Patio Del Cielo SHERMAN OAKS, CA

OFFERING MEMORANDUM Patio Del Cielo

SHERMAN OAKS, CA

CONFIDENTIALITY AND DISCLAIMER

The information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Marcus & Millichap and should not be made available to any other person or entity without the written consent of Marcus & Millichap. This Marketing Brochure has been prepared to provide summary, unverified information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough due diligence investigation. Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, the future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB's or asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any tenant’s plans or intentions to continue its occupancy of the subject property. The information contained in this Marketing Brochure has been obtained from sources we believe to be reliable; however, Marcus & Millichap has not verified, and will not verify, any of the information contained herein, nor has Marcus & Millichap conducted any investigation regarding these matters and makes no warranty or representation whatsoever regarding the accuracy or completeness of the information provided. All potential buyers must take appropriate measures to verify all of the information set forth herein.

NON-ENDORSEMENT NOTICE

Marcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation’s logo or name is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, or commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers.

ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY. PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS. Patio Del Cielo

TABLE OF CONTENTS

Section 1 PRICING AND FINANCIAL ANALYSIS

Section 2 PROPERTY DESCRIPTION

Section 3 RECENT SALES

Section 4 RENT COMPARABLES

Section 5 MARKET OVERVIEW

Section 6 DEMOGRAPHIC ANALYSIS PRICING AND FINANCIAL ANALYSIS

Patio Del Cielo SHERMAN OAKS, CA Patio Del Cielo SHERMAN OAKS, CA PRICING AND FINANCIAL ANALYSIS

OFFERING SUMMARY Unit Mix No. of Unit Approx. Units Type Square Feet

12 2 Bdr 2 Bath 1,048

4 2 Bdr 2 Bath 1,113

14 2 Bdr 2 Bath 1,115 - 1,162

1 3 Bdr 2 Bath 1,782 31 Total 38,657

Major Employers

Kaiser Permanente Northrop Grumman Corp. The Boeing Co. Price $18,500,000 Kroger Co. Down Payment 100% / $18,500,000 Cedars-Sinai Medical Center Price/Unit $596,774 Price/SF $478.57 University of Southern California Number of Units 31 Target Gross Square Feet 38,657 Bank of America Corp. Number of Buildings 1 The Home Depot Year Built 2010 Lot Size 14,967 SF Providence Health & Services

Vital Data Demographics CAP Rate - Current 3.08% 1-Mile 3-Miles 5-Miles GIM - Current 18.51 Net Operating Income - Current $570,648 Demographics2014 Total 20,882 145,992 444,452 Total Return - Current 3.1% / $570,648 Population CAP Rate - Pro Forma 3.81% 2019 Total 21,175 148,017 450,722 GIM - Pro Forma 16.19 Population Net Operating Income - Pro Forma $705,438 2014 Total 10,210 61,825 172,827 Total Return - Pro Forma 3.8% / $705,438 Households 2019 Total 10,374 62,883 175,817 Households Median HH Income $69,671 $65,150 $55,147

Per Capita Income $56,626 $47,842 $37,581 (based on Total Population) Average (Mean) HH $115,761 $112,567 $96,228 Income

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 X0121267 Marcus & Millichap. All rights reserved. Patio Del Cielo SHERMAN OAKS, CA PRICING AND FINANCIAL ANALYSIS

FINANCING

Existing Financing Loan Type Other

Please contact Listing Agent.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 2 Patio Del Cielo SHERMAN OAKS, CA PRICING AND FINANCIAL ANALYSIS

UNIT MIX

No. of Unit Approx. Rent/ Monthly Pro Forma Rent/ Monthly Current Rents Units Type Square Feet SF Income Rents SF Income 12 2 Bdr 2 Bath 1,048 $2,360 - $2,665 $2.32 $30,274 $2,900 $2.48 $34,800 4 2 Bdr 2 Bath 1,113 $2,565 - $2,718 $2.37 $10,592 $2,950 $2.47 $11,800 14 2 Bdr 2 Bath 1,115 - 1,162 $2,450 - $2,745 $2.20 $36,226 $2,950 $2.46 $41,300 1 3 Bdr 2 Bath 1,782 $2,670 $1.50 $2,670 $3,800 $2.13 $3,800 31 TOTAL 38,657 $79,762 $91,700

Unit Mix Unit Rent & Rent/SF

3B2B: 3%

$2,700 $2.40

$2,400 $2.10

$2,100 $1.80 $1,800 $1.50 $1,500 $1.20 $1,200 $0.90 $900 $0.60 $600

$300 $0.30 2B2B: 97% $0 $0.00 2B2B 2B2B 2B2B 3B2B

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 3 Patio Del Cielo SHERMAN OAKS, CA PRICING AND FINANCIAL ANALYSIS

RENT ROLL

Unit Number Unit Unit Current Rent/ Market Rent/ Type SF Rent SF Rent SF

101 2 Bdr 2 Bath 1,049 $2,621 $2.50 $2,900 $2.76 102 2 Bdr 2 Bath 1,048 $2,360 $2.25 $2,900 $2.77 104 3 Bdr 2 Bath 1,782 $2,670 $1.50 $3,800 $2.13 105 2 Bdr 2 Bath 1,115 $2,520 $2.26 $2,950 $2.65 106 2 Bdr 2 Bath 1,115 $2,450 $2.20 $2,950 $2.65 107 2 Bdr 2 Bath 1,048 $2,431 $2.32 $2,900 $2.77 108 2 Bdr 2 Bath 1,113 $2,565 $2.30 $2,950 $2.65 201 2 Bdr 2 Bath 1,049 $2,590 $2.47 $2,900 $2.76 202 2 Bdr 2 Bath 1,048 $2,695 $2.57 $2,900 $2.77 203 2 Bdr 2 Bath 1,122 $2,539 $2.26 $2,950 $2.63 204 2 Bdr 2 Bath 1,162 $2,745 $2.36 $2,950 $2.54 205 2 Bdr 2 Bath 1,122 $2,470 $2.20 $2,950 $2.63 206 2 Bdr 2 Bath 1,122 $2,610 $2.33 $2,950 $2.63 207 2 Bdr 2 Bath 1,048 $2,443 $2.33 $2,900 $2.77 208 2 Bdr 2 Bath 1,113 $2,642 $2.37 $2,950 $2.65 301 2 Bdr 2 Bath 1,049 $2,615 $2.49 $2,900 $2.76 302 2 Bdr 2 Bath 1,048 $2,410 $2.30 $2,900 $2.77 303 2 Bdr 2 Bath 1,122 $2,745 $2.45 $2,950 $2.63 304 2 Bdr 2 Bath 1,162 $2,685 $2.31 $2,950 $2.54 305 2 Bdr 2 Bath 1,122 $2,495 $2.22 $2,950 $2.63 306 2 Bdr 2 Bath 1,122 $2,505 $2.23 $2,950 $2.63 307 2 Bdr 2 Bath 1,048 $2,450 $2.34 $2,900 $2.77 308 2 Bdr 2 Bath 1,113 $2,667 $2.40 $2,950 $2.65 401 2 Bdr 2 Bath 1,049 $2,665 $2.54 $2,900 $2.76 402 2 Bdr 2 Bath 1,048 $2,534 $2.42 $2,900 $2.77 403 2 Bdr 2 Bath 1,122 $2,540 $2.26 $2,950 $2.63 404 2 Bdr 2 Bath 1,162 $2,620 $2.25 $2,950 $2.54 405 2 Bdr 2 Bath 1,122 $2,670 $2.38 $2,950 $2.63

406 2 Bdr 2 Bath 1,122 $2,632 $2.35 $2,950 $2.63 407 2 Bdr 2 Bath 1,048 $2,460 $2.35 $2,900 $2.77 408 2 Bdr 2 Bath 1,113 $2,718 $2.44 $2,950 $2.65

TOTAL VACANT $0 $0 31 TOTAL OCCUPIED 34,628 $79,762 $91,700 31 TOTAL 34,628 $79,762 $91,700

1) Rent Roll Effective July 12th, 2016

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 4 Patio Del Cielo SHERMAN OAKS, CA PRICING AND FINANCIAL ANALYSIS

INCOME & EXPENSES

Total Number of Units: 31 Total Area (Gross): 38,657 SF

Income Current Per Unit Pro Forma Per Unit GROSS POTENTIAL RENT $957,144 $30,876 $1,100,400 $35,497

Other Income Pet Income $3,955 $128 $3,955 $128 Water, Trash & Cable TV Income $16,690 $538 $16,690 $538 Move Out Charges $17,787 $574 $17,787 $574 Miscellaneous $3,948 $127 $3,948 $127 Total Other Income $42,380 $1,367 $42,380 $1,367

GROSS POTENTIAL INCOME $999,524 $32,243 $1,142,780 $36,864 Vacancy/Collection Allowance (GPR) 3.0% / $28,714 $926 3.0% / $33,012 $1,065 EFFECTIVE GROSS INCOME $970,810 $31,316 $1,109,768 $35,799

Expenses Real Estate Taxes (1.1920%) $220,520 $7,114 $220,520 $7,114 Insurance $28,253 $911 $28,253 $911 Utilities $40,000 $1,290 $40,000 $1,290 Repairs & Maintenance $22,826 $736 $22,826 $736 Operating Costs $32,058 $1,034 $32,058 $1,034 On Site Manager $14,880 $480 $14,880 $480 Management Fee 3.0% / $29,124 $939 3.0% / $33,293 $1,074 General & Administrative $7,500 $242 $7,500 $242 Reserves & Miscellaneous $5,000 $161 $5,000 $161 TOTAL EXPENSES $400,161 $12,908 $404,330 $13,043 Expenses per SF $10.35 $10.46 % of EGI 41.2% 36.4%

NET OPERATING INCOME $570,648 $18,408 $705,438 $22,756

Income: Rental Income: Based on Seller's Rent Roll dated 7/22/2016 Pet Income: Based on Seller’s Income Statement (July 2015‐June 2016). Water/Trash/Cable TV Income: Based on Seller’s Income Statement (July 2015‐June 2016). Move Out Charges: Based on Seller’s Income Statement (July 2015‐June 2016), minus outlying month of Dec 2015, which was $10,708. Miscellaneous Income: Based on Seller’s Income Statement (July 2015‐June 2016). Categories include: Deposit Forfeit, Late Fee, NSF Check Fee, Application Fee, Miscellaneous Income, Code Enforcement fee and Bad Debt Move Out Charges. Vacancy/Collection Allowance (GPR): Based on estimated 3 Percent vacancy rate.

Expenses: Real Estate Taxes: Based on published 2014‐2015 rate per LA County Tax Assessor website. Insurance: Based on Seller’s Income Statement (July 2015‐June 2016). Utilities: Based on Seller’s Income Statement (July 2015‐June 2016). (Includes: electricity, gas, water, sewer, water billing) Repairs and Maintenance: Based on Seller’s Income Statement (July 2015‐June 2016). Operating Costs: Based on Seller’s Income Statement (July 2015‐June 2016). On‐site Manager: Estimated at $40 per unit, per month. Management Fee: Based on estimated 3 Percent of EGI. General & Administrative: Estimated at $7,500 per year. Reserves & Miscellaneous: Estimated at $5,000 per year

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 5 Patio Del Cielo SHERMAN OAKS, CA PRICING AND FINANCIAL ANALYSIS

FINANCIAL OVERVIEW Location Annualized Operating Data 4410 Sepulveda Boulevard Sherman Oaks, CA 91403 Income Current Pro Forma Gross Potential Rent $957,144 $1,100,400 Price $18,500,000 Other Income $42,380 $42,380 Down Payment 100% / Gross Potential Income $999,524 $1,142,780 Number of Units 31 Less: Vacancy/Deductions (GPR) 3.0% / $28,714 3.0% / $33,012 Price/Unit $596,774 Effective Gross Income $970,810 $1,109,768 Gross Square Feet 38,657 Less: Expenses $400,161 $404,330 Price/SF $478.57 Net Operating Income $570,648 $705,438 CAP Rate - Current 3.08% Net Cash Flow Before Debt Service $570,648 $705,438 CAP Rate- Pro Forma 3.81% GIM - Current 18.51 Expenses GIM- Pro Forma 16.19 Real Estate Taxes $220,520 $220,520 Year Built 2010 Insurance $28,253 $28,253 Lot Size 14,967 SF Utilities $40,000 $40,000 Type of Ownership Fee Simple Repairs & Maintenance $22,826 $22,826 Operating Costs $32,058 $32,058 On Site Manager $14,880 $14,880 Management Fee $29,124 $33,293 General & Administrative $7,500 $7,500 Reserves & Miscellaneous $5,000 $5,000 Total Expenses $400,161 $404,330 Expenses/unit $12,908 $13,043 Expenses/SF $10.35 $10.46 % of EGI 41.22% 36.43%

Scheduled Income

No. of Unit Approx. Current Rents Rent/ Monthly Pro Forma Rent/ Monthly Units Type Square Feet SF Income Rents SF Income

12 2 Bdr 2 Bath 1,048 $2,360 - $2,665 $2.32 $30,274 $2,900 $2.48 $34,800 4 2 Bdr 2 Bath 1,113 $2,565 - $2,718 $2.37 $10,592 $2,950 $2.47 $11,800 14 2 Bdr 2 Bath 1,115 - $2,450 - $2,745 $2.20 $36,226 $2,950 $2.46 $41,300 1 3 Bdr 2 Bath 1,782 $2,670 $1.50 $2,670 $3,800 $2.13 $3,800 31 Total/Wtd. Avg. 38,657 $79,762 $91,700

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 6 PROPERTY DESCRIPTION

Patio Del Cielo SHERMAN OAKS, CA Patio Del Cielo SHERMAN OAKS, CA PROPERTY DESCRIPTION

INVESTMENT OVERVIEW

Investment Highlights

■ Trophy Asset in Prime Sherman Oaks

■ Irreplaceable Location South of Ventura Boulevard

■ Tentative Tract Map for Condominiums

■ Rooftop Deck with Gardens, Lounge Areas, BBQ and Tiled Walkways ■ Hardwood Floors with Distressed Walnut Finish ■ Granite Countertops with Mosaic Glass Backsplash

■ Hand Distressed and Finished Custom Cabinetry ■ Subterranean Parking, Resident Kiosk, Controlled Entry, Elevator, Trash Chute

Marcus and Millichap is pleased to market Patio Del Cielo, an extremely prime, beautiful 31-unit luxury apartment complex located in one of the best locations of Sherman Oaks. The property, which was constructed in 2010, is located on Sepulveda Boulevard, approximately three blocks south of Ventura Boulevard. This location is extremely desirable as it has easy access to both the 405 and 101 Freeways, is walking distance to the Sherman Oaks Galleria, a block south of a Whole Foods Grocery and walking distance to Ventura Boulevard with all the businesses’, restaurants, boutique shopping and services. The Sherman Oaks Galleria has state of the art Movie Theatres, restaurants such as The Cheesecake Factory and PF Changs, and many popular name brand shops.

Patio Del Cielo, prides itself with quality, luxury apartments. The complex consists of thirty two-bedroom/two-bath apartments ranging approximately 1,048-1,162-square feet and one large three-bedroom/two-Bath unit approximately 1,782-square feet.

As one enters the beautiful iron doors to the courtyard, a relaxing water fountain and giant, landscaped trellis softly catch your eye. The entry, courtyard and walk ways are paved with Spanish Saltillo tiles and includes a convenient Kiosk where tenants can pay rent, look at available units on line and other state of the art features. Taking the elevator up to the roof, there is a beautiful roof top deck with views of the Sherman Oaks and Encino Hills and across the San Fernando valley and a beautiful walking path through gorgeous gardens. Additionally, Patio Del Cielo has subterranean parking, 24- hour surveillance, and a spacious elevator. The units themselves all contain elegant designer finishes and features, modern appliances, full size washer and dryers and spacious balconies.

Properties like Patio Del Cielo, rarely ever come available for sale. The investor who can appreciate extreme quality and prime location will want to take a close look at this investment.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 8 Patio Del Cielo SHERMAN OAKS, CA PROPERTY DESCRIPTION

PROPERTY SUMMARY The Offering Property Patio Del Cielo Property Address 4410 Sepulveda Boulevard Sherman Oaks, CA 91403 Assessor's Parcel Number 2276-041-102 Zoning LAR4

Site Description Number of Units 31 Number of Buildings 1 Year Built 2010 Gross Square Feet 38,657 Lot Size 14,967 SF Type of Ownership Fee Simple Parking 70 Subterranean Spaces (Two Levels)

Utilities Water Owner & Tenant (RUBS) Phone Tenant Electric Tenant Gas Tenant

Construction Framing Wood Exterior Stucco

Mechanical HVAC Central

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 9 Patio Del Cielo SHERMAN OAKS, CA PROPERTY DESCRIPTION

AMENITIES

Common Area Amenities

■ Rooftop Deck with Gardens, Lounge Areas, BBQ and Tiled Walkways ■ Gated Subterranean Garage with Assigned Parking

■ Open Air, Professionally Landscaped Courtyard with Tiled Walkways and Serene Fountain ■ Resident Kiosk

■ Trash Chute, Elevator, 24-Hour Surveillance, Controlled Entry

Unit Amenities

■ Full Size Washer and Dryer in Every Unit

■ Hardwood floors with Distressed Walnut Finish

■ Granite Countertops with Mosaic Glass Backsplash

■ Bathrooms with Custom Tile Flooring, Granite Countertops, Cast Iron Bathtubs with Upgraded ■ Central Heat and Air

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 10 Patio Del Cielo SHERMAN OAKS, CA PROPERTY DESCRIPTION

PROPERTY PHOTOS

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 11 Patio Del Cielo SHERMAN OAKS, CA PROPERTY DESCRIPTION

PROPERTY PHOTOS

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 12 Patio Del Cielo SHERMAN OAKS, CA PROPERTY DESCRIPTION

PROPERTY PHOTOS

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 13 Patio Del Cielo SHERMAN OAKS, CA PROPERTY DESCRIPTION

PROPERTY PHOTOS

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 14 Patio Del Cielo SHERMAN OAKS, CA PROPERTY DESCRIPTION

PROPERTY PHOTOS

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 15 Patio Del Cielo SHERMAN OAKS, CA PROPERTY DESCRIPTION

PROPERTY PHOTOS

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 16 Patio Del Cielo SHERMAN OAKS, CA PROPERTY DESCRIPTION

AREA MAPS

Local Map Regional Map

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 17 Patio Del Cielo SHERMAN OAKS, CA PROPERTY DESCRIPTION

AERIAL PHOTO

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 18

RECENT SALES

Patio Del Cielo SHERMAN OAKS, CA Patio Del Cielo SHERMAN OAKS, CA RECENT SALES

CAP RATE AND GRM Average Cap Rate

5.00

4.50

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00 Subject 14625 4632-4646 4510 10640 11163 5056 4309 13037 Dickens Vista Murietta Woodbridge Aqua Laurel Dixie Moorpark Street Del Avenue Street Vista Canyon Canyon Street Monte Street Boulevard Avenue Avenue

Average GRM

20.00

18.00

16.00

14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00 Subject 14625 4632-4646 4510 10640 5056 4309 13037 Dickens Vista Murietta Woodbridge Laurel Dixie Moorpark Street Del Avenue Street Canyon Canyon Street Monte Boulevard Avenue Avenue

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 20 Patio Del Cielo SHERMAN OAKS, CA RECENT SALES

PRICE PER SF AND PRICE PER UNIT Average Price per Square Foot

500.00

450.00

400.00

350.00

300.00

250.00

200.00

150.00

100.00

50.00

0.00 Subject 14625 4632-4646 4510 10640 11163 5056 4440 4309 13037 Dickens Vista Murietta Woodbridge Aqua Laurel Sepulveda Dixie Moorpark Street Del Avenue Street Vista Canyon Boulevard Canyon Street Monte Street Boulevard Avenue Avenue

Average Price per Unit

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0 Subject 14625 4632-4646 4510 10640 11163 5056 4440 4309 13037 Dickens Vista Murietta Woodbridge Aqua Laurel Sepulveda Dixie Moorpark Street Del Avenue Street Vista Canyon Boulevard Canyon Street Monte Street Boulevard Avenue Avenue

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 21 Patio Del Cielo SHERMAN OAKS, CA RECENT SALES

RECENT SALES MAP

Patio Del Cielo 1) 14625 Dickens Street 2) 4632-4646 Vista Del Monte Avenue 3) 4510 Murietta Avenue 4) 10640 Woodbridge Street 5) 11163 Aqua Vista Street 6) 5056 Laurel Canyon Boulevard 7) 4440 Sepulveda Boulevard 8) 4309 Dixie Canyon Avenue 9) 13037 Moorpark Street

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 22 Patio Del Cielo SHERMAN OAKS, CA RECENT SALES

RECENT SALES

Patio Del Cielo 4410 Sepulveda Boulevard Sherman Oaks, CA 91403

No. of Units: 31 Units Unit Type Year Built: 2010 12 2 Bdr 2 Bath Sale Price: $18,500,000 4 2 Bdr 2 Bath Price/Unit: $596,774 14 2 Bdr 2 Bath Price/SF: $478.57 1 3 Bdr 2 Bath Subject Property CAP Rate: 3.08% GIM: 18.51

1 14625 Dickens Street Sherman Oaks, CA 91403

No. of Units: 19 Units Unit Type Year Built: 1987 6 1 Bdr 1 Bath Sale Price: $8,600,000 6 1 Bdr 1 Bath Loft Price/Unit: $452,632 6 2 Bdr 2 Bath Price/SF: $463.04 1 2 Bdr 2.5 Bath Twnhs Close of Escrow: 7/22/2016 CAP Rate: 3.93% GRM: 16.53

2 4632-4646 Vista Del Monte Avenue Sherman Oaks, CA 91403

No. of Units: 34 Units Unit Type Year Built: 2014 6 2 Bdr 2 Bath 1100 SF Sale Price: $16,510,000 28 3 Bdr 2 Bath 1200 SF Price/Unit: $485,588 Price/SF: $382.00 Close of Escrow: 6/1/2015 CAP Rate: 4.24% GRM: 15.04

Comments Built to Condominium specifications.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 23 Patio Del Cielo SHERMAN OAKS, CA RECENT SALES

RECENT SALES

3 4510 Murietta Avenue Sherman Oaks, CA 91423

No. of Units: 33 Units Unit Type Year Built: 2008 3 2 Bdr 2 Bath 1250 SF Sale Price: $19,500,000 6 2 Bdr 2.5 Bath 1400 SF Price/Unit: $590,909 24 3 Bdr 2.5 Bath 1589 SF Price/SF: $352.51 Close of Escrow: 9/30/2015 CAP Rate: 3.72% GRM: 16.89

Comments All Condominiums with separate parcels.

4 10640 Woodbridge Street Toluca Lake, CA 91602

No. of Units: 21 Units Unit Type Year Built: 2008 1 2 Bdr 2 Bath Sale Price: $14,725,000 1 3 Bdr 2.5 Bath Price/Unit: $701,190 1 3 Bdr 2.5 Bath Deck Price/SF: $405.00 12 3 Bdr 2.5 Bath Den Close of Escrow: 1/12/2016 CAP Rate: 3.79% 6 3 Bdr 2.5 Bath Den/Deck GRM: 16.57

Comments Built to Condominium specifications.

5 11163 Aqua Vista Street Studio City, CA 91602

No. of Units: 22 Units Unit Type Year Built: 2008 20 3 Bdr 2.5 Bath 1400 SF Sale Price: $14,518,000 2 3 Bdr 3 Bath 1400 SF Price/Unit: $659,909 Price/SF: $367.54 Close of Escrow: 10/10/2014 CAP Rate: 4.50%

Comments All 1,400-Square Feet Three Bedroom Condominiums.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 24 Patio Del Cielo SHERMAN OAKS, CA RECENT SALES

RECENT SALES

6 5056 Laurel Canyon Boulevard Valley Village, CA 91607

No. of Units: 12 Units Unit Type Year Built: 2011 8 3 Bdr 2.5 Bath 1826 SF Sale Price: $6,875,000 4 4 Bdr 2.5 Bath 1891 SF Price/Unit: $572,917 Price/SF: $310.36 Close of Escrow: 5/27/2014 CAP Rate: 4.80% GRM: 17.10

Comments All Three and Four Bedroom Condominium Units Ranging from 1,826-1,891-Square Feet

7 4440 Sepulveda Boulevard Sherman Oaks, CA 91403

No. of Units: 105 Units Unit Type Year Built: 1988 1 Studio 1 Bath 500 SF Sale Price: $38,500,000 34 1 Bdr 1 Bath 750 SF Price/Unit: $366,667 70 2 Bdr 2 Bath 920-1150 SF Price/SF: $422.33 Close of Escrow: 5/26/2015

8 4309 Dixie Canyon Avenue Sherman Oaks, CA 91423

No. of Units: 14 Units Unit Type Year Built: 2003 14 2 Bdr 2 Bath Sale Price: $6,150,000 Price/Unit: $439,286 Price/SF: $347.69 Close of Escrow: 1/5/2016 CAP Rate: 4.30% GRM: 14.50

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 25 Patio Del Cielo SHERMAN OAKS, CA RECENT SALES

RECENT SALES

9 13037 Moorpark Street Studio City, CA 91604

No. of Units: 8 Units Unit Type Year Built: 2009 1 1 Bdr 1 Bath Sale Price: $4,550,000 5 2 Bdr 2 Bath Price/Unit: $568,750 2 2 Bdr 2.5 Bath Price/SF: $404.00 Close of Escrow: IN ESCROW CAP Rate: 3.51% GRM: 18.42

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 26 RENT COMPARABLES

Patio Del Cielo SHERMAN OAKS, CA Patio Del Cielo SHERMAN OAKS, CA RENT COMPARABLES

OCCUPANCY AND AVERAGE RENTS

Average Rents - 2 and 3 Bedrooms

3,000

2,700

2,400

2,100

1,800

1,500

1,200

900

600

300

0 Subject 4440 14430 14141 4474 16350 Sepulveda Benefit Ventura Woodman Ventura Boulevard Street Boulevard Avenue Boulevard

2 Bdr 3 Bdr

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 28 Patio Del Cielo SHERMAN OAKS, CA RENT COMPARABLES

RENT COMPARABLES MAP

Patio Del Cielo 1) 4440 Sepulveda Boulevard 2) 14430 Benefit Street 3) 14141 Ventura Boulevard 4) 4474 Woodman Avenue 5) 16350 Ventura Boulevard

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 29 Patio Del Cielo SHERMAN OAKS, CA RENT COMPARABLES

RENT COMPARABLES

Patio Del Cielo 4410 Sepulveda Boulevard Sherman Oaks, CA 91403

Unit Type Units SF Rent Rent/SF 2 Bdr 2 Bath 12 1,048 $2,360 - $2,665 $2.32 2 Bdr 2 Bath 4 1,113 $2,565 - $2,718 $2.37 2 Bdr 2 Bath 14 1,115 - 1,162 $2,450 - $2,745 $2.20 3 Bdr 2 Bath 1 1,782 $2,670 $1.50 Subject Property No. of Units 31 Year Built: 2010 Total/Avg. 31 38,657 $2,605 $2.06

1 4440 Sepulveda Boulevard Sherman Oaks, CA 91403 Unit Type Units SF Rent Rent/SF 2 Bdr 2 Bath 920 $2,387 $2.59 2 Bdr 2 Bath 1,150 $2,902 $2.52

No. of Units 105 Year Built: 1988 Total/Wtd. Avg. 99,989 $2,644 $0.03

2 14430 Benefit Street Sherman Oaks, CA 91423 Unit Type Units SF Rent Rent/SF 2 Bdr 2 Bath 1,272 $2,650 $2.08

No. of Units 24 Year Built: 1987 Total/Wtd. Avg. 30,540 $2,650 $0.09

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 30 Patio Del Cielo SHERMAN OAKS, CA RENT COMPARABLES

RENT COMPARABLES

3 14141 Ventura Boulevard Sherman Oaks, CA 91423

Unit Type Units SF Rent Rent/SF 2 Bdr 2 Bath 1,135 $2,895 $2.55 2 Bdr 2 Bath 1,370 $2,945 $2.15

No. of Units 113 Year Built/Renovated: 2013 Total/Wtd. Avg. 158,644 $2,920 $0.02

4 4474 Woodman Avenue Sherman Oaks, CA 91423 Unit Type Units SF Rent Rent/SF 2 Bdr 2 Bath 1,150 $2,799 $2.43

No. of Units 20 Year Built/Renovated: 1998 Total/Wtd. Avg. 21,926 $2,799 $0.13

5 16350 Ventura Boulevard Encino, CA 91436 Unit Type Units SF Rent Rent/SF 2 Bdr 2 Bath 1,090 $2,796 $2.57

No. of Units 131 Year Built/Renovated: 2008 Total/Wtd. Avg. 173,050 $2,796 $0.02

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 31 MARKET OVERVIEW

Patio Del Cielo SHERMAN OAKS, CA Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES Market Highlights

Economic center ■ Los Angeles is a leading international trade and manufacturing center, and considered the capital of the entertainment world.

Infrastructure ■ The region has well-established and interconnected transportation systems.

Desirable climate ■ The average temperature rarely rises above 85 degrees or falls below 40 degrees.

Geography

Los Angeles County covers 4,752 square miles and includes the islands of San Clemente and Santa Catalina.ItisborderedontheeastbySanBernardino and Riverside counties, on the north by Kern and Ventura counties, on the west by the Pacific Ocean, and on the south by Orange County. Nearly every type of climate is represented in Los Angeles, ranging from desert and mountain to coastal. The Los Angeles coastline stretches along 81 miles of world-famous beaches. The Santa Monica and San Gabriel mountains are located in the county, with the highest point at Mount San Antonio reaching more than 10,000 feet.

Los Angeles County

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 33 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES Metro The Los Angeles-Long Beach metro is located entirely within Los Angeles County. The metro’s population is one of the largest in the nation at more than 10 million and is expected to grow at an annual rate of 0.5 percent over the next five years. Approximately one-quarter of California’s population lives in Los Angeles county, which encompasses 88 incorporated cities, along with

numerous unincorporated areas. Largest Cities in Metro by Population Los Angeles 3,907,400 Long Beach 475,600 Infrastructure Glendale 196,700 Los Angeles has one of the most extensive freeway Santa Clarita 180,600 systems in the country. The Alameda Corridor Lancaster 160,700 Palmdale 156,700 facilitates activity at the Los Angeles ports. The corridor is the first step in accommodating rail traffic and will Airports eventually link all major rail lines in Southern ■ Los Angeles International Airport California. The region’s growing population and ■ Three commuter airports heightened role in the burgeoning Pacific Rim trade are ■ Nine general aviation airports driving growth in container traffic at the ports of Los Major Roadways Angeles and Long Beach. Freight rail service in the ■ Interstates 5, 10, 15, 110, 210, 215, 405 and 710 county is provided by Union Pacific and Burlington Rail ■ Freight - Union Pacific and BNSF Northern Santa Fe railroads; Amtrak and Metrolink ■ Passenger - Amtrak, Metrolink lines offer passenger service and the Los Angeles Metro ■ Light rail - Metro is the area’s light rail. Ports ■ Port of Los Angeles ■ Port of Long Beach In addition to Los Angeles International Airport, one of Los Angeles is: the busiest in the nation, the county is served by ■ 30 miles from Anaheim commercial airports in Long Beach, Burbank and ■ 120 miles from San Diego Palmdale. There are also nine general aviation airports ■ 150 miles from Tijuana ■ 380 miles from San Francisco in the county.

* Forecast Sources: Marcus & Millichap Research Services, U.S. Census Bureau, Experian

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 34 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES Economy Long recognized as the financial, commercial and industrial capital of Southern California, the sprawling Los Angeles metropolitan area is one of the nation’s leading urban-industrial hubs. There are 13 Fortune 500 companies headquartered in the county. Tourism, trade, manufacturing, entertainment, healthcare and defense provide a foundation for the local economy.

Los Angeles is home to two of the busiest ports in the world: the Port of Los Angeles and the Port of Long Beach. The two ports generate more than $10 billion in U.S. Customs revenues and taxes. Together, the ports account for related employment for nearly l.3 million people throughout Southern California and receive more than 40 percent of all U.S. container traffic.

Aerospace is still a significant employment force. The metro’s aerospace employers, including Boeing, Northrop Grumman and Lockheed Martin, have benefited from new defense and homeland security- related contracts.

The motion picture/entertainment industry is one of the most high-profile sectors of the local economy. Los Angeles is known as the entertainment capital of the world, with most of the major motion-picture studios located in the county, as well as much of the music recording and production industry.

* Forecast Sources: Marcus & Millichap Research Services, Bureau of Economic Analysis, Moody's Analytics, U.S. Census Bureau, Fortune

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 35 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES Labor The Los Angeles metro has one of the largest labor forces in the United States. With more than 4.2 million positions, local employment ranks third nationally, behind New York City and Chicago. For the last five years, nonfarm employment growth has averaged 1.7 percent annually, slightly outpacing the national average. Over the next five years, employment growth will average 1.3 percent annually, on par with the U.S. rate.

Through 2019, nearly all local employment sectors are expected to expand by more than 1 percent. Education and health services, which currently comprises 18 percent of area jobs, is posed to register the most impressive gain of 2.7 percent annually to meet the demands of a growing population. Leisure and hospitality will record the second- highest growth rate in the county at 1.9 percent annually.

The trade, transportation and utilities sector is the largest local employment sector, hiring 19 percent of area employees, or nearly 793,000 people. Growth in this sector is expected to average 0.5 percent annually through 2019.

The entertainment industry remains a sizeable and vital component to the local labor market, generating high- paying jobs for camera operators, producers, engineers and high-tech equipment operators and others in movies, television and music. The industry also propels ancillary employment growth in many other sectors that provide services to the industry.

* Forecast Sources: Marcus & Millichap Research Services, BLS, Moody's Analytics

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 36 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES Employers Los Angeles has made significant strides in diversifying its employer base. In addition to the city’s strong aerospace sector, numerous financial firms have corporate headquarters in Los Angeles, as does a contingent of telecommunications, entertainment, technology and telecommunications companies.

TheprominenceofLosAngeles’portsmakesthemetro a major player in transportation and the global shipping Major Employers trade. The value of two-way trade passing through the Kaiser Permanente Port of Los Angeles and the Port of Long Beach totaled Northrop Grumman Corp. The Boeing Co. more than $400 billion in 2013. Additionally, the size Kroger Co. of Los Angeles International Airport (LAX), and its Cedars-Sinai Medical Center position as one of the busiest airports in the world, also University of Southern California provides many jobs in the transportation industry. Target Bank of America Corp. Kaiser Permanente is one of the most significant private- The Home Depot Providence Health & Services sector employers in the metro; it has more than 36,000 local employees. Providence Health & Services and Cedars-Sinai Medical Center each contribute roughly 10,000 healthcare jobs.

Northrop Grumman is the largest aerospace employer in the region, with roughly 18,000 employees. The company’s Aerospace Systems division manufactures defense electronics and constructs the Joint Strike Fighter. As Northrop wins more bids on federal contracts, the firm will likely expand hiring. The Boeing Co. also provides more than 11,000 aerospace jobs in the area.

* Forecast Sources: Marcus & Millichap Research Services, BLS, Moody's Analytics, Experian

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 37 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES Demographics Los Angeles County is one of the most populated metropolitan areas in the nation, containing more than 10 million inhabitants. Population gains in Los Angeles preceded and created economic expansion, rather than followed it, which was the case in most other U.S. metros. Since the year 2000, the local population expanded by more than 559,000 residents. Most of the growth came from foreign immigration, rather than natural increases or domestic migration. A population gain of 0.5 percent annually is expected during the next five years. Diminished growth will stem from smaller household sizes and declining affordability, trends that already have pushed housing development outward into surrounding counties.

The population of Los Angeles County is younger than the nation, with a median age of 35.2 years compared with the U.S. median of 37.4 years. The cohort ages 25 to 44 is much larger than that of the country, as many people come to the area seeking employment.

More metro residents are going to college. The number of people age 25 and older who have obtained a bachelor’s degree or higher has risen to 30 percent. Educational achievement contributed to the local median household income rising considerably since 2000, reaching $53,600 annually last year. Even though incomes are rising, Los Angeles is still a renter’s market as only 46.4 percent of households own their homes.

* Forecast Sources: Marcus & Millichap Research Services, AGS, Experian, Moody's Analytics, U.S. Census Bureau

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 38 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES Quality Of Life

The Los Angeles region enjoys pleasant weather, with sunshine reigning throughout the year. Bounded by mountains and the Pacific Ocean, the temperature rarely rises above 85 degrees or falls below 40 degrees and rainfall is minimal. The mild Los Angeles climate enables people to enjoy outdoor recreation during much of the year, and a variety of landscapes foster many outdoor activities. It is possible to swim in the oceanandskionthemountainsonthesameday.The region is home to the Los Angeles Zoo and Botanical Gardens and the 4,100-acre Griffith Park, one of the largest urban parks in the nation.

There are 27 institutes of higher learning in the county, including three campuses of the University of California, seven campuses of California State University, and private institutions such as Caltech, the Claremont Colleges, Occidental College and the University of Southern California. A number of community colleges also are situated in the county.

Several professional and college teams are located in the area for sports enthusiasts. Cultural venues include Walt Disney Concert Hall, Dorothy Chandler Pavilion, the Hollywood Bowl, Warner Bros. Studios, Huntington Library, the Museum of Art and the Natural History Museum of Los Angeles County.

* Forecast Sources: Marcus & Millichap Research Services, National Association of Realtors®, Moody's Analytics, U.S. Census Bureau

The information contained in the market overview comes from sources deemed to be reliable, however, no representation, warranty or guarantee, express or implied, may be made as to the accuracy or reliability of the information contained herein. The most timely data available at time of production, including estimates and forecasts, were used and may be subject to revision.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 39 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

SAN FERNANDO VALLEY

Almost 2.5 million people reside in the San Fernando Valley, which includes the submarkets of Northridge-Northwest San Fernando Valley; Van Nuys-Northeast San Fernando Valley; Woodland Hills; Burbank-Glendale-Pasadena; as well as Sherman Oaks-North Hollywood-Encino. The area’s population is expected to increase by 1.3 percent through 2018, or by nearly 33,000 new residents.

Known for its entertainment industry, the Valley boasts more than 100 soundstages. Entertainment giants calling the Valley home include Walt Disney Co., Universal Studios, Warner Brothers, DreamWorks and Paramount Ranch. The San Fernando Valley entertainment industry continues to set the area’s economic Share of Total Employment pulse. Local motion picture and entertainment companies San Fernando Valley Emp.: 965,700 employ just under 28,000 people. Services 46% Retail Trade 17% Manufacturing 9% While the Valley has grown into the world’s center for Finance, Insurance & Real Estate 9% entertainment, aerospace giants Boeing and Northrop Transportation, Communications & 5% Grumman, healthcare provider Kaiser Permanente, and 21st Public Administration 5% Century Insurance also generate numerous high-paying jobs. Other 5% As a result of its large concentration of high-paying, Construction 4% successful companies, the area’s median household income of Sources: Marcus & Millichap Research Services, Experian

$62,500 per year has risen drastically since 2000. Major Employers Warner Bros. Entertainment Inc. Although the median home price has decreased considerably The Walt Disney Co. since 2007, affordability remains a challenge for much of the Kaiser Permanente UCLA Medical Center local population. High home prices keep the homeownership Yahoo! Inc. rate below 50 percent in the San Fernando Valley. Providence Health & Services Boeing NBCUniversal 21st Century Insurance Co. Northrop Grumman Corp.

The information contained in the market overview comes from sources deemed to be reliable, however, no representation, warranty or guarantee, express or implied, may be made as to the accuracy or reliability of the information contained herein. The most timely data available at time of production, including estimates and forecasts, were used and may be subject to revision.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 40 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES Investors Look Past Construction Risks, Pursue Assets

The Los Angeles county multifamily market remains robust as organizations expand their payrolls. While the pace of hiring is slower than its highest level seen during 2013, growth remains broad-based and consistent with a strengthening economy. The new employees of these firms are seeking apartments at a heightened pace as the swelling prices for single-family homes make homeownership impossible for many metro residents. Builders have used these factors to justify adding multiple projects to the pipeline of activity, particularly in downtown Los Angeles, where several luxury towers are underway, and the San Fernando Valley, where more affordable rents can be obtained. Construction in these two areas will outpace demand this year, prompting increases in vacancy as more than 7,000 units come online. The outlook is much brighter in the Westside Cities and the South Bay/Long Beach markets, where technology firms are placing roots and planned completions are more muted. Despite overdevelopment concerns in some areas, vacancy rates will remain sufficiently tight, allowing a rise in average asking rent.

Market participants are unfazed by the construction outlook for multifamily housing, using historically low interest rates and easy access to commercial credit to bid aggressively on properties throughout the county. The resulting environment has led to deteriorating first-year yields as potential buyers place their best offers first, particularly on trophy assets in the Westside Cities and value-add complexes in the San Fernando Valley and South Bay. The average property now yields 5.1 percent, with many prime areas exchanging ownership in the low- 4 percent range. Market participants view the elevated level of construction as a transitory issue, focusing on the structural impediments to homeownership to underpin their thesis. As investors weigh a possible interest rate hike from the Federal Reserve for the first time in nearly a decade, transaction velocity will stay elevated. Buyers seeking to deploy capital into the metro will take advantage of the increase in listings, fostering further deterioration in cap rates.

2015 Annual Apartment Forecast

Employment: More than 104,000 workers will find gainful employment this year, a 2.4 percent growth rate. In the previous year, 97,900 jobs were created, a 2.3 percent rise.

Construction: The pace of deliveries will moderate somewhat as more than 8,600 units come to market this year. In 2014, nearly 10,000 rentals were placed into service.

Vacancy: Growing supply will limit net absorption in apartments this year, ushering in a 50-basis-point increase in vacancy to 3.5 percent by year end. Although the market will weaken this year, the average vacancy rate will remain incredibly tight.

Rents: The average effective rent will move up 4.8 percent to $1,870 per month this year. Last year, the average effective rent climbed 6.4 percent.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 41 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES Economy

■ Local employers added 18,200 jobs in the second quarter, improving job creation during the year to more than 98,700 positions and expanding payrolls by 2.4 percent. In the previous year, 99,600 workers were hired. ■ Accelerating economic development led organizations in the education and health services sector to add more than 30,300 positions during the year, the strongest growth in the metro. The trade, transportation and utilities and professional and business services sectors also outperformed, boosting headcounts by 18,000 and 14,800, respectively. ■ Since its height at 12.6 percent, the unemployment rate was down 500 basis points to 7.6 percent in the second quarter of this year. Economic improvement continues to accelerate this progress, with unemployment falling 50 basis points over the past year. ■ Outlook: Los Angeles County organizations will add 104,000 workers this year, a 2.4 percent growth rate. In 2014, 97,900 jobs were created, a 2.3 percent expansion.

Housing and Demographics

■ During the last year, multifamily and single-family housing permit issuance expanded 29 percent and 8.5 percent, respectively. While single-family permitting remains well below its 2007 peak, multifamily has set new highs. ■ Over the past 12 months, the average single-family house price rose 7.5 percent to more than $495,000. Meanwhile, the average median household income ticked up 3.4 percent to just under $57,000. ■ The minimum qualifying household income for a single-family mortgage with taxes and insurance is more than $112,600 per year. Additionally, the average effective rent was $1,850 at the end of the second quarter. The resulting affordability gap, of nearly $700, and the high minimum qualifying household income required for mortgages limit the possibility of homeownership for many residents. ■ Outlook: The large income gap between the average and the qualifying incomes needed for mortgages will require many potential buyers to put off homeownership, or eliminate the possibility all together. This environment will foster strength in rental rates for the foreseeable future.

* Forecast ** Trailing 12-month period through 1Q Sources: BLS; CoreLogic

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 42 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES Construction

■ Construction firms completed more than 1,000 rentals during the second quarter, bringing year-to-date deliveries to more than 5,000 apartments. The bulk of development was centered on the Downtown Los Angeles and San Fernando Valley; the two submarkets received more than 3,800 units. ■ Robust demand for apartments has led builders to expand the pipeline of multifamily projects to more than 18,000 rentals slated for delivery through 2018. More than 14,600 will come to market during the next 18 months. ■ More than 60 percent of under construction apartments are in Downtown Los Angeles, highlighting the live- work-play mindset that builders are catering toward. ■ Outlook: Developers will complete more than 8,600 units this year, down modestly from the nearly 10,000 rentals finished in 2014.

Vacancy

■ Countywide vacancy fell 20 basis points to 3 percent during the second quarter as demand for apartments continued to accelerate. Vacancy has fallen 30 basis points over the last 12 months. ■ Pre-1980s construction remains in high demand throughout the metro, with 1970s developments posting vacancy at just 2.2 percent, while pre-1970s projects registered 2.3 percent. ■ Three-bedroom rentals in Los Angeles County are the most demanded by tenants; the vacancy rate is at 1.2 percent, the lowest rate recorded. Soaring effective rents have made the option more popular among young professionals seeking to live in expensive neighborhoods together with roommates. ■ Outlook: The higher pace of construction and weaker net absorption will augur a 50-basis-point increase in vacancy to 3.5 percent by year end. Despite the rise in vacancy, the market remains extremely tight.

* Forecast Sources: MPF Research; CoStar Group, Inc.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 43 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES Rents ■ Theaverageeffectiverentrose1.7percentto$1,830duringthelastthreemonths,bringingyear-to-dategains to 6.5 percent. Rent growth above inflation has been the standard due to the high cost of single-family housing. ■ Properties developed during the 2000s have average effective rents that are more than $600 higher than the closest rival, with ownership asking nearly $2,370 per month as builders deliver apartments loaded with amenities to attract tenants. ■ Buildings completed during the 1970s and 1980s have average effective rents that are nearly $200 cheaper per month than both older and newer assets. As renters seek more affordable options, the spread between rent levels will tighten considerably. ■ Outlook: Demand for multifamily housing will lead to a 4.8 percent swell in the average effective rent to $1,870 per month.

Sales Trends

■ Transaction activity jumped more than 40 percent as real estate prices continued to improve, providing fresh incentive for property owners to list. Volume accelerated throughout 2014 and has remained elevated during the first six months of this year. ■ While trading spiked dramatically, the average price per unit ticked up 16 percent to more than $319,000. Price appreciation was apparent in the Westside Cities, where the average trade valued each apartment above $425,000. Transactions were most abundant in the San Fernando Valley, the most affordable of the submarkets in Los Angeles County. ■ The enhanced listing environment allowed investors more opportunity to expand their portfolios and they did so willingly, scooping up assets in Downtown Los Angeles and the San Fernando Valley at impressive rates. Cap rates fell 40 basis points to average 5.1 percent by the close of the second quarter. ■ Outlook: The impending rate hike hinted by the Federal Reserve will encourage market participants to evaluate their holdings in the first rising rate cycle in more than a decade. This will prompt owners to list additional properties, while investors will use historically low interest rates to bid aggressively on available assets, fostering robust transaction velocity.

** Trailing 12 months through 2Q Sources: MPF Research; CoStar Group, Inc.; Real Capital Analytics

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 44 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES

Greater Downtown Los Angeles Market

■ Builders brought more than 2,600 rentals to market during the last year, the largest source of construction in the county. The trend is set to continue; developers will widen the multifamily pipeline to nearly 12,000 units with delivery dates scheduled through 2018. ■ Downtown Los Angeles received the two largest completions of the past 12 months: Eastown Apartments in Hollywood containing 535 apartments and One Santa Fe on Santa Fe Avenue in Los Angeles with 438 rentals. Both projects highlight the renewed emphasis on urban development. ■ Vacancy fell 20 basis points in the second quarter to 3.4 percent, even with the same period one year ago, as increased construction limited the effects of accelerating demand. Improvement was most pronounced in Hollywood, where vacancy fell 60 basis points to 3.4 percent. ■ Outlook: Construction firms will bring more than 4,400 units to market this year, the most in several years. The resulting environment will foster average vacancy of 3.7 percent, 10 basis points above a year ago.

■ The average effective rent jumped 4.5 percent to $2,120 per month, with strong gains in all three submarkets. Hollywood outperformed the broader area as rents climbed 5.6 percent. ■ While the average effective rent is 4.6 percent above last year’s levels in Downtown Los Angeles, property owners have been slashing rents in the last six months to fill vacant space. Rents are more than $90 per month off the high seen in the fourth quarter of 2014. ■ The robust concentration of development limited 2000s assets to small gains in effective rents, particularly in the Mid-Wilshire submarket, which recorded a 1.6 percent advancement. Strong competition from amenities- laden rentals has provided switching options for high-end tenants. ■ Outlook: The pace of average effective rent growth will slow dramatically as numerous luxury towers come to market in the second half of the year, limiting owners to just a 1.2 percent uptick year over year.

* Forecast Source: MPF Research

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 45 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES

■ Over the past year, transaction velocity jumped 22.4 percent as investors take long-term positions in the face of short-term weakness. The average price per transaction topped $10 million for the first time in three years. ■ The average price per unit swelled 6.8 percent to more than $280,000 as several high-profile trades in Downtown Los Angeles and West Hollywood at more than $350,000 per unit brought up the averages. Value- add transactions in East Hollywood traded for $230,000 per unit. ■ First-year yields have slid 20 basis points to 4.7 percent as a number of deals in the Mid-Wilshire area traded in the low-4 percent range. The impact would have been greater without a surge of trading in Koreatown and Hollywood in the mid-5 percent range. ■ Outlook: Investors seeking to position in the Greater Downtown Los Angeles area will stay active despite the recent pickup in construction. These buyers are focused on the longer-term supply and demand picture.

Westside Cities Market

■ Builders completed slightly more than 440 rentals in the Westside Cities over the past 12 months. The bulk of the new stock was brought to market in the Brentwood/Westwood/Beverly Hills enclave, while the largest project was a 100-unit affordable housing complex in Venice. ■ For the remaining six months of 2015, development will shift to the Santa Monica/Marina del Rey and Palms/Mar Vista submarkets. The pace of deliveries will also rise to more than 480 rentals as crews finish work on NMS@Culver City in Culver City and Sway in Santa Monica. The two projects will supply 130 and 120 units, respectively. ■ Tenants flocked to more affordable housing in the Palms/Mar Vista area as vacancy fell 90 basis points, while the Santa Monica/Marina del Rey submarket vacancy plummeted 170 basis points to 2.3 percent. As a result, vacancy in the Westside Cities fell 80 basis points to just 2.1 percent, making it the tightest market in Los Angeles County. ■ Outlook: While construction will quicken in the latter half of this year, it will do little to meet the demand for new apartments. Overall, the market will contract 80 basis points to 2.3 percent.

* Forecast ** Trailing 12 months through 2Q Sources: MPF Research; CoStar Group, Inc.; Real Capital Analytics

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 46 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES

■ Outperformance in Brentwood/Westwood/Beverly Hills and Palms/Mar Vista submarkets led the average effective rent to climb 6.6 percent year over year to more than $2,700 per month. ■ Properties in Palms/Mar Vista reported average effective rents of $2,175 per month at the close of the second quarter, more than $150 higher than the same period last year. Despite the recent gains, prices remain more than $700 below the other enclaves in the Westside Cities. ■ The average effective rent in Brentwood/Westwood/Beverly Hills advanced 13.1 percent to nearly $3,000 per month over the last year as a lack of development and robust demand pushed prices higher. ■ Outlook: Demand will remain well ahead of the minimal growth in supply, allowing the average effective rent to rise 6.2 percent to $2,800 per month.

■ Transaction activity was largely unchanged over the past four quarters as a lack of listings held back deal flow. The vast majority of transactions targeted the Beverly Hills/Century City/UCLA, Santa Monica and Greater Culver City submarkets. ■ The average price per unit climbed to more than $500,000 per unit as a number of deals in the West County submarket traded at above $700,000 per unit. Market participants are focused on price appreciation, bidding aggressively for assets located in prime locations. ■ Cap rates in closed transactions generally start in the low-4 percent range for the best-quality properties, while the bulk of trading is in the mid-4 to high-4 percent range. ■ Outlook: Rising asset values will move current owners to consider listing, while potential buyers will seek to deploy capital ahead of the anticipated Federal Reserve interest rate hike.

* Forecast ** Trailing 12 months through 2Q Sources: MPF Research; CoStar Group, Inc.; Real Capital Analytics

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 47 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES San Fernando Valley/Tri-Cities Market

■ Construction crews completed 1,100 apartments over the past year, nearly a third less than the prior four- quarter period. Despite the recent slowdown, developers remain highly active in the area; more than 3,300 will be completed in the next 18 months. ■ The largest complex finished during the last year was The Millennium Woodland Hills. The 395-rental, three- building project came online during the fourth quarter of 2014. Another notable addition to the area was Camden Glendale on San Fernando Road, which contains nearly 300 units. ■ Vacancy levels were unchanged in the second quarter at 2.8 percent, down 10 basis points from the same period in the prior year. Assets in the Northridge/Northwest San Fernando Valley area registered the strongest growth as vacancy fell 50 basis points to 2.4 percent. ■ Outlook: An influx of completions concentrated in the back half of the year will lead vacancy 20 basis points higher to 3 percent in 2015. Weakness is likely to remain transitory as tenants seek cheaper alternatives.

■ The average effective rent climbed 6.8 percent to $1,615 per month amid widespread demand for more affordable housing in Los Angeles County. All submarkets posted high single-digit or double-digit gains. ■ Properties in the Van Nuys/Northeast San Fernando Valley recorded average effective rent advancement of 11.8 percent to $1,460 during the last year as tenant demand surged. Despite the improvement, rents remain more than $500 below other parts of the Valley. ■ The accelerated pace of economic expansion led more affluent renters to Woodland Hills rentals, where the average effective rent swelled 8.9 percent to more than $1,920 per month. ■ Outlook: Accelerated construction in the Burbank/Glendale/Pasadena and Van Nuys/Northeast San Fernando Valley submarkets will limit the pace of effective rent gains to 6.5 percent this year.

* Forecast Source: MPF Research

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 48 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES

■ Trading volume rose 20 percent as investors sought relatively higher yields in the mid- to high-5 percent range. Sellers were motivated by tightening conditions and rising asset values in key neighborhoods. ■ The average price per unit rose to more than $210,000, up 16 percent compared to the prior year. A number of deals in Burbank and Glendale exchanged ownership at more than $330,000 per unit, elevating the average. ■ Cap rates sank broadly to the mid-5 percent range, down 30 basis points over the last 12 months. Assets in Sherman Oaks an Woodland Hills traded in the high-4 percent range, while several North San Fernando Valley properties were contracted with implied yields in the high-5 percent range. ■ Outlook: As investors continue to be priced out of more expensive markets in Los Angeles County, demand for San Fernando Valley complexes will mount. Assets near major thoroughfares and employment hubs will receive multiple offers, often in excess of the asking price.

South Bay/Long Beach Market

■ Builders brought more than 750 rentals to market during the last four quarters, the fastest pace of construction in the current cycle. In the previous year just 170 apartments came online. ■ The 260-unit Playa del Oro West in Playa del Rey and the 220-unit Runway at Play Vista in the Alsace neighborhood highlighted completions over the past year. Meta Housing Corp. also completed nearly 100 affordable-housing rentals through two separate projects in San Pedro and Torrance and a senior-housing facility in Long Beach. ■ Vacancy ticked up 10 basis points to 2.9 percent in the second quarter, eliminating the improvement seen in the past year. While demand for apartments remains robust, the elevated pace of construction is limiting further tightening in the market. ■ Outlook: The rise of the Silicon Beach technology scene has produced remarkable demand for multifamily housing, yet the expansion of supply will push vacancy 40 basis points higher to 3.2 percent.

* Forecast ** Trailing 12 months through 2Q Sources: MPF Research; CoStar Group, Inc.; Real Capital Analytics

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 49 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES

■ The average asking rent advanced 6.2 percent during the last year, ending the second quarter at $1,765 per month, as potential tenants outweigh available rentals. The area provides a cheaper alternative to the Westside Cities where rents are more than $500 higher per month. ■ Assets in the South Bay posted average rental rates that ascended 6.8 percent to more than $2,040 per month as renters flocked to apartments within proximity to their employers. Properties built in the 2000s were in particular demand, expanding 8.9 percent to more than $2,675 per month. ■ While all Long Beach vintages benefited from rising average asking rent, 1970s and 1980s registered gains of 10.5 percent to more than $1,400 per month and 9.5 percent to more than $1,550, respectively. ■ Outlook: Lower rental rates will keep demand higher than supply despite more elevated levels of development. However, the pace of improvement will marginalize as more than 1,700 units come online during the next 18 months.

■ Transactions jumped significantly during the last year as the resolution of the port dispute encouraged buyers to place capital. The average transaction price was more than $12 million, up more than 40 percent year over year, as larger properties dominated trading. ■ The average price per unit was essentially unchanged, rising 2.3 percent for the year to more than $260,000 per unit. Properties in the Torrance submarket surged 30 percent to more than $225,000 per unit. ■ First-year yields fell 10 basis points to 5 percent as higher-quality assets encouraged buyers to bid more aggressively. Investor focus has been primarily on complexes in Long Beach, where yields are higher than the average. ■ Outlook: Strengthening employment growth in the area will lead investors to deploy capital in the South Bay/Long Beach markets, where first-year returns can be more than 100 basis points above comparable offerings.

* Forecast ** Trailing 12 months through 2Q Sources: MPF Research; CoStar Group, Inc.; Real Capital Analytics

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 50 Patio Del Cielo SHERMAN OAKS, CA MARKET OVERVIEW

LOS ANGELES

Capital Markets

■ Despite volatility surrounding economic growth in China and Greece’s status in the eurozone, the yield on the 10-year U.S. Treasury is trading near 2.25 percent. Economic data is showing improvement following weak first quarter GDP, with market participants now positioning for the December meeting as the most likely starting point for an interest rate hike. The latest comments from Federal Reserve Chairwoman Janet Yellen, however, indicate that the exact moment is still data-dependent. ■ The Federal Open Market Committee has committed to a policy of “lower for longer” as it assuages fears that the first interest rate increase will disrupt the recovery. The first policy rate change is expected to be just 25 basis points, and measures will remain accommodative for some time. ■ Agency lenders are underwriting 10-year multifamily loans ranging between 4.3 and 4.7 percent with average LTVs from 55 to 75 percent. Portfolio lenders are offering similar loan-to-value ratios with interest rates between 3.85 and 4.50 percent as underwriters have become more competitive in an effort to do business. Floating bridge loans for stabilized assets will require LTVs of 70 percent and price with a spread between 250 and 425 basis points over LIBOR, while value-add transactions will be underwritten at 80 percent LTV (60 to 65 percent of cost) with a 300- to 475-basis-point spread. ■ Total CMBS issuance is expected to top 2014 levels this year as $100 billion to $125 billion is underwritten. A wave of pre-crisis loans will start to come due over the next few years, prompting refinancing as current owners renegotiate the capital structure of their assets. Through April, $35.8 billion in CMBS had been originated, underscoring the availability of credit as credit unions, insurance companies and alternative asset managers expanded their offerings. Submarket Vacancy Ranking

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 51 DEMOGRAPHIC ANALYSIS

Patio Del Cielo SHERMAN OAKS, CA Patio Del Cielo SHERMAN OAKS, CA DEMOGRAPHIC ANALYSIS

DEMOGRAPHIC REPORT 1 Mile 3 Miles 5 Miles 2000 Population 18,876 137,977 417,580 2010 Population 20,052 141,274 430,993 2014 Population 20,882 145,992 444,452 2019 Population 21,175 148,017 450,722

2000 Households 9,428 58,622 163,209 2010 Households 9,687 59,054 165,415 2014 Households 10,210 61,825 172,827 2019 Households 10,374 62,883 175,817

2014 Average Household Size 2.03 2.33 2.54

2014 Daytime Population 19,153 79,115 177,860

2000 Owner Occupied Housing Units 42.03% 44.29% 42.80% 2000 Renter Occupied Housing Units 53.79% 51.92% 53.60% 2000 Vacant 4.18% 3.79% 3.61%

2014 Owner Occupied Housing Units 41.80% 44.64% 43.07% 2014 Renter Occupied Housing Units 58.20% 55.36% 56.93% 2014 Vacant 0.86% 1.64% 2.08%

2019 Owner Occupied Housing Units 41.62% 44.39% 42.89% 2019 Renter Occupied Housing Units 58.38% 55.61% 57.11% 2019 Vacant 0.60% 1.48% 2.00%

$ 0 - $14,999 9.6% 10.0% 12.1% $ 15,000 - $24,999 8.3% 8.7% 11.1% $ 25,000 - $34,999 8.8% 9.3% 10.3% $ 35,000 - $49,999 10.4% 11.8% 12.8% $ 50,000 - $74,999 16.1% 15.9% 16.0% $ 75,000 - $99,999 9.8% 11.0% 10.5% $100,000 - $124,999 10.6% 8.9% 8.0% $125,000 - $149,999 5.8% 5.4% 4.6% $150,000 - $199,999 8.3% 6.6% 5.1% $200,000 - $249,999 4.3% 4.1% 3.1% $250,000 + 8.1% 8.3% 6.4%

2014 Median Household Income $69,671 $65,150 $55,147 2014 Per Capita Income $56,626 $47,842 $37,581

2014 Average Household Income $115,761 $112,567 $96,228

Demographic data © 2012 by Experian.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 53 Patio Del Cielo SHERMAN OAKS, CA DEMOGRAPHIC ANALYSIS

SUMMARY REPORT

Geography: 5 miles Population

In 2014, the population in your selected geography is 444,451. The population has changed by 6.43% since 2000. It is estimated that the population in your area will be 450,721 five years from now, which represents a change of 1.41% from the current year. The current population is 49.17% male and 50.82% female. The median age of the population in your area is 37.7, compare this to the Entire US average which is 37.3. The population density in your area is 5,657.96 people per square mile.

Households There are currently 172,826 households in your selected geography. The number of households has changed by 5.89% since 2000. It is estimated that the number of households in your area will be 175,817 five years from now, which represents a change of 1.73% from the current year. The average household size in your area is 2.54 persons.

Income In 2014, the median household income for your selected geography is $55,147, compare this to the Entire US average which is currently $51,972. The median household income for your area has changed by 25.98% since 2000. It is estimated that the median household income in your area will be $66,394 five years from now, which represents a change of 20.39% from the current year.

The current year per capita income in your area is $37,581, compare this to the Entire US average, which is $28,599. The current year average household income in your area is $96,227, compare this to the Entire US average which is $74,533.

Race & Ethnicity The current year racial makeup of your selected area is as follows: 66.72% White, 4.38% Black, 0.11% Native American and 7.37% Asian/Pacific Islander. Compare these to Entire US averages which are: 71.60% White, 12.70% Black, 0.18% Native American and 5.02% Asian/Pacific Islander.

People of Hispanic origin are counted independently of race. People of Hispanic origin make up 35.62% of the current year population in your selected area. Compare this to the Entire US average of 17.13%.

Housing In 2000, there were 72,459 owner occupied housing units in your area and there were 90,749 renter occupied housing units in your area. The median rent at the time was $665.

Employment In 2014, there are 177,859 employees in your selected area, this is also known as the daytime population. The 2000 Census revealed that 69.38% of employees are employed in white-collar occupations in this geography, and 30.54% are employed in blue-collar occupations. In 2014, unemployment in this area is 9.25%. In 2000, the average time traveled to work was 33.4 minutes.

Demographic data © 2012 by Experian.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 54 Patio Del Cielo SHERMAN OAKS, CA DEMOGRAPHIC ANALYSIS

POPULATION DENSITY

Demographic data © 2012 by Experian.

Number of people living in a given area per square mile.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 55 Patio Del Cielo SHERMAN OAKS, CA DEMOGRAPHIC ANALYSIS

EMPLOYMENT DENSITY

Demographic data © 2012 by Experian.

The number of people employed in a given area per square mile.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 56 Patio Del Cielo SHERMAN OAKS, CA DEMOGRAPHIC ANALYSIS

AVERAGE HOUSEHOLD INCOME

Demographic data © 2012 by Experian.

Average income of all the people 15 years and older occupying a single housing unit.

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 57 Patio Del Cielo SHERMAN OAKS, CA DEMOGRAPHIC ANALYSIS

TRAFFIC COUNTS

Traffic Count data © 2012 by TrafficMetrix. All rights reserved. Two-way, average daily traffic volumes. * Traffic Count Estimate

This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a trademark of Marcus & Millichap Real Estate Investment Services, Inc. © 2016 Marcus & Millichap. All rights reserved. 58 Patio Del Cielo SHERMAN OAKS, CA

OFFERING MEMORANDUM

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