Appraisal Institute Fall Conference PANATTONI DEVELOPMENT COMPANY INTERNATIONAL VISION. LOCAL FOCUS. Appraisal Institute Fall Conference Seattle, WA October 6, 2017

TABLE OF CONTENTS Introduction Panattoni Overview Panattoni Current Projects Where is the Seattle Market Heading? Future Development Focus Panattoni Recent Sale/Lease Comps

COMPANY HISTORY Founded in 1986 by Carl Panattoni One of the largest warehouse/logistics development companies in the world 24 offices in the United States, Canada, and Europe Privately Owned 266 million SF developed since inception

COMPANY STATISTICS 22.1 million SF Under Construction Worldwide 15.3 million SF in North America 6.8 million SF in Europe Largest Privately Held Industrial Developer in the United States. Equity Partners Include: Met Life UBS Prudential LaSalle Investment Management Clarion PCCP

PANATTONI CURRENT PUGET SOUND PROJECTS Panattoni is currently developing 15 projects: Cummins Lease BTS - Sumner, WA - 55,000 SF Riverside / Glacier Peak - Everett, WA - 208,000 SF Reserve @ Woodinville - Woodinville, WA- 206,000 SF Tacoma Gateway - Lakewood, WA - 467,000 SF Portland Portal - Portland, OR- 156,000 SF Killingsworth Industrial Center – Portland, OR – 253,000 Des Moines Creek Business Park Phase II / FAA- Des Moines, WA - 282,000 SF Des Moines Creek Business Park Phase III - Des Moines, WA - 502,000 SF Des Moines Creek Business Park Phase IV- Des Moines, WA - 512,000 SF Enterprise Center - Fife, WA - 175,000 SF OSW BTS - Maltby, WA - 106,000 SF Tilt 142 – Sumner, WA – 72,000 SF North Auburn Logistics - Auburn, WA - 260,000 SF Valentine Ave Industrial Park - Pacific, WA – 120,000 Seattle Gateway I & II– Burien, WA – 458,000 SF TOTALING 3,832,000 SF

WHERE ARE WE TODAY? THE BASICS WHERE IS SEATTLE’S INDUSTRIAL MARKET HEADING? WHERE ARE WE TODAY? THE BASICS CAPALITIZATION RATES Class A Institutional Product CAP rates are hovering in the 4.0% – 4.75% range in the Kent Valley. This is 100 bps lower than our projections when breaking ground a couple of years ago. VACANCY The Puget Sound Industrial Vacancy Rate Currently Stands at 3.1%. Vacancy continues to keep up with deliveries keeping vacancy fairly consistent at 3%. ABSORPTION Absorption has increased on average 18% per year over the last 5 years. The market picked up a net gain of 6.8MM SF in 2016 and we are well on our way for another great year with 3.2mm SF absorbed in the first half of 2017.

WHERE ARE WE GOING? THE BASICS WHERE IS SEATTLE’S INDUSTRIAL MARKET HEADING? WHERE ARE WE GOING? THE BASICS CAPALITIZATION RATES CAP rates appear to have stabilized in the 4.25% to 4.75% range. Investors are occasionally paying sub 4% for properties that have under market leases expiring in 1-2 years. VACANCY Should stay relatively flat through 2017 as tenant demand is keeping up with new construction deliveries. ABSORPTION With the pace of industrial development at an all time high and the tenant thirst for space continuing, absorption should keep its current pace of appx. 5.5 – 6.5 million SF in 2017.

WHERE IS SEATTLE’S INDUSTRIAL MARKET HEADING? LAND PRICES CONTINUE TO RISE With CAP rates at an all time low and shell rates continuing to rise further into historic levels, industrial zoned land prices have been pushed into levels never seen before. We project land prices in the Kent Valley will trade in the $20 per usable square foot range before this cycle is over. MORE FOCUS ON SECONDARY SUB-MARKETS With tenant demand at an all time high, and rates continuing to climb in primary markets, look for more development in secondary markets such as the Eastside, Snohomish County, Thurston County, South Pierce County and Portland, OR. REPUROPOSE AND DEMOLITION OF BUILDINGS While secondary markets are a good option for tenants seeking space at lower cost (South Pierce County), many e-commerce focused tenants need to be close to Seattle’s CBD. Because of this, look for more developers to start buying buildings and retrofitting them for modern industrial uses. Examples of this include, raising roofs, removing SF from buildings for better truck access, or complete demolition with ground up construction to follow.

FUTURE DEVELOPMENT FOCUS Speculative Industrial Development 3.1% Industrial Vacancy Rate Rents continue to rise in all submarkets. E-Commerce continues to seek out large chunks of space (100,000 SF+) Re-Development of Existing Buildings Opportunities have presented themselves, but due to extremely high owner/user demand, we haven’t been able to compete in this arena over the last 3 years. BTS Sale/Lease We are working on two of these projects right now for Cummins & OSW Equipment and we continue to seek these opportunities out.

RECENT PANATTONI SALE/LEASE COMPS SALE COMPS Des Moines Creek BP Phase 1 – 545,000 SF 100% Leased, 6 Tenants 3 Building Portfolio Sale On a Port of Seattle Ground Lease $68,000,000 Sale Price 4.31% CAP Rate, $127/SF December 2016 Sale Des Moines Creek BP Phase 3 – 502,000 SF 100% Leased, 4 Tenants 2 Building Portfolio Sale $67,900,000 Sale Price 4.6% CAP Rate, $136/SF June 2017 Sale LEASE COMPS Bartell Drugs $0.56 Shell/$0.95 Office AmerisourceBergen Lennox $0.51 Shell/$1.00 Office

QUESTIONS?