Q4 2013 | INVESTMENT

CHICAGO INVESTMENT MARKET OVERVIEW

Office

U.S. investors indicate a clear preference for office assets in their home country, with three out of four respondents in Colliers International’s annual “Global Investor Sentiment” report anticipating that their primary investment focus during the next 12 months will be in the United States. Central and Latin America, as well as the UK, lag far behind. Within the U.S., global gateway cities remain the preferred targets for local and foreign investors, with the largest groups of buyers looking at the West Coast markets, followed by New York and . Nationally, job gains were steady, unemployment fell and fewer people looked for work. However, according to statistics from the U.S. Commerce Department, this recovery is the slowest and most sluggish recovery since World War II. Annual GDP, jobs, and population growth rates have in general been recovering at a snail’s pace, particularly in and Chicago with its pension woes and politics. According to Marquette University, office returns in the Midwest have significantly underperformed the U.S., particularly over the past ten years. On the surface it appears counter-intuitive that a property sector like office, which depends on space- consuming office tenants in the services sector, could be a top priority for investors. The reality is that office investors have abundant equity capital committed to the sector, and therefore continue to seek out opportunities in the metropolitan Chicago area. Existing owners have recognized this demand, and continue to replenish the pipeline of office investment offerings. Despite improving, but still weak real estate fundamentals and “more of the same” lethargy in the Chicago area’s overall economy, real estate investors continued to actively seek and acquire major office investments in the Chicago area in 2013 and the same is expected in 2014. Regardless of its economic and pension woes, Chicago continues to be recognized globally as one of the country’s most important financial and cultural centers and a key target market in office acquisitions. CHICAGO CBD There are several positive trends occurring beyond the oft-cited economic statistics that are fueling office investment activity in Chicago: • The acceptance of real estate as an alternative asset class is increasing • Long-term interest rates are expected to hold fairly steady over the next year • The overhang of OREO properties has begun to be sold or refinanced • Debt Lenders are becoming more risk tolerant and have eased underwriting criteria • Equity Investors have likewise been steadily less averse to risk and are seeking higher yield • There has been little new construction in the region

www.colliers.com/chicago RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

In 2013, Chicago CBD office investments totaled $3.75 billion, a whopping 70 percent increase over the $2.2 billion of sales in 2012. The average price paid in 2013 equaled $228 per square foot, exceeding the average of $170 per square foot paid in 2012. This number jumped partly due to the significant number of Class A, West Loop properties that traded. Investors also have taken an interest in core-plus opportunities with relatively straightforward underwriting of near-term rollover. A few smaller, vintage assets also traded and will be re-purposed into alternative uses such as hotels or retail. Relative to the steady appetite for office investments - even in light of the woes dictated by economists – Chicago’s CBD offers numerous bright spots to justify acquisitions. Aside from those discussed above, the CBD’s intangibles include: >> A steady CBD population surge and employers’ awareness of this new demographic trend >> Numerous new migrations of large tenants from the suburban office market to the CBD 200 SOUTH WACKER DRIVE >> A rapidly expanding technology sector including 1871, Motorola Mobility, Google and GoGo CHICAGO >> Mayor Emmanuel’s “big projects” and “big headlines” have a positive effect on investor perception

The year ended on a very high note with 11 properties, totaling over $2.1 billion, trading in a flurry of activity late in the fourth quarter. In what appears to be the largest transaction of the year, KBS REIT made its second jumbo purchase in the CBD by shelling out $425 million on the 1.4-million-square- HISTORICAL TRENDS Chicago CBD Office Investment Sale Volume foot office property at 500 West Madison Street. Earlier in the year, a venture of Mark Karasick of 601 W Cos. and Michael Silberberg of Berkley Properties completed the long-anticipated $415 million 4.0 $3.75 deal to gain control of the 2.2-million-square-foot Prudential I and II office complex overlooking 3.5 Millennium Park. Billions 3.0 $2.80 Just as Met Life had re-entered the CBD market in 2012 with its acquisition of 125 South Wacker 2.5 $2.20 $2.00 2.0 Drive, it followed up with the 2013 acquisitions of One North Franklin Street for $187 million and 550 Investment Sales 1.5 West Washington Street for $111 million. The latter property’s seller, Boston-based Beacon Capital

1.0 Partners, ended its brief absence in Chicago by acquiring 300 South Wacker in the third quarter.

0.5 $0.23 Foreign investment continues to be a steady barometer as well. Canada-based Manulife (operating 0.0 2009 2010 2011 2012 2013 in the U.S. as John Hancock) acquired its third CBD property in three years with the acquisition of 200 South Wacker Drice, and another Canadian firm – Ivanhoe Cambridge – acquired 10 and 120 S. Riverside for $360 million (with local partner Callahan), after committing $300 million earlier in the year to Hines’ 45-story River Point office tower in the West Loop. Korean Investors also continue to be attracted to Chicago, as evidenced by Mirae’s acquisition of 225 West Wacker Drive from Hines for $218 million, and Korea Post’s investment in 161 N. Clark Street for $331 million. CONCLUSION Even in light of the slow improvement in real estate fundamentals, sales of Chicago CBD office properties should remain strong in 2014. Several properties are being teed up to go to market while a few 2013 offerings, such as 200 South Michigan Avenue and 311 South Wacker Drive, are expected to close in the first quarter of 2014. The lack of new construction and ample supplies of cheap debt and equity, coupled with the long list of Chicago’s “intangibles,” should maintain the CBD’s widespread appeal and healthy sales pricing.

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CHICAGO CBD SALES | 2013

SELLER PURCHASER SF LOCATION VALUE PSF

601 West Associates, 111 West Melohn Properties 528,104 $135,000,000 $255.63 LLC Jackson Tier REIT/ 200 South Manulife (Hancock) 759,000 $215,000,000 $283.27 Pearlmark/EGI Wacker Drive GE Asset 500 West KBS REIT 1,457,470 $425,000,000 $291.60 Management Madison Street Harbor Group 300 South Beacon Capital Partners 512,436 $112,500,000 $219.54 International Wacker BGK Equities OBO 10 North Redico JV DRW Trading 80,228 $11,500,000 $143.34 Rosemont Realty Dearborn Bentall Kennedy Beacon Investment 20 North Clark 393,094 $63,750,000 $162.17 (US), LP Properties Street Callahan/Ivanhoe 10 South Tier REIT 684,911 $180,500,000 $263.54 Cambridge Riverside Callahan/Ivanhoe 120 South Tier REIT 684,962 $180,500,000 $263.52 Cambridge Riverside General Electric 181 West CBRE Global Investors 952,559 $302,000,000 $317.04 Pension Fund Madison Tishman Speyer MetLife 643,503 1 North Franklin $187,000,000 $290.60 CBRE GI/Korean Tishman Speyer 1,068,877 161 North Clark $331,250,000 $309.90 Consortium 400 S. JEFFERSON STREET Farbman Drake Real Estate 216 W Jackson HIGHEST PSF SALE IN THE CBD ($416.90) 171,876 $22,300,000 $129.74 Net Leased Corporate Headquarters Acquisitions, LLC Partners Blvd 68 E Wacker Aries Investors MB Real Estate 85,190 $9,500,000 $111.52 Place CBRE Global 190 South Tishman Speyer 797,750 $211,250,000 $264.81 Investors LaSalle 360 North Chetrit Oxford Capital 260,823 $53,000,000 $203.20 Michigan Avenue Kemper Corp AmTrust Realty Corp 526,158 One East Wacker $94,000,000 $178.65 Tribeca Holdings (Retail) / 625 North Hudson Advisors 343,072 $107,000,000 $311.89 Goldman Sachs / Golub Michigan Avenue (Office) MB Real Estate Ameritus 263,650 205 W Wacker Dr $22,750,000 $86.29 Deutsche Bank/ Hearn Company, Lynd, 896,980 875 N Michigan $140,000,000 $156.08 Northstar et al NorthStar Realty 180 N Stetson 601 W Companies 2,204,137 $415,000,000 $188.28 Finance Corp. Avenue Cole Real Estate 400 South Sterling Bay 233,869 $97,500,000 $416.90 Investments Jefferson JPMorgan Global Mirae Asset Global 650,812 225 West Wacker $218,000,000 $334.97 Real Assets Investments Harbor Group 111 West Shidler Group 579,848 $94,600,000 $163.15 International Washington 123 West CIBC Cagan Mangement 89,694 $4,850,000 $54.07 Madison Beacon Capital 550 West MetLife 372,597 $111,250,000 $298.58 Partners Washington

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SUBURBAN CHICAGO The suburban Chicago office market began to pick up in the second half of 2013, as several big lease deals were announced and tenant activity began to awaken from its slumber during the year. The suburban office market achieved its lowest vacancy level in over four years as 2013 came to a close, but at 20.5 percent overall vacancy, the suburban market is still a conundrum for most office investors. A strong knowledge of the individual submarkets and the key trends within it are key to investing in the suburban Chicago office market. While it remains a tenant’s market, Class A space is tightening and sales activity has been focused on well located Class A assets. A prime example of this trend is the fourth quarter sale of Central Park CENTRAL PARK OF LISLE of Lisle in Naperville for $116 million ($168 psf). White Oak/Angelo Gordon/Fulcrum had purchased LINCOLNSHIRE the 75 percent leased asset in early-2010 for $80 million, then leased it up to 90 percent and sold it SOLD FOR $175 PSF to Blackstone for a strong profit. The leasing story is a testament of the “flight to quality” seen all throughout the suburbs. On the opposite side of the spectrum are the opportunity plays which occurred in 2013. Acquiring higher-quality office buildings at low prices per square foot allow the new owners to quickly lease up the vacancies at lower rents than the competition. They include the $58.5 million ($64.24 per square foot) sale of Continental Towers, a 910,627-square-foot property in Rolling Meadows which was purchased by Walton Street Capital along with GlenStar, its local operating partner. Continental Towers was a victim of the crash and was sold by Colliers International for CWCapital as the latter tried to clear out its portfolio of defaulted loans. Walton/GlenStar is off to a good start, having leased 18,000 square feet in December to Rational A.G. As witnessed in prior years, significant corporate owner-occupied real estate activity has been healthy throughout the suburbs. When Kraft Foods Inc. split into two separate public companies in 2012, Hamilton Partners acquired its campus in Glenview and subsequently sold the bulk of the office buildings to Illinois Tool Works for $42 per square foot. Over the years, Walgreens had acquired Lake Cook Office Center I-IV in Deerfield, and in 2013 executed an $80 million, 10-year sale leaseback with Realty Income Corporation. Earlier in the year, a venture led by New York-based real estate investment trust W.P. Carey & Co. paid $72.3 million, or about $93 per square foot, for Kraft Foods Northfield headquarters. While during most of the recovery period lenders continued to work with borrowers to modify or even extend loans, 10 foreclosure proceedings are currently underway in the suburbs. Many special servicers have begun to believe that asset values have stabilized, and, convinced there is a market heating up for value-add or opportunity investors, have begun to put properties on the market. CWCapital, as part of its $2.5 billion portfolio of properties and loans, will be selling off Chicago properties such as International Tower in Chicago (O’Hare market), 500 Davis Street in Evanston, National Plaza I, II & III in Schaumburg, and 3030 Warrenville in Lisle. Overall in 2013, Colliers tracked the sale of 41 suburban office assets, amounting to an overall transaction volume of just over $1.0 billion, with an average sale price of $108. Sales activity for assets over $10 million totaled over $950 million during 2013, which is approximately 52 percent more than 2012 activity. In 2013, individual prices ranged from $23 per square foot to $255 per square foot which is the price that Oak Street Capital paid for the sale/leaseback of the Tate and Lyle headquarters in Hoffman Estates IL. Each of the submarkets had significant sales activity in 2013. Examples are highlighted below:

P. 4 | COLLIERS INTERNATIONAL RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

O’HARE Notable investment sales in the O’Hare market include 2300 E. Devon Avenue, a 239,331-square-foot property in Des Plaines which sold to Saban Capital Group, Inc. for $39 million ($162.95 per square foot). The property is currently home to FAA Regional Headquarters. Early in 2014, O’Hare Aerospace Center, a three-building, 203,912-square-foot property in Schiller Park is currently under contract.

NORTHWEST

Notable investment sales in the Northwest market during the fourth quarter of 2013 include Sovereign Partners, LLC.’s $40 million ($66.00 per square-foot) purchase of Two Century Centre and Centennial Center, totaling 605,297-square-feet. Both are high quality buildings that have significant upside KEMPER LAKES BUSINESS CENTER through lease-up. Also trading during 2013 was 25 Northwest Point, a 207,136-square-foot property LONG GROVE, IL in Elk Grove Village which sold to Farbman Group for $19.7 million ($95.11 per square foot). Reportedly, NEW TO MARKET 955 American Lane, a 109,373-square-foot property in Schaumburg, is currently under contract, and 532,975 square feet of buildings at 150 and 200 N. Martingale Road (part of Woodfield Corporate Center) were returned to the lender in a deed in lieu of foreclosure. NORTH The North market recorded sales of 1603 Orrington Avenue, a 307,255-square-foot property in Evanston that was sold to Golub and Investcorp International for $55.8 million ($181.45 per square foot); 111 S. Pfingsten Road, a 120,927-square-foot property in Deerfield that was sold to Adventus Realty Trust for $15.5 million ($128.18 per square foot); 440 N. Fairway Drive, a 99,579-square foot property in Vernon Hills that was sold to Select Income REIT for $18 million ($180.76 per square foot); and 1100 W. Lake Cook Road, a 97,831-square foot property in Buffalo Grove that was sold to Hamilton Partners for $3.1 million ($32.00 per square foot). Office buildings on the market and for sale at year’s end include 1717 Deerfield Road, a 141,186-square- foot property in Deerfield; One Conway Park, a 105,000-square-foot property, acquired in a joint venture between Sam Zell’s Equity Group Investments LLC and Chicago-based Fulcrum Asset Advisors LLC and West Lake of Conway Park, a 100,000-square-foot property, both in Lake Forest. The 1.1 million-square-foot former Motorola Mobility Headquarters in Libertyville was recently added to the market and Bannockburn Lake Office I, II & IV (composed of 315,738 square feet), are currently in receivership. Lastly, Equus has elected to sell Kemper Lakes Business Center, a 1.1-million-square- foot office complex in north suburban Long Grove.

EAST-WEST CORRIDOR There were numerous investments sales completed in the East-West Corridor (Lisle-Naperville-Oak Brook) including Stabilis Capital’s purchase of East-West Corporate Center, a two-building, 220,461-square-foot property in Naperville for $23 million ($104.23 per square foot); Beacon Investment Properties $24 million ($113.87 per square foot) purchase of Park Plaza, a 210,775-square- foot property in Naperville; and Walton Street Capital/GlenStar Properties’ $9.5 million ($45.96 per square foot) purchase of 2400 Cabot Drive, a 205,633-square-foot property in Lisle. Earlier in the year Agellan Commercial REIT purchased Naperville Woods Office Center, a two- building 486,979-square-foot property in Naperville for $83.4 million ($171.23 per square foot); and RREEF’s purchase of 9022 Heritage Parkway, a 94,233-square-foot property in Woodridge for $13.3 million ($141.14 per square foot). The largest transaction was Blackstone Group’s purchase of Central Park of Lisle, a two-building, 693,000-square-foot property in Lisle for $116 million ($168 per square foot). Marlin Equity recently added One Tellabs Center, a 800,000-square-foot property in Naperville to the market. Additionally, 1717 Park Street, a 114,016-square-foot property, also in Naperville, sold in early 2014 to a local partnership for $5.7 million ($50 per square foot).

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CONCLUSION Riding the wave of activity in 2013, we expect 2014 to be another big year for investment sales in the suburbs, as owners (and some lenders) look to cash out while the submarkets are getting easier to “read” at this point. Time will tell how things are going to change as the suburbs prepare for the shock waves of big investment offerings (Kemper, Tellabs), vacancies (Zurich Towers, Motorola) and further corporate mergers (Sysco/U.S. Foods). Investor interest will still be strong for core assets, and investors seeking strong upside will battle intensively to gain control of the best assets in the best locations.

CHICAGO SUBURBAN SALES | 2013 ONE TELLABS CENTER LOCATION SF VALUE PSF BUYER SELLER NAPERVILLE, IL NEW TO MARKET 5450 Prairie Stone Parkway Oak Street Real Estate Capital from 110,000 $28,000,000 $255 Hoffman Estates Tate and Lyle 801 Waukegan Road Illinois Tool Works (ITW) from Kraft 500,000 $24,100,000 $48 Glenview Foods Group/Hamilton 701 Warrenville Road Millbrook Real Estate from Winthrop 68,046 $2,500,000 $37 Lisle Realty Trust 1751 W Diehl Road Stabilis Capital Management from Wells 220,020 $22,950,000 $104 Naperville Fargo 4225 Naperville Road 693,438 $116,250,000 $168 Blackstone from Angelo Gordon Lisle 1100 Lake Cook Road Hamilton Capital Investors Inc from 99,000 $3,000,000 $30 Buffalo Grove HDG Mansur 800-810 Jorie Boulevard Server Farm Realty from LNR Property 193,688 $16,250,000 $84 Oak Brook Corporation 2301 Patriot Boulevard Globe Corporation from A I Glenview 167,000 $26,200,000 $157 Glenview LLC 1000 Milwaukee Avenue 416,209 $90,083,556 $216 ARCP from CapLease Glenview 215 Shuman Boulevard Beacon Investment Properties LLC from 210,774 $24,000,000 $114 Naperville TA Realty 1900 E. Golf Road Sovereign Partners from Aslan Realty 266,910 $19,000,000 $71 Schaumburg Partners 440 N. Fairway Drive Select Income REIT from Dividend Cap 99,579 $18,000,000 $181 Vernon Hills Diversified Prop Fund 1700 E. Golf Road Sovereign Partners from Aslan Realty 221,177 $16,500,000 $75 Schaumburg Partners 111 S. Pfingsten Road Adventus RE Ptnrs from Saban Capital 121,000 $15,528,000 $128 Deerfield Group

1000 MILWAUKEE AVE GLENVIEW, IL SOLD FOR $216 PSF

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CHICAGO SUBURBAN SALES | 2013

LOCATION SF VALUE PSF BUYER SELLER

1603 Orrington Ave, Evanston 308,695 $61,055,000 $198 Golub & Co from Lowe Enterprises 1420 Kensington Rd, Oak 298,946 $35,650,000 $119 Adventus RE Ptnrs from The Davis Cos Brook 1420 Kensington Rd, Oak 298,946 $35,650,000 $119 Adventus RE Ptnrs from The Davis Cos Brook 1750 E Golf Road Boxer Property from Pearlmark RE 212,212 $20,000,000 $94 Schaumburg Partners 908 N. ELM STREET 2400 Cabot Drive Walton Street Capital from Global HINSDALE 202,500 $9,500,000 $47 SOLD FOR ($210 PSF) Lisle Securitization Services 1750 E Golf Road Boxer Property from Pearlmark RE 212,212 $20,000,000 $94 Schaumburg Partners 2400 Cabot Drive Walton Street Capital from Global 202,500 $9,500,000 $47 Lisle Securitization Services 25 NW Point Boulevard 207,136 $19,700,000 $95 Farbman Group from John Buck Co Elk Grove Village 1411 Lake Cook Road 203,550 $40,000,000 $197 Realty Income Corp from Walgreens Deerfield 1425 Lake Cook Road 165,400 $17,958,734 $109 Realty Income Corp from Walgreens Deerfield 1417 Lake Cook Road 103,000 $11,183,492 $109 Realty Income Corp from Walgreens Deerfield 1419 Lake Cook Road 100,000 $10,857,759 $109 Realty Income Corp from Walgreens Deerfield 4450 Weaver Parkway Avgeris & Associates from Alloya 59,989 $4,850,000 $81 Warrenville Corporate 908 N. Elm Street G-A Healthcare REIT II from Bentall 169,000 $35,500,000 $210 Hinsdale Kennedy 2651 Warrenville Road Transwestern JV Soundview Real 300,000 $24,000,000 $80 Downers Grove Estate Partners from LNR Partners 400 E. Diehl Road Sara Investment Real Estate from 58,711 $7,100,000 $121 Naperville Congaree River 2000 York Road Convergent Capital Partners LLC from 199,245 $8,000,000 $40 Hinsdale Duke Realty 4801 N Ravenswood Avenue Hayes Properties Inc from Newark 135,000 $6,500,000 $48 Chicago Corporation 9022 Heritage Parkway Deutsche Asset/Wealth Mgmt from Oak 94,233 $13,300,000 $141 Woodridge Realty Group 1701 Golf Road Walton Street Capital from CWCapital 932,854 $58,500,000 $63 Rolling Meadows Asset Mgmt 739 Roosevelt Road Clark Street Development LLC from 233,143 $5,300,000 $23 Glen Ellyn GMAC Commercial Mortgage 2805 Butterfield Road Adventus RE Ptnrs from Inland 312,212 $32,971,500 $106 Oak Brook American REIT 2800 W. Higgins Road Lincoln Property Co from MEPT/Bentall 202,838 $12,000,000 $59 Hoffman Estates Kennedy 2300 N. Barrington Road Lincoln Property Co from MEPT/Bentall 148,385 $7,000,000 $47 Hoffman Estates Kennedy 2895 Greenspoint Parkway Lincoln Property Co from MEPT/Bentall 147,412 $4,500,000 $31 Barrington Kennedy 1000 E. Warrenville Road Agellan Comm'l REIT from Cargill Value 264,261 $45,253,791 $171 Naperville Investment 1100 E. Warrenville Road Agellan Comm'l REIT from Cargill Value 222,756 $38,146,202 $171 Naperville Investment

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Industrial Industrial investment sales remained strong in Chicago in 2013 with total sale volume slightly higher than 2012 results. Chicago traded $1.11 billion worth of industrial product during 2013 (compared to $1.06 billion in 2012). This volume level is slightly above the historical average, although below the peak of $1.7 billion in 2006. More than $317 million of total 2013 volume consisted of the Chicago portion of large multi-city portfolio sales. Although this has to considered when analyzing the Chicago market, however, very large multi-city transactions are available to a limited group of investors. Net transaction volume, excluding these transactions, would be classified as a down year. This lack of volume creates a shortage of high-quality opportunities institutional investors are seeking. After lagging much of the country, Chicago’s user market fundamentals improved dramatically with overall market vacany dropping to 8.7 percent from 9.5 percent at year-end 2012. With interest rates remaing at or near historical lows and an increasing amount of both short- and long-term financing available, demand outstripped supply for core transactions for the fourth consecutive year. Chicago saw significant amount of Class B product traded for the first time since 2007. This segment was led by two large transactions, a $102 million sale from Ares Capital to IndCor and a $80 million transaction sold by KTR Capital Partners to Westmount Real Estate. Although the KTR sale closed in January, it was priced and marketed in 2012. These large Class B transactions attracted private equity money, a sector that largely ignored Chicago industrial real estate in the past, because of comparatively low yields. With today’s available debt capital, and capitalization rates for Class B product in the 7.75 percent to 9.0 percent range, these Class B investments underwrite to leveraged returns in the 15 percent to 20percent range. Core Class A investments continued to trade at levels at or above historic highs. Cap rates for Class A assets range from 5.5 percent to 6.75 percent depending on price psf, lease term and tenant quality. There is a significant premium for investment grade credits as the marketplace continues to search for low risk, quality industrial real estate.

CHICAGO INDUSTRIAL INVESTMENT SALES | HISTORICAL TRANSACTION VOLUME

30.030.0 $1,600$1,600,000,000 $49.83 $49.83 $1,400$1,400,000,000 25.025.0 Millions $50.28 $1,200$1,200,000,000 $69.94$73.09 ($) Mllions

Millions (SF) 20.020.0 $73.09 $1,000$1,000,000,000 $53.95 $63.03 Total Sq. Ft. 15.015.0 $800$800,000,000 $59.20 Industrial Sale Volume $59.20 $600 10.0 $600,000,000 10.0 $46.80 $51.10 $46.80 $400 $51.10 $400,000,000 5.0 5.0 $200 $200,000,000 0.0 $0 0.0 2007 2008 2009 2010 2011 2012 2013 $0 2006 2007 2008 2009 2010 2011 2012 Total Sq. Ft. Industrial Sale Volume Price/SF

P. 8 | COLLIERS INTERNATIONAL RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

ACTIVE INVESTORS As discussed earlier, private equity investors are now newly active in the market as yields for quality Class B properties begin to meet their hurdle rates on a leveraged basis. Active private equity investors include The Partners Group, DLJ, DRA, and IndCor. Traditional institutional advisors continue to be active with LaSalle Investment Management, TA Realty Advisors, Exeter, Cabot and KTR Capital Partners all closing multiple transactions in 2013. Additionally, both public and private REITs are active as Liberty Property Trust, Duke Realty Corporation, Stag, DCT Industrial Trust, IIT/ IPT, and Welsh all closed Chicago area transactions in 2013. We expect even more investor demand in 2014 as user demand increases and institutional investors get priced out of the coasts.

TRANSACTION HIGHLIGHTS As discussed earlier a number of the largest transactions in the Chicago market were a component of a multi-city portfolio transaction. Below are a number of notable transactions that closed in 2013. As you can see the depth and variety of buyers in the market remains impressive. We expect an even more active 2014. o NOTABLE CHICAGO TRANSACTIONS CHICAGO PORTION OF MULTI-CITY TRANSACITONS

SALE PRICE/ LOCATION SIZE (SF) BUYER SELLER COMMENTS $170.5 million Liberty Chicago portion of a $1.474 2,754,000 Cabot Properties Various markets Property Trust billion national package $72.68 million Chicago portion of 7 million 1.615,045 IndCor Pacific Mutual Sauk Village / Rochelle square foot national package $74.0 million Realty Income American Realty Four properties in a 593- 1,018,900 DeKalb Corp Capital property entity level portfolio.

CHICAGO ONLY TRANSACTIONS

SALE PRICE /LOCATION SIZE (SF) BUYER SELLER COMMENTS $102.7 million 2,116,052 IndCor Ares Capital 15-building Class B portfolio Various markets $52.0 million 1,059,863 DCT Hamilton Partners Five-building portfolio Elgin $34.5 million LaSalle Investment Class A building leaed for 7 515,497 TA Realty Carol Stream Management years to Owens and Minor Class A distribution center $28.3 million LaSalle Investment 626,784 First Industrial leased through January 2018 Kenosha, WI Management to division of Omicron

I-94 LOGISTICS CENTER KENOSHA, WISCONSIN

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Multi-Family

FUNDAMENTALS SLIP AS LOOMING CONSTRUCTION PIPELINE WEIGHS DOWN MARKET Historically high occupancy rates and four years of consistent rent growth have pushed metropolitan Chicago’s multi-family rents to a level well above that of income and employment growth. An expanding job market and increased urbanization will continue to fuel renter demand in the downtown area which is expected to be offset by a robust development pipeline for at least the next four quarters. According to MPF research, apartment deliveries in Chicago are projected to remain elevated with annual completions registering between 4,400 to 6,400 units in each of the next four quarters. 3,169 new apartment units were delivered to market in the fourth quarter of 2013 in Chicago and over half, some 1,694 units, were delivered to the Streeterville/River North submarkets.

CONSTRUCTION ACTIVITY: PROPERTIES COMPLETED IN 2013

SUBMARKET PROPERTY NAME DEVELOPER UNITS FINISH The Loop K2 at K Station Fifield Companies/Wood Partners 496 06/13 The Loop Coast at Lakeshore East Magellan Development 515 07/13 Streeterville/River North 500 Lake Shore Drive The Related Companies 500 10/13 Streeterville/River North AMLI River North AMLI Residential 409 11/13 Streeterville/River North Optima Center Chicago Optima/DeBartolo Holdings 325 12/13 Streeterville/River North Seneca (The) Waterton Associates 260 12/13 K2 AT K STATION Streeterville/River North 850 Lake Shore Drive Integrated Development Group 200 12/13 Southeast Chicago Vesta Lofts JK Equities 59 09/13 Southeast Chicago Shoreland (The) MAC Property Management LLC 330 12/13 South Cook County Ninety 7 Fifty on the Park Flaherty & Collins Properties 295 08/13 North Cook County AMLI Evanston AMLI Residential 214 08/13 North Cook County 1717 Focus Development 175 10/13 North Cook County Central Station M&R Development LLC 80 10/13 North Cook County 1611 West Division 1601 W Division LLC 99 11/13 Southeast DuPage County Avant at the Arboretum The Opus Group 310 09/13 Far West Chicago Suburbs Algonquin Square Marquette Companies 220 12/13 Will County Springs at 127th Continental Properties Company 340 11/13

ONE YEAR FORECAST: CHICAGO METRO AREA Annual Supply (units) 4,423 Annual Demand (units) 4,201 Occupancy 95.0% Annual Occupancy Change 0.0 Annual Rent Change 2.8% Annual Revenue Change 2.8% Annual Jobs Change +70,000

Source: MPF Research®

COAST AT LAKESHORE EAST

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CONSTRUCTION ACTIVITY: PROPERTIES UNDER CONSTRUCTION

SUBMARKET PROPERTY NAME DEVELOPER UNITS FINISH Michigan Avenue Real Estate The Loop Madison Aberdeen Place 81 03/14 Group The Loop 73 East Lake M&R Development LLC 332 04/14 White Oak Realty Partners LLC/ The Loop Arkadia Tower 350 04/15 Campus Acquisitions LLC Michigan Avenue Real Estate The Loop 26 Aberdeen Street 54 06/14 Group The Loop Madison at Racine (The) Ascend Real Estate Group 216 09/14 The Loop AMLI on Clark AMLI Residential 398 10/14 HUBBARD PLACE CHICAGO The Loop Catalyst * Marquette Companies 223 10/14 The Loop 111 West Wacker Drive * The Related Companies 504 08/14 Streeterville/River North 212 West Illinois Illinois Franklin Associates LLC 188 01/15 Streeterville/River North 435 North Park DRW Holdings LLC 398 01/15 Streeterville/River North Hubbard Place The Habitat Company 450 01/14 Streeterville/River North 845 North State Newcastle Limited 367 02/15 JDL Development/Harlem Irving Streeterville/River North Scott Street Flats 71 05/14 Companies Streeterville/River North 220 West Illinois Street Gerding Edlen/Fred Latsko 188 10/14 Lincoln Park/Lakeview Belden Stratford Laramar Group 297 01/15 Lincoln Park/Lakeview Webster Square Sandz Development 75 12/14 Lincoln Park/Lakeview Halsted Flats JDL Development 269 11/14 Carroll Properties Inc/Fifield North Cook County E2 368 07/15 Companies North Cook County Ravenswood Terrace Belgravia Group Ltd 150 10/14 North Cook County Midtown Square Trammell Crow Residential 142 11/14 Arlington Heights/Palatine/ One Arlington Stoneleigh Companies LLC 214 09/14 Mount Prospect Central DuPage County Wheaton 121 Morningside Group 306 03/14 Oaks at Naperville Crossings Naperville Lennar Multifamily Investors LLC 298 12/14 (The) Lake County/Kenosha Oaks of Vernon Hills (The) REVA Development Partners LLC 304 05/15 Lake County/Kenosha AMLI Deerfield AMLI Residential 240 07/15 Far West Chicago Suburbs Randall Highlands Next Generation Development 146 01/14

MARKET STATISTICS According to MPF Research, occupancies fell 80 basis points in the fourth quarter from the third quarter as Chicago posted its worst quarterly occupancy performance since the recession. A combination of large supply volumes and net seasonal move-outs left the overall occupancy rate for the metro area at 95 percent. Despite this decline in overall occupancies, year-over-year rent growth levels have sustained at 2.6 percent in the fourth quarter which was in-line with similar performance seen over the previous four quarters. The Chicago metro area has averaged rent growth rates of 4 percent for the trailing three-year period.

P. 11 | COLLIERS INTERNATIONAL RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

Q4 2013 - CITY OF CHICAGO METRO AREA SNAPSHOT Occupancy Rent

Current Change Monthly Change Niche Rate Qtly Annual Rent Qtly Annual Year Built 2000+ 92.30% -2.40% -1.80% $1,776 -2.80% 0.80% 1990s 95.80% -0.10% 0.60% $1,276 -1.40% 1.30% 1980s 95.40% -0.80% 0.00% $1,279 -0.50% 3.30% 1970s 95.20% -0.20% -0.70% $982 -0.90% 3.30% Pre-1970 95.80% -0.90% 0.60% $1,078 2.40% 3.60% Building Height Low-Rise 95.50% -0.50% 0.00% $1,015 -0.40% 2.30% Mid-Rise 94.90% 0.90% 0.40% $1,111 -1.20% 4.30% High-Rise 94.00% -1.90% -1.20% $1,637 -1.00% 2.80% Unit Type Efficiency/Studio 93.40% -2.00% -2.00% $1,166 -0.80% 1.60% 1 BR 95.20% -0.60% -0.20% $1,118 -1.20% 2.00% 2 BR 95.00% -0.80% -0.20% $1,272 -0.60% 3.00% 3 BR 94.80% -0.80% -0.50% $1,643 1.00% 4.70% Metro Average 95.00% -0.80% -0.30% $1,214 -0.70% 2.60%

CITY OF CHICAGO SNAPSHOT BY SUBMARKET STREETERVILLE/ LINCOLN PARK/ SOUTHEAST THE LOOP RIVER NORTH LAKEVIEW CHICAGO Existing Units 18,877 31,566 50,880 108,268 Occupancy 93.10% 92.70% 97.60% 93.50% Annual Change -2.30% -2.20% -0.30% 0.30% Avg. Monthly Rent $1,931 $1,922 $1,546 $1,020 Avg. Monthly Rent $2.38 $2.42 $2.01 $1.40 Per Square Foot Annual Inventory 6.20% 5.70% 0.00% 0.60% Change 2014 Occupancy 90.30% 93.00% 97.20% 94.00% Forecast

SUBURBAN CHICAGO SUBMARKET SNAPSHOT NORTH COOK SOUTH COOK COUNTY COUNTY DUPAGE COUNTY LAKE COUNTY Existing Units 244,775 75,248 66,171 37,059 Occupancy 96.0% 95.0% 95.3% 96.3% Annual Change +0.7% +0.5% -1.0% +0.8% Avg. Monthly Rent $1,137 $916 $1,124 $982 Avg. Monthly Rent $1.33 $1.09 $1.26 $1.15 Per Square Foot Annual Inventory -0.1% +0.5% +1.6% +0.1% Change 2014 Occupancy 96.0% 95.1% 95.5% 96.3% Forecast

Source: MPF Research®

COLLIERS INTERNATIONAL | P. 12 RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

TRANSACTION VOLUME Few core assets were placed on the market in 2013 despite strong investor demand for downtown Chicago multi-family properties. Overall sales volume for the city rose 19 percent with most transactions concentrated in the Lakeview, Rogers Park, and South Shore neighborhoods. Highlights for the year include the sale of the 250-unit 1225 Old Town to Heitman from Northwestern Mutual for $165.9 million, translating to a record breaking $627,626 per unit.

2013 LARGE MULTI-FAMILY INVESTMENT SALE TRANSACTIONS | DOWNTOWN CHICAGO

PRICE PER 1225 OLD TOWN DATE PROPERTY UNITS TOTAL PRICE ($) UNIT ($) CAP RATE SOLD FOR $627,626 PER UNIT Sale Pending 2555 N. Clark 162 $53,000,000 $327,160 Sub 5% 12/10/2013 The Belden-Stratford 297 $86,750,000 $292,088 4.78% 2300 N. Lincoln Park West 12/5/2013 Reside Ravenswood 150 $13,000,000 $86,667 - 4543 N. Dover St. 10/15/2013 The Lex 332 $120,328,655 $362,436 - 2138 S. Indiana Avenue 10/10/2013 Mondial Apartments 141 $57,500,000 $407,801 5.25% 910 W. Huron Street 9/4/2013 Kingsbury Plaza 420 $84,634,000 $201,510 - 520 N. Kingsbury Street 8/30/2013 York Terrace 331 $28,491,000 $86,076 6.50% 2701 S. Indiana Avenue 7/25/2013 West Argyle Apartments 62 $8,200,000 $132,258 - 1338-1354 W. Argyle Street 6/5/2013 1225 Old Town 250 $156,906,500 $627,626 - 1225 N. Wells Street 4/4/2013 777 South State 330 $58,500,000 $177,273 6.32% 2 East 8th Street 2/12/2013 Old Town Apartments 54 $8,000,000 $148,148 227-245 W. North Avenue

CAPITALIZATION RATES The average capitalization rate for Chicago through the fouth quarter of 2013 was 6.5 percent as reported by Real Capital Analytics. Cap rates are expected to remain in a very tight range through 2017 and remain compressed despite interest rate uncertainty in the capital markets.

HISTORICAL MARKET PERFORMANCE CHICAGO METRO AREA UNITED STATES ACTUAL CHG VS PRIOR ACTUAL CHG VS PRIOR Volume $ (mil) past 12 mos. $2,219.60 4% $102,111.30 17% Q4 ‘13 $693.40 36% $30,214.90 41% No. of past 12 mos. 124 33% 5,750 7% properties Q4 ‘13 36 16% 1,819 27% Total units past 12 mos. 17,191 21% 929,052 9% Q4 ‘13 5,473 12% 295,532 34% Price $/unit past 12 mos. $135,172 -15% $113,180 3% Q4 ‘13 $113,218 -11% $120,074 12% Avg Cap Rate past 12 mos. 6.80% 43 bps 6.20% 2 bps Q4 ‘13 6.50% unch 6.20% -9 bps

Source: Real Capital Analytics®

P. 13 | COLLIERS INTERNATIONAL RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

Q4 2014 FORECAST BY SUBMARKET

ANNUAL ANNUAL OCCUPANCY ANNUAL SUBMARKET DEMAND OCCUPANCY CHANGE SUPPLY Chicago 4,201 95.0% 0.00% 4,423 The Loop 1,212 90.3% -2.80% 1,938 Streeterville/River North 747 93.0% 0.30% 709 Lincoln Park/Lakeview 174 97.2% -0.40% 424 Southeast Chicago 570 94.0% 0.50% 96 South Cook County 70 95.1% 0.10% 0 North Cook County 425 96.3% 0.10% 292 Arlington Heights/Palatine/ 129 96.1% -0.30% 214 Mount Prospect Schaumburg 33 95.7% 0.20% 0 North DuPage County 167 95.4% 0.90% 0 Central DuPage County 258 96.0% -0.20% 306 Southeast DuPage County 19 96.0% 0.10% 0

EMPLOYMENT According to the Bureau of Labor Statistics, the metropolitan Chicago area added 60,300 jobs during the year-ending November 2013, which was a 1.4% increase in the employment base. The professional and business services sector accounted for 28,600 jobs which was nearly half of Chicago’s recent job growth. Employment is expected to pick up in 2014 and MPF Research has forecast that some 70,000 jobs will be added in the metropolitan Chicago area in 2014 which would expand the employment base by 1.6 percent. This increase in labor would bring the metro’s overall employment to nearly 96,000 jobs ahead of the first quarter 2008 level. This level of growth would be significant as it would mean the metro would have successfully recouped all jobs lost to the recession and therefore has begun to expand.

COLLIERS INTERNATIONAL | P. 14 RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

Retail

THE BIG PICTURE While core properties and single tenant retail continued to dominate the retail investment marketplace throughout 2013, a notable rebound in prices occurred across the entire retail investment spectrum throughout the year. Investors appeared to re-embrace the sector in 2013, as was particularly evident in the marked increase in un-anchored strip center sales as well as a resurgence of activity throughout higher yielding secondary and tertiary markets. Sales of retail properties nationally totaled $60.8 billion in 2013, up 8 percent from 2012, and were paced by the increased sales of strip centers as well as the continuously-active single-tenant marketplace. A common trend throughout the investment markets in 2013 was the outperformance of property types and markets that had previously experienced a weakened recovery. In the retail sector specifically, the standout in terms of increasing sales volume was un-anchored strip centers, where volume surged 26 percent and prices spiked by 27 percent year-over-year. That asset class may even have greater upside, as prices still remain 32 percent below peak pricing levels in 2006 and 2007. 2013 was also a year that saw investors become less risk-averse and begin to pursue properties in markets that had previously lagged in the recovery. Correspondingly, volume in the non-major metros grew 23 percent year-over-year in 2013.

CAPITALIZATION RATE COMPRESSION Cap rate compression continued throughout 2013 for single-tenant retail properties, ending the year at an average cap rate of 6.8 percent across all tenants nationally. Cap rates for strip centers also experienced a slight decrease throughout the year, registering a 17 bps decrease and ending the year at 7.4 percent. It should be noted that average cap rates for strip centers are impacted by opportunistic and value-add investors chasing higher yield. On the whole, average cap rates across all retail property types declined by approximately 20 bps in 2013, ending the year at 7.0 percent.

P. 15 | COLLIERS INTERNATIONAL RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

LEASING FUNDAMENTALS Many have noted that recent retail investment trends reflect a capital environment that has nearly fully recovered. Nevertheless, retail leasing fundamentals have only recently started to improve, if at all, as overall vacancy rates continue to ebb on a market-by-market basis. Moving forward, gradual improvements in leasing fundamentals, corresponding market stabilization, and finally the subsequent improvement in NOIs is what will ultimately contribute to price appreciation of retail property, as opposed to solely cap rate compression. Fortunately, in many markets limited new development will assist in the recovery of rents and occupancies. Chicago’s overall retail vacancy rate ended 2013 just below 9 percent, remaining relatively flat throughout the year but registering a slight increase in the fourth quarter. Average quoted retail rental rates throughout Chicago also remained flat throughout 2527 WEST GOLF ROAD the year, ending the fourth quarter at $15.81 per square foot (down 0.19% YOY). Some of the larger HOFFMAN ESTATES, IL lease signings occurring throughout Chicagoland this year included: Brunswick Zone (80,425 SF renewal in Naperville, IL), Old Time Pottery (78,158 SF at 1935 N. Neltnor Blvd), and Mariano’s Fresh Market (75,564 SF at Glen Gate).

P. 16 | COLLIERS INTERNATIONAL RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

CHICAGO: THE SECOND MOST ACTIVE RETAIL INVESTMENT MARKET IN THE U.S. Retail property prices on both coasts generally outperformed Midwestern and Southern markets in 2013. Regionally, the Midwest posted the weakest price appreciation for retail properties. However, with prices still 39 percent below peak levels, it is potentially poised for a long awaited rebound in 2014. Chicago specifically registered an 8 percent gain in retail sales volume YOY, leapfrogging Manhattan and ending the year as the second most active retail market in the United States, only behind Los Angeles. Total retail sales volume in Chicago in 2013 was $3.55 billion, just behind LA at $3.58 billion and ahead of Manhattan at $3.45 billion. Notably, Chicago was the only major metro of the top four retail investment markets in the United States to register year-over-year increases in sales volume. Los Angeles, Manhattan, and Dallas – which round out the top four markets – registered decreases of 2 percent, 36 percent, and 5 percent, respectively.

CHICAGO’S TOP RETAIL INVESTMENT SALES OF 2013 Chicago was home to four of the top 25 retail investment sales nationally in 2013. These sales were (by national rank):

2. retail (Chicago, IL): $410,000,000 ($1,054 per square foot) 10. 830 N. Michigan Avenue (Chicago, IL): $166,000,000 ($1,317 per square foot) 15. Barney’s New York (Chicago, IL): $154,500,000 ($1,627 per square foot) 21. Geneva Commons (Geneva, IL): 124,500,000 ($285 per square foot) Additional noteworthy Chicagoland retail investment sales in 2013 included: >> Woodfield Village Green (Schaumburg, IL) for $119,000,000 ($234 per square foot) >> (Orland Park, IL) for $109,000,000 ($183 per square foot) >> Church Street Plaza (Evanston, IL) for $70,150,000 ($399 per square foot) >> Broadview Village Square (Broadview, IL) for $63,000,000 ($404 per square foot) >> BHLDN/Brioni (12 E. Walton, Chicago, IL) for $22,500,000 ($2,729 per square foot) >> Clybourn Galleria (Chicago, IL) for $11,750,000 ($469 per square foot)

GENEVA COMMONS GENEVA, IL SOLD FOR $285 PER SQUARE FOOT

WATER TOWER PLACE CHICAGO, IL SOLD FOR $1,054 PER SQUARE FOOT

P. 17 | COLLIERS INTERNATIONAL RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

CAPITAL FLOWS – CHICAGO While total investment was up in 2013, the proportion of where those investment dollars came from changed in a few categories. The most noticeable decline was in institutional investment, which as a total percentage of investment decreased by 20%. The difference was made up for with increases in foreign and private investment.

CAPITAL FLOWS

BUYER TYPES Chicago United States

7% 12% 14% 9%

15% 16% 45% 25%

46% 29% 39% Cross-Border Institutional Public Listed/REITs 33% Private 43% User/Other 8% 34% 43% 33% 26% 33% 17% 6% 2013 2010 2011 2012 2013 (YTD)

Rounded gures may not add up to 100% *Source: Real Capital Analytics

LOOKING AHEAD: WHAT WE EXPECT IN 2014 Looking ahead to 2014, we expect more of the same. As investor demand cannot be met by a supply- constrained market, cap rate compression will continue. We also expect investor focus to remain primarily bifurcated, with continued emphasis on either core or value-add (higher yield) opportunities. Moreover, if retailer performance is able to increase, we expect to see acceleration in rents, and therefore pricing increases as well additional cap rate compression.

P. 18 | COLLIERS INTERNATIONAL RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

Seniors Housing Although 2013 was a fairly robust year in terms of transactions of existing properties, the seniors industry experienced a significant transition from facility-based transactions to new development transactions. There were 21 transactions totaling $357,101,824 reported, 12 of which were dedicated Nursing Care (NC) facilities. NC sales of $159,873,606 represented 45 percent of total transaction volume. The Nursing Care provider industry is greatly tied to the Medicare and Medicaid reimbursable market. This reliance on government-based payments has resulted in the segment experiencing slippage in monthly rates and occupancies and therefore capitalization rates in excess of those in the primarily- SENIORS HOUSING CLASSIFICATIONS Assisted Living segment. According to Integra Realty Resources (Market Trends 2014), the national Widely accepted definitions of Seniors Housing, range of cap rates for NC properties was 12-14 percent with primarily-AL properties trading in the 6 from those with least amount of care and to 8 percent range. Primarily-Assisted Living facility transactions experienced per unit values services to those requiring nursing care for between $67,231 and $267,960, averaging $155,171. The newer facilities performed at the upper end residents, are Independent Living (IL), Assisted of the range with that trend expected to continue. Living (AL), which might or might not include 2013 CHICAGO AREA TOP SALES TRANSACTIONS Memory Care (MC) dedicated units and Nursing Care (NC). TOTAL BUYER CLOSE PRICE PROPERTY NAME/LOCATION UNITS SELLER SALE DATE PRICE PER UNIT Lincolnwood Place Griffin American Healthcare REIT II $84,038,360 299 12/15/2013 IL Independent Living Chicago Senior Lifestyle Corp $281,065 Forestview Rehabilitation & Nursing Forest View Nursing Realty LLC $6,600,000 AL Assisted Living 144 11/27/2013 Itasca First Chicago Bank & Trust $45,833 MC Memory Care Pavilion Of Waukegan II Pavilion of Waukegan Realty LLC $3,425,000 109 11/1/2013 NC Nursing Care Waukegan Extended Care Clinical LLC $31,422 Park Pointe Morris Senior Living Feiner Investment Corp $18,164,613 142 11/1/2013 Morris Morris Real Estate Holdings I LLC $127,920 Avalon Springs Health Campus Trilogy Healthcare Services LLC $11,469,996 132 10/25/2013 Valparaiso HealthLease Properties REIT $86,894 International Village YAM Management LLC (IL) $13,349,000 208 10/24/2013 Chicago Daniel Rothner Trust $64,178 Embassy Care Center YAM Management LLC (IL) $6,300,000 171 10/16/2013 Wilmington Embassy Holdings LLC $36,842 Tower Hill Healthcare Center Tower Hill Property LLC $8,280,000 206 8/27/2013 South Elgin Kane Street Property LLC $40,194 Three Oaks Assisted Living Spectrum Retirement Communities $18,494,647 80 8/12/2013 Cary Kimco Realty Corp $231,183 Evergreen Healthcare Center Legacy Healthcare Financial Services $12,200,000 242 8/5/2013 Evergreen Park First Investments Corp $50,413 Warren Barr Pavilion Legacy Healthcare Financial Services $22,685,000 271 8/5/2013 Chicago First Investments Corp $83,708 Westshire Nursing & Rehab Westshire Nursing Realty LLC $10,000,000 485 7/25/2013 Cicero Extended Care Clinical LLC $20,619 Norridge Healthcare & Rehab Feiner Investment Corp $39,500,000 292 7/16/2013 Harwood Heights Lancaster Health Group $135,274 Sunrise of Gurnee Health Care REIT $6,508,930 60 7/1/2013 Gurnee CNL Financial Group (CNL) $108,482 Sunrise of Schaumburg Health Care REIT $5,512,931 82 7/1/2013 Schaumburg CNL Financial Group (CNL) $67,231 Sunrise of Naperville North Health Care REIT $6,233,781 77 7/1/2013 Naperville CNL Financial Group (CNL) $80,958 Sunrise of Flossmoor Health Care REIT $4,168,313 62 7/1/2013 Flossmoor CNL Financial Group (CNL) $67,231 Sunrise at Fountain Square Health Care REIT $37,979,287 142 7/1/2013 Lombard CNL Financial Group (CNL) $267,460 Sunrise of Crystal Lake Health Care REIT $6,291,966 58 7/1/2013 Crystal Lake CNL Financial Group (CNL) $108,482 Providence Healthcare & Rehab FNR Healthcare Group $28,000,000 LINCOLNWOOD PLACE 356 4/30/2013 CHICAGO, IL South Holland Providence Life Services $78,652 SOLD FOR $281,065 PER UNIT Berwyn Rehab and Care Center Courtyard Realty At Berwyn LLC $7,900,000 145 1/3/2013 Berwyn Fairfax Health Care Props LLC $54,483

P. 19 | COLLIERS INTERNATIONAL RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

2013 CONSTRUCTION PLANNING

PROJECT ADDRESS STAGE UNITS Route 137 & Peterson Road Renaissance at Prairie Crossing Senior Assisted Living Facility Planning 204 Grayslake 3053 W. Franklin Boulevard Assisted Living Facility Pre-Planning Chicago Quentin Rd & NW Highway Senior Assisted Living Facility - Design/Build Planning 75 Palatine 1040 Dixie Highway S.Suburban Supportive Living Chicago Heights, IL Planning 144 Chicago Heights Founders Dr & Kamp Drive Northbrook Manor Senior Assisted Living Facility Planning 87 Northbrook 225 W Touhy Avenue Executive Plaza Senior Housing Building w/Activity Center Planning 50 Park Ridge 219 Parkway Drive Heritage Woods of Wheaton Assisted Living Facility Planning 84 Wheaton 1340 River Street Aurora Memory Care Assisted Living Facility Planning 49 Aurora 5820 151st Street Priory Estates Senior Living Facility Planning 110 Oak Forest 1000 Sunset Ridge Road North Shore Place Memory Care Building (Phase 3) Planning 76 Northbrook Wheeler Rd & Route 47 Hampstead Court Assisted Living Facility Planning 150 Sugar Grove Summit St &Indiana Avenue Hospice Care Facility (Master Report) Pre-Planning 78 Crown Point, IN Gurnee Autumn Leaves Memory Care Planning Arlington Heights NORTH SHORE PLACE Woodbine & Milwaukee Ave Memory Care Alzheimer's Care Facility Planning 66 NORTHBROOK, IL Vernon Hills 76 PLANNED UNITS Route 45 & 120 Journey Senior Living at Grayslake Planning 84 Grayslake 215 Bartlett Road Autumn Leaves of South Barrington Memory Care Planning 46 Barrington Calhoun & Tryon Street Woodstock Assisted Living Facility Pre-Planning 56 Woodstock 7800 Rhode Island Street Memory Care Facility Planning 50 Merrillville, IL 3535 N Ashland Avenue Artis Assisted Living Facility & Parking Garage Planning 118 Chicago Hunt Club Road Supportive Living Facility Pre-Planning 120 Gurnee 896 N Quentin Road Deer Grove Memory Care Design/Build Planning 69 Palatine 1000 Sunset Ridge Road North Shore Assisted Living Dementia Care Facility (Phase 2) Planning 32 Northbrook 5019 N Winthrop Avenue Uptown Supportive Living Planning 246 Chicago 300 W 22nd Street Lombard Assisted Living & Memory Care Facility Bidding 80 Lombard 21840 West Lake Cook Rd Solana Assisted - Independent Living and Parking Garage Underway 180 Deer Park 959 Lee Street Lee Street Assisted Living Facility Pre-Planning 60 Des Plaines 3000 Des Plaines Avenue Caledonian House Assisted-Living Residence Pre-Planning 103 Riverside 2400 Lacey Road Supportive Living Facility Bidding 100 Downers Grove Geneva & Blomingdale Road Autumn Leaves Memory Care (Glen Ellyn) Final Planning 40 Glen Ellyn

P. 20 | COLLIERS INTERNATIONAL RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

ELDERLY ADULTS AS A SHARE OF THE U.S. ACTIVE INVESTORS POPULATION 2000-2050 ELDERLY ADULTS AS A SHARE OF THE U.S. POPULATION Nationally, this segment has been dominated by publicly traded and privately held REITs. In the 25% Chicago market, the 2013 activity was in excess of $150,000,000, controlled by REITs. It should be Baby Boomers Baby Boomers Start Turning 65 Start Turning 85 noted that two transactions accounted for approximately $112,000 of this volume. This factor is not

20% lost on the capital markets focused on the seniors housing industry. Recognizing the dearth of Class Ages 85 or Older 2.3% A or B primarily-Assisted Living properties, the capital markets, dominated by national REITs, have begun to infuse the investment market with capital for ground-up facility development. In most 15% 6.9% Ages 75 to 84 instances, they have directed their favored Operating Partners to locate appropriate sites for 1.8% 1.5% development in prime markets throughout the country, Chicago among the most prime. 10% 4.3% 4.2% Senior living developers and providers such as Silverado, Spectrum, South Bay Partners, Artis, Randall Residence and Autumn Leaves have proceeded with significant new acquisitions for the 5% 10.5% Ages 65 to 74 purpose of developing new Assisted Living and Memory Care facilities in prime suburban Chicago 6.5% 7.1% markets. Chicago-based senior providers have been aggressive as well with Senior Lifestyle and 0% Pathway, among others, undertaking expansion/development programs. According to NIC MAP, the 2000 2010 2020 2030 2040 2050 leading research resource of senior housing data, this trend will increase based on several factors. Source: Congressional Budget O ce tabulations based on population projections reported in The 2012 Long-Term Budget Outlook (June 2012). www.cbo.gov/publication/43288. The first Baby Boomers turned age 65 in 2011, with an additional 10,000 Boomers each day or

Note: Members of the baby-boom generation (people born between 1946 and 1964) started 360,000 annually. Unlike their predecessors, these Boomers stay active longer, with better health turning 65 in 2011 and will turn 85 beginning in 2031. and eventually look for some form of senior housing as they age, closer to home. The desire to be near family, friends and the communities they have grown with, has guided their search in the same markets they have resided in for many years. The growth and development of senior housing facilities is primarily a suburban based phenomenon. This is based on the availability of suitable development sites and the nature of demographics/economics in wider trade areas in the suburbs.

ANNUALIZED TOTAL RETURNS

18

16

14

12

Seniors Housing 10 Apartment

Percent Retail 8 Industrial O‚ce Total 6

4

2

0 1 1 Year 3 Years 5 Years 8 Years

Source: AEW Research, NCREIF

P. 21 | COLLIERS INTERNATIONAL RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

SUPPLY AND DEMAND Development of senior housing facilities is based on need-driven economics. Developers and their financial resources determine the senior housing need of a trade area, taking into consideration existing facilities and those in planning and development, resulting in a definable number of the size facility and anticipated performance. As of fourth quarter 2013, there were 27 new developments in planning, accounting for approximately 2557 units. Senior housing developers and investors have identified private pay Assisted Living as the focus of new development. Most seniors are able to age in place in their early Boomer years with the average age of Assisted Living residents in the low- to mid-80s Chicago-based based Assisted Living facilities averaged 87.6 percent stabilized occupancy with an average rent of $4,486 monthly. Most Class A newer facilities are approaching 90 percent occupancies with even higher rents for Levels of Care fees. Unlike many other asset classes, this self-limiting factor has kept the investment potential of senior housing from out-performing Apartment, Retail, Industrial and Office segments over the last one, five and eight-year periods. Senior housing is not as cyclical by nature and is driven by a population component that will fuel its demand for many years to come. According to NIC data, there were 115 properties, comprising 10,547 AL units in the Chicago market, in the fourth quarter of 2013. With the properties already in the pipeline, there is significant capacity to approach that number, albeit the new projects will be primarily Assisted Living focused with Memory Care components in many instances. Limiting factors, in addition to the avoidance of unit duplication in a submarket, will be the availability of appropriate sites for new construction and the willingness of certain municipalities to have further senior housing development on land zoned for more intense uses. The availability of abundant capital for new development, the high occupancy rates and rental rates of existing facilities and the downward pressure on existing facility cap rates will all foster continued strong and sustainable growth of new senior housing properties through 2016.

2013 INVENTORY QUARTER # PROPERTIES # UNITS OCCUPANCY STABILIZED OCCUPANCY ABSORPTION INVENTORY GROWTH # PROPERTIES UNDER CONSTRUCTION UNDER # UNITS CONSTRUCTION RENT ANNUAL GROWTH RENT AVG

1Q2013 111 10,255 83.7% 85.6% -40 90 10 820 1.7% $4,445 2Q2013 112 10,398 83.5% 85.7% 91 143 9 676 2.3% $4,456 3Q2013 113 10,443 84.9% 87.6% 185 45 9 676 2.7% $4,485 4Q2013 115 10,547 85.0% 87.6% 100 104 7 568 2.2% $4,486 1Q2013 212 35,221 84.5% 85.7% 158 169 13 935 1.9% $3,231 2Q2013 213 35,407 84.4% 85.7% 135 186 12 872 1.1% $3,238 3Q2013 215 35,509 85.1% 86.5% 319 102 11 814 0.6% $3,244 4Q2013 217 35,607 86.0% 87.1% 397 98 9 706 0.8% $3,252

P. 22 | COLLIERS INTERNATIONAL RESEARCH REPORT | Q4 2013 | CHICAGO | INVESTMENT

482 offices in 62 countries on 6 continents

> $2.0 billion in annual revenue > 979 million square feet under management > Over 13,500 professionals

@ColliersChicago

CONTACTS: Office Tony Smaniotto, Executive Vice President [email protected]

Industrial Steve Disse, Principal [email protected]

Multi-Family Brian Pohl, Executive Vice President [email protected]

Retail Peter Block, Executive Vice President [email protected]

Seniors Housing Jeff Hyman, Senior Vice President [email protected]

Accelerating success.

www.colliers.com/marketname