APPRAISAL OF REAL PROPERTY · 2013. 11. 27. · APPRAISAL OF REAL PROPERTY The Center 1880 East...

APPRAISAL OF REAL PROPERTY

The Center

1880 East Hammer Lane

Stockton, San Joaquin County, CA 95210

IN A SELF-CONTAINED APPRAISAL REPORT

As of September 30, 2013

Prepared For:

Aviv Arlon Ltd.

7 Jabotinsky Street

Ramat Gan, Israel

Prepared By:

Cushman & Wakefield Western, Inc.

Valuation & Advisory

400 Capitol Mall, Suite 650

Sacramento, CA 95814

C&W File ID: 13-38032-900216-001

CUSHMAN & WAKEFIELD WESTERN, INC. 400 CAPITOL MALL, SUITE 650 SACRAMENTO, CA 95814

The Center

1880 East Hammer Lane

Stockton, San Joaquin County, CA 95210

400 CAPITOL MALL, SUITE 650

SACRAMENTO, CA 95814

November 18, 2013

Eyal Bartov Aviv Arlon Ltd. 7 Jabotinsky Street Ramat Gan, Israel

Re: Appraisal of Real Property In a Self-Contained Report

The Center 1880 East Hammer Lane Stockton, San Joaquin County, CA 95210

C&W File ID: 13-38032-900216-001

Dear Mr. Bartov:

In fulfillment of our agreement as outlined in the Letter of Engagement, we are pleased to transmit our appraisal of the above property in a self-contained report dated November 18, 2013. The effective date of value is September 30, 2013.

This appraisal report has been prepared in accordance with our interpretation of your institution’s guidelines and the Uniform Standards of Professional Appraisal Practice (USPAP).

The subject property consists of a portion of a community shopping center, shadow-anchored by Costco (not a part). The subject portion contains 152,719± square feet of rentable area, in eight single-story buildings. The improvements were completed in 1991 and are in average condition. The property is currently 100.00 percent occupied by 10 tenants. There is also approximately 1.72 acres of developable excess land.

Based on the agreed-to Scope of Work, and as outlined in the report, we developed the following opinion of Market Value:

Value Conclusions

Appraisal Premise Real Property Interest Date Of ValueValue Conclusion

Market Value As-Is Leased Fee 9/30/2013 $17,050,000Compiled by Cushman & Wakefield Western, Inc.

The value opinions in this report are qualified by certain assumptions, limiting conditions, certifications, and definitions. The value opinions in this report are not qualified by any extraordinary assumptions or hypothetical conditions.

EYAL BARTOV AVIV ARLON LTD. NOVEMBER 18, 2013 PAGE 2

CUSHMAN & WAKEFIELD WESTERN, INC.

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

Respectfully submitted,


Chris Stavros Director CA Certified General Appraiser License No. AG036470 [email protected] (209) 357-5667 Office Direct (916) 244-0386 Fax

Judson H. Cline, MAI, MRICS Senior Director CA Certified General Appraiser License No. AG027622 [email protected] (916) 473-7396 Office Direct (916) 720-0162 Fax

THE CENTER, STOCKTON, CA CLIENT SATISFACTION SURVEY III

C L I E N T S A T I S F A C T I O N S U R V E Y As part of our quality monitoring campaign, attached is a short survey pertaining to this appraisal report and the service that you received. Would you please take a few minutes to complete the survey to help us identify the things you liked and did not like?

Each of your responses will be catalogued and reviewed by members of our national Quality Control Committee, and appropriate actions will be taken where necessary. Your feedback is critical to our effort to continuously improve our service to you, and is sincerely appreciated.

To access the questionnaire, please click on the link here:

http://www.surveymonkey.com/s.aspx?sm=_2bZUxc1p1j1DWj6n_2fswh1KQ_3d_3d&c=13-38032-900216-001

The survey is hosted by Surveymonkey.com, an experienced survey software provider. Alternatively, simply print out the survey attached in the Addenda of this report and fax it to (716) 852-0890.

THE CENTER, STOCKTON, CA SUMMARY OF SALIENT FACTS AND CONCLUSIONS IV

Summary of Sal ient Facts and Conclusions The subject property consists of a portion of a community shopping center, shadow-anchored by Costco (not a part). The subject portion contains 152,719± square feet of rentable area, in eight single-story buildings. The improvements were completed in 1991 and are in average condition. The property is currently 100.00 percent occupied by 10 tenants. There is also approximately 1.72 acres of developable excess land.

BASIC INFORMATIONCommon Property Name: The CenterAddress: 1880 East Hammer Lane

Stockton, CA 95210County: San JoaquinProperty Ownership Entity: BAI Stockton/Bon Aviv Investments, LLC

SITE INFORMATIONLand Area: Square Feet Acres

Main Parcel 934,798 21.46Excess Land 74,706 1.72

Total Land Area: 1,009,504 23.18

Site Shape: Irregularly shapedSite Topography: Level at street gradeFrontage: AverageSite Utility: Good

Flood Zone Status:Flood Zone: X500Flood Map Number: 060302-0320FFlood Map Date: 10/16/09

BUILDING INFORMATIONType of Property: Multi-Tenant Retail

Building AreaGross Building Area: 152,719 SFGross Rentable Area: 152,719 SFLand to Building Ratio: 6.12:1

Number of Buildings: EightNumber of Stories: OneActual Age: 22 YearsQuality: Average

Year Built: 1991Condition: Average

Parking:Number of Parking Spaces: 1,021 Parking Ratio (per 1,000 sf): 4.17:1Parking Type: Surface

THE CENTER, STOCKTON, CA SUMMARY OF SALIENT FACTS AND CONCLUSIONS V

MUNICIPAL INFORMATIONAssessment Information:

Assessing Authority San Joaquin CountyAssessor's Parcel Identification 094-280-09, -10, -12-, 13, -14, -15, -18, -

19, -20, -22, and 094-040-07Current Tax Year 2013/14Taxable Assessment $10,289,050 Tax Assessment per square foot $67.37 Current Tax Liability $124,971 Taxes per square foot $0.82 Are taxes current? Taxes are currentIs a grievance underway? Not to our knowledgeSubject's assessment is Below market level

Zoning Information:Municipality Governing Zoning City of StocktonCurrent Zoning C-GIs current use permitted? YesCurrent Use Compliance Complying useZoning Change Pending NoZoning Variance Applied For Not applicable

HIGHEST & BEST USEAs Though Vacant:

As Improved:

A shopping center built to its maximum feasible building area, when warranted by demand

A shopping center as it is currently improved

TENANCY INFORMATIONOccupancy %: 100.0%Occupied (SF): 152,719Current Number of Tenants: 10Vacant (SF): 0Number of Vacant Spaces: 0

Base Rent Status:Attained Rent (Occupied Space): $8.73Market Rent: $9.79Attained Rent is: Below market

THE CENTER, STOCKTON, CA SUMMARY OF SALIENT FACTS AND CONCLUSIONS VI

VALUATION INDICESMarket Value

As-IsVALUE DATE 9/30/2013SALES COMPARISON APPROACHIndicated Value: $17,100,000Per Square Foot (GLA): $111.97

INCOME CAPITALIZATION APPROACHYield Capitalization

Projection Period: 12 YearsHolding Period: 11 YearsTerminal Capitalization Rate: 8.25%Internal Rate of Return: 9.00%Indicated Value: $17,100,000Per Square Foot (GLA): $111.97

Direct CapitalizationNet Operating Income (stabilized): $1,233,633Capitalization Rate: 7.75%Indicated Value: $16,950,000Pluse Excess Land $1,050,000Indicated Value $16,950,000Indicated Value Rounded: $16,950,000Per Square Foot (GLA): $110.99

Income Capitalization ApproachIndicated Value: $17,050,000Per Square Foot (GLA): $111.64

FINAL VALUE CONCLUSIONReal Property Interest: Leased FeeConcluded Value: $17,050,000Per Square Foot (GLA): $111.64Implied Capitalization Rate: 7.24%

EXCESS LAND VALUATIONIndicated Value: $1,050,000Per Square Foot: $14.06

EXPOSURE AND MARKETING TIMEExposure Time: 12 MonthsMarketing Time: 12 Months

THE CENTER, STOCKTON, CA PROPERTY PHOTOGRAPHS VII

Property Photographs AERIAL PHOTOGRAPHS

THE CENTER, STOCKTON, CA PROPERTY PHOTOGRAPHS VIII

AERIAL PHOTOGRAPHS

THE CENTER, STOCKTON, CA PROPERTY PHOTOGRAPHS IX

IHOP PAD BUILDING

EL FORASTERO PAD BUILDING WITH DRIVE-THRU

THE CENTER, STOCKTON, CA PROPERTY PHOTOGRAPHS X

PAD BUILDING OCCUPIED BY SPRINT

SIZZLER PAD BUILDING

THE CENTER, STOCKTON, CA PROPERTY PHOTOGRAPHS XI

COSTCO TIRE SERVICE BUILDING

ANCHOR BUILDING OCCUPIED BY PREMIER FURNITURE

THE CENTER, STOCKTON, CA PROPERTY PHOTOGRAPHS XII

SUB-ANCHOR BUILDING

COSTCO FUELING STATION (GROUND LEASE)

THE CENTER, STOCKTON, CA PROPERTY PHOTOGRAPHS XIII

JIFFY LUBE PAD BUILDING (GROUND LEASE)

MONTEREY WATER (KIOSK)

THE CENTER, STOCKTON, CA PROPERTY PHOTOGRAPHS XIV

REAR OF ANCHOR BUILDING (SOUTH ELEVATION)

INTERIOR OF ANCHOR BUILDING

THE CENTER, STOCKTON, CA PROPERTY PHOTOGRAPHS XV

VACANT PAD SITE

LOOKING WEST ALONG E HAMMER LANE

THE CENTER, STOCKTON, CA PROPERTY PHOTOGRAPHS XVI

LOOKING EAST ALONG E HAMMER LANE

THE CENTER, STOCKTON, CA TABLE OF CONTENTS XVII

T A B L E O F C O N T E N T S SUMMARY OF SALIENT FACTS AND CONCLUSIONS -------------------------------------------------------------------------------------- IV PROPERTY PHOTOGRAPHS ----------------------------------------------------------------------------------------------------------------------------- VII INTRODUCTION ---------------------------------------------------------------------------------------------------------------------------------------------------- 1

SCOPE OF WORK ------------------------------------------------------------------------------------------------------------------------------ 1 IDENTIFICATION OF PROPERTY --------------------------------------------------------------------------------------------------------- 2 PROPERTY OWNERSHIP AND RECENT HISTORY --------------------------------------------------------------------------------- 2 DATES OF INSPECTION AND VALUATION -------------------------------------------------------------------------------------------- 2 CLIENT, INTENDED USE AND USERS OF THE APPRAISAL --------------------------------------------------------------------- 2

REGIONAL ANALYSIS ------------------------------------------------------------------------------------------------------------------------------------------ 3 INTRODUCTION--------------------------------------------------------------------------------------------------------------------------------- 4 ECONOMIC & DEMOGRAPHIC PROFILE ----------------------------------------------------------------------------------------------- 4 CRITICAL OBSERVATIONS ----------------------------------------------------------------------------------------------------------------- 8 CONCLUSION------------------------------------------------------------------------------------------------------------------------------------ 9

LOCAL AREA ANALYSIS ------------------------------------------------------------------------------------------------------------------------------------ 10 LOCATION OVERVIEW ---------------------------------------------------------------------------------------------------------------------- 11 NEIGHBORHOOD ANALYSIS -------------------------------------------------------------------------------------------------------------- 11 ACCESS ------------------------------------------------------------------------------------------------------------------------------------------ 12 CONCLUSION----------------------------------------------------------------------------------------------------------------------------------- 13

RETAIL MARKET ANALYSIS ------------------------------------------------------------------------------------------------------------------------------ 14 INTRODUCTION-------------------------------------------------------------------------------------------------------------------------------- 14 NATIONAL RETAIL MARKET OVERVIEW ---------------------------------------------------------------------------------------------- 14 LOCAL RETAIL MARKET OVERVIEW --------------------------------------------------------------------------------------------------- 25 TRADE AREA OVERVIEW ------------------------------------------------------------------------------------------------------------------ 29 TRADE AREA ANALYSIS -------------------------------------------------------------------------------------------------------------------- 30 CONCLUSION----------------------------------------------------------------------------------------------------------------------------------- 37

PROPERTY ANALYSIS --------------------------------------------------------------------------------------------------------------------------------------- 38 SITE DESCRIPTION--------------------------------------------------------------------------------------------------------------------------- 38 IMPROVEMENTS DESCRIPTION --------------------------------------------------------------------------------------------------------- 43 REAL PROPERTY TAXES AND ASSESSMENTS ------------------------------------------------------------------------------------ 46 ZONING ------------------------------------------------------------------------------------------------------------------------------------------- 47

VALUATION --------------------------------------------------------------------------------------------------------------------------------------------------------- 49 HIGHEST AND BEST USE ------------------------------------------------------------------------------------------------------------------ 49 VALUATION PROCESS ---------------------------------------------------------------------------------------------------------------------- 51 LAND VALUATION (EXCESS LAND) ----------------------------------------------------------------------------------------------------- 53 SALES COMPARISON APPROACH ------------------------------------------------------------------------------------------------------ 59 INCOME CAPITALIZATION APPROACH ------------------------------------------------------------------------------------------------ 67 RECONCILIATION AND FINAL VALUE OPINION ---------------------------------------------------------------------------------- 110 SENSITIVTY ANALYSIS ------------------------------------------------------------------------------------------------------------------- 112 ASSUMPTIONS AND LIMITING CONDITIONS -------------------------------------------------------------------------------------- 113 CERTIFICATION OF APPRAISAL ------------------------------------------------------------------------------------------------------- 116

ADDENDA CONTENTS ------------------------------------------------------------------------------------------------------------------------------------ 117

THE CENTER, STOCKTON, CA INTRODUCTION 1

Introduct ion

S C O P E O F W O R K This appraisal, presented in a self-contained report, is intended to comply with the reporting requirements outlined under the USPAP for a self-contained appraisal report.

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

For this assignment, Quality Control Oversight was provided by Judson H. Cline, MAI, MRICS. In addition to a qualitative assessment of the appraisal report, Judson H. Cline, MAI, MRICS is a signatory to the appraisal report and concurs in the value estimate set forth herein.

The scope of this appraisal is to value the leased fee interest in the subject property. This required collecting primary and secondary data relevant to the subject property. Vacant land and improved sales were researched in the subject’s market, rental data was analyzed, and the input of buyers, sellers, brokers, property developers and public officials was considered. A physical inspection of the property was made. In addition, the general regional economy as well as the specifics of the subject’s local area was investigated.

The data have been thoroughly analyzed and confirmed with sources believed to be reliable, leading to the value conclusions in this report. The valuation process used generally accepted market-derived methods and procedures appropriate to the assignment.

This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these approaches would be considered applicable and/or necessary for market participants. Typical purchasers do not generally rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not utilized the Cost Approach to develop an opinion of market value. At the client’s request, we eliminated all specific references to the tenant’s identity. Additionally, we did not include the historical operating statements nor the Argus input assumptions and supporting schedules.

THE CENTER, STOCKTON, CA INTRODUCTION 2

I D E N T I F I C A T I O N O F P R O P E R T Y Common Property Name: The Center

Location: The subject property is located at 1880 East Hammer Lane Stockton, San JoaquinCounty, California 95210

Assessor's Parcel Numbers:

094-280-09, -10, -12-, 13, -14, -15, -18, -19, -20, -22, and 094-040-07

Legal Description: The legal description is presented in the Addenda of the report.

P R O P E R T Y O W N E R S H I P A N D R E C E N T H I S T O R Y Current Ownership: BAI Stockton/Bon Aviv Investments, LLC

Sale History: The property was purchased by the current owner as part of a multi-property portfolio on April 30, 2012 for a total purchase price of $60,000,000. There was no allocation to each of the properties.

We know of no other transfers within the last three years.

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

D A T E S O F I N S P E C T I O N A N D V A L U A T I O N Effective Date of Valuation:

As Is: September 30, 2013

Date of Inspection: September 14, 2013

Property Inspected by: Chris Stavros

C L I E N T , I N T E N D E D U S E A N D U S E R S O F T H E A P P R A I S A L Client: Aviv Arlon Ltd.

Intended Use: This appraisal is intended to provide an opinion of the Market Value of the Leased Fee interest in the property for the use of the client for financial reporting purposes according to the International Financial Reporting Standards (IFRS). This report is not intended for any other use.

Intended User: This appraisal has been prepared for the use of Aviv Arlon Ltd. The client agrees that there are no other intended users.

This appraisal does not employ any extraordinary assumptions, hypothetical conditions, supplemental standards, or jurisdictional exceptions.

THE CENTER, STOCKTON, CA REGIONAL ANALYSIS 3

Regional Analysis REGIONAL MAP


I N T R O D U C T I O N The short- and long-term value of real estate is influenced by a variety of interacting factors. Regional analysis identifies those factors that affect property value, and the role they play within the region. The four primary forces that determine the supply and demand for real property, and consequently affect market value, are: environmental characteristics, governmental forces, social factors, and economic trends.

The subject property is located in the City of Stockton in the Stockton CBSA.

E C O N O M I C & D E M O G R A P H I C P R O F I L E The following profile of the Stockton CBSA was provided by Moody’s Economy.com. Economy.com's core assets of proprietary editorial and research content as well as economic and financial databases are a source of information on national and regional economies, industries, financial markets, and demographics.

Economy.com's approach to the analysis of the U.S. economy consists of building a large-scale, simultaneous-equation econometric model, which they simulate and adjust with local market information, creating a model of the U.S. macro economy that is both top-down and bottom-up. In this model, those variables that are national in nature are modeled nationally while those that are regional in nature are modeled regionally. Interest rates, prices, and business investment are modeled as national variables; key sectors such as labor markets (employment, labor force), demographics (population, households, and migration), and construction activity (housing starts and sales) are modeled regionally and then aggregated to national totals. This approach allows local information to influence the macroeconomic outlook. Therefore, changes in fiscal policy at the national level (changes in tax rates, for example) are translated into their corresponding effects on state economies. At the same time, the growth patterns of large states, such as California, New York, and Texas, play a major role in shaping the national outlook.

In addition, on a regional basis, the modeling system is explicitly linked to other states through migration flows and unemployment rates. Economy.com's model structure also takes into account migration between states.

ANALYSIS

SHORTTERM

LONGTERM

STRENGTHS & WEAKNESSES

CURRENT EMPLOYMENT TRENDS

FORECAST RISKSRISK-ADJUSTEDRETURN, ’12-17

RELATIVE EMPLOYMENT PERFORMANCE (1998=100)

EMPLOYMENT GROWTH RANK

VITALITY

LIFE CYCLE PHASE

U.S.=100% Best=1 Worst=384

Best=1, Worst=392 U.S.=100%

2012-2014

RELATIVE COSTSLIVING BUSINESS

2012-2017

RELATIVE RANK

MOODY’S ANALYTICS / Précis U.S. Metro / West / April 2013

U.S. STO

95

100

105

110

115

120

125

130

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13F 14F 15F 16F 17F

STRENGTHS ● Proximity to the Bay Area and Sacramento. ● Well-developed regional transportation network.

● Moderately strong demographic trends.WEAKNESSES

● Low educational attainment and incomes. ● Port activity reliant on cyclical trade flows. ● High dependency on low-paying agriculture. ● Especially severe housing crisis.

UPSIDE ● Large service-related firms relocate to STO. ● Rebound in Bay Area high-tech industries spills over to STO.

● Area develops into a transportation hub between Sacramento and the Bay Area.

DOWNSIDE ● Housing market downturn persists longer than expected.

● Financial strain leads to more government layoffs.

Recent Performance. Stockton’s recovery is los-ing traction as large employers, including govern-ment, face fresh challenges. Although it is trend-ing lower, the unemployment rate, at 13.3%, is well above the state and national averages. After a lengthy downturn, house prices are inching up and permits are improving, but the market is not out of the woods yet, as distress sales loom.

Government. Local government’s challenges will weigh on the recovery. A federal bankruptcy judge has ruled that the City of Stockton met the quali-fications to continue with Chapter 9 bankruptcy. The city’s $90 million in cuts from the general fund, which included police and fire department layoffs, are a big first step toward solvency but will sting in the near term. Although the judge ruled in its favor, the city must now negotiate with creditors to resolve hundreds of millions of dollars in debt. Recent cuts to salaries and services are unlikely to be restored, which, given the large share of local government employment, will be particularly dam-aging to income and job growth.

On the bright side, the state-funded California Healthcare Facility will provide some offsetting support. The $900 million site will employ an es-timated 2,400 workers when it is completed this summer, mostly in healthcare occupations.

Housing. Near term, the metro area’s foreclo-sure problem will undermine the housing recov-ery. STO’s foreclosure inventory remains among the highest in the nation, although supply con-straints allowed house prices to increase in 2012. According to the California Association of Real-tors, distress sales in March accounted for only 28% of total sales, down from 49% at the same time last year. Foreclosures will hit the market slowly, limiting the number of distress sales and preventing outright price declines. However, the excess supply of distress homes will still need to

be absorbed, resulting in a shallower upturn in prices later on. A sustained recovery will set in next year, but prices will not fully recover within the next decade.

Income. Longer term, STO will be unable to keep pace with national income growth. The metro area’s share of high-tech employment is low, and aside from healthcare, it has few industries capable of driving wage growth. The economy is more reli-ant on low-paying industries with volatile employ-ment prospects such as agriculture. As a result, per capita incomes will remain well below average.

Despite its lack of high-paying industries, the metro area has potential to benefit from its prox-imity to San Jose and Oakland. Both metro areas boast large shares of high-tech employment and high per capita incomes, which bring outside mon-ey into STO. Despite steep housing corrections, the median house price in each of those metro areas is more than double that in the local market. As a result, the metro area will maintain its position as an affordable alternative for workers commuting to save money.

Stockton’s recovery will remain slow before accelerating later this year. Hiring in private services such as healthcare will drive job gains. Government cutbacks and the lingering effects of the severe housing correction will weigh on the recovery; STO will struggle to reach its pre-recession level of employment in the next several years. Over the long term, the metro area will benefit from its proximity to the wealthier Bay Area. Agriculture will also be a bright spot, and the Port of Stockton will grow as global trade in-creases. However, many new jobs will be in low-value-added services, sustaining the income gap between STO and the nation.

Kaitlyn MendolaApril 2013

STOCKTONX X

Data Buffet® MSA code: MSTO

234 3rd quintile

221 3rd quintile 93%100%

108%

Mature

92

1.07%

2006 2007 2008 2009 2010 2011 2012 INDICATORS 2013 2014 2015 2016 2017 22.0 22.1 21.3 20.5 20.2 20.3 20.9 Gross metro product (C$B) 21.3 21.9 22.8 23.4 23.9 2.4 0.3 -3.7 -3.6 -1.4 0.2 2.9 % change 2.0 2.8 4.1 2.9 1.9 209.0 211.5 205.7 193.7 187.7 187.5 190.2 Total employment (000) 191.5 194.9 200.5 204.7 206.4 1.5 1.2 -2.7 -5.8 -3.1 -0.1 1.4 % change 0.7 1.8 2.9 2.1 0.8 7.4 8.1 10.3 15.2 17.3 16.8 14.9 Unemployment rate 13.5 12.3 10.1 9.3 8.9 6.4 6.4 1.3 -3.2 2.3 3.8 2.7 Personal income growth 3.9 6.9 7.2 6.3 4.8 662.8 668.1 671.7 677.7 687.5 695.6 702.6 Population (000) 714.2 725.8 737.1 747.0 756.1 3,461 2,201 765 792 801 781 1,025 Single-family permits 1,657 3,297 4,223 4,479 4,113 191 225 54 0 12 152 192 Multifamily permits 24 35 45 44 40 404.1 353.5 229.6 168.5 180.5 163.8 169.8 Existing-home price ($ ths) 177.2 187.9 204.3 216.8 227.1 12,862 7,010 3,477 3,331 2,560 2,055 2,975 Mortgage originations ($ mil) 2,714 2,465 2,546 2,663 3,347 -0.6 -2.0 -3.2 -0.6 3.5 2.0 0.9 Net migration (000) 4.9 4.4 3.8 2.3 1.3 817 1,684 3,067 4,842 5,798 5,263 3,935 Personal bankruptcies 4,219 4,099 4,039 4,087 4,377

% CHANGE YR AGO, 3-MO MA Jul 12 Nov 12 Mar 13Total 1.2 1.1 0.7Construction 2.7 3.1 1.5Manufacturing -0.8 -5.0 -2.6Trade 4.0 3.0 1.1Trans/Utilities 3.5 5.2 7.2Information -10.1 -8.3 -4.6Financial Activities 1.8 -0.5 -1.1Prof & Business Svcs. 8.9 7.9 6.8Edu & Health Svcs. -3.2 -2.5 -2.0Leisure & Hospitality 3.1 3.1 2.7Other Services 2.3 2.9 0.4Government -1.9 0.0 -1.6

EMPLOYMENT & INDUSTRY MIGRATION FLOWS

LEADING INDUSTRIESHOUSE PRICES

COMPARATIVE EMPLOYMENT AND INCOME

PER CAPITA INCOME

Due to U.S. fl uctuations Relative to U.S.

TOP EMPLOYERS

PUBLIC

INDUSTRIAL DIVERSITY

EMPLOYMENT VOLATILITY

NAICS INDUSTRY EMPLOYEES (000)

Sector % of Total Employment Average Annual Earnings

Not due to U.S. Due to U.S.

Most Diverse (U.S.)

Least Diverse

Source: FHFA, 1996Q1=100, NSA

MiningConstructionManufacturing Durable NondurableTransportation/UtilitiesWholesale TradeRetail TradeInformationFinancial ActivitiesProf. and Bus. ServicesEduc. and Health ServicesLeisure and Hosp. ServicesOther ServicesGovernment

MOODY’S RATING


Sources: IRS (top), 2010; Census Bureau, 2012

Sources: BLS, Moody’s Analytics, 2012

2012

Sources: Percent of total employment — Moody’s Analytics & BLS, 2012; Average annual earnings — BEA, 2011

Source: Bureau of Economic Analysis, 2011NR

INTO STOCKTON, CA NUMBER OF MIGRANTSOakland, CA 6,944Modesto, CA 3,635San Jose, CA 2,810Sacramento, CA 2,703San Francisco, CA 925Los Angeles, CA 575Merced, CA 498Riverside, CA 401Fresno, CA 371San Diego, CA 327Total In-migration 26,423

FROM STOCKTON, CAOakland, CA 4,600Modesto, CA 3,380Sacramento, CA 3,056San Jose, CA 2,183San Francisco, CA 698Los Angeles, CA 549Riverside, CA 430San Diego, CA 398Fresno, CA 373Merced, CA 328Total Out-migration 24,052

Net Migration 2,371

GVSL State & Local Government 32.37225 Restaurants and other eating places 13.5FR Farms 9.4FH Fishing, Hunting, Etc. 7.16221 General medical and surgical hospitals 5.55613 Employment services 5.34931 Warehousing and storage 5.24841 General freight trucking 4.54521 Department stores 4.54451 Grocery stores 4.1GVF Federal Government 3.94244 Grocery & related prod. merchant wholesalers 3.9PH Private Household Workers 3.86231 Nursing care facilities (skilled nursing facilities) 3.26211 Offices of physicians 3.1

High-tech employment 2.5As % of total employment 1.2

2009 2010 2011 2012Domestic -2,115 1,643 628 -523Foreign 1,547 1,807 1,343 1,460Total -568 3,450 1,971 937

Federal 3,905State 3,654Local 28,660

STO CA U.S. 0.0% 0.2% 0.6% 4.0% 4.1% 4.2% 9.3% 8.7% 8.9% 40.1% 62.4% 62.6% 59.9% 37.6% 37.4% 7.9% 3.4% 3.7% 5.6% 4.7% 4.2% 13.1% 10.9% 11.1% 0.9% 3.0% 2.0% 3.9% 5.4% 5.8% 8.6% 15.5% 13.4% 15.2% 13.1% 15.2% 8.9% 11.1% 10.3% 3.4% 3.5% 4.1% 19.0% 16.5% 16.4%

STO CA U.S. $22,233 $75,833 $80,442 $62,381 $64,858 $57,059 $61,689 $93,487 $76,451 nd $105,024 $78,378 nd $74,760 $73,303 $62,111 $67,171 $63,289 $63,216 $78,212 $78,458 $33,263 $37,786 $32,088 $65,149 $127,523 $96,383 $27,723 $47,475 $50,553 $38,165 $67,822 $61,371 $53,494 $57,360 $50,771 $19,600 $29,191 $24,149 $37,709 $37,024 $34,601 $71,531 $78,670 $68,458

St. Joseph Medical Center 2,530OG Packing Co. 2,000San Joaquin General Hospital 1,780Defense Distribution Depot San Joaquin 1,504Safeway Inc. 1,500Dameron Hospital 1,300Pacific Gas and Electric Co. 1,100Kaiser Permanente 1,060San Joaquin Delta College 1,000North California Youth Center 1,000University of the Pacific 970Diamond Walnut 800O’Reilly Auto Parts 650Teletech Customer Care Management (WV) Inc. 600AT&T 500Morada Produce Co. 500Wal-Mart Stores Inc. 500General Mills Inc. 450Owens Brockway Inc. 450Bank of Stockton 440

Sources: City of Stockton, October 2011, San Joaquin Partnership, September 2010

0.00

0.20

0.40

0.60

0.80

1.00

0.51

0%

20%

40%

60%

80%

100%

81%

STO U.S.

100

148

0

1,000

2,000

3,000

4,000

-1,000

-2,00009 10 11 12

Net Migration, STONET MIGRATION, STO

STO U.S.

50

100

150

200

250

300

350

97 00 03 06 09 12

STO CA U.S.

31,013

43,647 41,560


STOCKTON

11

-8

-6

-4

-2

0

2

4

08 09 10 11 12 13

U.S.CaliforniaStockton

Stockton’s Recovery Is Trailing…Employment, % change yr ago, 3-mo MA

Sources: BLS, Moody’s Analytics

33

0102030405060708090

100

08 09 10 11 12 13

U.S.CaliforniaStockton

Foreclosures Are Falling but Still a BurdenForeclosure inventory per 1,000 households

Sources: RealtyTrac, Moody’s Analytics

55

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

-5

0

5

10

15

20

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Renewed In-Migration Will Boost Recovery

Net migration, ths (L)

Population, % change (R)

Sources: Census Bureau, Moody’s Analytics

22

-20

-15

-10

-5

0

5

09 10 11 12 13

Goods producingPrivate servicesGovernment

…As Government Challenges PersistEmployment, % change yr ago, 3-mo MA


44

90110130150170190210230250270290

0

1

2

3

4

5

6

7

8

05 06 07 08 09 10 11 12 13

Housing starts, SAAR, ths (L)

Case-Shiller® Home Price Index, 2000Q1=100 (R)

House Price Appreciation Will Be Slow

Sources: CoreLogic, Census Bureau, Moody’s Analytics

66

70

75

80

85

90

95

87 89 91 93 95 97 99 01 03 05 07 09 11

California

U.S.

Below-Average Incomes Are a Disadvantage

Sources: BEA, Moody’s Analytics

Per capita income indexed to…


C R I T I C A L O B S E R V A T I O N S The following is a summary of some of our general observations about the subject’s region.

Location - The Stockton MSA consists of San Joaquin County, and is located between the main cities of Sacramento and Fresno in central California. Highway 99 and Interstate 5, both of which extend north/south, serve the region. The Bay Area, Sacramento, and the central California coast are all within a two-hour drive.

Economy - Stockton’s economy continues to struggle, although there were recent signs of improvement in the first half of 2013. While the poor housing market and credit issues continue to drag on the economy, the primary issue facing the area is deteriorating fiscal conditions. In June 2012 the City of Stockton became the largest city ever to file for bankruptcy after it was unable to come to agreement with its employee unions and creditors on a plan to close a $26-million gap in its general fund. Public employment accounts for almost 20 percent of total employment, and is the second highest paying industry. While job losses in manufacturing have abated, there hasn’t been any real growth either. The Stockton housing market was among the hardest hit in the country, and unlike many areas of California, conditions aren’t improving much. Median home prices are down some 50 percent from their 2006 peak, and there remains a substantial inventory of foreclosures. Recent appreciation in the local housing market has lagged behind other areas of central California. Stockton has the third highest foreclosure rate of any metro area in the United States. The inventory of foreclosed homes is more than double the national average, and remains a hindrance to recovery. The unemployment rate in San Joaquin County was 12.8 percent in July 2013, up from a revised 12.0 percent in June 2013, and below the year-ago estimate of 15.5 percent. This compares with an unadjusted unemployment rate of 9.3 percent for California and 7.7 percent for the nation during the same period.

Population - Population growth in the MSA is forecasted to be 0.40 percent per year over the next five

years. This compares with 0.50 percent for the state of California, and 0.39 for the nation. Income - Income levels are projected to decrease at an annual rate of about 0.29 percent per year over

the next five years. Per capita income is below statewide levels and below the national average, with a relatively moderate cost of living.

Strengths - Strengths of the region include moderately strong demographic trends, a strong warehousing industry, and proximity to national markets. The MSA also benefits from an efficient transportation network. The Port of Stockton provides potential job growth for the area.


Weaknesses - Weaknesses within the MSA include continued housing problems, with high foreclosure rates and virtually no new construction. Serious fiscal problems in the local government, low educational attainment and income, and a high dependency on low-paying agricultural jobs continue to drag on the economy.

C O N C L U S I O N There are inherent risks to the economic health of the metropolitan area, including housing problems, a

strapped public sector, a one dimensional economic base, and high unemployment. In light of the social and economic attributes of the greater Stockton area, the short term outlook is not good. While the deterioration of the housing market has slowed recently, foreclosures loom. Unemployment remains high. Conversely, over the long term the area continues to be affordable (relative to nearby cities) and has a strong agricultural base. It is proximate to Sacramento, the state capitol, and the San Francisco Bay Area, which drives the northern California economy. The outlook is for sluggish demand for real estate in an economy that is not diversified.

THE CENTER, STOCKTON, CA LOCAL AREA ANALYSIS 10

Local Area Analysis LOCAL AREA MAP


L O C A T I O N O V E R V I E W The property is located in the northeast portion of the City of Stockton, which is a Central California city located approximately 80 miles east of San Francisco, and 50 miles south of Sacramento. Generally, the boundaries of the immediate area are Morada Lane to the north, Highway 99 to the east, March Lane to the south, and Pacific Avenue and Thornton Road to the west.

N E I G H B O R H O O D A N A L Y S I S According to the California Department of Finance, as of January 1, 2012, Stockton had a population of 295,707, up 1.0 percent from one year ago. This compares to a growth rate of 1.0 percent for San Joaquin County over the same period. According to Claritas, the average household income within a one-mile radius of the subject is $48,313, and $58,694 within a five-mile radius. This compares with $66,246 for the Stockton MSA, $83,189 for the State of California, and $69,636 for the nation. Income growth within a one-mile radius is projected to decrease by 0.29 percent per year over the next five years. This compares to a decrease of 0.23 percent for San Joaquin County, an increase of 0.64 percent for the State of California, and an increase of 0.65 percent for the nation.

Similar to other cities in the Central Valley, Stockton experienced a large increase in residential construction and values from 2000 through the first half of 2006. Since then values have dropped significantly and construction has virtually seized. While the area has seen recent increases in home values, estimates are that current home prices are down over 50 percent from their mid-2006 peak. As of July 2013, the median sale price of a residential home in Stockton was $158,000, a 31.67 percent increase from July 2012. San Joaquin County experienced an increase of 39.39 percent over the same period. While the housing market has shown signs of stabilizing, foreclosures still loom, and most experts are cautiously optimistic.

The labor force in Stockton amounts to 125,300, and the unemployment rate as of July 2013 was 15.5 percent, down from 18.3 percent as an annual average for 2012, and 20.2 percent as an annual average for 2011. This compares with an unadjusted unemployment rate of 12.8 percent for San Joaquin County, 9.3 percent for California and 7.7 percent for the nation during the same period.

NEARBY AND ADJACENT USES The subject’s local area is composed of commercial uses, particularly retail, along the primary arteries, and residential along secondary streets.

Adjacent properties include;

North: East Hammer Lane, then Normandy Village, a neighborhood shopping center anchored by a local grocery store, Single-story multi-family (duplexes and four-plexes)

East: Montauban Avenue, then a Honda dealership, and single-family homes

South: Single-family

West: Strip shopping center anchored by Walgreens

Nearby retailers include 99 Cents Only, dd’s Discounts, Factory 2-U, Walmart, Home Depot, Lowes, and Burlington Coat Factory.


Generally the homes in the area are in average condition, with a median year built of 1983 within a one-mile radius. Approximately 48 percent of the housing units in a one-mile radius of the subject are owner-occupied and 52 percent are renter-occupied.

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

LAND USE CHANGES We know of no land use changes in the immediate area that would impact the subject.

A C C E S S Local area accessibility is generally good, relying on the following transportation arteries:

Local: East Hammer Lane is the primary east/west thoroughfare in north Stockton, connecting Highway 99 with Interstate 5. It has four lanes in each direction, with a concrete center divide, and two dedicated turn lanes at the intersection of East Hammer Lane and West Lane. West Lane is a commercial artery running north/south. It has two lanes in each direction.

Regional: Highway 99 is a primary transportation corridor running north/south through central California It is accessible in both directions approximately 1 ½ miles east of the subject at East Hammer Lane. Interstate 5 is the other transportation corridor serving the area. It is accessible approximately 3 ¾ miles west of the subject via Hammer Lane. Interstate 5 runs north/south through the state of California, extending from the Mexico border to Canada.

According to the City of Stockton, traffic counts at the subject property are approximately 37,400 ADT along East Hammer Lane, and 29,100 ADT along West Avenue.

Stockton is centrally located with access to an international deep-water port, national railroad system, and intrastate and interstate freeway system.

Public transportation is provided by San Joaquin Regional Transit District. Rail transportation includes Amtrak and Altamont Commuter Express (ACE), with Amtrak providing passenger access to the rest of the nation. Union Pacific and BNSF Railway, the two largest railroad networks in North America both service Stockton and its port via connections with the Stockton Terminal and Eastern Railroad and Central California Traction Company, who provide local and interconnecting services between the various rail lines. Recently, BNSF Railway opened a much needed $150 million intermodal freight transport facility in southeast Stockton, which satisfies long-haul transportation needs.

The Stockton Metropolitan Airport is located on county land just south of the city limits. The airport has been designated a Foreign Trade Zone and is mainly used by manufacturing and agricultural companies for shipping purposes. Limited passenger service includes flights to Las Vegas and Long Beach by Allegiant Air. A recent $3 million grant from the Federal Aviation Administration will allow construction to begin on the expansion of the Stockton Metropolitan Airport.


The Port of Stockton is a fully operating seaport approximately 75 nautical miles east of the Golden Gate Bridge in San Francisco. Set on the San Joaquin River, the port operates a 2,000-acre transportation center with berthing space for 17 vessels. The port also includes 1.1 million square feet of dockside transit sheds and shipside rail trackage and 7.7 million square feet of warehousing.

C O N C L U S I O N The subject benefits from its corner location along one of Stockton’s main commercial thoroughfares. The population growth rate over the next five years, within a five-mile radius of the subject is expected to be below the Stockton CBSA, and in line with the State of California. The local economy, like many other California economies, has been hit hard by the housing slowdown. In fact, the metro area has the third highest foreclosure rate in the nation. Projected income growth for the area is negative over the next five years. The average household income level within a one-mile radius is lower than the City of Stockton, the Stockton CBSA, the State of California, and the nation. The outlook is for stabilizing but limited demand for real estate for the foreseeable future and until the economy begins to expand significantly once again; at least through the first half of 2014. Ultimately Stockton will likely perform at or near levels of the Central Valley overall, but behind the major metropolitan areas of California.

THE CENTER, STOCKTON, CA RETAIL MARKET ANALYSIS 14

Retai l Market Analysis

I N T R O D U C T I O N A variety of factors influence the performance of a property in the market. In this section we provide an in-depth analysis of both the market in which the subject property competes and its position within that market. Our analysis begins by defining the subject’s property type so that it can be understood in the context of the local retail structure. This competitive set is then analyzed in detail. Next, we thoroughly review current market statistics such as supply, absorption, vacancy, effective rental rates and new and proposed construction. Having quantified these components, we then determine a reasonable trading area for the subject based on highway accessibility, geographic constraints and area growth patterns including planned infrastructure improvements. We finish our Retail Market Analysis by examining the underlying demographic indices that define the trade area such as population, household income and retail sales potential. Comparisons are made to larger study areas such as the CBSA, state and U.S. as a whole in order to place the historical and prospective performance of the subject trade area in context.

The subject is best described as a Community Center. Community centers reflect a general merchandise or convenience concept and typically encompass 100,000 to 350,000 square feet of GLA, including anchors, on 10 to 40 acres. They will typically have two or more anchors (discount department, supermarket, drug, home improvement, large specialty discount) with a 40 to 60 percent anchor ratio (the share of a center’s total square footage that is attributable to its anchors) and a primary trade area (the area from which 60 to 80 percent of the center’s sales originate) of three to six miles.

N A T I O N A L R E T A I L M A R K E T O V E R V I E W

INTRODUCTION Since the recession officially ended in June 2009, the U.S. economy has produced slow but steady growth. While employment has not fully recovered, there has been gradual improvement in the economy, yet uncertainty remains. In June 2013, the U.S. Bureau of Labor Statistics reported that nonfarm payroll employment increased by 195,000 jobs, while the unemployment rate was essentially unchanged at 7.6 percent. While unchanged, the national unemployment rate has slowly decreased from 8.2 percent in March 2012 to where it is now. Cushman & Wakefield research currently projects the slow trend of recovery will continue through at least the first three quarters of 2013, and US growth will accelerate, perhaps beginning in the 4th quarter of 2013. The housing market is also showing signs of strength. Through the second quarter of 2013, new and existing home sales are well above the levels of a year ago. Inventories of new homes on the market are near record lows, while existing home inventory nears 20-year lows. In addition, home prices at year-end 2012 were approximately 7.0 percent higher than they were the previous year.

According to preliminary estimates of the Bureau of Economic Analysis, US real Gross Domestic Product increased 2.2 percent in 2012, following an increase of 1.8 percent in 2011 and 2.4 percent in 2010. Consumer spending, the largest component of GDP has increased at a slow pace, averaging 2.1 percent per year. Over the past three years business investment has grown at a strong pace, but it has been offset by declines in Government spending. Looking forward, Moody’s Analytics forecasts that GDP will grow at 2.0 percent in 2013, before accelerating to 3.8 percent in 2014.

The economy is also being impacted by the policies that were implemented at the end of 2012 to avoid the “fiscal cliff.” First, tax rates increased on most households, as tax reductions that had been in place since the recession


began were allowed to expire. At that time, the spending containment portion of the “fiscal cliff” was postponed until March 1, 2013 to permit further negotiation. Through the second quarter of 2013, Congressional leaders and the President of the United States have yet to reach agreements concerning spending as it relates to the limits set forth in the annual congressional Budget Resolution. Cuts in federal spending are likely to have the greatest impact in communities that have heavy concentrations of federal government agencies and government contractors.

This uncertainty has made some participants in the real estate industry cautious. However, with economic growth in Europe likely to be sluggish at best, global investors continue to be attracted to the relative stability and better long term growth prospects of the U.S. which is likely to attract overseas capital. In fact, the U.S. only trails China as the second most desirable market for foreign investment capital. According to collaborative research from Cushman & Wakefield and Real Capital Analytics, at year-end 2012, foreign investment in the U.S. was up 16.2 percent annually to $186.1 million. In the commercial property market, transactions have rebounded by more than four-fold from their post-crisis low in 2009.

Through mid-year 2013, the state of the investment market remains volatile. As recent as June 2013, statements made by representatives of the Federal Reserve thought to a reduction in government stimulus triggered a dramatic increase in interest rates. For example, rates on conventional mortgages jumped to as high as 4.56 percent from 3.93 percent, the biggest one-week increase since 1987.

The rapid and pronounced increase caught many by surprise and has increased investor anxiety about future rates and their impact on asset values. Higher interest rates obviously translate to increased costs for borrowers and could threaten sales of homes, cars, and other big-ticket items on the consumer side, as well as a myriad of commercial assets. On the commercial real estate front, spreads have also widened, exacerbating the increase in borrowing costs. Despite the spike, interest rates are still at historically low levels. Capital also remains widely available, and it is still a favorable period for borrowers.

For the retail sector, increased job creation and reduced unemployment figures brought record retail sales. For 2012, retail industry sales grew at a rate faster than many other industries. According to the U.S. Census Bureau, retail & food service sales for the 2012 totaled nearly $4.9 trillion, a 5.2 percent increase from this time in 2011. Through May 2013, retail & food service sales total $2.1 trillion. The recent gain marks 40 consecutive quarters of growth. Looking forward, the National Retail Federation is forecasting retail sales to grow 3.4 percent in 2013.

NATIONAL RETAIL INVESTMENT SALES MARKET

Retai l Capital ization Rates

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

Through the second quarter of 2013, capitalization rates gradually declined. Power center OARs averaged 6.7 percent, while regional mall and strip shopping center OARs averaged 6.5 and 7.0 percent, respectively. In the current market, investors are viewing higher-quality assets in primary urban and suburban markets most favorably. Market conditions for assets falling below this profile remain weak. However, investor sentiment is expected to moderate as confidence returns to the market. It should also be noted that the combination of low


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

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

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

National Power Center National Regional Mall National Strip Shopping Center

National Retail Cap Rates

Source: PwC Real Estate Investor Survey

CMBS Market

The availability of debt including the gradual resurgence of Commercial Mortgage Backed Securities (CMBS) has contributed to the increase in transaction activity. At its peak in 2007, CMBS issuance totaled nearly $230.0 billion in the United States. Retail assets accounted for approximately one-third of total CMBS volume. Funding plunged in the midst of the financial crisis beginning in late 2008. Total CMBS issuance in 2008 was just $12.0 billion, followed by a nearly non-existent $3.0 billion in 2009. Issuance reached $11.7 billion in 2010 as investors began returning to the market. However, with the European debt crisis, the slow U.S. economic recovery and admissions from Standard & Poor’s that it had “potentially conflicting methods” in how it was rating securitizations, bond buyers have exercised caution. To that end, many “balance sheet lenders” such as local savings and loan banks and life insurance companies have experienced notable increases in lending activity. Nonetheless, CMBS issuance in 2011 still managed to total nearly $33.0 billion, according to Trepp LLC. Additionally, Commercial Mortgage Alert reports CMBS issuance in 2012 reached $48.3 billion. In fact, as low rates and bond risk premiums encourage more borrowing, experts from the Blackstone Group, LNR Property and Morgan Stanley predicted at the Talmage 2012 Credit Conference that CMBS issuance could rise 40.0 percent in 2013, to as much as $65.0 billion.

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


2007 2008 2009 2010 2011 2012

TOTALS $228.6 $12.1 $2.7 $11.6 $32.7 $48.3Source: Commercial Mortgage Alert

U.S. CMBS ISSUANCE (IN BILLIONS)

At the moment, investors are concerned as 2013 marks a precarious position for the CMBS sector. Five-year debt originated at the peak of the market, is now hitting its maturity. Some of the most aggressive loans written in 2007 are now coming due. According to Standard & Poor’s, these loans are a cause for concern because a large number include high loan-to-value ratios, limited amortization and borrower equity buildup and reduced liquidity in the market.

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

Retai l Construction Activity

Despite improving fundamentals in the retail real estate market, developers are still concerned about investing in new construction projects. The exception being outlet center development and projects located in the highest-performing markets with strong tenant mixes possibly including grocery retailers, drug stores or similar net leased properties. According to data from the CoStar Group, retail construction starts peaked at 66.0 million square feet in the second quarter of 2006. Given the collapse of credit markets and consumer demand during the recent recession, construction starts have fallen significantly over the last few years. Recently, retail construction starts bottomed at just 7.0 million square feet in the first quarter of 2013. This marks an 89.4 percent decrease from peak figures in 2006.


The following graph shows retail construction starts from the second quarter of 2006 through the first quarter of 2013:

66.0

64.2

36.2

54.0

52.2

55.1

28.6

40.4

33.2

26.2

18.9

15.4

13.4

12.8

9.7

10.3

8.9

10.6

7.0

8.8

11.2

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13.5

11.7

8.4 7.7

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30.0

40.0

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SQU

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

Just 7.0 Million Square Feet Commenced in Q1 2013

Source: CoStar Group

Retail Construction Starts (SF in Millions)

Looking forward, new construction activity is expected to remain weak until the industry works through the large amounts of debt maturities scheduled to come due between now and 2017. At the moment, there are significant amounts of available space for retailers to choose from. We expect retail construction starts to remain tepid through 2013.

To that end, many retailers are crawling out of the worst recession in decades. Many realize that they overbuilt and are closing underperforming stores. According to data collected by the International Council of Shopping Centers, there were a total of 4,464 announced store closings in 2012. While declining sales have forced many retailer chains to pare down their number of outlets, other retailers are closing due to shifts in the marketplace. Such is the case for Blockbuster which fell victim to shifting consumer preferences toward online and digital viewing of movies, TV shows and recorded video content.


The following is a list of certain retailers that have made significant store closings in 2012:

Retai l Transaction Activity In 2012, retail transaction volumes posted promising numbers. Through the end of 2012, Real Capital Analytics reports that transaction volume totaled $55.2 billion; a strong indication that investors feel there is growth potential in the retail market.

Mimicking the overall market, transactions of retail properties through 2011 doubled the total annual volume recorded in 2010 at $44.2 billion. Transaction volume ramped up significantly through the first half of the year, but previously noted economic concerns stalled this momentum. Nonetheless, the total volume of retail property transactions in 2011 is a celebrated improvement over the dismal 2008, 2009 and 2010 showing.

STORE # CLOSING

Barnes & Noble 633

Blockbuster 500

Abercrombie & Fitch 180

Sears/Kmart 172

Collective Brands 123

Food Lion 113

Charming Shoppes 105

Family Dollar 100

The Gap 100

Casual MaleXL 70

Ascena Retail 55

Best Buy 50

Office Max 35

Source: UBS Investment Research, About.com

MAJOR ANNOUNCED STORE CLOSINGS - 2012


The following graph displays annual retail transaction volume since 2001:

$13.

8 $28.

3

$35.

7

$59.

7

$57.

0

$62.

0

$80.

2

$25.

1

$15.

3

$22.

9

$44.

2 $55.

2

$16.

6

$0$10$20$30$40$50$60$70$80$90

Source: Real Capital Analytics, Inc.Note: Data excludes transactions less than $5.0 million,

AnnualRetail Transaction Volume

Through the first half of 2013, pricing metrics have strengthened over recent months for retail properties with per-square-foot prices rising, average cap rates falling and the Commercial Property Price Index reaching its highest post recession level. According to Real Capital Analytics, sales of significant retail properties have totaled $16.6 billion through the mid-year 2013.

Commercial Property Price Index

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

As of April 2013, the most recent figures published, Moody’s/RCA CPPI for all properties measured an increase of 6.4 percent year-over-year. Currently at 150.84, the index is 23.4 percent below the peak of 186.06 measured in the December 2007. For retail properties CPPI figures reported by Moody’s/RCA have indicated growth at 3.4 percent during the year-ending April 2013. The current Moody’s/RCA CPPI figure for retail properties is 136.56.


The following graph displays the CPPI Index between January 2001 and April 2013:

210

260

310

360

410

460

80

100

120

140

160

180

200

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

Moody's/RCA CPPI - All Properties Moody's/RCA CPPI - Retail Properties NCREIF National Aggregate (right axis)

Commercial Property Price Index Comparison

Sources: Moody's/RCA

Similarly, the National Council of Real Estate Investment Fiduciaries (NCREIF) also compiles a property price index based on a large pool of individual commercial real estate properties. The NCREIF Property Price Index is a quarterly time series composite total rate of return measure of investment performance of said commercial real estate properties acquired in the private market for investment purposes only. Based on data from NCREIF, the property price index peaked in the first quarter of 2008 at 419.88 before falling 29.3 percent to 296.81 in the first quarter of 2010. Since bottoming, the NCREIF Property Price Index has climbed to near 90.0 percent of its pre-recession levels. The NCREIF Property Price Index stands at 383.1 as of first quarter 2013. Commercial real estate values have improved in recent quarters.

Retail Price Per Square Foot

In comparison to sales volume, pricing levels achieved by shopping centers and other retail properties trended downward rapidly before rising in recent months. Between 2003 and 2008, a time from when the market had picked up after the last recession up until the most recent market fall-out, the average price per square foot for retail assets increased by 50.8 percent to a peak of $187 per square foot in 2008. However, in 2010, the average price per square foot for all retail property would sharply decline to a low of $142 per square foot. Not until late 2010/early 2011 did the price per square foot begin to recover. The average price per square foot for retail space in 2011 jumped to $172, a 21.1 percent increase from 2010.

Through year-end 2012, the average price per square foot has increased to $182 per square foot. The average is within striking distance of the 2008 peak and baring some shift in fundamentals, it could surpass the peak average in 2013. We would note that RCA reports that there is a widening gap between unit prices paid in primary markets vs. secondary and tertiary markets. A flight to quality is prevalent in all of the major CRE market groups, including retail.


The following graph depicts the historical average price per square foot for retail assets as surveyed by RCA through year-end 2012:

$237

$143

$182

$75

$100

$125

$150

$175

$200

$225

$250

Mall & Other Strip Total RetailSource: Real Capital Analytics, Inc.Note: Data excludes transactions less than $5.0 million

National Average Price PerSquare Foot

Annual Retai l Rent Growth

Through 2012, falling vacancy rates and rising demand in the retail market is anticipated to bring the start of meaningful rent growth for landlords in most U.S. retail markets. According to Reis data, prior to the latest economic recession, annual effective retail rental rates grew at an average rate of 2.4 percent. Following nearly four years of negative rent growth during the economic fallout from 2008 to 2011, effective retail rental rate growth figures are now averaging near 1.0 percent.

Conversely, a significant drop in new construction coupled with some strengthening in key employment sectors will show a positive change as we proceed into 2013. It is notable that the CoStar Group recorded that construction starts peaked at 63.0 million square feet during the second quarter of 2006 and have since dropped to just 5.0 million square feet in the fourth quarter of 2012. To that end, Reis projects that effective retail rental rates will average upwards of 3.0 percent growth during the 2013 to 2016 timeframe.


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

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Ren

t Gro

wth

Per

cent

age

ASKING RENT % CHANGE EFFECTIVE RENT % CHANGE

Annual Rent Growth

FORECAST

Source: Reis, Inc.

Annual Retai l Market Condit ions

The graph below shows the severity of the last recession in terms of declining absorption and rising vacancy rates. In 2008 absorption went negative for the first time since REIS began collecting data in 1986. Mirroring the rebound in other commercial property sectors, leasing and occupancy of U.S. malls and shopping centers saw improving fundamentals through 2012. According to Reis, the low amount of new supply of retail space will lead to a decline in retail vacancy rates through 2016. From 2013 to 2016, Reis data forecasts absorption in the retail market to average approximately 25.0 million square feet per year while construction completions average approximately 20.0 million square feet per year. Given this forecast, overall vacancy rates in the national retail market will decline to approximately 9.0 percent from their current reading near 11.0 percent.


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

0%

2%

4%

6%

8%

10%

12%

-30

-20

-10

0

10

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REN

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ERC

ENT

AG

E

COMPLETIONS NET ABSORPTION VACANCY RATE

FORECAST

Source: Reis, Inc.

Annual MarketConditions

NATIONAL RETAIL MARKET SUMMARY

Market conditions for the retail sector are improved. Retail sales have increased, tenant rent concessions have abated, and leasing velocity is on the rise. Further, according to Reis, Inc., shopping center vacancy has held steady. Reis also projects that by 2016, vacancy rates will decline to near 9.0 percent. Asking and effective rents remain relatively unchanged. However, Reis forecasts positive rent growth as we head through 2013.

While the economy is far from robust, recoveries from recessions caused by a financial crisis have historically been sluggish. Financial institutions have largely rebuilt their balance sheets and reported several quarters of record earnings growth. Nonetheless, challenges remain. Retailer bankruptcies and store closures remain a concern through 2013. Much of this vacancy has been concentrated amongst medium and big-box space including book, music and video stores. While below 2010 levels, store closures present vacant space that needs to be filled by landlords. Of positive note is the substantial decline in new construction which is starting to have a positive effect on vacancy rates as expanding retailers have taken advantage of many once inaccessible locations.

In the near term, market conditions for the retail sector are cautiously optimistic as economic indicators trend positively. Total nonfarm payroll employment increased by 195,000 in June, with job gains in professional and business services, construction, and health care. Barring backlash from debt ceiling concerns, tax increases and entitlement cuts, consumer balance sheets continue to show improvement due to lower debt levels and a more stable employment market. We anticipate the second half of 2013 will be marked by accelerated improvement in several economic indicators following more modest first half growth.


L O C A L R E T A I L M A R K E T O V E R V I E W he Stockton/Modesto retail market did not experience much change in market conditions in the second quarter 2013. The vacancy rate went from 7.1% in the previous quarter to 7.0% in the current quarter. Net absorption was positive 64,497 square feet. Quoted rental rates decreased from first quarter 2013 levels, ending at $14.51 per square foot per year. There were no deliveries in the second quarter and one 14,308 square feet building delivered in the first quarter.

Costar divides this area into two markets, San Joaquin County and Stanislaus County, and further into six submarkets. The subject property is located within the Stockton submarket of the San Joaquin County market.

Market data is provided by CoStar (2nd Quarter 2013) and is summarized below.

YTD Net YTD Under Quoted#Bldgs Total RBA Direct SF Total SF Vac% Absorption Deliveries Construction Rates

San Joaquin County 2,154 29,023,284 1,942,791 1,994,994 6.9% -63,946 14,308 15,202 $15.57

Stanislaus County 2,208 25,087,710 1,738,017 1,794,102 7.2% 94,507 0 158,000 $13.60

Totals 4,362 54,110,994 3,680,808 3,789,096 7.0% 30,561 14,308 173,202 $14.51

YTD Net YTD Under Quoted#Bldgs Total RBA Direct SF Total SF Vac% Absorption Deliveries Construction Rates

Hughson/Oakdale 17 629,202 55,066 55,066 8.8% 10,528 0 0 $14.24

Lodi 36 2,190,256 118,071 118,071 5.4% 3,648 0 15,202 $20.38

Modesto 121 6,097,229 699,363 737,184 12.1% 43,829 0 0 $12.83

Stockton 112 5,081,038 471,462 471,462 9.3% 10,439 0 0 $13.87

Tracy/Manteca 68 3,256,340 244,555 294,558 9.0% (17,380) 0 0 $19.71

Turlock/SW Stanislaus 38 2,476,080 277,979 277,979 11.2% (895) 0 0 $14.70

Totals 392 19,730,145 1,866,496 1,954,320 9.9% 50,169 0 15,202 $14.85Source: Costar Second Quarter 2013

Existing Inventory VacancyMarket

OVERALL RETAIL STATISTICS(INCLUDING GENERAL RETAIL, MALL, SHOPPING, SPECIALTY, AND POWER CENTERS)

Existing Inventory VacancyMarket

SHOPPING CENTER SUBMARKET STATISTICS

ABSORPTION Retail net absorption was slightly positive in Stockton/ Modesto second quarter 2013, with positive 64,497 square feet absorbed in the quarter. In first quarter 2013, net absorption was negative (33,936) square feet, while in fourth quarter 2012, absorption came in at positive 247,777 square feet. In third quarter 2012, positive 434,513 square feet was absorbed in the market.

Year-to-date net absorption in the subject’s Stockton submarket was positive 10,439 square feet as of second quarter 2013.


VACANCY Stockton/Modesto’s retail vacancy rate decreased in the second quarter 2013, ending the quarter at 7.0%. Over the past four quarters, the market has seen an overall decrease in the vacancy rate, with the rate going from 7.2% in the third quarter 2012, to 7.0% at the end of the fourth quarter 2012, 7.1% at the end of the first quarter 2013, to 7.0% in the current quarter.

The amount of vacant sublease space in the Stockton/ Modesto market has trended down over the past four quarters. At the end of the third quarter 2012, there were 111,890 square feet of vacant sublease space. Currently, there are 108,288 square feet vacant in the market.

The Stockton submarket reported an overall vacancy rate of 6.0%, with a shopping center vacancy rate of 9.3%. This compares to 6.0% overall as of year-end 2012, and 9.2% for shopping centers. One year ago, the Stockton submarket reported vacancy rates of 7.1% overall and 12.2% for shopping centers.

The table on the following page indicates average vacancy and average rents over the past 9 quarters.

NEW CONSTRUCTION During the second quarter 2013, no new space was completed in the Stockton/Modesto retail market. Over the past four quarters, a total of 417,652 square feet of retail space has been built in Stockton/Modesto. In addition to the current quarter, one building with 14,308 square feet was completed in first quarter 2013, four buildings totaling 190,328 square feet completed in fourth quarter 2012, and 213,016 square feet in four buildings completed in third quarter 2012. There were 15,202 square feet of retail space under construction at the end of the second quarter 2013.


The only delivery in 2013 has been 660 W March Ln., a 14,308-square-foot facility that delivered in first quarter 2013 and is now 100% occupied by Walgreens. Total retail inventory in the Stockton/Modesto market area amounted to 54,110,994 square feet in 4,362 buildings and 413 centers as of the end of the second quarter 2013.

The Stockton submarket had no inventory delivered, and nothing under construction as of second quarter 2013.

RENT LEVELS Average quoted asking rental rates in the Stockton/Modesto retail market are down over previous quarter levels, and down from their levels four quarters ago. Quoted rents ended the second quarter 2013 at $14.51 per square foot per year. That compares to $14.88 per square foot in the first quarter 2013, and $14.80 per square foot at the end of the third quarter 2012. This represents a 2.5% decrease in rental rates in the current quarter, and a 2.00% decrease from four quarters ago.

In the Stockton submarket, the average quoted asking rental rate for available retail space was $13.89 per square foot per year, triple net, at the end of the Second Quarter 2013, down from $14.28 at year-end 2012,, and $15.05 one year ago. The average quoted asking rental rate for Shopping Center space was $13.87 per square foot, down from $15.07 at year-end 2012, and $15.81 one year ago.

CONCLUSION The local area retail market conditions appear to have stabilized in the second quarter 2013, with stabile vacancy, positive net absorption, and moderately deteriorating asking rents. The lack of new construction should bode well for vacancy rates through the end of 2013.

The following page displays retail market statistics specific to the subject’s San Joaquin County retail market:


T R A D E A R E A O V E R V I E W A retail center's trade area contains people who are likely to patronize that particular center, and its ability to draw these people comes from the strength of the anchor tenants, complemented by regional and local tenants. Customers are drawn by a given class of goods and services, and a successful combination of these elements creates a destination for customers seeking both variety and the comfort and convenience of an integrated shopping environment.

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

Once the trade area is defined, the area's demographics and economic profile can be analyzed, providing key insight into the area's potential for the subject.

SCOPE OF TRADE AREA To define trade area we must thoroughly review the retail market and the competitive structure of the general marketplace, as well as the subject's position within that marketplace. The subject property’s position within the area’s retail structure will be further examined by profiling the stores that anchor the subject.

COMPETITIVE RETAIL STRUCTURE To examine the subject property in its proper context we must also examine its most direct competition and give consideration to the potential for new competition via proposed centers. The Center is a community center with a wide mix of tenants. The potential trade area for the subject is defined by the location and drawing power of surrounding retail centers. The competitive retail centers with the subject are presented on the table below.


COMPETITIVE SHOPPING CENTERSDistance

No. Property Anchor Tenants Occ. to SubjectS The Center Centre Type: Community Center Total GLA: 268,013 Costco $24.00 - $24.00 100% --

1880 East Hammer Lane Year Built: 1991 Anchor GLA: 234,794 Premier Furniture GalleryStockton, CA Anchor Ratio: 88% Gold's Gym

1 Normandy Village Sub-Type: Neighborhood Center Total GLA: 141,737 SF Supermarket $15.00 - $24.00 100% Across Street8142 West Lane Year Built: 1980 Anchor GLA: 43,074Stockton, CA Renovation: 2009 Anchor Ratio: 30%

2 Hammertown Shopping Center Sub-Type: Community Center Total GLA: 201,054 99 Cents Only $15.00 - $24.00 100% 0.2 miles922-1212 E Hammer Ln Year Built: 1979 Anchor GLA: 112,940 dd's DiscountsStockton, CA Renovation: 1992 Anchor Ratio: 56% Factory 2-U

United Furniture

3 Northtown Village Sub-Type: Community Center Total GLA: 247,564 Burlington Coat Factory $12.00 - $18.00 78% 0.5 miles3702 E Hammer Ln Year Built: 1990 Anchor GLA: 83,520 Dollar TreeStockton, CA Anchor Ratio: 34%

4 Calaveras Square Sub-Type: Neighborhood Center Total GLA: 150,362 Anchor 1 $12.00 - $18.00 83% 1.7 miles1061-1209 E March Ln Year Built: 1990 Anchor GLA: 54,159 Anchor 2Stockton, CA Anchor Ratio: 36% Anchor 3

Anchor 4

5 The Village at Weber Ranch Sub-Type: Community Center Total GLA: 133,353 S-Mart Foods $15.00 - $15.00 97% 1.8 miles1540 E March Ln Year Built: 1990 Anchor GLA: 50,000 CVSStockton, CA Anchor Ratio: 37%

Survey Total GLA 1,142,083

Survey Minimum 133,353 $12.00 - $15.00 78%

Survey Maximum 268,013 $24.00 - $24.00 100%

Survey Average 190,347 $15.50 - $20.50 93%

Compiled by Cushman & Wakefield Western, Inc.

Description Rent/SF

PRIMARY COMPETITION

OTHER COMPETITION The subject property’s other competition comes from various freestanding stores and/or off-price, or discount-oriented big box users. The area also contains various other nodes of retail development that offer varying degrees of competition to the subject.

PROPOSED COMPETITION We know of no proposed projects that would compete directly with the subject.

T R A D E A R E A A N A L Y S I S We considered several factors in defining boundaries for the subject's trade area. First, the property's location with respect to transportation provides the basis for regional access to the area. Second, competition and geographic boundaries help to define the potential size of the trade area as a measure of distance from the property. Third, the merchandising mix and anchor alignment provides the basic draw of customers that are likely to patronize the property.

The subject is located in the Stockton CBSA and benefits from good regional and local accessibility, as well as the proliferation of peripheral draws. Major roadway proximity to the center provides the necessary access to more regional destinations throughout the area, while the property’s anchor stores provide the necessary drawing power for the property.

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

Highway accessibility, including area traffic patterns, geographical constraints, and nodes of residential development;


The position and nature of the area's retail structure, including the location of destination retail centers which compete with the subject and the strength and composition of the retail infill; and

The size, anchor tenancy, and merchandising composition of the subject property's tenants.

Given all of the above, we believe the subject property’s primary trade area would likely span an area encompassing about five miles around the center. The subject's secondary trade area might span up to seven miles from the site given its regional accessibility and location of competitive properties.

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

DEMOGRAPHIC SUMMARY1.0-mile 5.0-mile 7.0-mile Stockton State of United

Radius Radius Radius CBSA California StatesPOPULATION STATISTICS

2000 25,891 224,529 310,869 563,603 33,869,042 281,394,3172013 26,751 253,021 351,593 685,305 37,253,679 308,725,7222018 27,291 259,747 360,615 708,268 38,199,560 314,841,431

Compound Annual Change2000 - 2013 0.25% 0.92% 0.95% 1.52% 0.74% 0.72%2013 - 2018 0.40% 0.53% 0.51% 0.66% 0.50% 0.39%

HOUSEHOLD STATISTICS

2000 7,514 84,001 112,386 215,007 12,577,326 116,705,4362013 7,719 86,112 115,048 220,787 12,883,814 119,195,3272018 8,045 89,904 119,972 231,739 13,444,817 123,394,220

Compound Annual Change2000 - 2013 0.21% 0.19% 0.18% 0.20% 0.19% 0.16%2013 - 2018 0.83% 0.87% 0.84% 0.97% 0.86% 0.69%

AVERAGE HOUSEHOLD INCOME

2000 $42,069 $48,291 $47,358 $52,801 $65,619 $56,6742013 $48,313 $58,694 $58,031 $66,246 $83,189 $69,6362018 $47,626 $57,967 $57,327 $65,482 $85,889 $71,916

Compound Annual Change2000 - 2013 1.07% 1.51% 1.58% 1.76% 1.84% 1.60%2013 - 2018 -0.29% -0.25% -0.24% -0.23% 0.64% 0.65%

OCCUPANCY

Owner Occupied 48.25% 52.42% 52.99% 59.31% 55.87% 65.00%Renter Occupied 51.75% 47.58% 47.01% 40.69% 44.13% 35.00%

SOURCE: Claritas, Inc.


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

Between 2000 and 2013, Claritas, Inc., reports that the population within the primary trade area (5-mile radius) increased at a compound annual rate of 0.92 percent. This is characteristic of suburban areas in this market. This trend is expected to continue into the near future albeit at a slightly slower pace. Expanding to the total trade area (7-mile radius), population is expected to increase 0.51 percent per annum over the next five years.

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

The graphic on the second following page illustrates projected population growth in the trade area over the next five years (2013 - 2018). The trade area is clearly characterized by various levels of growth.


CURRENT POPULATION MAP


POPULATION GROWTH MAP

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

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

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


Higher divorce rates have resulted in an increase in single-person households; and

Many individuals have postponed marriage, also resulting in more single-person households.

According to Claritas, Inc., the Primary Trade Area grew at a compound annual rate of 0.19 percent between 2000 and 2013. Consistent with national trends, the trade area is experiencing household changes at a rate that varies from population changes. That pace is expected to continue through 2018, and is estimated at 0.87 percent.

Correspondingly, a greater number of smaller households with fewer children generally indicates more disposable income. In 2000, there were 2.86 persons per household in the Primary Trade Area and by 2013, this number is estimated to have increased to 2.96 persons. Through 2018, the average number of persons per household is forecasted to remain the same at 2.96 persons.

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

Trade area income figures for the subject support the profile of a low-to-middle-income market. According to Claritas, Inc. average household income in the primary trade area in 2013 was approximately $58,694, 88.60 percent of the CBSA average ($66,246) and 70.56 percent of the state average ($83,189).

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

DISTRIBUTION OF HOUSEHOLD INCOME1.0-mile 5.0-mile 7.0-mile Stockton State of United

Category Radius Radius Radius CBSA California States$150,000 or more 2.01% 5.21% 5.08% 7.14% 12.10% 8.06%$125,000 to $149,999 1.90% 3.01% 2.90% 3.87% 5.32% 4.07%$100,000 to $124,999 4.47% 5.70% 5.56% 7.48% 8.84% 7.35%$75,000 to $99,999 10.21% 11.24% 11.07% 12.56% 12.36% 11.73%$50,000 to $74,999 16.79% 17.83% 17.89% 18.48% 17.49% 18.11%$35,000 to $49,999 18.73% 16.26% 16.21% 15.24% 13.01% 14.35%$25,000 to $34,999 14.55% 13.25% 13.62% 11.86% 9.41% 10.94%$15,000 to $24,999 15.79% 12.70% 12.98% 11.37% 10.11% 11.58%Source: Claritas, Inc.

The previous chart makes it clear that the distribution of higher income level households increases as distance from the subject increases.

Below is a graphic presentation of the household income distribution throughout the trade area that clearly shows the area surrounding the subject to be characterized by lower to middle income households. Higher income areas are located in surrounding suburban communities.


HOUSEHOLD INCOME MAP

RETAIL SALES Perhaps an even more important measure of area income is the amount spent on retail purchases. At the end of last year, the Stockton CBSA had an aggregate retail sales level of $9.25 billion, with average retail sales per household of $41,898. By comparison, California had average sales per household of $45,048, while the U.S. was $41,512.


RETAIL SALES (in $000)

AreaStockton CBSAState of CaliforniaUnited StatesSource: Claritas, Inc.

$580,388,330 $640,570,293 2.0%$4,948,055,394 $5,443,139,078 1.9%

CAGR2013 2018 2013-18

$9,250,563 $10,144,757 1.9%

Claritas, Inc. projects retail sales in the CBSA will grow at a pace that is in line with both the State and nation.

C O N C L U S I O N We analyzed the retail trade history and profile of the subject's region and primary trade area in order to make reasonable assumptions regarding the continued performance of the property.

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

The Stockton/Modesto retail market has been performing worse since 2008, mainly as a result of increasing vacancy levels. Over the near term, new construction activity is expected to trail absorption, resulting in a decrease in vacancy levels. While asking rents are still slipping, they are not falling as fast as they were in 2012.

The subject benefits from its shadow anchor, Costco, and the resulting exposure.

As such we believe the property will serve a market encompassing a radius of 5-miles. Over the next five years, both the population and number of households in the subject’s trade area are projected to see moderate increases. Household income levels in the area are lower than the than the CBSA and the state.

The subject has good accessibility via the regional Interstate network and local arterials that provide linkages throughout the Stockton CBSA.

Based on our analysis we concluded that the subject has average positioning within its market area and the prospect for net appreciation in real estate values is expected to be moderate.

THE CENTER, STOCKTON, CA SITE DESCRIPTION 38

Property Analysis

S I T E D E S C R I P T I O N

Location: 1880 East Hammer Lane

Stockton, San Joaquin County, California 95210

The subject property is located on the southeast corner of East Hammer Lane and West Lane.

Shape: Irregularly shaped

Topography: Level at street grade

Land Area: 21.46 acres / 934,798 square feet

Excess Land: Yes

Excess Land Area: 1.72 acres / 74,706 square feet, contained within three separate parcels.

Total Land Area: 23.18 acres / 1,009,504 square feet

Frontage: The subject property has average frontage. The frontage dimensions are listed below:

East Hammer Lane: 656 feetMontauban Avenue: 1,000 feetWest Lane Frontage Road: 665 feet

Access: The subject property has average access.

Visibility: The subject property has average visibility.

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

Utilities: Utility providers for the subject property are as follows:

Water City of StocktonSewer City of StocktonElectricity PG&EGas PG&ETelephone AT&T

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

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


Flood Zone Description: The subject property is located in flood zone X500 (An area inundated by 500-year flooding; an area inundated by 100-year flooding with average depths of less than 1 foot or with drainage areas less than 1 square mile; or an area protected by levees from 100-year flooding.) as indicated by FEMA Map 060302-0320F, dated October 16, 2009.

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

Seismic Hazard: The site is not located in a Special Study Zone as established by California’s Alquist-Priolo Geological Hazards Act.

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

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

Location Rating: Average


PARCEL MAP 1


SITE PLAN

THE CENTER, STOCKTON, CA IMPROVEMENTS DESCRIPTION 43

I M P R O V E M E N T S D E S C R I P T I O N The following description of improvements is based on our physical inspection of the improvements and our discussions with the subject property’s owner’s representative.

GENERAL DESCRIPTION

Year Built: 1991

Number of Buildings: 8

Number of Stories: 1

Land To Building Ratio: 6.12 to 1

Gross Building Area: 152,719 square feet

Gross Leasable Area: 152,719 square feet

RETAIL GLA SUMMARYComponent Owned Area Total

Costco 115,294 SFPremier Furniture Gallery x 100,000 SFGold's Gym x 19,500 SF

Total Anchor GLA 234,794 SF 88%In-Line x 12,000 SFOutparcel GLA x 21,219 SF

Total Center GLA 268,013 SF 100%Total Owned GLA 152,719 SF 57%

CONSTRUCTION DETAIL

Basic Construction: Steel and masonry

Foundation: Poured concrete slab

Framing: Mostly concrete block

Floors: Concrete slab

Exterior Walls: Primarily concrete block and stucco

Roof Type: Flat with parapet walls

Roof Cover: Built-up assemblies with tar and gravel cover

Windows: Thermal windows in aluminum frames

Pedestrian Doors: Glass and metal

MECHANICAL DETAIL

Heat Source: HVAC


Heating System: Forced Air

Cooling: Central HVAC

Cooling Equipment: The cooling equipment is roof mounted.

Plumbing: The plumbing system is assumed to be adequate for the existing use and in compliance with local law and building codes.

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

Electrical Metering: Each tenant is separately metered

Emergency Power: None

Fire Protection: 100% sprinklered

Security: Exterior monitors

INTERIOR DETAIL

Floor Covering: Sealed concrete, ceramic tile, carpet

Walls: Drywall

Ceilings: 2 x 4 acoustical tile and exposed ceilings

Lighting: Primarily fluorescent

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

SITE IMPROVEMENTS

Parking: The property contains approximately 1,021 surface parking spaces, reflecting an overall parking ratio of 5.17 spaces per 1,000 square feet of gross leasable area. The parking spaces are asphalt-paved and striped, and adequately support the existing users.

Onsite Landscaping: The site is landscaped with a variety of trees, shrubbery and grass.

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

PERSONAL PROPERTY

Personal property was excluded from our valuation.

SUMMARY

Condition: Average

Quality: Average

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


Roof & Mechanical Inspections:

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

Actual Age: 22 years

Effective Age: 20 years

Expected Economic Life: 45 years

Remaining Economic Life: 25 years

PHYSICAL DETERIORATION

Cost to Cure: Curable physical deterioration refers to those items that are economically feasible to cure as of the effective date of the appraisal. One category of physical deterioration is deferred maintenance and is measured as the cost repairing or restoring the item to new or reasonably new condition. We have not been provided with a capital expenditure plan or an engineering report that would identify specific costs required to repair deficiencies at the subject property.

During our inspection, we did not notice any apparent physical deterioration that would require immediate repair.

FUNCTIONAL OBSOLESCENCE

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

THE CENTER, STOCKTON, CA REAL PROPERTY TAXES AND ASSESSMENTS 46

R E A L P R O P E R T Y T A X E S A N D A S S E S S M E N T S

CURRENT PROPERTY TAXES The subject property is located in the taxing jurisdiction of San Joaquin County, and the assessor’s parcel identification numbers are 094-280-09, -10, -12-, 13, -14, -15, -18, -19, -20, -22, and 094-040-07. According to the local tax collector’s office, taxes are current.

The assessment and taxes for the property are presented below:

CALIFORNIA ASSESSMENT AND TAX ANALYSISAssessor's Parcel Numbers: 094-280-09, -10, -12-, 13, -14, -15, -18,

-19, -20, -22, and 094-040-07Assessing Authority: San Joaquin CountyCurrent Tax Year: 2013/14Are taxes current? Taxes are currentIs there a grievance underway? Not to our knowledgeThe subject's assessment and taxes are: Below market level

ASSESSMENT INFORMATION2013/14

Assessed ValueLand: $3,088,000Improvements: 7,201,050Total: $10,289,050

TAX LIABILITYTaxable Assessment $10,289,050Tax Rate 0.012146Sub-Total $124,971Special Assessments $0Total Property Taxes $124,971

Building Area ( SF ) 152,920Property Taxes per Square Foot $0.82Compiled by Cushman & Wakefield Western, Inc.

Total taxes for the property are $124,971, or $0.82 per square foot. Under the provisions of Article XIIIA of the California Tax and Revenue Code, properties are assessed their market value as of March 1, 1975, the base year lien date. This value may be increased only 2.0 percent per year until the property is sold, substantial new construction occurs, or the property’s use changes significantly. In such cases the property may be reassessed to its market value.

Should the property transfer ownership, it would be reassessed to its then current market value. Market value is typically determined by the sale price. Since the definition of market value used in this appraisal assumes that a sale has occurred, we will estimate the property taxes used in the Income Capitalization Approach based upon our concluded market value. Due to the method of determining assessed values and tax rates in California, tax comparables are not relevant and not included herein.

THE CENTER, STOCKTON, CA ZONING 47

Z O N I N G

GENERAL INFORMATION The property is zoned C-G by the City of Stockton. A summary of the subject’s zoning is provided below:

ZONINGMunicipality Governing Zoning: City of StocktonCurrent Zoning: C-GCurrent Use: Community CenterIs current use permitted: YesChange In Zone Likely: NoPermitted Uses:

Prohibited Uses:

ZONING REQUIREMENTS CODE SUBJECT COMPLIANCEMinimum Lot Area: None ComplyingMaximum Building Height: 45 feet ComplyingMaximum Lot Coverage (% of lot area): 60.0% ComplyingMinimum Yard Setbacks

Front (feet): 10 Non-ComplyingRear (feet): None, except when abutting a

residential zone, then 10 feetComplying

Side (feet): None, except when abutting a residential zone, then 10 feet

Complying

Required On-Site Parking:Spaces per 1,000 square feet: 5.0 per 1,000 ComplyingCompiled by Cushman & Wakefield Western, Inc.

The CG zoning district is applied to areas appropriate for a wide variety of general commercial uses, including retail, personal and business services; commercial recreational uses; and a mix of office, commercial, and/or residential uses.

Prohibited uses within this district include heavy industrial and agricultural uses

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

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

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

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

THE CENTER, STOCKTON, CA ZONING 48

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

ZONING CONCLUSIONS We analyzed the zoning requirements in relation to the subject property, and considered the compliance of the existing or proposed use. We are not experts in the interpretation of complex zoning ordinances but based on our review of public information, the subject property appears to be a complying use.

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

We note that this appraisal is not intended to be a detailed determination of compliance, as that determination is beyond the scope of this real estate appraisal assignment.

THE CENTER, STOCKTON, CA HIGHEST AND BEST USE 49

Valuat ion

H I G H E S T A N D B E S T U S E

HIGHEST AND BEST USE DEFINITION The Dictionary of Real Estate Appraisal, Fifth Edition (2010), a publication of the Appraisal Institute, defines the highest and best use as:

The most probable use of a property which is physically possible, appropriately justified, legally permissible, financially feasible, and which results in the highest value of the property being valued.

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

HIGHEST AND BEST USE OF PROPERTY AS THOUGH VACANT

Legally Permissible The zoning regulations in effect at the time of the appraisal determine the legal permissibility of a potential use of the subject site. As described in the Zoning section, the subject site is zoned C-G by the City of Stockton. The CG zoning district is applied to areas appropriate for a wide variety of general commercial uses, including retail, personal and business services; commercial recreational uses; and a mix of office, commercial, and/or residential uses. We are not aware of any further legal restrictions that limit the potential uses of the subject. In addition, rezoning of the site is not likely due to the character of the area.

Physically Possible The physical possibility of a use is dictated by the size, shape, topography, availability of utilities, and any other physical aspects of the site. The subject site contains 21.46 acres, or 934,798 square feet. The site is irregularly shaped and level at street grade. It has average frontage, average access, and average visibility. The overall utility of the site is considered to be good. All public utilities are available to the site including public water and sewer, gas, electric and telephone. Overall, the site is considered adequate to accommodate most permitted development possibilities.

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

CONCLUSION We considered the legal issues related to zoning and legal restrictions. We also analyzed the physical characteristics of the site to determine what legal uses would be possible, and considered the financial feasibility of these uses to determine the use that is maximally productive. Considering the subject site’s physical characteristics and location, as well as the state of the local market, it is our opinion that the Highest and Best

THE CENTER, STOCKTON, CA HIGHEST AND BEST USE 50

Use of the subject site as though vacant is a shopping center built to its maximum feasible building area, when warranted by demand.

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

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

In analyzing the Highest and Best Use of a property as improved, it is recognized that the improvements should continue to be used until it is financially advantageous to alter physical elements of the structure or to demolish it and build a new one.

Legally Permissible As described in the Zoning Analysis section of this report, the subject site is zoned C-G. The site is improved with a community shopping center containing 152,719 square feet of gross building area. In the Zoning section of this appraisal, we determined that the existing improvements represent a complying use. We also determined that the existing use is a permitted use in this zone.

Physically Possible The subject improvements were constructed in 1991, and are in average condition. We know of no current or pending municipal actions or covenants that would require a change to the current improvements.

Financially Feasible and Maximally Productive In the Reconciliation section, we concluded to a market value for the subject property, as improved, of $17,050,000. In our opinion, the improvements contribute significantly to the value of the site. It is likely that no alternate use would result in a higher return.

CONCLUSION It is our opinion that the existing improvements add value to the site as though vacant, dictating a continuation of its current use. In addition, the leases encumbering the subject property mandate a continuation of the current use. It is our opinion that the Highest and Best Use of the subject property as improved is a shopping center as it is currently improved.

THE CENTER, STOCKTON, CA VALUATION PROCESS 51

V A L U A T I O N P R O C E S S

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

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

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

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

In the Cost Approach, the appraiser forms an opinion of the cost of all improvements, depreciating them to reflect any value loss from physical, functional and external causes. Land value, entrepreneurial profit and depreciated improvement costs are then added, resulting in an opinion of value for the subject property.

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

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

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

THE CENTER, STOCKTON, CA VALUATION PROCESS 52

SUMMARY This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these approaches would be considered applicable and/or necessary for market participants. Typical purchasers do not generally rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not utilized the Cost Approach to develop an opinion of market value.

THE CENTER, STOCKTON, CA LAND VALUATION (EXCESS LAND) 53

L A N D V A L U A T I O N ( E X C E S S L A N D ) We used the Sales Comparison Approach to develop an opinion of excess land value. We examined current offerings and analyzed prices buyers have recently paid for comparable sites. If the comparable was superior to the subject, a downward adjustment was made to the comparable sale. If inferior, an upward adjustment was made.

The most widely used and market-oriented unit of comparison for properties with characteristics similar to those of the subject’s excess land parcel is price per square foot of land. All transactions used in this analysis are based on the most appropriate method used in the local market.

The major elements of comparison used to value the subject site include the property rights conveyed, the financial terms incorporated into the transaction, the conditions or motivations surrounding the sale, changes in market conditions since the sale, the location of the real estate, its utility and the physical characteristics of the property.

The comparables and our analysis are presented on the following pages. Comparable excess land sale data sheets are presented in the Addenda of this report.


SUMMARY OF LAND SALES: EXCESS LANDPROPERTY INFORMATION TRANSACTION INFORMATION

No. Location Size (sf)Size

(Acres) Zoning Grantor GranteeSale Date Sale Price $/SF Land COMMENTS

S Subject Property 74,706 1.72 C-G

1 NEC of E. Harney Lane & N. Stockton Street, Lodi, CA

40,946 0.94 GC - General Commercial

Nanak State, Inc.

Dhami Lada, LLC

1/13 $730,000 $17.83 This sale consists of one vacant commercially zoned lot. The buyer plans to construct a gas station/C-Store/Carwash. We note that the City of Lodi previously designated this lot as being C-1 zoned. However, a new developement code was recently adopted in late 2012 and the site is zoned GC.

2 1502 North El Dorado Street, Stockton, CA

13,504 0.31 CG - Commercial,

General

Suncor Holdings Corp,

LLC

Sukdev & Raji Singh

11/11 $225,000 $16.66 This sale consists of one vacant commerical lot available for development. We note that this site was previously developed with a 76 gas station. However, all improvements and underground tanks have been removed.

3 1018 South Anteros Avenue, Stockton, CA


General

Elizabeth Fitzgerald

Autozone Development

Corp.

3/11 $413,500 $9.22 This sale consists of two contiguous vacant commercial lots. The site was developed by the buyer with an Auto Zone retail store.

4 4170 Waterloo Road, Stockton, CA

20,909 0.48 C-FS, Comm.-Freeway Services

John Kessler Available Listing $334,000 $15.97 This listing consists of the availability of one previously developed lot.

5 1664 East March Lane, Stockton, CA


General

Sukdev & Raji Singh

Available Listing $575,000 $16.50 This offering consists of one vacant commercial lot available for development. We note that this site was previously developed with a 76 gas station. However, all of the improvements and undergound tanks have been removed.

STATISTICSLow 13,504 0.31 3/11 $225,000 $9.22

High 44,866 1.03 1/13 $730,000 $17.83

Average 31,015 0.71 12/11 $455,500 $15.24



LAND SALE ADJUSTMENT GRID: EXCESS LANDEconomic Adjustments (Cumulative) Property Characteristic Adjustments (Additive)

No.Price PSF

Land & Date

PropertyRights

ConveyedConditions

of Sale FinancingMarket(1)

ConditionsPSF Land Subtotal Location Size

PublicUtilities Utility(2) Other

Adj.Price

PSF Land Overall1 $17.83 Fee Simple Arm's-Length None Similar $17.83 Superior Similar Similar Similar Similar $16.05 Superior

1/13 0.0% 0.0% 0.0% 0.0% 0.0% -10.0% 0.0% 0.0% 0.0% 0.0% -10.0%2 $16.66 Fee Simple Arm's-Length None Similar $16.66 Similar Similar Similar Superior Similar $15.00 Superior

11/11 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -10.0% 0.0% -10.0%3 $9.22 Fee Simple Arm's-Length None Similar $9.22 Inferior Similar Similar Superior Similar $9.68 Inferior

3/11 0.0% 0.0% 0.0% 0.0% 0.0% 10.0% 0.0% 0.0% -5.0% 0.0% 5.0%4 $15.97 Fee Simple Listing None Similar $14.38 Similar Similar Similar Superior Similar $12.94 Superior

Listing 0.0% -10.0% 0.0% 0.0% -10.0% 0.0% 0.0% 0.0% -10.0% 0.0% -10.0%5 $16.50 Fee Simple Listing None Similar $14.85 Similar Similar Similar Similar Similar $14.85 Similar

Listing 0.0% -10.0% 0.0% 0.0% -10.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

STATISTICS$9.22 - Low Low - $9.68

$17.83 - High High - $16.05$15.24 - Average Average - $13.70

Compiled by Cushman & Wakefield Western, Inc.(1) Market Conditions Adjustment Footnote (2) Utility Footnote

Utility includes shape, access, frontage and visibility.Date of Value (for adjustment calculations): 9/14/13Compound annual change in market conditions: 0.00%


LAND SALE LOCATION MAP

DISCUSSION OF ADJUSTMENTS

Property Rights Conveyed The property rights conveyed in a transaction typically have an impact on the sale price of a property. Acquiring the fee simple interest implies that the buyer is acquiring the full bundle of rights. Acquiring a leased fee interest typically means that the property being acquired is encumbered by at least one lease, which is a binding agreement transferring rights of use and occupancy to the tenant. A leasehold interest involves the acquisition of a lease, which conveys the rights to use and occupy the property to the buyer for a finite period of time. At the end of the lease term, there is typically no reversionary value to the leasehold interest. Since we are valuing the fee simple interest similar to each of the comparables, therefore an adjustment for property rights is not required.


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

Conditions of Sale Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. In many situations the conditions of sale may significantly affect transaction prices. However, all sales used in this analysis are considered to be "arms-length" market transactions between both knowledgeable buyers and sellers on the open market. Therefore, no adjustments were required. Comparables 4 and 5 represent current offerings and have been adjusted upward on the assumption that they would likely sell at a price that is lower than the current asking price.

Market Condit ions The sales that are included in this analysis occurred between March 2011 and January 2013. As the market has remained stable over this time period, we have not applied any adjustment.

Location An adjustment for location is required when the locational characteristics of a comparable property differ from those of the subject property. The subject property is rated average in location. We made a downward adjustment to those comparables considered superior in location compared to the subject. Conversely, an upward adjustment was made to those comparables considered inferior.

Size The adjustment for size generally reflects the inverse relationship between unit price and lot size. Smaller lots tend to sell for higher unit prices than larger lots, and vice versa. Therefore, upward adjustments were made to larger land parcels, and downward adjustments were made to smaller land parcels.

Public Uti l i t ies The availability of public utilities has a significant impact on the value of a property. Municipal utility providers often – but not always -- provide utilities such as gas, water, electric, sewer, and telephone. It is therefore important to understand any differences that may exist in the availability of public utilities to the subject property and its comparables. All of the sales, like the subject, had full access to public utilities at the time of sale. Therefore, no adjustments were required.

Uti l i ty The subject parcel is adequately shaped to accommodate a typical building. It has average access, average frontage and average visibility. Overall, it has been determined that the site has good utility. Adjustments were made where a comparable was considered to have superior or inferior utility.

Other In some cases, other variables will have an impact on the price of a land transaction. Examples include soil or slope conditions, restrictive zoning, easements, wetlands or external influences. In our analysis of the comparables we found that no unusual conditions existed at the time of sale. As a result, no adjustments were required.


DISCUSSION OF COMPARABLE SALES After a thorough analysis, the comparable land sales reflect adjusted unit values ranging from a low of $9.68 per square foot to $16.05 per square foot, with an average of $13.70 per square foot.

CONCLUSION OF EXCESS LAND VALUE With consideration given to all five comparables, we concluded that the indicated land value by the Sales Comparison Approach is:

EXCESS LAND VALUEPrice PSF

Indicated Value $14.00SQFT Measure x 74,706Indicated Value $1,045,884

$1,050,000$/SF Basis $14.06

EXCESS LAND VALUE $1,050,000$/SF Basis $14.06


Rounded to nearest $10,000

THE CENTER, STOCKTON, CA SALES COMPARISON APPROACH 59

S A L E S C O M P A R I S O N A P P R O A C H

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

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

Research recent, relevant property sales and current offerings in the competitive area; Select and analyze properties that are similar to the subject property, analyzing changes in economic

conditions that may have occurred between the sale date and the date of value, and other physical, functional, or locational factors;

Identify sales that include favorable financing and calculate the cash equivalent price; Reduce the sale prices to a common unit of comparison such as price per square foot of gross leasable area

or effective gross income multiplier; Make appropriate comparative adjustments to the prices of the comparable properties to relate them to the

subject property; and Interpret the adjusted sales data and draw a logical value conclusion.

The most widely used and market-oriented unit of comparison for properties such as the subject is the sales price per square foot of gross leasable area. All comparable sales were analyzed on this basis. The following pages contain a summary of the improved properties that we compared to the subject property, a map showing their locations, and the adjustment process. Comparable improved sale data sheets are presented in the Addenda of this report.

Due to the nature of the subject property and the level of detail available for the comparable data, we elected to analyze the comparables through the application of a traditional adjustment grid using percentage adjustments. This methodology is commonly used by participants that buy and sell property similar to the subject property, therefore; it is considered the appropriate methodology to use in this assignment.

In the Sales Comparison Approach we determined the Market Value As-Is.


PROPERTY INFORMATION TRANSACTION INFORMATION

No.Property NameAddress, City, State Land (AC)

Land to Building

Ratio Sold GLAYear Built

Parking Ratio per 1,000 sf Grantor Grantee

Sale Date Sale Price $/SF NOI/SF OAR Occup.

S Subject Property 21.46 6.12:1 152,719 1991 4.17:1

1 Sunset Shopping Center 100-108 Sunset AveSuisun City, CA

8.25 4.08:1 88,000 1981 5.52 WRI Golden State, LLC

Hall Equities Group

8/13 $12,250,000 $139.20 $13.04 9.37% 95%

2 Gettysburg Address 3102-3128 E Gettysburg AveFresno, CA

8.45 3.92:1 93,840 1991 5.78 Zinkin Family Partners LP

619, LLC 5/13 $8,940,000 $95.27 $8.34 8.75% 88%

3 Spreckels Plaza 131 Spreckels AvenueManteca, CA

6.56 3.89:1 73,400 2000 4.97 Jackson Retail Venture

LLC

YIP Holdings Five, LLC

12/12 $13,000,000 $177.11 $13.11 7.40% 95%

4 Raley's Plaza 3330 North Texas StreetFairfield, CA

9.61 4.39:1 95,441 1997 5.04 Donahue Schriber

Gerrity Atlantic Retail

P t

8/12 $20,350,000 $213.22 $15.46 7.25% 96%

5 Morada Ranch 4255 E Morada LaneStockton, CA

16.69 4.61:1 157,773 1980 3.43 Evergreen Commercial

ROIC California

LLC

5/11 $23,750,000 $150.53 $11.11 7.38% 90%

STATISTICSLow 6.56 3.89:1 73,400 1980 3.43 5/11 $8,940,000 $95.27 $8.34 7.25% 88%High 16.69 4.61:1 157,773 2000 5.78 8/13 $23,750,000 $213.22 $15.46 9.37% 96%Average 9.91 4.18:1 101,691 1990 4.95 9/12 $15,658,000 $155.07 $12.21 8.03% 93%


SUMMARY OF IMPROVED SALES


ECONOMIC ADJUSTMENTS (CUMULATIVE) PROPERTY CHARACTERISTIC ADJUSTMENTS (ADDITIVE)

No.

Price PSF &

Date

PropertyRights

ConveyedConditions

of Sale FinancingMarket (1)

Conditions Subtotal Location SizeAge, Quality & Condition

Land-Building

RatioParking

Ratio Utility (2) Economics Other

Adj.PricePSF Overall

1 $139.20 Leased Fee Arm's-Length None Similar $139.20 Superior Smaller Similar Similar Similar Similar Superior Similar $104.40 Superior8/13 0.0% 0.0% 0.0% 0.0% 0.0% -10.0% -10.0% 0.0% 0.0% 0.0% 0.0% -5.0% 0.0% -25.0%

2 $95.27 Leased Fee Arm's-Length None Similar $95.27 Inferior Smaller Similar Similar Similar Similar Inferior Similar $104.80 Inferior5/13 0.0% 0.0% 0.0% 0.0% 0.0% 10.0% -10.0% 0.0% 0.0% 0.0% 0.0% 10.0% 0.0% 10.0%

3 $177.11 Leased Fee Arm's-Length None Similar $177.11 Superior Smaller Superior Similar Similar Similar Superior Similar $106.27 Superior12/12 0.0% 0.0% 0.0% 0.0% 0.0% -5.0% -15.0% -10.0% 0.0% 0.0% 0.0% -10.0% 0.0% -40.0%

4 $213.22 Leased Fee Arm's-Length None Similar $213.22 Superior Smaller Superior Similar Similar Similar Superior Similar $106.61 Superior8/12 0.0% 0.0% 0.0% 0.0% 0.0% -15.0% -10.0% -5.0% 0.0% 0.0% 0.0% -20.0% 0.0% -50.0%

5 $150.53 Leased Fee Arm's-Length None Similar $150.53 Superior Similar Superior Similar Similar Similar Superior Similar $105.37 Superior5/11 0.0% 0.0% 0.0% 0.0% 0.0% -5.0% 0.0% -10.0% 0.0% 0.0% 0.0% -15.0% 0.0% -30.0%


$213.22 - High High - $106.61$155.07 - Average Average - $105.49

Compiled by Cushman & Wakefield Western, Inc.(1) Market Conditions Adjustment (2) Utility Footnote

Utility includes site layout, signage, visibility

IMPROVED SALE ADJUSTMENT GRID

Compound annual change in market conditions: 0.00%Date of Value (for adjustment calculations): 9/14/13


IMPROVED SALE LOCATION MAP

PERCENTAGE ADJUSTMENT METHOD

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

The first adjustment made to the market data takes into account differences between the subject property and the comparable property sales with regard to the legal interest transferred. Advantageous financing terms or atypical conditions of sale are then adjusted to reflect a normal market transaction. Next, changes in market conditions


are accounted for, creating a time adjusted price. Lastly, adjustments for location, physical traits and the economic characteristics of the market data are made in order to generate the final adjusted unit rate for the subject property.

We made a downward adjustment to those comparables considered superior to the subject and an upward adjustment to those comparables considered inferior. Where expenditures upon sale exist, we included them in the sales price.

Property Rights Conveyed The property rights conveyed in a transaction typically have an impact on the price that is paid. Acquiring the fee simple interest implies that the buyer is acquiring the full bundle of rights. Acquiring a leased fee interest typically means that the property being acquired is encumbered by at least one lease, which is a binding agreement transferring rights of use and occupancy to the tenant. A leasehold interest involves the acquisition of a lease, which conveys the rights to use and occupy the property to the buyer for a finite period of time. At the end of the lease term, there is typically no reversionary value to the leasehold interest. Since we are valuing the leased fee interest as reflected by each of the comparables, an adjustment for property rights is not required.


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

Market Condit ions The sales that are included in this analysis occurred between May 2011 and August 2013. As the market has remained relatively stable over this time period, we have not applied any adjustment

Location An adjustment for location is required when the locational characteristics of a comparable property differ from those of the subject property. The location of the subject property is rated average, and it has average access and average visibility. Each comparable was adjusted accordingly.

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

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


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

DISCUSSION OF COMPARABLE SALES

Comparable Sale No. 1 This is an August 2013 sale of a property known as Sunset Shopping Center, located at 100-108 Sunset Ave in Suisun City, CA. This neighborhood center is anchored by Rite Aid and In-Shape Fitness and situated on a site totaling 8.25 acres. Its total gross leasable area (GLA) is 88,000 square feet, all of which are included in this transaction. Anchor tenants occupy 53.5 percent of the total GLA. This property was constructed in 1981, and the improvements are of average quality and in average condition. The property has a land-to-building ratio of 4.08:1.00 and a parking ratio of 5.52 spaces per 1,000 square feet of building area. This neighborhood shopping center is located just north of Highway 12. The center includes several pad buildings that were not included in this sale (IHOP, McDonalds, KFC, and Taco Bell). The property was listed at $13,000,000. The leased fee interest in this property sold from WRI Golden State, LLC to Hall Equities Group for $12,250,000, or $139.20 per square foot. The overall rate at the time of sale was 9.37 percent and the occupancy was 95.00 percent.

After all adjustments, this comparable indicated a value of $104.40 per square foot.

Comparable Sale No. 2 In this May 2013 sale, the leased fee interest of comparable 2, known as Gettysburg Address, located at 3102-3128 E Gettysburg Ave in Fresno, CA, was sold from Zinkin Family Partners LP to 619, LLC for $8,940,000, or $95.27 per square foot. The GLA included in this transaction was 93,840 square feet. This neighborhood center is anchored by Fresno Ag Hardwar and contains a total GLA of 93,840 square feet, with anchor tenants occupying 53.2 percent. At the time of sale the property was 88.00 percent occupied. The property encompasses 8.45 acres with a land-to-building ratio of 3.92:1.00 and a parking ratio of 5.78 spaces per 1,000 square feet of building area. It was constructed in 1991 and last renovated in 1996, the improvements on this property are average in quality, and in average condition. This neighborhood center is anchored by Fresno Ag Hardware, which occupies 49,910 square feet, at $0.58/SF/Month, NNN, expiring August 2018, with six 5-year options. Other tenants include Autozone, Chubby's Diner, Little Caesar's, and Subway. Rents for in-line space generally range from $1.10 to $1.50/SF/Month, NNN. Asking rents are currently $1.00/SF. The property sold for $9,200,000, and included a vacant 1/2 acre pad site valued at $12.00/SF or approximately $260,000. The analyzed sale price is net of the pad site value. The overall rate at the time of sale was 8.75 percent.


Comparable Sale No. 3 This neighborhood center is known as Spreckels Plaza and is located at 131 Spreckels Avenue in Manteca, CA. At the time of sale this center was anchored by Food 4 Less and it was 95.00 percent occupied. The total GLA of the center is 73,400 square feet, all of which were included in this sale. Anchor tenants occupy 78.7 percent of this center’s foot GLA. The center’s site contains 6.56 acres with a land-to-building ratio of 3.89:1.00 and a parking ratio of 4.97 spaces per 1,000 square feet of building area. The center was constructed in 2000, and the improvements are considered to be of good quality and in good condition. Food 4 Less anchors this center on a net lease at $0.97/SF, increasing to $1.06/SF on 3/1/2015, and expiring in March 2020, with three 5-year options. The remaining tenants are in-line, with rents ranging from $1.45 to $2.36/SF, NNN. The most recent lease commenced in September 2009 at $1.45/SF. Three of the 10 in-line tenants are on a month-to-month basis. Traffic counts along Spreckles Ave are 21,200 ADT (2008). The property was listed in June 2012 at $13,750,000. This was an all cash sale. The leased fee interest in this property sold from Jackson Retail Venture LLC to YIP


Holdings Five, LLC for $13,000,000, or $177.11 per square foot in December 2012. The overall rate at the time of sale was 7.40 percent.


Comparable Sale No. 4 This neighborhood center is known as Raley's Plaza and is located at 3330 North Texas Street in Fairfield, CA. It is anchored by Raleys. The leased fee interest in 95,441 square feet of this property sold in August 2012 from Donahue Schriber to Gerrity Atlantic Retail Partners, LLC for $20,350,000, or $213.22 per square foot. Situated on a 9.61 acres site, this center contains a total GLA of 95,441 square feet, of which anchor tenants occupy 66.1 percent. The occupancy rate at the time of sale was 96.00 percent. This center was constructed in 1997, and its improvements are of average quality and sold in average condition. The property has a land-to-building ratio of 4.39:1.00 and a parking ratio of 5.04 spaces per 1,000 square feet of building area. The income stream is relatively secure as 72% of the subject is leased to Raleys and Chase. Raleys is leased through June 2024, at $1.04/SF/Month, NNN, with three 5-year options. Other tenants include Starbucks and Panda Express. Traffic counts at the intersection are 50,261 ADT. The average household income is $89,992 within a one-mile radius. The overall rate at the time of sale was 7.25 percent.


Comparable Sale No. 5 In May 2011 the leased fee interest in comparable 5, known as Morada Ranch, sold from Evergreen Commercial to ROIC California LLC for $23,750,000, or $150.53 per square foot. This transaction included GLA of 157,773 square feet. The overall rate at the time of sale was 7.38 percent. Located at 4255 E Morada Lane in Stockton, CA, this neighborhood center is situated on a site measuring 16.69 acres and contains a total GLA of 157,773 square feet. Anchors such as Raley's occupy 46.7 percent of the total GLA. The center was constructed in 1980, last renovated in 1996, and its improvements are of average quality and in average condition. The property’s land-to-building ratio is 4.61:1.00 and its parking ratio is 3.43 spaces per 1,000 square feet of building area. Morada Ranch is a Raley's-anchored neighborhood center in northeast Stockton. This site is located on the northwest corner of Highway 99 and Morada Lane. The property includes six pad sites. Notable inline tenants include Golden 1 Credit Union, Starbucks, Curves, and Subway. No adverse sale conditions were noted. At the time of sale this center was 90.00 percent occupied.


Summary of Percentage Adjustment Method After adjustments, the comparable improved sales reflect unit prices ranging from $104.40 to $106.61 per square foot with an average adjusted price of $105.49 per square foot.

We have placed greatest weight on Comparable 2, as this is a recent sale, with a non-grocery or credit anchor, and shares similar locational attributes, particularly in regards to overall demographics. An upward adjustment is warranted for location. A downward adjustment for size is warranted, as smaller centers typically sell at a higher price per square foot. An upward adjustment for inferior economics is warranted as this property was 88 percent occupied at the time of sale, and the overall tenant mix is inferior.


Therefore, we concluded that the indicated value by the Percentage Adjustment Method was:

Indicated Value per Square Foot GLA $105.00Net Rentable Area in Square Feet x 152,719Indicated Value $16,035,495

Plus Excess Land $1,050,000Indicated Value $17,085,495

$17,100,000Per square foot $111.97



APPLICATION TO SUBJECT Market Value As-Is

THE CENTER, STOCKTON, CA INCOME CAPITALIZATION APPROACH 67

I N C O M E C A P I T A L I Z A T I O N A P P R O A C H

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

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

Investors acquiring this type of asset will typically look at year one returns but must also consider long-term strategies. Hence, depending on certain factors, each of the income approach methods has merit. We used both Yield and Direct capitalization, and each method is well-supported by ample, recent market data. As a result, we placed roughly equal reliance on each of the techniques, and feel that a prospective purchaser would follow this approach.

POTENTIAL GROSS INCOME Potential gross income is generated by a number of distinct elements:

Minimum rent determined by the lease agreement

Reimbursement of certain expenses incurred in the ownership and operation of the real estate

Other miscellaneous revenues

Minimum base rent is a legal contract between landlord and tenant establishing a return to investors in the real estate. The lease terms also dictate specific expense reimbursement charges that can be billed to the tenant. Finally, miscellaneous income can be generated from a variety of sources. The first step in this appraisal is to analyze all potential gross income, starting with an analysis of the subject’s tenancy.

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


SPACE SUMMARY & OCCUPANCY STATUS The following is a summary of the occupied and vacant space within the subject property. The subject property contains 152,719 square feet of space, of which 152,719 square feet are occupied.

SPACE SUMMARY & OCCUPANCY STATUSSPACE SUMMARY TENANT COUNT

Tenant Category Occ. SF Vct. SF Total SF Occupancy Occupied Vacant TotalGround Lease - - - 100.0% 1 0 1Sub-Anchor 19,500 - 19,500 100.0% 1 0 1Restaurant 11,653 - 11,653 100.0% 2 0 2Drive-Thru 2,070 - 2,070 100.0% 1 0 1Anchor 100,000 - 100,000 100.0% 1 0 1Auto Service 12,000 - 12,000 100.0% 1 0 1Shop Space 2,296 - 2,296 100.0% 1 0 1Kiosk - - - 100.0% 1 0 1Ground Lease 2 5,200 - 5,200 100.0% 1 0 1Total 152,719 - 152,719 100.0% 10 0 10


There are a total of 10 tenant spaces, of which 10 spaces are leased, and 0 are vacant. The chart summarizes the occupancy level based on the leases in place as of the date of appraisal. There is also a ground-leased Costco fueling station that does not include any rentable square footage, and a kiosk leased to Monterey Water.

Base rent produced by the subject property is derived from that paid by the various tenant types. The projection used in this analysis is based on the actual rent roll as of the date of appraisal, together with our assumptions regarding the absorption of the vacant space, market rent growth, and renewal/turnover probability.

The rental income an asset such as the subject property will generate for an investor is analyzed based on its quality, quantity, and durability. The quality and probable duration of income will affect the amount of potential risk over the property's investment holding period. By segregating the income stream along these lines we can control the variables related to the forecasted performance with greater accuracy.

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

LEASE STRUCTURE

Types of Leases In addition to base rent, tenants are often required to reimburse the landlord for certain expenses. Expense recovery clauses range from absolutely net (whereby the tenant pays all property expenses) to fully gross (in which the tenant pays no expenses). Recovery provisions can vary by property type and locale, and can fall anywhere within the net to gross range.

Local Market Lease Structure

The market in which the subject property is located recognizes these basic lease structures, with slight variations. In the subject’s market, leases are typically written on a net basis, whereby the tenants are responsible for their pro-rata share of all operating expenses including real estate taxes, insurance, common


area maintenance (CAM) and management.

Lease terms are generally between 5 and 10 years. Leases that are 5 years or less in length typically include annual escalations of 3.0 percent. Longer lease terms generally include a 10.0 percent rent bump every five years.

Subject Property Lease Structure The existing retail leases at the subject property are written on a triple net basis, with the tenants responsible for their pro-rata share of all operating expenses including real estate taxes, insurance, and CAM. The notable exception is the sub-anchor lease to Gold’s Gym, which is written on a modified gross basis, whereby the tenant is only responsible for their utilities and interior maintenance.

At the subject property, lease terms are generally between 5 and 10 years. Leases that are five years or less in length typically include annual escalations of 3.0 to 4.0 percent. Longer lease terms generally include a 10 percent rent bump every five years of the lease term.


MARKET RENT ESTIMATE

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

ATTAINED RENT SCHEDULEAs Of Value Date:

Start End Area Contract Contract Lease Equiv. Net Equiv.Tenant Name Date Date ( SF ) Rent/Year Rent/SF Type(1) Adjus. Equiv. Annual.

Ground LeaseConfidential Feb-04 Jun-18 0 $36,384 N/Ap Gross $0.00 N/Ap $36,384

Sub-AnchorConfidential Feb-10 Jul-25 19,500 $292,500 $15.00 Gross -$3.24 $11.76 $229,320

RestaurantConfidential Dec-90 Dec-15 4,503 $177,348 $39.38 Net $0.00 $39.38 $177,348Confidential Jul-97 Feb-28 7,150 $141,576 $19.80 Net $0.00 $19.80 $141,5762 tenants subtotal 11,653 $318,924 $27.37 $27.37 $318,924

Drive-ThruConfidential Oct-09 Apr-15 2,070 $54,288 $26.23 Net $0.00 $26.23 $54,288

AnchorConfidential Sep-03 Jan-19 100,000 $353,928 $3.54 Net $0.00 $3.54 $353,928

Auto ServiceConfidential Jun-98 Jun-18 12,000 $185,664 $15.47 Net $0.00 $15.47 $185,664

Shop SpaceConfidential Jun-12 Jun-22 2,296 $55,104 $24.00 Net $0.00 $24.00 $55,104

KioskConfidential Sep-94 Aug-25 0 $6,000 N/Ap Net $0.00 N/Ap $6,000

Ground Lease 2Confidential Sep-04 Jun-15 5,200 $94,224 $18.12 Net $0.00 $18.12 $94,224

GRAND-TOTALS 152,719 $1,397,016 $9.15 $8.73 $1,333,836

Note: Attained rent equals current rent annualized for twelve months, and it excludes contractual rent increasesCompiled by Cushman & Wakefield Western, Inc.(1) Lease Types as defined by The Appraisal Institute(2) The equivalency adjustment is applied to atypical leases to reflect a common lease standard for this building or space category

Sep-13 Equivalency Adjustment (2)

A total of 10 tenants currently lease space within the property. The average rent for all of the existing tenants is $9.15 per square foot. The grand-totals exhibited in the attained rent schedule for contract rent do not incorporate lease-up or downtime provisions. Hence, the grand-totals might differ from the projections shown later in this section.

Rent Roll Equivalency Adjustment To account for atypical leases at the subject property, we also incorporated a rent roll equivalency adjustment. With the rent roll equivalency adjustment, a uniform standard of comparison can be obtained by adjusting contractual rent levels for those leases that have variances in lease terms. We adjusted all leases to reflect net lease terms. The net equivalent average contract rent was estimated to be $8.73 per square foot. This


equivalency adjustment will be useful later when we compare the contract rent to the market, which only has merit when there is a like-kind comparison.

Attained Rent Summary We presented a table detailing the individual leases encumbering the subject property. Below is a synopsis of the attained rent schedule (unadjusted for lease type equivalency).

ANNUALIZED RENT - OCCUPIED SPACETenant Category Occ. SF

No. Spaces Total Rent Avg. $/SF

Ground Lease - 1 $36,384 N/ApSub-Anchor 19,500 1 $292,500 $15.00Restaurant 11,653 2 $318,924 $27.37Drive-Thru 2,070 1 $54,288 $26.23Anchor 100,000 1 $353,928 $3.54Auto Service 12,000 1 $185,664 $15.47Shop Space 2,296 1 $55,104 $24.00Kiosk - 1 $6,000 N/ApGround Lease 2 5,200 1 $94,224 $18.12Total 152,719 10 $1,397,016 $9.15


In the “Ground Lease” category, there is one tenant paying $36,384 per year. In the “Sub-Anchor” category there is 1 tenant occupying 19,500 square feet at $15.00 per square foot per year, on a modified gross basis. There are 2 tenants occupying space in the “Restaurant” category. The rent for the 11,653 square feet of occupied space in this category is $27.37 per square foot. In the “Drive-Thru” category, there is 1 tenant occupying 2,070 square feet at an average rent of $26.23 per square foot. In the “Anchor” category, there is 1 tenant leasing 100,000 square feet of space at $3.54 per square foot. In the “Auto Service” category, there is 1 tenant leasing 12,000 square feet of space at $15.47 per square foot.

Pending Leases No pending leases were reported.

Month-To-Month Leases Based on our review of the rent roll, no month-to-month leases were modeled.

Analysis of Comparable Anchor and Sub-anchor Rents The following table summarizes rental activity for comparable space in competing buildings in the market. The comparables included in this analysis fall between the dates of March 2011 and January 2013.


ANCHOR/SUB-ANCHOR RENT COMPARABLESPROPERTY INFORMATION LEASE INFORMATION

NO.Property NameAddress, City, State Y

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COMMENTS1 College Square

4760 N Pershing AveStockton, CA

1976 2012 Hobby Lobby 9/12 55,245 10 $8.41 5% mid-term

Net Equivalent

6 $1.20 The actual lease rate is $10.00/SF on a modified gross basis, whereby the tenant reimburses for real estate taxes and insurance, but not common area maintenance.

2 Placer Center Plaza1818 Douglas BlvdRoseville, CA

1990 N/A Hobby Lobby 7/11 76,000 11 $7.55 6% in year 6 Net Equivalent

0 $11 This is a former Mervyn's space.

3 Manteca Marketplace1223-1499 W Yosemite AveManteca, CA

1973 2012 Big Lots 1/13 30,751 7 $8.32 Flat Net 0 $0 Older center anchored by Save Mart. Two new anchor spaces receiving new facades.


1973 2012 In-Shape Fitness 12/12 19,431 10 $9.82 10% mid-term

Net 0 $5 Older center anchored by Save Mart. Two new anchor spaces receiving new facades.

5 Weberstown East4950 Claremont AveStockton, CA

1988 2011 Gold's Gym 3/11 22,010 10 $11.75 10% mid-term

Net Equivalent

6 $25 This is a free-standing building located behind the Weberstown Mall. The indicated rent is a NNN equivalent reached after deducting $1.25/SF for insurance, CAM, and taxes.

6 College Square1155 W March LnStockton, CA

1976 2012 Planet Fitness LOI 25,849 10 $9.00 10% mid-term

Net 6 $4.84 This represents a fully-executed LOI for the remaining portion of a former Mervyn's space. The larger portion has been leased to Hobby Lobby.

7 Mission Ridge Plaza1009 S Main stManteca, CA

1992 2012 Burlington Coat Factory

9/12 78,454 11 $8.52 Increases to $8.88/SF in

year 7

Net 12 $10 This space is located in a Save Mart-anchored center across the street from Walmart.

8 Ralye's Union Square 1280 W Lathrop RdManteca, CA

1991 N/A Raley's 11/11 60,849 10 $7.44 N/Av Net 0 $16 The property was recently acquired and the new owner renegotiated the lease with Raley’s, extending their term by 10 years and reducing their rent by 25%. The renewal term commenced in November 2011.

9 McHenry Village1700 McHenry AveModesto, CA

1955 1991 Sprouts 10/11 28,000 10 $14.04 10% mid-term

Net 0 $35 This space is located in McHenry Village a lifestyle center at the corner of McHenry Ave & Briggsmore Ave. The lease includes four 5-year options, each with a 10% increase in rent.

STATISTICS

Low 1955 1991 3/11 19,431 7 $7.44 0 $0

High 1992 2012 1/13 78,454 11 $14.04 12 $35

Average 1979 2009 3/12 44,065 10 $9.43 3 $12



COMPARABLE RENTAL LOCATION MAP

DISCUSSION OF COMPARABLE RENTS We analyzed recent leases negotiated in competitive buildings in the marketplace. The comparables range in size from 19,431 square feet to 78,454 square feet. These are all located in buildings similar in class to the subject, and in the subject’s competitive market. The comparable leases have terms ranging from 7 to 11 years. The comparables exhibit a range of rents from $7.44 to $14.04 per square foot, with an average of $9.43 per square foot.

Free rent concessions ranged from 0 to 12 months, averaging 3.33 months. Tenant improvement allowances ranged from $0.00 to $35.00 per square foot, averaging $12.00. Rent escalation clauses vary, with most having fixed mid-term increases. Six of these are net leases in which the tenant is required to pay their pro-rata share of all operating expenses. Two are modified gross leases that have been adjusted to a net equivalent.


In general the larger leases have lower per square foot rents. There are four leases over 50,000 square feet. They range from $7.44 to $8.52 per square foot, averaging $7.98. The five leases under 50,000 square feet range from $8.32 to $14.04, averaging $10.59 per square foot.

The subject’s anchor space contains 100,000± square feet, which is larger than all of the comparables, suggesting a market rent below the range indicated by the comparables.

Conclusion of Market Rent for Anchor and Sub-anchor Space Based on our analysis of the comparables, we concluded to a market rent of $6.00 per square foot per year, triple net, for the anchor space, and $10.20 per square foot per year for the sub-anchor space.

Analysis of Comparable Restaurant Rents The following table summarizes rental activity for comparable space in competing buildings in the market. The comparables included in this analysis fall between the dates of June 2011 and March 2012.


RESTAURANT RENT COMPARABLESPROPERTY INFORMATION LEASE INFORMATION


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COMMENTS

1 612 E Kettleman DrLodi, CA

1996 N/Ap AVAILABLE Listing 4,500 Neg. $24.00 Negotiable Net Neg. Neg. Former Carrow's, just off Highway 99.

2 3001 N StSacramento, CA

1973 2011 IHOP 6/11 4,230 10 $25.80 2.0% annual

Net 0 $24 Former Lyon's restaurant in Mid-town Sacramento.

3 6009 Florin RdSacramento, CA

2012 N/Ap Sizzler 3/12 8,000 20 $24.96 1.5% annual

Net 0 BTS Pad site in front of Florin Mall.

4 1435 V StMerced, CA

1990 2011 Black Bear Diner 10/11 5,200 20 $24.24 Fixed annual

Net 0 $0 Free-standing building located in close proximity to Highway 99.

5 1809 McHenry AveModesto, CA

1990 N/Ap Taxi's Hamburgers

3/12 3,500 3 $18.00 4.0% annual

Net 3 $0 Multi-tenant pad building.

6 College Square3121 W Benjamin Holt DrStockton, CA

1980's N/Ap AVAILABLE Listing 9,500 Neg. $18.00 Negotiable Net Neg. Neg. Free-standing pad building in a shopping center anchored by 24-Hour Fitness and Ace Hardware. Visible from I-5.

STATISTICS

Low 1973 2011 6/11 3,500 3 $18.00 0 $0

High 2012 2011 3/12 9,500 20 $25.80 3 $24

Average 1992 2011 11/11 5,822 13 $22.50 1 $8





One of the comparables included 3 months of free rent. The highest rent was Comparable 2, which included a $24.00 per square foot tenant improvement allowance, the second highest rent, Comparable 3, was a build-to-suit. All of the comparable leases include fixed annual rent escalations. All of these are triple net leases.


Conclusion of Market Rent for Restaurant Space Based on our analysis of the comparables, we concluded to a market rent for the subject’s restaurant tenants of $24.00 per square foot per year, on a triple net basis.

Analysis of Comparable Fast Food Rents The following table summarizes rental activity for comparable space in competing buildings in the market. The comparables included in this analysis fall between the dates of August 2009 and February 2013.


FAST FOOD RENT COMPARABLESPROPERTY INFORMATION LEASE INFORMATION


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1 850 El Camino AveSacramento, CA

1980 El Forastero 9/12 1,944 5 $21.60 Assumed to be 3% annual

Net 0 $0 This is a free-standing building on a corner site. It does not have a drive-thru.

2 1830 E Main StWoodland, CA

2006 Popeye's 2/13 2,565 15 $35.04 8% every 5 years

Net 0 $0 This is a pad site in front of a Home Depot. The lease includes 4 5-year options.

3 7229 Stockton BlvdSacramento, CA

1985 Popeye's 8/09 1,661 5 $27.00 11% mid-term

Net 0 $0 Free-standing building south of Florin Ave.

4 Hammer Landing Center3558 W Hammer LnStockton, CA

1988 AVAILABLE Listing 2,561 Neg. $23.40 Negotiable Net Neg. Neg. Vacant free-standing building with drive-thru, formerly occupied by Lupe's Mexican Restaurant, located next to Jack-in-the-Box.

STATISTICS

Low 1980 8/09 1,661 5 $21.60 0 $0

High 2006 2/13 2,565 15 $35.04 0 $0

Average 1990 10/11 2,183 8 $26.76 0 $0Compiled by Cushman & Wakefield Western, Inc.



DISCUSSION OF COMPARABLE RENTS We analyzed recent leases negotiated in competitive buildings in the marketplace. The comparables range in size from 1,661 square feet to 2,565 square feet. These are all located in buildings similar in class to the subject, and in the subject’s competitive market. The comparable leases have terms ranging from 5 to 15 years. The comparables exhibit a range of rents from $21.60 to $35.04 per square foot, with an average of $26.76 per square foot. All of the comparables are on a triple net basis.

Comparable 2 was constructed in 2006 and sets the high end of the range at $35.04 per square foot.

Conclusion of Market Rent for Fast Food/Drive-thru Space Based on our analysis of the comparables, we concluded to a market rent of $30.00 per square foot per year, on a triple net basis.


Analysis of Comparable Auto Service Rents The following table summarizes rental activity for comparable auto service space in competing buildings in the market. The comparables included in this analysis fall between the dates of September 2010 and November 2011.


AUTO SERVICE RENT COMPARABLESPROPERTY INFORMATION LEASE INFORMATION


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1 1129 W 11th StreetTracy, CA

1955 2011 Big O Tires 11/11 6,200 6 $9.60 $0.60/SF annual

Net 0 $16 Older free-standing building.

2 402 E Maini StTurlock, CA

1985 N/Ap AVAILABLE Listing 6,500 Neg. $10.20 Negotiable Net Neg. Neg. Formerly Pacific Tire & Wheel in downtown Turlock. Masonry building with 3 service bays and retail/sales area.

3 1455 Herndon RdCeres, CA

1990 N/Ap AVAILABLE Listing 5,000 Neg. $15.00 Negotiable Modified Neg. Neg. Former Big O Tire store with 6 service bays.

4 9077 Foothills BlvdRoseville, CA

2000 N/Ap Midas 9/11 8,020 5 $12.84 3.0% annual

Net 0 $0 The lease includes one 5-year option.

5 790 Clovis AveClovis, CA

1989 N/Ap Firestone 9/10 6,712 10 $14.58 2.4% annual

Net 0 $0 This is a renewal of a tenant that has occupied this space since 1989.

STATISTICS

Low 1955 2011 9/10 5,000 5 $9.60 0 $0

High 2000 2011 11/11 8,020 10 $15.00 0 $16

Average 1984 2011 5/11 6,486 7 $12.44 0 $5Compiled by Cushman & Wakefield Western, Inc.




None of the executed leases included any free rent, and one lease included a $16 per square foot tenant improvement allowance. All of the signed leases included fixed annual rent escalations. All but one are on triple net terms. Comparable 3 is a modified gross lease, whereby the tenant is responsible for utilities and maintenance.


Conclusion of Market Rent for Retail Space Based on our analysis of the comparables, we concluded to a market rent of $12.00 per square foot per year, on a triple net basis.

Analysis of Comparable In- l ine Rents The following table summarizes rental activity for comparable space in competing buildings in the market. The comparables included in this analysis fall between the dates of May 2011 and April 2012.


IN-LINE RENT COMPARABLESPROPERTY INFORMATION LEASE INFORMATION

NO.Property NameAddress, City, State C

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COMMENTS

1 Raley's Stockton Plaza2309-2415 W Hammer LnStockton, CA

107,810 1999 N/A Postal Plus 4/12 1,200 2 $21.60 Flat Net 0 $0 Represents a renewal for space in a Raley's-anchored shopping center.

2 Raley's Union Square1280 W Lathrop RdManteca, CA

92,343 1991 N/A AT&T 3/12 1,100 1.5 $22.20 Flat Net 0 $0 Renewal in a Raley's-anchored center.


188,421 1973 2012 Park Avenue Cleaners

3/12 1,200 5 $24.00 3.0% annual

Net 2 $0 This center is anchored by Save Mart and includes two recent anchor leases to In-Shape Fitness and Big Lots.

4 Lincoln Plaza6323 Pacific AveStockton, CA

70,000 1990 N/A Bright Dental 5/11 3,800 10 $25.80 10% midpterm

Net 0 $34 Pad building in un-anchored strip center.

STATISTICS

Low 70,000 1973 2012 5/11 1,100 2 $21.60 0 $0

High 188,421 1999 2012 4/12 3,800 10 $25.80 2 $34

Average 114,644 1988 2012 12/11 1,825 5 $23.40 1 $9





Free rent concessions ranged from 0 to 2 months, averaging 0.50 months. Tenant improvement allowances ranged from $0.00 to $34.21 per square foot, averaging $8.55. Rent escalation clauses vary from flat to 3.0 percent annual increases. All of these are triple net leases


Conclusion of Market Rent for In- l ine Space Based on recent leasing activity at the subject property and our analysis of the comparables, we concluded to a market rent of $24.00 per square foot per year, on a triple net basis.

Analysis of Comparable Ground Leases The following table summarizes ground lease activity for comparable sites in the market. The comparables included in this analysis fall between the dates of August 2009 and February 2012.


GROUND LEASE COMPARABLESPROPERTY INFORMATION LEASE INFORMATION

NO.Property NameAddress, City, State T

ENA

NT

NA

ME

LEA

SE D

ATE

SITE

SIZ

E (S

F)

TER

M (y

rs.)

AN

NU

AL

REN

T

REN

T/SF

/YR

REN

T S

TEPS

LEA

SE T

YPE

1 NWC Mace Blvd & I-80Davis, CA

Chase Bank 11/11 33,106 20 $114,000 $3.44 10% every 5 years

Net

2 9871 Greenback LnFolsom, CA

Chevron 1/10 31,929 5 $102,000 $3.19 Flat Net

3 4040 Douglas BlvdRoseville, CA

Chick-fil-A 2/12 26,136 15 $125,000 $4.78 10% every 5 years

Net

4 11750 W Lathrop RdManteca, CA

CVS Pharmacy 8/09 63,707 25 $184,752 $2.90 Flat Net

5 Commons at Madera FaireSWC Cleveland Ave & Hwy 99Madera, CA

Fresh & Easy 9/09 74,052 20 $84,000 $1.13 12% in years 11 and 16

Net

6 NWC Manthey Rd & Carolyn Weston BlvdStockton, CA

Fresh & Easy 12/09 60,000 20 $130,000 $2.17 10% every 5 years

Net

STATISTICS

Low 8/09 26,136 5 $84,000 $1.13

High 2/12 74,052 25 $184,752 $4.78

Average 7/10 48,155 18 $123,292 $2.94




DISCUSSION OF COMPARABLE RENTS We analyzed recent leases negotiated for competitive sites in the marketplace. The sites range in size from 26,136 square feet to 74,052 square feet. The comparable leases have terms ranging from 5 to 25 years. Ground leases are typically negotiated on an annual amount for the entire site, and generally reflect the size and location of the site. The comparables have annual rents ranging from $84,000 to $184,752, and from $1.13 to $4.78 per square foot of site area, with an average of $2.94 per square foot.

The subject’s ground lease to Costco Fueling Station is for a 21,344 square foot site that is located behind Jiffy Lube, with less than average exposure. The annual rent is $36,383 or $1.70 per square foot of site area.

The Jiffy Mini-Lube ground lease is currently $94,224, which equates to $8.52 per square foot of site area, based on the 11,053 square foot site. This site has excellent exposure and visibility.


Conclusion of Market Ground Lease Based on our analysis of the comparables, we concluded to a market ground rent of $50,000 annually, for the Costco site, which equates to $2.34 per square foot of site area, and $100,000 annually for the Jiffy Lube site.

MARKET RENT CONCLUSION The following chart summarizes our market rent conclusion for each tenant category in the subject property.

MARKET RENT SYNOPSISTENANT CATEGORY Sub-Anchor Restaurant Drive-Thru Anchor Auto Service Shop SpaceMarket Rent $10.20 $24.00 $30.00 $6.00 $12.00 $24.00Lease Term (years) 10 10 10 10 5 5Lease Type (reimbursements) Net Net Net Net Net NetContract Rent Increase Projection 10% mid-term 10% mid-term 10% mid-term 10% mid-term 3% annual 3% annualCompiled by Cushman & Wakefield Western, Inc.

COMPARISON OF CONTRACT RENTS TO MARKET We previously outlined an attained rent schedule for all current tenants of the subject property. Adjustments were made to the subject leases to account for lease type equivalency, so all of the subject’s rents could be analyzed on a like-kind basis. For comparison to the market, we will look at the lease type equivalent rates that were developed earlier in this report. It should be noted that attained rents are calculated without reference to tenant contributions over expense stops.

The following chart outlines our estimated market rent for each tenant space in the subject property and the attained equivalent rent exclusive of contributions of each lease. Comparing these figures allows us to identify whether the attained rent levels are at, above or below the market. The results of this comparison will have an impact on our selection of the investment rates used in evaluating this property.


ATTAINED RENT LEVELS

Area Equiv. Rent Equiv.Tenant Name ( SF ) Per Year Rent/SF Rent/SF Annualized

Ground LeaseConfidential 0 $36,384 N/Ap N/Ap $50,000 27.23% below market

Sub-AnchorConfidential 19,500 $229,320 $11.76 $10.20 $198,900 15.29% above market

RestaurantConfidential 4,503 $177,348 $39.38 $24.00 $108,072 64.10% above marketConfidential 7,150 $141,576 $19.80 $24.00 $171,600 17.50% below market

11,653 $318,924 $27.37 $24.00 $279,672 14.04% above market

Drive-ThruConfidential 2,070 $54,288 $26.23 $30.00 $62,100 12.58% below market

AnchorConfidential 100,000 $353,928 $3.54 $6.00 $600,000 41.01% below market

Auto ServiceConfidential 12,000 $185,664 $15.47 $12.00 $144,000 28.93% above market

Shop SpaceConfidential 2,296 $55,104 $24.00 $24.00 $55,104 0.00% at market

KioskConfidential 0 $6,000 N/Ap N/Ap $6,000 0.00% at market

Ground Lease 2Confidential 5,200 $94,224 $18.12 $19.23 $100,000 5.78% below market

GRAND-TOTALS 152,719 $1,333,836 $8.73 $9.79 $1,495,776 10.83% below market

Note: Attained rent equals current rent annualized for twelve months, and it excludes contractual rent increasesCompiled by Cushman & Wakefield Western, Inc.

Contract Rent Versus Market Rent

MARKET RENT COMPARISONContract Rent Market Rent Comparison

As shown above, the subject property’s average contract rent is currently 10.8 percent below market. When a property is acquired with leases that are at or close to market rent levels, the level of risk involved with the investment is generally low. However, the potential increase to the income stream in this scenario is typically limited, which tends to normalize the investment parameters of participants for these types of properties.

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

Properties that are encumbered by leases with average rents that are significantly above market have increased risk in several key areas. When a property has an average rent that is above market, there is increased risk of default, slow payment or lack of payment by those tenants in that category. Also, at some point, the above market


leases will expire, at which time the spaces will be re-leased at market levels. When this occurs, there is a decline in rental revenue for the property, which many times leads to a declining net income stream. When this is the case, investors will require a higher initial return to offset the declining income stream, and to guard against the heightened risk of tenant defaults.

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

LEASE EXPIRATION SCHEDULE

YearSquare

Feet Expiring

Percent of

PropertyCumulative

Sq FtCumulative

Percent1 0 0.00% 0 0.00%2 7,270 4.76% 7,270 4.76%3 4,503 2.95% 11,773 7.71%4 0 0.00% 11,773 7.71%5 12,001 7.86% 23,774 15.57%6 100,000 65.48% 123,774 81.05%7 5,200 3.40% 128,974 84.45%8 0 0.00% 128,974 84.45%9 2,296 1.50% 131,270 85.96%10 1 0.00% 131,271 85.96%


0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

1 2 3 4 5 6 7 8 9 10

SQUARE

FEET

ANALYSIS YEAR

Lease Expiration Schedule

Cumulative Square Feet Square Feet Per Year


The following table provides a synopsis of the lease expiration anticipated at this property during the analysis period.

LEASE EXPIRATION ANALYSISTotal GLA of Subject Property (SF) 152,719 100.00%Year of Peak Expiration 6SF Expiring in Peak Year 100,000 65.48%Five Year Cumulative Expirations (SF) 23,774 15.57%Ten Year Cumulative Expirations (SF) 131,271 85.96%Compiled by Cushman & Wakefield Western, Inc.

To summarize, the average amount of space expiring annually at the subject property is approximately 13,025 percent. However, the rollover percentage varies significantly by year, and ranges from a no expirations up to 65.48% percent of the space in year 6, when the anchor lease is set to expire. A total of 85.96% percent of the leasable area expires over the holding period. This is not uncommon in multi-tenant properties and, overall, the turnover risk is considered typical for properties such as the subject.

ASSUMPTIONS REGARDING EXISTING LEASES We modeled all leases in accordance with the lease terms provided by ownership. None of the tenants is currently in default, and we assume that they will fulfill the obligations of their leases. We assumed that tenants with favorable renewal options would exercise those options. In instances when a tenant has a renewal option that is above market, we assumed a rollover to the weighted market parameters. After comparing the options terms of the existing tenants with our projection of market rent we included the following renewal options in our analysis as they are favorable to the tenant and thus likely to be exercised.

Lease Option SummaryOption Option Option Initial Option Market Market

Suite Start End Term Area Option Rent Rent at Rent PSFTenant Name Number Date Date Years SF Rent PSF Option at Option Costco Fuel Station 0ZZ Jul-18 Jun-23 5.0 0 $38,302 N/Ap $56,297 N/ApCostco Fuel Station 0ZZ Jul-23 Jun-28 5.0 0 $40,112 N/Ap $65,264 N/ApJiffy Lube 05 Jul-15 Jun-20 5.0 5,200 $103,584 $19.92 $100,996 $19.42Jiffy Lube 05 Jul-20 Jun-25 5.0 5,200 $114,192 $21.96 $119,447 $22.97


REVENUE & EXPENSE ANALYSIS We developed an opinion of the property’s annual income and operating expenses after reviewing both its historical performance and the operating performance of similar buildings. We analyzed each item of expense and developed an opinion regarding what an informed investor would consider typical.

The current owners acquired the property in early 2012. They provided us with the previous owner’s income & expense statements for 2010 and 2011, and a partial year 2012 that includes April through December. A historical operating history for the property, and our opinion of future income and expenses are presented on the following chart, followed by an analysis of subject property’s revenue and expenses.


REVENUE AND EXPENSE ANALYSIS

REVENUE Total PSF Total PSF Total PSF Total PSFBase Rental Revenue $1,160,330 $7.60 $1,394,811 $9.13 $1,513,697 $9.91 $1,401,767 $9.18Overage Rent 0 0.00 10,587 0.07 5,308 0.03 0 0.00Subtotal $1,160,330 $7.60 $1,405,398 $9.20 $1,519,005 $9.95 $1,401,767 $9.18

Total Reimbursement Revenue $495,822 $3.25 $531,305 $3.48 $378,591 $2.48 $447,170 $2.93

Other Revenue $10,556 $0.07 $15,144 $0.10 $8,584 $0.06 $0 $0.00POTENTIAL GROSS REVENUE $1,666,708 $10.91 $1,951,847 $12.78 $1,906,180 $12.48 $1,848,937 $12.11

Vacancy and Collection Loss (27,432) (0.18) (6,165) (0.04) 0 0.00 (95,197) (0.62)EFFECTIVE GROSS REVENUE $1,639,276 $10.73 $1,945,682 $12.74 $1,906,180 $12.48 $1,753,740 $11.48

OPERATING EXPENSESProperty Insurance 41,732 0.27 46,483 0.30 33,744 0.22 38,180 0.25Management Fees 54,471 0.36 58,568 0.38 65,511 0.43 52,612 0.34Administrative Fees 38,953 0.26 34,932 0.23 18,079 0.12 7,636 0.05Common Area Maintenance 392,058 2.57 328,629 2.15 184,749 1.21 229,079 1.50Total Operating Expenses $527,214 $3.45 $468,612 $3.07 $302,083 $1.98 $327,507 $2.14

Real Estate Taxes 199,133 1.30 189,812 1.24 100,688 0.66 192,600 1.26TOTAL EXPENSES $726,347 $4.76 $658,424 $4.31 $402,771 $2.64 $520,107 $3.41NET OPERATING INCOME $912,929 $5.98 $1,287,258 $8.43 $1,503,409 $9.84 $1,233,633 $8.08

(1) Fiscal Year Beginning: 9/01/2013 (2) Statement Period: 4/12 thru 12/12Fiscal Year Ending: 8/31/2014 No. of months included: 9Compiled by Cushman & Wakefield Western, Inc.

2010 Actual 2011 ActualPartial Year (2)

Annualized C&W Forecast (1)


BASE RENTAL REVENUE Base rental revenue is comprised of actual attained rent from existing leases, and potential rent that can be generated by vacant or rollover space.

The projected base rental revenue for year one of our analysis will be an amalgamation of various factors including contractual rents and increases, base rent that will be generated by vacant space as it is absorbed, as well as rent that is lost/generated for leases expiring in the first year, weighted by our rollover assumptions. Over the analysis period base rental revenue has ranged from $1,160,330 to $1,513,697 averaging $1,356,279.

After a thorough analysis of the actual lease, along with our forecast for future leasing, projected base rental revenue for the subject property in year one is at $1,401,767, which equates to $9.18 per square foot.

EXPENSE REIMBURSEMENTS The contractual lease obligations of the tenants specify that certain operating expenses are reimbursed to the landlord. We analyzed the historical reimbursement revenue, and made a projection of the future expense reimbursement revenue based on these figures. We also considered the contractual terms of the existing leases, together with our assumptions related to future leasing.

The existing tenants are responsible for their pro-rata share of real estate taxes and operating expenses. Over the analysis period reimbursements have ranged from $378,591 to $531,305 averaging $468,573. Based on our analysis, we estimated total reimbursement revenue for year one at $447,170 which equates to $2.93 per square foot.

VACANCY AND COLLECTION LOSS Vacancy and collection loss is a function of the interrelationship between absorption, lease expiration, renewal probability, estimated downtime between leases, and a collection loss factor based on the relative stability and credit of the subject’s tenant base. Earlier in the report we discussed the vacancy rates for the market in which the subject property is located. We also discussed the subject’s occupancy level, which conversely represents its current vacancy level. The following are key statistics that we considered in projecting the appropriate vacancy and collection loss for the subject property.

VACANCY ANALYSISVacancy Statistics Rate Building Class and Market

Current Vacancy at Subject Property 0.0% (Based on leases in place as of appraisal date)

Regional Vacancy Statistics 7.7% Class A Office Space - Nassau County

Local Vacancy Statistics 7.5% Class A Office Space - Eastern Nassau County

Competitive Property Vacancy Statistics 8.5% Class A Office Space - Competitive SetCompiled by Cushman & Wakefield Western, Inc.

Based on the historical occupancy of the subject, the current vacancy in the market, and our perception of future market vacancy, we projected a global stabilized vacancy rate of 5.00 percent. We also deducted a collection loss of 1.00 percent. Total vacancy and collection loss is equal to 6.00 percent. Due to their investment grade credit, we did not deduct any vacancy or credit loss for Costco. In year one, vacancy and collection loss is projected to be $95,197.


VACANCY DEDUCTION METHOD We used ARGUS - Version 15 cash flow software for the Vacancy Deduction Method. ARGUS - Version 15 is the industry standard commercial real estate cash flow projection, transaction analysis and asset valuation solution. ARGUS - Version 15 allows specific vacancy deductions, which impact the cash flow in different ways.

We selected the following, below-defined options in our cash flow model:

A: Percent Based on Revenue Minus Absorption & Turnover Vacancy B: Reduce General Vacancy Result by Absorption & Turnover Vacancy

A. If this option is selected, the Cash Flow report line will be reduced by the absorption and turnover vacancy. If this option is not selected, ARGUS will add the absorption and turnover vacancy back into the Cash Flow revenue line before calculating the amount of general vacancy. This results in the general vacancy being calculated on the potential revenue instead of the scheduled revenue.

B. If this option is selected, ARGUS subtracts absorption and turnover vacancy from the general vacancy. The reduced amount of general vacancy will then be subtracted from the cash flow. If absorption and turnover vacancy is greater than the initial general vacancy, there will be no deduction for general vacancy and the initial general vacancy will be treated as a minimum vacancy loss. If this option is not selected, ARGUS subtracts the entire general vacancy from the cash flow without any adjustment for absorption and turnover vacancy. The initial general vacancy amount calculated in the previous section would be reported on the cash flow with no adjustment.

OPERATING EXPENSE ANALYSIS Cushman & Wakefield, Inc. recognizes the standards defined by the Appraisal Institute as the definitive standards by which operating expense data should be analyzed. All operating statements provided by ownership have been recast to reflect these definitions, which are provided in the Glossary section of this appraisal report. In forecasting expenses, we relied on the owner’s historical statements and analyzed expense levels at competing properties. Our expense forecast is presented below, followed by a discussion of each expense line item.

EXPENSE FORECAST ANALYSISC&W Forecast

Expense Category Min Max Average Year 1 $/SFProperty Insurance $33,744 $46,483 $40,653 $38,180 $0.25Management Fees $54,471 $65,511 $59,517 $52,612 $0.34Administrative Fees $34,932 $38,953 $36,943 $7,636 $0.05Common Area Maintenance $184,749 $392,058 $301,812 $229,079 $1.50Real Estate Taxes $100,688 $199,133 $163,211 $192,600 $1.26TOTAL EXPENSES $402,771 $726,347 $595,847 $520,107 $3.41p g p

(1) Reporting Period includes actual historical data only exclusive of budget and/or partial year figures

Reporting Period (1)


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

Property Insurance Property insurance includes coverage for general liability and loss or damage to the property caused by fire, lightning, vandalism and malicious mischief, and additional perils. The historical expenses for property insurance from 2010 to 2011 ranged from $33,744 to $46,483 with an average of $40,653. We estimated this expense for year one at $38,180, which equates to $0.25 per square foot.

Management Fees This expense includes the costs paid for professional management services. Management services may be contracted for or provided by the property owner. Management fees for this type of property typically range from 3.00 to 5.00 percent of effective gross income. We utilized a management fee of 3.00 percent of effective gross income, which we consider to be market oriented.

Historically, management fees ranged from $54,471 to $65,511 and averaged $59,517. Based on our analysis, we estimated this expense for year one at $52,612, which equates to $0.34 per square foot.

Administrative Fees

This expense category includes professional fees and other general administrative expenses and services needed to operate the property, such as telephone, legal, audit and accounting, and other miscellaneous office supplies and expenses.

From 2010 to 2011, administrative fees ranged from $34,932 to $38,953 with an average of $36,943. Based on our analysis, we estimated this expense for year one at $7,636, which equates to $0.05 per square foot.

Common Area Maintenance

This expense includes all costs incurred for the repair, maintenance, and general upkeep of common areas within the subject property. The historical expenses for common area maintenance from 2010 to 2011 ranged from $184,749 to $392,058, averaging $301,812. Based on our analysis, we estimated this expense for year one at $229,079, which equates to $1.50 per square foot.

Real Estate Taxes A complete discussion of taxes for the subject property is included in the Real Property Taxes and Assessments section of this report. The historical real estate taxes from 2010 to 2011 ranged from $100,688 to $199,133, averaging $163,211. Our projected real estate taxes are based on our concluded market value per California’s Proposition 13. Based on our analysis, we estimated this expense for year one at $192,600, which equates to $1.26 per square foot.

OPERATING EXPENSE CONCLUSION We thoroughly analyzed the subject’s operating expense history and we used this information to make our projections. We forecast total operating expenses for the subject property (excluding real estate taxes) to be $327,507, equating to $2.14 per square foot. The operating expenses (excluding real estate taxes) projected for the subject property reflect an operating expense ratio at stabilization of 18.67 percent of effective gross income.


INCOME AND EXPENSE PRO FORMA The following chart summarizes our opinion of income and expenses for year one, which is the first stabilized year in this analysis.

SUMMARY OF REVENUE AND EXPENSESStabilized Year For Direct Capitalization: Year OneREVENUE Annual $/SF % of EGI

Base Rental Revenue $1,401,767 $9.18Total Reimbursement Revenue $447,170 $2.93

POTENTIAL GROSS REVENUE $1,848,937 $12.11 Vacancy and Collection Loss (95,197) (0.62)

EFFECTIVE GROSS REVENUE $1,753,740 $11.48 100.00%

OPERATING EXPENSESProperty Insurance 38,180 0.25 2.18%Management Fees 52,612 0.34 3.00%Administrative Fees 7,636 0.05 0.44%Common Area Maintenance 229,079 1.50 13.06%

Total Operating Expenses $327,507 $2.14 18.67%Real Estate Taxes $192,600 $1.26 10.98%TOTAL EXPENSES $520,107 $3.41 29.66%NET OPERATING INCOME $1,233,633 $8.08 70.34%Compiled by Cushman & Wakefield Western, Inc.

INVESTMENT CONSIDERATIONS

O V E R V I E W Despite economic uncertainty, growth in the U.S. economy strengthened over the first months of 2013. The automatic spending cuts and revenue increases triggered by sequestration were initially avoided at the onset of the year, but the inability of policymakers in Washington D.C. to reach a compromise over the following three months initiated sequestration in early March. The U.S. economy added 1.9 million new jobs in the twelve months ending in March 2013 and has regained nearly 5.3 million jobs since bottoming out in February 2010, or nearly two thirds of the 8.1 million jobs lost over the recession. Gross domestic product (GDP) grew by 0.4 percent in fourth quarter 2012 according to revised estimates from the U.S. Bureau of Economic Analysis, but increased to 2.5 percent in the first quarter of 2013. Although the full impact of Hurricane Sandy on commercial properties is beginning to be felt, many investors expect already distressed properties will be the hardest hit, and could increase their presence in CMBS by up to 30.0 percent. Retail sales increased 4.1 percent in the twelve months ending in March 2013 according to the U.S. Census Bureau, indicating that consumer confidence remains intact.

The search for higher-yielding assets and uncertainty regarding potential tax increases drove a rally in commercial mortgage bonds towards the end of 2012 and into 2013. Commercial real estate markets are expected to continue to strengthen over the remainder of 2013, and strong market fundamentals should help reduce CMBS volatility going forward. Sales of commercial properties totaled $72.8 billion in first quarter 2013 according to Real Capital Analytics, an increase of 34.6 percent from total sales in first quarter 2012. In addition, in October 2012 Citigroup priced a floating-rate CMBS with high loan-to-value “transitional” collateral for Northstar Realty Finance, the fifth floating-rate CMBS following the past recession and the first to feature multiple loans and non-stabilized properties. Challenges still exist however, and among the largest facing the CMBS market in the near-term will be the maturation of $24.0 billion in securitized loans originated in 2007. Many of these loans were underwritten to pro forma income and have experienced substantial declines in value. Despite potentially serious


obstacles in the near-term, positive momentum is likely to remain in the market although uncertain economic and political conditions will likely maintain a sense of caution among investors.

C U R R E N T E C O N O M I C C O N D I T I O N S The slow pace of job creation remains the primary challenge facing politicians and economists, and businesses will likely remain reluctant to expand payrolls unless necessary until an increase in optimism creates a greater willingness to take risk. Although 1.9 million jobs were added over the twelve months ending in March 2013, unemployment remains stubbornly high at 7.6 percent in March 2013 and 11.7 million residents remain out of work. With an average of only 168,000 jobs added monthly over 2013, it will take until mid-2014 to return to pre-recession employment levels under current conditions.

Real gross domestic product (GDP) increased at an annual rate of 2.5 percent in first quarter 2013, 210 basis points higher than fourth quarter 2012 GDP growth of 0.4 percent according to the U.S. Bureau of Economic Analysis (BEA). Overall GDP growth in 2012 reached 2.2 percent according to estimates provided by the BEA, 40 basis points higher than GDP growth in 2011 of 1.8 percent.

The following graph displays historical and projected U.S. Real GDP percent change (annualized on a quarterly basis) from first quarter 2008 through fourth quarter 2016 (red bar underscores the most recent quarter: 13Q1):

-10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

Rea

l GD

P, %

Cha

nge

Historical and Projected U.S. Real GDP2008Q1 - 2016Q4

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

Forecast

Notable concerns regarding current economic conditions are as follows:

Many states and municipalities continue to face budget shortfalls. Should state and municipal governments be forced to enact budget cuts and tax increases to fill these gaps, they could drain regional economies in the near-term.

Although the impact of automatic spending cuts and tax increases triggered by sequestration will not be immediately felt, the inability of legislators to reach a compromise amidst the pervading partisan gridlock will hinder growth in the near-term. These uncertainties could deter businesses from expanding payrolls and placing new orders as they await settlements from policymakers in Washington D.C.

Although federal assistance may help mitigate the impact of Hurricane Sandy for homeowners and businesses, it may have a more serious impact on the CMBS market as investors face a larger pool of distressed properties.


Home prices increased 9.3 percent on an annual basis in February 2013 according to the S&P Case Shiller Home Price Index, while housing permits issued over the first three months of 2013 outpaced previous year levels by 27.3 percent according to the U.S. Census Bureau. In spite of optimistic indications such as these, credit remains tight and sales activity remains below pre-recession levels.

US REAL ESTATE MARKET IMPLICATIONS Total volume in 2012 increased considerably on an annual basis for the third consecutive year. According to Real Capital Analytics total transaction volume in 2012 reached $293.8 billion, up 28.0 percent on a year over year basis, with the apartment and office markets reaching the highest volume at $87.5 and $80.0 billion, respectively. While this level of growth is respectable given the cautious economic climate, it remains well short of pre-recession transaction activity in 2005, 2006, and 2007. The average transaction cap rate on properties over $2.5 million in first quarter 2013 was 6.7 percent, a decline of 10 basis points from the previous quarter and 20 basis points below the first quarter 2012 average cap rate of 6.9 percent. Total transaction volume in first quarter 2013 reached $72.8 billion, a decrease of 32.4 percent from the previous quarter, but 34.6 percent higher than transaction volume in first quarter 2012 of $54.1 billion. Indications such as these suggest that total transaction volume in 2013 will increase on an annual basis for the fourth consecutive year, demonstrating the strength of underlying fundamentals in the commercial real estate investment market.

The following graph compares national transaction volume by property between 2002 and 2012:

0.0

100.0

200.0

300.0

400.0

500.0

600.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Volu

me,

bill

ions

$

National Transaction Volume By Property Type

Retail Office

Industrial Hotel

Apartment

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

C O N C L U S I O N Although investor activity and sales volume is expanding on a national level, the pace of recovery varies across regional metropolitan areas and markets. Recent indications suggest investors are becoming less risk averse as they seek yield, while increasing competition for top quality assets in major metro areas has spread into second-tier markets. Growth in the near-term is likely to be cautious however, pending external factors such as the European debt crisis and upcoming budget cuts related to sequestration. In spite of this, historically low interest rates and strong underlying economic fundamentals should support stable investment activity in commercial real estate markets going forward.


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

INVESTMENT CONSIDERATIONSAttained Rents Versus Market: The subject's attained rents (exclusive of expense contributions) are 10.82 percent

below market. Given this comparison, the investment rates selected will be slightlymore aggressive than market indicators.

NOI Growth: The subject's NOI is expected to grow 2.18 percent per annum from the firststabilized year of the analysis through the holding period. This rate of growth isconsidered acceptable.

Lease Expiration Exposure: Within the first five years of the analysis a total of 15.56 percent of the total netrentable area is scheduled to rollover. Extending to a ten-year period, a total of85.95 percent of the space is scheduled to expire. The peak expiration occurs inyear 6, when a total of 100,000 square feet is scheduled to expire. This isconsidered a moderate rollover exposure within this market.

Real Estate Market Trends: Real estate market trends have a significant bearing on the value of real property.The real estate market in which the subject property is located is currently stable.

Tenant Quality: The quality of a property's tenant base is an important factor that is scrutinized byinvestors prior to acquiring real property. The quality of the subject's tenant roster isconsidered to be average.

Property Rating: After considering all of the physical characteristics of the subject, we haveconcluded that this property has an overall rating that is average, when measuredagainst other properties in this marketplace.

Location Rating: After considering all of the locational aspects of the subject, including regional andlocal accessibility as well as overall visibility, we have concluded that the location ofthis property is average.

Overall Investment Appeal: There are many factors that are considered prior to investing in this type of property.After considering all of these factors, we conclude that this property has averageoverall investment appeal.


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

INVESTOR SURVEY HISTORICAL RESULTSSurvey: PwC End Quarter:

Property Type:

Quarter 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13OAR (average) 8.41% 8.53% 8.49% 8.38% 8.09% 7.63% 7.40% 7.33% 7.20% 7.16% 7.18% 7.18% 7.06% 7.06% 7.04% 6.95%Terminal OAR (average) 8.61% 8.63% 8.86% 8.63% 8.51% 8.26% 8.10% 7.97% 7.93% 7.93% 7.80% 7.77% 7.69% 7.66% 7.61% 7.53%IRR (average) 9.38% 9.44% 9.58% 9.46% 9.19% 8.88% 8.97% 8.85% 8.61% 8.44% 8.41% 8.41% 8.43% 8.43% 8.42% 8.19%

Source: Pw C Real Estate Investor Survey

NATIONAL STRIP SHOPPING CENTER 2Q 13

6.50%

6.75%

7.00%

7.25%

7.50%

7.75%

8.00%

8.25%

8.50%

8.75%

9.00%

9.25%

9.50%

9.75%

3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13

RATE

S

ANALYSIS PERIOD

INVESTOR SURVEY HISTORICAL RESULTS

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

Return requirements cited by investors climbed to more conservative levels from Third Quarter 2008 through the end of 2009. The financial crisis made investors more cautious and risk-averse resulting in higher return requirements. Investment rates have since declined as access to capital has increased and a greater number of quality properties have traded.


CAPITALIZATION RATE ANALYSIS On the following pages we discuss the process of how we determine an appropriate overall capitalization rate to apply to the subject’s forecast net income.

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

No. Name and Location Sales DateCapitalization

Rate1 Sunset Shopping Center

100-108 Sunset AveSuisun City, CA

8/2013 9.37%


5/2013 8.75%

3 Spreckels Plaza 131 Spreckels AvenueManteca, CA

12/2012 7.40%


8/2012 7.25%

5 Morada Ranch 4255 E Morada LaneStockton, CA

5/2011 7.38%

STATISTICSSample Size 5 5Low 5/2011 7.25%High 8/2013 9.37%Median 12/2012 7.40%Average 9/2012 8.03%


CAPITALIZATION RATE SUMMARY

CAPITALIZATION RATE FROM INVESTOR SURVEYS We considered data extracted from the PwC Real Estate Investor Survey for competitive properties. Earlier in the report, we presented historical capitalization rates for the prior four-year period. The most recent information from this survey is listed below:

CAPITALIZATION RATESSurvey Date AveragePwC Second Quarter 2013 5.50% - 9.50% 6.95%PwC Noninstitutional Second Quarter 2013 8.25%PwC - Refers to National Strip Shopping Center market regardless of class or occupancyPwC Noninstitutional - Reflects the average rate for this property type, adjusted by the average premium

Range

CAPITALIZATION RATE CONCLUSION We considered all aspects of the subject property that would influence the overall rate. Our analysis suggests that a capitalization rate of 7.75 percent represents reasonable investor criteria under current market conditions.


DIRECT CAPITALIZATION METHOD CONCLUSION In the Direct Capitalization Method, we developed an opinion of market value by dividing year one net operating income by our selected overall capitalization rate. Our conclusion using the Direct Capitalization Method is as follows:

DIRECT CAPITALIZATION METHOD

NET OPERATING INCOME $1,233,633 $8.08Sensitivity Analysis (0.50% OAR Spread) Value $/SF GLABased on Low-Range of 7.25% $17,015,628 $111.42Based on Most Probable Range of 7.75% $15,917,845 $104.23Based on High-Range of 8.25% $14,953,127 $97.91Preliminary Value $15,917,845 $104.23Rounded to nearest $50,000 $15,900,000 $104.11

ADJUSTMENTS TO PRELIMINARY VALUEPlus Excess Land $1,050,000 $6.88Indicated Value $16,950,000 $110.99

Rounded to nearest $50,000 $16,950,000 $110.99Compiled by Cushman & Wakefield Western, Inc.

Market Value As-Is

YIELD CAPITALIZATION METHOD In the Yield Capitalization Method, we employed ARGUS - Version 15 software to model the income characteristics of the property and to make a variety of cash flow assumptions. We attempted to reflect the most likely investment assumptions of typical buyers and sellers in this market segment.

GENERAL CASH FLOW ASSUMPTIONS The start date of the Yield Capitalization analysis is September 01, 2013. We performed this analysis on a fiscal year basis. The analysis incorporates a forecast period of 12 years, and a holding period of 11 years.


The following table outlines the assumptions used in the Yield Capitalization analysis.

DISCOUNTED CASH FLOW MODELING ASSUMPTIONSVALUATION SCENARIO: Market Value As-IsGENERAL CASH FLOW ASSUMPTIONS GROWTH RATES

Cash Flow Software: ARGUS - Version 15 Market Rent*: 1.00%Cash Flow Start Date: 9/1/2013 Consumer Price Index (CPI): 3.00%Calendar or Fiscal Analysis: Fiscal Expenses: 3.00%Investment Holding Period: 11 Years Tenant Improvements: 3.00%Analysis Projection Period: 12 Years Real Estate Taxes: 2.00%

na na

VACANCY & COLLECTION LOSS RATES OF RETURNGlobal Vacancy: 5.00% Internal Rate of Return: (Cash Flow) 9.00%Global Collection Loss: 1.00% Internal Rate of Return: (Reversion) 9.00%Total Vacancy & Collection Loss: 6.00% Terminal Capitalization Rate: 8.25%

Reversionary Sales Cost: 2.00%Credit Tenant Overide Rate (Vacancy): 0.00% Basis Point Spread (OARout vs. OARin) 50 ptsCredit Tenant Overide Rate (Collection Loss): 0.00%

VALUATIONCAPITAL EXPENDITURES Market Value As-Is $16,051,018

Reserves for Replacement ($/SF): $0.15 LESS Curable Depreciation $0Adjusted Value $16,051,018Plus Excess Land $1,050,000Indicated Value $17,101,018Rounded to nearest $50,000 $17,100,000Value $/SF $111.97

We have assumed rent growth of 1% in year 1, 2% in year 2, and 3% annually thereafterCompiled by Cushman & Wakefield Western, Inc.

The following information was extracted from the PwC Investor Survey and was used to help determine our growth rate assumptions.

OTHER INVESTOR SURVEY INFORMATIONSurvey Data AveragePwC Second Quarter 2013 Rent Change Rate 0.00% - 4.00% 1.72%

Expense Change Rate 2.50% - 3.00% 2.94%PwC - Refers to National Strip Shopping Center market regardless of class or occupancy

Range

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


The following chart summarizes the leasing assumptions that were used in preparing our Yield Capitalization analysis.

LEASING ASSUMPTIONSTENANT CATEGORY Sub-Anchor Restaurant Drive-Thru Anchor Auto Service Shop SpaceWEIGHTED ITEMSRenewal Probability 65.00% 65.00% 65.00% 65.00% 65.00% 65.00%Market Rent $10.20 $24.00 $30.00 $6.00 $12.00 $24.00Months Vacant 12.00 12.00 12.00 12.00 12.00 12.00Tenant Improvements

New Leases $5.00 $10.00 $10.00 $5.00 $5.00 $5.00Renewal Leases $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Leasing Commissions (1)New Leases 4.00% 6.00% 6.00% 4.00% 5.00% 6.00%Renewal Leases 2.00% 3.00% 3.00% 2.00% 2.50% 3.00%

Free RentNew Leases 0 0 0 0 0 0Renewal Leases 0 0 0 0 0 0

NON-WEIGHTED ITEMSLease Term (years) 10 10 10 10 5 5Lease Type (reimbursements) Net Net Net Net Net NetContract Rent Increase Projection 10% mid-term 10% mid-term 10% mid-term 10% mid-term 3% annual 3% annualCompiled by Cushman & Wakefield Western, Inc.(1) Leasing Commissions are detailed below

Leasing Commissions We have modeled leasing commissions in accordance with local market standards. The standard leasing commission for new leases is 6.0 percent of the scheduled rental income. On new leases, the leasing broker is entitled to a full commission. On renewing leases, the leasing broker is entitled to one half of the full commission. For anchor space we used 4.0% and 2.0%.

FINANCIAL ASSUMPTIONS The financial assumptions used in the Yield Capitalization process are discussed in the following commentary.

Terminal Capital ization Rate Selection A terminal capitalization rate was used to develop an opinion of the market value of the property at the end of the assumed investment holding period. The rate is applied to the net operating income following year 11 before making deductions for leasing commissions, tenant improvement allowances and reserves for replacement. We developed an opinion of an appropriate terminal capitalization rate based on rates in current investor surveys.

TERMINAL CAPITALIZATION RATES (OARout)Survey Date AveragePwC Second Quarter 2013 6.00% - 11.00% 7.53%PwC Noninstitutional Second Quarter 2013 8.83%PwC - Refers to National Strip Shopping Center market regardless of class or occupancyPwC Noninstitutional - Reflects the average rate for this property type, adjusted by the average premium

Range

Investors will typically use a slightly more conservative overall rate when exiting an investment versus the rate that would be used going into the investment. This accounts both for the aging associated with the improvements over the course of the holding period, and for any unforeseen risks that might arise over that time period.

As a result, we applied a terminal rate of 8.25 percent in our analysis. This rate is 50 basis points above the overall rate going into the investment, which is considered reasonable.

Reversionary Sales Costs We estimated the cost of sale at the time of reversion to be 2.00 percent, which is in keeping with local market practice.


Discount Rate Selection We developed an opinion of future cash flows, including property value at reversion, and discounted that income stream at an internal rate of return (IRR) currently required by investors for similar-quality real property. The IRR (also known as yield) is the single rate that discounts all future equity benefits (cash flows and equity reversion) to an opinion of net present value.

The PwC Investor survey indicates the following internal rates of return for competitive properties:

DISCOUNT RATES (IRR)Survey Date AveragePwC Second Quarter 2013 6.50% - 11.50% 8.19%PwC Noninstitutional Second Quarter 2013 10.29%PwC - Refers to National Strip Shopping Center market regardless of class or occupancyPwC Noninstitutional - Reflects the average rate for this property type, adjusted by the average premium

Range

The above table summarizes the investment parameters of some of the most prominent investors currently acquiring similar investment properties in the United States. We realize that this type of survey reflects target rather than transactional rates. Transactional rates are usually difficult to obtain in the verification process and are actually only target rates of the buyer at the time of sale. The property’s performance will ultimately determine the actual yield at the time of sale after a specific holding period.

We previously discussed all factors that would influence our selection of a discount rate for the subject property. Given all of these factors, we discounted our cash flow and reversionary value projections at an internal rate of return of 9.00 percent.

The ARGUS - Version 15 cash flow is presented on the following page. The cash flow commencement date is September 01, 2013.

Yield Capital ization Method Conclusion Our cash flow projection and valuation matrix are presented at the end of this section.


ANNUAL CASH FLOW REPORT AnnualThe Center Growth

1 2 3 4 5 6 7 8 9 10 11 12 Year 1 - For the Years Beginning Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24For the Years Ending Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21 Aug-22 Aug-23 Aug-24 Aug-25 Year 11

Base Rental Revenue 1,401,767$ 1,415,183$ 1,404,346$ 1,399,875$ 1,418,664$ 1,570,718$ 1,697,494$ 1,735,931$ 1,757,971$ 1,778,970$ 1,810,603$ 1,862,130$ 2.62%Absorption & Turnover Vacancy 0 (15,680) (27,834) 0 (26,231) (182,368) 0 0 (11,297) (5,818) (46,981) (51,638)Scheduled Base Rental Revenue 1,401,767$ 1,399,503$ 1,376,512$ 1,399,875$ 1,392,433$ 1,388,350$ 1,697,494$ 1,735,931$ 1,746,674$ 1,773,152$ 1,763,622$ 1,810,492$ 2.35%

Total Reimbursement Revenue 447,170$ 456,491$ 464,343$ 479,701$ 483,739$ 404,764$ 520,837$ 536,022$ 547,727$ 561,158$ 564,155$ 585,377$ 2.48%

TOTAL GROSS REVENUE 1,848,937$ 1,855,994$ 1,840,855$ 1,879,576$ 1,876,172$ 1,793,114$ 2,218,331$ 2,271,953$ 2,294,401$ 2,334,310$ 2,327,777$ 2,395,869$ 2.38%

General Vacancy (79,331) (64,738) (52,389) (80,716) (82,398) 0 (98,333) (100,695) (90,768) (97,631) (105,398) (56,490) -3.04%Collection Loss (15,866) (15,927) (15,766) (16,143) (16,480) (15,646) (19,667) (20,139) (20,300) (20,632) (21,080) (21,109) 2.63%EFFECTIVE GROSS REVENUE 1,753,740$ 1,775,329$ 1,772,700$ 1,782,717$ 1,777,294$ 1,777,468$ 2,100,331$ 2,151,119$ 2,183,333$ 2,216,047$ 2,201,299$ 2,318,270$ 2.57%

Insurance 38,180 39,325 40,505 41,720 42,972 44,261 45,589 46,956 48,365 49,816 51,310 52,850 3.00%Management 52,612 53,260 53,181 53,482 53,319 53,324 63,010 64,534 65,500 66,481 66,039 69,548 2.57%Administrative 7,636 7,865 8,101 8,344 8,594 8,852 9,118 9,391 9,673 9,963 10,262 10,570 3.00%Common Area Maintenance 229,079 235,951 243,029 250,320 257,830 265,565 273,532 281,738 290,190 298,895 307,862 317,098 3.00%Real Estate Taxes 192,600 196,452 200,381 204,389 208,476 212,646 216,899 221,237 225,662 230,175 234,778 237,234 1.91%TOTAL OPERATING EXPENSES 520,107$ 532,853$ 545,197$ 558,255$ 571,191$ 584,648$ 608,148$ 623,856$ 639,390$ 655,330$ 670,251$ 687,300$ 2.57%

NET OPERATING INCOME 1,233,633$ 1,242,476$ 1,227,503$ 1,224,462$ 1,206,103$ 1,192,820$ 1,492,183$ 1,527,263$ 1,543,943$ 1,560,717$ 1,531,048$ 1,630,970$ 2.57%

Reserves 22,908 23,595 24,303 25,032 25,783 26,556 27,353 28,174 29,019 29,890 30,786 31,710 3.00%Tenant Improvements 0 5,330 11,943 0 0 162,298 0 0 0 3,745 20,159 0Leasing Commissions 0 24,696 43,838 0 0 204,197 0 0 0 13,900 31,179 0TOTAL LEASING & CAPITAL COSTS 22,908$ 53,621$ 80,084$ 25,032$ 25,783$ 393,051$ 27,353$ 28,174$ 29,019$ 47,535$ 82,124$ 31,710$ 3.00%

CASH FLOW BEFORE DEBT SERVICE 1,210,725$ 1,188,855$ 1,147,419$ 1,199,430$ 1,180,320$ 799,769$ 1,464,830$ 1,499,089$ 1,514,924$ 1,513,182$ 1,448,924$ 1,599,260$ 2.56%

Implied Overall Rate 7.69% 7.74% 7.65% 7.63% 7.51% 7.43% 9.30% 9.52% 9.62% 9.72% 9.54%Cash on Cash Return 7.54% 7.41% 7.15% 7.47% 7.35% 4.98% 9.13% 9.34% 9.44% 9.43% 9.03%


The following graph depicts the forecasted change in both net income and net cash flow over the analysis period.

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

1 2 3 4 5 6 7 8 9 10 11 12

Net Operating Income Cash Flow Before Debt Service

The results of the Yield Capitalization analysis are presented below:

TerminalCap Rates 8.50% 8.75% 9.00% 9.25% 9.50%

7.75% 17,166,704$ 16,847,159$ 16,535,408$ 16,231,233$ 15,934,424$ 8.00% 16,903,984$ 16,591,007$ 16,285,645$ 15,987,685$ 15,696,924$ 8.25% 16,657,186$ 16,350,379$ 16,051,018$ 15,758,898$ 15,473,817$ 8.50% 16,424,906$ 16,123,906$ 15,830,194$ 15,543,568$ 15,263,834$ 8.75% 16,205,899$ 15,910,373$ 15,621,987$ 15,340,543$ 15,065,850$

IRR Reversion 8.50% 8.75% 9.00% 9.25% 9.50%

Cost of Sale at Reversion: 2.00%Percent Residual: 46.78%

$16,050,000 $105.09

PRICING MATRIX - Market Value As-IsDiscount Rate (IRR) for Cash Flow


Based on the rates selected, the value via the Yield Capitalization analysis is estimated at $16,050,000, rounded. The reversion contributes 46.78 percent to this value estimate. After adding the excess land value of $1,050,000, the resulting market value is $17,100,000,


RECONCILIATION WITHIN THE INCOME CAPITALIZATION APPROACH The following is a summary of our concluded values in the Income Capitalization Approach:

INCOME CAPITALIZATION APPROACH CONCLUSION

MethodologyMarket Value

As-Is PSFYield Capitalization $17,100,000 $111.97Direct Capitalization $16,950,000 $110.99

Income Approach Conclusion $17,050,000 $111.64Compiled by Cushman & Wakefield Western, Inc.

THE CENTER, STOCKTON, CA RECONCILIATION AND FINAL VALUE OPINION 110

R E C O N C I L I A T I O N A N D F I N A L V A L U E O P I N I O N

VALUATION METHODOLOGY REVIEW AND RECONCILIATION This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these approaches would be considered applicable and/or necessary for market participants. Typical purchasers do not generally rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not utilized the Cost Approach to develop an opinion of market value.

The approaches indicated the following:

FINAL VALUE RECONCILIATIONMarket Value

As-Is PSFDate of Value September 30, 2013Sales Comparison Approach Percentage Adjustment Method $17,100,000 $111.97

Income Capitalization Approach Yield Capitalization $17,100,000 $111.97 Direct Capitalization $16,950,000 $110.99Conclusion $17,050,000 $111.64

Final Value Conclusion $17,050,000 $111.64Compiled by Cushman & Wakefield Western, Inc.

We gave most weight to the Income Capitalization Approach because this mirrors the methodology used by purchasers of this property type.

Value Conclusions



The implied “going in” capitalization rate is 7.24 percent. The overall capitalization rates derived from the improved property sales are between 7.25 percent and 9.37 percent, averaging 8.03 percent. The implied going-in cap rate is in line with going-in capitalization rates indicated by the sales and the most recent Investor Surveys.

THE CENTER, STOCKTON, CA RECONCILIATION AND FINAL VALUE OPINION 111

EXCESS LAND VALUATION SUMMARY (INCLUDED IN AS-IS MARKET VALUE) Below is a summary of the excess land valuation:

EXCESS LAND VALUATIONExcess Land Area: 74,706 Square Feet

Market Value As-Is

Date of Value September 30, 2013

Excess Land Value $1,050,000 Land Value Per SF $14.06Compiled by Cushman & Wakefield Western, Inc.

EXPOSURE TIME Based on our review of national investor surveys, discussions with market participants and information gathered during the sales verification process, a reasonable exposure time for the subject property at the value concluded within this report would have been approximately twelve (12) months. This assumes an active and professional marketing plan would have been employed by the current owner.

THE CENTER, STOCKTON, CA SENSITIVITY ANALYSIS 112

S E N S I T I V T Y A N A L Y S I S At the request of the client, required by the Israeli SEC regulation, we have included a sensitivity analysis with a 1.0%± change in occupancy and a 1.0%± change in income from base rent. The following summarizes the sensitivity conclusions.

Based on Direct Capitalization Value Implied ValuePlus 1% change in occupancy $17,150,000Minus 1% change in occupancy $16,750,000

Plus 1% change in income from base rent $17,150,000Minus 1% change in income from base rent $16,800,000

SENSITIVITY ANALYSIS

Please note, the sensitivity analysis holds all other assumptions constant.

THE CENTER, STOCKTON, CA ASSUMPTIONS AND LIMITING CONDITIONS 113

A S S U M P T I O N S A N D L I M I T I N G C O N D I T I O N S

"Report" means the appraisal or consulting report and conclusions stated therein, to which these Assumptions and Limiting Conditions are annexed.

"Property" means the subject of the Report.

"C&W" means Cushman & Wakefield, Inc. or its subsidiary that issued the Report.

"Appraiser(s)" means the employee(s) of C&W who prepared and signed the Report.

The Report has been made subject to the following assumptions and limiting conditions:

No opinion is intended to be expressed and no responsibility is assumed for the legal description or for any matters that are legal in nature or require legal expertise or specialized knowledge beyond that of a real estate appraiser. Title to the Property is assumed to be good and marketable and the Property is assumed to be free and clear of all liens unless otherwise stated. No survey of the Property was undertaken.

The information contained in the Report or upon which the Report is based has been gathered from sources the Appraiser assumes to be reliable and accurate. The owner of the Property may have provided some of such information. Neither the Appraiser nor C&W shall be responsible for the accuracy or completeness of such information, including the correctness of estimates, opinions, dimensions, sketches, exhibits and factual matters. Any authorized user of the Report is obligated to bring to the attention of C&W any inaccuracies or errors that it believes are contained in the Report.

The opinions are only as of the date stated in the Report. Changes since that date in external and market factors or in the Property itself can significantly affect the conclusions in the Report.

The Report is to be used in whole and not in part. No part of the Report shall be used in conjunction with any other analyses. Publication of the Report or any portion thereof without the prior written consent of C&W is prohibited. Reference to the Appraisal Institute or to the MAI designation is prohibited. Except as may be otherwise stated in the letter of engagement, the Report may not be used by any person(s) other than the party(ies) to whom it is addressed or for purposes other than that for which it was prepared. No part of the Report shall be conveyed to the public through advertising, or used in any sales, promotion, offering or SEC material without C&W's prior written consent. Any authorized user(s) of this Report who provides a copy to, or permits reliance thereon by, any person or entity not authorized by C&W in writing to use or rely thereon, hereby agrees to indemnify and hold C&W, its affiliates and their respective shareholders, directors, officers and employees, harmless from and against all damages, expenses, claims and costs, including attorneys' fees, incurred in investigating and defending any claim arising from or in any way connected to the use of, or reliance upon, the Report by any such unauthorized person(s) or entity(ies).

Except as may be otherwise stated in the letter of engagement, the Appraiser shall not be required to give testimony in any court or administrative proceeding relating to the Property or the Appraisal.

The Report assumes (a) responsible ownership and competent management of the Property; (b) there are no hidden or unapparent conditions of the Property, subsoil or structures that render the Property more or less valuable (no responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them); (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws, unless noncompliance is stated, defined and considered in the Report; and (d) all required licenses, certificates of occupancy and other governmental consents have been or can be obtained and renewed for any use on which the value opinion contained in the Report is based.

The physical condition of the improvements considered by the Report is based on visual inspection by the Appraiser or other person identified in the Report. C&W assumes no responsibility for the soundness of structural components or for the condition of mechanical equipment, plumbing or electrical components.

The forecasted potential gross income referred to in the Report may be based on lease summaries provided by the owner or third parties. The Report assumes no responsibility for the authenticity or completeness of lease information provided by others. C&W recommends that legal advice be obtained regarding the interpretation of lease provisions and the contractual rights of parties.


The forecasts of income and expenses are not predictions of the future. Rather, they are the Appraiser's best opinions of current market thinking on future income and expenses. The Appraiser and C&W make no warranty or representation that these forecasts will materialize. The real estate market is constantly fluctuating and changing. It is not the Appraiser's task to predict or in any way warrant the conditions of a future real estate market; the Appraiser can only reflect what the investment community, as of the date of the Report, envisages for the future in terms of rental rates, expenses, and supply and demand.

Unless otherwise stated in the Report, the existence of potentially hazardous or toxic materials that may have been used in the construction or maintenance of the improvements or may be located at or about the Property was not considered in arriving at the opinion of value. These materials (such as formaldehyde foam insulation, asbestos insulation and other potentially hazardous materials) may adversely affect the value of the Property. The Appraisers are not qualified to detect such substances. C&W recommends that an environmental expert be employed to determine the impact of these matters on the opinion of value.

Unless otherwise stated in the Report, compliance with the requirements of the Americans with Disabilities Act of 1990 (ADA) has not been considered in arriving at the opinion of value. Failure to comply with the requirements of the ADA may adversely affect the value of the Property. C&W recommends that an expert in this field be employed to determine the compliance of the Property with the requirements of the ADA and the impact of these matters on the opinion of value.

If the Report is submitted to a lender or investor with the prior approval of C&W, such party should consider this Report as only one factor, together with its independent investment considerations and underwriting criteria, in its overall investment decision. Such lender or investor is specifically cautioned to understand all Extraordinary Assumptions and Hypothetical Conditions and the Assumptions and Limiting Conditions incorporated in this Report.

In the event of a claim against C&W or its affiliates or their respective officers or employees or the Appraisers in connection with or in any way relating to this Report or this engagement, the maximum damages recoverable shall be the amount of the monies actually collected by C&W or its affiliates for this Report and under no circumstances shall any claim for consequential damages be made.

If the Report is referred to or included in any offering material or prospectus, the Report shall be deemed referred to or included for informational purposes only and C&W, its employees and the Appraiser have no liability to such recipients. C&W disclaims any and all liability to any party other than the party that retained C&W to prepare the Report.

Any estimate of insurable value, if included within the agreed upon scope of work and presented within this Report, is based upon figures derived from a national cost estimating service and is developed consistent with industry practices. However, actual local and regional construction costs may vary significantly from our estimate and individual insurance policies and underwriters have varied specifications, exclusions, and non-insurable items. As such, C&W strongly recommends that the Intended Users obtain estimates from professionals experienced in establishing insurance coverage for replacing any structure. This analysis should not be relied upon to determine insurance coverage. Furthermore, C&W makes no warranties regarding the accuracy of this estimate.

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

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

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

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

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


By use of this Report each party that uses this Report agrees to be bound by all of the Assumptions and Limiting Conditions, Hypothetical Conditions and Extraordinary Assumptions stated herein.

THE CENTER, STOCKTON, CA CERTIFICATION OF APPRAISAL 116

C E R T I F I C A T I O N O F A P P R A I S A L We certify that, to the best of our knowledge and belief:

The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions,

and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions. We have no present or prospective interest in the property that is the subject of this report, and no personal interest with

respect to the parties involved. We have no bias with respect to the property that is the subject of this report or to the parties involved with this

assignment. Our engagement in this assignment was not contingent upon developing or reporting predetermined results. Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined

value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice.

The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

Chris Stavros did make a personal inspection of the property that is the subject of this report. Judson H. Cline, MAI, MRICS did not make a personal inspection of the property that is the subject of this report.

We have performed prior services involving the subject property one time within the three-year period immediately preceding the acceptance of the assignment.

No one provided significant real property appraisal assistance to the persons signing this report. As of the date of this report, Judson H. Cline, MAI, MRICS has completed the continuing education program for

Designated Members of the Appraisal Institute. As of the date of this report, Chris Stavros has completed the Standards and Ethics Education Requirements for

Candidates/Practicing Affiliates of the Appraisal Institute.

Chris Stavros Director CA Certified General Appraiser License No. AG036470 [email protected] (209) 357-5667 Office Direct (916) 244-0386 Fax

Judson H. Cline, MAI, MRICS Senior Director CA Certified General Appraiser License No. AG027622 [email protected] (916) 473-7396 Office Direct (916) 720-0162 Fax

THE CENTER, STOCKTON, CA ADDENDA CONTENTS

A D D E N D A C O N T E N T S ADDENDUM A: GLOSSARY OF TERMS & DEFINITIONS ADDENDUM B: CLIENT SATISFACTION SURVEY ADDENDUM C: ENGAGEMENT LETTER ADDENDUM D: LEGAL DESCRIPTION ADDENDUM E: COMPARABLE IMPROVED SALE DATA SHEETS ADDENDUM F: QUALIFICATIONS OF THE APPRAISERS


A D D E N D U M A : G L O S S A R Y O F T E R M S & D E F I N I T I O N S The following definitions of pertinent terms are taken from The Dictionary of Real Estate Appraisal, Fifth Edition (2010), published by the Appraisal Institute, Chicago, IL, as well as other sources.

AS IS MARKET VALUE The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date. (Proposed Interagency Appraisal and Evaluation Guidelines, OCC-4810-33-P 20%)

BAND OF INVESTMENT A technique in which the capitalization rates attributable to components of a capital investment are weighted and combined to derive a weighted-average rate attributable to the total investment.

CASH EQUIVALENCY An analytical process in which the sale price of a transaction with nonmarket financing or financing with unusual conditions or incentives is converted into a price expressed in terms of cash.

DEPRECIATION 1. In appraising, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date. 2. In accounting, an allowance made against the loss in value of an asset for a defined purpose and computed using a specified method.

DISPOSITION VALUE The most probable price that a specified interest in real property is likely to bring under all of the following conditions:

Consummation of a sale will occur within a limited future marketing period specified by the client.

The actual market conditions currently prevailing are those to which the appraised property interest is subject.

The buyer and seller is each acting prudently and knowledgeably.

The seller is under compulsion to sell.

The buyer is typically motivated.

Both parties are acting in what they consider their best interest.

An adequate marketing effort will be made in the limited time allowed for the completion of a sale.

Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable thereto.

The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Note that this definition differs from the definition of market value. The most notable difference relates to the motivation of the seller. In the case of Disposition value, the seller would be acting under compulsion within a limited future marketing period.

ELLWOOD FORMULA A yield capitalization method that provides a formulaic solution for developing a capitalization rate for various combinations of equity yields and mortgage terms. The formula is applicable only to properties with stable or stabilized income streams and properties with income streams expected to change according to the J- or K-factor pattern. The formula is RO = [YE – M (YE + P 1/Sn¬ – RM) – ∆O 1/S n¬] / [1 + ∆I J] where RO = Overall Capitalization Rate YE = Equity Yield Rate M = Loan-to-Value Ratio P = Percentage of Loan Paid Off 1/S n¬ = Sinking Fund Factor at the Equity Yield Rate RM =Mortgage Capitalization Rate ∆O = Change in Total Property Value ∆I = Total Ratio Change in Income J = J Factor Also called mortgage-equity formula.


EXPOSURE TIME 1. The time a property remains on the market. 2. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. See also marketing time.

EXTRAORDINARY ASSUMPTION An assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s opinions or conclusions.

Comment: Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.

FEE SIMPLE ESTATE Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.

HYPOTHETICAL CONDITIONS A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.

Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.

INSURABLE VALUE A type of value for insurance purposes.

INTENDED USE The use or uses of an appraiser’s reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment.

INTENDED USER The client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment.

LEASED FEE INTEREST A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease).

LEASEHOLD INTEREST The tenant’s possessory interest created by a lease. See also negative leasehold; positive leasehold.

LIQUIDATION VALUE The most probable price that a specified interest in real property is likely to bring under all of the following conditions:

Consummation of a sale will occur within a severely limited future marketing period specified by the client.


The buyer is acting prudently and knowledgeably.

The seller is under extreme compulsion to sell.


The buyer is acting in what he or she considers his or her best interest.

A limited marketing effort and time will be allowed for the completion of a sale.



Note that this definition differs from the definition of market value. The most notable difference relates to the motivation of the seller. Under market value, the seller would be acting in his or her own best interests. The seller would be acting prudently and knowledgeably, assuming the price is not affected by undue


stimulus or atypical motivation. In the case of liquidation value, the seller would be acting under extreme compulsion within a severely limited future marketing period.

MARKET RENT The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the lease agreement, including permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs).

MARKET VALUE As defined in the Agencies’ appraisal regulations, the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

Buyer and seller are typically motivated;

Both parties are well informed or well advised, and acting in what they consider their own best interests;

A reasonable time is allowed for exposure in the open market;

Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.1

MARKETING TIME An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, “Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions” address the determination of reasonable exposure and marketing time.) See also exposure time.

MORTGAGE-EQUITY ANALYSIS Capitalization and investment analysis procedures that recognize how mortgage terms and equity requirements affect the value of income-producing property.

OPERATING EXPENSES Other Taxes, Fees & Permits - Personal property taxes, sales taxes, utility taxes, fees and permit expenses. Property Insurance – Coverage for loss or damage to the property caused by the perils of fire, lightning, extended coverage perils, vandalism and malicious mischief, and additional perils. Management Fees - The sum paid for management services. Management services may be contracted for or provided by the property owner. Management expenses may include supervision, on-site offices or apartments for resident managers, telephone service, clerical help, legal or accounting services, printing and postage, and advertising. Management fees may occasionally be included among recoverable operating expenses Total Administrative Fees – Depending on the nature of the real estate, these usually include professional fees and other general administrative expenses, such as rent of offices and the services needed to operate the property. Administrative expenses can be provided either in the following expense subcategories or in a bulk total. 1) Professional Fees – Fees paid for any professional services contracted for or incurred in property operation; or 2) Other Administrative – Any other general administrative expenses incurred in property operation. Heating Fuel - The cost of heating fuel purchased from outside producers. The cost of heat is generally a tenant expense in single-tenant, industrial or retail properties, and apartment projects with individual heating units. It is a major expense item shown in operating statements for office buildings and many apartment properties. The fuel consumed may be coal, oil, or public steam. Heating supplies, maintenance, and workers’ wages are included in this expense category under certain accounting methods. Electricity - The cost of electricity purchased from outside producers. Although the cost of electricity for leased space is frequently a tenant expense, and therefore not included in the operating expense statement, the owner may be responsible for lighting public areas and for the power needed to run elevators and other building equipment. Gas - The cost of gas purchased from outside producers. When used for heating and air conditioning, gas can be a major expense item that is either paid by the tenant or reflected in the rent. Water & Sewer - The cost of water consumed, including water specially treated for the circulating ice water system, or purchased for drinking purposes. The cost of water is a major consideration for industrial plants that use processes depending on water and for multifamily projects, in which the cost of sewer service usually ties to the amount of water used. It is also an important consideration for laundries, restaurants, taverns, hotels, and similar operations. Other Utilities - The cost of other utilities purchased from outside producers. Total Utilities - The cost of utilities net of energy sales to stores and others. Utilities are services rendered by public and private utility companies (e.g., electricity, gas, heating fuel, water/sewer and other utilities providers). Utility expenses can be provided either in expense subcategories or in a bulk total. Repairs & Maintenance - All expenses incurred for the general repairs and maintenance of the building, including common areas and general upkeep. Repairs and maintenance expenses include elevator, HVAC, electrical and plumbing, structural/roof, and other repairs and maintenance expense items.

1 “Interagency Appraisal and Evaluation Guidelines.” Federal Register 75:237 (December 10, 2010) p. 77472.


Repairs and Maintenance expenses can be provided either in the following expense subcategories or in a bulk total. 1) Elevator - The expense of the contract and any additional expenses for elevator repairs and maintenance. This expense item may also include escalator repairs and maintenance. 2) HVAC – The expense of the contract and any additional expenses for heating, ventilation and air-conditioning systems. 3) Electrical & Plumbing - The expense of all repairs and maintenance associated with the property’s electrical and plumbing systems. 4) Structural/Roof - The expense of all repairs and maintenance associated with the property’s building structure and roof. 5) Pest Control – The expense of insect and rodent control. 6). Other Repairs & Maintenance - The cost of any other repairs and maintenance items not specifically included in other expense categories. Common Area Maintenance - The common area is the total area within a property that is not designed for sale or rental, but is available for common use by all owners, tenants, or their invitees, e.g., parking and its appurtenances, malls, sidewalks, landscaped areas, recreation areas, public toilets, truck and service facilities. Common Area Maintenance (CAM) expenses can be entered in bulk or through the sub-categories. 1) Utilities – Cost of utilities that are included in CAM charges and passed through to tenants. 2) Repair & Maintenance – Cost of repair and maintenance items that are included in CAM charges and passed through to tenants. 3) Parking Lot Maintenance – Cost of parking lot maintenance items that are included in CAM charges and passed through to tenants. 4) Snow Removal – Cost of snow removal that are included in CAM charges and passed through to tenants. 5) Grounds Maintenance – Cost of ground maintenance items that are included in CAM charges and passed through to tenants. 6) Other CAM expenses are items that are included in CAM charges and passed through to tenants. Painting & Decorating - This expense category is relevant to residential properties where the landlord is required to prepare a dwelling unit for occupancy in between tenancies. Cleaning & Janitorial - The expenses for building cleaning and janitorial services, for both daytime and night-time cleaning and janitorial service for tenant spaces, public areas, atriums, elevators, restrooms, windows, etc. Cleaning and Janitorial expenses can be provided either in the following subcategories or entered in a bulk total. 1) Contract Services - The expense of cleaning and janitorial services contracted for with outside service providers. 2) Supplies, Materials & Misc. - The cost any cleaning materials and any other janitorial supplies required for property cleaning and janitorial services and not covered elsewhere. 3) Trash Removal - The expense of property trash and rubbish removal and related services. Sometimes this expense item includes the cost of pest control and/or snow removal .4) Other Cleaning/Janitorial - Any other cleaning and janitorial related expenses not included in other specific expense categories. Advertising & Promotion - Expenses related to advertising, promotion, sales, and publicity and all related printing, stationary, artwork, magazine space, broadcasting, and postage related to marketing. Professional Fees - All professional fees associated with property leasing activities including legal, accounting, data processing, and auditing costs to the extent necessary to satisfy tenant lease requirements and permanent lender requirements. Total Payroll - The payroll expenses for all employees involved in the ongoing operation of the property, but whose salaries and wages are not included in other expense categories. Payroll expenses can be provided either in the following subcategories or entered in a bulk total. 1) Administrative Payroll - The payroll expenses for all employees involved in on-going property administration. 2) Repair & Maintenance Payroll - The expense of all employees involved in on-going repairs and maintenance of the property. 3) Cleaning Payroll - The expense of all employees involved in providing on-going cleaning and janitorial services to the property 4) Other Payroll - The expense of any other employees involved in providing services to the property not covered in other specific categories. Security - Expenses related to the security of the Lessees and the Property. This expense item includes payroll, contract services and other security expenses not covered in other expense categories. This item also includes the expense of maintenance of security systems such as alarms and closed circuit television (CCTV), and ordinary supplies necessary to operate a security program, including batteries, control forms, access cards, and security uniforms. Roads & Grounds - The cost of maintaining the grounds and parking areas of the property. This expense can vary widely depending on the type of property and its total area. Landscaping improvements can range from none to extensive beds, gardens and trees. In addition, hard-surfaced public parking areas with drains, lights, and marked car spaces are subject to intensive wear and can be costly to maintain. Other Operating Expenses - Any other expenses incurred in the operation of the property not specifically covered elsewhere. Real Estate Taxes - The tax levied on real estate (i.e., on the land, appurtenances, improvements, structures and buildings); typically by the state, county and/or municipality in which the property is located.

PROSPECTIVE OPINION OF VALUE A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy.

PROSPECTIVE VALUE UPON REACHING STABILIZED OCCUPANCY The value of a property as of a point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. At such point, all capital outlays for tenant improvements, leasing commissions, marketing costs and other carrying charges are assumed to have been incurred.

SPECIAL, UNUSUAL, OR EXTRAORDINARY ASSUMPTIONS Before completing the acquisition of a property, a prudent purchaser in the market typically exercises due diligence by making customary enquiries about the property. It is normal for a Valuer to make assumptions as to the most likely outcome of this due diligence process and to rely on actual information regarding such matters as provided by the client. Special, unusual, or extraordinary assumptions may be any additional assumptions relating to matters covered in the due diligence process, or may relate to other issues, such as the identity of the purchaser, the physical state of the property, the presence of environmental pollutants (e.g., ground water contamination), or the ability to redevelop the property.


A D D E N D U M B : C L I E N T S A T I S F A C T I O N S U R V E Y

Survey Link: http://www.surveymonkey.com/s.aspx?sm=_2bZUxc1p1j1DWj6n_2fswh1KQ_3d_3d&c=13-38032-900216-001 C&W File ID: 13-38032-900216-001 Fax Option: (716) 852-0890

1. Given the scope and complexity of the assignment, please rate the development of the appraisal relative to the adequacy and relevance of the data, the appropriateness of the techniques used, and the reasonableness of the analyses, opinions, and conclusions:

__ Excellent __ Good __ Average __ Below Average __ Poor

Comments:_____________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

2. Please rate the appraisal report on clarity, attention to detail, and the extent to which it was presentable to your internal/external users without revisions:


Comments:_____________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________


3. The appraiser communicated effectively by listening to your concerns, showed a sense of urgency in responding, and provided convincing support of his/her conclusions:

__ Not Applicable __ Excellent __ Good __ Average __ Below Average __ Poor

Comments:_____________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

4. The report was on time as agreed, or was received within an acceptable time frame if unforeseen factors occurred after the engagement:

__ Yes __ No

5. Please rate your overall satisfaction relative to cost, timing, and quality:


Comments:_____________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

6. Any additional comments or suggestions?

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________


7. Would you like a representative of Cushman & Wakefield’s National Quality Control Committee to contact you?

__ Yes __ No Your Name: ___________________________________________

Your Telephone Number: _________________________________________

Contact Information: Scott Schafer Managing Director, National Quality Control (716) 852-7500, ext. 121


A D D E N D U M C : E N G A G E M E N T L E T T E R


A D D E N D U M D : L E G A L D E S C R I P T I O N


A D D E N D U M E : C O M P A R A B L E I M P R O V E D S A L E D A T A S H E E T S

Sunset Shopping Center100-108 Sunset AveSuisun City CA 94585MSA: Vallejo-Fairfield-NapaSolano County

Shopping CenterProperty Type:Neighborhood CenterProperty Subtype:261223ID: 0173-390-1400173-390-150

APN:

PROPERTY INFORMATION

1981

88,000

40,885

359,4574.08:1

8.25

Average47,115N/A

4865.52:1,000

Sold GLA 88,000

Site Area (SqFt):

Parking Ratio:

Site Area (Acres):

Parking Spaces:

Inline GLATotal Anchor GLALast Renovation:

Quality:

L:B Ratio:

Total GLA

Year Built:

AverageCondition:

Rite Aid X 18,043In-Shape Fitness X 29,072

AnchorsIncludedin Sale GLA

X

SALE INFORMATIONRecorded Sale

Leased FeeWRI Golden State, LLC

$139.20

8/2013$12,250,000

Hall Equities Group

Transaction Date:

Grantor:

Price per SqFt:Sale Price:

Value Interest:

Grantee:

Sale Status:

95.00%N/A

$13.04

9.37%$1,147,825

N/A

Occupancy:

OAR:

EGIM:Expense Ratio:

NOI per SqFt:NOI:

NoneCondition of Sale:

COMMENTSThis neighborhood shopping center is located just north of Highway 12. The center includes several pad buildings that were not included in this sale (IHOP, McDonalds, KFC, and Taco Bell). The property was listed at $13,000,000.

VERIFICATION COMMENTSListing Agent, Brian Bollinger, 916.462.6215

VALUATION & ADVISORY

IMPROVED SALE COMPARABLE - 1

Gettysburg Address3102-3128 E Gettysburg Ave4542-4590 N First StreetFresno CA 93726MSA: FresnoFresno County

Shopping CenterProperty Type:Neighborhood CenterProperty Subtype:257441ID: 428-050-17, 18, 19, 20 & 21APN:


1991

93,840

43,930

368,0823.92:1

8.45

Average49,9101996

5425.78:1,000

Sold GLA 93,840

Site Area (SqFt):

Parking Ratio:

Site Area (Acres):

Parking Spaces:


Quality:

L:B Ratio:

Total GLA

Year Built:

AverageCondition:

Fresno Ag Hardwar X 49,910Anchors

Includedin Sale GLA

X


Leased FeeZinkin Family Partners LP

$95.27

5/2013$8,940,000

619, LLC

Transaction Date:

Grantor:


Value Interest:

Grantee:

Sale Status:

88.00%N/A

$8.34

8.75%$782,250

N/A

Occupancy:

OAR:

EGIM:Expense Ratio:

NOI per SqFt:NOI:


COMMENTSThis neighborhood center is anchored by Fresno Ag Hardware, which occupies 49,910 square feet, at $0.58/SF/Month, NNN, expiring August 2018, with six 5-year options. Other tenants include Autozone, Chubby's Diner, Little Caesar's, and Subway. Rents for in-line space generally range from $1.10 to $1.50/SF/Month, NNN. Asking rents are currently $1.00/SF. The property sold for $9,200,000, and included a vacant 1/2 acre pad site valued at $12.00/SF or approximately $260,000. The analyzed sale price is net of the pad site value.

VERIFICATION COMMENTSDan Riley, CBRE, 310-363.4899Appraiser's files



Spreckels Plaza131 Spreckels AvenueManteca CA 95377MSA: Stockton-LodiSan Joaquin County

Shopping CenterProperty Type:Neighborhood CenterProperty Subtype:227157ID: 221-200-34 and 36APN:


2000

73,400

N/A15,600

285,7543.89:1

6.56

Good57,800N/A

3654.97:1,000

Sold GLA 73,400

Site Area (SqFt):

Parking Ratio:

Site Area (Acres):

Parking Spaces:


Quality:

L:B Ratio:

Other GLA:Total GLA

Year Built:

GoodCondition: X

Food 4 Less X 57,800Anchors

Includedin Sale GLA

X


Leased FeeJackson Retail Venture LLC

$177.11

12/2012$13,000,000

YIP Holdings Five, LLC

Transaction Date:

Grantor:


Value Interest:

Grantee:

Sale Status:

95.00%25.76%

$13.11

7.40%$962,000

10.61

Occupancy:

OAR:

EGIM:Expense Ratio:

NOI per SqFt:NOI:


COMMENTSFood 4 Less anchors this center on a net lease at $0.97/SF, increasing to $1.06/SF on 3/1/2015, and expiring in March 2020, with three 5-year options. The remaining tenants are in-line, with rents ranging from $1.45 to $2.36/SF, NNN. The most recent lease commenced in September 2009 at $1.45/SF. Three of the 10 in-line tenants are on a month-to-month basis. Traffic counts along Spreckles Ave are 21,200 ADT (2008). The property was listed in June 2012 at $13,750,000. This was an all cash sale.

VERIFICATION COMMENTSRyan Forsyth at Cornish & Carey, 916.569.2377



Raley's Plaza3330 North Texas StreetFairfield CA 94533MSA: Vallejo-Fairfield-NapaSolano County

Shopping CenterProperty Type:Neighborhood CenterProperty Subtype:220095ID: 0167-130-170, 0167-130-210, 0167-130-160, 0167-130-180, 0167-130-220

APN:


1997

95,441

32,316

418,6124.39:1

9.61

Average63,125N/A

4815.04:1,000

Sold GLA 95,441

Site Area (SqFt):

Parking Ratio:

Site Area (Acres):

Parking Spaces:


Quality:

L:B Ratio:

Total GLA

Year Built:

AverageCondition:

Raleys X 63,125Anchors

Includedin Sale GLA

X


Leased FeeDonahue Schriber

$213.22

8/2012$20,350,000

Gerrity Atlantic Retail Partners, LLC

Transaction Date:

Grantor:


Value Interest:

Grantee:

Sale Status:

96.00%N/A

$15.46

7.25%$1,475,375

N/A

Occupancy:

OAR:

EGIM:Expense Ratio:

NOI per SqFt:NOI:


COMMENTSThe income stream is relatively secure as 72% of the subject is leased to Raleys and Chase. Raleys is leased through June 2024, at $1.04/SF/Month, NNN, with three 5-year options. Other tenants include Starbucks and Panda Express. Traffic counts at the intersection are 50,261 ADT. The average household income is $89,992 within a one-mile radius.

VERIFICATION COMMENTSOffering Memorandum, Listing Broker, Preston Fetrow at CBRE, 949.725.8538



Morada Ranch4255 E Morada LaneStockton CA 95212MSA: Stockton-LodiSan Joaquin County

Shopping CenterProperty Type:Neighborhood CenterProperty Subtype:201230ID: 124-290-14, -15, -16, -17, -18, -19,APN:


1980

157,773

N/A84,040

727,0164.61:1

16.69

Average73,7331996

5413.43:1,000

Sold GLA 157,773

Site Area (SqFt):

Parking Ratio:

Site Area (Acres):

Parking Spaces:


Quality:

L:B Ratio:

Other GLATotal GLA

Year Built:

AverageCondition: X

Raley's X 73,733Anchors

Includedin Sale GLA

X


Leased FeeEvergreen Commercial

$150.53

5/2011$23,750,000

ROIC California LLC

Transaction Date:

Grantor:


Value Interest:

Grantee:

Sale Status:

90.00%N/A

$11.11

7.38%$1,752,750

N/A

Occupancy:

OAR:

EGIM:Expense Ratio:

NOI per SqFt:NOI:


COMMENTSMorada Ranch is a Raley's-anchored neighborhood center in northeast Stockton. This site is located on the northwest corner of Highway 99 and Morada Lane. The property includes six pad sites. Notable inline tenants include Golden 1 Credit Union, Starbucks, Curves, and Subway. No adverse sale conditions were noted.

VERIFICATION COMMENTSListing Broker: Palmer Capital, Inc. Brian Bollinger




A D D E N D U M F : Q U A L I F I C A T I O N S O F T H E A P P R A I S E R S

A PROPOSAL FOR C&W BIOGRAPHY

CUSHMAN & WAKEFIELD 1

PROFESSIONAL QUALIFICATIONS

CHRIS STAVROS DIRECTOR | VALUATION & ADVISORY CUSHMAN & WAKEFIELD WESTERN, INC.

Chris Stavros is a Director with the Cushman & Wakefield Western, Inc. Sacramento Valuation & Advisory group. Prior to joining Cushman & Wakefield, in 2006, Mr. Stavros was a Senior Appraiser with the firm Joseph J. Blake and Associates, Inc., in the Western Regional Office located in Los Angeles, since 2000. He worked under the close supervision of two Designated Members of the Appraisal Institute.

EXPERIENCE

Mr. Stavros has performed appraisal and consulting services throughout California on all types of income producing properties including industrial facilities, office complexes, retail centers, apartments, self-storage facilities, mobile home parks and vacant land. The intended uses of these assignments were for mortgage lending, corporate advisory, off-balance sheet financing, disposition, acquisition, assessment districts, tax appeal purposes, litigation, and rent arbitration.

EDUCATION

• California State University Chico

− Degree: Bachelors of Science in Business Administration

APPRAISAL EDUCATION

Mr. Stavros has successfully completed the following courses related to appraisal and real estate:

• State Board of Equalization, Course 1 – Appraising for Tax Purposes (1999)

• Appraisal Institute

− Course 110, Appraisal Principles (1993)

− Course 520, Highest & Best Use and Market Analysis (2006)

− Course 510, Advanced Income Capitalization (2008)

− Course 503GD, Advanced Concepts and Case Studies (2011)

− Course 405G, General Appraiser Report Writing and Case Studies (2013)

MEMBERSHIPS, LICENSES AND PROFESSIONAL AFFILIATIONS

• Candidate for Designation, Appraisal Institute

• Certified General Real Estate Appraiser in the following states: − California – AG036470

− Nevada – A.0006726-CG




CALIFORNIA




JUDSON H. CLINE, MAI, MRICS SENIOR DIRECTOR | VALUATION & ADVISORY CUSHMAN & WAKEFIELD WESTERN, INC.

Judson Cline is a Senior Director of Valuation & Advisory of Cushman & Wakefield’s Sacramento office.

EXPERIENCE

Since joining Cushman & Wakefield in 2000, Mr. Cline has been responsible for appraisal and consulting services performed throughout Northern California and Northern Nevada on all types of income producing properties including industrial facilities, corporate headquarter campuses, office complexes, retail centers, apartments, vacant land, schools, churches, automobile dealerships, self storage facilities, agricultural properties and residential subdivisions. The intended uses of these assignments were for mortgage lending, corporate advisory, off-balance sheet financing, disposition, acquisition, assessment districts, tax appeal purposes, litigation, and rent arbitration. In 2012 alone, I personally prepared valuations on numerous properties exceeding $1.22 billion in aggregate value and 15.96 million square feet.

EDUCATION

• University of San Francisco − Degree: Bachelor of Science – Applied Economics

• Bulleted List − Bulleted List (1 indent) − Bulleted List (1 indent)

» Bulleted List (2 indents) » Bulleted List (2 indents)


• Designated Member, Appraisal Institute (MAI #12840) − As of the current date, Judson Cline, MAI has completed the requirements of the continuing education

program of the Appraisal Institute. • Appraisal Institute, Sacramento Chapter

− Chair, Sacramento Sierra Chapter (Current) − Vice-Chair on the California State Government Relations Committee (Current) − Associates Guidance Committee 2005 − Chair of the Associates Guidance Committee 2006-2008 − Member of the Chapter Board of Directors from 2006-2008

• Appraisal Institute, National Chapter − Regional Representative 2007-2008 − Member, National Diversity Committee 2008




− Alternate Regional Representative 2009 − Leadership & Development Advisory Council (LDAC) 2005, 2006

• Member, Royal Institution of Chartered Surveyors (MRICS) • Certified General Real Estate Appraiser in the following states:

− California – AG027622 − Nevada – A0005569-CG

OTHER ACCOMPLISHMENTS AND AWARDS

• Member, Cushman & Wakefield Valuation & Advisory Business Innovation Committee and Innovation Advisory Council since 2004. − This committee helped design and implement Appraisal Builder, an industry leading appraisal

aggregation software application. • Recipient, Service Excellence Award for Cushman & Wakefield Northern California – 2002 • Game Ball Award for Cushman & Wakefield Northern California – 2006 • Two-time recipient of the Appraisal Institute Northern California Chapter’s “George & Alberta Stauss

Scholarship” • Volunteer missionary work in South Africa, Botswana and Lesotho for two years. • Life Member of the National Eagle Scout Association and Beaded Wood Badge trained participant. • Chartered Organization Representative and Unit Executive for Pack/Troop/Team/Crew 145 of the Boy

Scouts of America in Lincoln, California from 2006 through 2012 − Currently serve as the Committee Chair for Troop/Team/Crew 145 − Outdoor/Camping Chair on the Sierra Gateway District Committee

• By appointment from the City Council, Mr. Cline serves on the City Building Board of Appeals (2nd Term) and the Transit Committee for the City of Lincoln (1st Term)




CALIFORNIA

November 21, 2013 Mr Eyal Bartov, CFO Aviv Arlon Ltd. 7 Jabotinsky St. Ramt Gan Israel To Whom It May Concern: RE: Appraisal Reports dated 18th of November 2013 of Riverwalk Plaza and Hagerstown Shopping

Center provided by Cushman & Wakefield of Washington, D.C., Inc.

Appraisal Reports dated 19th of November 2013 of Parkplace Shopping Center and The Center provided by Cushman & Wakefield Western Inc.

Appraisal Report dated 19th of November 2013 of Rivergate Station provided by Cushman & Wakefield of Georgia Inc.

We understand that the above appraisals (“Appraisal Reports”) provided by the respective firm identified above (each an "Appraisal Report") will be used by Aviv Arlon Ltd. (“Aviv Arlon”) for the preparation of its financial statements for the third quarter of 2013. We, as to our respective Appraisal Report, consent to the use of our Appraisal Report in Aviv Arlon financial statements and to its publication in connection with such financial statement should Aviv Arlon be required to do so. However, we take no responsibility or liability for any misrepresentation of the appraisal information in the financial statements or any other publication for public disclosure. Aviv Arlon and the issuer of such registration statement shall take full responsibility for the reference to the Appraisal Report and any reference to the Appraisal Report shall be accompanied by the following statement: “An appraisal is only an estimate of value, as of the date stated in the appraisal, and is subject to the Assumptions and Limiting Conditions, as well as any Extraordinary Assumptions and Hypothetical Conditions, stated in the report. Changes since that date in external and market factors or in the property itself can significantly affect the conclusions. As an opinion, it is not a measure of realizable value and may not reflect the amount which would be received if the property were sold. Reference should be made to the entire appraisal report because relying solely on excerpts or portions of a report do not necessarily convey all of the limitations, conditions, assumptions or qualifications of the report that influenced the opinion of value.”

In giving this consent, we do not thereby admit that we are experts within the meaning of the Securities Act or the rules and regulations of the Commission or that this consent is required by Section 7 of the Securities Act. Best regards, Cushman & Wakefield of Washington, D.C., Inc.

By: Name: Neal Eaton, MAI, MRICS Title: Senior Director Cushman & Wakefield Western, Inc.

By: Name: Chris Stavros Title: Director Cushman & Wakefield Western, Inc.

By: Name: George J. Geranios, MAI Title: Director Cushman & Wakefield of Georgia, Inc.

By: Name: Christopher S. Lassiter, MAI Title: Director

APPRAISAL OF REAL PROPERTY

Park Place Shopping Center

4300 Sonoma Boulevard

Vallejo, Solano County, CA 94589

IN A SELF-CONTAINED APPRAISAL REPORT

As of September 30, 2013

Prepared For:

Aviv Arlon Ltd.

7 Jabotinsky Street

Ramat Gan, Israel

Prepared By:

Cushman & Wakefield Western, Inc.

Valuation & Advisory

560 S. Winchester Boulevard,, Suite 200

San Jose, CA 95128

C&W File ID: 13-38010-900534-001

CUSHMAN & WAKEFIELD WESTERN, INC. 560 S. WINCHESTER BOULEVARD,, SUITE 200 SAN JOSE, CA 95128

Park Place Shopping Center

4300 Sonoma Boulevard

Vallejo, Solano County, CA 94589

560 S. WINCHESTER BOULEVARD,, SUITE 200

SAN JOSE, CA 95128

November 19, 2013

Eyal Bartov Aviv Arlon Ltd. 7 Jabotinsky Street Ramat Gan, Israel

Re: Appraisal of Real Property In a Self-Contained Report

Park Place Shopping Center 4300 Sonoma Boulevard Vallejo, Solano County, CA 94589

C&W File ID: 13-38010-900534-001

Dear Mr. Bartov:

In fulfillment of our agreement as outlined in the Letter of Engagement, we are pleased to transmit our appraisal of the above property in a self-contained report dated November 19, 2013. The effective date of value is September 30, 2013.

This appraisal report has been prepared in accordance with our interpretation of your institution’s guidelines and the Uniform Standards of Professional Appraisal Practice (USPAP).

The subject property consists of a one-story multi-tenant neighborhood center that contains 150,766 square feet of rentable area. The improvements were completed in 1987 and are in average condition. The property is currently 93.34 percent occupied by 19 tenants. A new tenant is completing its tenant improvements. It is our understanding that this tenant’s rent commenced September 2013.

Based on the agreed-to Scope of Work, and as outlined in the report, we developed the following opinion of Market Value:

Value Conclusions



The value opinion in this report is qualified by certain assumptions, limiting conditions, certifications, and definitions, as well as the following extraordinary assumptions and hypothetical conditions, if any.

EYAL BARTOV AVIV ARLON LTD. NOVEMBER 19, 2013 PAGE 2


E X T R A O R D I N A R Y A S S U M P T I O N S For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions. The use of extraordinary assumptions, if any, might have affected the assignment results.

Any outstanding tenant improvement dollars and leasing commissions due for the new lease have been paid. The tenant was completing tenant improvements as of the date of inspection.

This appraisal does not employ any other extraordinary assumptions.

H Y P O T H E T I C A L C O N D I T I O N S For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions. The use of hypothetical conditions, if any, might have affected the assignment results.

This appraisal does not employ any hypothetical conditions.

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

Respectfully submitted,


George J. Geranios, MAI Director CA Certified General Appraiser License No. AG011942 [email protected] (408) 572-4106 Office Direct (408) 434-1554 Fax

Robby D. Perrino, MAI, CRE, CCIM Executive Managing Director CA Certified General Appraiser License No. AG002595 [email protected] (408) 572-4134 Office Direct (408) 434-1554 Fax

PARK PLACE, VALLEJO, CA CLIENT SATISFACTION SURVEY III

C L I E N T S A T I S F A C T I O N S U R V E Y As part of our quality monitoring campaign, attached is a short survey pertaining to this appraisal report and the service that you received. Would you please take a few minutes to complete the survey to help us identify the things you liked and did not like?

Each of your responses will be catalogued and reviewed by members of our national Quality Control Committee, and appropriate actions will be taken where necessary. Your feedback is critical to our effort to continuously improve our service to you, and is sincerely appreciated.

To access the questionnaire, please click on the link here:

http://www.surveymonkey.com/s.aspx?sm=_2bZUxc1p1j1DWj6n_2fswh1KQ_3d_3d&c=13-38010-900534-001

The survey is hosted by Surveymonkey.com, an experienced survey software provider. Alternatively, simply print out the survey attached in the Addenda of this report and fax it to (716) 852-0890.

PARK PLACE, VALLEJO, CA SUMMARY OF SALIENT FACTS AND CONCLUSIONS IV

Summary of Sal ient Facts and Conclusions The subject property consists of a one-story multi-tenant neighborhood center that contains 150,766 square feet of rentable area. The improvements were completed in 1987 and are in average condition. The property is currently 93.34 percent occupied by 19 tenants. A new tenant is completing its tenant improvements. It is our understanding that this tenant’s rent commenced September 2013.

BASIC INFORMATIONCommon Property Name: Park Place Shopping CenterAddress: 4300 Sonoma Boulevard

Vallejo, CA 94589County: SolanoProperty Ownership Entity: BAI Park Place LP, a Delaware

limited partnership

SITE INFORMATIONLand Area: Square Feet AcresTotal Land Area: 616,810 14.16

Site Shape: Irregularly shaped, but usableSite Topography: LevelFrontage: GoodSite Utility: Average

Flood Zone Status: Flood Insurance Required for Lending PurposesFlood Zone: AEFlood Map Number: 060374-0420EFlood Map Date: 5/4/09

BUILDING INFORMATIONType of Property: Shopping Center

Building AreaGross Building Area: 150,766 SFGross Leaseable Area: 150,766 SFLand to Building Ratio: 4.09:1

Number of Buildings: EightNumber of Stories: OneActual Age: 26 YearsQuality: Average

Year Built: 1987Condition: Average

Parking:Number of Parking Spaces: 541 Parking Ratio (per 1,000 sf): 3.59:1Parking Type: Surface

PARK PLACE, VALLEJO, CA SUMMARY OF SALIENT FACTS AND CONCLUSIONS V

MUNICIPAL INFORMATIONAssessment Information:

Assessing Authority Solano CountyAssessor's Parcel Identification 0052-130-050Current Tax Year 2012/2013Taxable Assessment $20,202,362 Tax Assessment per square foot $134.00 Current Tax Liability $230,463 Taxes per square foot $1.53 Are taxes current? Taxes are currentIs a grievance underway? Not to our knowledge

Zoning Information:Municipality Governing Zoning City of VallejoCurrent Zoning Pedestrian Commercial (CP)Is current use permitted? YesCurrent Use Compliance Complying useZoning Change Pending NoZoning Variance Applied For Not applicable

HIGHEST & BEST USEAs Though Vacant:

As Improved:

A shopping center built to its maximum feasible building area when warranted by demand

A shopping center as it is currently improved

TENANCY INFORMATIONOccupancy %: 93.3%Occupied (SF): 140,723Current Number of Tenants: 19Vacant (SF): 10,043Number of Vacant Spaces: 5

Base Rent Status:Attained Rent (Occupied Space): $14.17Market Rent: $16.74Attained Rent is: Below market

PARK PLACE, VALLEJO, CA SUMMARY OF SALIENT FACTS AND CONCLUSIONS VI

VALUATION INDICES

Market Value As-Is

VALUE DATE 9/30/2013SALES COMPARISON APPROACHIndicated Value: $21,900,000Per Square Foot (GLA): $145.26

INCOME CAPITALIZATION APPROACHYield Capitalization

Projection Period: 11 YearsHolding Period: 10 YearsTerminal Capitalization Rate: 7.75%Internal Rate of Return: 8.50%Indicated Value: $23,700,000Per Square Foot (GLA): $157.20

Direct CapitalizationNet Operating Income (stabilized): $1,790,479Capitalization Rate: 7.50%Indicated Value: $23,873,053Indicated Value Rounded: $23,900,000Per Square Foot (GLA): $158.52

Income Capitalization ApproachIndicated Value: $23,800,000Per Square Foot (GLA): $157.86

FINAL VALUE CONCLUSIONReal Property Interest: Leased FeeConcluded Value: $23,800,000Per Square Foot (GLA): $157.86Implied Capitalization Rate: 7.52%

EXPOSURE AND MARKETING TIMEExposure Time: 12 Months

INSURABLE VALUEConclusion: See Below

Insurable Value Breakdown

Location SF % of Total Insurable ValueBuilding 1 (Units 408--764) 120,644 80.02% $12,803,311

Building 2 (Unit 300) 3,900 2.59% $413,886

Building 3 (Unit 200) 7,200 4.78% $764,098

Building 4 ( Unit 100-148) 11,987 7.95% $1,272,117

Building 5 (Units 800-824) 7,035 4.67% $746,587

150,766 100.00% $16,000,000

PARK PLACE, VALLEJO, CA SUMMARY OF SALIENT FACTS AND CONCLUSIONS VII

E X T R A O R D I N A R Y A S S U M P T I O N S For a definition of Extraordinary Assumptions please see the Glossary of Terms & Definitions. The use of extraordinary assumptions, if any, might have affected the assignment results.

Any outstanding tenant improvement dollars and leasing commissions due for the new lease have been paid. The tenant was completing tenant improvements as of the date of inspection.


H Y P O T H E T I C A L C O N D I T I O N S For a definition of Hypothetical Conditions please see the Glossary of Terms & Definitions. The use of hypothetical conditions, if any, might have affected the assignment results.

This appraisal does not employ any hypothetical conditions.

PARK PLACE, VALLEJO, CA PROPERTY PHOTOGRAPHS VIII

Property Photographs AERIAL PHOTOGRAPH

Looking from North to South

PARK PLACE, VALLEJO, CA PROPERTY PHOTOGRAPHS IX

PARK PLACE, VALLEJO, CA PROPERTY PHOTOGRAPHS X

Signage Along Sonoma Boulevard

PARK PLACE, VALLEJO, CA PROPERTY PHOTOGRAPHS XI

Building 500

PARK PLACE, VALLEJO, CA PROPERTY PHOTOGRAPHS XII

New tenant space

New tenant space

PARK PLACE, VALLEJO, CA PROPERTY PHOTOGRAPHS XIII

Building 700

Building 700

PARK PLACE, VALLEJO, CA PROPERTY PHOTOGRAPHS XIV

Building 800

Building 800

PARK PLACE, VALLEJO, CA TABLE OF CONTENTS XV

T A B L E O F C O N T E N T S SUMMARY OF SALIENT FACTS AND CONCLUSIONS -------------------------------------------------------------------------------------- IV PROPERTY PHOTOGRAPHS ---------------------------------------------------------------------------------------------------------------------------- VIII INTRODUCTION ---------------------------------------------------------------------------------------------------------------------------------------------------- 1

SCOPE OF WORK ------------------------------------------------------------------------------------------------------------------------------ 1 IDENTIFICATION OF PROPERTY --------------------------------------------------------------------------------------------------------- 2 PROPERTY OWNERSHIP AND RECENT HISTORY --------------------------------------------------------------------------------- 2 DATES OF INSPECTION AND VALUATION -------------------------------------------------------------------------------------------- 2 CLIENT, INTENDED USE AND USERS OF THE APPRAISAL --------------------------------------------------------------------- 2 EXTRAORDINARY ASSUMPTIONS ------------------------------------------------------------------------------------------------------- 3 HYPOTHETICAL CONDITIONS ------------------------------------------------------------------------------------------------------------- 3

REGIONAL ANALYSIS ------------------------------------------------------------------------------------------------------------------------------------------ 4 REGIONAL ANALYSIS ------------------------------------------------------------------------------------------------------------------------------------------ 5

INTRODUCTION--------------------------------------------------------------------------------------------------------------------------------- 5 ECONOMIC & DEMOGRAPHIC PROFILE ----------------------------------------------------------------------------------------------- 5

LOCAL AREA ANALYSIS -------------------------------------------------------------------------------------------------------------------------------------- 9 LOCATION OVERVIEW ---------------------------------------------------------------------------------------------------------------------- 10 NEIGHBORHOOD ANALYSIS -------------------------------------------------------------------------------------------------------------- 10 ACCESS ------------------------------------------------------------------------------------------------------------------------------------------ 11 CONCLUSION----------------------------------------------------------------------------------------------------------------------------------- 11

RETAIL MARKET ANALYSIS ------------------------------------------------------------------------------------------------------------------------------ 12 INTRODUCTION-------------------------------------------------------------------------------------------------------------------------------- 12 NATIONAL RETAIL MARKET OVERVIEW ---------------------------------------------------------------------------------------------- 12 RETAIL MARKET OVERVIEW -------------------------------------------------------------------------------------------------------------- 23 TRADE AREA ANALYSIS -------------------------------------------------------------------------------------------------------------------- 25 CONCLUSION----------------------------------------------------------------------------------------------------------------------------------- 31

PROPERTY ANALYSIS --------------------------------------------------------------------------------------------------------------------------------------- 32 SITE DESCRIPTION--------------------------------------------------------------------------------------------------------------------------- 32 IMPROVEMENTS DESCRIPTION --------------------------------------------------------------------------------------------------------- 36 REAL PROPERTY TAXES AND ASSESSMENTS ------------------------------------------------------------------------------------ 39 ZONING ------------------------------------------------------------------------------------------------------------------------------------------- 41

VALUATION --------------------------------------------------------------------------------------------------------------------------------------------------------- 43 HIGHEST AND BEST USE ------------------------------------------------------------------------------------------------------------------ 43 VALUATION PROCESS ---------------------------------------------------------------------------------------------------------------------- 45 SALES COMPARISON APPROACH ------------------------------------------------------------------------------------------------------ 47 INCOME CAPITALIZATION APPROACH ------------------------------------------------------------------------------------------------ 54 OVERVIEW -------------------------------------------------------------------------------------------------------------------------------------- 77 CURRENT ECONOMIC CONDITIONS --------------------------------------------------------------------------------------------------- 78 CONCLUSION----------------------------------------------------------------------------------------------------------------------------------- 79 RECONCILIATION AND FINAL VALUE OPINION ------------------------------------------------------------------------------------ 89 SENSITIVTY ANALYSIS --------------------------------------------------------------------------------------------------------------------- 90 INSURABLE VALUE --------------------------------------------------------------------------------------------------------------------------- 91 ASSUMPTIONS AND LIMITING CONDITIONS ---------------------------------------------------------------------------------------- 93 CERTIFICATION OF APPRAISAL --------------------------------------------------------------------------------------------------------- 96

ADDENDA CONTENTS --------------------------------------------------------------------------------------------------------------------------------------- 97

PARK PLACE, VALLEJO, CA INTRODUCTION 1

Introduct ion

S C O P E O F W O R K This appraisal, presented in a self-contained report, is intended to comply with the reporting requirements outlined under the USPAP for a self-contained appraisal report.

Cushman & Wakefield Western, Inc. has an internal Quality Control Oversight Program. This Program mandates a “second read” of all appraisals. For this assignment, Quality Control Oversight was provided by Robby D. Perrino, MAI, CRE, CCIM. In addition to a qualitative assessment of the appraisal report, Robby D. Perrino, MAI, CRE, CCIM is a signatory to the appraisal report and concurs in the value estimate(s) set forth herein.

The scope of this appraisal is to value the leased fee estate. This required collecting primary and secondary data relevant to the subject property. Improved sales were researched in the subject’s market, rental data was analyzed, and the input of buyers, sellers, brokers, property developers and public officials was considered. A physical inspection of the property was made. In addition, the general regional economy as well as the specifics of the subject’s local area was investigated.

At the client’s request, we eliminated all specific references to the tenant’s identity. Additionally, we did not include the historical operating statements nor the Argus input assumptions and supporting schedules.

The data have been thoroughly analyzed and confirmed with sources believed to be reliable, leading to the value conclusions in this report. The valuation process used generally accepted market-derived methods and procedures appropriate to the assignment.

This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these approaches would be considered applicable and/or necessary for market participants. Typical purchasers do not generally rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not utilized the Cost Approach to develop an opinion of market value.


I D E N T I F I C A T I O N O F P R O P E R T Y Common Property Name: Park Place Shopping Center

Location: The subject property is located at 4300 Sonoma Boulevard Vallejo, Solano County, California 94589

Assessor's Parcel Number:

0052-130-050

Legal Description: The legal description is presented in the Addenda of the report.

P R O P E R T Y O W N E R S H I P A N D R E C E N T H I S T O R Y Current Ownership: BAI Park Place LP, a Delaware limited partnership

Sale History:

The property was purchased by the current owner on April 4, 2012 from KRC Park Place, LP (Kimco). This was part of a multi-property sale that reportedly sold for $68,000,000 ($76.98 per square foot of GLA). We requested but were not provided with a copy of the Purchase and Sale Agreement, the allocated value and/or the occupancy for the subject property at the time of sale.

The Solano County Tax Assessor is showing the current tax value at $20,202,362.

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

D A T E S O F I N S P E C T I O N A N D V A L U A T I O N Effective Date(s) of Valuation:

As Is: September 30, 2013

Date of Inspection: September 10, 2013

Property Inspected by: George J. Geranios, MAI

C L I E N T , I N T E N D E D U S E A N D U S E R S O F T H E A P P R A I S A L Client: Aviv Arlon Ltd.

Intended Use: This appraisal is intended to provide an opinion of the Market Value of the Leased Fee interest in the property for the use of the client for financial reporting purposes according to the International Financial Reporting Standards (IFRS). This report is notintended for any other use.

Intended User: This appraisal report was prepared for the exclusive use of Aviv Arlon Ltd.. Use of this report by others is not intended by the appraiser unless specified in the Engagement Letter.


E X T R A O R D I N A R Y A S S U M P T I O N S Any outstanding tenant improvement dollars and leasing commissions due for the new lease have been paid. The tenant was completing tenant improvements as of the date of inspection.


H Y P O T H E T I C A L C O N D I T I O N S This appraisal does not employ any hypothetical conditions.

PARK PLACE, VALLEJO, CA REGIONAL ANALYSIS 4

Regional Analysis REGIONAL MAP

PARK PLACE, VALLEJO, CA REGIONAL ANALYSIS 5

REGIONAL ANALYSIS

I N T R O D U C T I O N The short- and long-term value of real estate is influenced by a variety of interacting factors. Regional analysis identifies those factors that affect property value, and the role they play within the region. The four primary forces that determine the supply and demand for real property, and consequently affect market value, are: environmental characteristics, governmental forces, social factors, and economic trends.

The subject property is located in the City of Vallejo in Solano County.

E C O N O M I C & D E M O G R A P H I C P R O F I L E The following profile of the City of Vallejo was provided by Moody’s Economy.com. Economy.com's core assets of proprietary editorial and research content as well as economic and financial databases are a source of information on national and regional economies, industries, financial markets, and demographics.

Economy.com's approach to the analysis of the U.S. economy consists of building a large-scale, simultaneous-equation econometric model, which they simulate and adjust with local market information, creating a model of the U.S. macro economy that is both top-down and bottom-up. In this model, those variables that are national in nature are modeled nationally while those that are regional in nature are modeled regionally. Interest rates, prices, and business investment are modeled as national variables; key sectors such as labor markets (employment, labor force), demographics (population, households, and migration), and construction activity (housing starts and sales) are modeled regionally and then aggregated to national totals. This approach allows local information to influence the macroeconomic outlook. Therefore, changes in fiscal policy at the national level (changes in tax rates, for example) are translated into their corresponding effects on state economies. At the same time, the growth patterns of large states, such as California, New York, and Texas, play a major role in shaping the national outlook.

In addition, on a regional basis, the modeling system is explicitly linked to other states through migration flows and unemployment rates. Economy.com's model structure also takes into account migration between states.

SHORTTERM

LONGTERM

STRENGTHS & WEAKNESSES

CURRENT EMPLOYMENT TRENDS

FORECAST RISKSRISK-ADJUSTEDRETURN, ’12-17

RELATIVE EMPLOYMENT PERFORMANCE (1998=100)

EMPLOYMENT GROWTH RANK

VITALITY

LIFE CYCLE PHASE

U.S.=100% Best=1 Worst=384

Best=1, Worst=392 U.S.=100%

2012-2014

RELATIVE COSTSLIVING BUSINESS

2012-2017

RELATIVE RANK

ANALYSIS


U.S. VAL

95100105110115120125130135

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13F 14F 15F 16F 17F

STRENGTHS ● Affordable office space for Bay Area. ● Good transportation linkages. ● High employment diversity. ● Low cost of living for Bay Area.

WEAKNESSES ● Below-average per capita income. ● Higher than average delinquency rates on most forms of credit.

● Net outflow of younger residents.

UPSIDE ● Bay Area location helps incubate biotech expansion.

● Low living costs attract new residents, leading to a quicker than expected housing rebound, while boosting services.

DOWNSIDE ● California’s new foreclosure law slows the foreclosure process more than expected.

● State deficits re-emerge, prompting cuts in state services in the metro area.

Recent Performance. After a rocky start to the year, Vallejo’s recovery is finding its footing. Bureau of Labor Statistics data revisions show that hiring was substantially weaker in 2012 than first estimat-ed, but payroll gains in construction and education/healthcare are increasingly offsetting job losses in federal and local government. Furthermore, the job-less rate is slipping, declining to 9.4%, even as the labor force nears its prerecession peak. Foreclosures are falling, approaching an almost seven-year low, yet remain high by national standards. As a result, house prices are slowly climbing, fueling a slight up-tick in housing starts.

Sequester. Federal fiscal policy will weigh on federal government payrolls over the coming year as further spending cuts go into effect. Although sequester budget reductions will be made across the board, defense will feel the brunt of them. Approxi-mately 1,500 civilian defense workers at Travis Air Force base will be furloughed through September, representing a 20% reduction in pay. Furthermore, although the Obama administration exempted military personnel from direct cuts, they are still feeling the sting of slashed resources such as child care. Pilots at Travis Air Force base must also reduce flying hours by 30% over the remainder of 2013. These cuts will spill into private service payrolls as consumers pull back on spending. Income appreci-ation will slow as a result, dragging on the recovery.

However, near-term drag from the sequester will likely be offset over the long term. Travis Air Force Base is one of the largest military installations on the West Coast, and the Defense Department’s new global security strategy is focused on the Pacific Rim, emphasizing the Air Force and Navy.

Local government. Local government payrolls will trend lower over the coming year as municipali-ties throughout VAL struggle to balance their bud-gets. High unemployment and lower home values

are diminishing tax revenue. Consequently, the City of Vallejo is still operating in the red, despite emerg-ing from bankruptcy almost two years ago, while nearby Benicia recently froze hiring in an effort to close its $1.2 million budget deficit. However, these fiscal woes will fade as the housing recovery cements itself and the labor market regains momentum, transforming local government from a drag on the recovery to a driver.

Housing. House prices will rise more slowly over the next few months, as the decline in foreclosure filings stutters. California’s new foreclosure law, en-acted in the summer, will temporarily delay further progress as homeowners challenge proceedings. The bill put further restrictions on lenders and enabled homeowners to sue or halt proceedings if foreclosure laws are violated. Nevertheless, the already-substan-tial decline in foreclosures, the continued uptick in house prices, and housing’s overall brighter prospects will translate into homebuilding. Residential permits will trend higher over the medium term, spurring robust growth in construction payrolls. However, weak in-migration will keep house prices below their prerecession peak over the forecast outlook.

Vallejo’s recovery will gather pace over the com-ing months, taking off toward the end of 2013 as consumer spending picks up and the sequester fades. Longer term, lower living costs will attract individuals from elsewhere in the Bay Area to VAL. However, a low educational attainment will hinder the expansion of high-paying service jobs, which flourish in surrounding metro areas. VAL will be an above-average performer over the long term, as measured by employment growth, but only average in terms of gross product, reflect-ing the nature of its low-value-added economy in contrast with those of its tech-rich neighbors.

Sean F. EllisApril 2013

VALLEJO

W W

Data Buffet® MSA code: MVAL

141 2nd quintile

86 2nd quintile 95%105%

91% 237

Mature

1.81%

2006 2007 2008 2009 2010 2011 2012 INDICATORS 2013 2014 2015 2016 2017 14.4 13.8 13.3 12.9 13.0 12.9 13.2 Gross metro product (C$B) 13.5 13.9 14.4 14.9 15.2 1.3 -4.4 -3.1 -3.5 1.0 -0.8 2.2 % change 2.1 3.0 4.0 3.0 2.2 129.9 128.4 125.6 121.0 117.5 117.4 119.4 Total employment (000) 120.9 123.7 127.8 131.5 133.9 0.9 -1.2 -2.1 -3.7 -2.9 -0.2 1.7 % change 1.2 2.3 3.3 2.9 1.8 4.9 5.3 6.8 10.6 12.0 11.4 10.1 Unemployment rate 9.3 8.9 7.7 7.3 7.1 5.5 5.1 2.5 -4.0 -0.5 3.7 3.2 Personal income growth 3.6 7.2 7.7 6.8 5.3 408.4 408.2 409.0 410.3 414.1 416.9 420.8 Population (000) 420.9 421.8 423.4 425.3 427.3 1,002 866 326 586 467 387 488 Single-family permits 818 1,571 1,857 1,897 1,767 203 153 239 0 0 0 0 Multifamily permits 62 85 99 93 85 475.6 424.7 287.8 204.8 211.3 191.5 201.7 Existing-home price ($ ths) 210.6 216.2 226.8 242.8 271.6 9,236 5,619 2,640 2,908 2,310 1,639 2,419 Mortgage originations ($ mil) 2,285 1,985 2,056 2,262 3,133 -2.6 -3.4 -2.3 -1.5 1.2 0.4 1.5 Net migration (000) -2.4 -1.8 -1.4 -1.0 -1.0 518 1,179 2,247 3,166 3,904 3,523 2,539 Personal bankruptcies 2,636 2,538 2,495 2,507 2,658

% CHANGE YR AGO, 3-MO MA Jul 12 Nov 12 Mar 13Total 2.0 1.9 1.8Construction 0.2 4.6 9.4Manufacturing 4.4 4.5 1.0Trade 3.4 2.9 1.2Trans/Utilities 9.7 10.4 11.2Information -0.2 0.5 -1.1Financial Activities -1.9 -0.4 -0.3Prof & Business Svcs. -1.5 -2.6 -1.8Edu & Health Svcs. 2.5 2.8 2.4Leisure & Hospitality 2.3 -0.3 4.9Other Services 6.5 8.4 2.5Government -0.1 -0.8 -2.2

EMPLOYMENT & INDUSTRY MIGRATION FLOWS

LEADING INDUSTRIESHOUSE PRICES

COMPARATIVE EMPLOYMENT AND INCOME

PER CAPITA INCOME

Due to U.S. fl uctuations Relative to U.S.

TOP EMPLOYERS

PUBLIC

INDUSTRIAL DIVERSITY

EMPLOYMENT VOLATILITY

NAICS INDUSTRY EMPLOYEES (000)

Sector % of Total Employment Average Annual Earnings

Not due to U.S. Due to U.S.

Most Diverse (U.S.)

Least Diverse

Source: FHFA, 1996Q1=100, NSA

MiningConstructionManufacturing Durable NondurableTransportation/UtilitiesWholesale TradeRetail TradeInformationFinancial ActivitiesProf. and Bus. ServicesEduc. and Health ServicesLeisure and Hosp. ServicesOther ServicesGovernment

MOODY’S RATING


Sources: IRS (top), 2010; Census Bureau, 2012

Sources: BLS, Moody’s Analytics, 2012

2012

Sources: Percent of total employment — Moody’s Analytics & BLS, 2012; Average annual earnings — BEA, 2011

Source: Bureau of Economic Analysis, 2011NR

INTO VALLEJO, CA NUMBER OF MIGRANTSOakland, CA 4,754Sacramento, CA 2,387Napa, CA 1,844San Francisco, CA 1,688Santa Rosa, CA 501Los Angeles, CA 382San Jose, CA 376Stockton, CA 322Riverside, CA 265San Diego, CA 252Total In-migration 19,652

FROM VALLEJO, CAOakland, CA 4,165Sacramento, CA 2,875Napa, CA 1,983San Francisco, CA 1,208Santa Rosa, CA 404Los Angeles, CA 392San Jose, CA 320Stockton, CA 296San Diego, CA 270Riverside, CA 246Total Out-migration 19,633

Net Migration 19

GVSL State & Local Government 20.27225 Restaurants and other eating places 9.5ML Military Personnel 7.1GVF Federal Government 3.96221 General medical and surgical hospitals 3.86214 Outpatient care centers 3.83254 Pharmaceutical and medicine manufacturing 2.94451 Grocery stores 2.62382 Building equipment contractors 2.3PH Private Household Workers 2.24529 Other general merchandise stores 2.14521 Department stores 1.96211 Offices of physicians 1.75613 Employment services 1.74481 Clothing stores 1.6

High-tech employment 4.7As % of total employment 3.6

2009 2010 2011 2012Domestic -2,207 66 -713 -130Foreign 727 1,157 1,151 1,648Total -1,481 1,223 438 1,518

Federal 3,906State 5,297Local 14,931

VAL CA U.S. 0.2% 0.2% 0.6% 6.6% 4.1% 4.2% 8.4% 8.7% 8.9% 36.0% 62.4% 62.6% 64.0% 37.6% 37.4% 3.9% 3.4% 3.7% 3.6% 4.7% 4.2% 14.1% 10.9% 11.1% 0.9% 3.0% 2.0% 4.2% 5.4% 5.8% 7.3% 15.5% 13.4% 16.1% 13.1% 15.2% 11.2% 11.1% 10.3% 3.3% 3.5% 4.1% 20.2% 16.5% 16.4%

VAL CA U.S. $48,370 $75,833 $80,442 $75,036 $64,858 $57,059 $107,237 $93,487 $76,451 nd $105,024 $78,378 nd $74,760 $73,303 $53,226 $67,171 $63,289 $67,684 $78,212 $78,458 $32,365 $37,786 $32,088 $51,714 $127,523 $96,383 $30,940 $47,475 $50,553 $40,543 $67,822 $61,371 $67,131 $57,360 $50,771 $19,622 $29,191 $24,149 $38,160 $37,024 $34,601 $81,574 $78,670 $68,458

Travis Air Force Base 14,353Kaiser Permanente 3,828North Bay Health Care 1,750Six Flags Discovery Kingdom 1,600Sutter Solano Medical Center 1,242Wal-Mart Stores Inc. 932Genentech Inc. 850Safeway Inc. 730Meyer Corp. 600Paradise Valley Estates 600Costco 597Alza Corp. 535Valero Refining Co. 516The Home Depot U.S.A. Inc. 454Target Corp. 450Copart Inc. 450Best Buy 450Jelly Belly Candy Co. 400Travis Credit Union 374Mariani Packing Co. 327

Sources: Guide to Military Installations, 2011, North Bay Business Journal, 2012 Book of Lists

0.00

0.20

0.40

0.60

0.80

1.00

0.56

0%

20%

40%

60%

80%

100%

57%

VAL U.S.

100

130

0500

1,0001,5002,000

-500-1,000-1,500-2,000

09 10 11 12

Net Migration, VALNET MIGRATION, VAL

VAL U.S.

50

100

150

200

250

300

350

97 00 03 06 09 12

VAL CA U.S.

38,07843,647 41,560


VALLEJO

91

93

95

97

99

101

08 09 10 11 12 13

Construction Bolstering Service Sector GainsEmployment, Jan 2008=100


U.S.

California

Vallejo

0

500

1,000

1,500

2,000

2,500

3,000

07 08 09 10 11 12 13

Default120-day90-day60-day

Improving Job Market Helping Clear Pipeline…Household first mortgage debt, delinquency or default, $ mil, NSA

Sources: Equifax, Moody’s Analytics

80 85 90 95 100 105 110

California

Napa

Sacramento

Vallejo

Stockton

Santa Rosa

Affordable Office Space Gives Edge

Source: Moody’s Analytics

Cost of doing business, U.S.=100, 2010

209210211212213214215216217218219220

5

6

7

8

9

10

11

12

13

08 09 10 11 12 13

Increased Hiring Attracting Workers


Labor force, ths (R)

Unemployment rate, % (L)

3-mo MA

-40

-30

-20

-10

0

10

20

08 09 10 11 12

VallejoCaliforniaU.S.

…Allowing House Prices to Gather MomentumCase Shiller® Home Price Index, % change yr ago

Sources: CoreLogic, Moody’s Analytics

0 1 2 3 4

Napa

Stockton

Santa Rosa

Vallejo

California

Sacramento

Change between 2008 and 2011

Uptick Encouraging, but Not Enough

Sources: Census Bureau, Moody’s Analytics

Population 25 and older with a bachelor’s degree, ppt

PARK PLACE, VALLEJO, CA LOCAL AREA ANALYSIS 9

Local Area Analysis LOCAL AREA MAP


L O C A T I O N O V E R V I E W The property is located in the City of Vallejo. Generally, the boundaries of the immediate area are Route 37/Columbus Parkway to the north, Redwood Parkway to the south, Solano Boulevard to the west, and Ascot Parkway to the east.

Vallejo is the largest city in Solano County, California, United States. It is the tenth most populous city in the San Francisco Bay Area, and is located on the northeastern shore of San Pablo Bay.

Area: 48.8 sq miles (126.4 km²)

Unemployment rate: 7.1%

Vallejo is located in the northern part of the East Bay region of the Bay Area in Central California. Vallejo is accessible by Interstate 80 between San Francisco and Sacramento, and is the location for the northern half of the Carquinez Bridge. It is also accessible by Interstate 780 from neighboring Benicia to the east, and by Route 37 from Sonoma to the west. Route 219 (former U.S. Route 40) begins in the city near the Carquinez Bridge and travels north through the heart of the city and beyond into Napa County, entering neighboring American Canyon and eventually Napa.

Mare Island, former home to the oldest Naval Base west of the Mississippi and decommissioned in 1996, has the newest homes in the city as well as some of the oldest. Touro University California is located on the south side of Mare Island.

As one of the nation’s oldest decommissioned shipyard and naval bases, Mare Island has a rich history and contains many National Historic Landmark buildings, including a 19th century industrial brick warehouse, the Coal Shed Artists Studios, Officers Mansions, designated historic landscapes Alden Park and Chapel Park, the oldest golf course west of the Mississippi, and Saint Peters Chapel, a nondenominational church built in 1901 that boasts the largest collection of actual Louis Comfort Tiffany stain-glass windows on the west coast.

VALLEJO BANKRUPTCY

On May 6, 2008, the City Council voted 7-0 to file for Chapter 9 bankruptcy, at the time becoming the largest California city to do so at the time.

On November 1, 2011, a federal judge released Vallejo from bankruptcy after nearly three years. The city is now taking measures to find more revenue, and has already gotten new employee contracts, lowered pension plans for firefighters, increased the amount city staffers add to their health insurance and eliminated minimum staffing requirements for the fire department.

N E I G H B O R H O O D A N A L Y S I S

NEARBY AND ADJACENT USES The subject market area is heavily developed with commercial and light industrial uses. The predominant land uses are commercial along the main streets and residential along the secondary roadways.

The subject’s local area is composed mostly of commercial uses such as the subject property along the primary roadways. The Vallejo Kaiser Permanent Hospital is located to the south off of Sereno Drive. There are mixed auto repair, self-storage and light industrial uses in or nearby the subject property.


Marine World (amusement park) is located across the I-80 at Columbus Parkway and Fairgrounds Drive. This amusement park is a regional draw for the area.

To the subject’s north is a Mobile Home community and to the south is an office building. To the west across Sonoma Boulevard are light industrial uses including a self-storage business. To the east across Broadway Street are residential uses and the Vallejo Transit offices and bus parking area.

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

LAND USE CHANGES The subject market area appears to be stable with no major land use changes.

A C C E S S Local area accessibility is generally good, relying on the following transportation arteries:

Local: Sonoma Boulevard and Broadway Street are primary north-south surface roads through the neighborhood. The primary east-west roadways include Sereno Drive and Redwood Street.

Regional: Interstate 80 is a major route thorough out California. It passes through Vallejo providing to the south and east to Oakland and connects with the Bay Bridge which in turn provides access to San Francisco. To the east and north, Highway 80 runs into the California Central Valley and the city of Sacramento.

Highway 37 is located just north and provides access to Highway 80 to the east and runs across the Napa Slough to give access into Napa and Marin Counties.

Vallejo is served by two bridges. The Carquinez Bridge built in 1922 crosses the Carquinez Strait along Highway 80. Highway 780 intersects Highway 80 south of the subject and provides access to the east into the city of Benicia. Highway 780 crosses the Benicia Bridge and intersects Highway 680 at that point.

C O N C L U S I O N We found the subject market area to be currently improving. The unemployment rate is declining. We found the market area to show few vacancies and there were no signs of distressed properties. We foresee no changes to the market that would influence the subject area in a negative way and we are optimistic about the general local economy.

PARK PLACE, VALLEJO, CA RETAIL MARKET ANALYSIS 12

Retai l Market Analysis

I N T R O D U C T I O N The subject is best described as a Neighborhood Center. Neighborhood centers reflect a convenience concept and typically encompass 30,000 to 150,000 square feet of GLA, including anchors, on three to five acres. They will typically have one or more anchors (supermarket) with a 30 to 50 percent anchor ratio and a primary trade area of three miles.

N A T I O N A L R E T A I L M A R K E T O V E R V I E W

INTRODUCTION Since the recession officially ended in June 2009, the U.S. economy has produced slow but measured growth. While employment has not fully recovered, there has been gradual improvement in the economy, yet uncertainty remains. In March 2013, the U.S. Bureau of Labor Statistics reported that nonfarm payroll employment increased by 88,000 jobs, while the unemployment rate declined 10 basis points to 7.6 percent. The national unemployment rate has hovered between 7.6 percent to 8.2 percent since March 2012. C&W research currently projects the slow trend of recovery will continue through at least the first three quarters of 2013, and US growth will accelerate, perhaps beginning in the 4th quarter of 2013. The housing market is also showing signs of strength. As of March 2013, new and existing home sales are well above the levels of a year ago. Inventories of new homes on the market are near record lows while for existing homes they are near 20-year lows. In addition, home prices at year-end 2012 were approximately 7.0 percent higher than they were a year ago.

According to preliminary estimates of the Bureau of Economic Analysis, US Real GDP increased 2.2 percent in 2012 following an increase of 1.8 percent in 2011 and 2.4 percent in 2010. Consumer spending, the largest component of GDP has increased at a slow pace, averaging 2.1 percent per year. Over the past three years business investment has grown at a strong pace, but it has been offset by declines in Government spending. Looking forward, Moody’s Analytics forecasts that GDP will grow at 2.0 percent in 2013 before accelerating to 3.8 percent in 2014.

The economy is also being impacted by the policies that were implemented at the end of 2012 to avoid the “fiscal cliff”. First tax rates have been increased on most households as tax reductions that had been in place since the recession began were allowed to expire. At that time, the spending containment portion of the “fiscal cliff” was postponed until March 1, 2013 in order to permit further negotiation. Through the second quarter of 2013, Congressional leaders and the President of the United States had yet to reach agreements concerning spending as it relates to the limits set forth in the annual congressional Budget Resolution. Most recently, as of late March 2013, the Senate has passed its first budget in four years, a $3.7 trillion blueprint for 2014. The Senate plan includes upfront infrastructure spending and implementations that would increase tax revenue and reduce spending. However, as passed, the Senate plan would leave the government with a $566.0 billion annual budget deficit in 10 years, and $5.2 trillion in additional debt during the same time period. While this plan will certainly fail to be adopted by the republican-controlled House of Representatives as it stands, congressional members are hopeful that it may work to improve negotiations regarding the framework for overhauling the tax code and entitlement programs such as Medicare. As mandated by the President and Congress in July 2011, an “automatic” form of spending cutback has taken place; sequestration. Under sequestration, an amount of money equal to the difference between the cap set in the Budget Resolution and the amount actually appropriated is “sequestered” by the Treasury and not handed over to the agencies to which it was originally appropriated by Congress. It is estimated that the amount sequestered will be approximately $43.0 billion over the period from


March 1, 2013 to September 30, 2013. Cuts in federal spending are likely to have the greatest impact in communities that have heavy concentrations of federal government agencies and government contractors. This combination of higher tax burdens and reduction of Federal spending is likely to act as a drag on the economy which is reflected in the modest 2.0 percent GDP growth forecast for 2013 as a whole. The uncertainty about how this process will occur has made some participants in the real estate industry cautious. However, with economic growth in Europe likely to be sluggish at best, global investors continue to be attracted to the relative stability and better long term growth prospects of the U.S. which is likely to draw in overseas capital. In fact, the U.S. only trails China as the second most desirable market for foreign investment capital. According to collaborative research from Cushman & Wakefield and Real Capital Analytics, at year-end 2012, foreign investment in the U.S. was up 16.2 percent annually at $186.1 million. In the commercial property market, transactions have rebounded by more than four-fold from their post-crisis low in 2009.

For the retail sector, increased job creation and reduced unemployment figures brought record retail sales. For 2012, retail industry sales grew at a rate faster than many other industries. According to the U.S. Census Bureau, retail & food service sales for 2012 totaled nearly $4.9 trillion, a 5.2 percent increase 2011. The recent gain marks 39 consecutive quarters of growth. Looking forward, the National Retail Federation is forecasting retail sales to grow 3.4 percent in 2013.

Retail sales are an important indicator of consumer sentiment, typically a major driver of economic growth. After recording significant gains during the year, data released by Thomson Reuters and the University of Michigan indicated that the consumer sentiment index plunged from 77.6 in February 2013 to 71.8 percent in March 2013, its lowest point in over a year. Dissatisfaction with government economic policies and an inability to reach partisan agreement on fiscal planning lead as the primary concerns for consumers.

NATIONAL RETAIL INVESTMENT SALES MARKET

Capital ization Rates

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

Through the first quarter of 2013 capitalization rates have gradually declined. Power center OARs averaged 7.0 percent, while regional mall and strip shopping center OARs averaged just less than 6.9 and 7.0 percent, respectively. In the current market, investors are viewing higher-quality assets in primary urban and suburban markets most favorably. Market conditions for assets falling below this profile remain weak. However, investor sentiment is expected to moderate as confidence returns to the market. It should also be noted that the combination of low interest rates and increasing loan-to-value ratios are driving many investors to turn to real estate as an alternative investment vehicle. The added demand should continue to lead to an increase in real estate values and the subsequent compression of cap rates.

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


6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

National Power Center National Regional Mall National Strip Shopping Center

National Retail Cap Rates

CMBS Market

The availability of debt including the gradual resurgence of Commercial Mortgage Backed Securities (CMBS) has contributed to the increase in transaction activity. At its peak in 2007, CMBS issuance totaled nearly $230.0 billion in the United States. Retail assets accounted for approximately one-third of total CMBS volume. Funding plunged in the midst of the financial crisis beginning in late 2008. Total CMBS issuance in 2008 was just $12.0 billion, followed by a nearly non-existent $3.0 billion in 2009. Issuance reached $11.7 billion in 2010 as investors began returning to the market. However, with the European debt crisis, the slow U.S. economic recovery and admissions from Standard & Poor’s that it had “potentially conflicting methods” in how it was rating securitizations; bond buyers have exercised caution. To that end, many “balance sheet lenders” such as local savings and loan banks and life insurance companies have experienced notable increases in lending activity. Nonetheless, CMBS issuance in 2011 still managed to total nearly $33.0 billion, according to Trepp LLC. Additionally, Commercial Mortgage Alert reports CMBS issuance in 2012 reached $48.3 billion. In fact, as low rates and bond risk premiums encourage more borrowing, experts from the Blackstone Group, LNR Property and Morgan Stanley predicted at the Talmage 2012 Credit Conference that CMBS issuance could rise 40.0 percent in 2013, to as much as $65.0 billion.

The following chart compares annual CMBS volume over the last six years:

2007 2008 2009 2010 2011 2012

TOTALS $228.6 $12.1 $2.7 $11.6 $32.7 $48.3Source: Commercial Mortgage Alert

U.S. CMBS ISSUANCE (IN BILLIONS)

At the moment, investors are concerned as 2013 marks a precarious position for the CMBS sector. Five-year debt originated at the peak of the market, is now hitting its maturity. Some of the most aggressive loans written in 2007 are now coming due. According to Standard & Poor’s, these loans are a cause for concern because a large


number include high loan-to-value ratios, limited amortization and borrower equity buildup and reduced liquidity in the market.

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

Construction Activity

Despite improving fundamentals in the retail real estate market, developers are still concerned about investing in new construction projects. The exception being outlet center development and projects located in the highest-performing markets with strong tenant mixes possibly including grocery retailers, drug stores or similar net leased properties. According to data from the CoStar Group, retail construction starts peaked at 66.0 million square feet in the second quarter of 2006. Given the collapse of credit markets and consumer demand during the recent recession, construction starts have fallen significantly over the last few years. Recently, retail construction starts bottomed at just 5.0 million square feet in the fourth quarter of 2012. This marks a 92.4 percent decrease from peak figures in 2006.

The following graph shows retail construction starts from the second quarter of 2006 through the fourth quarter of 2012:


66.0

64.2

36.2

54.0

52.2

55.1

28.6

40.4

33.2

26.2

18.9

15.4

13.4

12.8

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9.9

8.1

10.0

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8.7

11.4

8.3

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50.0

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70.0

SQU

AR

E FE

ET IN

MIL

LIO

NS

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

Just 5.0 Million Square Feet Commenced in Q4 2012

Source: CoStar Group

Retail Construction Starts (SF in Millions)

Looking forward, new construction activity is expected to remain weak until the industry works through the large amounts of debt maturities scheduled to come due between 2013 and 2017. At the moment, there are significant amounts of available space for retailers to choose from. We expect retail construction starts to remain tepid through 2013.

To that end, many retailers are crawling out of the worst recession in decades. Many realize that they overbuilt and are closing underperforming stores. According to data collected by the International Council of Shopping Centers, there were a total of 4,464 announced store closings in 2012. While declining sales have forced many retailer chains to pare down their number of outlets, other retailers are closing due to shifts in the marketplace. Such is the case for Blockbuster which fell victim to shifting consumer preferences toward online and digital viewing of movies, TV shows and recorded video content.

The following is a list of certain retailers that made significant store closings in 2012:


STORE # CLOSING

Barnes & Noble 633

Blockbuster 500

Abercrombie & Fitch 180

Sears/Kmart 172

Collecive Brands 123

Food Lion 113

Charming Shoppes 105

Family Dollar 100

The Gap 100

Casual MaleXL 70

Ascena Retail 55

Best Buy 50

Office Max 35

Source: UBS Investment Research, About.com

MAJOR ANNOUNCED STORE CLOSINGS - 2012

Transaction Activity In 2012, retail transaction volumes posted promising numbers. Through the end of 2012, Real Capital Analytics reports that transaction volume totaled $41.3 billion; a strong indication that investors feel there is growth potential in the retail market.

Mimicking the overall market, transactions of retail properties through 2011 doubled the total annual volume recorded in 2010 at $44.0 billion. Transaction volume ramped up significantly through the first half of the year, but previously noted economic concerns stalled this momentum. Nonetheless, the total volume of retail property transactions in 2011 is a celebrated improvement over the dismal 2008, 2009 and 2010 showing.

The following graph displays annual retail transaction volume since 2001:


$13.

4 $28.

3

$33.

4

$59.

2

$56.

8

$62.

1

$79.

9

$24.

4

$14.

9

$22.

7

$44.

0

$41.

3

$0$10$20$30$40$50$60$70$80$90

Source: Real Capital Analytics, Inc.Note: Data excludes transactions less than $5.0 million,

AnnualRetail Transaction Volume

Through the first few months of 2013, pricing metrics have strengthened over recent months for retail properties with per-square-foot prices rising, average cap rates falling and the Commercial Property Price Index reaching its highest post recession level. According to Real Capital Analytics, sales of significant retail properties totaled $2.4 billion in February 2013, up 22.0 percent year-over-year bringing the total transaction volume for the first two months of 2013 to $5.7 billion, up 42.0 percent year-over-year. The increases largely result from increased portfolio transactions especially those involving strip centers.

Commercial Property Price Index

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

As of January 2013, the most recent figures published, Moody’s/RCA CPPI for all properties measured an increase of 4.0 percent year-over-year. Currently at 148.53, the index is 20.2 percent below the peak of 186.06 measured in the December 2007.

The following graph displays the CPPI Index between January 2001 and January 2013:


210

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80

100

120

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200

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

Moody's/RCA CPPI - All Properties Moody's/RCA CPPI - Retail Properties NCREIF National Aggregate (right axis)

Commercial Property Price Index Comparison

Likewise, the National Council of Real Estate Investment Fiduciaries (NCREIF) also compiles a property price index based on a large pool of individual commercial real estate properties. The NCREIF Property Price Index is a quarterly time series composite total rate of return measure of investment performance of said commercial real estate properties acquired in the private market for investment purposes only. Based on data from NCREIF, the property price index peaked in the first quarter of 2008 at 419.88 before falling 29.3 percent to 296.81 in the first quarter of 2010. Since bottoming, the NCREIF Property Price Index has climbed to near 90.0 percent of its pre-recession levels. The NCREIF Property Price Index stands at 377.31 as of year-end 2012. Commercial real estate values have improved in recent quarters.

Price Per Square Foot

In comparison to sales volume, pricing levels achieved by shopping centers and other retail properties trended downward rapidly before rising in recent months. Between 2003 and 2008, a time from when the market had picked up after the last recession up until the most recent market fall-out, the average price per square foot for retail assets increased by 50.8 percent to a peak of $187 per square foot in 2008. However, in 2010, the average price per square foot for all retail property would sharply decline to a low of $142 per square foot. Not until late 2010/early 2011 did the price per square foot begin to recover. The average price per square foot for retail space in 2011 jumped to $172, a 21.1 percent increase from 2010.

Through year-end 2012, this figure increased to $182 per square foot. The average price per square foot is within striking distance of the 2008 peak and baring some shift in fundamentals, it could surpass the peak average in 2013. We would note that RCA reports that there is a widening gap between unit prices paid in primary markets vs. secondary and tertiary markets. A flight to quality is prevalent in all of the major CRE market groups, including retail.

The following graph depicts the historical average price per square foot for retail assets as surveyed by RCA through year-end 2012:


$237

$143

$182

$75

$100

$125

$150

$175

$200

$225

$250

Mall & Other Strip Total Retail

Annual Rent Growth

Through 2012, falling vacancy rates and rising demand in the retail market is anticipated to bring the start of meaningful rent growth for landlords in most U.S. retail markets. According to Reis data, prior to the latest economic recession, annual effective retail rental rates grew at an average rate of 2.4 percent. Following nearly four years of negative rent growth during the economic fallout from 2008 to 2011, effective retail rental rate growth figures are now averaging near 1.0 percent.

Conversely, a significant drop in new construction coupled with some strengthening in key employment sectors will show a positive change as we proceed into 2013. It is notable that the CoStar Group recorded that construction starts peaked at 63.0 million square feet during the second quarter of 2006 and have since dropped to just 5.0 million square feet in the fourth quarter of 2012. To that end, Reis projects that effective retail rental rates will average upwards of 3.0 percent growth during the 2013 to 2016 timeframe.

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


-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%R

ent G

row

th P

erce

ntag

e

ASKING RENT % CHANGE EFFECTIVE RENT % CHANGE

Annual Rent Growth

FORECAST

Source: Reis, Inc.

Annual Market Condit ions

The graph below shows the severity of the last recession in terms of declining absorption and rising vacancy rates. In 2008 absorption went negative for the first time since REIS began collecting data in 1986. Mirroring the rebound in other commercial property sectors, leasing and occupancy of U.S. malls and shopping centers saw improving fundamentals through 2012. According to Reis, the low amount of new supply of retail space will lead to a decline in retail vacancy rates through 2016. From 2013 to 2016, Reis data forecasts absorption in the retail market to average approximately 25.0 million square feet per year while construction completions average approximately 20.0 million square feet per year. Given this forecast, overall vacancy rates in the national retail market will decline to approximately 9.0 percent from their current reading near 11.0 percent.

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


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COMPLETIONS NET ABSORPTION VACANCY RATE

FORECAST

Source: REIS, Inc.

Annual MarketConditions

NATIONAL RETAIL MARKET SUMMARY

Market conditions for the retail sector are improved. Retail sales have increased, tenant rent concessions have abated, and leasing velocity is on the rise. Further, according to Reis, Inc., shopping center vacancy held steady at 10.7 percent through the end of 2012. Reis also projects that by 2016, vacancy rates will decline to near 9.0 percent. Asking and effective rents remained relatively unchanged at the end of 2012. However, Reis forecasts positive rent growth as we head through 2013.

While the economy is far from robust, recoveries from recessions caused by a financial crisis have historically been sluggish. Financial institutions have largely rebuilt their balance sheets and reported several quarters of record earnings growth. Nonetheless, challenges remain. Retailer bankruptcies and store closures remain a concern going into 2013. Much of this vacancy has been concentrated amongst medium and big-box space including book, music and video stores. While below 2010 levels, store closures present vacant space that needs to be filled by landlords. Of positive note is the substantial decline in new construction which is starting to have a positive effect on vacancy rates as expanding retailers have taken advantage of many once inaccessible locations.

In the near term, market conditions for the retail sector are cautiously optimistic as economic indicators trend positively. Total nonfarm payroll employment increased by 88,000 in March, with job gains in professional and business services, construction, and health care. Barring backlash from debt ceiling concerns, tax increases and entitlement cuts, consumer balance sheets continue to show improvement due to lower debt levels and a more stable employment market. We anticipate the second half of 2013 will be marked by accelerated improvement in several economic indicators following more modest first half growth.


R E T A I L M A R K E T O V E R V I E W

INTRODUCTION Data for the analysis of the Solano County Shopping Centers retail market was provided by Terranomics Retail Services.

Solano County Market The following table shows that Solano County has approximately 8.6 million square feet of shopping center space. The current vacancy is 10.4 percent and the average asking rated on triple net terms is $14.54 per square foot per annum triple net. The subject is also part of the Neighborhood & Community Center category. The vacancy rate for this sector of the market is 11.9 percent and the average asking rate is $14.63 per square foot per annum triple net.


Solano County Market

The following Terranomics’ table shows a quarterly history over the past five quarters.

Benicia & Val lejo Submarket The following Terranomics’ table shows a quarterly history over the past five quarters for the Benicia & Vallejo area of Solano County.

CONCLUSION The market has experienced a slight increase in vacancy levels over the past quarter. The average asking rental rates are expected to be stable for the near term.


T R A D E A R E A A N A L Y S I S Park Place Shopping Center is located in the Vallejo CBSA and benefits from good regional and local accessibility, as well as the proliferation of peripheral draws. Major roadway proximity to the center provides the necessary access to more regional destinations throughout the area, while the property’s anchor stores provide the necessary drawing power for the property.

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

Highway accessibility, including area traffic patterns, geographical constraints, and nodes of residential development;

The position and nature of the area's retail structure, including the location of destination retail centers which compete with the subject and the strength and composition of the retail infill; and

The size, anchor tenancy, and merchandising composition of the subject property's tenants.

Given all of the above, we believe the subject property’s primary trade area would likely span an area encompassing about three miles around the center. The subject's secondary trade area might span up to five miles from the site given its regional accessibility and location of competitive properties.

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


DEMOGRAPHIC SUMMARY1.0-mile 3.0-mile 5.0-mile City of County of State of

Radius Radius Radius Vallejo Solano CaliforniaPOPULATION STATISTICS

2000 11,685 85,334 129,339 118,408 394,536 33,869,042

2013 12,682 95,827 138,763 115,734 418,458 38,199,560

2018 12,985 98,302 142,089 116,366 429,493 39,836,497

Compound Annual Change

2000 - 2013 0.63% 0.90% 0.54% -0.18% 0.45% 0.93%

2013 - 2018 0.47% 0.51% 0.47% 0.11% 0.52% 0.84%

HOUSEHOLD STATISTICS

2000 4,081 29,146 43,614 40,017 130,405 11,502,662

2013 4,648 32,522 47,458 40,911 144,269 12,883,814

2018 4,792 33,384 48,748 41,555 148,859 13,444,817


2000 - 2013 1.01% 0.85% 0.65% 0.17% 0.78% 0.88%

2013 - 2018 0.61% 0.52% 0.54% 0.31% 0.63% 0.86%

AVERAGE HOUSEHOLD INCOME

2000 $51,822 $53,674 $58,532 $59,409 $64,792 $65,619

2013 $56,600 $70,964 $75,812 $74,379 $82,405 $83,189

2018 $59,856 $75,404 $80,615 $79,832 $88,219 $85,889


2000 - 2013 0.68% 2.17% 2.01% 1.74% 1.87% 1.84%

2013 - 2018 1.12% 1.22% 1.24% 1.43% 1.37% 0.64%

OCCUPANCY

Owner Occupied 52.18% 58.87% 61.71% 59.59% 63.22% 55.87%

Renter Occupied 47.82% 41.13% 38.29% 40.41% 36.78% 44.13%

SOURCE: Claritas, Inc.

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

Between 2000 and 2013, Claritas, Inc., reports that the population within the primary trade area (3-mile radius) increased at a compound annual rate of 0.9 percent. This is characteristic of suburban areas in this market. This trend is expected to continue into the near future albeit at a slightly slower pace. Expanding to the total trade area (5-mile radius), population is expected to increase 0.47 percent per annum over the next five years.

The following pages contain graphic representation of the current population distribution within the subject’s region.


The graphic on the following page illustrates projected population growth in the trade area over the next five years (2013 - 2018). The trade area is clearly characterized by various levels of growth.

CURRENT POPULATION MAP


POPULATION GROWTH MAP

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

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

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


Higher divorce rates have resulted in an increase in single-person households; and

Many individuals have postponed marriage, also resulting in more single-person households.

According to Claritas, Inc., the Primary Trade Area grew at a compound annual rate of 0.85 percent between 2000 and 2013. Consistent with national trends, the trade area is experiencing household changes at a rate that varies from population changes. That pace is expected to continue through 2018, and is estimated at 0.52 percent.

Correspondingly, a greater number of smaller households with fewer children generally indicates more disposable income. In 2000, there were 2.88 persons per household in the Primary Trade Area and by 2013, this number is estimated to have increased to 2.90 persons. Through 2018, the average number of persons per household is forecasted to decline to 2.90 persons.

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

Trade area income figures for the subject support the profile of a broad middle-income market. According to Claritas, Inc. average household income in the primary trade area in 2013 was approximately $70,964, 95.41 percent of the city average ($74,379) and 86.12 percent of the county average ($82,405).

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

DISTRIBUTION OF HOUSEHOLD INCOME1.0-mile 3.0-mile 5.0-mile City of County of State of

Category Radius Radius Radius Vallejo Solano California

$150,000 or more 5.14% 8.35% 9.77% 9.39% 11.12% 12.10%$125,000 to $149,999 3.64% 4.94% 5.44% 5.42% 6.81% 5.32%$100,000 to $124,999 4.43% 9.11% 9.77% 9.31% 10.54% 8.84%$75,000 to $99,999 12.46% 13.73% 13.86% 13.42% 14.54% 12.36%$50,000 to $74,999 21.13% 19.92% 20.57% 21.01% 20.79% 17.49%$35,000 to $49,999 11.58% 11.42% 11.23% 11.13% 11.82% 13.01%$25,000 to $34,999 9.86% 9.01% 8.73% 8.90% 8.22% 9.41%$15,000 to $24,999 11.10% 9.89% 8.82% 9.04% 7.32% 10.11%Under $15,000 20.66% 13.63% 11.79% 12.39% 8.84% 11.37%

Source: Claritas, Inc.

The previous chart makes it clear that the distribution of higher income level households increases as distance from the subject increases.

Below is a graphic presentation of the household income distribution throughout the trade area that clearly shows the area surrounding the subject to be characterized by lower to middle income households. Higher income areas are located in surrounding suburban communities.


HOUSEHOLD INCOME MAP

RETAIL SALES Perhaps an even more important measure of area income is the amount spent on retail purchases. At the end of last year, the City of Vallejo had an aggregate retail sales level of $1.78 billion, with average retail sales per household of $43,515. By comparison, Solano County had average sales per household of $45,530, while California was $45,048.


RETAIL SALES (in $000)

Area

City of VallejoCounty of SolanoCalifornia

Source: Claritas, Inc.

$6,568,539 $7,274,279 2.1%$580,388,330 $640,570,293 2.0%

CAGR2013 2018 2013-18

$1,780,240 $1,940,449 1.7%

Claritas, Inc. projects retail sales in the City of Vallejo will grow at a pace below that of both the County and the State.

C O N C L U S I O N The following are our key conclusions.

The vacancy rate is slightly increasing and rent levels are relatively stable.

Local properties are generally well maintained. The Park Place Shopping Center has a competitive advantage in that among its competitive set because of the supermarket anchor.

Generally, the subject’s anchor tenant alignment is perceived with good ratings.

As such we believe the property will serve a market encompassing a radius of 5-miles. Over the next five years, both the population and number of households in the subject’s trade area are projected to remain fairly stable. Household income levels in the area are lower than the County and State levels.

The subject has very good accessibility via the regional Interstate network and local arterials that provide linkages throughout the Vallejo CBSA.

Based on our analysis we concluded that the subject is well positioned within its market area and the prospect for net appreciation in real estate values is expected to be good as the economy improves.

PARK PLACE, VALLEJO, CA SITE DESCRIPTION 32

Property Analysis

S I T E D E S C R I P T I O N

Location: 4300 Sonoma Boulevard

Vallejo, Solano County, California 94589

The subject property is located on the east side of Sonoma Boulevard (State Highway 29) and on the west side of Broadway.

Shape: Irregularly shaped, but usable

Topography: Level

Land Area: 14.16 acres / 616,810 square feet

Frontage: The subject property has good frontage. The frontage dimensions are listed below:

Sonoma Boulevard: 731 feetBroadway: 549 feet

Access: The subject property has average access.

Visibility: The subject property has average visibility.

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

Utilities: Utility providers for the subject property are as follows:

Water City of VallejoSewer City of VallejoElectricity PG&EGas PG&ETelephone AT&T

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

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

Flood Zone Description: The subject property is located in flood zone AE (Special flood hazard areas subject to inundation by the 100-year flood determined in a Flood Insurance Study by detailed methods. Base flood elevations are shown within these zones. Mandatory flood insurance purchase requirements apply) as indicated by FEMA Map 060374-0420E, dated May 04, 2009.


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

Seismic Hazard: The site is not located in a Special Study Zone as established by California’s Alquist-Priolo Geological Hazards Act.

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

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

Location Rating: Average


TAX MAP

PARK PLACE, VALLEJO, CA IMPROVEMENTS DESCRIPTION 36

I M P R O V E M E N T S D E S C R I P T I O N The following description of improvements is based on our physical inspection of the improvements and information provided by the owner’s representatives.

GENERAL DESCRIPTION

Year Built: 1987

Number of Buildings: 8

Number of Stories: 1

Land To Building Ratio: 4.09 to 1

Gross Building Area: 150,766 square feet

Gross Leasable Area: 150,766 square feet

RETAIL GLA SUMMARYComponent Owned Area Total

Confidential x 60,114 SFConfidential x 22,000 SF

Total Anchor GLA 82,114 SF 54%Confidential x 11,200 SFConfidential x 11,987 SFConfidential x 7,200 SFConfidential x 38,265 SF

Total Center GLA 150,766 SF 100%Total Owned GLA 150,766 SF 100%

CONSTRUCTION DETAIL

Basic Construction: Concrete block

Foundation: Poured concrete slab

Framing: Concrete block and metal pole

Floors: Concrete slab

Exterior Walls: Concrete block

Roof Type: Flat with parapet walls

Roof Cover: Built-up assemblies with tar and gravel cover

Windows: Storefront

Pedestrian Doors: Glass and metal


MECHANICAL DETAIL

Heat Source: HVAC

Heating System: Forced Air

Cooling: HVAC

Cooling Equipment: The cooling equipment is roof mounted.

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

Electrical Service: The electricity for the building is obtained through low voltage power lines that is assumed to be adequate for the existing use and in compliance with local law and building codes.

Electrical Metering: Each tenant is separately metered

Fire Protection: 100% sprinklered

INTERIOR DETAIL

Layout: The subject consists of eight buildings. Buildings 100, 200 and 300 are single tenant pad buildings on the west and south sides of the center. Building 200 and 300 have frontage along Sonoma Boulevard.

Building 400 is occupied by an anchor. It is located on the northwest side of the center.

Building 500 is located on the north-central side of the center and accommodates the an anchor use as well as several inline shop spaces.

Building 600 is also located on the north-central side of the site, east of the anchor store. It houses two tenants. Building 700 is located on the east side of the site with some tenants having frontage along Broadway Street. Building 8 is a multi-tenant pad building that is located on the southeast side of the center.

Parking is generally distributed in the center of the site.

Floor Covering: Carpet, ceramic tile, vinyl per tenant specifications

Walls: Drywall

Ceilings: Open and acoustical tile systems

Lighting: Fluorescent

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


SITE IMPROVEMENTS

Parking: The property contains approximately 541 surface parking spaces, reflecting an overall parking ratio of 3.59 spaces per 1,000 square feet of gross leasable area. The parking spaces are asphalt-paved and striped, and adequately support the existing users.

Onsite Landscaping: The site is landscaped with a variety of trees, shrubbery and grass.

Other: The site improvements include asphalt paved parking areas, curbing, signage, landscaping, parking lot lighting and drainage.

PERSONAL PROPERTY

Personal property was excluded from our valuation.

SUMMARY

Condition: Average

Quality: Average

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

Roof & Mechanical Inspections:

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

Actual Age: 26 years

Effective Age: 20 years

Expected Economic Life: 45 years

Remaining Economic Life: 25 years

PHYSICAL DETERIORATION

Cost to Cure: Curable physical deterioration refers to those items that are economically feasible to cure as of the effective date of the appraisal. One category of physical deterioration is deferred maintenance and is measured as the cost repairing or restoring the item to new or reasonably new condition. We have not been provided with a capital expenditure plan or an engineering report that would identify specific costs required to repair deficiencies at the subject property.

During our inspection, we did not notice any apparent physical deterioration that would require immediate repair.

FUNCTIONAL OBSOLESCENCE

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

PARK PLACE, VALLEJO, CA REAL PROPERTY TAXES AND ASSESSMENTS 39

R E A L P R O P E R T Y T A X E S A N D A S S E S S M E N T S

CURRENT PROPERTY TAXES The subject property is located in the taxing jurisdiction of Solano County, and the assessor’s parcel identification number is 0052-130-050. According to the local tax collector’s office, taxes are current. The assessment and taxes from the most recent tax year for the property are presented below:

The assessment and taxes for the property are presented below:

CALIFORNIA ASSESSMENT AND TAX ANALYSISAssessor's Parcel Number: 0052-130-050Assessing Authority: Solano CountyCurrent Tax Year: 2012/2013Are taxes current? Taxes are currentIs there a grievance underway? Not to our knowledge

ASSESSMENT INFORMATION2012/2013

Assessed ValueLand: $5,170,843Improvements: 15,031,519Total: $20,202,362

TAX LIABILITY

Taxable Assessment $20,202,362Tax Rate 0.01138299Sub-Total $229,963Special Assessments $500Total Property Taxes $230,463

Effecive Tax Rate 1.140774%

Building Area ( SF ) 150,766Property Taxes per Square Foot $1.53Compiled by Cushman & Wakefield Western, Inc.

Total taxes for the property are $230,463, or $1.53 per square foot. Under the provisions of Article XIIIA of the California Tax and Revenue Code (Proposition 13), properties are assessed their market value as of March 1, 1975, the base year lien date, or a later date, such as when a property was last sold or substantial renovation/construction occurred. Under Proposition 13 the base tax rate is limited to 1.0 percent plus any additional increase subject to a two-thirds voter approval (55% approval in the case of educational districts). Because of the required voter approval ratio, the tax rate is usually stable.

The assessed value may be increased for inflation a maximum of 2.0 percent per year until the property is again sold, substantial new construction occurs, or the property’s use changes significantly. Generally, a property should not be assessed above its current market value. There are certain instances (ground leased properties) where a property may be assessed above its current market level.

PARK PLACE, VALLEJO, CA REAL PROPERTY TAXES AND ASSESSMENTS 40

Reassessment due to new construction is usually based on the additional construction costs. Should the property sell, it would be reassessed according to the Assessor’s opinion of market value. Generally, market value for reassessment after transfer of ownership is based on the sale price.

Thus, assessed value typically only relates to market value as of a particular sale date. As a result, comparison of assessed value with other properties in the market is not material to this analysis. Therefore, tax comparables are not pertinent and not included herein.

This analysis assumes taxes are current to the date of value. The tax amount used in the analysis assumes taxes based on a market sale as of the appraisal date (assessed at the estimated market value of the property and based on the current tax rate) plus any special assessments.

PARK PLACE, VALLEJO, CA ZONING 41

Z O N I N G

GENERAL INFORMATION The property is zoned Pedestrian Commercial (CP) by the City of Vallejo. A summary of the subject’s zoning is provided below:

ZONINGMunicipality Governing Zoning: City of VallejoCurrent Zoning: Pedestrian Commercial (CP)Current Use: Neighborhood CenterIs current use permitted: YesChange In Zone Likely: NoZoning Change Applied For: NoPermitted Uses:

General Plan:


Permitted uses within this district include office and general retail services. Uses permitted subject to limitations include automotive and equipment repairs, food and beverage retail sales and medical offices. Automotive service and tobacco retailing require a major use permit.

Retail

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

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

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

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

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

ZONING CONCLUSIONS We analyzed the zoning requirements in relation to the subject property, and considered the compliance of the existing or proposed use. We are not experts in the interpretation of complex zoning ordinances but based on our review of public information, the subject property appears to be a complying use.

PARK PLACE, VALLEJO, CA ZONING 42

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

We note that this appraisal is not intended to be a detailed determination of compliance, as that determination is beyond the scope of this real estate appraisal assignment.

PARK PLACE, VALLEJO, CA HIGHEST AND BEST USE 43

Valuat ion

H I G H E S T A N D B E S T U S E

HIGHEST AND BEST USE DEFINITION The Dictionary of Real Estate Appraisal, Fifth Edition (2010), a publication of the Appraisal Institute, defines the highest and best use as:

The most probable use of a property which is physically possible, appropriately justified, legally permissible, financially feasible, and which results in the highest value of the property being valued.

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

HIGHEST AND BEST USE OF PROPERTY AS THOUGH VACANT

Legally Permissible The zoning regulations in effect at the time of the appraisal determine the legal permissibility of a potential use of the subject site. As described in the Zoning section, the subject site is zoned Pedestrian Commercial (CP) by the City of Vallejo. Permitted uses within this district include office and general retail services. Uses permitted subject to limitations include automotive and equipment repairs, food and beverage retail sales and medical offices. Automotive service and tobacco retailing require a major use permit. We are not aware of any further legal restrictions that limit the potential uses of the subject. In addition, rezoning of the site is not likely due to the character of the area.

Physically Possible The physical possibility of a use is dictated by the size, shape, topography, availability of utilities, and any other physical aspects of the site. The subject site contains 14.16 acres, or 616,810 square feet. The site is irregularly shaped, but usable and level. It has good frontage, average access, and average visibility. The overall utility of the site is considered to be average. All public utilities are available to the site including public water and sewer, gas, electric and telephone. Overall, the site is considered adequate to accommodate most permitted development possibilities.

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

Under current regional and local economic conditions, it is unlikely that financing would be available for speculative shopping center development on the subject site unless there were substantial pre-commitments for space.

PARK PLACE, VALLEJO, CA HIGHEST AND BEST USE 44

CONCLUSION We considered the legal issues related to zoning and legal restrictions. We also analyzed the physical characteristics of the site to determine what legal uses would be possible, and considered the financial feasibility of these uses to determine the use that is maximally productive. Considering the subject site’s physical characteristics and location, as well as the state of the local market, it is our opinion that the Highest and Best Use of the subject site as though vacant is a shopping center built to its maximum feasible building area when warranted by demand.

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

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

In analyzing the Highest and Best Use of a property as improved, it is recognized that the improvements should continue to be used until it is financially advantageous to alter physical elements of the structure or to demolish it and build a new one.

Legally Permissible As described in the Zoning Analysis section of this report, the subject site is zoned Pedestrian Commercial (CP). The site is improved with a neighborhood shopping center containing 150,766 square feet of gross building area. In the Zoning section of this appraisal, we determined that the existing improvements represent a complying use. We also determined that the existing use is a permitted use in this zone.

Physically Possible The subject improvements were constructed in 1987. The improvements are in average condition. We know of no current or pending municipal actions or covenants that would require a change to the current improvements.

Financially Feasible and Maximally Productive In the Reconciliation section, we concluded to a market value for the subject property, as improved, of $23,800,000. In our opinion, the improvements contribute significantly to the value of the site. It is likely that no alternate use would result in a higher return.

MOST LIKELY BUYER The subject is currently leased to 19 tenants. Its size, type, and configuration make it ideally suited for multiple-tenant occupancy. An examination of recent rental activity in the area suggests that there is demand for similar space in such properties by tenants within the market, and recent comparable sales indicate such properties are typically purchased by real estate investors. As a result, we conclude that the most likely purchaser of the subject is an investor, who would typically rely on the income approach to value the property.

CONCLUSION It is our opinion that the existing improvements add value to the site as though vacant, dictating a continuation of its current use. In addition, the leases encumbering the subject property mandate a continuation of the current use. It is our opinion that the Highest and Best Use of the subject property as improved is a shopping center as it is currently improved.

PARK PLACE, VALLEJO, CA VALUATION PROCESS 45

V A L U A T I O N P R O C E S S

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

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

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

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

In the Cost Approach, the appraiser forms an opinion of the cost of all improvements, depreciating them to reflect any value loss from physical, functional and external causes. Land value, entrepreneurial profit and depreciated improvement costs are then added, resulting in an opinion of value for the subject property.

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

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

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

PARK PLACE, VALLEJO, CA VALUATION PROCESS 46

SUMMARY This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these approaches would be considered applicable and/or necessary for market participants. Typical purchasers do not generally rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not utilized the Cost Approach to develop an opinion of market value.

PARK PLACE, VALLEJO, CA SALES COMPARISON APPROACH 47

S A L E S C O M P A R I S O N A P P R O A C H

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

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

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

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

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

Reduce the sale prices to a common unit of comparison such as price per square foot of gross leasable area or effective gross income multiplier;

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

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

The most widely used and market-oriented unit of comparison for properties such as the subject is the sales price per square foot of gross leasable area. All comparable sales were analyzed on this basis. The following pages contain a summary of the improved properties that we compared to the subject property, a map showing their locations, and the adjustment process. Comparable improved sale data sheets are presented in the Addenda of this report.

Due to the nature of the subject property and the level of detail available for the comparable data, we elected to analyze the comparables through the application of a traditional adjustment grid using percentage adjustments. This methodology is commonly used by participants that buy and sell property similar to the subject property, therefore; it is considered the appropriate methodology to use in this assignment.

In the Sales Comparison Approach we determined the Market Value As-Is.


PROPERTY INFORMATION TRANSACTION INFORMATION

No.Property NameAddress, City, State

Land to Building

RatioTotal

Center GLA AnchorsAnchor Ratio

Year Built Year Ren.

Parking Ratio per 1,000 sf Grantor Grantee

Sale Date Sale Price $/SF NOI/SF OAR Occup.


4.08:1 88,000 Rite Aid and In-Shape Fitness

53.5% 1981 N/A 5.52 WRI Golden State, LLC

Hall Equities Group 8/13 $12,250,000 $139.20 $13.04 9.37% 95%


3.92:1 93,840 Fresno Ag Hardware

53.2% 1991 1996 5.78 Zinkin Family Partners LP

619, LLC 5/13 $8,940,000 $95.27 $8.34 8.75% 88%

3 Village One Plaza 3020 Floyd AveModesto, CA

4.89:1 105,658 Raley's 62.2% 2007 N/A 4.00 Village One Plaza LLC

Phillips Edison - ARC 12/12 $26,500,000 $250.81 $19.06 7.60% 92%


4.39:1 95,441 Raley's 66.1% 1997 N/A 5.04 Donahue Schriber Gerrity Atlantic Retail Partners, LLC

8/12 $20,350,000 $213.22 $15.46 7.25% 96%

5 Visalia Marketplace 3247-3549 West Noble AvenueVisalia, CA

5.36:1 200,794 Save Mart and K-Mart

73.9% 1965 2008 5.73 Uhlmann Lionel Hayes Jr

Thompson National Properties, LLC

6/12 $19,000,000 $94.62 $8.28 8.75% 92%

STATISTICSLow 3.92:1 88,000 1965 1996 4.00 6/12 $8,940,000 $94.62 $8.28 7.25% 88%

High 5.36:1 200,794 2007 2008 5.78 8/13 $26,500,000 $250.81 $19.06 9.37% 96%

Average 4.53:1 116,747 1988 2002 5.21 12/12 $17,408,000 $158.63 $12.84 8.34% 93%


SUMMARY OF IMPROVED SALES


ECONOMIC ADJUSTMENTS (CUMULATIVE) PROPERTY CHARACTERISTIC ADJUSTMENTS (ADDITIVE)

No.

Price PSF &

Date

PropertyRights

ConveyedConditions

of Sale Financing

Market (1)

Conditions Subtotal Location SizeAge, Quality & Condition

Land-Building

Ratio Utility (2) Economics Other

Adj.PricePSF Overall

1 $139.20 Leased Fee Arm's-Length None Inferior $139.62 Similar Smaller Inferior Similar Similar Superior Similar $132.64 Superior

8/13 0.0% 0.0% 0.0% 0.3% 0.3% 0.0% -5.0% 5.0% 0.0% 0.0% -5.0% 0.0% -5.0%

2 $95.27 Leased Fee Arm's-Length None Inferior $96.32 Inferior Smaller Similar Inferior Similar Inferior Similar $130.03 Inferior

5/13 0.0% 0.0% 0.0% 1.1% 1.1% 10.0% -5.0% 0.0% 5.0% 0.0% 25.0% 0.0% 35.0%

3 $250.81 Leased Fee Arm's-Length None Inferior $256.58 Superior Smaller Superior Similar Similar Superior Similar $141.12 Superior

12/12 0.0% 0.0% 0.0% 2.3% 2.3% -5.0% -5.0% -20.0% 0.0% 0.0% -15.0% 0.0% -45.0%

4 $213.22 Leased Fee Arm's-Length None Inferior $220.26 Similar Smaller Superior Similar Similar Superior Similar $165.19 Superior

8/12 0.0% 0.0% 0.0% 3.3% 3.3% 0.0% -5.0% -10.0% 0.0% 0.0% -10.0% 0.0% -25.0%

5 $94.62 Leased Fee Arm's-Length None Inferior $98.22 Inferior Larger Superior Superior Similar Inferior Similar $122.78 Inferior

6/12 0.0% 0.0% 0.0% 3.8% 3.8% 10.0% 5.0% -10.0% -5.0% 0.0% 25.0% 0.0% 25.0%


$250.81 - High High - $165.19

$158.63 - Average Average - $138.35

Compiled by Cushman & Wakefield Western, Inc.(1) Market Conditions Adjustment (2) Utility Footnote

Utility includes site layout, signage, visibility

IMPROVED SALE ADJUSTMENT GRID

Compound annual change in market conditions: 3.00%

Date of Value (for adjustment calculations): 9/10/13


IMPROVED SALE LOCATION MAP

PERCENTAGE ADJUSTMENT METHOD

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

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

We made a downward adjustment to those comparables considered superior to the subject and an upward adjustment to those comparables considered inferior. Where expenditures upon sale exist, we included them in the sales price.

Property Rights Conveyed The property rights conveyed in a transaction typically have an impact on the price that is paid. Acquiring the fee simple interest implies that the buyer is acquiring the full bundle of rights. Acquiring a leased fee interest typically means that the property being acquired is encumbered by at least one lease, which is a binding agreement transferring rights of use and occupancy to the tenant. A leasehold interest involves the acquisition of a lease, which conveys the rights to use and occupy the property to the buyer for a finite period of time. At the end of the lease term, there is typically no reversionary value to the leasehold interest. Since we are valuing the leased fee interest as reflected by each of the comparables, an adjustment for property rights is not required.



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

Market Condit ions In this analysis, we determined the Market Value As-Is using the value date of September 2013. All of the comparables were adjusted to this date. The sales that are included in this analysis occurred between June 2012 and August 2013. As the market has improved over this time period, we applied an annual adjustment of 3.00 percent.

Location An adjustment for location is required when the locational characteristics of a comparable property differ from those of the subject property. The location of the subject property is rated average, and it has average access and average visibility. Each comparable was adjusted accordingly. The adjustments were made primarily for variances in demographics.

Physical Traits Each property has various physical traits that determine its appeal. These traits include size, age, condition, quality, land-to-building ratio and utility. Each comparable was adjusted accordingly.

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

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

DISCUSSION OF COMPARABLE SALES

Comparable Sale No. 1 This is an August 2013 sale of a property known as Sunset Shopping Center, located at 100-108 Sunset Ave in Suisun City, CA. This neighborhood center is anchored by Rite Aid and In-Shape Fitness and situated on a site totaling 8.25 acres. Its total gross leasable area (GLA) is 88,000 square feet, and 88,000 square feet are included in this transaction. Anchor tenants occupy 53.5 percent of the total GLA. This property was constructed in 1981. The improvements are of average quality and in average condition. The property has a land-to-building ratio of 4.08:1.00 and a parking ratio of 5.52 spaces per 1,000 square feet of building area. This neighborhood shopping center is located just north of Highway 12. The center includes several pad buildings that were not included in


this sale (IHOP, McDonalds, KFC, and Taco Bell). The property was listed at $13,000,000. The leased fee interest in this property sold from WRI Golden State, LLC to Hall Equities Group for $12,250,000, or $139.20 per square foot. The overall rate at the time of sale was 9.37 percent and the occupancy was 95.00 percent.


Comparable Sale No. 2 In this May 2013 sale, the leased fee interest of Comparable 2, known as Gettysburg Address, located at 3102-3128 E Gettysburg Ave in Fresno, CA, sold from Zinkin Family Partners LP to 619, LLC for $8,940,000, or $95.27 per square foot. The GLA included in this transaction was 93,840 square feet. This neighborhood center is anchored by Fresno Ag Hardware and contains a total GLA of 93,840 square feet, with anchor tenants occupying 53.2 percent. At the time of sale the property was 88.00 percent occupied. The property encompasses 8.45 acres with a land-to-building ratio of 3.92:1.00 and a parking ratio of 5.78 spaces per 1,000 square feet of building area. It was constructed in 1991 and the improvements on this property are average in quality, and in average condition. This neighborhood center is anchored by Fresno Ag Hardware, which occupies 49,910 square feet, at $0.58/SF/Month, NNN, expiring August 2018, with six 5-year options. Other tenants include AutoZone, Chubby's Diner, Little Caesar's, and Subway. Rents for in-line space generally range from $1.10 to $1.50/SF/Month, NNN. Asking rents are currently $1.00/SF. The property sold for $9,200,000, and included a vacant 1/2 acre pad site valued at $12.00/SF or approximately $260,000. The analyzed sale price is net of the pad site value. The overall rate at the time of sale was 8.75 percent.


Comparable Sale No. 3 This neighborhood center is known as Village One Plaza and located at 3020 Floyd Avenue in Modesto, CA. At the time of sale this center was anchored by Raley's and it was 92.00 percent occupied. The total GLA of the center is 105,658 square feet and 105,658 square feet were included in this sale. Anchor tenants occupy 62.2 percent of this center’s foot GLA. The center’s site contains 11.87 acres with a land-to-building ratio of 4.89:1.00 and a parking ratio of 4.00 spaces per 1,000 square feet of building area. The center was constructed in 2007 and the improvements are considered to be of good quality and good condition. This center is leased to 19 tenants, with Raley's being the largest. The Raley's lease is at $1.48/SF/Month, NNN, commencing in August 2007 and expiring January 2033. The property does include a Raley's gas station, but unable to confirm if that component is included in stated rent. Raley's had recently closed a nearby store. The property was purchased by a REIT. The leased fee interest in this property sold from Village One Plaza LLC to Phillips Edison - ARC for $26,500,000, or $250.81 per square foot in December 2012. The overall rate at the time of sale was 7.60 percent.


Comparable Sale No. 4 This neighborhood center is known as Raley's Plaza and located at 3330 North Texas Street in Fairfield, CA. It is anchored by Raley's. The leased fee interest in 95,441 square feet of this property sold in August 2012 from Donahue Schriber to Gerrity Atlantic Retail Partners, LLC for $20,350,000, or $213.22 per square foot. Situated on a 9.61 acres site, this center contains a total GLA of 95,441 square feet, of which anchor tenants occupy 66.1 percent. The occupancy rate at the time of sale was 96.00 percent. This center was constructed in 1997 and its improvements are of average quality and sold in average condition. The property has a land-to-building ratio of 4.39:1.00 and a parking ratio of 5.04 spaces per 1,000 square feet of building area. The income stream is relatively secure as 72% of the subject is leased to Raley's and Chase. Raley's is leased through June 2024, at $1.04/SF/Month, NNN, with three 5-year options. Other tenants include Starbucks and Panda Express. Traffic


counts at the intersection are 50,261 ADT. The average household income is $89,992 within a one-mile radius. The overall rate at the time of sale was 7.25 percent.


Comparable Sale No. 5 In June 2012 the leased fee interest in Comparable 5, known as Visalia Marketplace, sold from Uhlmann Lionel Hayes Jr to Thompson National Properties, LLC for $19,000,000, or $94.62 per square foot. This transaction included GLA of 200,794 square feet. The overall rate at the time of sale was 8.75 percent. Located at 3247-3549 West Noble Avenue in Visalia, CA, this center is situated on a site measuring 24.72 acres and contains a total GLA of 200,794 square feet. Anchors such as Save Mart and K-Mart occupy 73.9 percent of the total GLA. The center was constructed in 1965, and last renovated in 2008, and its improvements are of average quality and average condition. The property’s land-to-building ratio is 5.36:1.00 and its parking ratio is 5.73 spaces per 1,000 square feet of building area. The center is anchored by Save Market Supermarket and Kmart. Other tenants include Starbucks and Brandman University. The property was originally developed in 1965 but was renovated in 2008. The current size of the property reflects the demolition of a previous “building C”, which contained 32,241 square feet. The seller also represented there is the potential to develop an additional 60,000 square feet of space, with a proposed ground lease for this space. The two anchor tenants are leased long-term, with Save Mart expiring in 2028 and in Kmart 2024. The center was 92 percent leased at sale. The asking price was $19,950,000. At the time of sale this center was 92.00 percent occupied.


Summary of Percentage Adjustment Method We used the Sales Comparison Approach to determine the Market Value As-Is of the subject property.

After adjustments, the comparable improved sales reflect unit values ranging from $122.78 to $165.19 per square foot with an average adjusted value of $138.35 per square foot.

Due to the number of and magnitude of adjustments made, no particular sale was given most weight in the analysis. It is our opinion that the subject could achieve a unit value proximate to the adjusted mean.

Therefore, we concluded that the indicated value by the Percentage Adjustment Method was:

Indicated Value per Square Foot GLA $145.00

Net Rentable Area in Square Feet x 150,766

Indicated Preliminary Value $21,861,070

$21,900,000

Per square foot $145.26



APPLICATION TO SUBJECT Market Value As-Is

PARK PLACE, VALLEJO, CA INCOME CAPITALIZATION APPROACH 54

I N C O M E C A P I T A L I Z A T I O N A P P R O A C H

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

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

Investors acquiring this type of asset will typically look at year one returns but must also consider long-term strategies. Hence, depending on certain factors, each of the income approach methods has merit. We used both Yield and Direct capitalization, and each method is well-supported by ample, recent market data. As a result, we placed roughly equal reliance on each of the techniques, and feel that a prospective purchaser would follow this approach.

POTENTIAL GROSS INCOME Potential gross income is generated by a number of distinct elements:

Minimum rent determined by the lease agreement

Reimbursement of certain expenses incurred in the ownership and operation of the real estate

Other miscellaneous revenues

Minimum base rent is a legal contract between landlord and tenant establishing a return to investors in the real estate. The lease terms also dictate specific expense reimbursement charges that can be billed to the tenant. Finally, miscellaneous income can be generated from a variety of sources. The first step in this appraisal is to analyze all potential gross income, starting with an analysis of the subject’s tenancy.

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


SPACE SUMMARY & OCCUPANCY STATUS The following is a summary of the occupied and vacant space within the subject property. The subject property contains 150,766 square feet of space, of which 140,723 square feet are occupied. One new tenant is completing its tenant improvements. We understand that rent commences in September 2013.

SPACE SUMMARY & OCCUPANCY STATUSSPACE SUMMARY TENANT COUNT

Tenant Category Occ. SF Vct. SF Total SF Occupancy Occupied Vacant Total

Confidential 60,114 - 60,114 100.0% 1 0 1Confidential 22,000 - 22,000 100.0% 1 0 1Confidential 30,997 10,043 41,040 75.5% 10 5 15Confidential 4,525 - 4,525 100.0% 4 0 4Confidential 23,087 - 23,087 100.0% 3 0 3

Total 140,723 10,043 150,766 93.3% 19 5 24


There are a total of 24 tenant spaces, of which 19 spaces are leased, and 5 are vacant. The chart summarizes the occupancy level based on the leases in place as of the date of appraisal.

Base rent produced by the subject property is derived from that paid by the various tenant types. The projection used in this analysis is based on the actual rent roll as of the date of appraisal, together with our assumptions regarding the absorption of the vacant space, market rent growth, and renewal/turnover probability.

The rental income an asset such as the subject property will generate for an investor is analyzed based on its quality, quantity, and durability. The quality and probable duration of income will affect the amount of potential risk over the property's investment holding period. By segregating the income stream along these lines we can control the variables related to the forecasted performance with greater accuracy.

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

LEASE STRUCTURE

Types of Leases In addition to base rent, tenants are often required to reimburse the landlord for certain expenses. Expense recovery clauses range from absolutely net (whereby the tenant pays all property expenses) to fully gross (in which the tenant pays no expenses). Recovery provisions can vary by property type and locale, and can fall anywhere within the net to gross range.

Local Market Lease Structure In the subject’s market, leases are typically written on a net basis, whereby the tenants are responsible for their pro-rata share of all operating expenses including real estate taxes, insurance, common area maintenance (CAM) and management. At times, the management includes an administrative fee as well ranging generally from 10.0 to 15.0 percent.


Lease terms are generally between 10 and 20 years for anchor and major tenants and from 5 to 10 years for inline tenants. Leases that are 5 years or less in length typically include annual escalations of 3.0 percent. Longer lease terms generally include a 10.0 to 15.0 percent rent bump every five years.

Subject Property Lease Structure The existing retail leases at the subject property are written on a triple net basis, with the tenants responsible for their pro-rata share of all operating expenses including real estate taxes, insurance, CAM and an administrative fee from 10.0 to 15.0 percent. Many of the tenants also pay a management fee within the CAM charges.

At the subject property, lease terms are generally between 5 and 10 years. Leases that are five years or less in length typically include annual escalations of 3.0 percent. Longer lease terms generally include a 10 percent rent bump every five years of the lease term.


MARKET RENT ESTIMATE

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


ATTAINED RENT SCHEDULEAs Of Value Date:

Start End Area Contract Contract LeaseTenant Name Date Date ( SF ) Rent/Year Rent/SF Type(1)

Anchor 1Confidential Sep-87 Sep-17 60,114 $457,464 $7.611 tenant subtotal 60,114 $457,464 $7.61 Net

Anchor 2Confidential Aug-03 Jul-23 22,000 $396,000 $18.001 tenant subtotal 22,000 $396,000 $18.00 Net

ShopConfidential Nov-02 Jan-18 11,200 $79,188 $7.07Confidential Mar-00 Mar-15 1,957 $42,348 $21.64Confidential Aug-13 Apr-18 3,720 $73,920 $19.87Confidential Mar-88 Mar-18 2,510 $76,284 $30.39Confidential Nov-03 Feb-14 2,545 $59,556 $23.40Confidential Sep-11 Oct-16 1,200 $22,464 $18.72Confidential Nov-03 Oct-18 2,400 $55,464 $23.11Confidential Feb-03 Aug-14 3,065 $53,664 $17.51Confidential Oct-87 Oct-17 1,200 $49,044 $40.87Confidential Jul-06 Jun-16 1,200 $36,156 $30.1310 tenants subtotal 30,997 $548,088 $17.68 Net

Pad 8Confidential Sep-02 Aug-17 1,125 $31,668 $28.15Confidential Oct-99 Sep-15 900 $20,364 $22.63Confidential Nov-09 May-14 1,000 $15,600 $15.60Confidential Nov-09 Aug-14 1,500 $36,852 $24.574 tenants subtotal 4,525 $104,484 $23.09 Net

Pad 1, 2, 3Confidential Feb-02 Jan-17 3,900 $119,772 $30.71Confidential Jul-11 Nov-16 7,200 $116,640 $16.20Confidential May-13 Aug-23 11,987 $251,724 $21.003 tenants subtotal 23,087 $488,136 $21.14 Net

GRAND-TOTALS 140,723 $1,994,172 $14.17 Net

Note: Attained rent equals current rent annualized for twelve months, and it excludes contractual rent increases


(1) Lease Types as defined by The Appraisal Institute

Sep-13

A total of 19 tenants currently lease space within the property. The average rent for all of the existing tenants is $14.17 per square foot. The grand-totals exhibited in the attained rent schedule for contract rent do not incorporate lease-up or downtime provisions. Hence, the grand-totals might differ from the projections shown later in this section.


Attained Rent Summary We presented a table detailing the individual leases encumbering the subject property. Below is a synopsis of the attained rent schedule (unadjusted for lease type equivalency).

ANNUALIZED RENT - OCCUPIED SPACE

Tenant Category Occ. SFNo.

Spaces Total Rent Avg. $/SFConfidential 60,114 1 $457,464 $7.61Confidential 22,000 1 $396,000 $18.00Confidential 30,997 10 $548,088 $17.68Confidential 4,525 4 $104,484 $23.09Confidential 23,087 3 $488,136 $21.14

Total 140,723 19 $1,994,172 $14.17


Both of the anchors appear to have favorable renewal options.

Month-To-Month Leases Two tenants are month-to-month tenants. We assumed that these tenants will remain in place through August 2014, after which the standard speculative renewal assumptions are applied

Asking Rents At Subject Property The subject property has 10,043 square feet of vacant space, contained within 5 tenant spaces. The leasing agent has this space listed on the market at the following terms.

The asking rents range from $18.00 to $30.00 per square foot per annum triple net for shop space and from $33.00 to $39.00 per square foot per annum triple net for pad space.

The broker is currently marketing the one of the existing tenant spaces. The plan is to move this tenant to some inline space and reduce their size commitment.

The ownership plans to re-tenant Building 200 for multi-tenancy. This space has been on the market for 12 months.

One space has been on the market for less than 30 days. The tenant is a month-to-month tenant.

According to Costar, the other available units have been on the market from 10 to 66 months. We understand that the landlord was looking for national tenants to backfill these spaces.


Recent Leasing At Subject Property The following chart summarizes the property’s recent leases.

RECENT LEASING AT SUBJECT PROPERTY (BY CATEGORY)Start End Term Area Initial Final Rent Change Rent Lease Months

Tenant Name Date Date (Yrs) (SF) Initial rent Rent/SF Rent/SF over Term Steps Type Free TI/SF

Shop

Shop Aug-13 Apr-18 4 3,720 $73,916 $19.87 $19.87 0.00% Flat Net 0 $10.75

Sub-Total 3,720 $73,916 $19.87 $19.87 0.00%

Pad 100-200-300

Pad May-13 Aug-23 10 11,987 $251,727 $21.00 $26.60 26.67% Years 1-2: Flat; thereafter 3% per

annum

Net 10 $ 35.86

Sub-Total 11,987 $251,727 $21.00 $26.60 26.67%

GRAND TOTALSNo. of Recent Leases 2 7 15,707 $325,643 $20.73 $25.01 20.61%


One of the existing tenants renewed and expanded to a larger space. The rent is flat for five years and the tenant was granted a tenant improvement allowance of $10.75 per square foot for the new space. The tenant improvement allowance may account for this tenant’s over market rent.

A new tenant has a starting rent of $21.00 per square foot per annum triple net. After year 2, the rent increases approximately 3.0 percent per annum. The landlord provided $250,000 for building improvements plus a tenant improvement allowance of $15.00 per square foot.


Analysis of Comparable Anchor Rents The following table summarizes rental activity for comparable space in competing buildings in the market.


RETAIL ANCHOR RENT COMPARABLESPROPERTY INFORMATION LEASE INFORMATION

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SF

COMMENTS

S Subject Property 150,766 1987 N/A 3.58

1 Jacson Square277 West Jackson StreetHayward, CA

Neighborhood Center

114,220 87,015 1972 N/A 4.90 Safeway 4/12 39,956 5 $13.44 Flat Net 0 $0 Lease renewal based upon market terms. No Tis or free rent. CVS and 24 Hour Fitness are also anchors in the center.

2 Pinole Vista Crossing1200 Fitzgerald DrivePinole, CA

Neighborhood Center

207,624 112,843 1997 N/A 5.00 Petsmart 3/12 15,011 10 $13.56 Year 6: 10% increase

Net 0 $5 The center is shadow anchored by Taget and Burlington Coat Factory. Anchors include Food Maxx, Toys 'R Us, and Staples.

3 The Crossroads at Pleasant Hill2314 Monument BoulevardPleasanton, CA

Community Center

275,047 NA 1963 2013 5.00 Dick's Sporting Goods

Est. 2/1/2013 70,000 10 $21.00 Year 6: 10% Net 0 $40 Excellent location off of I-680. Anchors include Kohl's and Marshalls. Landlord is building new shell building and providing $40 to $45 per square foot for tenant improvements.

4 Slatten Ranch East5769 Lone Tree WayAntioch, CA

Neighborhood Center

167,405 102,560 2003 N/A 5.00 Sports Authority 10/12 40,000 10 $14.40 Year 6: 10% increase

Net 18 $34 This portion of Contra Costa County is still economically depressed. The rent commencement is February 1, 2015.

5 Downtown Pleasant Hill1796 Contra Costa BoulevardPleasant Hill, CA

Lifestyle Center

345,687 195,000 1999 NA 4.58 GolfSmith 3/12 25,000 10 $22.00 Year 6: 12% Net 0 $0 Excellent location off of I-680. Anchors include Century Theatres (16), Lucky (supermarket), Ross, Michaels, Golfsmith, and Bed Bath & Beyond.

STATISTICS

Low 114,220 87,015 1963 2013 4.58 3/12 15,011 5 $13.44 0 $0

High 345,687 195,000 2003 2013 5.00 10/12 70,000 10 $22.00 18 $40

Average 221,997 124,355 1987 2013 4.90 5/12 37,993 9 $16.88 4 $16



COMPARABLE ANCHOR RENTAL LOCATION MAP

DISCUSSION OF COMPARABLE RENTS We analyzed leases negotiated in competitive buildings in the marketplace. The comparables range in size from 15,011 square feet to 70,000 square feet. The comparable leases have terms ranging from 5 to 10 years. The comparables exhibit a range of rents from $13.44 to $22.00 per square foot per annum triple net, with an average of $16.88 per square foot per annum triple net.

Free rent concessions ranged from 0 to 18 months, averaging 3.60 months. Tenant improvement allowances ranged from $0.00 to $40.00 per square foot, averaging $15.80. Rent escalation clauses vary, with most having percentage increases of 10.0 percent every five years. All of these are triple net leases similar to the subject’s leases.

Comparable 1 suggests that the grocery anchor is leased below market. We found a number of other supermarket rents in the San Francisco Bay Area. These suggested a range from $12.00 to $28.00 per square foot per annum triple net for this store. We estimated market rent for this store to be $15.00 per square foot per annum triple net. This tenant also has a favorable option to extend its lease beyond the holding period.

The remaining comparables were considered to estimate market rent for the subject’s other anchor. This tenant is currently paying $18.00 per square foot per annum triple net, which appears to be within market levels. We also surveyed some older fitness facility rent comparables that further support our market rent conclusion for this tenant. These are shown as follows:


PROPERTY INFORMATION LEASE INFORMATION

NO.Property NameAddress, City, State C

EN

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COMMENTS

2 Safeway Center462 Sunnyvale Saratoga RoadSunnyvale, CA

120,000 120,000 2011 N/A 5.00 24 Hour Fitness USA

4/11 44,790 15 $34.32 N/A Net 0 $50 Safeway ground leased the center and built the building.

3 Gould Plaza1001 East Capitol Expressway San Jose, CA

127,864 73,200 1978 2010 4.50 Bay Area Fitness Centers

6/11 38,133 10 $15.00 3.0% per annum

Net 9 $0 Anchors include Lion Supermarket and Bay Area Fitness Centers.

4 Jackson Square24727 Amador Street Hayward, CA

112,125 87,009 1972 NA 5.10 24 Hour Fitness 12/10 23,400 5 $17.76 Flat Net 0 $0 Lease renewal. Facilty includes lap pool, sauna, whirlpool and steam rooms. Anchors include Safeway and CVS.

5 Unnamed1825 Hillsdale Avenue San Jose, CA

74,514 38,364 1968 2001 4.50 24-Hour Fitness 12/10 32,000 10 $15.00 Year 6: 15% Net 0 $0 Lease renewal. Facility includes full size basketball court, indoor lap pool, whirlpool, sauna and steam rooms. Other anchors include The Home Depot and TJ Maxx. Renovated 2001.

Conclusion of Market Rent for Anchor Space Based on recent leasing activity at the subject property and our analysis of the comparables, we concluded at the market rents shown in the Market Rent Synopsis table shown later in this section of the report.


Analysis of Comparable Shop/Pad Rents The following table summarizes rental activity for comparable space in competing buildings in the market.


RETAIL SHOP/PAD RENT COMPARABLESPROPERTY INFORMATION LEASE INFORMATION

NO.Property NameAddress, City, State S

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SF

COMMENTS

S Subject Property 150,766 1987 N/A 3.58

1 Vallejo Plaza3315 Sonoma BoulevardVallejo, CA

Neighborhood Center

239,695 141,050 1961 1980 4.50 Biz Center 4/12 1,220 3 $18.00 Flat Net 0 $4.68 Anchors include DD/s Discount and Seafood City.

2 Vallejo Plaza3315 Sonoma BoulevardVallejo, CA

Neighborhood Center

239,695 141,050 1961 1980 4.50 Karaoke 7/12 1,937 1 $16.44 Flat Net 0 $0.00 Anchors include DD/s Discount and Seafood City. This is a short-term lease in a pad building.

3 Solano 802001 Solano AvenueVallejo, CA

Neighborhood Center

113,800 78,230 1968 2010 5.00 Real PCS 4/12 1,191 10 $21.00 Annual CPI Net 0 $0.00 Anchors include Mi Pueblo Foods (now in bankruptcy), Rite Aid and Harbor Freight Tools.

4 Solano 802001 Solano AvenueVallejo, CA

Neighborhood Center

133,800 78,230 1968 2010 5.00 AJR Watch 4/12 1,224 5 $18.00 Annual CPI Net 0 $0.00 Anchors include Mi Pueblo Foods (now in bankruptcy), Rite Aid and Harbor Freight Tools.

5 Unnamed3612 Sonoma BoulevardVallejo, CA

Convenience/ Strip Center

12,584 N/A 1978 N/A 4.80 Carpet store 3/13 2,400 3 $8.28 Annual CPI Net 0 $0.00 DVS and B&N Furniture are the shadow anchors for this strip center.

6 Vallejo Village4380 Sonoma BoulevardVallejo, CA

Convenience/ Strip Center

41,190 N/A 1980 N/A 4.00 Convenience Store

1/13 1,200 3 $12.00 $0.60/SF every year

Net 1 $0.00 This is an unachored center at Highway 37 and Sonoma Boulevard.

7 Glen Cove Center100 Robles DriveVallejo, CA

Neighborhood Center

66,000 50,360 1990 2009 5.00 GNC 5/13 2,085 5 $13.78 Flat Net 0 $20.00 Anchored by Safeway and recently romodeled. Triple net costs are $0.85/sf/month.

8 Glen Cove Center100 Robles DriveVallejo, CA

Neighborhood Center

66,000 50,360 1990 2009 5.00 Available space 9/13 1,425 5 $30.00 Neg. Net 0 $0.00 Anchored by Safeway and recently romodeled. Triple net costs are $0.85/sf/month.

STATISTICS

Low 12,584 50,360 1961 1980 4.00 4/12 1,191 1 $8.28 0 $0.00

High 239,695 141,050 1990 2010 5.00 9/13 2,400 10 $30.00 1 $20.00

Average 114,096 89,880 1975 2000 4.73 10/12 1,585 4 $17.19 0 $3.09



COMPARABLE SHOP/PAD RENTAL LOCATION MAP

DISCUSSION OF COMPARABLE RENTS We analyzed leases negotiated in competitive buildings in the marketplace. The comparables range in size from 1,191 square feet to 2,400 square feet. These are all located in buildings similar in class to the subject, and in the subject’s competitive market. The comparable leases have terms ranging from 1 to 10 years. The comparables exhibit a range of rents from $8.28 to $30.00 per square foot per annum triple net, with an average of $17.19 per square foot per annum triple net.

Free rent concessions ranged from 0 to 1 months, averaging 0.13 months. Tenant improvement allowances ranged from $0.00 to $20.00 per square foot, averaging $3.09. Rent escalation clauses vary, with many having annual CPI increases. All of these are triple net leases similar to the subject’s leases.

Greatest reliance has been placed on recent new lease at the subject property for the pad building located along Sonoma Boulevard. These buildings include Pads 100, 200 and 300.

The rent comparables bracket our rent conclusions for the shop space and Pad 800.

Conclusion of Market Rent for Shop/Pad Space Based on recent leasing activity at the subject property and our analysis of the comparables, we concluded at the market rents shown in the Market Rent Synopsis table.


MARKET RENT CONCLUSION The following chart summarizes our market rent conclusion for each tenant category in the subject property.

MARKET RENT SYNOPSISTENANT CATEGORY Anchor 1 Anchor 2 Shop Pad 8 Pads 1, 2, 3Market Rent/SF/Annum $15.00 $18.00 $15.00 $24.00 $21.00Lease Term (years) 10 10 5 5 5Lease Type (reimbursements) Net Net Net Net NetContract Rent Increase Projection 10% every 5 years 10% every 5 years 3% per annum 3% per annum 3% per annum


COMPARISON OF CONTRACT RENTS TO MARKET We previously outlined an attained rent schedule for all current tenants of the subject property. Adjustments were made to the subject leases to account for lease type equivalency, so all of the subject’s rents could be analyzed on a like-kind basis. For comparison to the market, we will look at the lease type equivalent rates that were developed earlier in this report. It should be noted that attained rents are calculated without reference to tenant contributions over expense stops.

The following chart outlines our estimated market rent for each tenant space in the subject property and the attained equivalent rent exclusive of contributions of each lease. Comparing these figures allows us to identify whether the attained rent levels are at, above or below the market. The results of this comparison will have an impact on our selection of the investment rates used in evaluating this property.


ATTAINED RENT LEVELS

Area Equiv. Rent Equiv.Tenant Name ( SF ) Per Year Rent/SF Rent/SF Annualized

Anchor 1Confidential 60,114 $457,464 $7.61 $15.00 $901,710 49.27% below market

60,114 $457,464 $7.61 $15.00 $901,710 49.27% below market

Anchor 2Confidential 22,000 $396,000 $18.00 $18.00 $396,000 0.00% at market

22,000 $396,000 $18.00 $18.00 $396,000 0.00% at market

ShopConfidential 11,200 $79,188 $7.07 $15.00 $168,000 52.86% below marketConfidential 1,957 $42,348 $21.64 $15.00 $29,355 44.26% above marketConfidential 3,720 $73,920 $19.87 $15.00 $55,800 32.47% above marketConfidential 2,510 $76,284 $30.39 $15.00 $37,650 102.61% above marketConfidential 2,545 $59,556 $23.40 $15.00 $38,175 56.01% above marketConfidential 1,200 $22,464 $18.72 $15.00 $18,000 24.80% above marketConfidential 2,400 $55,464 $23.11 $15.00 $36,000 54.07% above marketConfidential 3,065 $53,664 $17.51 $15.00 $45,975 16.72% above marketConfidential 1,200 $49,044 $40.87 $15.00 $18,000 172.47% above marketConfidential 1,200 $36,156 $30.13 $15.00 $18,000 100.87% above market

30,997 $548,088 $17.68 $15.00 $464,955 17.88% above market

Pad 8Confidential 1,125 $31,668 $28.15 $24.00 $27,000 17.29% above marketConfidential 900 $20,364 $22.63 $24.00 $21,600 5.72% below marketConfidential 1,000 $15,600 $15.60 $24.00 $24,000 35.00% below marketConfidential 1,500 $36,852 $24.57 $24.00 $36,000 2.37% above market

4,525 $104,484 $23.09 $24.00 $108,600 3.79% below market

Pad 1, 2, 3Confidential 3,900 $119,772 $30.71 $21.00 $81,900 46.24% above marketConfidential 7,200 $116,640 $16.20 $21.00 $151,200 22.86% below marketConfidential 11,987 $251,724 $21.00 $21.00 $251,727 0.00% below market

23,087 $488,136 $21.14 $21.00 $484,827 0.68% above market

GRAND-TOTALS 140,723 $1,994,172 $14.17 $16.74 $2,356,092 15.36% below market

Note: Attained rent equals current rent annualized for twelve months, and it excludes contractual rent increases


Contract Rent Versus Market Rent

MARKET RENT COMPARISON

Contract Rent Market Rent Comparison

As shown above, the subject property’s average contract rent is currently 15.4 percent below market. When a property is acquired with leases that are at or close to market rent levels, the level of risk involved with the investment is generally low. However, the potential increase to the income stream in this scenario is typically limited, which tends to normalize the investment parameters of participants for these types of properties.

When a property has attained rent levels that are below market, the early returns are generally limited but there is greater potential for the income stream to increase as the below market leases rollover. There is less risk involved with tenants with below market leases, as they have a greater ability to pay the lower rent than they would market


level rent. Buyers of properties with below market leases are often entering a lower risk investment with greater upside to their eventual income earning potential, resulting in overall rates that tend to be lower than normal.

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

ABSORPTION OF VACANT SPACE The subject property is presently 93.34 percent occupied, with 10,043 square feet of vacant space in tenant spaces. This represents stabilized occupancy for the subject property.

The following chart summarizes our absorption forecast for this property.

ABSORPTION SCHEDULEVacant Space

Name Unit # GLA DateTenant

CategoryMarketRent (1) Annual

*Vacant 516 516 2,443 Jun-14 Shop $15.00 $36,645*Vacant 524 524 4,000 Sep-14 Shop $15.00 $60,000*Vacant 740 740 1,200 Mar-14 Shop $15.00 $18,000*Vacant 748 748 1,200 May-14 Shop $15.00 $18,000*Vacant 756 756 1,200 Jul-14 Shop $15.00 $18,000

Total 10,043 $15.00 $150,645

(1) Reflects current market rent, which will grow at our forecasted growth rate discussed herein.

ABSORPTION STATISTICSAnalysis Start Date 09/01/13Absorption Commencement 03/01/14Absorption Completion 09/01/14Total Absorption Period (Months) 12Absorption Per Month (SF) 837


We forecast an absorption period of 12 months to lease this space. The market rent noted in the chart reflects a current market rent estimate. If the space is forecast to lease beyond year one of the analysis, the market rent listed above will have grown at our market rent growth rate derived in this report.

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


LEASE EXPIRATION SCHEDULE

YearSquare

Feet Expiring

Percent of

PropertyCumulative

Sq FtCumulative

Percent

1 8,110 5.38% 8,110 5.38%2 1,957 1.30% 10,067 6.68%3 2,100 1.39% 12,167 8.07%4 13,425 8.90% 25,592 16.97%5 78,744 52.23% 104,336 69.20%6 15,988 10.60% 120,324 79.81%7 6,522 4.33% 126,846 84.13%8 900 0.60% 127,746 84.73%9 13,500 8.95% 141,246 93.69%10 53,742 35.65% 194,988 129.33%


020,00040,00060,00080,000

100,000120,000140,000160,000180,000200,000

1 2 3 4 5 6 7 8 9 10

SQUARE

FEET

ANALYSIS YEAR

Lease Expiration Schedule

Cumulative Square Feet Square Feet Per Year

The following table provides a synopsis of the lease expiration anticipated at this property during the analysis period.

LEASE EXPIRATION ANALYSISTotal GLA of Subject Property (SF) 150,766 100.00%Year of Peak Expiration 5SF Expiring in Peak Year 78,744 52.23%Five Year Cumulative Expirations (SF) 104,336 69.20%Ten Year Cumulative Expirations (SF) 194,988 129.33%Compiled by Cushman & Wakefield Western, Inc.

The most desirable scenario from a leasing risk standpoint is to have expirations spread evenly over the holding period. In reality, expirations are typically not evenly dispersed. Depending upon expectations of market


performance, excessive leasing exposure can increase risk and impact discount and capitalization rates for a property.

A complete lease expiration schedule is contained in the Addenda of this report.

ASSUMPTIONS REGARDING EXISTING LEASES We modeled all leases in accordance with the lease terms provided by ownership. None of the tenants is currently in default, and we assume that they will fulfill the obligations of their leases. All month-to-month tenants were assumed to vacate or sign a new lease after 12 months of the cash flow start date. We assumed that tenants with favorable renewal options would exercise those options. In instances when a tenant has a renewal option that is above market, we assumed a rollover to the weighted market parameters. After comparing the options terms of the existing tenants with our projection of market rent we included the following renewal options in our analysis as they are favorable to the tenant and thus likely to be exercised.

Lease Option SummaryOption Option Option Initial Option Market Market

Start End Term Area Option Rent Rent at Rent PSF

Tenant Name Date Date Years SF Rent PSF Option at Option

Confidential Aug-23 Jul-33 10.0 22,000 $471,900 $21.45 $516,690 $23.49

Confidential Oct-17 Sep-32 15.0 60,114 $457,468 $7.61 $1,014,883 $16.88


CO-TENANCY A common clause in retail lease contracts which provides tenants certain rights or penalties (typically early cancellation or rent reductions) in the event a named Co-Tenant closes its store or certain occupancy thresholds are not maintained. While co-tenancy clauses are meant to protect a tenant, they can exacerbate the impact of the loss of a co-tenant or reduction in occupancy in a center. Traditionally named co-tenants have been limited to the anchor stores of a center but have expanded over the past several years to include notable inline tenants.

One tenant has a co-tenancy clause tied to the supermarket anchor.

REVENUE & EXPENSE ANALYSIS We developed an opinion of the property’s annual income and operating expenses after reviewing both its historical performance and the operating performance of similar buildings. We analyzed each item of expense and developed an opinion regarding what an informed investor would consider typical.

A historical operating history for the property, annualized April 2012 through December 2012 statement, and our opinion of future income and expenses are presented on the following chart, followed by an analysis of subject property’s revenue and expenses.


REVENUE AND EXPENSE ANALYSIS

REVENUE Total PSF Total PSF Total PSF Total PSF

Base Rental Revenue $1,841,513 $12.21 $1,634,076 $10.84 $1,746,181 $11.58 $2,112,146 $14.01

Reimbursement RevenueCAM, Insurance, Management $603,000 $4.00 $459,812 $3.05 $546,216 $3.62 $598,741 $3.97Real Estate Taxes (182,949) (1.21) 175,422 1.16 231,248 1.53 262,527 1.74

Total Reimbursement Revenue $420,051 $2.79 $635,234 $4.21 $777,464 $5.16 $861,268 $5.71

POTENTIAL GROSS REVENUE $2,261,564 $15.00 $2,269,310 $15.05 $2,523,645 $16.74 $2,973,414 $19.72 Vacancy and Collection Loss 0 0.00 0 0.00 0 0.00 (273,974) (1.82)

EFFECTIVE GROSS REVENUE $2,261,564 $15.00 $2,269,310 $15.05 $2,523,645 $16.74 $2,699,440 $17.90

OPERATING EXPENSESProperty Insurance 38,341 0.25 35,510 0.24 58,191 0.39 60,000 0.40Management Fees 72,012 0.48 68,941 0.46 96,820 0.64 80,983 0.54Common Area Maintenance 563,221 3.74 516,653 3.43 452,572 3.00 475,000 3.15Non-Reimbursable 18,685 0.12 12,986 0.09 71,881 0.48 22,615 0.15Total Operating Expenses $692,259 $4.59 $634,090 $4.21 $679,464 $4.51 $638,598 $4.24

Real Estate Taxes 222,434 1.48 226,683 1.50 230,584 1.53 270,363 1.79TOTAL EXPENSES $914,693 $6.07 $860,773 $5.71 $910,048 $6.04 $908,961 $6.03NET OPERATING INCOME $1,346,871 $8.93 $1,408,537 $9.34 $1,613,597 $10.70 $1,790,479 $11.88

Kimco Kimco Zamias(1) Fiscal Year Beginning: 9/01/2013

(2) Statement Period: 4/12 to 12/12

Fiscal Year Ending: 8/31/2014 No. of months included: 9Compiled by Cushman & Wakefield Western, Inc.

2010 Actual 2011 ActualPartial Year (2)

Annualized C&W Forecast (1)


BASE RENTAL REVENUE Base rental revenue is comprised of actual attained rent from existing leases, and potential rent that can be generated by vacant or rollover space.

The projected base rental revenue for year one of our analysis will be an amalgamation of various factors including contractual rents and increases, base rent that will be generated by vacant space as it is absorbed, as well as rent that is lost/generated for leases expiring in the first year, weighted by our rollover assumptions. Over the analysis period base rental revenue has ranged from $1,634,076 to $1,841,513 averaging $1,737,795.

After a thorough analysis of the actual leases and the August 2013 Rent Roll, along with our forecast for future leasing, projected base rental revenue for the subject property in year one is at $2,112,146, which equates to $14.01 per square foot.

The primary difference for this variance is that a new tenant will add $250,000 of base rental income in Year 1. Also, there is absorption estimated over the next 12 months and many tenants will have rent increases in Year 1.

EXPENSE REIMBURSEMENTS The contractual lease obligations of the tenants specify that certain operating expenses are reimbursed to the landlord. The expense reimbursements that we forecast for the subject property are discussed below:

CAM, Insurance & Management:

Historically this reimbursement has ranged from $459,812 to $603,000, averaging $531,406. Based on our analysis, we estimated this reimbursement for year one at $598,741, which equates to $3.97 per square foot.

Real Estate Taxes Historically this reimbursement has ranged from $39,485 to $402,105, averaging $220,795. Based on our analysis, we estimated this reimbursement for year one at $262,527, which equates to $1.74 per square foot.

SUMMARY We analyzed the historical reimbursement revenue, and made a projection of the future expense reimbursement revenue based on these figures. We also considered the contractual terms of the existing leases, together with our assumptions related to future leasing.

The existing tenants are responsible for their pro-rata share of real estate taxes and operating expenses. Over the analysis period reimbursements have ranged from $499,297 to $1,005,105 averaging $752,201. Based on our analysis, we estimated total reimbursement revenue for year one at $861,268 which equates to $5.71 per square foot.

VACANCY AND COLLECTION LOSS Vacancy and collection loss is a function of the interrelationship between absorption, lease expiration, renewal probability, estimated downtime between leases, and a collection loss factor based on the relative stability and credit of the subject’s tenant base. Earlier in the report we discussed the vacancy rates for the market in which the subject property is located. We also discussed the subject’s occupancy level, which conversely represents its current vacancy level. The following are key statistics that we considered in projecting the appropriate vacancy and collection loss for the subject property.


VACANCY ANALYSISVacancy Statistics Rate Building Class and Market

Current Vacancy at Subject Property 6.7% (Based on leases in place as of appraisal date)

Regional Vacancy Statistics 10.4% Terranomics 2q-13 Solano County

Local Vacancy Statistics 11.6% Terranomics 2q-13 Benicia & Vallejo

Competitive Property Vacancy Statistics 8.5% Class A Office Space - Competitive Set


Based on the historical occupancy of the subject, the current vacancy in the market, and our perception of future market vacancy, we projected a global stabilized vacancy rate of 10.00 percent. We also deducted a collection loss of 2.00 percent. Total vacancy and collection loss is equal to 12.00 percent.

For the anchors, we calculated a vacancy rate of 5.0 percent and a collection loss of 1.0 percent for a total of 6.0 percent for these tenants.

In year one, vacancy and collection loss is projected to be $273,974.

OPERATING EXPENSE ANALYSIS Cushman & Wakefield, Inc. recognizes the standards defined by the Appraisal Institute as the definitive standards by which operating expense data should be analyzed. All operating statements provided by ownership have been recast to reflect these definitions, which are provided in the Glossary section of this appraisal report. In forecasting expenses, we relied on the owner’s historical statements and analyzed expense levels at competing properties. Our expense forecast is presented below, followed by a discussion of each expense line item.

EXPENSE FORECAST ANALYSIS

Expense Category Min Max Average Year 1 $/SFProperty Insurance $35,510 $38,341 $36,926 $60,000 $0.40Management Fees $68,941 $72,012 $70,477 $80,983 $0.54Common Area Maintenance $516,653 $563,221 $539,937 $475,000 $3.15Real Estate Taxes $222,434 $226,683 $224,559 $270,363 $1.79Non-Reimbursable $12,986 $18,685 $15,836 $22,615 $0.15

TOTAL EXPENSES $856,524 $918,942 $887,733 $908,961 $6.03p g p(1) Reporting Period includes actual historical data only exclusive of budget and/or partial year figures

Reporting Period (1) C&W Forecast Stabilized

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

Property Insurance Property insurance includes coverage for general liability and loss or damage to the property caused by fire, lightning, vandalism and malicious mischief, and additional perils. The historical expenses for property insurance from 2010 to 2011 ranged from $35,510 to $38,341 with an average of $36,926. The 2012 annualized expense was $58,191.We estimated this expense for year one at $60,000, which equates to $0.40 per square foot.


Management Fees This expense includes the costs paid for professional management services. Management services may be contracted for or provided by the property owner. Management fees for this type of property typically range from 3.00 to 5.00 percent of effective gross income. We utilized a management fee of 3.00 percent of effective gross income, which we consider to be market oriented.

Historically, management fees ranged from $68,941 to $72,012 and averaged $70,477.Based on our analysis, we estimated this expense for year one at $80,983, which equates to $0.54 per square foot.

Common Area Maintenance

This expense includes all costs incurred for the repair, maintenance, and general upkeep of common areas within the subject property. The historical expenses for common area maintenance from 2010 to 2011 ranged from $516,653 to $563,221, averaging $539,937.Based on our analysis, we estimated this expense for year one at $475,000, which equates to $3.15 per square foot.

Real Estate Taxes A complete discussion of taxes for the subject property is included in the Real Property Taxes and Assessments section of this report. The historical real estate taxes from 2010 to 2011 ranged from $222,434 to $226,683, averaging $224,559. Based on our analysis, we estimated this expense for year one at $270,363, which equates to $1.79 per square foot.

Other Non-Reimbursable

Historically this expense has ranged from $12,986 to $18,685, averaging $15,836. Based on our analysis, we estimated this expense for year one at $22,615, which equates to $0.15 per square foot.

OPERATING EXPENSE CONCLUSION We thoroughly analyzed the subject’s operating expense history and we used this information to make our projections. We forecast total operating expenses for the subject property (excluding real estate taxes) to be $638,598, equating to $4.24 per square foot. The operating expenses (excluding real estate taxes) projected for the subject property reflect an operating expense ratio at stabilization of 23.66 percent of effective gross income. We forecast total operating expenses for the subject property (including real estate taxes) to be $908,961, equating to $6.03 per square foot. The operating expenses (including real estate taxes) projected for the subject property reflect an operating expense ratio at stabilization of 33.67 percent of effective gross income.

INCOME AND EXPENSE PRO FORMA The following chart summarizes our opinion of income and expenses for year one, which is the first stabilized year in this analysis.


SUMMARY OF REVENUE AND EXPENSES

Stabilized Year For Direct Capitalization: Year OneREVENUE Annual $/SF % of EGI

Base Rental Revenue $2,112,146 $14.01

Reimbursement RevenueCAM, Insurance, Management $598,741 $3.97Real Estate Taxes 262,527 1.74

POTENTIAL GROSS REVENUE $2,973,414 $19.72 Vacancy and Collection Loss (273,974) (1.82)

EFFECTIVE GROSS REVENUE $2,699,440 $17.90 100.00%

OPERATING EXPENSESProperty Insurance 60,000 0.40 2.22%Management Fees 80,983 0.54 3.00%Common Area Maintenance 475,000 3.15 17.60%Non-Reimbursable 22,615 0.15 0.84%

Total Operating Expenses $638,598 $4.24 23.66%Real Estate Taxes $270,363 $1.79 10.02%

TOTAL EXPENSES $908,961 $6.03 33.67%NET OPERATING INCOME $1,790,479 $11.88 66.33%Compiled by Cushman & Wakefield Western, Inc.

INVESTMENT CONSIDERATIONS

O V E R V I E W Despite economic uncertainty, growth in the U.S. economy strengthened over the first months of 2013. The automatic spending cuts and revenue increases triggered by sequestration were initially avoided at the onset of the year, but the inability of policymakers in Washington D.C. to reach a compromise over the following three months initiated sequestration in early March. The U.S. economy added 1.9 million new jobs in the twelve months ending in March 2013 and has regained nearly 5.3 million jobs since bottoming out in February 2010, or nearly two thirds of the 8.1 million jobs lost over the recession. Gross domestic product (GDP) grew by 0.4 percent in fourth quarter 2012 according to revised estimates from the U.S. Bureau of Economic Analysis, but increased to 2.5 percent in the first quarter of 2013. Although the full impact of Hurricane Sandy on commercial properties is beginning to be felt, many investors expect already distressed properties will be the hardest hit, and could increase their presence in CMBS by up to 30.0 percent. Retail sales increased 4.1 percent in the twelve months ending in March 2013 according to the U.S. Census Bureau, indicating that consumer confidence remains intact.

The search for higher-yielding assets and uncertainty regarding potential tax increases drove a rally in commercial mortgage bonds towards the end of 2012 and into 2013. Commercial real estate markets are expected to continue to strengthen over the remainder of 2013, and strong market fundamentals should help reduce CMBS volatility going forward. Sales of commercial properties totaled $72.8 billion in first quarter 2013 according to Real Capital Analytics, an increase of 34.6 percent from total sales in first quarter 2012. In addition, in October 2012 Citigroup priced a floating-rate CMBS with high loan-to-value “transitional” collateral for Northstar Realty Finance, the fifth floating-rate CMBS following the past recession and the first to feature multiple loans and non-stabilized properties. Challenges still exist however, and among the largest facing the CMBS market in the near-term will be the maturation of $24.0 billion in securitized loans originated in 2007. Many of these loans were underwritten to pro forma income and have experienced substantial declines in value. Despite potentially serious


obstacles in the near-term, positive momentum is likely to remain in the market although uncertain economic and political conditions will likely maintain a sense of caution among investors.

C U R R E N T E C O N O M I C C O N D I T I O N S The slow pace of job creation remains the primary challenge facing politicians and economists, and businesses will likely remain reluctant to expand payrolls unless necessary until an increase in optimism creates a greater willingness to take risk. Although 1.9 million jobs were added over the twelve months ending in March 2013, unemployment remains stubbornly high at 7.6 percent in March 2013 and 11.7 million residents remain out of work. With an average of only 168,000 jobs added monthly over 2013, it will take until mid-2014 to return to pre-recession employment levels under current conditions.

Real gross domestic product (GDP) increased at an annual rate of 2.5 percent in first quarter 2013, 210 basis points higher than fourth quarter 2012 GDP growth of 0.4 percent according to the U.S. Bureau of Economic Analysis (BEA). Overall GDP growth in 2012 reached 2.2 percent according to estimates provided by the BEA, 40 basis points higher than GDP growth in 2011 of 1.8 percent.

The following graph displays historical and projected U.S. Real GDP percent change (annualized on a quarterly basis) from first quarter 2008 through fourth quarter 2016 (red bar underscores the most recent quarter: 13Q1):

-10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

Rea

l GD

P, %

Ch

ang

e

Historical and Projected U.S. Real GDP2008Q1 - 2016Q4

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

Forecast

Notable concerns regarding current economic conditions are as follows:

Many states and municipalities continue to face budget shortfalls. Should state and municipal governments be forced to enact budget cuts and tax increases to fill these gaps, they could drain regional economies in the near-term.

Although the impact of automatic spending cuts and tax increases triggered by sequestration will not be immediately felt, the inability of legislators to reach a compromise amidst the pervading partisan gridlock will hinder growth in the near-term. These uncertainties could deter businesses from expanding payrolls and placing new orders as they await settlements from policymakers in Washington D.C.

Although federal assistance may help mitigate the impact of Hurricane Sandy for homeowners and businesses, it may have a more serious impact on the CMBS market as investors face a larger pool of distressed properties.


Home prices increased 9.3 percent on an annual basis in February 2013 according to the S&P Case Shiller Home Price Index, while housing permits issued over the first three months of 2013 outpaced previous year levels by 27.3 percent according to the U.S. Census Bureau. In spite of optimistic indications such as these, credit remains tight and sales activity remains below pre-recession levels.

US REAL ESTATE MARKET IMPLICATIONS Total volume in 2012 increased considerably on an annual basis for the third consecutive year. According to Real Capital Analytics total transaction volume in 2012 reached $293.8 billion, up 28.0 percent on a year over year basis, with the apartment and office markets reaching the highest volume at $87.5 and $80.0 billion, respectively. While this level of growth is respectable given the cautious economic climate, it remains well short of pre-recession transaction activity in 2005, 2006, and 2007. The average transaction cap rate on properties over $2.5 million in first quarter 2013 was 6.7 percent, a decline of 10 basis points from the previous quarter and 20 basis points below the first quarter 2012 average cap rate of 6.9 percent. Total transaction volume in first quarter 2013 reached $72.8 billion, a decrease of 32.4 percent from the previous quarter, but 34.6 percent higher than transaction volume in first quarter 2012 of $54.1 billion. Indications such as these suggest that total transaction volume in 2013 will increase on an annual basis for the fourth consecutive year, demonstrating the strength of underlying fundamentals in the commercial real estate investment market.

The following graph compares national transaction volume by property between 2002 and 2012:

0.0

100.0

200.0

300.0

400.0

500.0

600.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Vo

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e, b

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National Transaction Volume By Property Type

Retail Office

Industrial Hotel

Apartment

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

C O N C L U S I O N Although investor activity and sales volume is expanding on a national level, the pace of recovery varies across regional metropolitan areas and markets. Recent indications suggest investors are becoming less risk averse as they seek yield, while increasing competition for top quality assets in major metro areas has spread into second-tier markets. Growth in the near-term is likely to be cautious however, pending external factors such as the European debt crisis and upcoming budget cuts related to sequestration. In spite of this, historically low interest rates and strong underlying economic fundamentals should support stable investment activity in commercial real estate markets going forward.


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

INVESTMENT CONSIDERATIONSAttained Rents Versus Market: The subject's attained rents (exclusive of expense contributions) are 15.36 percent

below market. Given this comparison, the investment rates selected will be slightlymore aggressive than market indicators.

NOI Growth: The subject's NOI is expected to grow 1.69 percent per annum from the firststabilized year of the analysis through the holding period. This rate of growth isbelow levels expected in this market.

Lease Expiration Exposure: Within the first five years of the analysis a total of 69.2 percent of the total netrentable area is scheduled to rollover. Extending to a ten-year period, a total of129.33 percent of the space is scheduled to expire. The peak expiration occurs inyear 5, when a total of 78,744 square feet is scheduled to expire. This isconsidered a moderate rollover exposure within this market.

Real Estate Market Trends: Real estate market trends have a significant bearing on the value of real property.The real estate market in which the subject property is located is currentlyimproving.

Tenant Quality: The quality of a property's tenant base is an important factor that is scrutinized byinvestors prior to acquiring real property. The quality of the subject's tenant roster isconsidered to be average.

Property Rating: After considering all of the physical characteristics of the subject, we haveconcluded that this property has an overall rating that is average, when measuredagainst other properties in this marketplace.

Location Rating: After considering all of the locational aspects of the subject, including regional andlocal accessibility as well as overall visibility, we have concluded that the location ofthis property is average.

Overall Investment Appeal: There are many factors that are considered prior to investing in this type of property.After considering all of these factors, we conclude that this property has averageoverall investment appeal.


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

INVESTOR SURVEY HISTORICAL RESULTSSurvey: PwC End Quarter:

Property Type:

Quarter 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13

OAR (average) 8.41% 8.53% 8.49% 8.38% 8.09% 7.63% 7.40% 7.33% 7.20% 7.16% 7.18% 7.18% 7.06% 7.06% 7.04% 6.95%

Terminal OAR (average) 8.61% 8.63% 8.86% 8.63% 8.51% 8.26% 8.10% 7.97% 7.93% 7.93% 7.80% 7.77% 7.69% 7.66% 7.61% 7.53%

IRR (average) 9.38% 9.44% 9.58% 9.46% 9.19% 8.88% 8.97% 8.85% 8.61% 8.44% 8.41% 8.41% 8.43% 8.43% 8.42% 8.19%

Source: Pw C Real Estate Investor Survey

NATIONAL STRIP SHOPPING CENTER 2Q 13

6.50%

6.75%

7.00%

7.25%

7.50%

7.75%

8.00%

8.25%

8.50%

8.75%

9.00%

9.25%

9.50%

9.75%

3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13

RA

TE

S

ANALYSIS PERIOD

INVESTOR SURVEY HISTORICAL RESULTS

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

OARs have declined 9 basis points from last quarter and 23 basis points from one year ago. Terminal OARs have declined 8 basis points from last quarter and 24 basis points from one year ago. IRRs have declined 23 basis points from last quarter and 22 basis points from one year ago. Over the past three quarters, the IRR average has been relatively steady.


CAPITALIZATION RATE ANALYSIS On the following pages we discuss the process of how we determine an appropriate overall capitalization rate to apply to the subject’s forecast net income.

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

No. Name and Location Sales DateCapitalization

Rate


8/2013 9.37%


5/2013 8.75%

3 Village One Plaza 3020 Floyd AveModesto, CA

12/2012 7.60%


8/2012 7.25%

5 Visalia Marketplace 3247-3549 West Noble AvenueVisalia, CA

6/2012 8.75%

STATISTICSSample Size 5 5

Low 6/2012 7.25%

High 8/2013 9.37%

Median 12/2012 8.75%

Average 12/2012 8.34%


CAPITALIZATION RATE SUMMARY

CAPITALIZATION RATE FROM INVESTOR SURVEYS We considered data extracted from the PwC Real Estate Investor Survey for competitive properties. Earlier in the report, we presented historical capitalization rates for the prior four-year period. The most recent information from this survey is listed below:

CAPITALIZATION RATESSurvey Date AveragePwC Second Quarter 2013 5.50% - 9.50% 6.95%PwC - Refers to National Strip Shopping Center market regardless of class or occupancy

Range

CAPITALIZATION RATE CONCLUSION We considered all aspects of the subject property that would influence the overall rate. Our analysis suggests that a capitalization rate of 7.50 percent represents reasonable investor criteria under current market conditions.

DIRECT CAPITALIZATION METHOD CONCLUSION In the Direct Capitalization Method, we developed an opinion of market value by dividing year one net operating income by our selected overall capitalization rate. Our conclusion using the Direct Capitalization Method is as follows:


DIRECT CAPITALIZATION METHOD

NET OPERATING INCOME $1,790,479 $11.88Sensitivity Analysis (0.25% OAR Spread) Value $/SF GLABased on Low-Range of 7.25% $24,696,262 $163.81Based on Most Probable Range of 7.50% $23,873,053 $158.35Based on High-Range of 7.75% $23,102,955 $153.24Preliminary Value $23,873,053 $158.35Rounded to nearest $100,000 $23,900,000 $158.52

$23,873,053ADJUSTMENTS TO PRELIMINARY VALUE

Indicated Value $23,873,053 $158.35Rounded to nearest $100,000 $23,900,000 $158.52Compiled by Cushman & Wakefield Western, Inc.

Market Value As-Is

YIELD CAPITALIZATION METHOD In the Yield Capitalization Method, we employed ARGUS - Version 15 software to model the income characteristics of the property and to make a variety of cash flow assumptions. We attempted to reflect the most likely investment assumptions of typical buyers and sellers in this market segment.

GENERAL CASH FLOW ASSUMPTIONS The start date of the Yield Capitalization analysis is September 01, 2013. We performed this analysis on a fiscal year basis. The analysis incorporates a forecast period of 11 years, and a holding period of 10 years.

The following table outlines the assumptions used in the Yield Capitalization analysis.

DISCOUNTED CASH FLOW MODELING ASSUMPTIONSVALUATION SCENARIO: Market Value As-Is

GENERAL CASH FLOW ASSUMPTIONS GROWTH RATES

Cash Flow Software: ARGUS - Version 15 Market Rent: 3.00%Cash Flow Start Date: 9/1/2013 Consumer Price Index (CPI): 3.00%Calendar or Fiscal Analysis: Fiscal Expenses: 3.00%Investment Holding Period: 10 Years Tenant Improvements: 3.00%Analysis Projection Period: 11 Years Real Estate Taxes: 2.00%

na na

VACANCY & COLLECTION LOSS RATES OF RETURN

Global Vacancy: 10.00% Internal Rate of Return: (Cash Flow) 8.50%Global Collection Loss: 2.00% Internal Rate of Return: (Reversion) 8.50%Total Vacancy & Collection Loss: 12.00% Terminal Capitalization Rate: 7.75%

Reversionary Sales Cost: 2.00%Confidential 5.00% Basis Point Spread (OARout vs. OARin) 25 ptsConfidential 1.00%

6.00% VALUATION

CAPITAL EXPENDITURES Market Value As-Is $23,656,668Reserves for Replacement ($/SF): $0.15 LESS Curable Depreciation $0Other Deductions ($) $0 Adjusted Value $23,656,668

Rounded to nearest $100,000 $23,700,000Value $/SF $157.20



The following information was extracted from the PwC Investor Survey and was used to help determine our growth rate assumptions.

OTHER INVESTOR SURVEY INFORMATIONSurvey Data Average

PwC Second Quarter 2013 Rent Change Rate 0.00% - 4.00% 1.72%Expense Change Rate 2.50% - 3.00% 2.94%

PwC - Refers to National Strip Shopping Center market regardless of class or occupancy

Range

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

The following chart summarizes the leasing assumptions that were used in preparing our Yield Capitalization analysis.

LEASING ASSUMPTIONSTENANT CATEGORY Anchor 1 Anchor 2 Shop Pad 8 Pads 1, 2, 3WEIGHTED ITEMSRenewal Probability 65.00% 65.00% 65.00% 65.00% 65.00%

Market Rent/SF/Annum $15.00 $18.00 $15.00 $24.00 $21.00Months Vacant 12.00 12.00 9.00 9.00 9.00Tenant Improvements

New Leases $15.00 $15.00 $10.00 $15.00 $15.00Renewal Leases $5.00 $5.00 $5.00 $5.00 $5.00First Generation (shell)

Leasing Commissions (1)New Leases $4.00 $4.00 7.00% 7.00% 7.00%Renewal Leases $2.00 $2.00 3.50% 3.50% 3.50%

Free RentNew Leases 0 0 0 0 0Renewal Leases 0 0 0 0 0

NON-WEIGHTED ITEMSLease Term (years) 10 10 5 5 5Lease Type (reimbursements) Net Net Net Net NetContract Rent Increase Projection 10% every 5 years 10% every 5 years 3% per annum 3% per annum 3% per annum


(1) Leasing Commissions are detailed below

Leasing Commissions Leasing commissions have been based upon the generally accepted standard schedule. Anchor and major tenants have different leasing commission schedules than satellite tenants. For anchor and major tenants, we have modeled a leasing commission of $4.00 per square foot for new leases. For smaller tenants, the standard schedule for new leases is 7.0 percent of total rent in the first five years, and 3.5 percent of total rent from years 6 through 10. Leasing commissions are typically higher for new tenants than renewal tenants. A new tenant causes a full commission to be paid, whereas a renewing tenant typically results in a half commission. We have incorporated these standard assumptions in our cash flow projection.

FINANCIAL ASSUMPTIONS The financial assumptions used in the Yield Capitalization process are discussed in the following commentary.

Terminal Capital ization Rate Selection A terminal capitalization rate was used to develop an opinion of the market value of the property at the end of the assumed investment holding period. The rate is applied to the net operating income following year 10 before


making deductions for leasing commissions, tenant improvement allowances and reserves for replacement. We developed an opinion of an appropriate terminal capitalization rate based on rates in current investor surveys.

TERMINAL CAPITALIZATION RATES (OARout)

Survey Date Average

PwC Second Quarter 2013 6.00% - 11.00% 7.53%PwC - Refers to National Strip Shopping Center market regardless of class or occupancy

Range

Investors will typically use a slightly more conservative overall rate when exiting an investment versus the rate that would be used going into the investment. This accounts both for the aging associated with the improvements over the course of the holding period, and for any unforeseen risks that might arise over that time period.

As a result, we applied a terminal rate of 7.75 percent in our analysis. This rate is 25 basis points above the overall rate going into the investment, which is considered reasonable.

Reversionary Sales Costs We estimated the cost of sale at the time of reversion to be 2.00 percent, which is in keeping with local market practice.

Discount Rate Selection We developed an opinion of future cash flows, including property value at reversion, and discounted that income stream at an internal rate of return (IRR) currently required by investors for similar-quality real property. The IRR (also known as yield) is the single rate that discounts all future equity benefits (cash flows and equity reversion) to an opinion of net present value.

The PwC Investor survey indicates the following internal rates of return for competitive properties:

DISCOUNT RATES (IRR)Survey Date Average

PwC Second Quarter 2013 6.50% - 11.50% 8.19%

PwC - Refers to National Strip Shopping Center market regardless of class or occupancy

Range

The above table summarizes the investment parameters of some of the most prominent investors currently acquiring similar investment properties in the United States. We realize that this type of survey reflects target rather than transactional rates. Transactional rates are usually difficult to obtain in the verification process and are actually only target rates of the buyer at the time of sale. The property’s performance will ultimately determine the actual yield at the time of sale after a specific holding period.

We previously discussed all factors that would influence our selection of a discount rate for the subject property. Given all of these factors, we discounted our cash flow and reversionary value projections at an internal rate of return of 8.50 percent.

The ARGUS - Version 15 cash flow is presented on the following page. The cash flow commencement date is September 01, 2013.

Yield Capital ization Method Conclusion Our cash flow projection and valuation matrix are presented at the end of this section.


ANNUAL CASH FLOW REPORT AnnualPark Place Shopping Center Growth

1 2 3 4 5 6 7 8 9 10 11 Year 1 - For the Years Beginning Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23For the Years Ending Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21 Aug-22 Aug-23 Aug-24 Year 10

Base Rental Revenue 2,112,146$ 2,145,413$ 2,168,210$ 2,176,737$ 2,217,304$ 2,277,673$ 2,317,683$ 2,359,919$ 2,400,605$ 2,437,479$ 2,534,256$ 1.84%Absorption & Turnover Vacancy (139,028) (28,668) (8,912) (70,235) (86,228) (46,029) (57,178) (9,650) (85,221) (83,732) (121,449) -1.34%Scheduled Base Rental Revenue 1,973,118$ 2,116,745$ 2,159,298$ 2,106,502$ 2,131,076$ 2,231,644$ 2,260,505$ 2,350,269$ 2,315,384$ 2,353,747$ 2,412,807$ 2.03%

Resl Estate Taxes 262,527 282,724 290,777 291,764 293,524 303,995 309,661 321,356 320,878 325,566 322,644 2.08%Property Insurance 58,935 64,009 66,470 69,659 71,507 74,625 76,763 80,375 81,130 83,145 85,856 3.83%Management Fees 48,281 54,393 56,075 54,592 54,030 56,981 57,977 61,136 59,892 60,389 62,716 2.65%CAM 491,525 532,431 552,697 558,286 566,111 590,781 607,727 636,312 642,285 658,232 679,718 3.29%Total Reimbursement Revenue 861,268$ 933,557$ 966,019$ 974,301$ 985,172$ 1,026,382$ 1,052,128$ 1,099,179$ 1,104,185$ 1,127,332$ 1,150,934$ 2.94%

TOTAL GROSS REVENUE 2,834,386$ 3,050,302$ 3,125,317$ 3,080,803$ 3,116,248$ 3,258,026$ 3,312,633$ 3,449,448$ 3,419,569$ 3,481,079$ 3,563,741$ 2.32%

General Vacancy (91,601) (211,867) (236,492) (176,182) (164,503) (212,624) (207,317) (263,015) (191,242) (197,760) (169,563) 6.35%Collection Loss (43,345) (47,534) (48,902) (47,879) (48,422) (50,810) (51,755) (54,340) (53,588) (54,624) (55,774) 2.55%EFFECTIVE GROSS REVENUE 2,699,440$ 2,790,901$ 2,839,923$ 2,856,742$ 2,903,323$ 2,994,592$ 3,053,561$ 3,132,093$ 3,174,739$ 3,228,695$ 3,338,404$ 2.15%

Resl Estate Taxes 270,363 275,771 281,286 286,912 292,650 298,503 304,473 310,563 316,774 323,109 319,346 1.68%Property Insurance 60,000 61,800 63,654 65,564 67,531 69,556 71,643 73,792 76,006 78,286 80,635 3.00%Management Fees 80,983 83,727 85,198 85,702 87,100 89,838 91,607 93,963 95,242 96,861 100,152 2.15%CAM 475,000 489,250 503,928 519,045 534,617 550,655 567,175 584,190 601,716 619,767 638,360 3.00%Non-Reimbursable 22,615 23,293 23,992 24,712 25,453 26,217 27,003 27,813 28,648 29,507 30,393 3.00%TOTAL OPERATING EXPENSES 908,961$ 933,841$ 958,058$ 981,935$ 1,007,351$ 1,034,769$ 1,061,901$ 1,090,321$ 1,118,386$ 1,147,530$ 1,168,886$ 2.55%

NET OPERATING INCOME 1,790,479$ 1,857,060$ 1,881,865$ 1,874,807$ 1,895,972$ 1,959,823$ 1,991,660$ 2,041,772$ 2,056,353$ 2,081,165$ 2,169,518$ 1.94%

Capital Reserves 22,615 23,293 23,992 24,712 25,453 26,217 27,003 27,813 28,648 29,507 30,393 3.00%Tenant Improvements 77,609 96,802 8,116 120,801 152,299 37,560 132,189 25,655 140,041 121,687 215,217 10.74%Leasing Commissions 43,265 57,934 5,748 73,765 86,523 20,939 77,518 15,721 85,514 69,717 128,507 11.50%TOTAL LEASING & CAPITAL COSTS 143,489$ 178,029$ 37,856$ 219,278$ 264,275$ 84,716$ 236,710$ 69,189$ 254,203$ 220,911$ 374,117$ 10.06%

CASH FLOW BEFORE DEBT SERVICE 1,646,990$ 1,679,031$ 1,844,009$ 1,655,529$ 1,631,697$ 1,875,107$ 1,754,950$ 1,972,583$ 1,802,150$ 1,860,254$ 1,795,401$ 0.87%

Implied Overall Rate 7.57% 7.85% 7.95% 7.93% 8.01% 8.28% 8.42% 8.63% 8.69% 8.80%Cash on Cash Return 6.96% 7.10% 7.79% 7.00% 6.90% 7.93% 7.42% 8.34% 7.62% 7.86%


The following graph depicts the forecasted change in both net income and net cash flow over the analysis period.

$-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

1 2 3 4 5 6 7 8 9 10 11

Net Operating Income Cash Flow Before Debt Service

The results of the Yield Capitalization analysis are presented below:

TerminalCap Rates 8.00% 8.25% 8.50% 8.75% 9.00%

7.25% 25,373,795$ 24,928,568$ 24,493,469$ 24,068,236$ 23,652,613$

7.50% 24,921,010$ 24,486,131$ 24,061,121$ 23,645,725$ 23,239,694$

7.75% 24,497,436$ 24,072,239$ 23,656,668$ 23,250,474$ 22,853,415$

8.00% 24,100,336$ 23,684,215$ 23,277,492$ 22,879,925$ 22,491,278$

8.25% 23,727,303$ 23,319,707$ 22,921,297$ 22,531,834$ 22,151,089$

IRR Reversion 8.00% 8.25% 8.50% 8.75% 9.00%

Cost of Sale at Reversion: 2.00%

Percent Residual: 51.29%

$23,700,000 $157.20

PRICING MATRIX - Market Value As-Is

Discount Rate (IRR) for Cash Flow


Based on the rates selected, the value via the Yield Capitalization analysis is estimated at $23,700,000, rounded. The reversion contributes 51.29 percent to this value estimate.


RECONCILIATION WITHIN THE INCOME CAPITALIZATION APPROACH The following is a summary of our concluded values in the Income Capitalization Approach:

INCOME CAPITALIZATION APPROACH CONCLUSION

MethodologyMarket Value

As-Is PSFYield Capitalization $23,700,000 $157.20Direct Capitalization $23,900,000 $158.52

Income Approach Conclusion $23,800,000 $157.86Compiled by Cushman & Wakefield Western, Inc.

PARK PLACE, VALLEJO, CA RECONCILIATION AND FINAL VALUE OPINION 89

R E C O N C I L I A T I O N A N D F I N A L V A L U E O P I N I O N

VALUATION METHODOLOGY REVIEW AND RECONCILIATION This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these approaches would be considered applicable and/or necessary for market participants. Typical purchasers do not generally rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not utilized the Cost Approach to develop an opinion of market value.

The approaches indicated the following:

FINAL VALUE RECONCILIATION

Market Value As-Is PSF

Date of Value September 30, 2013Sales Comparison Approach Percentage Adjustment Method $21,900,000 $145.26

Income Capitalization Approach Yield Capitalization $23,700,000 $157.20 Direct Capitalization $23,900,000 $158.52Conclusion $23,800,000 $157.86

Final Value Conclusion $23,800,000 $157.86Compiled by Cushman & Wakefield Western, Inc.

We gave sole weight to the Income Capitalization Approach because this mirrors the methodology used by purchasers of this property type.

Value Conclusions



The implied “going in” capitalization rate is 7.52 percent. The overall capitalization rates derived from the improved property sales are between 7.25 percent and 9.37 percent, averaging 8.34 percent. The implied going-in cap rate is in line with going-in capitalization rates indicated by the sales and the most recent Investor Surveys.

Although the subject sold in April 2012, we were not provided with details of the sale.

EXPOSURE TIME Based on our review of national investor surveys, discussions with market participants and information gathered during the sales verification process, a reasonable exposure time for the subject property at the value concluded within this report would have been approximately twelve (12) months. This assumes an active and professional marketing plan would have been employed by the current owner.

PARK PLACE, VALLEJO, CA SENSITIVITY ANALYSIS 90

S E N S I T I V T Y A N A L Y S I S At the request of the client, required by the Israeli SEC regulation, we have included a sensitivity analysis with a 1.0%± change in occupancy and a 1.0%± change in income from base rent. The following summarizes the sensitivity conclusions.

Based on Direct Capitalization Value Implied ValuePlus 1% change in occupancy $23,900,000Minus 1% change in occupancy $23,400,000

Plus 1% change in income from base rent $26,700,000Minus 1% change in income from base rent $23,800,000

SENSITIVITY ANALYSIS

Please note, the sensitivity analysis holds all other assumptions constant.

PARK PLACE, VALLEJO, CA INSURABLE VALUE 91

I N S U R A B L E V A L U E At the Client's request, we provided an insurable value estimate. The estimate is based on figures derived from the Marshall and Swift (M&S) Commercial Cost Explorer and is developed consistent with industry practices. However, actual local and regional construction costs may vary significantly from our estimate and individual insurance policies and underwriters have varied specifications, exclusions, and non-insurable items. As such, we strongly recommend that the Client obtain estimates from professionals experienced in establishing insurance coverage for replacing any structure. This analysis should not be relied upon to determine insurance coverage. Furthermore, we make no warranties regarding the accuracy of this estimate.

Insurable Value is directly related to the portion of the real estate that is covered under the asset’s insurance policy. We based this opinion on the building’s replacement cost new (RCN) which has no direct correlation with its actual market value.

We developed an opinion of RCN using the Calculator Method developed by Marshall & Swift.

The RCN is the total construction cost of a new building with the same specifications and utility as the building being appraised, but built using modern technology, materials, standards and design. For insurance purposes, RCN includes all direct costs and indirect costs necessary to construct the building improvements. Items that are not considered include land value, site improvements, depreciation and entrepreneurial profit. To develop an opinion of insurable value, exclusions for below-grade foundations and architectural fees must be deducted from RCN.

Insurable Breakdown:

Location SF % of Total Insurable ValueBuilding 1 (Units 408--764) 120,644 80.02% $12,803,311

Building 2 (Unit 300) 3,900 2.59% $413,886

Building 3 (Unit 200) 7,200 4.78% $764,098

Building 4 ( Unit 100-148) 11,987 7.95% $1,272,117

Building 5 (Units 800-824) 7,035 4.67% $746,587

150,766 100.00% $16,000,000

The Insurable Valuation summary (combined) is presented on the following page:

PARK PLACE, VALLEJO, CA INSURABLE VALUE 92

INSURABLE VALUE SUMMARY

DESCRIPTION Shopping Centers

Marshall & Swift - Improvement Type Neighborhood Shopping Centers

Construction Class C

Quality of Construction Average

Marshall & Swift - Section Section 13

Marshall & Swift - Page Page 33

Date May-12

Base SF Cost $80.35

HVAC Refinements ($2.65)

Sprinklers $3.00

Elevators $0.00

Adjusted Base Cost $80.70

Number of Stories 1.000

Height Per Story 1.000

Perimeter 1.000

Adjusted Base Cost $80.70

Current Cost Multiplier 1.040

Local Area Multiplier 1.290

Prospective Multiplier 1.000

Adjusted SF Cost $108.27

TIMES: SF for Replacement Cost Purposes 150,766

Adjusted Cost $16,323,001

Adjusted Base Costs $16,323,001

PLUS: Indirect Costs 10.0% $1,632,300

$17,955,301

Total includes all component / building costs as detailed above

Insurable Value Type Insurable Value As-Is

Cost Source: Marshall Valuation Service

Replacement Cost New $17,955,301Insurance Exclusions

Foundations Below Grade (5.0%)Piping Below Grade (Negligible) 0.0%Architect Fees (6.0%)

Total Insurance Exclusion Adjustment -11.0%Total Insurance Exclusion Amount ($1,975,083)

Adjusted Costs (Structures) $15,980,218

Rounded to the Nearest $100,000 $16,000,000

Total GBA (SF) 150,766Conclusion PSF of GBA $106.12Total Structures (SF) 150,766Conclusion PSF of All Structures $106.12

INSURABLE VALUE SUMMARY

IMPROVEMENTS (STRUCTURES)

SQUARE FOOT REFINEMENTS

HEIGHT AND SIZE REFINEMENTS

FINAL CALCULATIONS

REPLACEMENT COST SUMMARY (STRUCTURES)

PARK PLACE, VALLEJO, CA ASSUMPTIONS AND LIMITING CONDITIONS 93

A S S U M P T I O N S A N D L I M I T I N G C O N D I T I O N S "Report" means the appraisal or consulting report and conclusions stated therein, to which these Assumptions and Limiting Conditions are annexed.

"Property" means the subject of the Report.

"C&W" means Cushman & Wakefield, Inc. or its subsidiary that issued the Report.

"Appraiser(s)" means the employee(s) of C&W who prepared and signed the Report.

The Report has been made subject to the following assumptions and limiting conditions:

No opinion is intended to be expressed and no responsibility is assumed for the legal description or for any matters that are legal in nature or require legal expertise or specialized knowledge beyond that of a real estate appraiser. Title to the Property is assumed to be good and marketable and the Property is assumed to be free and clear of all liens unless otherwise stated. No survey of the Property was undertaken.

The information contained in the Report or upon which the Report is based has been gathered from sources the Appraiser assumes to be reliable and accurate. The owner of the Property may have provided some of such information. Neither the Appraiser nor C&W shall be responsible for the accuracy or completeness of such information, including the correctness of estimates, opinions, dimensions, sketches, exhibits and factual matters. Any authorized user of the Report is obligated to bring to the attention of C&W any inaccuracies or errors that it believes are contained in the Report.

The opinions are only as of the date stated in the Report. Changes since that date in external and market factors or in the Property itself can significantly affect the conclusions in the Report.

The Report is to be used in whole and not in part. No part of the Report shall be used in conjunction with any other analyses. Publication of the Report or any portion thereof without the prior written consent of C&W is prohibited. Reference to the Appraisal Institute or to the MAI designation is prohibited. Except as may be otherwise stated in the letter of engagement, the Report may not be used by any person(s) other than the party(ies) to whom it is addressed or for purposes other than that for which it was prepared. No part of the Report shall be conveyed to the public through advertising, or used in any sales, promotion, offering or SEC material without C&W's prior written consent. Any authorized user(s) of this Report who provides a copy to, or permits reliance thereon by, any person or entity not authorized by C&W in writing to use or rely thereon, hereby agrees to indemnify and hold C&W, its affiliates and their respective shareholders, directors, officers and employees, harmless from and against all damages, expenses, claims and costs, including attorneys' fees, incurred in investigating and defending any claim arising from or in any way connected to the use of, or reliance upon, the Report by any such unauthorized person(s) or entity(ies).

Except as may be otherwise stated in the letter of engagement, the Appraiser shall not be required to give testimony in any court or administrative proceeding relating to the Property or the Appraisal.

The Report assumes (a) responsible ownership and competent management of the Property; (b) there are no hidden or unapparent conditions of the Property, subsoil or structures that render the Property more or less valuable (no responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them); (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws, unless noncompliance is stated, defined and considered in the Report; and (d) all required licenses, certificates of occupancy and other governmental consents have been or can be obtained and renewed for any use on which the value opinion contained in the Report is based.

The physical condition of the improvements considered by the Report is based on visual inspection by the Appraiser or other person identified in the Report. C&W assumes no responsibility for the soundness of structural components or for the condition of mechanical equipment, plumbing or electrical components.

The forecasted potential gross income referred to in the Report may be based on lease summaries provided by the owner or third parties. The Report assumes no responsibility for the authenticity or completeness of lease information provided by others. C&W recommends that legal advice be obtained regarding the interpretation of lease provisions and the contractual rights of parties.


The forecasts of income and expenses are not predictions of the future. Rather, they are the Appraiser's best opinions of current market thinking on future income and expenses. The Appraiser and C&W make no warranty or representation that these forecasts will materialize. The real estate market is constantly fluctuating and changing. It is not the Appraiser's task to predict or in any way warrant the conditions of a future real estate market; the Appraiser can only reflect what the investment community, as of the date of the Report, envisages for the future in terms of rental rates, expenses, and supply and demand.

Unless otherwise stated in the Report, the existence of potentially hazardous or toxic materials that may have been used in the construction or maintenance of the improvements or may be located at or about the Property was not considered in arriving at the opinion of value. These materials (such as formaldehyde foam insulation, asbestos insulation and other potentially hazardous materials) may adversely affect the value of the Property. The Appraisers are not qualified to detect such substances. C&W recommends that an environmental expert be employed to determine the impact of these matters on the opinion of value.

Unless otherwise stated in the Report, compliance with the requirements of the Americans with Disabilities Act of 1990 (ADA) has not been considered in arriving at the opinion of value. Failure to comply with the requirements of the ADA may adversely affect the value of the Property. C&W recommends that an expert in this field be employed to determine the compliance of the Property with the requirements of the ADA and the impact of these matters on the opinion of value.

If the Report is submitted to a lender or investor with the prior approval of C&W, such party should consider this Report as only one factor, together with its independent investment considerations and underwriting criteria, in its overall investment decision. Such lender or investor is specifically cautioned to understand all Extraordinary Assumptions and Hypothetical Conditions and the Assumptions and Limiting Conditions incorporated in this Report.

In the event of a claim against C&W or its affiliates or their respective officers or employees or the Appraisers in connection with or in any way relating to this Report or this engagement, the maximum damages recoverable shall be the amount of the monies actually collected by C&W or its affiliates for this Report and under no circumstances shall any claim for consequential damages be made.

If the Report is referred to or included in any offering material or prospectus, the Report shall be deemed referred to or included for informational purposes only and C&W, its employees and the Appraiser have no liability to such recipients. C&W disclaims any and all liability to any party other than the party that retained C&W to prepare the Report.

Any estimate of insurable value, if included within the agreed upon scope of work and presented within this Report, is based upon figures derived from a national cost estimating service and is developed consistent with industry practices. However, actual local and regional construction costs may vary significantly from our estimate and individual insurance policies and underwriters have varied specifications, exclusions, and non-insurable items. As such, C&W strongly recommends that the Intended Users obtain estimates from professionals experienced in establishing insurance coverage for replacing any structure. This analysis should not be relied upon to determine insurance coverage. Furthermore, C&W makes no warranties regarding the accuracy of this estimate.

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

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

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

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

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


By use of this Report each party that uses this Report agrees to be bound by all of the Assumptions and Limiting Conditions, Hypothetical Conditions and Extraordinary Assumptions stated herein.

PARK PLACE, VALLEJO, CA CERTIFICATION OF APPRAISAL 96

C E R T I F I C A T I O N O F A P P R A I S A L We certify that, to the best of our knowledge and belief:

The statements of fact contained in this report are true and correct.

The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions.

We have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved.

We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment.

Our engagement in this assignment was not contingent upon developing or reporting predetermined results.

Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice.

The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

George J. Geranios, MAI did make a personal inspection of the property that is the subject of this report. Robby D. Perrino, MAI, CRE, CCIM did not make a personal inspection of the property that is the subject of this report.

We have performed prior services involving the subject property within the three-year period immediately preceding the acceptance of the assignment (one appraisal).

No one provided significant real property appraisal assistance to the persons signing this report.

As of the date of this report, George J. Geranios, MAI and Robby D. Perrino, MAI, CRE, CCIM have completed the continuing education program for Designated Members of the Appraisal Institute.

George J. Geranios, MAI Director CA Certified General Appraiser License No. AG011942 [email protected] (408) 572-4106 Office Direct (408) 434-1554 Fax

Robby D. Perrino, MAI, CRE, CCIM Executive Managing Director CA Certified General Appraiser License No. AG002595 [email protected] (408) 572-4134 Office Direct (408) 434-1554 Fax

PARK PLACE, VALLEJO, CA ADDENDA CONTENTS

A D D E N D A C O N T E N T S ADDENDUM A: GLOSSARY OF TERMS & DEFINITIONS ADDENDUM B: CLIENT SATISFACTION SURVEY ADDENDUM C: LEGAL DESCRIPTION ADDENDUM D: COMPARABLE IMPROVED SALE DATA SHEETS ADDENDUM E: QUALIFICATIONS OF THE APPRAISERS


A D D E N D U M A : G L O S S A R Y O F T E R M S & D E F I N I T I O N S The following definitions of pertinent terms are taken from The Dictionary of Real Estate Appraisal, Fifth Edition (2010), published by the Appraisal Institute, Chicago, IL, as well as other sources.

AS IS MARKET VALUE The estimate of the market value of real property in its current physical condition, use, and zoning as of the appraisal date. (Proposed Interagency Appraisal and Evaluation Guidelines, OCC-4810-33-P 20%)

BAND OF INVESTMENT A technique in which the capitalization rates attributable to components of a capital investment are weighted and combined to derive a weighted-average rate attributable to the total investment.

CASH EQUIVALENCY An analytical process in which the sale price of a transaction with nonmarket financing or financing with unusual conditions or incentives is converted into a price expressed in terms of cash.

DEPRECIATION 1. In appraising, a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date. 2. In accounting, an allowance made against the loss in value of an asset for a defined purpose and computed using a specified method.

DISPOSITION VALUE The most probable price that a specified interest in real property is likely to bring under all of the following conditions:

Consummation of a sale will occur within a limited future marketing period specified by the client.


The buyer and seller is each acting prudently and knowledgeably.

The seller is under compulsion to sell.


Both parties are acting in what they consider their best interest.

An adequate marketing effort will be made in the limited time allowed for the completion of a sale.



Note that this definition differs from the definition of market value. The most notable difference relates to the motivation of the seller. In the case of Disposition value, the seller would be acting under compulsion within a limited future marketing period.

ELLWOOD FORMULA A yield capitalization method that provides a formulaic solution for developing a capitalization rate for various combinations of equity yields and mortgage terms. The formula is applicable only to properties with stable or stabilized income streams and properties with income streams expected to change according to the J- or K-factor pattern. The formula is RO = [YE – M (YE + P 1/Sn¬ – RM) – ∆O 1/S n¬] / [1 + ∆I J] where RO = Overall Capitalization Rate YE = Equity Yield Rate M = Loan-to-Value Ratio P = Percentage of Loan Paid Off 1/S n¬ = Sinking Fund Factor at the Equity Yield Rate RM =Mortgage Capitalization Rate ∆O = Change in Total Property Value ∆I = Total Ratio Change in Income J = J Factor Also called mortgage-equity formula.


EXPOSURE TIME 1. The time a property remains on the market. 2. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. See also marketing time.

EXTRAORDINARY ASSUMPTION An assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s opinions or conclusions.

Comment: Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.

FEE SIMPLE ESTATE Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.

HYPOTHETICAL CONDITIONS A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.

Comment: Hypothetical conditions are contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis.

INSURABLE VALUE A type of value for insurance purposes.

INTENDED USE The use or uses of an appraiser’s reported appraisal, appraisal review, or appraisal consulting assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment.

INTENDED USER The client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or appraisal consulting report by the appraiser on the basis of communication with the client at the time of the assignment.

LEASED FEE INTEREST A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease).

LEASEHOLD INTEREST The tenant’s possessory interest created by a lease. See also negative leasehold; positive leasehold.

LIQUIDATION VALUE The most probable price that a specified interest in real property is likely to bring under all of the following conditions:

Consummation of a sale will occur within a severely limited future marketing period specified by the client.


The buyer is acting prudently and knowledgeably.

The seller is under extreme compulsion to sell.


The buyer is acting in what he or she considers his or her best interest.

A limited marketing effort and time will be allowed for the completion of a sale.



Note that this definition differs from the definition of market value. The most notable difference relates to the motivation of the seller. Under market value, the seller would be acting in his or her own best interests. The seller would be acting prudently and knowledgeably, assuming the price is not affected by undue


stimulus or atypical motivation. In the case of liquidation value, the seller would be acting under extreme compulsion within a severely limited future marketing period.

MARKET RENT The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the lease agreement, including permitted uses, use restrictions, expense obligations, term, concessions, renewal and purchase options, and tenant improvements (TIs).

MARKET VALUE As defined in the Agencies’ appraisal regulations, the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

Buyer and seller are typically motivated;

Both parties are well informed or well advised, and acting in what they consider their own best interests;

A reasonable time is allowed for exposure in the open market;

Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.1

MARKETING TIME An opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of an appraisal. Marketing time differs from exposure time, which is always presumed to precede the effective date of an appraisal. (Advisory Opinion 7 of the Appraisal Standards Board of The Appraisal Foundation and Statement on Appraisal Standards No. 6, “Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions” address the determination of reasonable exposure and marketing time.) See also exposure time.

MORTGAGE-EQUITY ANALYSIS Capitalization and investment analysis procedures that recognize how mortgage terms and equity requirements affect the value of income-producing property.

OPERATING EXPENSES Other Taxes, Fees & Permits - Personal property taxes, sales taxes, utility taxes, fees and permit expenses. Property Insurance – Coverage for loss or damage to the property caused by the perils of fire, lightning, extended coverage perils, vandalism and malicious mischief, and additional perils.

Management Fees - The sum paid for management services. Management services may be contracted for or provided by the property owner. Management expenses may include supervision, on-site offices or apartments for resident managers, telephone service, clerical help, legal or accounting services, printing and postage, and advertising. Management fees may occasionally be included among recoverable operating expenses

Total Administrative Fees – Depending on the nature of the real estate, these usually include professional fees and other general administrative expenses, such as rent of offices and the services needed to operate the property. Administrative expenses can be provided either in the following expense subcategories or in a bulk total. 1) Professional Fees – Fees paid for any professional services contracted for or incurred in property operation; or 2) Other Administrative – Any other general administrative expenses incurred in property operation.

Heating Fuel - The cost of heating fuel purchased from outside producers. The cost of heat is generally a tenant expense in single-tenant, industrial or retail properties, and apartment projects with individual heating units. It is a major expense item shown in operating statements for office buildings and many apartment properties. The fuel consumed may be coal, oil, or public steam. Heating supplies, maintenance, and workers’ wages are included in this expense category under certain accounting methods.

Electricity - The cost of electricity purchased from outside producers. Although the cost of electricity for leased space is frequently a tenant expense, and therefore not included in the operating expense statement, the owner may be responsible for lighting public areas and for the power needed to run elevators and other building equipment.

Gas - The cost of gas purchased from outside producers. When used for heating and air conditioning, gas can be a major expense item that is either paid by the tenant or reflected in the rent.

Water & Sewer - The cost of water consumed, including water specially treated for the circulating ice water system, or purchased for drinking purposes. The cost of water is a major consideration for industrial plants that use processes depending on water and for multifamily projects, in which the cost of sewer service usually ties to the amount of water used. It is also an important consideration for laundries, restaurants, taverns, hotels, and similar operations.

Other Utilities - The cost of other utilities purchased from outside producers.

Total Utilities - The cost of utilities net of energy sales to stores and others. Utilities are services rendered by public and private utility companies (e.g., electricity, gas, heating fuel, water/sewer and other utilities providers). Utility expenses can be provided either in expense subcategories or in a bulk total.

Repairs & Maintenance - All expenses incurred for the general repairs and maintenance of the building, including common areas and general upkeep. Repairs and maintenance expenses include elevator, HVAC, electrical and plumbing, structural/roof, and other repairs and maintenance expense items.

1 “Interagency Appraisal and Evaluation Guidelines.” Federal Register 75:237 (December 10, 2010) p. 77472.


Repairs and Maintenance expenses can be provided either in the following expense subcategories or in a bulk total. 1) Elevator - The expense of the contract and any additional expenses for elevator repairs and maintenance. This expense item may also include escalator repairs and maintenance. 2) HVAC – The expense of the contract and any additional expenses for heating, ventilation and air-conditioning systems. 3) Electrical & Plumbing - The expense of all repairs and maintenance associated with the property’s electrical and plumbing systems. 4) Structural/Roof - The expense of all repairs and maintenance associated with the property’s building structure and roof. 5) Pest Control – The expense of insect and rodent control. 6). Other Repairs & Maintenance - The cost of any other repairs and maintenance items not specifically included in other expense categories.

Common Area Maintenance - The common area is the total area within a property that is not designed for sale or rental, but is available for common use by all owners, tenants, or their invitees, e.g., parking and its appurtenances, malls, sidewalks, landscaped areas, recreation areas, public toilets, truck and service facilities. Common Area Maintenance (CAM) expenses can be entered in bulk or through the sub-categories. 1) Utilities – Cost of utilities that are included in CAM charges and passed through to tenants. 2) Repair & Maintenance – Cost of repair and maintenance items that are included in CAM charges and passed through to tenants. 3) Parking Lot Maintenance – Cost of parking lot maintenance items that are included in CAM charges and passed through to tenants. 4) Snow Removal – Cost of snow removal that are included in CAM charges and passed through to tenants. 5) Grounds Maintenance – Cost of ground maintenance items that are included in CAM charges and passed through to tenants. 6) Other CAM expenses are items that are included in CAM charges and passed through to tenants.

Painting & Decorating - This expense category is relevant to residential properties where the landlord is required to prepare a dwelling unit for occupancy in between tenancies.

Cleaning & Janitorial - The expenses for building cleaning and janitorial services, for both daytime and night-time cleaning and janitorial service for tenant spaces, public areas, atriums, elevators, restrooms, windows, etc. Cleaning and Janitorial expenses can be provided either in the following subcategories or entered in a bulk total. 1) Contract Services - The expense of cleaning and janitorial services contracted for with outside service providers. 2) Supplies, Materials & Misc. - The cost any cleaning materials and any other janitorial supplies required for property cleaning and janitorial services and not covered elsewhere. 3) Trash Removal - The expense of property trash and rubbish removal and related services. Sometimes this expense item includes the cost of pest control and/or snow removal .4) Other Cleaning/Janitorial - Any other cleaning and janitorial related expenses not included in other specific expense categories.

Advertising & Promotion - Expenses related to advertising, promotion, sales, and publicity and all related printing, stationary, artwork, magazine space, broadcasting, and postage related to marketing.

Professional Fees - All professional fees associated with property leasing activities including legal, accounting, data processing, and auditing costs to the extent necessary to satisfy tenant lease requirements and permanent lender requirements.

Total Payroll - The payroll expenses for all employees involved in the ongoing operation of the property, but whose salaries and wages are not included in other expense categories. Payroll expenses can be provided either in the following subcategories or entered in a bulk total. 1) Administrative Payroll - The payroll expenses for all employees involved in on-going property administration. 2) Repair & Maintenance Payroll - The expense of all employees involved in on-going repairs and maintenance of the property. 3) Cleaning Payroll - The expense of all employees involved in providing on-going cleaning and janitorial services to the property 4) Other Payroll - The expense of any other employees involved in providing services to the property not covered in other specific categories.

Security - Expenses related to the security of the Lessees and the Property. This expense item includes payroll, contract services and other security expenses not covered in other expense categories. This item also includes the expense of maintenance of security systems such as alarms and closed circuit television (CCTV), and ordinary supplies necessary to operate a security program, including batteries, control forms, access cards, and security uniforms.

Roads & Grounds - The cost of maintaining the grounds and parking areas of the property. This expense can vary widely depending on the type of property and its total area. Landscaping improvements can range from none to extensive beds, gardens and trees. In addition, hard-surfaced public parking areas with drains, lights, and marked car spaces are subject to intensive wear and can be costly to maintain.

Other Operating Expenses - Any other expenses incurred in the operation of the property not specifically covered elsewhere.

Real Estate Taxes - The tax levied on real estate (i.e., on the land, appurtenances, improvements, structures and buildings); typically by the state, county and/or municipality in which the property is located.

PROSPECTIVE OPINION OF VALUE A value opinion effective as of a specified future date. The term does not define a type of value. Instead, it identifies a value opinion as being effective at some specific future date. An opinion of value as of a prospective date is frequently sought in connection with projects that are proposed, under construction, or under conversion to a new use, or those that have not yet achieved sellout or a stabilized level of long-term occupancy.

PROSPECTIVE VALUE UPON REACHING STABILIZED OCCUPANCY The value of a property as of a point in time when all improvements have been physically constructed and the property has been leased to its optimum level of long-term occupancy. At such point, all capital outlays for tenant improvements, leasing commissions, marketing costs and other carrying charges are assumed to have been incurred.

SPECIAL, UNUSUAL, OR EXTRAORDINARY ASSUMPTIONS Before completing the acquisition of a property, a prudent purchaser in the market typically exercises due diligence by making customary enquiries about the property. It is normal for a Valuer to make assumptions as to the most likely outcome of this due diligence process and to rely on actual information regarding such matters as provided by the client. Special, unusual, or extraordinary assumptions may be any additional assumptions relating to matters covered in the due diligence process, or may relate to other issues, such as the identity of the purchaser, the physical state of the property, the presence of environmental pollutants (e.g., ground water contamination), or the ability to redevelop the property.


A D D E N D U M B : C L I E N T S A T I S F A C T I O N S U R V E Y

Survey Link: http://www.surveymonkey.com/s.aspx?sm=_2bZUxc1p1j1DWj6n_2fswh1KQ_3d_3d&c=13-38010-900534-001

C&W File ID: 13-38010-900534-001

Fax Option: (716) 852-0890

1. Given the scope and complexity of the assignment, please rate the development of the appraisal relative to the adequacy and relevance of the data, the appropriateness of the techniques used, and the reasonableness of the analyses, opinions, and conclusions:


Comments:_____________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

2. Please rate the appraisal report on clarity, attention to detail, and the extent to which it was presentable to your internal/external users without revisions:


Comments:_____________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________


3. The appraiser communicated effectively by listening to your concerns, showed a sense of urgency in responding, and provided convincing support of his/her conclusions:

__ Not Applicable __ Excellent __ Good __ Average __ Below Average __ Poor

Comments:_____________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

4. The report was on time as agreed, or was received within an acceptable time frame if unforeseen factors occurred after the engagement:

__ Yes __ No

5. Please rate your overall satisfaction relative to cost, timing, and quality:


Comments:_____________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

6. Any additional comments or suggestions?

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________


7. Would you like a representative of Cushman & Wakefield’s National Quality Control Committee to contact you?

__ Yes __ No Your Name: ___________________________________________

Your Telephone Number: _________________________________________

Contact Information: Scott Schafer

Managing Director, National Quality Control

(716) 852-7500, ext. 121


A D D E N D U M C : L E G A L D E S C R I P T I O N


A D D E N D U M D : C O M P A R A B L E I M P R O V E D S A L E D A T A S H E E T S

Sunset Shopping Center100-108 Sunset AveSuisun City CA 94585MSA: Vallejo-Fairfield-NapaSolano County

Shopping CenterProperty Type:Neighborhood CenterProperty Subtype:261223ID:

0173-390-1400173-390-150

APN:


1981

88,000

40,885

359,4574.08:1

8.25

Average47,115N/A

4865.52:1,000

Sold GLA 88,000

Site Area (SqFt):

Parking Ratio:

Site Area (Acres):

Parking Spaces:


Quality:

L:B Ratio:

Total GLA

Year Built:

AverageCondition:

Rite Aid X 18,043In-Shape Fitness X 29,072


(SF)

X

SALE INFORMATION

Recorded Sale

Leased FeeWRI Golden State, LLC

$139.20

8/2013$12,250,000

Hall Equities Group

Transaction Date:

Grantor:


Value Interest:

Grantee:

Sale Status:

95.00%N/A

$13.04

9.37%$1,147,825

N/A

Occupancy:

OAR:

EGIM:Expense Ratio:

NOI per SqFt:NOI:


COMMENTS

This neighborhood shopping center is located just north of Highway 12. The center includes several pad buildings that were not included in this sale (IHOP, McDonalds, KFC, and Taco Bell). The property was listed at $13,000,000.

VERIFICATION COMMENTS

Listing Agent, Brian Bollinger, 916.462.6215



Gettysburg Address3102-3128 E Gettysburg Ave4542-4590 N First StreetFresno CA 93726MSA: FresnoFresno County


428-050-17, 18, 19, 20 & 21APN:


1991

93,840

43,930

368,0823.92:1

8.45

Average49,9101996

5425.78:1,000

Sold GLA 93,840

Site Area (SqFt):

Parking Ratio:

Site Area (Acres):

Parking Spaces:


Quality:

L:B Ratio:

Total GLA

Year Built:

AverageCondition:

Fresno Ag Hardwar X 49,910


(SF)

X

SALE INFORMATION

Recorded Sale

Leased FeeZinkin Family Partners LP

$95.27

5/2013$8,940,000

619, LLC

Transaction Date:

Grantor:


Value Interest:

Grantee:

Sale Status:

88.00%N/A

$8.34

8.75%$782,250

N/A

Occupancy:

OAR:

EGIM:Expense Ratio:

NOI per SqFt:NOI:


COMMENTS

This neighborhood center is anchored by Fresno Ag Hardware, which occupies 49,910 square feet, at $0.58/SF/Month, NNN, expiring August 2018, with six 5-year options. Other tenants include Autozone, Chubby's Diner, Little Caesar's, and Subway. Rents for in-line space generally range from $1.10 to $1.50/SF/Month, NNN. Asking rents are currently $1.00/SF. The property sold for $9,200,000, and included a vacant 1/2 acre pad site valued at $12.00/SF or approximately $260,000. The analyzed sale price is net of the pad site value.


Dan Riley, CBRE, 310-363.4899Appraiser's files



Village One Plaza3020 Floyd AveModesto CA 95355MSA: ModestoStanislaus County


N/AAPN:


2007

105,658

39,955

517,0574.89:1

11.87

Good65,703N/A

N/AN/A

Sold GLA 105,658

Site Area (SqFt):

Parking Ratio:

Site Area (Acres):

Parking Spaces:


Quality:

L:B Ratio:

Total GLA

Year Built:

GoodCondition:

Raley's X 65,703


(SF)

X

SALE INFORMATION

Recorded Sale

Leased FeeVillage One Plaza LLC

$250.81

12/2012$26,500,000

Phillips Edison - ARC

Transaction Date:

Grantor:


Value Interest:

Grantee:

Sale Status:

92.00%N/A

$19.06

7.60%$2,014,000

N/A

Occupancy:

OAR:

EGIM:Expense Ratio:

NOI per SqFt:NOI:


COMMENTS

This center is leased to 19 tenants, with Raley's being the largest. The Raley's lease is at $1.48/SF/Month, NNN, commencing in August 2007 and expiring January 2033. The property does include a Raley's gas station, but unable to confirm if that component is included in stated rent. Raley's had recently closed a nearby store. The property was purchased by a REIT.


Knowledgeable 3rd party. Buyer cannot disclose anything that isn't in the SEC Filing.



Raley's Plaza3330 North Texas StreetFairfield CA 94533MSA: Vallejo-Fairfield-NapaSolano County


0167-130-170, 0167-130-210, 0167-130-160, 0167-130-180, 0167-130-220

APN:


1997

95,441

32,316

418,6124.39:1

9.61

Average63,125N/A

4815.04:1,000

Sold GLA 95,441

Site Area (SqFt):

Parking Ratio:

Site Area (Acres):

Parking Spaces:


Quality:

L:B Ratio:

Total GLA

Year Built:

AverageCondition:

Raleys X 63,125


(SF)

X

SALE INFORMATION

Recorded Sale

Leased FeeDonahue Schriber

$213.22

8/2012$20,350,000

Gerrity Atlantic Retail Partners, LLC

Transaction Date:

Grantor:


Value Interest:

Grantee:

Sale Status:

96.00%N/A

$15.46

7.25%$1,475,375

N/A

Occupancy:

OAR:

EGIM:Expense Ratio:

NOI per SqFt:NOI:


COMMENTS

The income stream is relatively secure as 72% of the subject is leased to Raleys and Chase. Raleys is leased through June 2024, at $1.04/SF/Month, NNN, with three 5-year options. Other tenants include Starbucks and Panda Express. Traffic counts at the intersection are 50,261 ADT. The average household income is $89,992 within a one-mile radius.


Offering Memorandum, Listing Broker, Preston Fetrow at CBRE, 949.725.8538



Visalia Marketplace3247-3549 West Noble Avenue3247-3549 W Noble AveVisalia CA 93277MSA: Visalia-Tulare-PortervilleTulare County

Shopping CenterProperty Type:Community CenterProperty Subtype:232740ID:

095-010-024, -052, -053, -054, -055, -056, -057APN:


1965

200,794

52,307

1,076,8035.36:1

24.72

Average148,4872008

1,1505.73:1,000

Sold GLA 200,794

Site Area (SqFt):

Parking Ratio:

Site Area (Acres):

Parking Spaces:


Quality:

L:B Ratio:

Total GLA

Year Built:

AverageCondition:

Save Mart X 50,000K-Mart X 100,000


(SF)

X

SALE INFORMATION

Recorded Sale

Leased FeeUhlmann Lionel Hayes Jr

$94.62

6/2012$19,000,000

Thompson National Properties, LLC

Transaction Date:

Grantor:


Value Interest:

Grantee:

Sale Status:

92.00%33.02%

$8.28

8.75%$1,662,500

7.64

Occupancy:

OAR:

EGIM:Expense Ratio:

NOI per SqFt:NOI:


COMMENTS

The center is anchored by Save Market Supermarket and Kmart. Other tenants include Starbucks and Brandman University. The property was originally developed in 1965 but was renovated in 2008. The current size of the property reflects the demolition of a previous “building C”, which contained 32,241 square feet. The seller also represented there is the potential to develop an additional 60,000 square feet of space, with a proposed ground lease for this space. The two anchor tenants are leased long-term, with Save Mart expiring 2028 and Kmart 2024. The center was 92 percent leased at sale. The asking price was $19,950,000.


Listing Agent, Chris Maling, Colliers, 213.532.3292




A D D E N D U M E : Q U A L I F I C A T I O N S O F T H E A P P R A I S E R S




GEORGE J. GERANIOS, MAI DIRECTOR | VALUATION & ADVISORY PRACTICE GROUP MEMBER | RETAIL | AUTOMOBILE | TAX | RESTAURANT CUSHMAN & WAKEFIELD WESTERN, INC.

George J. Geranios is a Director of Valuation & Advisory of Cushman & Wakefield’s San Jose office. Mr. Geranios is a member of Cushman & Wakefield’s Retail Industry specialty practice and also specializes in the valuation of automobile dealerships, tax appeal and restaurants. Mr. Geranios was made a Director in 2006 by Cushman & Wakefield. Prior to becoming a Cushman & Wakefield Associate Director in 2003, he was the Director of Marketing for Colliers Investment Services Group-Silicon Valley, where he was responsible for financial analysis, preparation of marketing proposals and offering memoranda for institutional properties valued in excess of $10 million. During the 1980’s, he was a commercial broker for Cushman & Wakefield in Silicon Valley specializing in the leasing of office/research and development buildings. Prior to that time, he was an Innkeeper of a Holiday Inn franchisee in the Northeast.

EXPERIENCE

The property types appraised include appraisal and consulting services on all types of income producing properties including industrial facilities, business campuses, office complexes, retail centers, automobile dealerships, apartments, vacant land, residential subdivisions, tax appeal purposes, litigation support, and rent and market value arbitration.

EDUCATION

Hellenic College − Degree: Bachelor of Arts – Behavioral and Social Sciences


Designated Member of the Appraisal Institute (MAI No. 13799) − As of the current date, George J. Geranios, MAI has completed the requirements of the continuing

education program of the Appraisal Institute. Certified General Real Estate Appraiser in the following state:

− California – AG011942


In 2010, Mr. Geranios was the recipient of the Cushman & Wakefield Northern California Gameball Award. In 2004, Mr. Geranios was a co-recipient of the 2004 Achievement Award for the Top New Assignment -

Northern California. This consulting assignment was for the development of the Master Real Estate Plan for the County of Santa Clara, California.

Mr. Geranios was the recipient of the Cushman & Wakefield Northern California Service Excellence Award in 1997.




LITIGATION

− Mr. Geranios has qualified as an expert in the Oakland Federal Bankruptcy Court




CALIFORNIA




ROBBY D. PERRINO, MAI, CRE, CCIM EXECUTIVE MANAGING DIRECTOR | VALUATION & ADVISORY NATIONAL DIRECTOR | CORPORATE AND INSTITUTIONAL SOLUTIONS CUSHMAN & WAKEFIELD WESTERN, INC.

Robby D. Perrino joined Cushman & Wakefield in 1990. Currently, Mr. Perrino serves as an Executive Managing Director of Valuation & Advisory for Cushman & Wakefield Western, Inc. In this capacity, Mr. Perrino is responsible for the everyday operation of the Northern California offices (San Francisco, San Jose, and Sacramento). Additionally, he is the National Director of Corporate Solutions focusing on valuation and advisory opportunities with corporations and private equity firms. In 2013, with the realignment of Valuation & Advisory of Cushman & Wakefield, Mr. Perrino accepted further leadership responsibility for developing and managing institutional relationships in the Americas, including public and private plan sponsors, investment managers, REITs, and life insurance companies. In 2009, Mr. Perrino received additional leadership responsibility for Northern California and Pacific Northwest offices (San Francisco, San Jose, Sacramento, Portland, Seattle, Denver, and Salt Lake City) offices. In 2005, with the reorganization Valuation & Advisory of Cushman & Wakefield, Mr. Perrino accepted leadership responsibility for Northern California and Pacific Southwest offices (San Francisco, San Jose, Sacramento, Phoenix, and Las Vegas) offices.

EXPERIENCE

Mr. Perrino has valued and advised on institutional and corporate real estate throughout the Americas. He also serves as a consultant/fiduciary advisor providing strategic advice to corporations, institutional clients, and developers/investors.

Mr. Perrino serves as the national relationship manager and single point of contact for the following institutional accounts: the California Public Employees’ Retirement System (“CalPERS”), the Los Angeles County Employee’s Retirement Association (“LACERA”), RREEF, Stockbridge Real Estate Funds, and CIM.

EDUCATION

• University of Southern California – Graduated 1989 − Degree: Bachelor of Arts – Economics


• Designated Member, Appraisal Institute (MAI #11406) − As of the current date, Robby Perrino, MAI has completed the requirements of the continuing

education program of the Appraisal Institute. • The Counselors of Real Estate (CRE ID: 12895) • Member Commercial Investment Real Estate Institute (CCIM No. 8219) • Certified General Real Estate Appraiser in the following state:

− California – AG002595 • Broker License, State of California (No. 01034857)





• Mr. Perrino was the recipient of the Francis Corcoran Award as the Outstanding Cushman & Wakefield Valuation & Advisory Manager of the Year for 2000 due to his leadership and successful initiatives.

• During his tenure as an Associate Director, Mr. Perrino was recognized as one of Cushman & Wakefield’s Valuation & Advisory Top Producers, qualifying for Cushman & Wakefield’s Achievement Conference in 1998 and 1999. Additionally, he was the recipient of the Cushman & Wakefield Northern California Service Excellence Award in 1998 and 1999.




CALIFORNIA

November 21, 2013 Mr Eyal Bartov, CFO Aviv Arlon Ltd. 7 Jabotinsky St. Ramt Gan Israel To Whom It May Concern: RE: Appraisal Reports dated 18th of November 2013 of Riverwalk Plaza and Hagerstown Shopping

Center provided by Cushman & Wakefield of Washington, D.C., Inc.

Appraisal Reports dated 19th of November 2013 of Parkplace Shopping Center and The Center provided by Cushman & Wakefield Western Inc.

Appraisal Report dated 19th of November 2013 of Rivergate Station provided by Cushman & Wakefield of Georgia Inc.

We understand that the above appraisals (“Appraisal Reports”) provided by the respective firm identified above (each an "Appraisal Report") will be used by Aviv Arlon Ltd. (“Aviv Arlon”) for the preparation of its financial statements for the third quarter of 2013. We, as to our respective Appraisal Report, consent to the use of our Appraisal Report in Aviv Arlon financial statements and to its publication in connection with such financial statement should Aviv Arlon be required to do so. However, we take no responsibility or liability for any misrepresentation of the appraisal information in the financial statements or any other publication for public disclosure. Aviv Arlon and the issuer of such registration statement shall take full responsibility for the reference to the Appraisal Report and any reference to the Appraisal Report shall be accompanied by the following statement: “An appraisal is only an estimate of value, as of the date stated in the appraisal, and is subject to the Assumptions and Limiting Conditions, as well as any Extraordinary Assumptions and Hypothetical Conditions, stated in the report. Changes since that date in external and market factors or in the property itself can significantly affect the conclusions. As an opinion, it is not a measure of realizable value and may not reflect the amount which would be received if the property were sold. Reference should be made to the entire appraisal report because relying solely on excerpts or portions of a report do not necessarily convey all of the limitations, conditions, assumptions or qualifications of the report that influenced the opinion of value.”

In giving this consent, we do not thereby admit that we are experts within the meaning of the Securities Act or the rules and regulations of the Commission or that this consent is required by Section 7 of the Securities Act. Best regards, Cushman & Wakefield of Washington, D.C., Inc.

By: Name: Neal Eaton, MAI, MRICS Title: Senior Director Cushman & Wakefield Western, Inc.

By: Name: Chris Stavros Title: Director Cushman & Wakefield Western, Inc.

By: Name: George J. Geranios, MAI Title: Director Cushman & Wakefield of Georgia, Inc.

By: Name: Christopher S. Lassiter, MAI Title: Director

APPRAISAL OF REAL PROPERTY · 2013. 11. 27. · APPRAISAL OF REAL PROPERTY The Center 1880 East...

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Transcript of APPRAISAL OF REAL PROPERTY · 2013. 11. 27. · APPRAISAL OF REAL PROPERTY The Center 1880 East...