Net Lease Investment Outlook

United States H1 2018 JLL Research Report Net Lease Investment Outlook First half of 2018 outperforms but overall selectivity prevails

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Net lease transaction volume (billions $US) Transactions Top transactions what s happening and where 2 Investment Outlook United States Net Lease H1 2018 Overall Net Lease $23.7 Net Lease Industrial $11.2 Net Lease Office $7.6 6.5% Net Lease Retail $4.9 6.1% Net lease transaction volumes soften by 5.7 percent in H1 2018, with liquidity underpinned by industrial trades Overall net lease sales volumes for H1 2018 totaled $23.7 billion, marking a 5.7 percent decrease from volumes recorded in the first half of 2017. The year-over-year change mirrors combined capital markets activity across office, industrial, and retail assets as a whole. In the first half of 2018, sale leasebacks accounted for 14.4 percent of transactions by volume, or $4.1 billion, and remain a driving force of activity. Among the largest sale leaseback transactions thus far in 2018 are a Supervalu portfolio of eight distribution centers, an Albertsons portfolio spanning 23 assets, and 3M Company s campus. Net lease transactions market remains active $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 Q4 Q2 Source: JLL Research, Real Capital Analytics (transactions larger than $5.0 million, includes entity-level transactions) Q3 Q1

3 Outlook United States Net Lease H1 2018 MarketsInvestment Notable net lease transactions Office Market Property Buyer Price ($) Size (s.f.) Price (p.s.f.) New York NYU Langone Medical Center Commerz Real $332,500,000 386,000 $860 Los Angeles 2230 East Imperial Hwy Swift Realty Partners $167,500,000 562,264 $296 New York 430 West 15th Street Invesco $158,500,000 93,119 $1,702 Boston 300 Massachusetts Avenue Forest City / Madison International $134,384,328 245,000 $1,119 Industrial Market Property Buyer Price ($) Size (s.f.) Price (p.s.f.) Columbus Duke Realty (4 Buildings) Granite REIT $232,500,000 3,806,420 $61 Los Angeles Supervalu Distribution Center Rexford Industrial REIT $121,000,000 693,282 $175 Los Angeles 20333 South Normandie Avenue Morgan Stanley $102,500,000 512,490 $200 South Bay-Silicon Valley Orchard 611 Gaw Capital $93,500,000 206,488 $453 Retail Market Property Buyer Price ($) Size (s.f.) Price (p.s.f.) Silicon Valley Macy's SARES-REGIS Group / Hunter Storm $95,000,000 177,000 $537 New York Chanel Chanel $81,466,435 54,888 $1,485 All Others Marketplace at Hamden Wilder Cos / Silverpeak RE Partners $55,000,000 234,510 $235 New York AMC Ashkenazy Acquisition $53,000,000 42,713 $1,241 Primary markets accounted for 36.7 percent of net lease transactions in the first half of 2018, representing the lowest share in recent years. The proportion of activity in secondary and tertiary markets rose, signaling a shift in buyer preference towards higheryield markets. For the first time this cycle, the industrial sector accounted for a greater share of net lease transactions activity than the office sector. Flush with investor interest, transactions volumes in the industrial sector rose by 46.1 percent from H1 2017. At the same time, the office and retail sectors posted year-over-year declines in transaction volumes. Primary markets continue to account for smaller share of investment volumes as investors seek higher-yielding assets H1 2018 2017 2016 2015 36.7% 39.7% 40.7% 39.9% 33.8% 30.8% 33.1% 32.2% 29.4% 29.5% 2 27.9% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Primary Secondary Tertiary Source: JLL Research, Real Capital Analytics (transactions larger than $5.0 million, includes entity-level transactions)

Net lease acquisitions (as a % of total) 4 Investment Outlook United States Net Lease H1 2018 capital Sources of Private investors remain the most active buyer group of net lease acquisitions in the first half of 2018; offshore activity ticks up after a slow first quarter Investment from private investors remains the most prominent source of liquidity, accounting for 37.9 percent of transaction volumes, the highest proportion this cycle. The ongoing opportunity for 1031 tax exchange transactions, an overall increase in capital allocation, and private investors abilities to nimbly place capital are the main drivers behind this uptick in activity. Purchases by REITs continue to mark declines following outlier years from 2013 to 2015, but full-year acquisition targets are healthy for 2018. Foreign investment has bounced back since the first quarter of 2018 and is in line with recent annual averages. In total, 10.4% of transactions by volume during the first half of 2018 were completed by foreign buyers. Canada leads the pack with volumes summing $854.3 in the first half, Singapore follows suit with $491.1 million in net lease acquisitions, while Germany is a close third with $419.5 million of transactions. These acquisitions predominantly consisted of industrial portfolios in secondary and tertiary markets. Net lease assets often represent offshore investors first foray outside of primary markets given the relative security of income. Private buyers are driving net lease liquidity as selectivity is impacting institutional buyers; offshore interest holding steady 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 2012 2013 2014 2015 2016 2017 H1 2018 Institution-Advisor REIT-REOC User-Other Private Foreign Source: JLL Research, Real Capital Analytics (transactions larger than $5.0 million; includes entity-level transactions)

Average net lease cap rate (%) 5 Investment Outlook United States Net Lease H1 2018 risk Sources of Cap rates for net lease transactions overall hold steady in the first half of 2018 Capitalization rates for net lease transactions overall during the first six months of 2018 held steady on levels recorded during 2017. Industrial cap rates compressed by 20 basis points. With the number of active investors seeking industrial assets perpetually rising, the competition to acquire assets continues to drive valuations. Office pricing was within ten basis points of the levels seen last year, while retail pricing widened by approximately 30 basis points on average nationally. Compressed cap rates are intensifying the search for yield. This is taking capital deeper into secondary and tertiary markets and spurring a reevaluation of risk strategies. There is a heightened focus on critical-use assets with strong rent growth, but somewhat more flexibility on lease term, credit quality, and location. Investors will remain attracted to the sector given net lease s bond-like returns and favorable long-term performance. Amid a healthy and steady economic outlook, cautious optimism is the prevailing sentiment. Industrial cap rates continue to tighten while retail pricing marks softening 9.0% 8.0% Overall Office Industrial Retail YOY Change Flat -10 bps -20 bps +30 bps 7.0% 6.0% 5.0% 4.0% 10-Year Treasury (%) Net lease industrial Overall net lease Net lease office Net lease retail 6.5% 6.1% 3.0% 2.8% 2.0% 1.0% 0.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 H1 2018 Source: JLL Research, Real Capital Analytics (transactions larger than $5.0 million, includes entity-level transactions)

Investor Research: Sean Coghlan Senior Director +1 215 988 5556 sean.coghlan@am.jll.com Lauro Ferroni Director +1 312 228 2566 lauro.ferroni@am.jll.com Office: Industrial: Multifamily: Retail: David Hoebbel +1 312 228 3017 david.hoebbel@am.jll.com Peter Kroner +1 312 228 2744 peter.kroner@am.jll.com Sean Kane +1 206 971 7010 sean.kane@am.jll.com Arielle Einhorn +1 312 228 3466 arielle.einhorn@am.jll.com Net Lease: Hotels: Debt & Equity: Anthony Josipovic +1 312 228 3787 lauro.ferroni@am.jll.com Geraldine Guichardo Ronak Sheth +1 312 228 2107 +1 312 228 3471 geraldine.guichardo@am.jll.comronak.sheth@am.jll.com About JLL About JLL Research JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion and fee revenue of $6.7 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000. As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com. JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with nearly 300 corporate offices, operations in over 80 countries and a global workforce of 83,500 as of March 31, 2018. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com. 2018 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.