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The Austin McGuire Company Navigating the built environment Valuation Analysis Of The Waterfront Located at 100-146 West Bridge Street Homestead, Pennsylvania 15120 Prepared For BIG Shopping Centers (2004) LTD. Elad Pedy | Chief Financial Officer BIG Shopping Centers USA, Inc. One East Washington Street | Suite 430 | Phoenix AZ 85004 Prepared By The Austin McGuire Company 64 Wall Street, Suite 401 Norwalk, Connecticut 06850 www.austinmcguire.com ∙ 64 Wall Street, suite 401, Norwalk, CT 06850 ∙ (203) 299-0101 The Austin McGuire Company 64 Wall Street, Suite 401 Norwalk, CT 06850 [email protected] Navigating the built environment o (203) 299-0101 November 21, 2018 PERSONAL AND CONFIDENTIAL BIG Shopping Centers (2004) LTD. Elad Pedy | Chief Financial Officer BIG Shopping Centers USA, Inc. One East Washington Street | Suite 430 | Phoenix AZ 85004 Re: Valuation of The Waterfront located at 100-146 West Bridge Street in Homestead, Pennsylvania 15120 Dear Mr. Pedy: Per your request, we have completed our appraisal assignment to estimate the market value of the referenced property (“subject property”) according to the definitions stated herein and subject to the assumptions, limiting conditions, and certification also contained in the report. The subject property consists of the land and improvements located along Waterfront Drive on either side of the Homestead Grays Bridge. Once the site of the world’s largest steel mill, The Waterfront has been transformed into a mixed-use development including retail, restaurants, office, residential, and recreation. It spans the burroughs of Homestead, West Homestead, and Munhall near Pittsburgh and sits on land once occupied by U.S. Steel's Homestead Steel Works plant, which closed in 1987. The development extends along the south bank of the Monogahela River. According to Allegheny County assessor records, the subject property contains 90.34 acres of land in aggregrate in 20 tax lots. Notably, this valuation does not include any parcels owned by the Waterfront Owner’s Association or the Waterfront TIF. The Waterfront was developed as a suburban fashion center with retail, residential, and office spaces all being separated from each other by parking lots and roadways. The development officially opened in 1999 followed by the construction of additional buildings. The subject property includes four individually identified shopping centers located in the central portion of The Waterfront. The subject centers are identified in the chart on the following page. www.austinmcguire.com ∙ 64 Wall Street, suite 401, Norwalk, CT 06850 ∙ (203) 299-0101 The Austin McGuire Company Navigating the built environment Mr. Elad Pedy November 21, 2018 Page 2 Property Size (SF) Type Occupancy No. Units Tenancy Type of Space Major Tenants Market on the Waterfront 259,456 Power Center 90.9% 13 Multi Anchor/In-Line/ Best Buy, Michael's, TJ Maxx, Ross, DSW, Bed Freestanding Bath & Beyond, Marshall's Market Amity 83,428 Power Center 100.0% 4 Multi Anchor Dick's Sporting Goods, Crunch Amity Square 13,727 Strip Center 100.0% 4 Multi In-Line Waterfront Town Center/ 406,343 Lifestyle Center/ 96.6% 49 Multi Lifestyle Loews Theatre, Barnes & Noble, Dave & Stacks at the Waterfront Entertainment Buster's Center Sub-Total 762,954 95.1% Macy's 138,140 0.0% Total 901,094 80.6% Notably, the subject proeprty is 95.1 percent occupied when the former Macy’s space is removed from the equation. With the former Macy’s space the vacancy rate drops to 80.6 percent. For purposes of this report we will be deviding each of the four centers up for indiviaul analysis within both the Income and Sales Comparison Approaches to value. The purpose of this report is to render an opinion of the as-is market value of the leased fee estate in the subject property, as of September 30, 2018, the stipulated date of value. The function of this appraisal is to estimate the market value of the property in conjunction with financial reporting for filling with the Israel Securities Authority (“ISA”). This report has been prepared in conformance with Standards One and Two of the Uniform Standards of Professional Appraisal Practice (USPAP) and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). We have considered all three classical approaches in determining value, the Income, Cost, and Sales Comparison Approaches. For this analysis primary reliance has been placed on the Income Approach with secondary support from the Sales Comparison Approach. It is the result of a complete appraisal process and is intended to comply with the reporting requirements set forth under Standards Rule 2-2 of the USPAP for an appraisal report. Based upon our research and analyses, we have formed the opinion that the as-is market value of the leased fee interest in the subject property, as of September 30, 2018, free and clear of financing, is: $148,000,000 www.austinmcguire.com ∙ 64 Wall Street, suite 401, Norwalk, CT 06850 ∙ (203) 299-0101 The Austin McGuire Company Navigating the built environment Mr. Elad Pedy November 21, 2018 Page 3 The report has been prepared by Michael McGuire, MAI. His certification is part of the report. The Austin McGuire Company has no present or contemplated interest in the property, nor any other interest that might prevent an unbiased valuation. According to data from the PwC Real Estate Investor Survey, survey respondents indicated marketing times between 3 and 18 months for power centers and strip shopping centers with the majority between 3 and 9 months. Overall, the subject will likely face marketing and exposure periods of 3 to 9 months. Extraordinary Assumptions 1) We have not measured the subject property. We have relied on the rent rolls provided by the client. We reserve the right to alter or change our opinion of value if, subsequent to our appraisal, the measurement data is shown to be in error. 2) It is assumed that all easements and restrictive covenants encumbering the subject property are typical of the area with no adverse impact on the use or value of the subject. We reserve the right to alter or change our opinion of value if subsequent data indicates otherwise. 3) During the inspection of the subject, no conditions were observed that would indicate the presence or existence of hazardous substances, such as petroleum leakage, asbestos, or other adverse environmental conditions. However, prior to redevelopment, the site was considered to be a superfund site. No environmental site assessments were provided to the appraiser. The value stated within this report is subject to change if any other hazardous substances or environmental conditions are detected by an expert in the field. The appraiser is not qualified to detect or measure hazardous materials and this appraisal is predicated upon the assumption that environmental hazards do not exist on the subject. www.austinmcguire.com ∙ 64 Wall Street, suite 401, Norwalk, CT 06850 ∙ (203) 299-0101 The Austin McGuire Company Navigating the built environment Mr. Elad Pedy November 21, 2018 Page 4 4) Given the nature of the subject as a redevelopment, it is part of a tax increment district for the Waterfront redevelopment. As reported by the client, the presence of the TIF district has no impact on the value of the subject with no impact on the subject revenue or expenses. We reserve the right to alter or change our opinion of value if subsequent information indicates otherwise. 5) Information regarding the expense reimbursements has been supplied by the client. Given the highly complex and varying nature of the reimbursement calculations as structured in the leases, we have hard coded the reimbursement revenue by tenant in the ARGUS program. If this information is shown to be in error we reserve the right to alter or amend our report to reflect the updated or corrected information. Very truly yours, Michael D. McGuire, MAI Pennsylvania Temp Practice Permit No. 93653 www.austinmcguire.com ∙ 64 Wall Street, suite 401, Norwalk, CT 06850 ∙ (203) 299-0101 The Austin McGuire Company Table of Contents Page Table of Contents 5 Area Map 6 Location Map 6 Aerial View 7 Executive Summary 8 Introduction 10 Identification and History of the Subject Property 10 Purpose and Use of the Appraisal 11 Intended Use of the Report 11 Effective Date of Value Estimate 11 Relevant Definitions 11 Scope of Work 12 Area Analysis 13 Market Analysis 24 Description of the Property 27 Site Description 27 Improvement Description 30 Real Estate Taxes 35 Highest and Best Use 37 Income Approach 39 Sales Comparison Approach 102 Reconciliation and Value Conclusion 106 General Assumptions and Limiting Conditions 107 Certification 109 Qualifications 111 Addenda 113 5 The Austin McGuire Company Subject Regional Map Subject Location Map 6 The Austin McGuire Company Aerial View 7 The Austin McGuire Company Executive Summary Property Location: The subject property is located along Waterfront Drive on either side of the Homestead Grays Bridge. It spans the boroughs of Homestead, West Homestead, and Munhall near Pittsburgh, Pennsylvania. Purpose of the Appraisal: To estimate the as-is market value of the leased fee interest. Function of the Appraisal: To estimate the market value of the property for financial reporting purposes. Site Size: 90.34 acres in 20 tax parcels Property Description: The subject property is composed of five shopping centers located within the larger Waterfront redevelopment of the former U.S. Steel Homestead Steel Works plant. The subject centers contain 762,323 square feet in aggregate. Anchor tenants include Best Buy, Office Depot, TJ Maxx, Loews Theatre, and Barnes and Noble among others. The redevelopment originally opened in 1999 with other buildings constructed subsequently. The combined occupancy is 79.6 percent, but without the former Macy’s space included the occupancy rate is 93.9 percent.