, and Lower Manhattan) experienced a decline in availability rates, while five others (Lower Fifth Avenue, SoHo, Third Avenue, Upper West Side, and Herald Square) experienced an increase. Madison Avenue’s quarter-over-quarter availability rate remained unchanged. Similarly, the number of available retail spaces shrank in five submarkets (Lower Fifth Avenue, Madison Avenue, Third Avenue, Times Square, and Lower Manhattan) over the past year, while increasing in the other five submarkets (Upper Fifth Avenue, SoHo, Upper West Side, Flatiron, and Meatpacking District). Herald Square’s available space remained static over the year. Recent rent escalation in retail space has priced older tenants (including Times Square’s Toys “R” Us and Pearl River Mart at 477 Broadway) out, and caused landlords to wait for flagship store opportunities and other upscale tenants able to afford higher rents.

It should be noted that the availability rate (as tracked by Cushman & Wakefield Research Services) is a distinct measure from vacancy. Whereas vacancy is calculated on a square-footage basis, availability is derived from the number of retail spaces available divided by the total number of retail spaces in a given market.

Further considerations on availability are as follows:

 Availability in the Upper Fifth Avenue submarket increased by 1.4 percentage points over the past year to 8.8 percent. Over the past quarter, however, it decreased by 3.0 percentage points as a result of almost 25,000 square feet of new leasing.  Lower Fifth Avenue’s availability rate increased by 1.5 percentage points during the quarter at 24.5 percent. In contrast, the submarket’s availability rate decreased by 1.6 percentage points over the past year. Sephora completed a lease at 580 Fifth Avenue and will be relocating across the street and further south from its current location at 597 Fifth Avenue.  In the Madison Avenue submarket, availability fell by 1.7 percentage points over the past year. Over the past quarter, availability remained unchanged at 13.0 percent. New commitments were announced including high- end fashion brand Brion’s lease at 680 Madison Avenue and British woman’s designer L.K. Bennett’s lease at 655 Madison Avenue.  SoHo’s availability increased in both quarter-over-quarter and year-over-year statistics, by 2.7 percentage points and 1.7 percentage points, respectively. The submarket is currently sitting at 16.4 percent availability rate.  Retail availability on Third Avenue experienced a slight increase during the first quarter, rising 0.4 percentage points to 7.5 percent. It decreased by 0.8 percentage points over the past year, however. New leases announced included fitness studio BFX's lease at 1231 Third Avenue and a New Balance store that will be opening at 1172 Third Avenue. Moreover, six new availabilities were added to the market during the first quarter.  At 13.3 percent, availability decreased by 2.3 percentage points in Times Square over the past quarter, as well as decreasing by 2.3 percentage points over the year. The decrease was due to several leases on Broadway including T-Mobile, Swatch, and Invicta Watches.  The Upper West Side submarket’s availability rate during the first quarter was 9.7 percent. This was 1.2 percentage points higher than the previous quarter, and an increase of 2.1 percentage points from the previous year. The increase in vacancy can be attributed to ten new stores that entered the inventory sample including: Radio Shack, Clarins’ skin-care store, Canadian boutique Judith & Charles, Wells Fargo, and Danskin Hosiery.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM MANHATTAN RETAIL MARKET ANALYSIS 36

 Over the past year, retail availability in the Flatiron submarket increased by 0.6 percentage points, while dropping 1.3 percentage points during the quarter to 11.6 percent. Two availabilities as well as four new leases came to the market.  The Meatpacking District’s availability rate increased by 0.6 percentage points over the past year, but decreased by 1.3 percentage points to 18.3 percent during the first quarter. New availabilities included spaces from the Anj Bar at 25 Little West 12th Street and 860 Washington Street, a new development at the corner of West 13th Street.  In Lower Manhattan, the availability decreased by 0.5 percentage points in the first quarter to 8.6 percent, and decreased by 0.5 percentage points from the previous year. New leases included restaurant giant Nobu’s expansion at 195 Broadway and Open Kitchen’s lease at 120 Wall Street.  In Herald Square, Cushman & Wakefield’s newly tracked submarket, 12.5 percent of the retail spaces were available during the first quarter. Availability was unchanged over the year, but increased by 1.8 percentage points over the quarter. One new availability was added to the submarket by ladies retailer Mango. The following table contains availability rates for the Manhattan retail market according to Cushman & Wakefield Research Services:

Manhattan Retail Market Statistics Availability Rates

Annual Quarterly Percentage Percentage Market 1Q15 4Q14 1Q14 Point Change Point Change Upper Fifth Avenue 8.8% 11.8% 7.4% 1.4 -3.0 Low er Fifth Avenue 24.6% 23.1% 26.2% -1.6 1.5 Madison Avenue 13.0% 13.0% 14.7% -1.7 0.0

SoHo 16.4% 13.7% 14.7% 1.7 2.7 Third Avenue 7.5% 7.1% 8.3% -0.8 0.4 Times Square 13.3% 15.6% 15.6% -2.3 -2.3 Upper West Side 9.7% 8.5% 7.6% 2.1 1.2 Flatiron 11.6% 12.9% 11.0% 0.6 -1.3 Meatpacking District 18.3% 19.6% 17.7% 0.6 -1.3 Low er Manhattan 8.6% 9.1% 9.1% -0.5 -0.5 Herald Square* 12.5% 10.7% 12.5% 0.0 1.8 Source: Cushman & Wakefield Research Services

*New ly created statistical submarket CONSTRUCTION Inventory in Manhattan’s retail market has remained generally constant due to a lack of developable sites. The lack of viable development sites has lead to the retail borders being pushed west and north. The gentrification of northern Manhattan has opened up new opportunities for retail development, particularly along 125th Street. The newer development in upper Manhattan is comprised of big box users interspersed with neighborhood uses typically in the form of shopping centers.

In addition, the escalation of retail rents has caused owners in some neighborhoods to convert ground floor residential space to retail space. These conversions have been most appealing in trendier neighborhoods like SoHo and the West Village.

Some notable retail developments and redevelopments are discussed below:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM MANHATTAN RETAIL MARKET ANALYSIS 37

 The retail portion of the World Trade Center site, called Westfield World Trade Center, is estimated to be completed in fall 2015. The current plan includes some 350,000 square feet of initial retail space within an underground mall, all of which is now owned by Westfield. When the $1.4 billion project opens, it will be filled by brands such as Hugo Boss, John Varvatos, Michael Kors, Stuart Weitzman and Turnbull & Asser as well as fashion favorites LK Bennett, Zadig et Voltaire, Reiss and Banana Republic.  The Howard Hughes Corporation is currently rebuilding Pier 17 near the Seaport, and constructing a sleeker high-end retail complex with a green roof. The 365,000 square foot project is estimated to cost $425.0 million and is expected to be finished in 2016.  Brookfield Place (formerly known as World Financial Center) opened its doors to its swanky new fashion stores and food marketplace in late March 2015. The project, which took four years and $300.0 million to complete, included a renovation of the site to transform the waterfront portion into a European-style marketplace with dining from high-end restaurants and luxury retailers. Other renovations on the site included a new lobby, a retail corridor, an entry pavilion, and a dining terrace. The transformation attracted several notable tenants including Burberry, Tony Burch, Hermès, J.Crew, Michael Kors, and multiple restaurants.  Fosun Group, the real estate arm of Chinese company Fosun International, purchased 28 Liberty Street (formerly known as One Chase Manhattan Plaza) at the end of 2013 for $725.0 million. The company is spending between $100.0 million and $200.0 million to renovate the 2.2 million square foot tower, including an expansion of the retail space by 175,000 square feet as well as converting another 130,000 square feet of space below ground level into shops and restaurants.  The future location of Nordstrom’s flagship New York store is being constructed in the base of an 88-story tower at 217 West 57th Street. Nordstrom’s new store will be approximately 285,000 square feet. Opening day is expected in 2018.  Essex Crossing, a massive project on the former Seward Park Urban Renewal Area, will start first phase of construction as early as this summer. It will include 561 apartments, a new space for the Andy Warhol museum, the new Essex Street Market, a supermarket, and other retail and commercial space. Regal Cinema signed a lease to take up 65,000 square feet at 115 Delancey Street.  The Related Companies’ ongoing development project at Hudson Yards on the west side of Manhattan will contain space for over 100 retail shops, including Neiman Marcus, which will open its first location in the city in fall 2018.  Samyon Ruvinsky filed a permit in February for a new building at 639 Eleventh Avenue. It will be consisted of five floors, each containing 5,000 square feet. It is designed to suit retail, showroom, office, rehearsal space, and/or film/music studio use.  A developer was issued construction permits during the fourth quarter of 2013 for a new development at 100 West 125th Street. The new building will be five stories tall and feature 180,000 square feet of retail space, to be completed later in 2015. Whole Foods is set to anchor the development and as of March, construction of the store had reached ground level.  In June 2014, a developer filed plans to construct a four-story, 52-foot glass retail building on a vacant parcel of land at 144 Spring Street in SoHo. In September, the developer received a unanimous approval from the Landmarks Preservation Committee. Designed by Higgins Quasebarth & Partners and Bohlin Cywinski Jackson, the building will have two floors and two mezzanines and draw inspiration from the Lever House and Seagram Building.  The proposed Silverstein Properties residential development at 520 West 41st Street (also known as 514 Eleventh Avenue) will contain a podium with 300,000 square feet of retail space. ASKING RENTS Over the past year, asking rents grew steadily in most submarkets, with Upper Fifth Avenue being the only exception. In contrast, some submarkets exhibited a drop in rental rates during the first quarter of 2015 while

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM MANHATTAN RETAIL MARKET ANALYSIS 38 others showcased an increase. During the quarter, asking rents decreased in Upper Fifth Avenue, Madison Avenue, Upper West Side, Lower Manhattan and Herald Square. Lower Fifth Avenue, SoHo, Third Avenue, Flatiron and Meatpacking District experienced lower rental rates in the first quarter. Times Square did not experience any change in rental rate during the quarter. The changing composition of available spaces as a result of high-end space being leased was partly responsible for the slowdowns in some of these submarkets. Asking rents are typically tracked based on the ground floor space only. Below grade and upper level retail space is generally leased at a discount to the ground floor.

Additional info regarding each submarket includes:

 Upper Fifth Avenue continues to have the highest asking rents in Manhattan despite a quarterly and an annual decrease in the average asking rent. The average asking rent fell by 2.0 percentage points over the past year and by 9.0 percentage points from the end of last quarter. During the first quarter of 2015, tenants found landlords asking an average of $3,350 per square foot for direct space. The highest asking rent on the corridor was $3,800 per square foot at 685 Fifth Avenue.  Lower Fifth Avenue asking rents increased by 2.5 percent during the first quarter to $1,238 per square foot. Over the past year, the average asking rent rose by 17.1 percent. Five years ago, the submarket’s average asking rent was only $458 per square foot, highlighting its recent transformation into a destination for flagship stores.  On Madison Avenue, the average asking rent fell by 1.1 percent during the first quarter but rose by 8.0 percent over the past year at $1,584 per square foot. Prior to the quarterly decline, the average asking rent increased in each of the last six quarters. In addition, space at 761 Madison Avenue had the highest asking rent at $2,100 per square foot.  SoHo’s average asking rent rose by 0.4 percentage points during the quarter and 13.8 percentage points over the year at $519 per square foot. The market’s high streets of Broadway, Prince, and Spring have average asking rents of $884 per square foot, with Prince Street registering the highest average asking rents at over $1,000 per square foot.  Third Avenue’s average asking rent increased by 18.8 percentage points over the past year and 10.1 percentage points during the first quarter, closing the quarter at $328 per square foot. Typically, this submarket receives considerably less foot traffic than other more prominent ones in Manhattan, resulting in an average rental rate of less than $300 per square foot. This is the first time since at least the third quarter of 2009 where the average asking rent exceeded $300 per square foot.  Times Square’s average asking rate remained unchanged during the first quarter at $2,508 per square foot, with a 4.2 percent increase over the year. Five years ago, asking rents in this corridor registered only $647 per square foot. In comparison to all other submarkets tracked, this submarket continued to experience the greatest long term increase, a 287.0 percent jump in five-year growth in asking rents.  The Upper West Side’s average asking rent decreased by 2.3 percentage points during the first quarter at $388 per square foot. Over the year, however, it has increased by 2.1 percent.  Average asking rents in Flatiron increased by 1.7 percent during the quarter, and are now at an all-time high of $424 per square foot. This is attributed to the popularity of this shopping neighborhood which continues to lure high-end retail tenants, resulting in landlords seeking an increase in asking retail rental rates.  The Meatpacking District’s evolution into a hip shopping district has led to a 7.7 percent increase in the average rental rate over the past year. During the first quarter, the submarket’s average rate rose 3.0 percent to $376 per square foot.  Even though Lower Manhattan’s retail market statistics do not include any data from the World Trade Center retail complex or Brookfield Place, the submarket continues to benefit from Brookfield Place’s repositioning and the ongoing development of the World Trade Center sites. Retail asking rents rose substantially by 57.6 percent over the past year despite falling 3.0 percentage points during the quarter.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM MANHATTAN RETAIL MARKET ANALYSIS 39

 The average asking rent for retail spaces in Herald Square was $791 per square foot during the first quarter, the fifth highest of any submarket in Manhattan. The average asking rent increased by 7.5 percentage points over the past year while falling 3.9 percentage points during the quarter. Select spaces along the corridor are asking up to $1,100 per square foot.

The following table contains the average asking rent for ground floor retail space along the main corridors tracked by Cushman & Wakefield Research Services. Asking rents for neighborhood space outside of the main corridors will vary:

Manhattan Retail Market Statistics Re ntal Rate s

Annual Quarterly Percent Percent Market 1Q15 4Q14 1Q14 Change Change Upper Fifth Avenue* $3,350 $3,683 $3,417 -2.0% -9.0% Low er Fifth Avenue $1,238 $1,208 $1,057 17.1% 2.5% Madison Avenue $1,584 $1,602 $1,466 8.0% -1.1% SoHo $519 $517 $456 13.8% 0.4% Third Avenue $328 $298 $276 18.8% 10.1% Times Square $2,508 $2,507 $2,407 4.2% 0.0% Upper West Side $388 $397 $380 2.1% -2.3% Flatiron $424 $417 $378 12.2% 1.7% Meatpacking District $376 $365 $349 7.7% 3.0% Low er Manhattan $394 $406 $250 57.6% -3.0% Herald Square** $791 $823 $736 7.5% -3.9% Source: Cushman & Wakefield Research Services *Direct space only on Asking Rent for Upper Fifth Avenue **New ly created statistical submarket

REBNY Findings in the Spring 2015 retail report (the report is released bi-annually in the spring and fall) from the Real Estate Board of New York (REBNY) reflect much of Cushman & Wakefield’s own. Rental rates in most submarkets are showing an overall upward trend from the fall of 2014, as well as from the spring of 2014. The report suggests that this continued rent growth is a result of the city’s strong tourism industry and its cachet for global retail brands.

Further considerations:

 Asking rents in the Upper East Side along Third Avenue between 60th and 72nd Streets rose most rapidly among the primary retail markets and corridors. The submarket’s asking rents rose by 36.0 percent from the fall of 2014 to the spring of 2015.  Retail spaces along 57th Street between Fifth Avenue and Park Avenue have begun to command higher rents, with the average asking rent increasing by 28.0 percent from the fall 2014 report. This trend is expected to continue due to the recent influx of ultra-luxury residential developments on 57th Street. The following chart details average asking rents for Spring 2015 according to REBNY. The boundaries for each submarket may not perfectly coincide with Cushman & Wakefield’s:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM MANHATTAN RETAIL MARKET ANALYSIS 40

Primary Retail Markets Spring '15 Fall '14 Percent Change From and Corridors Average Asking Rents Average Asking Rents Fall '14 Eastside Upper East Side Third Ave: 60th-72nd St. $363 $266 36% East 86th St: Lexington Ave - 2nd Ave $456 $423 8% Madison Ave: 57th-72nd St. $1,700 $1,709 -1% Westside Upper West Side Broadw ay: 72nd-86th St. $390 $377 3% Columbus Ave: 66 -79 St. $447 $347 29% Midtown East 57th St: 5th Ave-Park Ave $1,600 $1,250 28% Upper Fifth Avenue Fifth Ave: 49th-59th St. $3,683 $3,420 8% Lower Fifth Avenue Fifth Ave: 42nd - 49th St. $1,200 $1,095 10% Times Square Broadw ay & 7 Ave: 42 - 47 St. $2,413 $2,317 4% Midtown South Herald Square 34th St: 5th-7th Ave. $1,000 $891 12% Flatir on Fifth Ave: 14th-23rd St. $403 $403 0% Broadw ay: 14-23rd St. $435 $359 21% Downtown Meatpacking 14 St. 9 - 10 Ave $372 $339 10% Financial District Broadw ay: Battery Park-Chambers St. $234 $265 -12% SoHo Broadw ay: Houston-Broome St. $977 $830 18% West Villlage Bleeker St: 7 Ave South - Hudson St $481 $484 -1% Upper Manhattan Harlem 125th Street: (River to River) $141 $130 8% Source: The Real Estate Board of New York Spring 2015 Retail Report and Cushman & Wakefield Valuation & Advisory DEMAND ANALYSIS LEASING ACTIVITY Retail leasing activity in the city continues to remain healthy. Since 2010 many of the major players in the market have been fast-fashion clothiers like H&M and Uniqlo and bargain department stores like TJ Maxx and Century 21. Fast casual restaurants are making moves in the market now as Chipotle, Shake Shack, Goodburger and their counterparts spread across Manhattan. In addition, upscale grocery stores like Fairway and Whole Foods have been expanding in Manhattan recently. Other recent leasing activity has come from more upscale department stores pushing the boundaries in new retail neighborhoods, like Neiman Marcus.

Further considerations:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM MANHATTAN RETAIL MARKET ANALYSIS 41

 The largest transaction in the first quarter was Equinox signing a lease at 10 East 53rd Street. The upscale fitness club is taking 29,851 square feet of space in the Plaza District. Equinox Fitness is a full-service fitness club that operates 73 centers in major U.S. markets, London and Toronto.  Urban Market signed a lease for more than 27,000 square feet of space at 525 West 52nd Street in Midtown West. The location will be the grocery’s first Manhattan outpost. Urban Market, a full-service market, is a spinoff of Key Foods that opened its first location in late 2013 in South Williamsburg in Brooklyn.  Gymnastics studio NYC Elite signed the third largest lease during the quarter, taking more than 25,000 square feet of space at 40 Worth Street in TriBeCa. The studio has three locations in Manhattan and will be relocating from its current space at 100 Avenue of the Americas. NYC Elite will move into its new space this fall. The following table details some of the most significant retail leases within Manhattan during the first quarter:

Significant Retail Lease Transactions Manhattan 1st Quarter 2015

Building Address Submarket Tenant Size (sf) 10 East 53rd Street Plaza Equinox 29,851 525 West 52nd Street Midtow n West Urban Market 27,416 40 Worth Street TriBeCa NYC Elite 25,014 2085 Broadw ay Upper West Side Bloomingdale's Outlet 24,985 100 West 125th Street Harlem TD Bank 20,000 Source: Cushman & Wakefield Research Services

TOURISM New York’s wealth of historical and cultural landmarks attracts visitors from across the globe. This international presence has long provided a substantial flow of spending in the market, creating large demand for retail space. The great recession caused a dip in tourism and associated revenues in 2009, just as it did after September 11th and the recession of 2001. The city has bounced back strongly since then, due largely to the global economic recovery and advertising efforts by the City’s tourism agency.

Further considerations are as follows:

 New York City’s tourism industry continues to expand. According to NYC & Company, a record 56.4 million people visited the city in 2014, up nearly 4.0 percent from 54.3 million in 2013. It also had a total tourism spending of $40.3 billion.  NYC & Company had set a goal to reach 50.0 million visitors by 2012. The city surpassed the 50.0 million visitor mark in 2011, one year ahead of schedule. NYC & Company had also set a new goal for the city to reach 55.0 million visitors by 2015. That goal was also accomplished as demonstrated by the 2014’s tally of 56.4 million visitors. The following chart contains information on yearly direct tourism sales for Manhattan through 2014:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM MANHATTAN RETAIL MARKET ANALYSIS 42

$45.0 Total Visitor Spending in NYC 40.3 $40.0

$35.0

$30.0

$25.0

$20.0 billions

$15.0

$10.0

$5.0

$0.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: NYC & Company

The following chart portrays the number of visitors New York City has received annually through 2014:

60 Total Visitors to NYC 56.4

30 millions 20

0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: NYC & Company

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM MANHATTAN RETAIL MARKET ANALYSIS 43

CONCLUSION Despite a recent slowdown in the Upper Fifth Avenue submarket, Manhattan remains one of the strongest retail markets in the country, particularly in the prime corridors on Times Square. New York City’s constant foot traffic and robust tourism industry has led to rising rents and an influx of flagship stores. As empty spaces on the major high streets are absorbed, secondary corridors will continue to evolve.

Further considerations are as follows:

 Nearly every Manhattan retail submarket witnessed rising asking rents over the past year. Times Square has rapidly emerged as a world-class retail corridor on par with Upper Fifth Avenue, and SoHo is poised for a similar ascent.  With major retail projects such as Brookfield Place and the World Trade Center garnering increased attention, Lower Manhattan is beginning transform into a retail destination.  The boom in tourism will see local retailers reaping rewards for years to come. Through NYC & Company, New York City continues its global marketing operation which ensures the area’s status as a top travel destination.  The subject property is a well located multi-level retail condominium within the Union Square neighborhood of Manhattan. The subject contains a good mix of national and credit tenants that provide a good draw to the property.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RETAIL TRADE AREA ANALYSIS 44

RETAIL TRADE AREA ANALYSIS RETAIL MARKET OVERVIEW Retail properties typically track a trade area which contains people who are likely to patronize their particular store. These customers are drawn by a given class of goods and services from a particular tenant mix. A local retail building’s fundamental drawing power comes from the strength of the tenants, as well as the population in the local area. A successful combination of these elements creates a destination for customers seeking a variety of goods and services within a self-contained environment.

In order to define and analyze the market potential for the subject property it is important to first the typical market lease terms followed by establishing the boundaries of the trade area from which the subject will draw its customers. In some cases, defining the trade area may be complicated by the existence of other retail facilities on main thoroughfares within trade areas that are not clearly defined or whose trade areas overlap with that of the subject.

Once the trade area is defined, the area's demographics and economic profile can be analyzed. This will provide key insight into the area's dynamics as it relates to the subject. TRADE AREA ANALYSIS In defining boundaries for the subject's trade area, several factors have been considered. First, the property's location with respect to transportation provides the basis for regional access to the area. Second, local competition and geographic boundaries help to define the potential size of the trade area as a measure of distance from the property. Third, the merchandising mix and anchor alignment provides the basic draw of customers that are likely to patronize the property.

The existing large scale retail developments in Manhattan are clustered into self-contained districts that serve primarily the immediate office and residential populations. The subject is located on south side of Union Square South between University Place and Broadway within the Union Square neighborhood of Manhattan. The immediate surrounding environs are residential in nature with retail and commercial uses to the west and south. The property also benefits from excellent frontage across Union Square Park and within close proximity to the 4, 5, 6, L, N, Q and R subway lines.

As discussed, the location and accessibility of competing properties has a direct bearing on the formation and make-up of the subject's potential trade area as well. The subject property is a unique asset in the market in terms of its size, visibility, and location that is not easily duplicated in the marketplace. Therefore, the subject’s limited competition is with other large multi-level retail properties, and the surrounding retail districts in Manhattan.

The foundation of our analysis in the delineation of the subject's trade area may be summarized as follows:

 Good subway access, highway accessibility, geographical constraints, and nodes of residential, and office development;

 The position and nature of the area's retail structure, including the location of destination retail properties which compete with the subject and the strength and composition of the retail infill; and

 The size, layout, quality, tenancy, and merchandising composition of the subject property.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RETAIL TRADE AREA ANALYSIS 45

Given all of the preceding, and considering the population density surrounding the subject, we believe that the primary trade area for the subject property would be made up of the area from Water Street, the southernmost point of Manhattan, up to 23rd Street. The subject’s secondary trade area encompasses the area from 23rd Street to Central Park South (a/k/a 60th Street). We have analyzed the demographics based on the respective zip codes of the subject's primary and secondary trade areas in Manhattan. To add perspective to our analysis of the primary and secondary trade area, we have included comparison data for the Manhattan, New York City, and New York State. MARKET ASSUMPTIONS TYPICAL LEASE TERM Our survey of market participants has included a broad cross section of retail center owner / developers and leasing agents. Typical lease terms in the region for local tenants vary from 5 to 10 years, with larger regional and national tenants commanding longer terms of 10 to upwards of 20 years. Major / anchor leases typically run a range of 15 to 30 years, with 20 years being typical. Inline tenant leases range between 10 to 15 years in duration.

EXPENSE REIMBURSEMENT Typically, retail leases in comparable retail centers are structured on a net basis, with tenants responsible for a full pro-rata share of taxes and common area maintenance (CAM) expenses. Common area maintenance recoveries will typically have an administrative surcharge of 5.0 to 15.0 percent in addition to the pro-rata pass- through. Periodically, the management fee may be recovered in lieu of this structure.

RENT ESCALATIONS Rental increases in the form of a CPI increase or a fixed step-up are usually sought, but not always achieved. The strength of a particular property or location generally dictates the ability of a landlord to command rental increases. The two most common structures in the subject market appear to be annual escalations or fixed steps. Annual increases are typically based upon CPI, or a lower stipulated rate, usually around 2.0 to 3.0 percent per year. Fixed steps appear to equal nearly 5.0 to 10.0 percent every three years or 10 to 15 percent every five years over the course of the term. OVERAGE RENT In addition to the minimum base rent, many retail tenants contract to pay a percentage of their gross annual sales over a pre-established base amount as overage rent. Most leases in the market appear to have a natural breakpoint. The average overage percentage for small retail tenants is in a range of 4.0 to 6.0 percent. Anchor tenants typically have the lowest percentage clauses, with ranges of 1.0 to 3.0 percent being most common. CONCESSIONS Concessions will vary considerably by property and tenant type. The level of rent that tenants are willing to pay is often influenced by the magnitude of the build-out offered, as well as the amount, if any, of free rent granted. Anchor tenants are generally in a better negotiating position to extract concessions in the form of free rent or improvement allowances. However, if an anchor is strongly motivated to be in a particular market or center, it is not unusual for an owner to be able to maintain a firm bargaining position, yielding little or no concessions. We typically do not see tenant allowances for existing retail centers in the marketplace.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RETAIL TRADE AREA ANALYSIS 46

LEASING COMMISSIONS 5-Year: 19.5% or 3.90% per year

10-Year: 32.0% or 3.20% per year

15-Year: 42.0% or 2.80% per year

20-Year: 52.0% or 2.60% per year

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RETAIL TRADE AREA ANALYSIS 47

DEMOGRAPHIC SUMMARY Primary Secondary New York New York State of United Trade Trade County City New York States POPULATION STATISTICS

2000 380,539 599,316 1,534,071 7,995,717 18,963,706 281,422,839 2014 424,169 678,201 1,639,470 8,447,426 19,705,465 318,283,904 2019 438,161 702,944 1,672,934 8,581,074 19,996,178 331,097,940

Compound Annual Change 2000 - 2014 0.78% 0.89% 0.48% 0.39% 0.27% 0.88% 2014 - 2019 0.65% 0.72% 0.40% 0.31% 0.29% 0.79%

HOUSEHOLD STATISTICS

2000 190,112 322,421 737,359 3,017,153 7,052,365 105,480,206 2014 214,137 362,724 793,378 3,241,645 7,482,075 120,696,822 2019 222,462 377,733 814,079 3,313,873 7,641,317 126,162,821

Compound Annual Change 2000 - 2014 0.85% 0.84% 0.52% 0.51% 0.42% 0.97% 2014 - 2019 0.77% 0.81% 0.52% 0.44% 0.42% 0.89%

AVERAGE HOUSEHOLD INCOME

2000 $81,679 $93,926 $88,207 $58,507 $61,885 $56,669 2014 $129,028 $139,172 $124,230 $80,263 $84,302 $75,020 2019 $149,804 $160,528 $143,034 $89,613 $95,243 $86,231

Compound Annual Change 2000 - 2014 3.32% 2.85% 2.48% 2.28% 2.23% 2.02% 2014 - 2019 3.03% 2.90% 2.86% 2.23% 2.47% 2.82%

OCCUPANCY

Owner Occupied 22.56% 24.58% 22.58% 29.91% 52.01% 64.19% Renter Occupied 77.44% 75.42% 77.42% 70.09% 47.99% 35.81%

SOURCE: Claritas, Inc. POPULATION Having established the subject’s trade area, our analysis focuses on the trade area's population. Claritas, Inc provides historical, current and forecasted population estimates for the total trade area. Patterns of development density and migration are reflected in the current levels of population estimates.

Between 2000 and 2014, Claritas, Inc., reports that the population within the primary trade area (23rd Street south to the tip of Manhattan) increased at a compound annual rate of 0.78 percent. This trend is expected to continue into the near future albeit at a slightly slower pace. Expanding to the secondary trade area (23rd Street south to 60th Street), population is expected to increase 0.72 percent per annum over the next five years.

The following page contains a graphic representation of the current population distribution within the subject’s region.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RETAIL TRADE AREA ANALYSIS 48

Overall, the existing population and density for the primary trade area of approximately 424,100 residents is a good potential market for retailers.

CURRENT POPULATION MAP

Population - 1: 60,462 - 112,940 Population - 2: 38,198 - 60,461 Population - 3: 18,163 - 38,197 Population - 4: 0 - 18,162

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RETAIL TRADE AREA ANALYSIS 49

POPULATION GROWTH MAP

Household Income - 1: $115,427 - 230,932 Household Income - 2: $74,755 - 115,426 Household Income - 3: $59,064 - 74,754 Household Income - 4: $0 - 59,063

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RETAIL TRADE AREA ANALYSIS 50

The population is living longer on average. This results in an increase of single- and two-person households;

 Higher divorce rates have resulted in an increase in single-person households; and  Many individuals have postponed marriage, also resulting in more single-person households. According to Claritas, Inc., the Primary Trade Area grew at a compound annual rate of 0.85 percent between 2000 and 2014. Consistent with national trends, the trade area is experiencing household changes at a rate that varies from population changes. That pace is expected to continue through 2019, and is estimated at 0.65 percent.

Correspondingly, a greater number of smaller households with fewer children generally indicate more disposable income. In 2000, there were 1.77 persons per household in the Primary Trade Area and by 2014, this number is estimated to have increased to 1.78 persons. Through 2019, the average number of persons per household is forecasted to decline to 1.77 persons.

Overall, the existing households for the primary trade area of approximately 214,000 units provide a significantly large market from which to draw customers. TRADE AREA INCOME Income levels either on a per capita, per family or household basis, indicate the economic level of the residents of the trade area and form an important component of this total analysis. Average household income, when combined with the number of households, is a major determinant of an area's retail sales potential.

Trade area income figures for the subject support the profile of a broad middle-income market. According to Claritas, Inc average household income in the primary trade area in 2014 was approximately $139,172, 173.39 percent of the CBSA average ($80,263) and 165.09 percent of the state average ($84,302).

DISTRIBUTION OF HOUSEHOLD INCOME Primary Secondary New York New York State of United Category Trade Trade County City New York States $150,000 or more 25.23% 27.80% 23.61% 11.26% 11.76% 8.78% $125,000 to $149,999 5.70% 6.13% 5.33% 4.41% 5.17% 4.54% $100,000 to $124,999 9.39% 9.48% 8.32% 7.45% 8.57% 8.06% $75,000 to $99,999 10.18% 10.34% 9.94% 10.66% 12.03% 12.21% $50,000 to $74,999 11.89% 11.78% 12.30% 15.99% 17.25% 18.37% $35,000 to $49,999 7.96% 7.84% 8.80% 12.19% 12.11% 13.78% $25,000 to $34,999 6.52% 6.16% 7.18% 9.47% 9.24% 10.35% $15,000 to $24,999 7.96% 7.29% 8.63% 10.87% 10.21% 10.96% Under $15,000 15.17% 13.18% 15.90% 17.69% 13.66% 12.95% Source: Claritas, Inc. The following graphic presentation of the household income distribution throughout the trade area that clearly shows the area surrounding the subject to be characterized by middle income households.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RETAIL TRADE AREA ANALYSIS 51

HOUSEHOLD INCOME MAP

Household Income - 1: $88,004 - 230,932 Household Income - 2: $69,921 - 88,003 Household Income - 3: $57,442 - 69,920 Household Income - 4: $36,195 - 57,441

RETAIL SALES Perhaps an even more important measure of area income retail expenditures. Retail sales potential and growth are also tracked by Claritas, Inc. At the time of the writing of this report, the total retail sale potential for the primary trade area totaled $7.65 billion and $13.35 billion for the secondary trade area. By comparison, New York County had potential retail sales of $27.94 billion and New York City contained a retail trade potential of $116.11 billion.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RETAIL TRADE AREA ANALYSIS 52

Retail Trade Potential Primary Trade Secondary Trade New York County New York City New York State United States Total Retail Demand $7,651,588,216 $13,349,265,641 $27,939,467,039 $116,108,462,519 $288,236,796,060 $5,093,204,999,974 Motor Vehicle & Parts Dealers $1,181,228,111 $2,109,445,227 $4,197,776,045 $17,512,033,059 $46,618,768,099 $962,354,000,000 Furniture & Home Furnishings Stores $182,502,233 $323,497,551 $656,338,620 $2,621,082,879 $6,349,079,596 $101,196,000,000 Electronics & Appliances Stores $159,372,356 $278,186,818 $582,604,131 $2,446,618,547 $6,128,484,734 $101,042,000,000 Building Material, Garden Equipment Stores $479,771,008 $852,233,959 $1,769,082,483 $7,029,945,097 $18,781,183,790 $312,404,999,969 Food & Beverage Stores $1,003,646,535 $1,724,764,763 $3,759,911,317 $16,015,923,489 $36,820,356,536 $652,638,000,000 Health & Personal Care Stores $347,108,840 $598,729,761 $1,316,105,404 $5,611,728,451 $14,180,949,034 $285,860,000,000 Gasoline Stations $738,032,981 $1,270,515,774 $2,717,622,754 $11,531,809,887 $27,958,567,830 $546,185,000,000 Clothing & Clothing Accessories Stores $432,618,596 $751,078,301 $1,566,819,109 $6,405,024,659 $15,223,602,560 $250,625,000,002 Sporting Goods, Hobby, Book, Music Stores $139,506,599 $241,859,756 $509,795,596 $2,108,612,753 $5,265,233,152 $90,225,000,000 General Merchandise Stores $893,314,914 $1,543,973,768 $3,319,957,115 $13,977,225,700 $33,078,939,316 $659,070,000,000 Miscellaneous Store Retailers $180,687,999 $313,394,874 $669,285,305 $2,787,051,538 $7,079,585,417 $126,599,000,003 Foodservice & Drinking Places $1,063,567,325 $1,862,031,281 $3,729,703,243 $14,820,297,782 $37,361,057,160 $553,008,000,000

Retail Sales Primary Trade Secondary Trade New York County New York City New York State United States Total Consumer Expenditures - Including Food 2014 11,246,473,474 19,619,380,398 40,798,338,264 167,943,276,759 412,903,213,412 6,292,556,700,084 Total Consumer Expenditures - Not Including Food 2014 9,919,052,718 17,320,072,931 35,923,971,368 147,657,308,158 365,075,683,068 5,484,738,360,802 Total Consumer Expenditures - Including Food 2019 13,411,655,508 23,383,867,773 47,923,084,309 196,037,715,198 484,685,111,544 7,691,615,556,105 Total Consumer Expenditures - Not Including Food 2019 11,814,255,211 20,619,020,534 42,154,178,911 172,190,484,042 428,392,834,228 6,733,800,507,161 OVERAGE RENT In addition to the minimum base rent, many retail tenants contract to pay a percentage of their gross annual sales over a pre-established base amount as overage rent. Most leases within large retail centers in the market appear to have a natural breakpoint. The average overage percentage for small space retail tenants is in a range of 5.0 to 10.0 percent. Anchor tenants typically have the lowest percentage clauses, with ranges of 1.0 to 5.0 percent being most common. Within the subject property only Nordstrom’s Rack has reached the threshold for overage rent. The overage rent equated to $40,000, or $1.26 per square foot in 2014. In the next section we will overview the subject’s historical sales SUBJECT HISTORICAL SALES Several of the subject tenants are responsible for reporting sales figures. Exhibited on the following chart are the sales figures for the last 5 years:

TOTAL PROPERTY TENANT SALES CATEGORY Total Sq/Ft Actual 2010 Sales/SF Total Sq/Ft Actual 2011 Sales/SF Actual 2012 Sales/SF Actual 2013 Sales/SF Total Sq/Ft Actual 2014 Sales/SF Anchor Regal Cinemas 118,779 SF $24,841,292 $209 118,779 SF $24,247,728 $204 $26,655,507 $224 $23,779,697 $200 118,779 SF $24,780,595 $209 In-Line Best Buy 46,088 SF $69,175,630 $1,501 46,088 SF $75,199,424 $1,632 $72,507,670 $1,573 $66,241,268 $1,437 N/A N/A N/A Duane Reade N/A N/A N/A 13,947 SF $14,944,242 $1,072 $15,536,936 $1,114 $15,320,855 $1,099 N/A N/A N/A Nordstrom Rack 32,136 SF $21,991,328 $684 32,136 SF $29,112,729 $906 $34,580,086 $1,076 $41,496,558 $1,291 32,136 SF $47,044,057 $1,464 US Wines 6,419 SF $6,797,460 $212 6,419 SF $6,709,381 $209 $6,897,630 $215 $6,769,394 $211 N/A N/A N/A Inline Subtotal 84,643 SF $97,964,418 $1,157 98,590 SF $125,965,776 $1,488 $129,522,322 $1,530 $129,828,075 $1,534 32,136 SF $47,044,057 $556 We have utilized the most recent sales information provided by the ownership which for the majority of the tenants was as of yearend 2013. Regal Cinemas has exhibited sales ranging from $23.8 million in 2013 to $24.8 million in 2010. Regal exhibited sales of $24.8 million in 2014, which exhibited a continued appreciation over the previous three years. Best Buy has reported sales for calendar years 2010 through 2013. The sales have ranged from $66.2 million in 2013 to $75.2 million in 2011. The most recent sales exhibited a slight decrease over the previous two years. Duane Reade has reported sales for calendar years 2011 through 2013. The sales have ranged from $14.9 million in 2011 to $15.4 million in 2012. The sales have remained fairly stable over the last two years. Nordstrom Rack has reported sales for calendar years 2010 through 2014. The sales have ranged from $21.9 million in 2010 to $47.0 million in 2014. The sales have exhibited significant increases over the analysis period. US wines has reported sales for calendar years 2010 through 2013. The sales have ranged from $6.7 million in 2010 to $6.9 million in 2012. The sales have remained fairly stable over the analysis period. Overall, the subject sales have increased over the analysis period. We have assumed the subject sales will increase 3.0 percent per annum going forward based on improving market conditions.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RETAIL TRADE AREA ANALYSIS 53

TENANT PROFILES The subject is 100.0 percent leased to seven retail tenants. The subject is anchored by Best Buy, Duane Rease, Regal Cinemas, and Nordstrom Rack, which occupy 83.7 percent of the subject. We have provided a profile of the larger and credit tenants in order analyze the tenant quality of the subject property. DUANE READE TENANT PROFILE Duane Reade is a chain of drugstores located in the metropolitan New York area. The chain, which was opened in 1960, operates over 250 stores in commercial and residential neighborhoods throughout New York. Duane Reade was purchased by Walgreen Company (parent company of the Walgreen’s national drugstore chain) in 2010.

Walgreen Company is the largest drug store chain in the United States by sales. At the end of fiscal 2013, the company operated some 8,300 retail drugstores in all 50 States, the District of Columbia, Puerto Rico, as well as two mail-order facilities. Walgreen’s fill over 650.0 million prescriptions annually, and 65.0 percent of the company’s revenue is derived through the sale of prescription drugs. Walgreen’s stores also sell non-prescription drugs, general merchandise, cosmetics, toiletries, household items, food and beverages. The company owns 20.0 percent of its retail stores and leases the remainder. Customers can have prescriptions filled at the drugstore counter, as well as through mail, by telephone and on the Internet.

On the last day of 2014, Walgreen took full ownership of European drugstore chain Alliance Boots for more than $15.0 billion in cash and stock. The deal created a network of nearly 13,000 stores across two dozen countries, with Walgreen Company becoming a subsidiary of newly formed Walgreens Boots Alliance.

Company founder Charles Walgreen opened his first namesake store in Chicago in 1901. The Company grew rapidly throughout the Chicago metro area, reaching 20 stores in 1920. Walgreen took the company public in 1927 with nearly 400 stores. Walgreens was a pioneer of self-service stores after World War II. In recent years, the company has expanded aggressively into other health care sectors, including home care and prescription management. The company’s stock is publicly traded on the New York Stock Exchange under the ticker symbol “WAG”.

Credit Ratings Walgreen Company is rated investment grade by Moody’s and Standard & Poor’s. A summary of the company’s credit profile is provided in the table below:

CREDIT RATINGS

Agency Rating Last Rating Action Outlook Moody's Baa2 Dec-14 Stable Fitch - - - S&P BBB Aug-12 Stable Source: Moody's, Fitch, S&P Annual Financial Data Walgreen Company’s net sales in fiscal 2014 were $76.4 billion, an increase of nearly 6.0 percent from $72.2 billion in fiscal 2013. Net income for the year fell by 21.1 percent to $1.9 billion. The following table is a profile of the company’s annual financial performance:

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RETAIL TRADE AREA ANALYSIS 54

WALGREEN COMPANY FINANCIAL OVERVIEW FY2014 FY 2013 FY 2012 Revenues (in millions) $76,392 $72,217 $71,633 Change in Revenues 5.8% 0.8% -0.8% Net Income (in millions) $1,932 $2,450 $2,127 Number of Employees 251,000 248,000 240,000 Source: Hoovers NORDSTROM, INC. TENANT PROFILE Nordstrom, Incorporated is a leading national upscale department store retailer. Nordstrom operates 294 stores across 38 states. The company operations include 116 full-line ‘Nordstrom’ department stores, 178 discount ‘Nordstrom Rack’ stores, five “Trunk Club” clubhouses, one clearance, and other retail channels including their online private sale subsidiary “HauteLook” and two “Jeffrey” boutiques.

Company founder John Nordstrom, a former lumberjack and gold miner, opened a shoe store with his Alaska Gold Rush earnings in 1901. The Nordstrom family is heavily involved in the management of the company and owns an estimated 15.0 percent of Nordstrom’s outstanding shares. Once the largest independent shoe chain in the country, the company grew quickly and was taken public in 1971.

Nordstrom has grown from a regional department store to a national chain by opening new stores rather than by acquisition of other retailers. In early 2011, the company acquired HauteLook, a Los Angeles-based online retailer that offers flash sales on designer goods. The deal includes Nordstrom paying $180.0 million in stock and a three- year "earn-out" payment based on HauteLook's financial performance.

Credit Ratings Nordstrom is rated investment grade by Moody’s, Fitch, and Standard & Poor’s. A summary of the company’s credit ratings is provided in the table below:

CREDIT RATINGS

Agency Rating Last Rating Action Outlook Moody's Baa1 Jan-14 Stable Fitch BBB+ Apr-15 Stable S&P A- Feb-12 Stable Source: Moody's, Fitch, S&P Annual Filing Data Nordstrom’s revenue in fiscal 2014 grew by 7.7 percent year-over-year to more than $13.51 billion. The company’s net income for the year was $720.00 million, slightly lower than the $734.00 million generated in the previous year. A summary of the company’s annual financial performance is provided in the table below:

NORDSTROM, INCORPORATED FINANCIAL OVERVIEW FY2014 FY 2013 FY 2012 Revenues (in millions) $13,506 $12,540 $12,148 Change in Revenues 7.7% 3.2% 11.7% Net Income (in millions) $720 $734 $735 Number of Employees 67,000 62,500 61,000 Source: Hoovers

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RETAIL TRADE AREA ANALYSIS 55

REGAL ENTERTAINMENT GROUP TENANT PROFILE Regal Entertainment Group is the U.S.'s largest theater owner. The company has 7,324 screens within 569 theaters in 42 states through its Regal Cinemas, Edwards Theatres, United Artists Theatre Company, and Hoyts Cinema brands. Regal Entertainment Group was founded in 2002 when Philip Anschutz bought and combined controlling interests in the bankrupt Regal Cinemas, United Artists, and Edwards Theatres through his firm, The Anschutz Corporation. Anschutz owns about half of Regal Entertainment Group and controls 78.0 percent of its voting power.

Regal Entertainment Group's theaters house an average of 12.7 screens, and more than 75.0 percent of its screens are in theaters with stadium seating. The company makes nearly 70.0 percent of its revenues from ticket sales, and also generates about a quarter of its revenues from concession sales. Additional revenues come from vendor marketing programs, gift cards, and discount ticket programs.

The company operates solely in the US, and targets midsized metropolitan markets and suburban growth areas of larger cities. It has a large number of theaters in California, Florida, and New York; those three states together account for more than a third of REG's locations.

Credit Ratings Regal Entertainment Group is rated below investment grade by Moody’s, Fitch, and S&P. A summary of the company’s credit ratings is provided in the table below:

CREDIT RATINGS

Agency Rating Last Rating Action Outlook Moody's B1 May-14 Stable Fitch B+ Sep-14 Stable S&P B+ Jan-15 Stable Source: Moody's, Fitch, S&P Annual Filing Data Company-wide revenue for fiscal 2014 decreased 1.6 percent over the prior year, to over $2.99 billion. As well, Regal Entertainment Group’s net income for the year fell to $105.60 million, a significant decrease following recorded net income of $157.70 million 2013. A summary of the company’s annual financial performance is provided in the table below:

REGAL ENTERTAINMENT GROUP FINANCIAL OVERVIEW FY2014 FY 2013 FY 2012 Revenues (in millions) $2,990 $3,038 $2,824 Change in Revenues -1.6% 7.6% 5.3% Net Income (in millions) $106 $158 $145 Number of Employees 23,168 24,201 22,056 Source: Hoovers BEST BUY CO., INC. TENANT PROFILE Best Buy is a specialty retailer of consumer electronics, home-office products, entertainment software, appliances and related services. Best Buy operates more than 1,400 stores in the United States and more than 200 internationally. The company was founded by Dick Schulze with the “Sound of Music” store in 1966. Mr. Schulze gradually broadened the Company’s product selection to appeal to a wider demographic. In 1983, Schulze changed the company name to “Best Buy” and began opening larger format superstores. Best Buy is currently the

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largest consumer electronics retailer in the United States with approximately one-third of total electronics, appliance, and computer store sales according to the Census Bureau.

Credit Ratings Best Buy is currently rated investment grade by Moody’s and below investment grade by Fitch and Standard & Poor’s:

CREDIT RATINGS

Agency Rating Last Rating Action Outlook Moody's Baa2 Jul-14 Stable Fitch BB Apr-15 Stable S&P BB Aug-13 Stable Source: Moody's, Fitch, S&P Annual Filing Data On November 2, 2011, Best Buy’s board approved a change in their fiscal year-end from the Saturday nearest the end of February to the Saturday nearest the end of January, effective beginning with their fiscal year 2013. As a result of this change, fiscal year 2013 transition period was 11 months and ended on February 2, 2013.

BEST BUY FINANCIAL OVERVIEW FY2014 FY 2013 FY 2012 Revenues (in millions) $40,339 $42,410 $45,085 Change in Revenues -4.9% -5.9% -11.1% Net Income (in millions) $1,233 $532 -$441 Number of Employees 125,000 140,000 165,000 Source: Hoovers CITIBANK TENANT PROFILE Founded in New York in 1812, Citibank represents the consumer banking operations of financial services giant Citigroup. The unit has more than 1,000 branches in more than a dozen US states. California, New York, and Texas are its largest markets, but the bank also has a significant presence in the Northeast, as well as in Chicago and Miami. It has about 300 international locations in some 40 countries, with a focus on emerging markets in Asia, Latin America, and Central and Eastern Europe. Citibank provides standard banking fare such as deposit accounts, credit cards, and loans to consumers and small businesses, and utilizes its parent's breadth of financial services to also offer investment and financial planning services.

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In 2009 Citigroup restructured itself into two primary divisions -- Citicorp and Citi Holdings. Citicorp comprises the group's core regional consumer and institutional banking operations, including Citibank. Citi Holdings contains Citigroup's riskier operations that it planned to spin off or wind down, such as CitiMortgage and CitiFinancial.

Citigroup expands its investment in the commodities business by purchasing Deutsche Bank’s metals-, power- and oil-trading books in October 2014, as well as the commodity trading books of Credit Suisse in December 2014. The transactions are a part of Citigroup’s undertaking on a multiyear effort to gain revenue and market share in commodities.

Credit Ratings Citigroup Incorporated is rated investment grade by Moody’s, Fitch and Standard & Poor’s. The table below details Citigroup’s credit ratings:

CREDIT RATINGS

Agency Rating Last Rating Action Outlook Moody's Baa1 May-15 Stable Fitch A May-15 Stable S&P A- Nov-11 Negative Source: Moody's, Fitch, S&P Annual Performance Citigroup Incorporated’s total revenue in fiscal 2014 was $90.57 billion, a decrease of 2.1 percent from $92.54 billion in fiscal 2013. Net income for the year was $7.31 billion, down 46.5 percent from $13.67 billion in fiscal year 2012. The following table is a profile of Citigroup’s annual financial performance:

CITIGROUP FINANCIAL OVERVIEW FY2014 FY 2013 FY 2012 Revenues (in millions) $90,572 $92,543 $90,708 Change in Revenues -2.1% 2.0% -18.2% Net Income (in millions) $7,313 $13,673 $7,541 Number of Employees 241,000 251,000 259,000 Source: Hoovers

CONCLUSION We have analyzed the profile of the subject's region and primary and secondary trade areas in order to make reasonable assumptions as to the continued performance of the property. Demographic and economic data specific to the trade area were also presented. The following summarizes our key conclusions.

 The subject benefits from its location in one of the nation's largest metropolitan areas. The location is extremely dense in population, with an adequate number of households and very good income levels for retailers. The subject is one of the largest Manhattan retail properties in the competitive market and is situated in along the prime Union Square South corridor across from Union Square Park.

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 The subject has excellent access immediately outside of the property including the 4, 5, 6 L, N, Q and R subway lines and multiple public transportation buses and major thoroughfares.

 The subject property comprises the 5-level retail condominium unit within a 22-story luxury residential building that features approximately 240 luxury residential rental apartments.

 The subject property is considered to be one of the premier large retail properties in Manhattan market. Furthermore, based on its location, excellent condition, layout, quality and tenant mix, the subject property is classified as a Class A retail property in a major urban market.

 The subject property is 100 percent leased by 7 retail tenants. Approximately, 47.9 percent of the subject is leased to four credit tenants inclusive of Best Buy, Duane Reade, Nordstrom’s, and Citibank. The remaining tenants include a Regal Entertainment which is operated as a multi-plex theater, a wine store along Fourth Avenue and a small medical office on the lower level. The property is considered to be leased to a mix of credit and good quality tenants.

 The combination of the demographic and competitive characteristics of the trade area creates an environment where the subject property should continue to perform well due to the subject’s location and tenant mix. The subject is a prime retail property within the market given its size, quality, location, and transportation access. Clearly the forces of supply and demand that exist in the current market along with the demographic profile of the subject location indicate that the subject property is a sustainable and stable asset.

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MOVIE THEATER OVERVIEW INTRODUCTION The Motion Pictures Association of America reports that total U.S./Canadian box office sales in 2014 were $10.4 billion, down 5.0 percent compared to $10.9 billion in 2013. Admissions, or tickets sold (1.27 billion), and average tickets sold per person (3.7) both declined 6.0 percent in 2014. Admissions fell during the year but are generally consistent with recent trends.

The stability of ticket sales demonstrates the movie theater’s key role in our national psyche. More than two-thirds of the U.S./Canada population (68.0 percent) – or 229.7 million people – went to the movies at least once in 2014, consistent with prior years. Ticket sales continue to be driven by frequent moviegoers who, by definition, attend movies once a month or more. In 2014, frequent moviegoers represented 11.0 percent of the population and 51.0 percent of all movie tickets. The typical moviegoer bought 5.5 tickets over the course of the year, down from 5.9 tickets in 2013. This suggests that the decrease in ticket sales in 2014 was among moviegoers who decreased their attendance to at least once a month from intervals of once a month or more in 2013.

The following chart displays U.S. box office sales since 2001:

U.S. Theater Statistics ‐ 2014

$11.0 1.8

$10.0 1.7

$9.0 1.6 $8.0 1.5 $7.0 1.4 $6.0

$5.0 1.3 $8.1 $9.1 $9.2 $9.3 $8.8 $9.2 $9.6 $9.6 $5.65 $5.80 $6.03 $6.21 $6.41 $6.55 $6.88 $7.18 $10.6 $7.50 $10.6 $7.89 $10.2 $7.93 $10.8 $7.96 $10.9 $8.13 $10.4 $8.17 $4.0 1.2 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Box Office Sales ($ Bil.) Average Ticket Price Admissions (Bil.) Source: mpaa.org

PHASES OF MOTION PICTURE INDUSTRY Production Production peaked after World War II at 491 releases in 1949. It would take nearly 50 years to reach 500 releases, which occurred for the first time in 1997. During the intervening decades releases bottomed out at 186

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in 1977. Releases gradually increased through the 1980s, finally tying the 1929 mark with 491 in 1988. Many of these films play only limited runs in major cities, while others are released direct to video and/or DVD. A total of 707 films were released during 2014.

Distribution A finished movie moves into the distribution phase of the business. This sector of the industry is dominated by the established studios, who routinely command around 95.0 percent of domestic box office dollars. The distributor finances national advertising (local advertising is shared by the exhibitor) and the production of prints. There are two common formulas, one which is based on a declining percentage of gross revenue each week and one based on the excess of revenue over the "house nut" (the theater's expenses). The industry average is 50.0 percent of box office to the distributor and 50.0 percent to the exhibitor. In return, the distributor receives a percentage of box office receipts. Production costs in excess of $100.0 million for major releases are a high barrier to entry.

Exhibition Until 1948, vertically-integrated movie studios owned their own theaters. Anti-trust prosecution forced the studios to divest their theater chains, and the modern exhibition industry was born.

The movie theater industry is highly competitive, particularly in the licensing of films, attracting patrons, and finding new theater sites. Theaters operated by national and regional circuits, and by smaller independent exhibitors, tend to compete with each other. Some of the principal competitive factors in film licensing include: licensing terms, seating capacity, location and reputation of an exhibitor’s theaters, quality of projection and sound equipment at the theaters, and the exhibitor’s ability and willingness to promote the films.

The studios distribute films to the exhibitors based on a zone system. Generally studios only release copies of a film to a single exhibitor within a zone. Depending on demographics characteristics of a given area and the locations of all exhibitors in the area, theaters will either have a captive zone, or a split zone. In captive zones the studio and the exhibitor are free to negotiate the terms to exhibit each film and if terms are agreed upon, the exhibitor will rent the film. In a split zone, the studio will alternate between the exhibitors within that zone. Although this system is designed to give each exhibitor an equal share of revenues from any given studio, the success of each film and the capacity of the exhibitors within the market often leads to a 40/60 percent split in annual revenues when two exhibitors share a zone.

In 1963, the first twin-screen theater opened in the U.S. The industry had approximately 10,000 indoor screens in 1970, and grew to 14,171 indoor screens by 1980, a 42.0 percent increase. At the end of 2013 there were reportedly 39,368 screens, a 178.0 percent increase since 1980.

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The following table displays the top ten movie exhibitors by screen count:

TOP TEN MOVIE EXHIBITORS ‐ 2014 RANK EXHIBITOR USA THEATER USA SCREEN MARKET TOTAL TOTAL SHARE 1 Regal Entertainment 574 7,367 18.9% Group 2 AMC Entertainment, 348 4,960 12.6% Inc. 3 Cinemark USA, Inc. 430 4,945 11.4% 4 Carmike Cinemas, Inc. 274 2,897 6.8% 5 Cineplex Entertainment 136 1,672 4.3% LP 6 Marcus Theatres Corp. 55 685 1.8% 7 Southern Theatres LLC 38 444 1.1% 8 Harkins Theatres 30 432 1.1% 9 National Amusements, 32 424 0.9% Inc. 10 B&B Theatres 50 409 0.8 % Total 1,967 24,235 59.7 % Source: National Association of Theatre Owners; * as of July 2014

Although there are well over 400 exhibitors in the United States and Canada, the Top 10 operate approximately 36.0 percent of the sites, and 59.7 percent of the screens. The discrepancy between the share of sites and screens is a result of hundreds of single-site/single-screen exhibitors. In 1985, the top ten exhibitors owned about 25.0 percent of the screens in the U.S. The industry has since consolidated, most recently with the mergers of Regal Cinemas, Edwards Theater Circuit and United Artists, and the AMC/Loews merger.

There is an ever-widening gap in the marketplace between vintage single screen theaters, and newer mega- plexes. Data from the top 10 exhibitors reveals an average of 12.5 screens per theater. New multi-plex construction trends will continue to boost this figure, with most new and proposed multiplexes having at least eight screens, and several existing or proposed theaters containing as many as 24 screens.

Through consolidation, the exhibition industry has realized cost savings. It is feasible for a theater operator with critical mass of more than 100 screens to utilize an electronic management information system for monitoring ticket and concession sales from a central location. With such data quickly available, central management can precisely adjust film selection, staffing requirements, and concession supplies. Typically, theater chains with economies of scale can also exact more favorable terms from concession suppliers, and film distributors. However, film rental rates usually depend more on the dynamics of specific local markets than the overall size of an exhibitor chain.

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THE EVOLUTION OF MOVIE THEATERS Single screen motion picture theaters first emerged at the turn of the 19th century. With the advent of full-length feature films around 1915, the development of increasingly ornate “movie palaces” swept across the country. In 1948, the landmark Supreme Court case United States vs. Paramount Pictures broke the Hollywood studio system by forcing the studios to divest their theaters. As the multiplex concept caught on beginning in the 1960s, the number of indoor screens has grown exponentially, doubling approximately every twenty years since 1970.

The following table highlights the growth of U.S. movie theater screens from 1948 through 2013:

Total Screen Count

45,000 40,000 35,000 30,000 25,000 20,000 39,368 39,056 38,974 38,902 37,092 15,000 35,597

10,000 26,995 22,904 18,327 17,811 14,716

5,000 14,171 12,291 12,168 9,240 9,150 10,000 0 1948 1954 1958 1963 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2011 2012 2013

Source: National Association of Theatre Owners

Drive-In theaters entered a protracted decline after their heyday in the 1960s, when they accounted for nearly one out of three screens. In 1999, overbuilding finally caught up with the industry, leading to a 5.4 percent decline in indoor screen count over the next two years as market pressure forced functionally obsolete theaters to close their curtains. Growth picked back up in 2001, and in 2005 the number of indoor screens surpassed the previous record set in 1999. Total indoor screen count at the end of 2013 stood at 39,368, up over 10.0 percent over the last 10 years.

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The following table provides industry statistics from 1980:

U.S. THEATRE INDUSTRY OVERVIEW

ADMISSIONS TICKET SALES YEAR NEW PICTURES NUMBER OF TOTAL IN PER TOTAL IN PER AVG. TICKET RELEASED INDOOR SCREENS MILLIONS SCREEN MILLIONS SCREEN PRICE

1980 193 14,171 1,022 72,084 $2,749 $193,98 $2.69 1985 389 18,327 1,056 57,620 $3,749 $204,56 $3.55 1990 385 22,904 1,190 51,956 $5,020 $219,17 $4.22 1995 370 26,995 1,211 44,860 $5,269 $195,18 $4.35 2000 482 35,696 1,383 38,744 $7,510 $210,38 $5.39 2005 507 37,040 1,376 37,149 $8,820 $238,12 $6.41 2010 569 38,902 1,340 34,446 $10,580 $272,48 $7.89 2011 607 38,974 1,280 32,842 $10,180 $261,71 $7.93 2012 677 39,056 1,360 34,070 $10,790 $270,55 $7.96 2013 659 39,368 1,340 34,038 $10,920 $277,38 $8.13 2014 707 40,158* 1,270 31,625* $10,376* $258,37 $8.17 Source: National Association of Theatre Owners, Motion Picture Association of America *estimate

As part of their effort to continually lure consumers, movie theaters have grown in size, enabling the exhibitor to market a wider selection of releases at each location. Smaller boutique theaters have made a comeback in recent years, yet the vast majority of new construction dollars are spent on "multi-plexes" (8 to 15 screens) and “mega- plexes” (16+ screens). By enabling operators to show a wider variety of films for longer periods of time, additional screens generally ensure higher profits. Key benefits include longer run times enabling a theater operator to receive a larger share of the ticket revenue, and higher concession stand sales that are an important part of an exhibitors bottom-line. Up to 70.0 percent of every dollar spent on concessions represents profits to the exhibitor. Additionally, operations are more profitable at multiplexes since employees at the box office and concessions stands can be used more productively with rolling starting times.

Larger screens are also part of an industry-wide shift, another inducement designed to lure the consumer from the comfort of home with its smaller screen. The small screens and "shoe-box" theaters that cropped up in the 1980s have fallen into disfavor, as operators recognize that customers demand and expect the movie experience to be as grand as possible.

There is minimal demand for shuttered movie theaters for their original use. Many of the older, smaller, theaters have been purchased for their historic value, or conversion to office or retail space. Smaller theaters that compete directly with larger franchises have been increasingly losing market share. Large franchise theaters operate on a higher budget and can draw larger crowds, commanding higher ticket and concession prices. Ticket and concession prices generally increase proportionately with the population of the trade area they serve.

Between 2002 and 2014, average ticket prices increased by over 35.0 percent. Over the past decade ticket prices have risen at roughly 4.0 percent per annum, reaching an average of $8.17 at year-end 2014 according to MPAA’s annual theater industry report.

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INDUSTRY CONSOLIDATION By 1999, many analysts believed that the cinema industry was oversaturated. Several national theater operators struggled after taking on excessive debt to finance aggressive expansion campaigns. As companies opened large, luxurious mega-plexes, they often found that they were taking business away from their smaller multiplexes, which often lacked up to date amenities. Many smaller theaters operated under long-term leases that prevented their owners from closing underperforming locations. At the same time, bank lenders tightened their credit standards, making it more difficult to obtain new cash or refinance existing debt.

As a result, a flood of exhibitors who were top-heavy with expansion debt filed for Chapter 11 bankruptcy protection. Filing Chapter 11 allowed the companies to escape long-term leases and close money-losing locations. Over the past few years, Regal Cinemas, Loews Cineplex, Carmike Cinemas, United Artists, Edwards Cinemas, Silver Cinemas, Cinema Star Luxury Theaters, West Star Cinemas, Mann Theaters, Resort Theaters of America, and General Cinemas all declared bankruptcy. In addition, other companies that were in a financial strain attempted to keep their heads above water by restructuring debt, renegotiating leases, closing theaters, completing sale-leasebacks, and obtaining equity infusions. Theater chains with older facilities, as well as those with shallow market penetration, were the most vulnerable to the oversaturated market.

Reversing course after the 1990s mega-plex boom, chain owners came to grips with the glut of theater seating. The total number of U.S. screens (both indoor and drive-in) declined by over 5.0 percent between 1999 and 2001. Screen count slowly rebounded after 2001, surpassing the high-mark set in 1999 by 2005.

After years of consolidation a handful of national chains now control nearly two-thirds of the cinema market. Notable deals over the last five years include Madison Dearborn Partners acquisition of Century Theaters in 2006. In 2005, AMC Entertainment Inc., the second largest US exhibitor announced that they had entered a definitive merger agreement with Loews Cineplex Entertainment, the sixth largest U.S. exhibitor. The merger closed in January, 2006.

In December 2009, Sumner Redstone’s National Amusements Inc. agreed to sell 35 theaters to Rave Cinemas LLC. as part of an effort to refinance loans of $1.46 billion that threatened his control of CBS Corp. and Viacom Inc. Financial terms weren’t disclosed. Rave Cinemas also acquired the four-theater operation of Boston Ventures Management LLC’s Rave Reviews Cinemas LLC in late 2009. The company expects to own or manage 65 theaters with 1,000 screens in 20 states.

More recently, AMC completed the acquisition of 92 theaters and 928 screens from Kerasotes Showplace Theaters in May 2010 for total consideration of $275.0 million. Kerasotes operated 95 theaters and 972 screens in 21 mid-sized suburban and metropolitan markets, primarily in the Midwest. MOVIE THEATER INVESTMENT TRENDS From an investment perspective, movie theaters are unique assets due to their high cost of occupancy and large space requirements. Accordingly, investment in movie theaters is generally limited to a small pool of owner- operators and specialized institutions. Our review of the 2008 edition of Dollars & Cents of Shopping Centers (the most recent available) published by the International Council of Shopping Centers and the Urban Land Institute reveals that movie theaters have the highest median occupancy cost ratio of all the major shopping center anchors covered in the survey. Our proprietary survey of nearly 100 national chain theaters primarily located in super regional malls and lifestyle centers lends additional support to Dollars & Cents, with an average annual rent per square foot of $20.93 and an average lease term of 17.6 years.

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The following chart summarizes the current Dollars & Cents survey results:

ANCHOR RENT AND OCCUPANCY COSTS CENTER CLASSIFICATION MEDIAN SALES PER SQ. MEDIAN RENT PER MEDIAN RENT/ SALES MEDIAN GLA TOTAL CHARGES; FOOT SQ. FOOT RATIO % OF SALES

SUPER REGIONAL MALL Department Store $163.99 $3.35 2.04% 108,731 3.24%

Discount Department Store $201.83 $6.08 3.01% 89,690 3.17%

Cinema $100.80 $17.45 17.31% 50,000 20.23%

Furniture $98.40 $6.56 6.67% 26,771 11.31%

Sporting Goods $279.80 $10.93 3.91% 39,287 6.64%

Books $235.67 $15.11 6.41% 25,278 8.19%

REGIONAL MALL Department Store $115.79 $3.30 2.85% 121,099 3.24%

Cinema $78.47 $11.02 14.04% 26,340 20.02%

Books $199.98 $15.43 7.72% 26,484 9.60%

Other Retail $265.27 $6.25 2.36% 48,636 4.01%

Overall Mean $174.00 $9.55 6.63% 56,232 8.97%

Source: ICSC/ULI Dollars & Cents of Shopping Centers 2008

As displayed in the preceding chart, high movie theater occupancy costs are the result of low median sales productivity and high median rents. The low sales productivity of movie theaters is the result of an over- abundance of supply. Growth in movie theater screens since 1980 has greatly exceeded population growth. In fact, the number of indoor screens increased by 182.0 percent over the period, compared to a 36.0 percent increase in the U.S. population. This disparity has caused an approximate 50.0 percent decrease in annual admissions per screen. Total admissions over the period increased by approximately 31.0 percent, or somewhat below population growth.

The following table compares the sales, size, and credit of the publicly traded movie theater operators:

MOVIE THEATER SALES COMPARISON

2010 2011 2012 2013 2014 TOTAL TOTAL SALES SALES SALES SALES SALES MOODY'S RETAILER NUMBER OF SCREEN PER PER PER PER PER RATING THEATERS COUNT SCREEN SCREEN SCREEN SCREEN SCREEN Regal Entertainment Group $418,318 $404,581 $409,883 $410,887 $405,877 574 7,367 B1 AMC Entertainment, Inc. $542,398 $476,126 $518,072 $552,537 $543,425 348 4,960 B2 Cinemark USA $432,992 $442,471 $472,047 $482,274 $432,991 430 4,945 ‐ Carmike Cinemas, Inc. $213,416 $209,405 $213,389 $238,646 $238,142 274 2,897 B2 Average $401,781 $383,145 $403,347 $421,086 $405,108 1,626 20,169 Source: Annual Filings, *Sales Per Screen calculation includes revenues from international theaters

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Capitalization Rates Capitalization rates for movie theater assets are somewhat opaque due to the limited amount of transaction activity and high number of sales between privately-owned companies. Market participants we surveyed noted that investment in movie theaters over the last two years has been very low. Access to capital is generally either too costly or simply not available for this asset type. The acquisition requirements for one respondent, a large REIT, are generally no less than 12.0 percent based on stabilized year one net operating income for un-leveraged yield returns. According to our sources that acquire these special purpose properties, the rate should factor the competitive nature of a cinema’s given market area.

Concerns that must be addressed generally include how the property measures up to its local competition e.g. market share, demographics/location, and most importantly, sales performance. These key economic and location attributes will dictate the risk level of a given investment. Markets that have screen over-supply or cinemas that have declining sales are far more difficult to sell. Markets that leave room for more competition are also of concern.

Established cinemas in built-out markets are most attractive to the typical investor as the barriers to market entry are far more difficult and more costly to operators desirous of expansion. The established locations help assure stability, which keeps the rate lower for this investment type. A representative of the seller for a recent sale of a seven-property Carmike Cinema portfolio believes historical capitalization rates are not applicable in present market conditions. While very few recent transactions have occurred, the broker holds the opinion that these special use properties would likely trade in the 10.0 to 12.0 percent capitalization rate range. The operator, location and historical sales performance would dictate the low and high end of the stated range. COMPETITION OF THE FUTURE A multitude of technological advances will make new at-home entertainment alternatives possible over the next several years. The impact of such developments on the health of the movie theater industry has yet to be determined, but exhibitors consider advancements in entertainment-related technology seriously. A new and illegal form of competition has developed in recent years largely due to technological advances and the increasing number of internet users. Labeled piracy and considered illegal under copyright laws, it has become an increasingly greater burden on the movie theater industry.

High-Definition Television (HDTV) The most imminent technological breakthrough in the entertainment industry is High Definition Television, or HDTV, which came to market in 1999. HDTV utilizes digital technology, which produces clearer images and sounds than the analog transmissions used in television broadcasts today. An HDTV broadcast would be received on wide screen television sets that mimic the dimensions of a movie screen. Sales of digital television sets, many of which are HD compatible, have exploded due to advances in technology and lower prices.

Home Theater Current technology provides consumers with the ability to create a home theater for movie viewing. State-of-the- art audio and video equipment may be combined to create the effect of watching a film in a movie theater, albeit on a smaller scale. It is estimated that 62.0 million households in the U.S. owned a home-theater system in 2006. However, the majority of moviegoers feel that the theater offers the ultimate movie-watching experience as seen in the study by Nielsen EDI that concluded 69.0 percent prefer watching a movie in the theater due to the overall experience.

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First Run Movies on Cable While the opening of the interactive cable networks is still several years away, the potential for first run movies to be shown on cable channels is more imminent. Some of the smaller film distributors are spearheading the movement toward first-run cable releases. The National Association of Theater Owners, the trade group that represents exhibitors, has vociferously denounced the practice and some of the larger studios, many of which own movie theater chains, have vowed to oppose the practice as well. Thus, while first-run movies will probably be available on cable in the near future, the practice is unlikely to be widespread, nor to cause the downfall of the traditional movie theater.

Piracy: Hard Goods and Internet While this form of competition is fairly new, in recent years according to a 2005 study by the MPAA it has caused a $1.3 billion loss in revenue in US studios and $4.8 billion internationally, with nearly half of that loss occurring in Europe. There are three types of piracy explained in the study; bootlegging is obtaining movies by either purchasing an illegally copied VHS/DVD/VCD or acquiring hard copies of bootleg movies, illegal copying is making illegal copies for self or receiving illegal copies from friends of a legitimate VHS/DVD/VCD, and Internet piracy is obtaining movies by either downloading them from the Internet without paying or acquiring hard copies of illegally downloaded movies from friends or family. INNOVATIONS IN THE MOVIE THEATER INDUSTRY Movie theaters have become more competitive over the last decade, facing up to a market that has shrunk and is now controlled by a relatively small number of large operators. In addition to building multiplexes with large screens, movie theater chains are instituting a variety of new services geared toward patron comfort, convenience and enjoyment. The sound wave of the future for movie theaters is digital sound technology. Digital sound technology is used to create movies that have a sound quality akin to that produced by compact discs. There are three major competitors in the digital sound market: Sony Dynamic Digital Sound (SDDS), Digital Theater Systems (DTS), and Dolby. Exhibitors have quickly begun to adopt the digital sound format, realizing that the enhanced sound quality adds immeasurably to the movie experience.

Movie theaters are also introducing many concession-related improvements. Concession stands provide a significant portion of a movie theater's revenue, in the neighborhood of 30.0 percent. Movie theaters have been branching out from the traditional popcorn and soda to embrace ideas like bulk candy stations, where patrons serve themselves from a variety of candy, which they pay for by weight. The self-service concept has been adapted to popcorn and soda in some theaters, and even to hot dogs and nachos. Self-service eliminates labor costs and moves patrons quickly through the concession area.

IMAX Viewed by many in the movie industry as the movie technology of the future, the IMAX (or "Image Maximum") film was developed by the Canadian company, IMAX Systems Corporation in 1967. IMAX movies are shot with special cameras and equipment that utilize 70 millimeter film, which creates an image that is ten times larger than that shot with standard 35 millimeter film. IMAX films are shown on giant screens, several stories tall and over 80 feet wide, and also on a domed version of the oversize screen, known as Omnimax. A 3-D version of IMAX is also available, which is based on the same concept as the glasses used to watch the 3-D movies of the 1950s.

The IMAX Theater Network currently consists of more than 837 IMAX affiliated theaters in 57 countries. Approximately 60.0 percent of the theaters are located in North America, while the remaining 40.0 percent are spread internationally. Roughly 50.0 percent of the theaters are located in institutional venues, such as museums, planetariums, and maritime centers, while the other half are part of commercial theater complexes. More than 100 of these theaters are equipped with IMAX 3D technology.

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The main obstacle to more widespread development of IMAX theaters is their high construction cost relative to multiplex movie theaters and the high cost of producing commercial films in the IMAX format. The latter problem has led, up until now, to a “lack of product” for commercial IMAX viewers. Although the commercial IMAX format has generated interest among moviegoers in the major cities, the likelihood of its widespread development nationally remains less certain.

3D After decades of stagnation, 3D films have exploded in popularity. The format has existed in many forms since the 1950s, but was relegated to a niche within the motion picture industry due to capital intensive production and distribution, and the lack of a standardized format. Renewed interest was beginning in the early 2000s as filmmakers began to utilize digital 3D filming techniques.

In November 2004, The Polar Express was released as IMAX's first full-length, animated 3D feature. The film was released in 3,584 theaters in 2D, and only 66 IMAX locations. However, ticket sales from 3D screens accounted for approximately 25.0 percent of the film’s total box office gross. The 3D version of The Polar Express reportedly earned 14 times as much per screen as the 2D version due to higher ticket prices and increased attendance. This pattern caused the industry to take notice, prompting a wave of investment in 3D filming and exhibition.

In June 2005, the Mann's Chinese 6 theater in Hollywood became the first commercial movie theater to be equipped with the digital 3D format. By 2007, digital 3D screens accounted for 2.5 percent of all U.S. indoor screens according to the IHS Screen Digest. As of 2014, digital 3D screens represent approximately 35.0 percent of all domestic screens, and nearly 50.0 percent of digital screens. Nearly two-thirds of all digital cinema installations utilized 3D technology.

In 2014, 27.0 percent of the U.S./Canada population viewed at least one movie in 3D. Consistent with the general movie going population, 3D viewing is highly correlated to age. According to statistics from the Motion Picture Association of America, nearly half of all young people (defined as ages 2-17) saw a 3D movie in 2014. OUTLOOK On balance, we conclude that the outlook remains optimistic for the movie theater industry. In 2014, movie theater revenues and average ticket prices remain near all-time highs. Revenue and attendance appear poised to remain fairly stable for the balance of the year due to a strong pipeline of new releases.

Alternative entertainment is unlikely to cause a precipitous decline in the industry, but it will inescapably hamper growth. The industry will maintain its position because it is the only way to tap the large funding to bring top-flight talent together, and its marketing is the basis for the marketing of cable and video. Exhibitors will need to make continual investments to ensure high-quality projection, sound, and concessions, and in general a quality movie experience that will encourage people to leave the home.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM SITE DESCRIPTION 69

Property Analysis SITE DESCRIPTION

Location: Retail Condominium Unit within One Union Square South New York, New York County, NY 10003 The subject site is located on the entire city block bounded by Union Square South to the north, Fourth Avenue to the east, East 13th Street to the south and Broadway to the west in the Union Square neighborhood of Manhattan.

Shape: Irregular

Topography: Level at street grade

Land Area: 48,223 square feet

Frontage: The subject has 208 feet of frontage along the south side of side of Union Square South, 219 feet along the east side of Broadway, 252 feet along the north side of 13th Street and 238 feet long the west side Fourth Avenue.

Visibility: The subject property has excellent visibility.

Access: The subject property has excellent access.

Street Improvements: Curbing, sidewalks and street lights.

Soil Conditions: We did not receive nor review a soil report. However, we assume that the soil's load- bearing capacity is sufficient to support existing structure. We did not observe any evidence to the contrary during our physical inspection of the property. Drainage appears to be adequate.

Utilities: Utility providers for the subject property are as follows: Water City of New York Sewer City of New York Electricity Consolidated Edison Gas Keyspan Telephone Verizon and Others

Site Improvements: The site is improved with a 22-story luxury residential apartment building with multi- level retail space.

Land Use Restrictions: We have not reviewed a title report. Therefore, we do not know of any easements, encroachments, or restrictions that would adversely affect the site's use. However, we recommend a title search to determine whether any adverse conditions exist.

Flood Zone Description: The subject property is located in flood zone X (Areas determined to be outside the 500 year flood plain.) as indicated by FEMA Map 360497-0054 B, dated September 5, 2007.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM SITE DESCRIPTION 70

Hazardous Substances: We observed no evidence of toxic or hazardous substances during our inspection of the site. However, we are not trained to perform technical environmental inspections and recommend the hiring of a professional engineer with expertise in this field.

Overall Site Utility: The subject site is functional for its current use.

Location Rating: Good

SAN BORN MAP

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM IMPROVEMENTS DESCRIPTION 71

IMPROVEMENTS DESCRIPTION The following description of improvements is based upon our physical inspection of the improvements along with our discussions with the building ownership.

GENERAL DESCRIPTION Year Built: 1996

Number of Stories:

Entire Project: 22 stories, plus 1 below grade level

Subject Unit: 4 stories, plus 1 below grade level

Gross Building Area- Subject: 236,215 square feet (Per Tax Assessor)

Net Rentable Area- Subject: 236,215 square feet (Per Rent Roll)

CONSTRUCTION DETAIL Basic Construction: Steel and masonry

Foundation: Structural steel and concrete

Framing: A combination of structural steel and reinforced cast in place concrete flat plate construction.

Roof Cover: Insulated Roof Membrane Assembly (IRMA) roof comprised of fluid applied water proofing installed below extruded polystyrene board insulation, installed below precast concrete pavers or roofing aggregate.

Windows: The subject contains large glass storefront windows.

Pedestrian Doors: Storefronts and entrances contain stainless steel clad aluminum and glass entrances.

MECHANICAL DETAIL HVAC & Heating: Package HVAC units provide heating and cooling.

Plumbing: The plumbing system is assumed to be adequate for existing use and in compliance with local law and building codes. The plumbing system is typical of other commercial properties in the area with a combination of steel, copper and cast iron piping throughout the building.

Electrical Service: Electricity for the building is obtained through low voltage power lines.

Fire Protection: The subject property is fully sprinklered.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM IMPROVEMENTS DESCRIPTION 72

Elevator Service There is two escalators and one elevator in each of the Best Buy and Nordstrom’s retail suites. There are 6 escalators and 4 elevators within the Regal Cinemas suite. There is one elevator within the medical office space and one within the wine store.

INTERIOR DETAIL Layout: The subject property is a multi-level retail condominium unit at the base of 22-story luxury residential apartment building. The subject contains a total of 236,215 square feet of net rentable area on 4 levels, plus one below grade level. The ground floor comprises an entrance for each of the seven tenants along with the lobby for the residential component of the building. The ground floor comprises two retail suites along Union Square South which are occupied by Citibank, Duane Reade and one retail suite along Fourth Avenue which is occupied by Union Square Wine. The second floor is occupied by Best Buy, and the lower level is occupied by Nordstrom Rack and Park South Imaging. The Regal Cinemas multi-plex space is accessed along the northeast corner of Broadway and East 13th Street and contains a box office area on the ground floor and the majority of the space on the third and fourth floors.

Floor Covering: Ceramic tile, carpet or resilient tile.

Walls: Painted or wallpapered sheetrock

Ceilings: Floor to floor ceiling heights are 18 feet on the lower level, 16 feet on the ground floor and ranges from 20 to 35 feet on the upper floors.

Lighting: A mixture of suspended fluorescent and incandescent light fixtures.

Restrooms: The property features adequate restrooms for men and women.

SITE IMPROVEMENTS Other: Curb cuts and walkways

PERSONAL PROPERTY Personal property was excluded from our valuation.

SUMMARY Quality: Excellent

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM IMPROVEMENTS DESCRIPTION 73

Condition The subject property consists of a Class A retail condominium in excellent condition. We did not inspect the roof of the building or make a detailed inspection of the mechanical systems. The appraisers, however, are not qualified to render an opinion as to the adequacy or condition of these components. The client is urged to retain an expert in this field if detailed information is needed about the adequacy and condition of mechanical systems.

Property Rating: After considering all of the physical characteristics of the subject, we have concluded that this property has an overall rating that is excellent when measured against other properties in this marketplace.

Actual Age: 19 years

Effective Age: 5 years

Expected Economic Life: 50 years

Remaining Economic Life: 45 years

AMERICANS WITH DISABILITIES ACT The Americans With Disabilities Act (ADA) became effective January 26, 1992. We have not made, nor are we qualified by training to make, a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey and a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since we have not been provided with the results of a survey, we did not analyze the results of possible non-compliance. HAZARDOUS SUBSTANCES We are not aware of any potentially hazardous materials (such as formaldehyde foam insulation, radon-emitting materials, or other potentially hazardous materials) that may have been used in the construction of the improvements. However, we are not qualified to detect such materials and urge the client to employ an expert in the field to determine if such hazardous materials are thought to exist.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM IMPROVEMENTS DESCRIPTION 74

LOWER LEVEL

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM IMPROVEMENTS DESCRIPTION 75

GROUND FLOOR

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM REAL PROPERTY TAXES AND ASSESSMENTS 76

REAL PROPETY TAXES AND ASSESSMENTS The subject property is located in the taxing jurisdiction of the City Of New York. The assessor’s parcel identification number is Block 565, Lot 21. Assessments for the current and prior years are as follows:

NEW YORK CITY ASSESSMENT AND TAX ANALYSIS Block 565; Lot 21 ASSESSMENT INFORMATION 2014/15 2015/16 Actual Transitional Actual Transitional Assessed Value Land: $9,720,000 $9,720,000 $9,720,000 $9,720,000 Improvements: 68,580,000 47,693,340 68,976,450 56,043,630 Total: $78,300,000 $57,413,340 $78,696,450 $65,763,630 Tax Rate 10.684% 10.791% Calendar Year Taxes: $6,134,041 $7,096,448

TAX LIABILITY

FY 2014/15: $57,413,340 x 10.684% @ 50% $3,067,021 FY 2015/16: $65,763,630 x 10.791% @ 50% $3,548,224 BID Taxes $107,830 CY 2015 Real Estate Taxes $6,723,074 Gross Building Area (GBA): 222,716 Property Taxes per Square Foot: $30.19 Compiled by Cushman & Wakefield, Inc. Real estate taxes in New York City are normally the product of the transitional assessed value times the tax rate, for the fiscal year July 1 through June 30 (payable July 1 and January 1). The transitional assessed value is based on a five-year phase-in of actual assessed value. If the actual assessed value is lower than the transitional assessed value for that year, the actual assessed value is multiplied by the tax rate to determine the tax.

The 2014/2015 Class 4 tax rate is 10.648 percent per $100 of assessed valuation. The 2014/2015 Class 4 tax rate reflects a 3.50 percent increase from the 2013/2014 Class 4 tax rate of 10.323 percent per $100 of assessed valuation. We have projected the 2015/16 tax rate to increase 1.00 percent to 10.791 percent per $100.

The subject’s transitional 2015/16 assessment represents a 14.54 percent increase from the 2014/15 transitional assessment. The transitional assessed values are less than the actual assessed values for the 2014/2015 and 2015/2016. Therefore, our tax projection for the subject property is based upon the 2014/15 and 2015/16 transitional assessments for calendar year 2015 as illustrated above.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM REAL PROPERTY TAXES AND ASSESSMENTS 77

TAX COMPARISONS Listed below is a summary chart of the 2014/15 assessments for six properties considered to have varying degrees of comparability to the subject property.

REAL ESTATE TAX COMPARABLES Property Name & Parcel Building Year No. Location No. Area (SF) Built Assessment Assess/SF Total Taxes Taxes/SF 1 731 Lexington Avenue 1313-1001 207,000 2001 $100,853,044 $487.21 $10,883,052 $52.58 2 955 Madison Avenue 1392-1001 54,449 1958 $16,504,080 $303.11 $1,780,955 $32.71 3 1-5 East 55th Street 1291-1 310,000 1927 $77,902,955 $251.30 $8,406,508 $27.12 4 10 Columbus Circle 1049-1002 547,024 1998 $125,930,928 $230.21 $13,589,206 $24.84 5 660 Madison Avenue 1375-1101 275,971 1958 $56,495,070 $204.71 $6,096,383 $22.09 6 1992 Broadway 1139-1205 133,820 1996 $24,741,810 $184.89 $2,669,889 $19.95 STATISTICS Low: 54,449 1927 $16,504,080 $184.89 $1,780,955 $19.95 High: 547,024 2001 $125,930,928 $487.21 $13,589,206 $52.58 Average: 254,711 1973 $67,071,315 $276.91 $7,237,666 $29.88

Compiled by Cushman & Wakefield, Inc. The comparable properties reflect assessment’s ranging from $184.89 to $487.89 per square foot with an average of $276.91 per square foot of gross building area. The comparables also reflect real estate taxes that range from a low of $19.75 to $52.05 per square foot and develop an overall average of $29.58 per square foot of gross building area. This compares with the subject's 2015 calendar tax liability of $6,723,074 or $30.19 per square foot of the assessor’s gross building area of 236,215 square feet. NEW YORK CITY ASSESSMENT PRACTICE Based upon our discussions with officials at the New York City Department of Finance, the following guidelines serve to summarize New York City's assessment policy.

1. New York City is guided by the basic principles of ad valorem assessment. Consequently, within the same property classes, properties of similar value should experience approximately equal assessments and pay similar property taxes.

2. Assessments are primarily made for Class IV property by capitalizing net operating income at market level capitalization rates. When a property is sold, the sales price is recorded and the Assessor notes the sales price.

3. Upon sale, the Assessor will likely use the sale, along with other sales data, as indications of general price levels. If the recently sold property has an assessment that is comparable to other similar properties, the sale price is unlikely to cause a substantial reassessment.

As will be discussed later within this report, we have concluded at a market value estimate of $380,000,000 for the subject property. The total 2015/16 actual assessed value of $78,696,450 is equivalent 20.71 percent of market value. This assessment/market value ratio is within the range of acceptable ratios found for similar buildings in this marketplace.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM REAL PROPERTY TAXES AND ASSESSMENTS 78

CONCLUSION OF CURRENT AND FUTURE REAL ESTATE TAXES The total subject property calendar year 2015 real estate taxes are $6,723,074, or $30.19 per square foot of the assessor’s gross building area of 222,716 square feet, which is within the range of comparable properties and market parameters. Therefore, we have assumed a 3.0 percent per annum growth over our analysis period.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM ZONING 79

ZONING Map 12c of the Zoning Resolution of the City of New York indicates that the subject property is zoned C6-4 and C6-1; Restricted Central Commercial District by the City of New York. In addition, the subject property is located within the “Special Union Square District.” The New York City Planning Commission defines the subject zoning district as follows:

ZONING C6-4 AND C6-1; RESTRICTED CENTRAL COMMERCIAL DISTRICT DESIGNATION Definition C6 districts are zoned for a wide range of high bulk commercial uses requiring a central location. Most C6 districts are in Manhattan and provide for corporate headquarters, large hotels, entertainment facilities, retail stores and some residential development in mixed buildings. The C6-4 district is classified as a medium bulk office district with a maximum FAR for residential and commercial districts of 10.0. The C6-1 district is classified as a medium bulk office district with a maximum FAR for commercial districts of 6.0 and 3.44 for residential districts.

ZONING COMPLIANCE Property value is affected by whether or not an existing or proposed improvement complies to zoning regulations, as discussed below.

Complying Uses An existing or proposed use that complies to zoning regulations implies that there is no legal risk and that the existing improvements could be replaced “as-of-right.”

Pre-Existing, Non-Complying Uses In many areas, existing buildings pre-date the current zoning regulations. When this is the case, it is possible for an existing building that represents a non-complying use to still be considered a legal use of the property. Whether or not the rights of continued use of the building exist depends on local laws. Local laws will also determine if the existing building may be replicated in the event of loss or damage.

Non-Complying Uses A proposed non-complying use to an existing building might remain legal via variance or special use permit. When appraising a property that has such a non-complying use, it is important to understand the local laws governing this use. SPECIAL UNION SQUARE DISTRICT The “Special Union Square District” was established to revitalize the area around Union Square by encouraging mixed use development. These general goals include, among others, the following specific purposes:

(a) Its urban design provisions are designed to provide compatibility between new development, existing buildings and Union Square Park. to preserve apparel production and showroom space in designated areas of the Garment Center;

(b) The district mandates ground floor retail uses, off-street relocation of subway stairs and the continuity of street walls;

(c) Special streetscape and signage controls enhance the physical appearance of the district within this district a floor area ratio bonus for subway improvements is available by special permit of the City Planning Commission.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM ZONING 80

(d) to promote the most desirable use of land within the district, to conserve the value of land and buildings, and thereby protect the City's tax revenues. SUBJECT PROPERTY CONFORMANCE The subject lies within the C6-4 and C6-1 zoning designations. The C6-4 zoning designation permits a maximum as-of-right floor area ratio (FAR) of 10.0 times the lot area for commercial, residential and community facility uses. The C6-4 zoning designation permits a maximum as-of-right floor area ratio (FAR) of 6.0 times the lot area for commercial and community facility use, and 3.44 times the lot area for residential use.

The subject site contains 24,112 square feet within the C6-4 zoning designation, and 24,111 square feet in the C6-1 zoning designation for a total area of 48,223 square feet. Therefore, the maximum permitted zoning floor area (ZFA) as-of-right that could be constructed on the site is 385,786 square feet (24,112 SF x 10.0 FAR = 241,120 + 24,111 SF x 6.0 FAR = 144,666). The existing improvements contain an above grade gross building area of 431,677 square feet. The subject property was constructed in 1996, after the 1961 overhaul of the NYC zoning regulations. We have not been provided with a zoning analysis but assume that the subject property has received all the appropriate approvals for the current improvements. CONCLUSION Detailed zoning studies are typically performed by a zoning or land use expert, including attorneys, land use planners, or architects. The depth of our study correlates directly with the scope of this assignment, and it considers all pertinent issues that have been discovered through our due diligence.

We are not experts in the interpretation of complex zoning ordinances but we have analyzed the zoning requirements in relation to the subject property, and considered the compliance of the existing use. We are not experts in the interpretation of complex zoning ordinances but based on our review of public information, the subject property is a legal non-conforming use.

We note that this appraisal is not intended to be a detailed determination of compliance, as that determination is beyond the scope of this real estate appraisal assignment.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM ZONING 81

ZONING MAP

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM HIGHEST AND BEST USE 82

HIGHEST AND BEST USE HIGHEST AND BEST USE CRITERIA The Dictionary of Real Estate Appraisal, Fifth Edition (2010), a publication of the Appraisal Institute, defines the highest and best use as:

To determine the highest and best use we have evaluated the subject site under two scenarios: as if vacant land and as presently improved. In both cases, the property’s highest and best use must meet the four criteria described above.

HIGHEST AND BEST USE OF SITE AS IF VACANT LEGALLY PERMISSIBLE The first test concerns permitted uses. According to our understanding of the zoning ordinance, noted earlier in this report, the site may legally be improved with structures that accommodate office, retail, residential, and general commercial uses. We are not aware of any legal restrictions that limit the potential uses of the subject. PHYSICALLY POSSIBLE The second test is what is physically possible. As discussed in the "Property Description," the site's size, soil, topography, etc. do not physically limit its use. The subject site is of adequate shape and size to accommodate almost all urban uses. FINANCIALLY FEASIBLE AND MAXIMALLY PRODUCTIVE The third and fourth tests are, respectively, what is feasible and what will produce the highest net return. After analyzing the physically possible and legally permissible uses of the property, the highest and best use must be considered in light of financial feasibility and maximum productivity. For a potential use to be seriously considered, it must have the potential to provide a sufficient return to attract investment capital over alternative forms of investment. A positive net income or acceptable rate of return would indicate that a use is financially feasible. CONCLUSION We have considered the legal issues related to zoning and legal restrictions. We have analyzed the physical characteristics of the site to determine what legal uses would be possible and have considered the financial feasibility of these uses to determine the use that is maximally productive.

The subject site is located on an entire, irregular block bounded by Union Square South to the north, Fourth Avenue to the east, East 13th Street to the south and Broadway to the west in the Union Square neighborhood of Manhattan. The subject has 208 feet of frontage along the south side of side of Union Square South, 219 feet along the east side of Broadway, 252 feet along the north side of East 13th Street and 238 feet long the west side Fourth Avenue which provides excellent visibility and exposure.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM HIGHEST AND BEST USE 83

Several features of the subject property indicate that a residential building with retail space is the highest and best use of the site. First, skyline exposure of the subject is one that offers good natural lighting and ventilation. Furthermore, the market rents or sale prices achievable for residential use exceed that of current or projected rents or sale prices for office use, in the immediate area. A mixed-use residential building with multi-level retail space is the highest and best use of any development of the subject property. Multi-level retail uses are consistent with other uses in the local market area.

Considering the subject site’s physical characteristics and location, as well as the state of the local market, it is our opinion that the Highest and Best Use of the subject site as if vacant is a mixed-use development comprising of residential units on the upper floors, and multi-level retail space on the lower floors. HIGHEST AND BEST USE OF PROPERTY AS IMPROVED The Dictionary of Real Estate Appraisal defines highest and best use of the property as improved as:

In analyzing the Highest and Best Use of a property as improved, it is recognized that the improvements should continue to be used until it is financially advantageous to alter physical elements of the structure or to demolish it and build a new one. LEGALLY PERMISSIBLE As described in the Zoning Analysis section of this report, the subject site is zoned C6-4 and C6-1; Restricted Central Commercial District. The site is improved with a 22-story luxury residential building with multi-level retail space containing 431,677 square feet of gross building area. In the Zoning section of this appraisal, we determined that the existing improvements represent a legal, non-conforming use. PHYSICALLY POSSIBLE The existing improvements were constructed in 1996 and are in excellent condition. We know of no current or pending municipal actions or covenants that would require a change to the current improvements. FINANCIALLY FEASIBLE AND MAXIMALLY PRODUCTIVE In our opinion, the existing improvements, including the subject condominium unit, contribute significantly to the value of the site. It is likely that no alternate use would result in a higher return.

CONCLUSION It is our opinion, the existing building adds value to the site as if vacant, therefore dictating a continuation of its current use. In conclusion, it is our opinion that the Highest and Best Use of the subject property as improved is as currently improved.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM VALUATION PROCESS 84

VALUATION PROCESS METHODOLOGY There are three generally accepted approaches to developing an opinion of value: Cost, Sales Comparison and Income Capitalization. We have considered each in this appraisal to develop an opinion of the market value of the subject property. In appraisal practice, an approach to value is included or eliminated based on its applicability to the property type being valued and the quality of information available. The reliability of each approach depends on the availability and comparability of market data as well as the motivation and thinking of purchasers.

We have considered each approach in developing our opinion of the market value of the subject property. We discuss each approach below and conclude with a summary of their applicability to the subject property. COST APPROACH The Cost Approach is based on the proposition that an informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements which represent the Highest and Best Use of the land; or when relatively unique or specialized improvements are located on the site for which there are few improved sales or leases of comparable properties.

In the Cost Approach, the appraiser forms an opinion of the cost of all improvements, depreciating them to reflect any value loss from physical, functional and external causes. Land value, entrepreneurial profit and depreciated improvement costs are then added, resulting in an opinion of value for the subject property. SALES COMPARISON APPROACH The Sales Comparison Approach uses sales of comparable properties, adjusted for differences, to estimate a value for the subject property. This approach typically uses a unit of comparison such as price per square foot of building area or effective gross income multiplier. When developing an opinion of land value the analysis is based on recent sales of sites of comparable zoning and utility, and the typical units of comparison are price per square foot of land, price per acre, price per unit, or price per square foot of potential building area. In both cases, adjustments are applied to the unit of comparison from an analysis of comparable sales, and the adjusted unit of comparison is then used to derive an opinion of value for the subject property.

The reliability of this approach is dependent upon (a) the availability of comparable sales data; (b) the verification of the sales data; (c) the degree of comparability; (d) the absence of non-typical conditions affecting the sales price. INCOME CAPITALIZATION APPROACH The Income Capitalization Approach first determines the income-producing capacity of a property by using contract rents on existing leases and by estimating market rent from rental activity at competing properties for the vacant space. Deductions are then made for vacancy and collection loss and operating expenses. The resulting net operating income is divided by an overall capitalization rate to derive an opinion of value for the subject property. The capitalization rate represents the relationship between net operating income and value. This method is referred to as Direct Capitalization.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM VALUATION PROCESS 85

The reliability of the Income Capitalization Approach depends upon whether investors actively purchase the subject property type for income potential, as well as the quality and quantity of available income and expense data from comparable investments. SUMMARY This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these approaches would be considered applicable and/or necessary for market participants. Typical purchasers do not generally rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not utilized the Cost Approach to develop an opinion of market value.

Analyzing each approach to value used in the appraisal concludes the valuation process. When more than one approach is used, each approach is judged based on its applicability, reliability, and the quantity and quality of its data. A final value opinion is chosen that either corresponds to one of the approaches to value, or is a correlation of all the approaches used in the appraisal.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM SALES COMPARISON APPROACH 86

SALES COMPARISON APPROACH METHODOLOGY Using the Sales Comparison Approach, we developed an opinion of value by comparing the subject property to similar, recently sold properties in the surrounding or competing area. This approach relies on the principle of substitution, which holds that when a property is replaceable in the market, its value tends to be set at the cost of acquiring an equally desirable substitute property, assuming that no costly delay is encountered in making the substitution.

1. By analyzing sales that qualify as arm’s-length transactions between willing and knowledgeable buyers and sellers, we can identify value and price trends. The basic steps of this approach are: 2. Research recent, relevant property sales and current offerings in the competitive area; 3. Select and analyze properties that are similar to the subject property, analyzing changes in economic conditions that may have occurred between the sale date and the date of value, and other physical, functional, or locational factors; 4. Identify sales that include favorable financing and calculate the cash equivalent price; 5. Reduce the sale prices to a common unit of comparison such as price per square foot of Net Rentable Area, effective gross income multiplier, or net income per square foot; 6. Make appropriate comparative adjustments to the prices of the comparable properties to relate them to the subject property and 7. Interpret the adjusted sales data and draw a logical value conclusion. The subject property comprises a 5-level, inclusive of lower level, retail condominium unit totaling 236,215 square feet of net rentable area within a 22 story luxury residential condominium building located at One Union Square South within the Union Square neighborhood of Manhattan. Due to the subject’s unique size and configuration, we have compiled the most recent sale transactions of retail properties throughout Manhattan. As of the date of value, these sales provide the best indication of market transactions, albeit smaller in size, and some located in superior locations. The most widely used and market-oriented unit of comparison for properties such as the subject is the sales price per square foot of net rentable area. All comparable sales were analyzed on this basis. The following pages contain a summary of the improved properties that we compared to the subject property, a map showing their locations, and the adjustment process.

Due to the nature of the subject property and the level of detail available for the comparable data, we have elected to analyze the comparables through the application of:

 A traditional adjustment grid using percentage adjustments

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM SALES COMPARISON APPROACH 87

COMPARABLE SALES MAP IMPROVED SALES COMPARABLE MAP

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM SALES COMPARISON APPROACH 88

SUMMARY OF COMPARABLE RETAIL SALES

Physical Data Sale Data Financial Data Property Name Net Rentable Year Sale Grantor/ Occupancy No. Location Area (SF) Built Date Grantee Price Price/NRA NOI/SF OAR at Sale 1 150 West 34th Street SOF-IX U.S. Acquisitions, L.L.C. c/o B/w Sixth and Seventh Avenues 77,760 1998 May-15 Starwood Capital Group / $355,500,000 $4,571.76 $46.61 1.02% 100% Herald Square, Manhattan Contract Confidential

Comments: Contract of sale of a 4-story, plus lower level, single tenant retail building that contains a total net rentable area of 77,760 square feet (inclusive of 19,922 SF lower level). The entire property is leased by Old Navy until May 31, 2019 at significantly below current market levels. The tenant also has two 5-year renewal options at 100.0 percent of fair market value which could extend the lease term to May 31, 2029. The subject is Old Navy’s flagship store, and represents its highest grossing store in the country. The subject is located along the prime 34th Street retail corridor across the street from Macy’s flagship department store, and just east of Penn Station and Madison Square Garden. The property was purchased a year ago for $252,000,000 which represents a 41 percent increase in value. The implied capitalization rate in year 7, upon the expiration of the lease is projected to be 6.87. The subject is under contract for an overall capitalization rate of 1.02 percent. The sale is inclusive of excess develompent rights. According to the buyer, there was no separate allocation of the excess develompent rights. 2 503 Broadway B/w Broome & Spring Streets 41,215 1900 Jan-15 FCF SoHo, LLC / $280,000,000 $6,793.64 N/A N/A 0% SoHo, Manhattan 503 Broadway LLC

Comments: This is the sale of a 3-level retail condominium unit totaling 41,215 square feet of net rentable area within a newly renovated 5-story office condominium building located at 503-511 Broadway between Broome and Spring Streets within the SoHo neighborhood of Manhattan. The property comprises 13,000 square feet on the ground floor (32%), 10,000 square feet within the basement (24%) and 18,215 square feet on the second floor (44%). The buyer, Inditex, is a parent company of Zara. Zara will occupy the entire space as an owner-user. The previous tenant, Old Navy, was bought out of there lease.

3 461 West 14th Street N/E/C Tenth Avenue 24,682 2015 Jan-15 Mulnick Realty LLC/ $86,000,000 $3,484.32 N/A N/A 0% Chelsea, Manhattan 461 West 14th Street Property

Comments: This is the sale of a 1-story retail building totaling 24,684 square feet of net rentable area within a recently completed, glass-facade LEED certified building at the northeast corner of Tenth Avenue in the Chelsea neighborhood of Manhattan. The property is adjacent to the High-Line and was purchased vacant.

4 170 Broadway S/E/C Maiden Lane 19,204 1920 Feb-14 170 Broadway Retail, LLC/ $70,100,000 $3,650.28 N/A N/A 0% Downtown, Manhattan 2014 170 Broadway NYC LP

Comments: This is the sale of a 4-level retail condominium unit totaling 19,204 square feet of net rentable area inclusive of 5,846 square feet on the ground floor (30%), 7,213 on the second floor (38%), 4,281 square feet on the mezzanine level (22%), and 1,864 square feet on the lower level (10%) within 170 Broadway, a 18-story former Class B office building has been converted into a 243-room Marriott Residence Inn hotel. and features a new 2-story glass façade along the entire façade fronting Broadway and Maiden Lane. At the time of sale, the property was vacant and in raw condition. Subsequently, the buyer leased the space to the Gap for a 15-year term through May 2029. 5 697-699 Fifth Avenue B/w 56th & 57th Streets 24,700 1904 Jul-14 Richemont / $700,000,000 $28,340.08 $252.95 0.89% 100% Plaza District, Manhattan 1990 Vornado & Crown Acquisitions

Comments: This is the sale of the 3-level retail condominium unit within the St. Regis Hotel and the adjoining 5-story single tenant retail building located at 697 Fifth Avenue in the Plaza District of Manhattan. The property has 100 feet of frontage on east side of Fifth Avenue and 249.50 feet of frontage along south side of 55th Street. The St. Regis retail condominium contains 7,646 square feet and is leased to DeBeers. DeBeers subleased part of its space to Tag Hauer. The retail building at 697 Fifth Avenue contains 17,091 square feet and is net leased to Bottega Veneta. The seller acquired the property in October 2012 from GFC Fifth Avenue LLC, an joint venture group. The existing leases are approximately 80 percent below current market rent levels. The retail tenants, De Beers and Bottega Veneta, are scheduled to expire in January 2019 and January 2016, respectively. The property was purchased based on an overall capitalization rate of 0.89 percent and and increases to 3.39 percent in year 3.

6 432 Park Avenue B/w 56th & 57th Streets 81,579 2013 Jun-14 56th and Park (NY) Owner, LLC $425,000,000 $5,209.67 N/A N/A 0% Plaza District, Manhattan 57th Development Acquisition LLC

Comments: This is the sale of the multi-level retail/commercial condominium unit within 432 Park Avenue, a proposed 83-story luxury residential condominium tower currently under construction located on an “L” shaped block through site along the south side of East 57th Street, the north side of East 56th Street, and the west side of Park Avenue in Midtown Manhattan. The property will consist of a 5-level, plus two lower levels, retail/commercial condominium unit that totals 81,579 square feet of retail space, and a 9,200 square foot below grade parking garage. The parking garage reportedly will have 46 licensed spaces, excluding legal stackers that will provide an additional 45 spaces for a total of 91 spaces. The property was sold vacant.

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SUMMARY OF COMPARABLE RETAIL SALES

Physical Data Sale Data Financial Data Property Name Net Rentable Year Sale Grantor/ Occupancy No. Location Area (SF) Built Date Grantee Price Price/NRA NOI/SF OAR at Sale 7 865 Lexington Avenue S/E/C East 65th Street 5,124 2013 Feb-14 865 Lex Inc. $12,000,000 $2,341.92 $105.57 4.51% 100% Upper East Side, Manhattan 180 E. 88th St. Associates, LLC (c/o Muss Development) Comments: This is the sale of a 2-level retail condominium unit totaling 5,124 square feet of net rentable area within a newly constructed 15-story luxury residential condominium building known as The Touraine. The property comprises of 1,991 square feet on the ground floor (39%) and 3,133 square feet of retail space on the lower level (61%). The property was leased for a base term of 15 years to Le Pain Quotidian through January 31, 2029. In addition, the tenant has two 5-year renewal options which could extend the lease term to January 31, 2039. The property was purchased based on an overall capitalization rate of 1.64 percent which is reflective of the free rent period. The overall going-in capitalization rate increases to 4.51 percent in Year 2 when the rent abatement expires. 8 1107 Broadway N/W/C West 24th Street 20,609 1915 Feb-14 MS/WG 1007 Broadway Owner LLC/ $56,500,000 $2,741.52 $160.75 5.86% 21% Madison Square, Manhattan 2013 1101 Broadway Property Investors IIA, LLC (c/o Savanna) Comments: This is the sale of a 2-level retail condominium unit totaling 16,341 square feet on the ground floor and 4,268 square feet on the lower level within 1107 Broadway, a 16-story former Class B office building that is currently being converted into a luxury residential condominium building with retail space that will be named 10 Madison Park West. The unit was 21.2 percent net leased to Citibank through August, 2043. The remaining retail space (16,250 SF) will be utilized as a staging area for the renovation of the condominium units until 3rd quarter 2015 at which point it will be available for lease. The property is being purchased 21 percent leased. The overall capitalization rate is projected to increase to 5.86 percent by year 3 when he property is projected to be stabilized. 9 202-204 Canal Street S/E/C Mulberry Street 16,797 1991 Jan-14 202 Canal Owner LLC/ $46,000,000 $2,738.58 $108.45 5.06% 100% Chinatown, Manhattan 202 CPAM LLC

Comments: This is the sale of a 4-level retail condominium unit located within 202 Canal Street, a 9-story office condominium building located at the southeast corner of Mulberry and Canal Streets. The retail unit comprises 3,593 square feet on the ground floor (22%), 4,030 square feet in the sub-cellar (25%), 4,161 square feet in the cellar (26%) and 4,354 square feet on the second floor (28%), for a total of 16,138 square feet. The retail condominium unit was 100 percent leased at the time of sale to the Industrial and Commercial Bank of China USA, N.A. (ICBC USA) November 2028. The property was purchased based on an overall capitalization rate of 5.06 percent. As of the date of this report, the property was subsequently placed on the market at an asking price of $46 million ($2,739/SF).

10 112 Greene Street B/w Prince & Spring Streets 5,400 1900 Jul-13 112 Greene Street Partners LLC / $22,000,000 $4,074.07 $103.44 2.54% 100% SoHo, Manhattan Leasehold 112 Greene Street LLC

Comments: This is the sale of a 2-level retail cooperative unit located within 112 Greene Street, a 6-story mixed use residential building between Prince and Spring Streets. The cooperative unit contains 2,800 square feet on the ground floor and 2,600 square feet on the lower level. The entire building is master leased through December 2050, with an additional 70 years of option periods. The property is subleased to a fashion retailer, Stella McCartney, at significantly below current market rent levels. The sublease expires in January 2022 and contains no renewal option periods. The property was purchased based on an overall capitalization rate of 2.54 percent.

11 465 Broadway (40 Mercer Street) N/W/C Grand Street 14,002 2006 Jul-13 Savanna / $80,000,000 $5,713.47 $188.49 3.30% 67% SoHo, Manhattan V ASB Capital Management, Imperium Ca

Comments: This is the sale of a 2-level retail condominium unit within a modern 14-story mixed-use condominium building located at 465 Broadway (40 Mercer Street) at the northwest corner of Grand Street within the SoHo neighborhood of Manhattan. At the time of sale the property was leased to four retail tenants: Wachovia Bank, Vivienne Tam, Dermalogica and Bose. There was one vacant retail space on the lower level totaling 4,663 square feet available for lease. All of the property's leases are projected to expire by 2018. The property previously sold in June 2012 to Savanna from GLL Real Estate Partners for $57 million. Originally, GLL Real Estate Partners acquired the retail condo in March 2010 from Hines Interest Limited Partnership for $41.9 million. The property was purchased based on an overall capitalization rate of 3.30 percent. STATISTICS LOW 5,124 1900 $2,341.92 $46.61 0.89% 0% HIGH 81,579 2015 $28,340.08 $252.95 5.86% 100% MEAN 30,097 1971 $6,332.67 $138.04 3.31% 53% MEDIAN 20,609 1995 $4,074.07 $108.45 3.30% 67%

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IMPROVED SALE ADJUSTMENT GRID ECONOMIC ADJUSTMENTS (CUMULATIVE) PROPERTY CHARACTERISTIC ADJUSTMENTS (ADDITIVE) Property Adj. Price NRA & Rights Conditions Market Age, Quality Price No. Date Conveyed of Sale Conditions (1) Subtotal Location Size & Condition Utility Economics Other NRA 1 $4,571.76 Leased Fee Arm's-Length Inferior $3,675.69 Superior Smaller Similar Superior Similar Similar $1,654.06 5/15 -20.0% 0.0% 0.5% -19.6% -10.0% -20.0% 0.0% -25.0% 0.0% 0.0% -55.0% 2 $6,793.64 Leased Fee Arm's-Length Inferior $5,554.48 Superior Smaller Superior Superior Superior Similar $1,666.34 1/15 -20.0% 0.0% 2.2% -18.2% -25.0% -20.0% -15.0% -5.0% -5.0% 0.0% -70.0% 3 $3,484.32 Leased Fee Arm's-Length Inferior $2,848.78 Superior Smaller Inferior Superior Similar Similar $1,566.83 1/15 -20.0% 0.0% 2.2% -18.2% -15.0% -30.0% 5.0% -5.0% 0.0% 0.0% -45.0% 4 $3,650.28 Leased Fee Arm's-Length Inferior $3,118.80 Superior Smaller Similar Similar Similar Similar $1,559.40 2/14 -20.0% 0.0% 6.8% -14.6% -20.0% -30.0% 0.0% 0.0% 0.0% 0.0% -50.0% 5 $28,340.08 Leased Fee Arm's-Length Inferior $23,737.65 Superior Smaller Superior Similar Superior Similar $4,747.53 7/14 -20.0% 0.0% 4.7% -16.2% -30.0% -30.0% -10.0% 0.0% -10.0% 0.0% -80.0% 6 $5,209.67 Leased Fee Arm's-Length Inferior $4,380.29 Superior Smaller Superior Similar Superior Similar $1,971.13 6/14 -20.0% 0.0% 5.1% -15.9% -25.0% -20.0% -5.0% 0.0% -5.0% 0.0% -55.0% 7 $2,341.92 Leased Fee Arm's-Length Inferior $2,000.94 Inferior Smaller Inferior Similar Inferior Similar $1,700.80 2/14 -20.0% 0.0% 6.8% -14.6% 5.0% -35.0% 10.0% 0.0% 5.0% 0.0% -15.0% 8 $2,741.52 Leased Fee Arm's-Length Inferior $2,337.97 Similar Smaller Similar Similar Similar Similar $1,753.48 2/14 -20.0% 0.0% 6.6% -14.7% 0.0% -25.0% 0.0% 0.0% 0.0% 0.0% -25.0% 9 $2,738.58 Leased Fee Arm's-Length Inferior $2,350.80 Inferior Smaller Superior Similar Similar Similar $1,645.56 1/14 -20.0% 0.0% 7.3% -14.2% 5.0% -30.0% -5.0% 0.0% 0.0% 0.0% -30.0% 10 $4,074.07 Leasehold Arm's-Length Inferior $4,477.41 Superior Smaller Superior Similar Similar Similar $1,790.96 7/13 0.0% 0.0% 9.9% 9.9% -20.0% -30.0% -10.0% 0.0% 0.0% 0.0% -60.0% 11 $5,713.47 Leased Fee Arm's-Length Inferior $5,023.28 Superior Smaller Superior Similar Similar Similar $2,009.31 7/13 -20.0% 0.0% 9.9% -12.1% -20.0% -30.0% -10.0% 0.0% 0.0% 0.0% -60.0% STATISTICS $2,341.92 - Low Low - $1,559.40 $28,340.08 - High High - $4,747.53 $6,332.67 - Average Average - $2,005.61 Compiled by Cushman and Wakefield, Inc. (1) Market Conditions Adjustment As Is Market Value Compound annual change in market conditions: 5.00% Indicated Value Per Square Foot of NRA $1,600 Date of Value (for adjustment calculations): 6/10/15 Net Rentable Area (SF) 236,215 Indicated Value $377,944,000 Rounded $380,000,000 Per Square Foot $1,608.70

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PERCENTAGE ADJUSTMENT METHOD ADJUSTMENT PROCESS The sales we have used were the best available comparables to the subject property. The major points of comparison for this type of analysis include the property rights conveyed, the financial terms incorporated into the transaction, the conditions or motivations surrounding the sale, changes in market conditions since the sale, the location of the real estate, its physical traits and the economic characteristics of the property.

We have made a downward adjustment to those comparables considered superior to the subject and an upward adjustment to those comparables considered inferior. PROPERTY RIGHTS CONVEYED The property rights conveyed in a transaction typically have an impact on the price that is paid. Acquiring the fee simple interest implies that the buyer is acquiring the full bundle of rights. Acquiring a leased fee interest typically means that the property being acquired is encumbered by at least one lease, which is a binding agreement transferring rights of use and occupancy to the tenant. A leasehold interest involves the acquisition of a lease, which conveys the rights to use and occupy the property to the buyer for a finite period of time. At the end of the lease term, there is typically no reversionary value to the leasehold interest. The subject property is ground leased through December 31, 2095, with no renewal options. Based on the leasehold interest we have adjusted each of the downward 20 percent. FINANCIAL TERMS The financial terms of a transaction can have an impact on the sale price of a property. A buyer who purchases an asset with favorable financing might pay a higher price, as the reduced cost of debt creates a favorable debt coverage ratio. A transaction involving above-market debt will typically involve a lower purchase price tied to the lower equity returns after debt service. We have analyzed all of the transactions to account for atypical financing terms. To the best of our knowledge, all of the sales used in this analysis were accomplished with cash or market- oriented financing. Therefore, no adjustments were required. CONDITIONS OF SALE Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. In many situations the conditions of sale may significantly affect transaction prices. However, all sales used in this analysis are considered to be "arm’s-length" market transactions between both knowledgeable buyers and sellers on the open market. Upward adjustments were required to Sale Nos. 9 and 10, which were simultaneously marketed by Vornado Realty Trust consisting of a 5-property Manhattan commercial portfolio in SoHo, The Upper East Side and Union Square. MARKET CONDITIONS The sales that are included in this analysis occurred between July 2013 and May 2015. Beginning in September 2010, we have made a positive adjustment for the improving market conditions at a rate of 5.0 percent per annum.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM SALES COMPARISON APPROACH 92

LOCATION An adjustment for location is required when the locational characteristics of a comparable property differ from those of the subject property. Each comparable was adjusted accordingly. PHYSICAL TRAITS Each property has various physical traits that determine its appeal. These traits include size, age, condition, quality, parking ratio and utility. Each comparable was adjusted accordingly. ECONOMIC CHARACTERISTICS The economic characteristics of a property include its occupancy levels, operating expense ratios, tenant quality, and other items not covered under prior adjustments that would have an economic impact on the transaction. Each comparable was adjusted accordingly. OTHER This category accounts for any other adjustments not previously discussed. Based on our analysis of these sales, none required any additional adjustment. DISCUSSION OF COMPARABLE RETAIL SALES COMPARABLE SALE NO. 1 This is the contract of sale for a 4-level retail building located at 150 West 34th Street between Sixth and Seventh Avenues within the Herald Square neighborhood of Manhattan. A confidential buyer is under contract to purchase the property from SOF-IX U.S. Acquisitions, L.L.C. in care of Starwood Capital Group as of May 2015 for $355,500,000. The property contains four levels of retail space for a total net rentable area of 77,760 square feet (inclusive of 19,922 SF lower level). The entire property is leased by Old Navy until May 31, 2019 at significantly below current market levels. The tenant also has two 5-year renewal options at 100.0 percent of fair market value which could extend the lease term to May 31, 2029. The subject is Old Navy’s flagship store, and represents its highest grossing store in the country. The subject is located along the prime 34th Street retail corridor across the street from Macy’s flagship department store, and just east of Penn Station and Madison Square Garden. The property was purchased a year ago for $252,000,000 which represents a 41 percent increase in value. The implied capitalization rate in year 7, upon the expiration of the lease is projected to be 6.87. The subject is under contract for an overall capitalization rate of 1.02 percent. The sale is inclusive of excess development rights. According to the buyer, there was no separate allocation of the excess development rights. The contract price equates to a unit price of $4,571.76 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $1,654.06 per square foot. COMPARABLE SALE NO. 2 This is the of sale for a 3-level retail condominium unit located at 503 Broadway between Broome and Spring Streets within the SoHo neighborhood of Manhattan. FCF Soho, LLC purchased the property from 503 Broadway LLC in January 2015 for a sale price of $280,000,000. This is the sale of a 3-level retail condominium unit totaling 41,215 square feet of net rentable area within a newly renovated 5-story office condominium building located at 503-511 Broadway between Broome and Spring Streets within the SoHo neighborhood of Manhattan. The property comprises 13,000 square feet on the ground floor (32%), 10,000 square feet within the basement (24%) and 18,215 square feet on the second floor (44%). The buyer, Inditex, is a parent company of Zara. Zara will occupy the entire space as an owner-user. The previous tenant, Old Navy, was bought out of their lease. The purchase price equates to a unit price of $6,793.64 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $1,666.34 per square foot.

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COMPARABLE SALE NO. 3 Sale for a 1-story retail building within a recently completed, glass-facade LED certified building located at 461 West 14th Street on the northeast corner of the Tenth Avenue within the Chelsea neighborhood of Manhattan. FCF Mulnick Realty LLC purchased the property from 461 West 14th Street Property in January 2015 for a sale price of $86,000,000. This is the sale of a 1-story retail building totaling 24,684 square feet of net rentable area within a recently completed, glass-facade LEED certified building at the northeast corner of Tenth Avenue in the Chelsea neighborhood of Manhattan. The property is adjacent to the High-Line and was purchased vacant. The sale price equates to $3,484.32 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $1,566.83 per square foot. COMPARABLE SALE NO. 4 Sale of a 4-level retail condominium unit within a 18-story former Class B office building, located at 170 Broadway, South East corner of Maiden Lane170 Broadway Retail, LLC purchased the property from 170 Broadway NYC LP in February 2014 for a sale price of $ 70,100,000. This is the sale of a 4-level retail condominium unit totaling 19,204 square feet of net rentable area inclusive of 5,846 square feet on the ground floor (30%), 7,213 on the second floor (38%), 4,281 square feet on the mezzanine level (22%), and 1,864 square feet on the lower level (10%) within 170 Broadway, a 18-story former Class B office building has been converted into a 243-room Marriott Residence Inn hotel. and features a new 2-story glass façade along the entire façade fronting Broadway and Maiden Lane. At the time of sale, the property was vacant and in raw condition. Subsequently, the buyer leased the space to the Gap for a 15-year term through May 2029. The sale price equates to a unit price of $3,650.28 per square foot. After all adjustments, this comparable indicated an adjusted unit price $1,559.40 per square foot. COMPARABLE SALE NO. 5 Sale of the 3-level retail condominium unit within the St. Regis Hotel (699 Fifth Avenue) and the 5-story single tenant retail building at 697 Fifth Avenue located on the southeast corner of East 55th Street within the Madison/Fifth Avenue neighborhood in Midtown Manhattan. The property sold to Vornado & Crown Acquisitions from Richemont in July 2014 for $700,000,000. The property has 100 feet of frontage on east side of Fifth Avenue and 249.50 feet of frontage along south side of 55th Street. The St. Regis retail condominium contains 7,646 square feet and is leased to DeBeers. DeBeers subleased part of its space to Tag Hauer. The retail building at 697 Fifth Avenue contains 17,091 square feet and is net leased to Bottega Veneta. The seller acquired the property in October 2012 from GFC Fifth Avenue LLC, an joint venture group. The existing leases are approximately 80 percent below current market rent levels. The retail tenants, De Beers and Bottega Veneta, are scheduled to expire in January 2019 and January 2016, respectively. The property was purchased based on an overall capitalization rate of 0.89 percent and increases to 3.39 percent in year 3. The seller acquired the property in October 2012 from GFC Fifth Avenue LLC, an investment group comprised of Crown Acquisitions, Goldman Properties and The Feil Organization. The sale price equates to a unit price of $28,340.08 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $4,747.53 per square foot.

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COMPARABLE SALE NO. 6 This is the sale of a multi-level retail/commercial condominium unit within 432 Park Avenue, a proposed 83-story luxury residential condominium tower currently under construction located on an “L” shaped block through site along the south side of East 57th Street, the north side of East 56th Street, and the west side of Park Avenue in Midtown Manhattan. The property sold from 56th and Park (NY) Owner, LLC to 57th Development Acquisition LLC in August 2014 for $425,000,000. The property will consist of a 5-level, plus two lower levels, retail/commercial condominium unit that totals 81,579 square feet of retail space, and a 9,200 square foot below grade parking garage. The parking garage reportedly will have 46 licensed spaces, excluding legal stackers that will provide an additional 45 spaces for a total of 91 spaces. The property was sold vacant. The sale price equates to a unit price of $5,209.67 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $1,971.13 per square foot. COMPARABLE SALE NO. 7 This is the sale of a 2- level retail condominium unit located at 865 Lexington Avenue on the southeast corner of East 65th Street within the Upper East Side neighborhood of Manhattan. 180 E. 88th St. Associates, LLC in care of Muss Development purchased the property from 865 Lex Inc. as of January 2014 for $12,000,000. The unit is located within a newly constructed 15-story luxury residential condominium building known as The Touraine. The unit comprises 5,124 square feet of net rentable area (inclusive of 3,133 SF of lower level retail space). The property was leased for a base term of 15 years to Le Pain Quotidien through January 31, 2029. At the time the contract was signed, the property was vacant and projected to be delivered to the tenant by February 1, 2014. The property was purchased based on an overall capitalization rate of 1.64 percent, which is attributable to the free rent period. The overall going-in capitalization rate increases to 4.51 percent in Year 2. The sales price equates to a unit price of $2,341.92 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $1,700.80 per square foot. COMPARABLE SALE NO. 8 This is the sale of a 2-level retail condominium unit located at 1107 Broadway at the northeast corner of West 24th Street within the Madison Square neighborhood of Manhattan. MS/WG 1107 Broadway Owner LLC in care of Savanna purchased the property from 1107 Broadway Property Investors IIA, LLC in February 2014 for $68,000,000. This retail condominium unit is located at the base of a 16-story former Class B office building that is being converted into a luxury residential condominium building with retail space that will be named 10 Madison Park West. The retail unit comprises 16,341 square feet on the ground floor and 4,268 square feet on the lower level within 1107 Broadway totaling 20,609 square feet. The unit was 21 percent leased to Citibank at the time of sale. Citibank’s lease is through August 31, 2023. In addition, the tenant possesses two 10-year options through August 31, 2043. The remaining retail space (16,250 SF) will be utilized as a staging area for the renovation of the upper floor condominium units until January 31, 2015, at which point it will be available for lease. At the time of sale, the property was 21 percent leased. The overall capitalization was 2.89 percent in year 2 and was projected to increase to 6.99 percent in year 3 when the property is projected to be stabilized. The sale price equates to a unit price of $2,741.52 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $1,753.48 per square foot.

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COMPARABLE SALE NO. 9 This is the sale of a 4-level retail condominium unit located at 202 Canal Street, a 9-story condominium building located at the southeast corner of Mulberry Street within the Chinatown neighborhood of Manhattan. 202 Canal Owner LLC purchased the property from 202 CPAM LLC in January 2014 for $36,000,000. The property condominium unit was 100 percent leased to 100 percent leased to the Industrial and Commercial Bank of China USA, N.A. (ICBC USA) on a through November 2028. This location serves as the flagship bank branch for the US banking operations of the world’s largest bank by assets, ICBC. The property was purchased based on an overall capitalization rate of 5.06 percent. The sale price equates to a unit price of $2,143.24 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $1,645.56 per square foot. COMPARABLE SALE NO. 10 This is the sale of a 2-level, inclusive of lower level, retail cooperative unit located at 112 Greene Street between Prince and Spring Streets within the SoHo neighborhood of Manhattan. 112 Greene Street LLC purchased the property from 112 Greene Street Partners LLC in July 2013 for $22,000,000. The 5,400 square foot retail unit is located within a 6-story mixed use residential cooperative building. The cooperative unit contains 2,800 square feet on the ground floor and 2,600 square feet on the lower level. The site is ground leased through December 2050 with an additional 70 years of option periods. The property is subleased to a fashion retailer, Stella McCartney, at significantly below current market rent levels. The sublease expires in January 2022 and contains no renewal options. The property was purchased based on an overall capitalization rate of 2.50 percent. The sale price equates to a unit price of $4,074.07 per square foot. After all adjustments, this comparable indicated an adjusted unit price of $1,790.96 per square foot. COMPARABLE SALE NO. 11 This is the sale of a 2-level retail condominium unit located within 465 Broadway on the northwest corner of Grand Street within the SoHo neighborhood of Manhattan. JV ASB Capital Management purchased the property from Savanna in July 2013 for $80,000,000. The property consists of the multi-tenant retail condominium unit located on the ground floor and basement of 465 Broadway (aka 40 Mercer Street), a modern 14-story mixed-use condominium building containing retail and residential space. At the time of sale, the property was leased to four retail tenants: Wachovia Bank, Vivienne Tam, Dermalogica and Bose. There was one vacant retail space on the lower level totaling 4,663 square feet available for lease. All of the property's leases are due to expire by 2018. The property previously sold in June 2012 to Savanna from GLL Real Estate Partners for $57 million. Originally, GLL Real Estate Partners acquired the retail condominium in March 2010 from Hines Interest Limited Partnership for $41.9 million. The sale price equates to a unit price of $5,713.47 per square foot. The property was purchased based on an overall capitalization rate of 3.30 percent. After all adjustments, this comparable indicated an adjusted unit price of $2,009.31 per square foot. SUMMARY OF PERCENTAGE ADJUSTMENT METHOD The subject property comprises a multi-level retail condominium unit totaling 236,215 square feet of net rentable area within five levels (inclusive of one below grade level) of the luxury mixed-use development located at One Union Square South. The subject is 100.0 percent leased to 7 retail tenants. The subject is anchored by Regal Cinemas, Best Buy, and Nordstrom Rack, which occupy 83.7 percent of the subject. We have also considered the subject’s above and below grade retail space in our analysis. We have also considered the subject’s ground lease.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM SALES COMPARISON APPROACH 96

Prior to adjustments, the comparable sales exhibited a range from $2,341.92 to $28,340.08 per square foot with an average unadjusted price of $6,332.67 per square foot. After adjustments the comparable improved sales reflect unit prices ranging from $1,559.40 to $4,747.53 per square foot with an average adjusted price of $2,005.61 per square foot. We have placed greatest reliance on Sale Nos. 1, 2, 3, and 4 as they are the most similar to the subject with respect to sales date, location and physical characteristics. These sales reflect retail condominiums located along prime retail corridors or in and around the Union Square West neighborhood. The range in adjusted prices from $1,566.83 to $1,666.34 per square foot, with an average of $1,611.66 per square foot. Therefore, based on the subject’s location, layout, condition, tenancy, contract rents and the underground parking component we conclude that the indicated value of the subject property by the Percentage Adjustment Method is:

PERCENT ADJUSTMENT METHOD SUMMARY MARKET VALUE AS IS: Net Rentable Area: 236,215

Concluded Price Per Square Foot: x $1,600

Indicated Value: $377,944,000

Rounded: $380,000,000

Per Square Foot: $1,608.70

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 97

INCOME CAPITALIZATION APPROACH METHODOLOGY The Income Capitalization Approach is a method of converting the anticipated economic benefits of owning property into a value through the capitalization process. The principle of "anticipation" underlies this approach in that investors recognize the relationship between an asset's income and its value. In order to value the anticipated economic benefits of a particular property, potential income and expenses must be projected, and the most appropriate capitalization method must be selected.

The two most common methods of converting net income into value are Direct Capitalization and Discounted Cash Flow. In direct capitalization, net operating income is divided by an overall capitalization rate to indicate an opinion of market value. In the discounted cash flow method, anticipated future cash flows and a reversionary value are discounted to an opinion of net present value at a chosen yield rate (internal rate of return).

Based on the subject’s characteristics, we have considered both the Direct Capitalization and Discounted Cash Flow methods in this assignment.

POTENTIAL GROSS INCOME The total potential gross revenues generated by a retail property are composed of a number of distinct elements: minimum rent determined by lease agreement; additional overage rent based upon a percentage of retail sales; reimbursement of certain expenses incurred in the ownership and operation of the real estate; and other miscellaneous revenues. Minimum base rent represents a legal contract establishing a return to investors in the real estate, while the passing-on of certain expenses to tenants serves to maintain this return in an era of continually rising costs of operation. Additional rent based upon a percentage of retail sales experienced at the subject serves to preserve the purchasing power of the residual income to an equity investor over time.

OCCUPANCY STATUS The subject property is currently 100.0 percent leased by 7 tenants. The following chart summarizes the subject net rentable area (NRA) by tenant.

SPACE SUMMARY & OCCUPANCY STATUS SPACE SUMMARY TENANT COUNT Tenant Category Occ. SF Vct. SF Total SF Occupancy Occupied Vacant Total Park Avenue Imaging 9,091 - 9,091 100.0% 1 0 1 US Wines 6,419 - 6,419 100.0% 1 0 1 Duane Reade 13,947 - 13,947 100.0% 1 0 1 CitiBank 9,755 - 9,755 100.0% 1 0 1 Nordstrom Rack 32,136 - 32,136 100.0% 1 0 1 Best Buy 46,088 - 46,088 100.0% 1 0 1 Regal Cinemas 118,779 - 118,779 100.0% 1 0 1 Total 236,215 - 236,215 100.0% 7 0 7

Compiled by Cushman & Wakefield, Inc.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 98

ATTAINED RENT SCHEDULE The following chart summarizes the attained rent level within the subject property as at the date of valuation.

Ground Floor- 14th Street Duane Reade 110 Mar-10 Sep-30 13,947 $3,324,996 $238.40 $400.00 $5,578,800 40.40% below market Citibank 100 Mar-10 Feb-20 9,755 $5,365,248 $550.00 $550.00 $5,365,250 0.00% below market Subtotal 23,702 $8,690,244 $366.65 $461.74 $10,944,050 20.59% below market

Lower Level- Office Park South Imaging 001 Sep-02 Jan-17 9,091 $468,012 $51.48 $55.00 $500,005 6.40% below market Subtotal 9,091 $468,012 $51.48 $55.00 $500,005 6.40% below market

Ground- Fourth Avenue Union Square Wines 120 Feb-06 Jan-20 6,419 $544,500 $84.83 $400.00 $2,567,600 78.79% below market Subtotal 6,419 $544,500 $84.83 $400.00 $2,567,600 78.79% below market

Un Sq Wines Best Buy G & 2 Jul-09 Jan-25 46,088 $3,751,560 $81.40 $125.00 $5,761,000 34.88% below market Subtotal 46,088 $3,751,560 $81.40 $125.00 $5,761,000 34.88% below market

Lower Level- Retail Nordstrom G & 2 Dec-09 Jun-20 32,136 $4,320,000 $134.43 $175.00 $5,623,800 23.18% below market Subtotal 32,136 $4,320,000 $134.43 $175.00 $5,623,800 23.18% below market

Movie Theater Regal Cinemas 4 & 5 Apr-98 Apr-23 118,779 $5,619,708 $47.31 $50.00 $5,938,950 5.38% below market Subtotal 118,779 $5,619,708 $47.31 $50.00 $5,938,950 5.38% below market

GRAND-TOTALS 7 tenants in occupancy 236,215 $23,394,024 $99.04 $132.66 $31,335,405 25.34% below market

Note: Attained rent equals current rent annualized for twelve months, and it excludes contractual rent increases Compiled by Cushman & Wakefield, Inc. The contract rents for the ground floor retail space along 14th Street exhibit a range of $238.40 to $550.00 per square foot, with an average $366.65 per square foot, which is considered below current market rent levels. The Fourth Avenue retail space exhibits a contract rent of $84.83 per square foot, which is considered below market. The lower level retail space exhibits a contract rent of $134.43 per square foot, which is considered below market. The lower level office space exhibits an average of $51.48 per square foot, which is considered within market levels. The second floor retail space exhibits a contract rent of $81.40 per square foot, which is considered below market rent levels. Lastly, the multi-level movie theater space exhibits a contract averaging of $47.31 per square foot, which is considered slightly below current market levels. Overall, the subject property is leased at an average of $99.04 per square foot, which is considered below market rent levels. LEASE STRUCTURE The majority of the subject’s tenants are gross leases whereby, the tenants are responsible for their pro- rata share of CAM charges and a pro-rata share of real estate taxes above their base year. However, Best Buy and Regal Cinemas, are net leases whereby, the tenants are responsible for a pro-rata share of condominium charges and real estate taxes.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 99

MARKET RENTAL RATE – RETAIL SPACE The subject property comprises of a multi-level retail condominium unit that contains 236,215 square feet of retail space on the five levels, inclusive of one below grade level. Based on the property’s size, configuration, and location, we have researched the Union Square market and other comparable prime retail corridors along with large multi-level retail leases in Manhattan, which have a varying degree of comparability to the subject’s location. It should be noted that the above and below grade spaces associated with the retail space other than ground floor are generally leased at a discount to the ground floor space.

We have identified several leases and two offerings within Union Square and surrounding corridors which occurred between January 2014 and June 2015. We have also identified several large multi-level retail spaces throughout Manhattan and three offerings which occurred between August 2012 and May 2015. The retail comparables are exhibited on the summary charts and adjustment grids on the following pages.

Our adjustment for rent concessions considers the difference in the comparables for market standard free rent of six months and no tenant work letters. The adjustment for rent concessions attempts to quantify ($ per square foot) the differences between market free rent and work letter between the subject and the comparables. The differences between free rent and work letter (+/-) is divided by the comparable’s lease term, and applied to the beginning “face” rent of the comparable lease. Although this methodology does not take into account amortization of rental increases over the lease term, we believe this is a simplistic approach to understanding the affect of concessions on beginning base rent.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 100

COMPARABLE MULTI-LEVEL RETAIL RENTS AND ADJUSTMENTS SUBJECT RENTAL 1 RENTAL 2 RENTAL 3 RENTAL 4 RENTAL 5 ADDRESS One Union Square 95 Fifth Avenue 114 Fifth Avenue 129 Fifth Avenue 168 Fifth Avenue 33 Union Square West CROSS STREET B/w University Pl. & 4th Ave S/E/C E. 17th St. S/W/C W. 17th St. B/w E. 19th & E.20th Sts B/w E. 21st & E. 22nd Sts B/w E. 16th & E. 17th Sts LEASE INFO TENANT NAME Bonobos Lululemon Tory Burch Sport Sweaty Betty Dylan's Candy Bar

FRONTAGE Broadway Fifth Avenue Fifth Avenue Fifth Avenue Fifth Avenue Union Square West BEGINNING DATE June 2015 March 2015 March 2015 February 2015 February 2015 December 2014 TERM 10 10 10 10 10 LEASE TYPE Gross Gross Gross Gross Gross Gross TENANT SIZE 1,900 Grade 5,468 Grade 4,047 Grade 1,600 Grade 3,300 Grade LL 400 LL 3,000 LL 5,795 LL 4,940 300 Mezz 3,157 Mezz 8,987 Total 2,000 Total 2,400 2nd 14,420 Total 7,600 Total

RENT PER SF $300 Grade $461 Grade $435 Grade $350 Grade $545 Grade $25 LL $75 LL $30 LL $30 LL $65 Mezz $30 Mezz $211 Avg. $288 Avg. $65 2nd $212 Avg. $108 Avg.

FREE RENT(MONTHS) 66 4 6 6 6 WORKLETTER (PSF) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 ADJUSTMENTS RENT CONCESSIONS $0 $8 $0 $0 $0 EFFECTIVE ADJUSTED RENT PER SF/GRADE LEVEL $300 $469 $435 $350 $545 MONTHS FROM VALUE DATE 33 446 TIME (MARKET CONDITIONS) 1.3% 1.3% 1.7% 1.7% 2.5% TIME ADJUSTED RENT PER SF $304 $475 $442 $356 $559 LOCATION 10% 10% 10% 15% -5% QUALITY 15% 10% 5% 0% 0% SIZE 5% 0% 0% -5% 0% UTILITY 10% 5% 5% 10% 10% CORNER INFLUENCE 0% 0% 5% 5% 5% 0% 0% 0% 0% WINDOW FRONTAGE 10% TOTAL ADJUSTMENT 50% 25% 25% 25% 10% INDICATED RENT PER SF $456 $593 $553 $445 $615

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 101

COMPARABLE MULTI-LEVEL RETAIL RENTS AND ADJUSTMENTS

SUBJECT RENTAL 6 RENTAL 7 RENTAL 8 RENTAL 9 RENTAL 10 RENTAL 11 ADDRESS One Union Square 87 Fifth Avenue 100 Fifth Avenue 105 Fifth Avenue 872 Broadway 22 East 14th Street 15 Union Square West CROSS STREET B/w University Pl. & 4th wA E. 16th & E. 17th Sts N/W/C W. 15th St. B/w E. 17th & E. 18th Sts N/W/C E. 18th Street B/w University & 5th Avenue B/w W. 14th & 15th Sts LEASE INFO TENANT NAME Aritzia Eddie Bauer Banana Republic Fresh Offering Offering

FRONTAGE Broadway Fifth Avenue Fifth Avenue Fifth Avenue Broadway East 14th Street Union Sq. West BEGINNING DATE June 2015 December 2014 November 2014 February 2014 January 2014 June 2015 June 2015 TERM 10 10 10 5 10 10 LEASE TYPE Gross Gross Gross Gross Gross Gross Gross TENANT SIZE 5,200 Grade 4,400 Grade 8,900 Grade 800 Grade 8,000 Grade 3,368 Grade 3,000 LL 11,000 LL 7,400 Total 8,900 2nd 28,800 Total

RENT PER SF $380 Grade $250 Grade $295 Grade $600 Grade $200 Grade $500 Grade $30 LL $30 LL $162 Avg. $50 2nd $118 Avg.

FREE RENT(MONTHS) 6606666 WORKLETTER (PSF) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 ADJUSTMENTS RENT CONCESSIONS $0 $13 $0 $0 $0 $0 EFFECTIVE ADJUSTED RENT PER SF/GRADE LEVEL $380 $263 $295 $600 $200 $500 MONTHS FROM VALUE DATE 6 7 16 17 0 0 TIME (MARKET CONDITIONS) 2.5% 2.9% 6.7% 7.2% -10.0% -10.0% TIME ADJUSTED RENT PER SF $390 $270 $315 $643 $180 $450 LOCATION 10% 10% 10% 10% -10% 5% QUALITY 0% 0% 0% 0% 0% 5% SIZE 0% 0% 0% 0% 0% 5% UTILITY 10% 5% 0% -15% -5% 0% CORNER INFLUENCE 5% 0% 5% 0% 5% 5% WINDOW FRONTAGE 5% 10% 0% 0% -5% 0% TOTAL ADJUSTMENT 30% 25% 15% -5% -15% 20% INDICATED RENT PER SF $506 $338 $362 $611 $153 $540

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 102

SUMMARY OF COMPARABLE RETAIL RENTS AND ADJUSTMENTS

SUBJECT RENTAL 1 RENTAL 2 RENTAL 3 RENTAL 4 ADDRESS 1 Union Square South 1460 Broadway Downtown 546 Broadway 9 Ninth Avenue B/w University Pl. & 4th B/w Spring & Prince N/W/C W. 12th CROSS STREETS Ave S/W/C W 41st Street Confidential Sts Street

LEASE INFORMATION TENANT NAME Footlocker Confidential Uniqlo Restoration Hardware FRONTAGE Broadway Ninth Avenue BEGINNING DATE June 2015 May 2015 September 2014 September 2014 August 2014 TERM 10 10 10 10 LEASE TYPE Gross Gross Gross Gross TENANT SIZE 9,000 Grd 55,000 Multi-level 17,500 Grd 15,000 Grd 6,000 LL 17,500 LL 15,000 LL 10,000 2nd 17,500 2nd 15,000 2nd 10,000 3rd 52,500 Total 10,000 3rd 35,000 Total 10,000 4th 65,000 Total

STARTING BASE ANNUAL RENT $9,100,000 $5,500,000 $12,000,000 $8,600,000

RENT PER SF $800 Grd $100 Avg. $600 Grd $300 Grd $65 LL $43 LL $35 LL $85 2nd $100 2nd $125 2nd $65 3rd $229 Avg $100 3rd $260 Avg $70 4th $136 Avg

FREE RENT(MONTHS) 66 6 6 6 WORKLETTER (PSF) $0.00 $0.00 $0.00 $0.00 $0.00 ADJUSTMENTS RENT CONCESSIONS $0.00 $0.00 $0.00 $0.00 AVERAGE RENT PER SF $260 $100 $229 $136 MONTHS FROM VALUE DATE 19910 TIME (MARKET CONDITIONS) 0.5% 3.9% 3.9% 4.3% TIME ADJUSTED AVERAGE RENT PER SF $261.42 $103.86 $237.40 $141.59 LOCATION -20% -10% -30% -5% QUALITY -10% 0% -15% -10% SIZE -15% -10% -10% -10% CORNER INFLUENCE -10% -10% 0% -10% WINDOW FRONTAGE -15% -15% -15% -15% UTILITY 5% 5% 5% 5% TOTAL ADJUSTMENT -65% -40% -65% -45% INDICATED AVG FLOOR RENT PER SF $91 $62 $83 $78

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 103

SUMMARY OF COMPARABLE RETAIL RENTS AND ADJUSTMENTS

SUBJECT RENTAL 5 RENTAL 6 RENTAL 7 RENTAL 8 ADDRESS 1 Union Square South 837 Washington Street Herald Center 4 Times Square 41 Union Square West B/w University Pl. & 4th B/w 42nd & 43rd S/W/C W. 17th CROSS STREETS Ave S/E/C W. 13th Street 106 West 34th Street Sts. Street

LEASE INFORMATION TENANT NAME Samsing Electronics H&M H&M Offering FRONTAGE Washington Street West 34th Street West 42nd Street Un. Sq West & W. 17th BEGINNING DATE June 2015 July 2014 February 2014 August 2012 June 2015 TERM 10 10 10 10 LEASE TYPE Gross Gross Gross Gross TENANT SIZE 10,500 Grd 8,000 Grd 9,700 Grd 2,800 Grd 7,000 LL 12,377 LL 13,298 LL 11,024 2nd 10,000 2nd 21,219 2nd 18,439 2nd 11,024 3rd 10,000 3rd 21,327 3rd 2,800 3rd 1,500 LL 7,230 4th 62,923 Total 44,237 Total 26,348 Total 44,730 Total

STARTING BASE ANNUAL RENT $10,000,000 $14,000,000 $13,000,000 $1,820,000

RENT PER SF $225 Grd $735 Grd $900 Grd $410 Grd $35 LL $100 LL $250 LL $35 2nd $100 2nd $175 2nd $45 2nd $25 3rd $90 3rd $150 3rd $43 Mezz $10 LL $75 4th $223 Avg $294 Avg $69 Avg $113 Avg

FREE RENT(MONTHS) 36 6 6 6 WORKLETTER (PSF) $0.00 $0.00 $0.00 $0.00 $0.00 ADJUSTMENTS RENT CONCESSIONS $0.00 $0.00 $0.00 $0.00 $113 $223 $294 $69 MONTHS FROM VALUE DATE 11 16 35 0 TIME (MARKET CONDITIONS) 4.7% 6.8% 14.3% -10.0% TIME ADJUSTED $118.21 $238.09 $336.00 $62.17 LOCATION -15% -25% -40% 0% QUALITY -15% -15% -15% 0% SIZE -10% -10% -10% -15% CORNER INFLUENCE -10% 0% 0% -10% WINDOW FRONTAGE -15% -15% -15% -5% UTILITY 5% 5% 5% 5% TOTAL ADJUSTMENT -60% -60% -75% -25% INDICATED AVG FLOOR RENT PER SF $47 $95 $84 $47

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 104

RETAIL RENT MAP COMPARABLE SMALL RETAIL MAP

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 105

MULTI-LEVEL RETAIL RENT MAP COMPARABLE MULTI-LEVEL RETAIL MAP

RETAIL MARKET RENTAL RATE CONCLUSION We have analyzed the Union Square area leases negotiated in competitive buildings in the marketplace, along with other leases within comparable prime retail corridors, which range from $200 to $545 per square foot of ground floor area. After adjustments, these leases range from $153 to $615 per square foot. It should be noted the high end of the range reflects the premium bank branches will pay for prime retail corners. The multi-level comparables reflected unadjusted blended rents ranging from $69 and $260 per square foot, with an average of $113 per square foot. After adjustments, the multi-level spaces range in average rental rates between $47 and $95 per square foot, with an average of $73 per square foot. The comparables generally have rent increases during the term. The upper level rents ranged between $25.00 to $175 per square foot. The lower level selling retail rents ranged between $35 to $250 per square foot.

There is a dearth of quality available space located within the prime Union Square market. Asking rents have increased over the last several quarters as vacancy has continued to diminish. Based on the subject’s prime location along Union Square South and its unique size, layout, and overall utility, it is our opinion that the recent leases within the subject are good indicators of market rents for the subject multi-level retail spaces.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 106

Based upon recent market leasing activity in the area, the subject’s size, layout, construction, location, and condition along with our analysis of the comparables, it is our opinion that the market rent for the corner ground floor space (Citibank) is $550 per square foot, while the Union Square South ground floor retail space is $400 per square foot. Furthermore, the market rent for the ground floor space along East 13th Street (Union Square Wine) is estimated at $110 per square foot. We have estimated the second floor retail space (Best Buy) is at $125 per square foot. Furthermore, the market rent for the lower level retail space (Nordstrom Rack) is estimated at $175 per square foot. Finally, we have assumed the lower level office space will have a market rent of $55 per square foot. A summary of the market rent estimates for the various spaces are summarized below:

ONE UNION SQUARE SOUTH RETAIL FAIR MARKET RENT ESTIMATE NET RENTABLE NET SPACE FLOOR TOTAL RENT AREA (SF) RENT/SF

Citibank Ground-Corner 9,755 $550 $5,365,250 Duane Reade Ground-Union Square So 13,947 $400 $5,578,800 Union Square Wines Ground-13th St. 6,419 $110 $706,090 Best Buy 2nd Floor 46,088 $125 $5,761,000 Regal Cinemas 3rd & 4th Floors 118,779 $50 $5,938,950 Park South Imaging Lower Level Office 9,091 $55 $500,005 Nordstrom Rack Lower Level Retail 32,136 $175 $5,623,800 TOTAL/AVG. 236,215 $124.78 $29,473,895 Rounded: $124.89 $29,500,000 Overall, the subject’s total market rent is projected at $29,500,000 or $124.89 per square foot for the entire subject property (236,215 NRA-SF). The subject’s fiscal year 2015/16 contract base rent is $23,394,024 or $99.04 per square foot. Considering the subject’s construction, location, size, and condition, we are of the opinion that the total contract rent is below current market rents as exhibited by comparable retail spaces and market parameters.

MARKET RENTAL RATE- MOVIE THEATRE SPACE The subject property includes a multi-level multi-plex lease by Regal Cinemas. The cinema space is currently leased at an average rent of $47.31 per square foot. Furthermore, the subject multiplex movie theatre is one of the highest grossing movie theatres in the nation with total annual box office and concession sales of over $25.0 million according to the ownership.

There has been a dearth of movie theater leases within the New York City region over the past few years. Therefore, we have expanded our search to include the entire metropolitan New York region and the surrounding areas. In addition, we have utilized historical movie theater leases within the New York metropolitan area. The most recent cinema leases that we surveyed range in size from 20,690 to 105,000 square feet and were negotiated between January 2000 and January 2013. The rent range exhibited by the comparables is from $16.43 to $54.00 per square foot. However, many of these comparables require significant location adjustments as they are in suburban locations within the New York region.

The following table summarizes the most recent rental activity for movie theaters within the surrounding New York metropolitan region, albeit many at inferior locations as compared to the subject.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 107

MOVIE THEATER RENT COMPARABLES PROPERTY INFORMATION LEASE INFORMATION

Property Name NO. Address, City, State TENANT NAME LEASE DATE SIZE (NRA) (yrs.) TERM OF NUMBER SCREENS ANNUAL RENT PER RENT SQUARE FOOT PER RENT SCREEN RENT STEPS LEASE TYPE 1 CityPoint Alamo Draft House 1/13 39,818 20 7 $1,274,176 $32.00 $182,025 Increases every 5 years Net Brooklyn, NY 2 Parkchester Retail Mall American Theater 6/08 20,690 10 7 $339,937 $16.43 $48,562 N/A Net Bronx, NY 2 Tanger Outlet at The Arches Regal Cinema 5/08 63,000 20 16 $2,016,000 $32.00 $126,000 Yrs 6-10: $35.20/sf Net Deer Park, NY Yrs 11-15: $38.72/sf Yrs 16-20: $42.59/sf 3 Gateway Cinemas Gateway Cinemas 5/07 68,000 17 12 $2,251,480 $33.11 $187,623 Yrs 6-10: $36.42/sf Net 301 Mount Hope Avenue Yrs 11-15: $40.06/sf Rockaway, NJ Yrs 16-20: $44.07/sf 4 Shops at Atlas Park Regal Cinema 5/06 32,549 15 8 $812,500 $24.96 $101,563 10% every 5 years Net Queens, NY 5 Pavilion Theater Pavilion 2/05 33,120 10 10 $1,127,736 $34.05 $112,774 N/A Net Brooklyn, NY 6 City Center National Amusements 5/04 80,000 20 15 $2,508,000 $31.35 $167,200 N/A Net White Plains, NY 7 Waterfront at Port Chester Loews Theater 1/02 70,000 25 25 $2,000,000 $28.57 $80,000 $20,000/yr increase Net Port Chester, NY 8 One Jamaica Center National Amusements 5/02 83,000 20 20 $2,200,330 $26.51 $110,017 N/A Net Queens, NY 9 AMC Loews Orpheum 7 Loews Theater 10/01 100,000 20 7 $5,400,000 $54.00 $771,429 N/A Net 312 West 34th Street New York, NY 10 Harlem USA AMC Cinema 6/00 68,087 30 9 $1,925,004 $28.27 $213,889 10% every 5 years Net 322 West 125th Street New York, NY 11 Regal Battery Park Stadium Regal Cinema 1/00 105,000 20 11 $3,465,000 $33.00 $315,000 N/A Net 102 North End Avenue New York, NY STATISTICS Low 1/00 20,690 10 7 $339,937 $16.43 $48,562 High 1/13 105,000 30 25 $5,400,000 $54.00 $771,429 Average 8/96 63,605 19 12 $2,110,014 $31.19 $201,340 Compiled by Cushman & Wakefield, Inc.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 108

We analyzed recent leases for movie theaters negotiated in competitive properties within the New York region. The comparables range in size from 20,690 square feet to 105,000 square feet. The comparable leases have terms ranging from 10 to 30 years, averaging 19 years. Rent escalation clauses vary, with most having percentage increases of about 10 percent every 5 years. All of these are net leases in which the tenant is required to pay a pro-rata share of real estate taxes and insurance, and CAM expenses.

The comparables exhibit a range of rents from $16.43 to $54.00 per square foot, with an average of $31.19 per square foot. In addition, the annual rent per screen ranges from $48,562 to $771,429 per screen, with an average of $201,340 per screen. The high end of this range is formed by the AMC Loews Orpheum 7 located on West 34th Street in Manhattan, which commands $771,429 per screen, more than double the next highest rent per screen. However, these comparables require significant location adjustments as the majority are located in suburban locations within the New York region. Furthermore, the subject multiplex movie theatre is one of the highest grossing movie theatres in the nation with total annual box office and concession sales of approximately $25.0 million according to the ownership.

Considering the subject’s layout, construction, size, condition, and excellent location along Union Square South within Union Square, and the large multi-level retail leases throughout Manhattan exhibited earlier, it is our opinion the market rent for the multiplex movie theatre space is $50.00 per square foot.

MOVIE THEATRE MARKET RENT TYPE SPACE RENT/SF Multiplex Movie Theatre $50.00/SF

ASSUMPTIONS REGARDING EXISTING AND PROPOSED LEASES OVERVIEW We have modeled the lease in accordance with the lease terms provided by ownership. We assume that they will fulfill the obligations of their lease. LEASE TERMS Lease term, work letter and free rent vary based upon size. Typical retail leases are ten to fifteen years in duration. We have assumed ten year terms for the small retail tenants (< 9,000 SF) tenants and fifteen year terms for the large retail tenants (>9,000 SF). RENEWAL PROBABILITY Regarding lease expirations, we have assumed a 65 percent probability of rollover (signing new lease) and 35 percent probability of turnover (allow the lease to expire and vacate the property) upon expiration of each primary lease term. These assumptions are based on retention rates quoted by owners and managers of competitive buildings. DOWNTIME Vacancy between leases includes the period of actual downtime and the construction period to build out tenant spaces. Consistent with the current market, we have assumed 8 months downtime. Our downtime of 8 months is supported through discussions with leasing brokers as well as surveying actual downtime of vacant space in building comparable with the subject property. Vacancy between leases is weighted for a renewal probability of 65 percent for retail and office tenants, resulting in an effective downtime of 3 months.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 109

REIMBURSABLE EXPENSES (ESCALATIONS) The majority of the subject’s leases are gross, whereby the tenants are responsible for their pro-rata share of CAM charges. In addition, the tenants are responsible for their pro-rata share of real estate taxes above their base year amounts. Two of the subject’s tenants, Best buy and the Regal Cinemas are net, whereby the tenants are responsible for their pro-rata share of CAM charges and real estate taxes. We have assumed that future leases in the subject property will be on a gross basis, whereby the tenants will be responsible for their pro-rata share of real estate taxes over a base year and a pro-rata of CAM charges.

LEASE EXPIRATIONS LEASE EXPIRATION SCHEDULE

Square Year Feet Percent of Cumulative Cumulative Expiring Property Sq Ft Percent 1 0 0.00% 0 0.00% 2 9,091 3.85% 9,091 3.85% 3 0 0.00% 9,091 3.85% 4 0 0.00% 9,091 3.85% 5 16,174 6.85% 25,265 10.70% 6 32,136 13.60% 57,401 24.30% 7 0 0.00% 57,401 24.30% 8 118,779 50.28% 176,180 74.58% 9 0 0.00% 176,180 74.58% 10 55,843 23.64% 232,023 98.23% 11 32,136 13.60% 264,159 111.83% Lease Expiration Schedule S 300,000 Q U A 250,000 R E 200,000 F E 150,000 E T 100,000

50,000

0 1234567891011

ANALYSIS YEAR

Cumulative Square Feet Square Feet Per Year

LEASE EXPIRATION ANALYSIS Total GLA of Subject Property (SF) 236,215 100.00% Year of Peak Expiration 8 SF Expiring in Peak Year 118,779 50.28% Five Year Cumulative Expirations (SF) 25,265 10.70% Ten Year Cumulative Expirations (SF) 232,023 98.23% Compiled by Cushman & Wakefield, Inc. Based on the significant lease expirations during Years 10 and 11 of our analysis, we have extended our projection 12-years to reflect a stabilized reversion.

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VACANCY AND COLLECTION LOSS Our cash flow projection assumes a tenant vacancy of 8 months upon lease expiration set against our probability of renewal estimated at 65.00 percent, in addition to a vacancy/global credit loss provision applied to the gross rental income. Based upon the current vacancy in the market, and our perception of future market vacancy, and the creditworthiness of the tenants in the subject building, we have also projected a total vacancy and credit loss of 1.0 percent, except for the credit tenants (Duane Reade, Chase, Nordstrom’s and Best Buy) which we have applied a 0.0 percent credit loss factor only. OPERATING EXPENSES We have developed an opinion of the property’s annual operating expenses after reviewing the ownership’s historical and budgeted statements along with reviewing the operating performance of comparable properties. We analyzed each item of expense and developed an opinion as to what a typical informed investor would consider normal. A historical operating history for the property and our opinion of year one operating expenses are presented below:

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SUMMARY OF INCOME & EXPENSE ANALYSIS

Actual 2012 Actual 2013 Actual 2014 2015 Budget 2015 C&W Forecast

Total Per SF Total Per SF Total Per SF Total Per SF Total Per SF POTENTIAL GROSS REVENUE Rental Income $21,564,978 $91.29 $22,053,824 $93.36 $22,370,639 $94.70 $23,334,368 $98.78 $23,662,250 $100.17 CAM Income $1,004,190 $4.25 $792,599 $3.36 $939,221 $3.98 $1,142,985 $4.84 $1,266,815 $5.36 Miscellaneous / Overage Rent $3,384 $0.01 -$5,538 -$0.02 $4,838 $0.02 $0 $0.00 $40,000 $0.17 Real Estate Tax Income $3,238,243 $13.71 $3,663,834 $15.51 $4,515,464 $19.12 $6,077,135 $25.73 $5,413,866 $22.92 TOTAL POTENTIAL GROSS REVENUE $25,810,795 $109.27 $26,504,719 $112.21 $27,830,162 $117.82 $30,554,488 $129.35 $30,382,931 $128.62 Vacancy and Collection Loss $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0 $0.00 ($466,213) -$1.97 EFFECTIVE GROSS REVENUE $25,810,795 $109.27 $26,504,719 $112.21 $27,830,162 $117.82 $30,554,488 $129.35 $29,916,718 $126.65

OPERATING EXPENSES Common Area Maintenance $1,479,954 $6.27 $1,866,202 $7.90 $1,358,749 $5.75 $1,371,266 $5.81 $1,430,000 $6.05 Management Fees $431,300 $1.83 $441,076 $1.87 $447,385 $1.89 $467,467 $1.98 $473,245 $2.00 Subtotal $1,911,254 $8.09 $2,307,278 $9.77 $1,806,134 $7.65 $1,838,733 $7.78 $1,903,245 $8.06

Ground Rent $3,136,000 $13.28 $3,324,160 $14.07 $3,512,320 $14.87 $3,512,320 $14.87 $3,512,316 $14.87 Real Estate Taxes* $4,364,563 $18.48 $4,940,527 $20.92 $5,643,432 $23.89 $7,390,221 $31.29 $6,723,074 $28.46

TOTAL EXPENSES $9,411,817 $39.84 $10,571,965 $44.76 $10,961,886 $46.41 $12,741,274 $53.94 $12,138,635 $51.39

NET OPERATING INCOME $16,398,978 $69.42 $15,932,754 $67.45 $16,868,276 $71.41 $17,813,214 $75.41 $17,778,083 $75.26

* The historical and budget Real Estate Taxes provided by ownership are reflective of the ICIP abated taxes. The C&W projection is reflective of unabated taxes. Moreover, the ICIP has subsequently expired.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 112

ANALYSIS OF EXPENSES We analyzed each item of expense and developed an opinion of a level of expense we believe a typical investor in a property like this would consider reasonable. The forecast income and expenses are for fiscal year 2011.

OPERATING EXPENSE ANALYSIS Common Area Maintenance: The common charges reflect expenses that are related to the subject retail condominium unit and certain allocated expenses from the residential building such as payroll, repairs and maintenance. The historical expense ranged between $1,358,749 ($6.10/SF) and $1,866,202 ($8.38/SF). The 2015 budget reflected an expense of $1,371,266, or $6.16 per square foot. Our forecast is $1,430,000 or $6.05 per square foot, which is within the range of historical expenses, the budget, comparable properties and market parameters.

Management Fees: Management fees for comparable retail/commercial properties typically range from 2.0 to 3.0 percent. Based on the size of the subject, and number of tenants, we have utilized a management fee of 2.0 percent, or $473,245, which we consider to be market oriented.

Ground Rent: The current ground rent is $3,512,316, or $14.87 per square foot through June 30, 2018. During the analysis period the ground rent reset to $3,933,804, (12% increase from the prior 5 year periods ground rent) on July 1, 2019 and to $8,343,360 on July 1, 2024. This represents our current forecast of the ground rent reset, which has been discussed in detail under the Ground Rent Summary detailed on the following page.

Real Estate Taxes: The fiscal year 2015/16 real estate taxes are projected to be $6,723,074 or $28.46 per square foot of net rentable area. ($28.46 per square foot of the gross building area of 236,215 square feet). This represents our current forecast of real estate taxes, which have been discussed in detail under the Real Property Taxes and Assessments section of this report.

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GROUND LEASE SUMMARY The subject site is encumbered by a 99-year ground lease, which terminates on December 31, 2095. The ground lease is summarized on the following chart:

GROUND LEASE ANALYSIS Lessor (landlord): First Sterling Corporation and West Realty Co.

Lessee (tenant): Union Square Retail Trust, in care of The Related Companies, L.P.

Lease Commencement Date: December 13, 1996

Rent Commencement: July 1, 1998

Lease Expiration Date: December 31, 2095

Base Lease Term: 99 years

Renewal Options: No renewal options

Base Rent: The ground lease has an initial ground rent of $2,500,000 per annum. The ground rent increases 12% every 5 years. In the 6th, 11th and 16th rental periods the ground rent is reset based on a “Revaluation Rent” formula indicated below. Following the respective “Revaluation Periods” the ground rent increases 12 percent every 5 years.

First Period: $2,500,000

Two Period: $2,800,000

Third Period: $3,136,000

Fourth Period: $3,512,320 (Current Ground Rent)

Fifth Period: $3,933,798

Sixth Period: As mentioned above, the 6th rental period represents the first “Revaluation Period”. We have projected the ground rent to be reset to $8,343,356 as of July 1, 2023 based on the following ground rent reset formula: For the period commencing on the day following the expiration of the Fifth Period (such day being sometimes herein referred to as the “First Revaluation Date”) and continuing for a period of five (5) Lease Years (the “Sixth Period”), Base Rent shall be payable at an annual rate equal to the greater of (I) Revaluation Base Rate as of the First Revaluation Date, and (II) an annual rate equal to the sum of “(x) the annual Lease Base Rental Rate as of the day immediately prior to the First Revaluation Date, plus (y) the Percentage Rent Payments attributable to the Lease Year

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ending immediately prior to the First Revaluation Date. For purposes of determining the Percentage Rent Payments attributable to such Lease Year, the portion(s) of any Percentage Rent Payments which consist of Alternative Amounts (as opposed to actual payments of Sublease Percentage Rent) shall be deemed to attributable to the periods for which the underlying Sublease Percentage Rent (i.e., the Sublease Percentage Rent in lieu of which the Alternative Amounts are in effect received) would be deemed attributable (determined on a pro-rated basis in the case of Alternative Amounts which are less than the underlying Sublease Percentage Rent which would — otherwise have been payable).

*It should be noted that the subrent rental rate equates to the product of (i) the subrent rental rate multiplied by the subrent percentage. The subrent percentage rent shall mean a percentage equal to the sum of (i) three percent plus, (ii) a fraction (expressed as a percentage), (A) the numerator is equal to the sum of $2,500,000 and any percentage rent payments and (B) the denominator of which is an amount equal to $9,027,000.

Based on our calculations of the market rent as of the 1st “Revaluation Period” the market rent for the subject retail space is $27,181,753. Therefore, the reset ground rent reflects $8,343,356. We have exhibited the ground rent reset calculation in the Addenda.

Seventh through Tenth Rental Periods: 12% increase every 5 years

Eleventh Rental Period: Second Revaluation Period

Twelfth through Fifteenth Rental Periods: 12% increase every 5 years

Sixteenth Rental Period: Third Revaluation Period

Seventeenth through ground lease expiration: 12% increase every 5 years

Operating Expenses: The lease is triple net, whereby the tenant is responsible for all operating expenses and real estate taxes.

EXPENSE GROWTH RATE Our cash flow projections assume that operating expenses, real estate taxes and tenant improvement costs will grow at the rate of 3.00 percent per year during the holding period.

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RESERVES FOR REPLACEMENTS It is customary and prudent to deduct an annual sum from effective gross income to establish a reserve for replacing short-lived items throughout the building. These costs may include roof repair, HVAC upgrades and ADA compliance. Our projection of $0.15 per square foot of net rentable area is a reasonable amount to cover the cost of capital expenditures over the course of the investment-holding period. DISCOUNTED CASH FLOW ANALYSIS In the Discounted Cash Flow Method, we employed Argus for Windows software to model the income characteristics of the property and to make a variety of cash flow assumptions. We attempted to reflect the most likely investment assumptions of typical buyers and sellers in this particular market segment. The following table illustrates the assumptions used in the discounted cash flow analysis.

LEASING ASSUMPTIONS Ground- Ground- Union Multi-Level- Lower Level- TENANT CATEGORY Corner Square South Theater Second Floor Retail Un Sq Wines MRI Center WEIGHTED ITEMS Renewal Probability 65.00% 65.00% 65.00% 65.00% 65.00% 65.00% 65.00% Market Rent $550.00 $400.00 $50.00 $125.00 $175.00 $110.00 $55.00 Months Vacant 8.00 8.00 8.00 8.00 8.00 8.00 8.00 Tenant Improvements New Leases $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Renewal Leases $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Leasing Commissions New Leases 3.50% 3.50% 3.50% 3.50% 3.50% 4.00% 4.00% Renewal Leases 1.75% 1.75% 1.75% 1.75% 1.75% 2.00% 2.00% Free Rent New Leases 3 3 6 3 3 3 3 Renewal Leases 1 1 3 1 1 1 1

NON-WEIGHTED ITEMS Lease Term (years) 15 15 15 15 15 10 10 Lease Type (reimbursements) Gross Gross Gross Gross Gross Gross Gross Contract Rent Increase Projection 3% Annual 3% Annual 10% Every 5 3% Annual 3% Annual 3% Annual 3% Annual Yrs Compiled by Cushman & Wakefield, Inc. INVESTMENT CONSIDERATIONS OVERVIEW The U.S. economic expansion hit a soft spot in the fourth quarter of 2014, a spot that carried over into first quarter 2015. The U.S. gross domestic product (GDP) slowed to a growth rate between 1.0-1.5 percent annual rate in the first quarter, down from 2.2 percent in the fourth quarter 2014. The main reason for the slowdown was a slowdown in consumer spending caused by a second consecutive year of severe winter weather. Although the economy grew at a slower pace in first quarter, we expect stronger growth for the balance of the year to boost full year GDP growth to about 3.0 percent to 3.5 percent.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 116

Interest rates remained low in the fourth quarter, with the yield on the 10-year Treasury note falling to 30 basis points during the past month. The decline is still somewhat of a surprise due to the Federal Reserve’s ending of its quantitative easing policy, which should have reduced demand for U.S. Treasury securities. But a combination of lower inflation and concerns about global growth and stability caused investors to look to the safety of U.S. Treasury securities and pushed down yields. We expect that as the U.S. economy grows in 2015, interest rates will increase in anticipation that the Federal Reserve will begin to tighten monetary policy. CURRENT ECONOMIC CONDITIONS The evidence of a stronger economy prompted the Federal Reserve’s Open Market Committee (FOMC) to announce that the Central Bank would gradually reduce its purchases of long-term Treasury securities and mortgage backed securities widely referred to as quantitative easing. During 2014, the FOMC continued to reduce the amount of bonds purchased each month, indicating the Central Bank’s confidence that the economy does not require the additional stimulation that this policy has been providing. A statement released after the FOMC meeting in December was the clearest indication that the Central Bank will begin to raise interest rates in 2015. Strong economic growth will be the main factor pushing rates higher, and although wages are lagging many feel the jobs numbers are good enough to allow the Central Bank to stay on course in terms of adjusting policy as the economy grows.

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Historical and Projected U.S. Real GDP 2009Q1 - 2019Q1 7.5

5.0

2.5

0.0

-2.5

Real GDP,% Change -5.0 Forecast -7.5

Source: Historical Data Courtesy of the Bureau of Economic Analysis; Forecast Data Courtesy of Moody's Economy.com

Notable concerns regarding current economic conditions are as follows:

 The U.S. Continues to outperform most other markets. The missing piece in the current, nearly six-year- old economic expansion has been higher wages. Conditions in labor markets suggest that this is about to change. If so, it will help to propel growth for the rest of 2015 and into 2016.  The latest numbers from the BEA show that the U.S. GDP increased 2.2 percent annual rate during fourth quarter 2014. Much of the economic data for the U.S. in the first quarter of 2015 has been released. The data suggest that the economy remained sluggish in the first quarter of the year, and the U.S. GDP grew somewhere between 1.0-1.5 percent. The biggest reason for the slowdown is weaker consumer spending caused by a second consecutive year of severe winter weather.  Based on data from Commercial Real Estate Direct, CMBS issuance was strong during 1Q2015 at $25.2 billion. Total issuance was up 47.0 percent from $17.2 billion during 1Q2014. Multi-borrower pool decreased a modest 4.0 percent year-over-year to $13.2 billion while several large deals helped increased single borrower securitizations by 248.0 percent year-over-year to $12.1 billion. Current consensus is for CMBS issuance to close the year at ~$124.0 billion.  As employment continues to rise, the odds that the Federal Reserve will start to raise short term interest rates increases as well. The timing and extent of the interest rate increases will depend on how the economy performs over the next several months, but there seems to be a consensus that the Fed will start to test rate increases in the first half of 2015.  Morgan Stanley estimates $125.0 billion of private-label CMBS issuance for 2015 comprised of $80.0 billion conduit and $45.0 billion SASB (Sustainability Accounting Standards Board) and floaters. A bear case scenario where insurance companies are more competitive for larger loans is estimated to be $100.0 billion and a bull case scenario where M&A activity drives SASB and floaters is estimated to be $140.0 billion. US REAL ESTATE MARKET IMPLICATIONS The commercial real estate market started to pick up in 2012 and continued to progress in 2013 and 2014. According to Real Capital Analytics, 23,015 properties traded hands in 2013 for a total transaction volume of approximately $338.9 billion. Commercial real estate sales volume remained strong throughout 2014, as transaction volume totaled $401.9 billion. Property prices at an aggregate level surpassed the 2007 peak and cap rates in many sectors are at all-time lows. As volume and price levels head into uncharted territory, investors are reassessing risk and took their foot off of the gas towards the end of 2014. Through first quarter 2015, 6,795 properties changed hands as volume reached $124.3 billion in the first three months of 2015. Portfolio and entity- level transactions were big components of transaction activity in first quarter, this trend will likely continue into second quarter as there were a number of deals in the works at the close of first quarter. Commercial property

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 118

prices as measured by the CPPI are up for the year across all property types. Not all property types have recovered to the peak levels set prior to the Global Financial Crisis (GFC). The combination of growing volume and prices across all property sectors suggests that investors have an appetite for commercial real estate, though how they are placing capital is evolving. The big story of this quarter was the heavy activity in the portfolio and entity-level transactions. These sorts of transactions played an important role in the run-up of asset process that proceeded the calamitous fall into the GFC. Combine this activity with cap rates now at or below the precious low- water marks seen before the GFC and some investors are worried that we will face a similar downturn in the near future given the same signals.

The following graph compares national transaction volume by property between 2003 and first quarter 2015:

National Transaction Volume By Property Type 600.0 Retail Office 500.0 Industrial Hotel Apartment 400.0

300.0

200.0 Volume, billions $

100.0

0.0

Source: Real Capital Analytics, Inc. Note: Hotel data not avail. until 2005,

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 119

First Quarter 2105 Investment Survey. As a result, competition among buyers is likely to remain strong and keep prices elevated for the best properties offered.

The factors listed below have been key to our valuation of this property and will have an impact on our selection of all investor rates.

INVESTMENT CONSIDERATIONS Attained Rents Versus Market: The subject's attained rents (exclusive of expense contributions) are significantly below current market rent levels. Given this comparison, the investment rates selected will be more aggressive than market indicators. NOI Growth: The subject's NOI is expected to grow 1.86 percent per annum from the first year of the analysis through the analysis period. This rate of growth is considered acceptable.

Lease Expiration Exposure: Within the first five years of the analysis a total of 10.69 percent of the total net rentable area is scheduled to rollover. Extending to a ten-year period, a total of 98.22 percent of the space is scheduled to expire. The peak expiration occurs in year 8, when a total of 118,779 square feet is scheduled to expire. This is considered a moderate rollover exposure within this market.

Real Estate Market Trends: Real estate market trends have a significant bearing on the value of real property. The real estate market in which the subject property is located is currently improving. Tenant Quality: The quality of a property's tenant base is an important factor that is scrutinized by investors prior to acquiring real property. The quality of the subject's tenant roster is considered to be good. Property Rating: After considering all of the physical characteristics of the subject, we have concluded that this property has an overall rating that is average, when measured against other properties in this marketplace.

Location Rating: After considering all of the locational aspects of the subject, including regional and local accessibility as well as overall visibility, we have concluded that the location of this property is good. Overall Investment Appeal: There are many factors that are considered prior to investing in this type of property. After considering all of these factors, we conclude that this property has good overall investment appeal.

The investment criteria derived from the improved property sales within the Sales Comparison Approach section of this report also lend support to national investor surveys of investment parameters. Following is a brief review of effective gross income multipliers, overall rates, forecasted holding periods, internal rates of return and terminal overall rates from several Manhattan retail condominium sales.

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SUMMARY OF COMPARABLE SALES ECONOMIC INDICATORS Sales Price/ Terminal No. Date Property Name Price NRA OAR Forecast IRR OAR 1 May-15 150 West 34th Street $355,500,000 $4,572 1.02% 10 7.25% 5.00% 2 Jan-15 503 Broadway $280,000,000 $6,794 N/A N/A N/A N/A 3 Jan-15 461 West 14th Street $86,000,000 $3,484 N/A N/A N/A N/A 4 Feb-14 170 Broadway $70,100,000 $3,650 N/A N/A N/A N/A 5 Jul-14 697-699 Fifth Avenue $700,000,000 $28,340 0.89% 10 5.75% 4.50% 6 Jun-14 432 Park Avenue $425,000,000 $5,210 N/A N/A N/A N/A 7 Feb-14 865 Lexington Avenue $12,000,000 $2,342 4.51% N/A N/A N/A 8 Feb-14 1107 Broadway $56,500,000 $2,742 5.86% 10 6.25% 5.50% 9 Jan-14 202-204 Canal Street $46,000,000 $2,739 5.06% N/A N/A N/A 10 Jul-13 112 Greene Street $22,000,000 $4,074 2.54% 10 6.75% 5.25% 11 Jul-13 465 Broadway (40 Mercer Street) $80,000,000 $5,713 3.30% 10 6.00% 5.00% Low $12,000,000 $2,342 0.89% 10 5.75% 4.50% High $700,000,000 $28,340 5.86% 10 7.25% 5.50% Average $193,918,182 $6,333 3.31% 10 6.40% 5.05% Compiled by Cushman & Wakefield Valuation & Advisory It should be noted that the internal rate of return and terminal overall capitalization rate information reflected in the above chart was extracted from cash flows prepared by Cushman & Wakefield, Inc. from appraisals they prepared of these properties. This information is not provided in publications, but is a technique which only Cushman & Wakefield, Inc. employs in their analysis of New York City retail condominium and building sales from an appraisal standpoint. The Cushman & Wakefield, Inc. internal rate of return and terminal overall capitalization rate information are confirmed directly from the owners of the respective properties when the properties were appraised.

In addition, the following graph shows the historic trends for the subject’s asset class spanning a period of four years as reported in the PricewaterhouseCoopers Real Estate Investor Survey.

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INVESTOR SURVEY HISTORICAL RESULTS Survey: PwC End Quarter:

Property Type: NATIONAL STRIP SHOPPING CENTER 1Q 15

Quarter 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 1Q 15 OAR (average) 7.33% 7.20% 7.16% 7.18% 7.18% 7.06% 7.06% 7.04% 6.95% 6.91% 6.98% 6.97% 7.09% 7.05% 7.05% 7.00% Terminal OAR (average) 7.97% 7.93% 7.93% 7.80% 7.77% 7.69% 7.66% 7.61% 7.53% 7.44% 7.39% 7.33% 7.44% 7.34% 7.22% 7.19% IRR (average) 8.85% 8.61% 8.44% 8.41% 8.41% 8.43% 8.43% 8.42% 8.19% 8.06% 8.05% 8.06% 8.31% 8.23% 8.11% 8.09%

INVESTOR SURVEY HISTORICAL RESULTS

OAR (average) Terminal OAR (average) IRR (average)

9.00%

8.75%

8.50%

8.25%

8.00%

7.75% RATES

7.50%

7.25%

7.00%

6.75%

6.50% 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 1Q 15 ANALYSIS PERIOD

Source: PwC Real Estate Investor Survey

TERMINAL CAPITALIZATION RATE SELECTION We based the estimate of property value at reversion on assumed resale at the end of Year 11, using our forecast of Year 12 net operating income. The reversion value was calculated by applying a capitalization rate of 5.00 percent to the fiscal year 2026/27 NOI and subtracting sales expenses of 4.00 percent. The net cash flows and the net reversion were discounted to net present value using a discount rate of 6.00 percent, the derivation of which is discussed below.

A terminal capitalization rate was used to develop an opinion of the market value of the property at the end of the assumed investment holding period. The rate is applied to the net operating income following year 11 before making deductions for leasing commissions, tenant improvement allowances and reserves for replacement. We have developed an opinion of an appropriate terminal capitalization rate based on indicated rates in current investor surveys.

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TERMINAL CAPITALIZATION RATES (OARout) Survey Date Range Average PwC First Quarter 2015 5.00% - 10.00% 7.19% PwC - Refers to National Strip Shopping Center market regardless of class or occupancy In addition, we examined the discount capitalization rates derived from the improved property sales:

MANHATTAN RETAIL SALES TERMINAL CAPITALIZATION RATE SUMMARY Capitalization No. Property Rate

1 150 West 34th Street 5.00% 2 503 Broadway N/A 3 461 West 14th Street N/A 4 170 Broadway N/A 5 697-699 Fifth Avenue 4.50% 6 432 Park Avenue N/A 7 865 Lexington Avenue N/A 8 1107 Broadway 5.50% 9 202-204 Canal Street N/A 10 112 Greene Street 5.25% 11 465 Broadway (40 Mercer Street) 5.00% STATISTICS Low 4.50% High 5.50% Median 5.00% Average 5.05% Compiled by Cushman & Wakefield Valuation & Advisory The overall capitalization rates derived from the improved property sales are between 5.00 and 6.00 percent, with an average of 5.50 percent. A premium was added to today’s rate to allow for the risk of unforeseen events or trends which might affect our estimate of net operating income during the holding period, including a possible deterioration in market conditions for the property. Investors typically add 25 to 150 basis points to the “going-in” rate to arrive at a terminal capitalization rate, according to Cushman & Wakefield’s periodic investor surveys. The difference between going-in capitalization rates and terminal capitalization rates is typically risk related due to time (market conditions).

Based on the overall characteristics of the subject property, we have applied a 5.00 percent terminal capitalization rate in our analysis, which is supported by terminal capitalization rates (terminal OAR’s) extracted from recent retail sales and the investor surveys previously cited. In addition, our selection of the terminal capitalization rate is considers the subject ground lease. DISCOUNT RATE ANALYSIS We estimated future cash flows, including property value at reversion, and discounted that income stream at an internal rate of return (yield rates) currently required by investors for similar-quality real property. The yield rate (internal rate of return or IRR) is the single rate that discounts all future equity benefits (cash flows and equity reversion) to an estimate of net present value.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 123

DISCOUNT RATES (IRR) Survey Date Range Average PwC First Quarter 2015 6.00% - 11.00% 8.09% PwC - Refers to National Strip Shopping Center market regardless of class or occupancy The above table summarizes the investment parameters of some of the most prominent investors currently acquiring similar investment properties in the United States. We realize that this type of survey reflects target rather than transactional rates. Transactional rates are usually difficult to obtain in the verification process and are actually only target rates of the buyer at the time of sale. The property’s performance will ultimately determine the actual yield at the time of sale after a specific holding period.

In addition, we examined the discount capitalization rates derived from the improved property sales:

MANHATTAN RETAIL SALES DISCOUNT RATE (IRR) SUMMARY

No. Property Discount Rate

1 150 West 34th Street 7.25% 2 503 Broadway N/A 3 461 West 14th Street N/A 4 170 Broadway N/A 5 697-699 Fifth Avenue 5.75% 6 432 Park Avenue N/A 7 865 Lexington Avenue N/A 8 1107 Broadway 6.25% 9 202-204 Canal Street N/A 10 112 Greene Street 6.75% 11 465 Broadway (40 Mercer Street) 6.00% STATISTICS Low 5.75% High 7.25% Median 6.25% Average 6.40% Compiled by Cushman & Wakefield Valuation & Advisory The discount capitalization rates derived from the Sales Comparison Approach ranged from 5.75 percent to 7.25 percent, with an average of 6.40 percent.

The subject property is a 5-level (inclusive of lower level) retail condominium unit within a luxury mixed use residential building located in the Union Square neighborhood of Manhattan. The property is 100.0 percent leased on a long-term basis at significantly below market rents to good quality tenants and is anchored by national retail tenants such as Regal Cinemas, Best Buy, and Nordstrom Rack. Furthermore, 42.9 percent of the subject is leased to credit tenants. The subject’s Net Operating Income (NOI) is expected to increase 1.86 percent per annum from year one through the analysis period. Therefore, taking into consideration the subject’s location, size, condition, long-term ground lease, below market contract rents, construction, tenant quality, and returns expected by investors in the current market in relation to other comparable properties, we discounted the cash flows at 6.00 percent. Our selection of discount rate is considered reasonable given the projected cash flow of the property and the subject ground lease.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 124

DISCOUNTED CASH FLOW ANALYSIS AND DCF SUMMARY TABLE Based on the discount rate selected above, market value would be $360,000,000, rounded. The reversionary sale contributes 61.64 percent to this value estimate. The 12-year discounted cash flow summary table is presented on the following page.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 125

ANNUAL CASH FLOW REPORT Annual One Union Square Growth 123456789101112Year 1 - For the Years Beginning Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Jun-23 Jun-24 Jun-25 Jun-26 For the Years Ending May-16 May-17 May-18 May-19 May-20 May-21 May-22 May-23 May-24 May-25 May-26 May-27 Year 11

Base Rental Revenue$ 23,662,250 $ 23,806,012 $ 23,941,662 $ 24,569,034 $ 25,087,022 $ 26,221,569 $ 26,413,112 $ 26,508,903 $ 27,160,697 $ 27,688,663 $ 31,903,076 $ 32,914,410 3.05% Absorption & Turnover Vacancy 0 (128,751) 0 0 (198,678) 0 0 0 0 (1,750,109) (1,889,479) (57,677) Base Rent Abatements 0 (42,917) (30,042) 0 (66,226) (46,358) 0 0 0 0 (2,092,185) 0 Scheduled Base Rental Revenue$ 23,662,250 $ 23,634,344 $ 23,911,620 $ 24,569,034 $ 24,822,118 $ 26,175,211 $ 26,413,112 $ 26,508,903 $ 27,160,697 $ 25,938,554 $ 27,921,412 $ 32,856,733 3.03%

Real Estate Tax Reimbursement 5,413,866 5,537,554 5,590,580 5,800,653 5,977,915 6,121,649 6,350,266 6,585,739 6,828,281 7,028,869 7,616,967 8,215,266 3.86% CAM Reimbursement 1,266,815 1,306,459 1,362,586 1,412,395 1,429,458 1,399,976 1,444,283 1,476,784 1,406,402 1,433,228 1,444,487 1,510,179 1.61% Total Reimbursement Revenue$ 6,680,681 $ 6,844,013 $ 6,953,166 $ 7,213,048 $ 7,407,373 $ 7,521,625 $ 7,794,549 $ 8,062,523 $ 8,234,683 $ 8,462,097 $ 9,061,454 $ 9,725,445 3.47%

Miscellneous Income 40,000 41,200 42,436 43,709 45,020 46,371 47,762 49,195 50,671 52,191 53,757 55,369 3.00% TOTAL GROSS REVENUE$ 30,382,931 $ 30,519,557 $ 30,907,222 $ 31,825,791 $ 32,274,511 $ 33,743,207 $ 34,255,423 $ 34,620,621 $ 35,446,051 $ 34,452,842 $ 37,036,623 $ 42,637,547 3.13%

General Vacancy (303,829) (177,732) (309,072) (318,258) (126,054) (337,432) (342,554) (346,206) (354,461) 0 0 (369,275) 1.79% Collection Loss (162,384) (162,014) (165,267) (173,810) (176,562) (181,782) (184,671) (187,600) (195,109) (199,712) (204,368) (208,729) 2.31% EFFECTIVE GROSS REVENUE$ 29,916,718 $ 30,179,811 $ 30,432,883 $ 31,333,723 $ 31,971,895 $ 33,223,993 $ 33,728,198 $ 34,086,815 $ 34,896,481 $ 34,253,130 $ 36,832,255 $ 42,059,543 3.15%

Real Estate Taxes 6,723,074 6,924,766 7,132,509 7,346,484 7,566,879 7,793,885 8,027,702 8,268,533 8,516,589 8,772,087 9,035,249 9,306,307 3.00% CAM 1,430,000 1,472,900 1,517,087 1,562,600 1,609,478 1,657,762 1,707,495 1,758,720 1,811,481 1,865,826 1,921,800 1,979,454 3.00% Management Fee 473,245 476,120 478,833 491,381 501,740 524,431 528,262 530,178 543,214 553,773 638,062 658,288 3.05% Ground Rent 3,512,316 3,512,320 3,512,320 3,898,680 3,933,804 3,933,804 3,933,804 3,933,804 7,975,897 8,343,360 8,343,360 8,343,360 8.18% TOTAL OPERATING EXPENSES$ 12,138,635 $ 12,386,106 $ 12,640,749 $ 13,299,145 $ 13,611,901 $ 13,909,882 $ 14,197,263 $ 14,491,235 $ 18,847,181 $ 19,535,046 $ 19,938,471 $ 20,287,409 4.78%

NET OPERATING INCOME$ 17,778,083 $ 17,793,705 $ 17,792,134 $ 18,034,578 $ 18,359,994 $ 19,314,111 $ 19,530,935 $ 19,595,580 $ 16,049,300 $ 14,718,084 $ 16,893,784 $ 21,772,134 1.86%

Capital Reserves 35,432 36,495 37,590 38,718 39,879 41,076 42,308 43,577 44,885 46,231 47,618 49,047 3.00% Leasing Commissions 0 157,437 0 0 242,943000006,439,781 0 TOTAL LEASING & CAPITAL COSTS$ 35,432 $ 193,932 $ 37,590 $ 38,718 $ 282,822 $ 41,076 $ 42,308 $ 43,577 $ 44,885 $ 46,231 $ 6,487,399 $ 49,047 3.00%

CASH FLOW BEFORE DEBT SERVICE$ 17,742,651 $ 17,599,773 $ 17,754,544 $ 17,995,860 $ 18,077,172 $ 19,273,035 $ 19,488,627 $ 19,552,003 $ 16,004,415 $ 14,671,853 $ 10,406,385 $ 21,723,087 1.86%

Implied Overall Rate 4.94% 4.94% 4.94% 5.01% 5.10% 5.37% 5.43% 5.44% 4.46% 4.09% 4.69% Cash on Cash Return 4.93% 4.89% 4.93% 5.00% 5.02% 5.35% 5.41% 5.43% 4.45% 4.08% 2.89%

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 126

DISCOUNTED CASH FLOW MODELING ASSUMPTIONS VALUATION SCENARIO: Market Value As-Is GENERAL CASH FLOW ASSUMPTIONS GROWTH RATES Cash Flow Software: ARGUS - Version 15 Market Rent-Retail: 3.00% Cash Flow Start Date: 6/1/2015 Consumer Price Index (CPI): 3.00% Calendar or Fiscal Analysis: Fiscal Expenses: 3.00% Investment Holding Period: 11 Years Tenant Improvements: 3.00% Analysis Projection Period: 12 Years Real Estate Taxes: 3.00% After Reassessment

VACANCY & COLLECTION LOSS RATES OF RETURN Global Vacancy: 1.00% Internal Rate of Return: (Cash Flow) 6.00% Global Collection Loss: 1.00% Internal Rate of Return: (Reversion) 6.00% Total Vacancy & Collection Loss: 2.00% Terminal Capitalization Rate: 5.00% Credit Tenants Reversionary Sales Cost: 4.00% Global Vacancy: 0.00% Global Collection Loss: 1.00% Total Vacancy & Collection Loss: 1.00% VALUATION CAPITAL EXPENDITURES Market Value As-Is $357,244,781 Reserves for Replacement ($/SF): $0.15 LESS Curable Depreciation $0 Adjusted Value $357,244,781 Rounded: $360,000,000 Value $/SF $1,524.04

Compiled by Cushman & Wakefield, Inc.

$30,000,000

$25,000,000

$20,000,000

$15,000,000

$10,000,000

$5,000,000

$- 123456789101112

Net Operating Income Cash Flow Before Debt Service

PRICING MATRIX - Market Value As-Is Terminal Discount Rate (IRR) for Cash Flow Cap Rates 5.50% 5.75% 6.00% 6.25% 6.50% 4.50%$ 398,212,481 $ 389,853,810 $ 381,712,597 $ 373,782,504 $ 366,057,394 4.75%$ 384,647,192 $ 376,637,142 $ 368,834,799 $ 361,234,120 $ 353,829,253 5.00%$ 372,438,431 $ 364,742,141 $ 357,244,781 $ 349,940,575 $ 342,823,926 5.25%$ 361,392,410 $ 353,979,997 $ 346,758,575 $ 339,722,605 $ 332,866,726 5.50%$ 351,350,573 $ 344,196,230 $ 337,225,659 $ 330,433,542 $ 323,814,726

IRR Reversion 5.50% 5.75% 6.00% 6.25% 6.50% Cost of Sale at Reversion: 4.00% Percent Residual: 61.64% Rounded: $360,000,000 $1,524.04 Based on the rates selected, the value via the Discounted Cash Flow (DCF) method analysis is estimated at $360,000,000, rounded. The reversionary sale contributes 61.64 percent to this value estimate.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 127

DIRECT CAPITALIZATION VALUATION METHOD In the direct capitalization method, we estimated market value by dividing stabilized net operating income by an overall rate derived from our analyses of market sales and computed by dividing the net operating income from a sold property by its sale price. We have utilized the sales exhibited in the Sales Comparison Approach. These sales are the most recent market transactions and are the best indicators of current investment parameters in the market for retail/commercial properties in Manhattan. The overall capitalization rates derived from the most applicable improved property sales are shown below:

MANHATTAN RETAIL SALES OVERALL CAPITALIZATION RATE SUMMARY Capitalization No. Property Rate

1 150 West 34th Street 1.02% 2 503 Broadway N/A 3 461 West 14th Street N/A 4 170 Broadway N/A 5 697-699 Fifth Avenue 0.89% 6 432 Park Avenue N/A 7 865 Lexington Avenue 4.51% 8 1107 Broadway 5.86% 9 202-204 Canal Street 5.06% 10 112 Greene Street 2.54% 11 465 Broadway (40 Mercer Street) 3.30% STATISTICS Low 0.89% High 5.86% Median 3.30% Average 3.31% Compiled by Cushman & Wakefield Valuation & Advisory

CAPITALIZATION RATES Survey Date Range Average PwC First Quarter 2015 5.00% - 10.00% 7.00% PwC - Refers to National Strip Shopping Center market regardless of class or occupancy The overall rates derived from the improved property sales are between 0.89 and 5.86 percent, with an average of 3.31 percent. These retail sales vary in location but are generally located along prime and secondary retail corridors. In addition, the location and tenancy adds to the diverging economic profiles. The Pwc investor survey for National Strip Centers ranged between 5.00 and 10.00 percent, with an average of 7.00 percent. Additionally, two of the comparable sales reflected overall going in capitalization rates that 1.02 percent or below. These comparables are located along West 34th Street and Upper Fifth Avenue, two of the strongest retail corridors within Manhattan. Excluding these comparables the remaining sales reflect overall going in capitalization rates ranging between 2.54 and 5.86 percent, with an average of 4.25 percent. These sales are located along good secondary commercial corridors within Manhattan. Based on the credit and strong tenants within the subject, the quality and condition of the condominium unit, the subject ground lease, the below market rent levels and the location within Union Square we believe the property would likely trade at 4.50 percent.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM INCOME CAPITALIZATION APPROACH 128

In addition, the investor survey is reflective of national and regional strip and community shopping centers, not a prime Manhattan retail property within the Union Square neighborhood of Manhattan. The capitalization rates exhibited by the comparable sales are given the most weight in our analysis, since they reflect current local market data, and are more relevant than national investor surveys. These rates are well below the average rates reflected in the exhibited investor surveys for retail properties outside of Manhattan, and indicate the premium paid by investors for well located irreplaceable retail/commercial properties in major urban markets like Manhattan.

The subject property comprises a multi-level retail condominium unit totaling 236,215 square feet of net rentable area within five levels (inclusive of one below grade level) of the luxury mixed-use development located within the Union Square neighborhood. The subject is 100.0 percent leased to 7 retail tenants and is anchored by Regal Cinemas, Best Buy, and Nordstrom Rack, which occupy 83.7 percent of the subject. The subject site is ground leased through December 31, 2095, with no renewal options. The subject is leased long term to quality tenants and the cash flow reflects rent increases throughout the lease term. In addition, the retail space is leased long term at significantly below current market rent levels in an area with strong demand for this tenant type. The subject’s NOI is projected to increase 1.86 percent from the first year of the analysis through the analysis period. As such, the tenant quality and potential rental income increase provide for a secure cash flow. Based on the specific characteristics of the subject property, along with our observations and analysis suggest that a going-in capitalization rate of 4.50 percent represents reasonable investor criteria under current market conditions. Our selected capitalization rate is considered reasonable, compensating the typical buyer for the risk inherent in investing in this property. A summary of the direct capitalization method is shown below: INDICATED VALUE BASED ON DIRECT CAPITALIZATION OF NOI DIRECT CAPITALIZATION METHOD Market Value As-Is NET OPERATING INCOME $17,778,083 $75.26 Sensitivity Analysis (0.25% OAR Spread) Value $/SF GLA Based on Low-Range of 4.25% $418,307,835 $1,770.88 Based on Most Probable Range of 4.50% $395,068,511 $1,672.50 Based on High-Range of 4.75% $374,275,432 $1,584.47 Indicated Value $395,068,511 $1,672.50 Rounded to nearest $5,000,000 $395,000,000 $1,672.21 Compiled by Cushman & Wakefield, Inc. RECONCILIATION WITHIN INCOME CAPITALIZATION APPROACH

SUMMARY OF INCOME CAPITALIZATION METHODS Value Indicated by the Discounted Cash Flow Method: $360,000,000

Value Indicated by the Direct Capitalization Method: $395,000,000

We have placed equal reliance on the Discounted Cash Flow Analysis Method and the Direct Capitalization Method. Therefore, our opinion of market value via the Income Capitalization Approach is as follows.

INCOME CAPITALIZATION CONCLUSION Conclusion: $380,000,000

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM RECONCILIATION AND FINAL VALUE OPINION 129

RECONCILIATION AND FINAL VALUE OPINION VALUATION METHODOLOGY REVIEW AND RECONCILIATION This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these approaches would be considered applicable and/or necessary for market participants. Typical purchasers do not generally rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not utilized the Cost Approach to develop an opinion of market value.

The approach indicated the following:

METHODOLOGY Sales Comparison Approach: $380,000,000

Income Capitalization Approach: $380,000,000

It is the Income Capitalization Approach, however, that is logically considered the most appropriate technique for estimating the value of income-producing property. Not only does this approach represent the most direct and accurate simulation of market behavior, it is the method explicitly employed by buyers and sellers in acquisition and disposition decisions. We have, therefore primarily used the Income Capitalization Approach based primarily on projected income and expense as the foundation for our valuation of the subject property. Furthermore, we utilized the Sales Comparison Approach to support our estimated value of the subject from sales of comparable properties in the marketplace.

$380,000,000 EXPOSURE TIME Based on our review of national investor surveys, discussions with market participants and information gathered during the sales verification process, a reasonable exposure time for the subject property at the value concluded within this report would have been approximately nine (9) months. This assumes an active and professional marketing plan would have been employed by the current owner.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM ASSUMPTIONS AND LIMITING CONDITIONS 130

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM ASSUMPTIONS AND LIMITING CONDITIONS 131

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM CERTIFICATION OF APPRAISAL 132

CERTIFICATION OF APPRAISAL We certify that, to the best of our knowledge and belief:  The statements of fact contained in this report are true and correct.  The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions.  We have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved.  We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.  Our engagement in this assignment was not contingent upon developing or reporting predetermined results.  Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.  The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice.  The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.  John A. Katinos, MAI, Charles R. Looney and James P. Stuckey, Jr. did make a personal inspection of the property that is the subject of this report.  The signatories have performed a previous appraisal of the subject property once within the three years prior to this assignment.  Charles R. Looney provided significant real property appraisal assistance to the persons signing this report.  As of the date of this report, John A. Katinos, MAI and has completed the continuing education program of the Appraisal Institute.  As of the date of this report, James P. Stuckey Jr. has completed the Standards and Ethics Education Requirement of the Appraisal Institute for Associate Members.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM GLOSSARY OF TERMS & DEFINITIONS 133

GLOSSARY OF TERMS & DEFINITIONS The following definitions of pertinent terms are taken from The Dictionary of Real Estate Appraisal, Fifth Edition (2010), published by the Appraisal Institute, Chicago, IL, as well as other sources. AS IS MARKET VALUE The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date. (Proposed Interagency Appraisal and Evaluation Guidelines, OCC-4810-33-P 20%) BAND OF INVESTMENT A technique in which the capitalization rates attributable to components of a capital investment are weighted and combined to derive a weighted-average rate attributable to the total investment. CASH EQUIVALENCY An analytical process in which the sale price of a transaction with nonmarket financing or financing with unusual conditions or incentives is converted into a price expressed in terms of cash. DEPRECIATION 1. In appraising, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date. 2. In accounting, an allowance made against the loss in value of an asset for a defined purpose and computed using a specified method. ELLWOOD FORMULA A yield capitalization method that provides a formulaic solution for developing a capitalization rate for various combinations of equity yields and mortgage terms. The formula is applicable only to properties with stable or stabilized income streams and properties with income streams expected to change according to the J- or K-factor pattern. The formula is RO = [YE – M (YE + P 1/Sn¬ – RM) – ∆O 1/S n¬] / [1 + ∆I J] where RO = Overall Capitalization Rate YE = Equity Yield Rate M = Loan-to-Value Ratio P = Percentage of Loan Paid Off 1/S n¬ = Sinking Fund Factor at the Equity Yield Rate RM =Mortgage Capitalization Rate ∆O = Change in Total Property Value ∆I = Total Ratio Change in Income J = J Factor Also called mortgage-equity formula. EXPOSURE TIME 1. The time a property remains on the market. 2. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. See also marketing time. FEE SIMPLE ESTATE Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. HYPOTHETICAL CONDITIONS A hypothetical condition is “that which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.” INSURABLE VALUE A type of value for insurance purposes. LEASED FEE INTEREST A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease).

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM GLOSSARY OF TERMS & DEFINITIONS 134

LEASEHOLD INTEREST The tenant’s possessory interest created by a lease. See also negative leasehold; positive leasehold. MARKET RENT The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the lease agreement, including permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs). MARKET VALUE As defined in the Agencies’ appraisal regulations, the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

 Buyer and seller are typically motivated;

 Both parties are well informed or well advised, and acting in what they consider their own best interests;

 A reasonable time is allowed for exposure in the open market;

 Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

 The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.1 MARKETING TIME An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, “Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions” address the determination of reasonable exposure and marketing time.) See also exposure time. MORTGAGE-EQUITY ANALYSIS Capitalization and investment analysis procedures that recognize how mortgage terms and equity requirements affect the value of income-producing property. OPERATING EXPENSES Other Taxes, Fees & Permits - Personal property taxes, sales taxes, utility taxes, fees and permit expenses. Property Insurance – Coverage for loss or damage to the property caused by the perils of fire, lightning, extended coverage perils, vandalism and malicious mischief, and additional perils. Management Fees - The sum paid for management services. Management services may be contracted for or provided by the property owner. Management expenses may include supervision, on-site offices or apartments for resident managers, telephone service, clerical help, legal or accounting services, printing and postage, and advertising. Management fees may occasionally be included among recoverable operating expenses Total Administrative Fees – Depending on the nature of the real estate, these usually include professional fees and other general administrative expenses, such as rent of offices and the services needed to operate the property. Administrative expenses can be provided either in the following expense subcategories or in a bulk total. 1) Professional Fees – Fees paid for any professional services contracted for or incurred in property operation; or 2) Other Administrative – Any other general administrative expenses incurred in property operation. Heating Fuel - The cost of heating fuel purchased from outside producers. The cost of heat is generally a tenant expense in single-tenant, industrial or retail properties, and apartment projects with individual heating units. It is a major expense item shown in operating statements for office buildings and many apartment properties. The fuel consumed may be coal, oil, or public steam. Heating supplies, maintenance, and workers’ wages are included in this expense category under certain accounting methods. Electricity - The cost of electricity purchased from outside producers. Although the cost of electricity for leased space is frequently a tenant expense, and therefore not included in the operating expense statement, the owner may be responsible for lighting public areas and for the power needed to run elevators and other building equipment. Gas - The cost of gas purchased from outside producers. When used for heating and air conditioning, gas can be a major expense item that is either paid by the tenant or reflected in the rent. Water & Sewer - The cost of water consumed, including water specially treated for the circulating ice water system, or purchased for drinking purposes. The cost of water is a major consideration for industrial plants that use processes depending on water and for multifamily projects, in which the cost of sewer service usually ties to the amount of water used. It is also an important consideration for laundries, restaurants, taverns, hotels, and similar operations. Other Utilities - The cost of other utilities purchased from outside producers. Total Utilities - The cost of utilities net of energy sales to stores and others. Utilities are services rendered by public and private utility companies (e.g., electricity, gas, heating fuel, water/sewer and other utilities providers). Utility expenses can be provided either in expense subcategories or in a bulk total.

1 “Interagency Appraisal and Evaluation Guidelines.” Federal Register 75:237 (December 10, 2010) p. 77472.

ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM GLOSSARY OF TERMS & DEFINITIONS 135

Repairs & Maintenance - All expenses incurred for the general repairs and maintenance of the building, including common areas and general upkeep. Repairs and maintenance expenses include elevator, HVAC, electrical and plumbing, structural/roof, and other repairs and maintenance expense items. Repairs and Maintenance expenses can be provided either in the following expense subcategories or in a bulk total. 1) Elevator - The expense of the contract and any additional expenses for elevator repairs and maintenance. This expense item may also include escalator repairs and maintenance. 2) HVAC – The expense of the contract and any additional expenses for heating, ventilation and air-conditioning systems. 3) Electrical & Plumbing - The expense of all repairs and maintenance associated with the property’s electrical and plumbing systems. 4) Structural/Roof - The expense of all repairs and maintenance associated with the property’s building structure and roof. 5) Pest Control – The expense of insect and rodent control. 6). Other Repairs & Maintenance - The cost of any other repairs and maintenance items not specifically included in other expense categories. Common Area Maintenance - The common area is the total area within a property that is not designed for sale or rental, but is available for common use by all owners, tenants, or their invitees, e.g., parking and its appurtenances, malls, sidewalks, landscaped areas, recreation areas, public toilets, truck and service facilities. Common Area Maintenance (CAM) expenses can be entered in bulk or through the sub-categories. 1) Utilities – Cost of utilities that are included in CAM charges and passed through to tenants. 2) Repair & Maintenance – Cost of repair and maintenance items that are included in CAM charges and passed through to tenants. 3) Parking Lot Maintenance – Cost of parking lot maintenance items that are included in CAM charges and passed through to tenants. 4) Snow Removal – Cost of snow removal that are included in CAM charges and passed through to tenants. 5) Grounds Maintenance – Cost of ground maintenance items that are included in CAM charges and passed through to tenants. 6) Other CAM expenses are items that are included in CAM charges and passed through to tenants. Painting & Decorating - This expense category is relevant to residential properties where the landlord is required to prepare a dwelling unit for occupancy in between tenancies. Cleaning & Janitorial - The expenses for building cleaning and janitorial services, for both daytime and night-time cleaning and janitorial service for tenant spaces, public areas, atriums, elevators, restrooms, windows, etc. Cleaning and Janitorial expenses can be provided either in the following subcategories or entered in a bulk total. 1) Contract Services - The expense of cleaning and janitorial services contracted for with outside service providers. 2) Supplies, Materials & Misc. - The cost any cleaning materials and any other janitorial supplies required for property cleaning and janitorial services and not covered elsewhere. 3) Trash Removal - The expense of property trash and rubbish removal and related services. Sometimes this expense item includes the cost of pest control and/or snow removal .4) Other Cleaning/Janitorial - Any other cleaning and janitorial related expenses not included in other specific expense categories. Advertising & Promotion - Expenses related to advertising, promotion, sales, and publicity and all related printing, stationary, artwork, magazine space, broadcasting, and postage related to marketing. Professional Fees - All professional fees associated with property leasing activities including legal, accounting, data processing, and auditing costs to the extent necessary to satisfy tenant lease requirements and permanent lender requirements. Total Payroll - The payroll expenses for all employees involved in the ongoing operation of the property, but whose salaries and wages are not included in other expense categories. Payroll expenses can be provided either in the following subcategories or entered in a bulk total. 1) Administrative Payroll - The payroll expenses for all employees involved in on-going property administration. 2) Repair & Maintenance Payroll - The expense of all employees involved in on-going repairs and maintenance of the property. 3) Cleaning Payroll - The expense of all employees involved in providing on-going cleaning and janitorial services to the property 4) Other Payroll - The expense of any other employees involved in providing services to the property not covered in other specific categories. Security - Expenses related to the security of the Lessees and the Property. This expense item includes payroll, contract services and other security expenses not covered in other expense categories. This item also includes the expense of maintenance of security systems such as alarms and closed circuit television (CCTV), and ordinary supplies necessary to operate a security program, including batteries, control forms, access cards, and security uniforms. Roads & Grounds - The cost of maintaining the grounds and parking areas of the property. This expense can vary widely depending on the type of property and its total area. Landscaping improvements can range from none to extensive beds, gardens and trees. In addition, hard-surfaced public parking areas with drains, lights, and marked car spaces are subject to intensive wear and can be costly to maintain. Other Operating Expenses - Any other expenses incurred in the operation of the property not specifically covered elsewhere. Real Estate Taxes - The tax levied on real estate (i.e., on the land, appurtenances, improvements, structures and buildings); typically by the state, county and/or municipality in which the property is located. PROSPECTIVE OPINION OF VALUE A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy. PROSPECTIVE VALUE UPON REACHING STABILIZED OCCUPANCY The value of a property as of a point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. At such point, all capital outlays for tenant improvements, leasing commissions, marketing costs and other carrying charges are assumed to have been incurred. SPECIAL, UNUSUAL, OR EXTRAORDINARY ASSUMPTIONS Before completing the acquisition of a property, a prudent purchaser in the market typically exercises due diligence by making customary enquiries about the property. It is normal for a Valuer to make assumptions as to the most likely outcome of this due diligence process and to rely on actual information regarding such matters as provided by the client. Special, unusual, or extraordinary assumptions may be any additional assumptions relating to matters covered in the due diligence process, or may relate to other issues, such as the identity of the purchaser, the physical state of the property, the presence of environmental pollutants (e.g., ground water contamination), or the ability to redevelop the property.

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ADDENDA CONTENTS

ADDENDUM A: GLOSSARY OF TERMS AND DEFINITNONS ADDENDUM B: CLIENT SATISFACTION SURVEY ADDENDUM C: GROUND RENT RESET CALCULATION ADDENDUM D: QUALIFICATIONS OF THE APPRAISERS

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ADDENDUM A: GLOSSARY OF TERMS & DEFINITIONS The following definitions of pertinent terms are taken from The Dictionary of Real Estate Appraisal, Fifth Edition (2010), published by the Appraisal Institute, Chicago, IL, as well as other sources. AS IS MARKET VALUE The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date. (Proposed Interagency Appraisal and Evaluation Guidelines, OCC-4810-33-P 20%) BAND OF INVESTMENT A technique in which the capitalization rates attributable to components of a capital investment are weighted and combined to derive a weighted-average rate attributable to the total investment. CASH EQUIVALENCY An analytical process in which the sale price of a transaction with nonmarket financing or financing with unusual conditions or incentives is converted into a price expressed in terms of cash. DEPRECIATION 1. In appraising, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date. 2. In accounting, an allowance made against the loss in value of an asset for a defined purpose and computed using a specified method. ELLWOOD FORMULA A yield capitalization method that provides a formulaic solution for developing a capitalization rate for various combinations of equity yields and mortgage terms. The formula is applicable only to properties with stable or stabilized income streams and properties with income streams expected to change according to the J- or K-factor pattern. The formula is RO = [YE – M (YE + P 1/Sn¬ – RM) – ∆O 1/S n¬] / [1 + ∆I J] where RO = Overall Capitalization Rate YE = Equity Yield Rate M = Loan-to-Value Ratio P = Percentage of Loan Paid Off 1/S n¬ = Sinking Fund Factor at the Equity Yield Rate RM =Mortgage Capitalization Rate ∆O = Change in Total Property Value ∆I = Total Ratio Change in Income J = J Factor Also called mortgage-equity formula. EXPOSURE TIME 1. The time a property remains on the market. 2. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. See also marketing time. FEE SIMPLE ESTATE Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat. HYPOTHETICAL CONDITIONS A hypothetical condition is “that which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.” INSURABLE VALUE A type of value for insurance purposes.

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LEASED FEE INTEREST A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease). LEASEHOLD INTEREST The tenant’s possessory interest created by a lease. See also negative leasehold; positive leasehold. MARKET RENT The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the lease agreement, including permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs). MARKET VALUE As defined in the Agencies’ appraisal regulations, the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

 Buyer and seller are typically motivated;

 Both parties are well informed or well advised, and acting in what they consider their own best interests;

 A reasonable time is allowed for exposure in the open market;

 Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

 The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.2 MARKETING TIME An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, “Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions” address the determination of reasonable exposure and marketing time.) See also exposure time. MORTGAGE-EQUITY ANALYSIS Capitalization and investment analysis procedures that recognize how mortgage terms and equity requirements affect the value of income-producing property. OPERATING EXPENSES Other Taxes, Fees & Permits - Personal property taxes, sales taxes, utility taxes, fees and permit expenses. Property Insurance – Coverage for loss or damage to the property caused by the perils of fire, lightning, extended coverage perils, vandalism and malicious mischief, and additional perils. Management Fees - The sum paid for management services. Management services may be contracted for or provided by the property owner. Management expenses may include supervision, on-site offices or apartments for resident managers, telephone service, clerical help, legal or accounting services, printing and postage, and advertising. Management fees may occasionally be included among recoverable operating expenses Total Administrative Fees – Depending on the nature of the real estate, these usually include professional fees and other general administrative expenses, such as rent of offices and the services needed to operate the property. Administrative expenses can be provided either in the following expense subcategories or in a bulk total. 1) Professional Fees – Fees paid for any professional services contracted for or incurred in property operation; or 2) Other Administrative – Any other general administrative expenses incurred in property operation. Heating Fuel - The cost of heating fuel purchased from outside producers. The cost of heat is generally a tenant expense in single-tenant, industrial or retail properties, and apartment projects with individual heating units. It is a major expense item shown in operating statements for office buildings and many apartment properties. The fuel consumed may be coal, oil, or public steam. Heating supplies, maintenance, and workers’ wages are included in this expense category under certain accounting methods. Electricity - The cost of electricity purchased from outside producers. Although the cost of electricity for leased space is frequently a tenant expense, and therefore not included in the operating expense statement, the owner may be responsible for lighting public areas and for the power needed to run elevators and other building equipment. Gas - The cost of gas purchased from outside producers. When used for heating and air conditioning, gas can be a major expense item that is either paid by the tenant or reflected in the rent.

2 “Interagency Appraisal and Evaluation Guidelines.” Federal Register 75:237 (December 10, 2010) p. 77472.

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Water & Sewer - The cost of water consumed, including water specially treated for the circulating ice water system, or purchased for drinking purposes. The cost of water is a major consideration for industrial plants that use processes depending on water and for multifamily projects, in which the cost of sewer service usually ties to the amount of water used. It is also an important consideration for laundries, restaurants, taverns, hotels, and similar operations. Other Utilities - The cost of other utilities purchased from outside producers. Total Utilities - The cost of utilities net of energy sales to stores and others. Utilities are services rendered by public and private utility companies (e.g., electricity, gas, heating fuel, water/sewer and other utilities providers). Utility expenses can be provided either in expense subcategories or in a bulk total. Repairs & Maintenance - All expenses incurred for the general repairs and maintenance of the building, including common areas and general upkeep. Repairs and maintenance expenses include elevator, HVAC, electrical and plumbing, structural/roof, and other repairs and maintenance expense items. Repairs and Maintenance expenses can be provided either in the following expense subcategories or in a bulk total. 1) Elevator - The expense of the contract and any additional expenses for elevator repairs and maintenance. This expense item may also include escalator repairs and maintenance. 2) HVAC – The expense of the contract and any additional expenses for heating, ventilation and air-conditioning systems. 3) Electrical & Plumbing - The expense of all repairs and maintenance associated with the property’s electrical and plumbing systems. 4) Structural/Roof - The expense of all repairs and maintenance associated with the property’s building structure and roof. 5) Pest Control – The expense of insect and rodent control. 6). Other Repairs & Maintenance - The cost of any other repairs and maintenance items not specifically included in other expense categories. Common Area Maintenance - The common area is the total area within a property that is not designed for sale or rental, but is available for common use by all owners, tenants, or their invitees, e.g., parking and its appurtenances, malls, sidewalks, landscaped areas, recreation areas, public toilets, truck and service facilities. Common Area Maintenance (CAM) expenses can be entered in bulk or through the sub-categories. 1) Utilities – Cost of utilities that are included in CAM charges and passed through to tenants. 2) Repair & Maintenance – Cost of repair and maintenance items that are included in CAM charges and passed through to tenants. 3) Parking Lot Maintenance – Cost of parking lot maintenance items that are included in CAM charges and passed through to tenants. 4) Snow Removal – Cost of snow removal that are included in CAM charges and passed through to tenants. 5) Grounds Maintenance – Cost of ground maintenance items that are included in CAM charges and passed through to tenants. 6) Other CAM expenses are items that are included in CAM charges and passed through to tenants. Painting & Decorating - This expense category is relevant to residential properties where the landlord is required to prepare a dwelling unit for occupancy in between tenancies. Cleaning & Janitorial - The expenses for building cleaning and janitorial services, for both daytime and night-time cleaning and janitorial service for tenant spaces, public areas, atriums, elevators, restrooms, windows, etc. Cleaning and Janitorial expenses can be provided either in the following subcategories or entered in a bulk total. 1) Contract Services - The expense of cleaning and janitorial services contracted for with outside service providers. 2) Supplies, Materials & Misc. - The cost any cleaning materials and any other janitorial supplies required for property cleaning and janitorial services and not covered elsewhere. 3) Trash Removal - The expense of property trash and rubbish removal and related services. Sometimes this expense item includes the cost of pest control and/or snow removal .4) Other Cleaning/Janitorial - Any other cleaning and janitorial related expenses not included in other specific expense categories. Advertising & Promotion - Expenses related to advertising, promotion, sales, and publicity and all related printing, stationary, artwork, magazine space, broadcasting, and postage related to marketing. Professional Fees - All professional fees associated with property leasing activities including legal, accounting, data processing, and auditing costs to the extent necessary to satisfy tenant lease requirements and permanent lender requirements. Total Payroll - The payroll expenses for all employees involved in the ongoing operation of the property, but whose salaries and wages are not included in other expense categories. Payroll expenses can be provided either in the following subcategories or entered in a bulk total. 1) Administrative Payroll - The payroll expenses for all employees involved in on-going property administration. 2) Repair & Maintenance Payroll - The expense of all employees involved in on-going repairs and maintenance of the property. 3) Cleaning Payroll - The expense of all employees involved in providing on-going cleaning and janitorial services to the property 4) Other Payroll - The expense of any other employees involved in providing services to the property not covered in other specific categories. Security - Expenses related to the security of the Lessees and the Property. This expense item includes payroll, contract services and other security expenses not covered in other expense categories. This item also includes the expense of maintenance of security systems such as alarms and closed circuit television (CCTV), and ordinary supplies necessary to operate a security program, including batteries, control forms, access cards, and security uniforms. Roads & Grounds - The cost of maintaining the grounds and parking areas of the property. This expense can vary widely depending on the type of property and its total area. Landscaping improvements can range from none to extensive beds, gardens and trees. In addition, hard-surfaced public parking areas with drains, lights, and marked car spaces are subject to intensive wear and can be costly to maintain. Other Operating Expenses - Any other expenses incurred in the operation of the property not specifically covered elsewhere. Real Estate Taxes - The tax levied on real estate (i.e., on the land, appurtenances, improvements, structures and buildings); typically by the state, county and/or municipality in which the property is located. PROSPECTIVE OPINION OF VALUE A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy. PROSPECTIVE VALUE UPON REACHING STABILIZED OCCUPANCY The value of a property as of a point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. At such point, all capital outlays for tenant improvements, leasing commissions, marketing costs and other carrying charges are assumed to have been incurred.

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ADDENDUM B: CLIENT SATISFACTION SURVEY Survey Link: http://www.surveymonkey.com/s.aspx?sm=_2bZUxc1p1j1DWj6n_2fswh1KQ_3d_3d&c=09- 12002-9471 C&W File ID: 15-12002-901504 Fax Option: (716) 852-0890

1. Given the scope and complexity of the assignment, please rate the development of the appraisal relative to the adequacy and relevance of the data, the appropriateness of the techniques used, and the reasonableness of the analyses, opinions, and conclusions:

__ Excellent __ Good __ Average __ Below Average __ Poor

Comments:______

2. Please rate the appraisal report on clarity, attention to detail, and the extent to which it was presentable to your internal/external users without revisions:

__ Excellent __ Good __ Average __ Below Average __ Poor

Comments:______

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3. The appraiser communicated effectively by listening to your concerns, showed a sense of urgency in responding, and provided convincing support of his/her conclusions:

__ Not Applicable __ Excellent __ Good __ Average __ Below Average __ Poor

Comments:______

4. The report was on time as agreed, or was received within an acceptable time frame if unforeseen factors occurred after the engagement:

__ Yes __ No

5. Please rate your overall satisfaction relative to cost, timing, and quality:

__ Excellent __ Good __ Average __ Below Average __ Poor

Comments:______

6. Any additional comments or suggestions?

______

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7. Would you like a representative of Cushman & Wakefield’s National Quality Control Committee to contact you?

__ Yes __ No

Your Name: ______Your Telephone Number: ______

Contact Information: Scott Schafer Managing Director, National Quality Control (716) 852-7500, ext. 121

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ADDENDUM C: GROUND RENT RESET CALCULATION

One Union Square South Ground Rent Reset Analysis Supporting Schedule -- Scheduled Base Rental Revenue Contract Rent as of July 2023 For the Years Ending Tenant Suite Occupied Area Jun-2024 Best Buy G & 2 46,088 4,126,720 Best Buy G & 2 Citibank 100 9,755 Citibank 100 5,901,775 Duane Reade 110 13,947 4,023,250 Nordstrom G & 2 32,136 Nordstrom G & 2 4,665,600 Park South Imaging 1 9,091 618,018 Regal Cinemas 4 & 5 118,779 Regal Cinemas 4 & 5 6,973,646 Union Square Wines 120 6,419 872,744 ______Total Amount Per Year 236,215 27,181,753 ======Weighted Average Per SqFt 115.07 ======

Ground Rent as of July 2013 (12% Increase over Previous): $3,512,316 Ground Rent as of July 2018 (12% Increase over Previous): $3,933,794 Ground Rent as of July 2023 (30.69% of Base SubRent As of July 2023)*: $8,343,356 *It should be noted that the subrent rental rate equates to the product of (i) the subrent rental rate multiplied by the subrent percentage. The subrent percentage rent shall mean a percentage equal to the sum of (i) three percent plus, (ii) a fraction (expressed as a percentage), (A) the numerator is equal to the sum of $2,500,000 and any percentage rent payments and (B) the denominator of which is an amount equal to $9,027,000.

SubRent Percentage Calculation 3% PLUS 3.00% = $2,500,000 / $9,027,000, OR (27.69%) 27.69% SubRent Percentage Calculation Conclusion: 30.69%

$2,500,000 $9,027,000 27.69% ONE UNION SQUARE SOUTH RETAIL CONDOMINIUM ADDENDA CONTENTS

ADDENDUM D: QUALIFICATIONS OF THE APPRAISERS

A PROPOSAL FOR

C&W BIOGRAPHY PROFESSIONAL QUALIFICATIONS

JOHN A. KATINOS SENIOR DIRECTOR | VALUATION & ADVISORY

CUSHMAN & WAKEFIELD, INC.

John A. Katinos is a Senior Director with Cushman & Wakefield, Inc. Valuation & Advisory. He joined Cushman & Wakefield, Inc. in August, 1989.

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A PROPOSAL FOR

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NEW YORK

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A PROPOSAL FOR

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JAMES P. STUCKEY JR. ASSOCIATE DIRECTOR | VALUATION & ADVISORY

CUSHMAN & WAKEFIELD, INC.

BACKGROUND James Stuckey is an appraiser with Cushman & Wakefield, Inc. Valuation & Advisory Group. He joined Cushman and Wakefield, Inc. in August 2007.

EDUCATION  University of Scranton, Pennsylvania − Degree: Bachelors of Science in Political Science

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CHARLES R. LOONEY APPRAISER | VALUATION & ADVISORY

CUSHMAN & WAKEFIELD, INC.

Charles R. Looney is an Associate Appraiser of Valuation & Advisory for Cushman & Wakefield. He joined Cushman and Wakefield, Inc. in July, 2014.

EDUCATION  Marist College– Graduated 2014 − Degree: Bachelor of Science – School of Biological Sciences

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