2017 in Review. A Look at the Top Wisconsin Investment Transactions. Market Research Report Year End 2017

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1 2017 in Review A Look at the Top Wisconsin Investment Transactions Market Research Report Year End 2017

2 Introduction Welcome to our fourth annual Colliers Wisconsin Investment Services Team top ten report. Our goal with this report is provide our investors and followers a concise snapshot of the health of the capital markets in the Badger State was a very active year for our team and the market as a whole. The bull market in real estate is well into its ninth year, and some prognosticators may have concerns that this historic run is getting long-in-the-tooth. But the abundance of pent-up capital and the underlying fundamental health of the real estate market are strong indicators that suggest this rally will continue deep into In recent years investors have consistently bid up the pricing on institutional quality opportunities in the white-hot industrial and multifamily sectors. Capitalization rates for core, stabilized properties in these sectors are at all-time lows in Wisconsin. The contrarians that are chasing higher-yielding investments have found excellent value-add buying opportunities in the hospitality, retail, and suburban office sectors. In 2017 Milwaukee welcomed several new capital sources to its central business district. Time Equities (New York), Middleton Partners (Chicago), North Wells Capital (Chicago), and Bentall Kennedy (Toronto) are just a few of the key players that made a splash with significant office investments in downtown this year. The recent increased investor interest in Milwaukee may stem from the momentum of over $3 billion in new development that has occurred over the last three years. This surge is led by the under-construction Bucks NBA Arena ($550 million+) and Northwestern Mutual s recently completed 1.1 million square foot headquarters office tower ($450 million). Furthermore, Foxconn s announcement that it will build a catalytic 20 million square foot, high-tech manufacturing campus just 25 miles south of Milwaukee has given all sectors of the market a bump. This massive development will lead to both job and population growth in Southeast Wisconsin for the first time in over thirty years and it has investors optimistic that they will experience noteworthy rent growth in In Madison, once again the stout student housing and multi-family market stole the headlines. Major recent multifamily developments such as the 408 bed Uncommon, the 150 bed Varsity Quarters, the 231 bed The Towers, 226 bed the Statesider, and the 420 unit Rivers Edge & Fordem Towers package all changed hands in 2017 at cap rates that are estimated in the 5.25% to 6.00% range. The strong Dane County economy is buoyed by large employers such as the University of Wisconsin, the State of Wisconsin government, software developer Epic Systems, UW Health, and burgeoning biotech firms such as Promega and Exact Sciences. Madison is attractive to long-term investors due to its constraints on new development and its high barriers to entry. These factors contribute to capitalization rates that typically are 50 to 100 basis points lower compared to those realized in the Milwaukee market. Investors are digesting tax reform, a changing bond market, rising interest rates, and global uncertainty in However, several of these macro issues were in play in 2017 and that did not stop the momentum of real estate capital. We anticipate another great year in 2018 and we hope you enjoy our 2017 Wisconsin Investment Services Team year-end report. -Tom, Joe, Jennifer, Margaret, and David 2

TOP TEN TRANSACTION VALUE 2014 2015 2016 2017 $312.6 MILLION $312.4 MILLION $811.7 MILLION $495.

3 TOP TEN TRANSACTION VALUE $312.6 MILLION $312.4 MILLION $811.7 MILLION $495.2 MILLION *Figures above are cumulative dollar values of the Colliers Wisconsin Investment Services Team s most recent YE top ten reports. 3

4 4

MARKET INDICATORS WISCONSIN Q4 2017 OFFICE using jobs 191,900 Quarter over Quarter **RESTAURANT performance index 101.1 METRO MKE unemployment 3.0% METRO Madison unemployment 2.

5 MARKET INDICATORS WISCONSIN Q OFFICE using jobs 191,900 Quarter over Quarter **RESTAURANT performance index METRO MKE unemployment 3.0% METRO Madison unemployment 2.1% WISCONSIN unemployment 3.2% MIDWEST unemployment 4.1% NATIONAL unemployment 4.1% **Values more than 100 equals expansion; Values less than 100 equals contraction Source: US Bureau of Labor Statistics November 2017 Numbers and National Restaurant Association MILWAUKEE OFFICE absorption Q Quarter over Quarter Year over Year 293,489 SF OFFICE vacancy 8.5% INDUSTRIAL absorption 722,492 SF INDUSTRIAL vacancy 4.5% MULTIFAMILY vacancy 6.5% Source: CoStar & Colliers Wisconsin Research 5

MARKET TRENDS Since 2015, there has been an up-tick in investment activity within the State of Wisconsin, unlike the national market that has seen a reduction in overall transaction volume during the

6 MARKET TRENDS Since 2015, there has been an up-tick in investment activity within the State of Wisconsin, unlike the national market that has seen a reduction in overall transaction volume during the same period. For transactions exceeding $2.5 million, 2017 volume was fairly similar to last year, with investment across asset types split evenly. The most notable change within the state has been the decreased investment in retail and increase in industrial properties. Nationally, the industrial sector experienced a 20 percent increase in deal volume in 2017, resulting in industrial being the only sector to realize year over year transaction growth1. Over the past few years, Wisconsin has continued to attract regional, national, and international investors who have not previously been active in the state. Not only has Wisconsin seen a shift in geographic distribution of investors active in the state, but also the makeup of the source of funds has begun to shift. Traditionally, the Wisconsin market has been dominated by private funds. While private funds remain the primary source of funds in the state, institutional and public activity has steadily increased over the past few years. As the state continues to attract outside investors, the source of funds and even the types of properties that investors find enticing may continue to evolve. Real Capital Analytics, US Capital Trends The Big Picture Source of Funds Transactions > $2.5 million 73.0% 13.5% PRIVATE USER 76.9% 11.6% PRIVATE USER 7.1% 6.9% INSTITUTIONAL INSTITUTIONAL % PUBLIC Source: Real Capital Analytics % PUBLIC

7 Wisconsin Historical Transaction Volume Billions Transactions > $2.5 million $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $- Office Industrial Retail Apartments Source: Real Capital Analytics 7

purchased 8500 & 8551 Research Way in Middleton, Wisconsin (suburban Madison) for a combined purchase price of $55 million ($235.35 PSF).

8 TEN 8551 Research Way Middleton, Wisconsin In March 2017, Vanta Commercial Properties LLC, the successor of T. Wall Properties of Wisconsin LLC, sold a two building flex pharmaceutical anchored campus to a California investor. IRA Management, Inc. purchased 8500 & 8551 Research Way in Middleton, Wisconsin (suburban Madison) for a combined purchase price of $55 million ($ PSF). The campus is anchored by Pharmaceutical Product Development, a Wilmington, North Carolina-based 138,000 square foot continuously growing anchor tenant of over 20 years. The reported cap rate was 7.57% and there was approximately 11 years of term remaining on the anchor tenant s lease. 8

NINE Boston Store Milwaukee, Wisconsin After nearly 17 years of ownership, in April WISPARK sold 331 W Wisconsin Ave to North Wells Capital, an affiliate of Chicago based Urban Innovations, Ltd.

The 428,652 square foot property is mixed-use with office and retail on the lower floors and 74 units of multi-family on the top four floors.

9 NINE Boston Store Milwaukee, Wisconsin After nearly 17 years of ownership, in April WISPARK sold 331 W Wisconsin Ave to North Wells Capital, an affiliate of Chicago based Urban Innovations, Ltd. The property traded for $25,000,000 ($58.32 PSF) at a 7.9% capitalization rate. The 428,652 square foot property is mixed-use with office and retail on the lower floors and 74 units of multi-family on the top four floors. The office and retail portion of the property have been home to Boston Store for over 100 years. Prior to the sale, Boston Store committed to keep operations in the building for an additional ten years in exchange for $1.9 million from the City of Milwaukee to defray the cost of renovations. As part of the funding agreement, the Boston Store has committed to keep 750 jobs in downtown Milwaukee. Additional funding for the $4 million renovation project, which will restructure the retail and corporate office component of the property will be funded by WISPARK and was credited to North Wells Capital at the time of sale. * Note: As of February 5, 2018, Bon-Ton, parent company of the Boston Store, has filed Chapter 11 bankrupcy. 9

EIGHT Gehl Foods Germantown, Wisconsin In May, Wind Point Partners sold three single tenant buildings totaling 629,000 square feet to New York-based investor Angelo, Gordon & Co. as a portfolio deal.

10 EIGHT Gehl Foods Germantown, Wisconsin In May, Wind Point Partners sold three single tenant buildings totaling 629,000 square feet to New York-based investor Angelo, Gordon & Co. as a portfolio deal. The portfolio sale consisted of properties in Germantown and Richfield, WI and sold for $34,420,000 ($55.80 PSF) at an undisclosed capitalization rate. Wind Point Partners originally acquired the properties in 2015 when the company acquired Gehl Foods. The deal was a sale lease-back with Gehl Foods reportedly executing a 20-year NNN lease. 10

SEVEN Mitchell Industrial Park Milwaukee, Wisconsin Mitchell Industrial Park is a renovated and rebranded group of industrial properties located at the southeast corner of Milwaukee s General

11 SEVEN Mitchell Industrial Park Milwaukee, Wisconsin Mitchell Industrial Park is a renovated and rebranded group of industrial properties located at the southeast corner of Milwaukee s General Mitchell International Airport near the corner of College Avenue and Pennsylvania. From its inception in the 1970s until 2005 it was locally owned by the original developer, the Steiner family, who coined the portfolio Ace Industrial Park after their moving and storage business Ace Worldwide. In 2005 they sold it to Oak Brook, Illinois based CenterPoint Properties. Under CenterPoint s ownership the property lost value due to declining occupancies and aging buildings. In July of 2014, CenterPoint sold to an Illinois-based joint venture led by WHI Real Estate Partners L.P. and BK Ace Industrial Holdings LLC. The occupancy of the property was only in the mid 60% range at the time of the 2014 closing and there was significant deferred maintenance. On August 18th, 2017 WHI and BK sold the ten building, 879,704 square foot, 95% occupied Mitchell Industrial Park to Deerfield, Illinois-based Oak Realty Group, Inc for a gross purchase price of $30,585,000 (before parking lot and roof credits). The going in cap rate was approximately 10%. The building addresses included in the sale were: 1920 E. College Ave, E. College Ave, 2150 E. College Ave, 2200 E. College Ave, 6215 S. Ace Industrial Dr, 6201 S. Ace Industrial Dr, 6120 S. Ace Industrial Dr, 6185 S. Ace Industrial Dr, 6055 S. Pennsylvania, and 5877 S. Pennsylvania. Notable tenants in the park include DHL-Air Express International, Menasha Packaging, Mattress Firm, National Packaging, and the General Services Administration. 11

SIX BMO Harris Bank SLB Brookfield, Wisconsin BMO Harris Bank NA unloaded a significant chunk of their real estate holdings in the suburban Milwaukee market in a large July sale leaseback transaction

12 SIX BMO Harris Bank SLB Brookfield, Wisconsin BMO Harris Bank NA unloaded a significant chunk of their real estate holdings in the suburban Milwaukee market in a large July sale leaseback transaction with SunTrust Robinson Humphrey Inc. As part of the $40.3 million ($ PSF) transaction, SunTrust acquired three office buildings totaling 208,535 square feet. All three properties are located in the same suburban office park in Brookfield, a western suburb of Milwaukee. The addresses are 180, 395, and 401 N. Executive Drive. BMO agreed to leaseback the properties for 12 to 15 year terms under an absolute net structure according to their offering memorandum. The reported NOI was $2.545 million which results in a 6.3% capitalization rate on in place income. 12

W. Wisconsin Avenue, Milwaukee. The building traded for $43.

13 FIVE The Marq Milwaukee, Wisconsin In October, a partnership between Marquette University and Chicago-based Harrison Street Real Estate Capital acquired the 231-unit, 612 bed student housing property, The Marq, located near Marquette University s campus at 2040 W. Wisconsin Avenue, Milwaukee. The building traded for $ million which equates to approximately $183,009 per unit or $69,077 on a per bed basis. The seller was Austin, Texas-based Campus Advantage, Inc. who had acquired the property as part of a package in

FOUR 310 West Wisconsin Avenue Milwaukee, Wisconsin 310 W. Wisconsin, Milwaukee ( 310 West ), formerly known as the Reuss Federal Plaza, closed on December 29th, 2017 for $19,500,000.

14 FOUR 310 West Wisconsin Avenue Milwaukee, Wisconsin 310 W. Wisconsin, Milwaukee ( 310 West ), formerly known as the Reuss Federal Plaza, closed on December 29th, 2017 for $19,500,000. The 578,000 square foot building in Milwaukee is the third largest multi-tenant office complex in the central business district behind only the US Bank tower and 411 E. Wisconsin Avenue. The building was purchased as a repositioning opportunity by an affiliate of Time Equities, Inc. which is based out of New York, New York. The seller was RAIT Reuss Federal Plaza LLC based out of Philadelphia, Pennsylvania. Major tenants in the property include Captel, Previant Law, the General Services Administration, ESPN Wisconsin 540 AM, and the Capital Grille. At the time of sale the property was 52% leased but within the near term the occupancy will drop to approximately 36% as two large tenants are vacating by the end of The iconic cobalt blue glass building, built in 1984, features two office towers connected by a soaring atrium that reaches 14 stories high. 310 West boasts 360 degree views of Milwaukee s skyline and it enjoys a strategic location in the quickly redeveloping Westown neighborhood. It is connected via the skyway system to Boston Store, Grand Avenue Mall, the Wisconsin Center, the Hyatt, and brand new SpringHill Suites by Marriott hotel. The property is situated on the planned street car path and it is walking distance to the new Bucks arena, the proposed Milwaukee Symphony Orchestra development, and several new multi-unit housing developments. The sale included an attached 606 stall parking garage. 14

THREE Uncommon Madison Madison, Wisconsin In a national eleven property $640 million student housing portfolio sale, two recent Madison developments

Bedford Street, traded to the Chicago-based The Scion Group, the Canada Pension Plan Investment Board, and Singapore wealth fund GIC under a joint

15 THREE Uncommon Madison Madison, Wisconsin In a national eleven property $640 million student housing portfolio sale, two recent Madison developments sold for big prices in March of The 72 unit/150 bed Varsity Quarters, 1423 N. Monroe Street, and the 179 unit/408 bed Uncommon, 110 N. Bedford Street, traded to the Chicago-based The Scion Group, the Canada Pension Plan Investment Board, and Singapore wealth fund GIC under a joint venture called Scion Student Committees LP. The 2,158 unit total portfolio includes 6,303 beds and a resulting purchase price of $296,571/unit and $101,534/bed. 15

TWO 100 Manpower Place Milwaukee, Wisconsin 2017 continued the three-year surge in significant office closings in Milwaukee s central business district.

16 TWO 100 Manpower Place Milwaukee, Wisconsin 2017 continued the three-year surge in significant office closings in Milwaukee s central business district. In June 2017, Manpower s Global Headquarters located at 100 N. Manpower Place on the Milwaukee River traded from the original developer, Schlitz Park/Brewery Works, to Seattle, Washington-based Bentall Kennedy for $66.5 million ($ PSF). Manpower (NYSE: MAN) is a Fortune 500 global staffing firm that was founded in Milwaukee in It is the third largest staffing firm in the world behind Swiss firm Adecco and Dutch firm Randstad. The investment traded at a 6.53% capitalization rate and the tenant is on a long term net lease that expires in 2031 for the entire 280,000 square foot property. According to the buyer s statement, Bentall Kennedy acquired the asset as investment manager and partner for Warba Bank K.S.C.P, a Kuwaitibased public shareholding company. The deal comes as Bentall Kennedy will now serve as Warba s US real estate investment advisor. 16

ONE 411 East Wisconsin Avenue Milwaukee, Wisconsin The 693,132 square foot CBD Class A tower 411 E. Wisconsin Avenue ( 411 ) scoops up top honors in this publication for the second time in four years.

In a span of just over three years, Five Mile Capital injected over $17 million in capital replacements as they increased occupancy from 76% to 89%.

17 ONE 411 East Wisconsin Avenue Milwaukee, Wisconsin The 693,132 square foot CBD Class A tower 411 E. Wisconsin Avenue ( 411 ) scoops up top honors in this publication for the second time in four years. In 2014 we reported 411 as the top transaction of the year (Click here for our 2014 report) when it sold to Five Mile Capital Partners (Stamford, CT) for $74.3M ($93.84 PSF) as a value-add investment. In a span of just over three years, Five Mile Capital injected over $17 million in capital replacements as they increased occupancy from 76% to 89%. Northbrook, Illinois-based Middleton Partners acquired the asset in June of 2017 after the repositioning. Work that was required included HVAC, lobby, roof, elevator and parking structure upgrades. The 2017 sale value was $124.6 million ($180 PSF) and the 9.3% reported cap rate is inclusive of parking income (by removing the parking income the cap rate would be in the 8.5% range). Law firm Quarles & Brady LLP at 186,472 square fee and law firm von Briesen & Roper at 67,914 square feet, are two of the larger tenants that occupy the building. 411 is the second largest multi-tenant office building in Milwaukee behind only the US Bank tower located at 777 E. Wisconsin Avenue. 17

18 Honorable Mentions West Grove on the Lake Apartments Waukesha, Wisconsin Sold Price: $36,500,000 $64.46 PSF Rivers Edge Apartments Madison, Wisconsin Sold Price: $37,000,000 $89.93 PSF The Towers Madison, Wisconsin Sold Price: $32,501,124 $ PSF 18

Mequon Health Center Mequon, Wisconsin Sold Price:

03 PSF Applewood Senior Living Portfolio

19 Mequon Health Center Mequon, Wisconsin Sold Price: $31,927,039 $ PSF Applewood Senior Living Portfolio Brookfield, Wisconsin Sold Price: $26,100,000 $ PSF Cap Rate: 8.30% Single Tenant Industrial Portfolio New Berlin & Caledonia, Wisconsin Sold Price: $100,000,000 $40.00 PSF Cap Rate: 10.0% 19

68 countries $2.6 billion in annual revenue Investment Services Tom Shepherd Partner Wisconsin Direct +1 414 278 6815 tom.shepherd@colliers.

About Colliers International Colliers International Group Inc.

With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide.

valuation and tax consulting; customized research; and thought leadership consulting.

Colliers has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 12 consecutive years, more than any other real estate

20 68 countries $2.6 billion in annual revenue Investment Services Tom Shepherd Partner Wisconsin Direct billion square feet under management 15,000 professionals and staff $105 billion in total transaction value *All statistics are for 2016, are in U.S. dollars and include affiliates. About Colliers International Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIGI) is an industry leading global real estate services company with more than 15,000 skilled professionals operating in 68 countries. With an enterprising culture and significant employee ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include strategic advice and execution for property sales, leasing and finance; global corporate solutions; property, facility and project management; workplace solutions; appraisal, valuation and tax consulting; customized research; and thought leadership consulting. Colliers professionals think differently, share great ideas and offer thoughtful and innovative advice that help clients accelerate their success. Colliers has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 12 consecutive years, more than any other real estate services firm. Research Joe Eldredge Senior Vice President Wisconsin Direct joe.eldredge@colliers.com Jennifer Huber-Bullock Investment Analyst Wisconsin Direct jennifer.huber@colliers.com Margaret Bruckner Research Analyst Direct margaret.bruckner@colliers.com David Fischer Research Analyst Direct david.fischer@colliers.com Copyright 2018 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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