STATE OF THE U.S. SALE LEASEBACK MARKET Year in Review

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1 STATE OF THE U.S. SALE LEASEBACK MARKET 2017 Year in Review

2 Executive Summary $13.95B 2017 Transaction Volume 6.51% Average Cap Rate $25.5M Average Deal Size 547 Transactions 1,057 Properties 76.8M Square Feet 41 States The sale leaseback market had an impressive amount of activity in 2017, particularly given the fact the overall net lease transaction volume was down for the year. The net lease sector experienced $55.4 billion in overall transaction volume which is a slight decrease from 2016 overall transaction volume of $56.3 billion. In contrast, the sale leaseback market ended 2017 close to $14 billion in volume which is a 25% increase over 2016 transaction volume of $11.2 billion. The month of December saw two significant transactions with Albertsons making headlines closing on a 69-property store portfolio and raising over $720 million in proceeds. State Farm also closed on a portfolio of five offices in Tempe, Arizona for $928 million. Overall, cap rates decreased in each sector of the sale leaseback market and compressed 24 bps from 2016 to 2017 ending the year at an average of 6.51%. 90% of all partial sale leasebacks were office. Office At the beginning of 2017, we observed the rise of partial sale leasebacks which occur when a property owner sells its property and simultaneously signs a lease for a portion of that property. This is particularly true in the office category as owners grapple with shifting demographics and workplace utilization. Whereas baby boomers historically used approximately 350 square feet per employee, the desire for shared workspace coupled with the rise of technology has decreased the space need per employee to 150 square feet or less for millennials and future generations. As such, 90% of all partial sale leasebacks from 2017 were in the office category and comprised $2.1 billion in transaction volume. Average cap rates for the office sector compressed 22 bps from 2016 to 2017 ending the year at 6.93%. Retail The retail industry spent 2017 battling headlines, and owner-occupiers utilized their real estate portfolios as a way to raise capital though likely for very different reasons. Of the top 20 transactions by sales volume, nine were by retailers, representing 45% of total volume. Embattled retailers Sears and Macy s sold approximately $658 million of sale leaseback assets for liquidity and to capitalize on attractive real estate valuations. Other retailers utilized their real estate as a way to raise funds for mergers, acquisitions and future exit strategies. In addition to the aforementioned Albertsons transaction, Cabela s, Bass Pro Shops, CVS Pharmacy, Art Van Furniture, At Home and AMC Theatres all took advantage of the sale leaseback environment for a combined capital raise of nearly $2 billion. Cap rates for the retail sector compressed 8 bps from 2016 to 2017 ending the year at an average of 6.18%. 36% of all sale leaseback volume is retail.

3 Executive Summary Industrial 67% of industrial sale leasebacks occurred outside of a primary market. For the past several years, demand for mission critical industrial facilities has been high, and this was no exception in As a result, owneroccupants in secondary and tertiary markets are taking advantage of such demand. In 2017, 67% of all industrial sale leasebacks took place outside of a primary market. By comparison, in % of all industrial sale leasebacks occurred in a secondary or tertiary market. Average cap rates for the industrial sector compressed 30 bps from 2016 to 2017 ending the year at 7.15%. All Transactions by Type Conclusion 2017 was a strong year for the sale leaseback market as companies utilized their real estate footprints as a means to raise capital and unlock value. We expect the momentum to continue in 2018 with companies leveraging their real estate as a capital-raising alternative and exit strategy for corporations, in particular as interest rates continue to rise. Industrial Retail 16% 36% Office 48% All Transactions by Volume by Region Midwest Midsouth 9% 6% Northeast West 12% 32% Southeast Multi-State 10% 31%

4 Office Market $6.7B 6.93% M 2017 Transaction Volume Average Cap Rate Transactions Square Feet Office Mega Deals 12 Transactions by Product Type Office transactions were over $100 million Transactions by Location Multi Class A 57% 1 Medical Seconday & Tertitary 23% Primary Class B 32% 16% 5 Telecom Transactions by Volume by Region Midwest Midsouth 5% Northeast West 21% 45% Southeast Multi-State 10% 15% Source: Stan Johnson Company, Real Capital Analytics, Costar Group *Office properties are comprised of office, medical, and telecom properties *Primary markets include NYC and boroughs, LA & LA Metro, Chicago, Dallas, Houston, DC & Metro, Philadelphia, Southern Florida (Broward, Miami, Palm Beach), Atlanta, Boston, San Francisco & Metro, Phoenix

5 Industrial Market $2.24B 7.15% 2017 Transaction Volume 154 Transactions Average Cap Rate $14.7M 29.1M Average Deal Size Square Feet Top 10 Industrial Deals 37% Transactions by Product Type The top 10 deals made up 37% of volume Transactions by Location Warehouse Primary 55% 29% Distribution 18% Manufacturing 17% Flex 10% Seconday & Tertitary 67% Multi Transactions by Volume by Region Midwest Midsouth 19% 12% Northeast West 11% 38% Southeast Multi-State 1 6% Source: Stan Johnson Company, Real Capital Analytics, Costar Group *Primary markets include NYC and boroughs, LA & LA Metro, Chicago, Dallas, Houston, DC & Metro, Philadelphia, Southern Florida (Broward, Miami, Palm Beach), Atlanta, Boston, San Francisco & Metro, Phoenix

6 Retail Market $5.01B 6.18% M 2017 Transaction Volume Average Cap Rate Transactions 10 Square Feet Transactions by Product Type Transactions made up over 50% of retail sales volume 1% 51% AUTO BIG BOX 7% Transactions by Location Seconday & Tertitary Primary 12% 7% DRUGSTORE OTHER 5% 23% GAS RESTAURANT 1% 19% BANK Multi 65% 3% QSR/FAST CASUAL GROCERY 2% FITNESS Transactions by Volume by Region Midwest Midsouth 10% Northeast West 3% 1 Southeast Multi-State 65% Source: Stan Johnson Company, Real Capital Analytics, Costar Group *Primary markets include NYC and boroughs, LA & LA Metro, Chicago, Dallas, Houston, DC & Metro, Philadelphia, Southern Florida (Broward, Miami, Palm Beach), Atlanta, Boston, San Francisco & Metro, Phoenix

7 Notable Transactions Office Transactions State Farm at Marina Heights Price: $928,000,000 Cap Rate: 5.69% Size: +/- 2,118,000 SF PSF: $438 Liberty Mutual Insurance Price: $673,000,000 Cap Rate: 4.30% Size: +/- 824,637 SF PSF: $816 Broadcom* Price: $443,000,000 Size: +/- 1,034,525 SF PSF: $428 *Partial Sale Leaseback McKesson* Price: $245,000,000 Size: +/- 424,000 SF PSF: $578 *Partial Sale Leaseback Industrial Transactions JCPenney Distribution Price: $131,300,000 Size: +/- 1,035,000 SF PSF: $127 Lasko Price: $100,000,000 Cap Rate: 6.70% Size: +/- 2,224,627 SF PSF: $45 Georgia-Pacific Price: $66,700,000 Size: +/- 1,121,120 SF PSF: $59 Petco Headquarters* Price: $110,000,000 Cap Rate: 6.75% Size: +/- 260,000 SF PSF: $423 *R&D Component Retail Transactions Albertsons Price: $720,661,534 Size: +/- 3,853,915 SF PSF: $187 AMC Theatres Price: $130,000,000 Size: +/- 288,083 SF PSF: $451 Bass Pro Shops & Cabela s* Price: $846,500,000 Size: +/- 6,321,232 SF PSF: $134 *This combines 3 different Bass Pro Shops & Cabela s portfolio sales CVS Pharmacy Price: $275,000,000 Size: +/- 596,840 SF PSF: $461

8 The Corporate Finance Group going beyond Shan Gastineau Senior Director Daniel Herrold Senior Director Katie Elliott Associate Director Robert Poirier Associate Director Campbell Black Associate Jennifer Cameron Associate Janet Woods Regional Managing Director Scott Merkle Senior Director Stephen Cheng Director Matt Wrobleski Associate Director David Annett Associate Director Mitchell Townsend Associate Tyler Vining Associate Austin Duff Associate Stan Johnson Company 3340 Peachtree Rd NE Suite 650 Atlanta, GA S Yale Ave Suite 300 Tulsa, OK Madison Ave Suite 1500 New York, NY E Wacker Dr Suite 1111 Chicago, IL 60601