Andrew H. Kessenich, CRE

MADISON RETAIL MARKET REPORT 2010

Retail Market Overview Generally Soft Market Conditions Generally Soft Market Conditions Vacancies Up Vacancies Up Rents Mostly Stagnant or Decreasing Rents Mostly Stagnant or Decreasing Financing Difficult Financing Difficult Fewer Sale Transactions Fewer Sale Transactions Alternative Uses of Retail Sites Alternative Uses of Retail Sites Market Conditions Have Changed 2008 – Transition Year

Market Conditions – Leasing Average Vacancy Rates Up Average Vacancy Rates Up Class B & C Space Class B & C Space Old Rates:6% - 10% Old Rates:6% - 10% New Rates:10% - 15% New Rates:10% - 15% Class A Space Class A Space Unchanged at 5% - 10% Unchanged at 5% - 10%

Average Rental Rates Average Rental Rates Class A Class A Steady at $15 - $25/SF 3N Steady at $15 - $25/SF 3N Class B Class B Old Rates$14 – 16/SF 3N Old Rates$14 – 16/SF 3N New Rates$12 - $14/SF 3N New Rates$12 - $14/SF 3N Class C Class C Old Rates$10 - $12/SF 3N Old Rates$10 - $12/SF 3N New Rates$ 8 - $10/SF 3N New Rates$ 8 - $10/SF 3N

Financing Financing New Construction Requirements New Construction Requirements 70% minimum pre-leased 70% minimum pre-leased Loan to Value Ratios Loan to Value Ratios Old75% - 80% LTV Old75% - 80% LTV New60% - 70% LTV New60% - 70% LTV Tenant Credit Reviews Tenant Credit Reviews

Market Conditions - Sales Cap Rates Cap Rates Pre – 2009 Conditions Pre – 2009 Conditions Post – 2009 Conditions Post – 2009 Conditions Average Rate Increases 50 – 100 BPs Average Rate Increases 50 – 100 BPs Class A Properties Class A Properties Low 7%s to Low 8%s Low 7%s to Low 8%s Class B Properties Class B Properties Low 8%s to Low 9%s Low 8%s to Low 9%s Class C Properties Class C Properties Low 9%s to High 9%s Low 9%s to High 9%s

Sales Activity Sales Activity Sales Sales Sales Sales Sales Sales Sales Sales Average & Median Sale Prices Average & Median Sale Prices Decreasing Decreasing

East, West & Suburban Markets Historical designs losing favor Historical designs losing favor Mixed-use & New Urbanism Mixed-use & New Urbanism Spike in condo construction Spike in condo construction

Alternative Uses of Retail Sites Mixed Use Mixed Use Medical Medical Dental Dental

New Projects – Retail Target at Hilldale

The Depot Mixed Use Project