Presented by JP de Kervor (858) Tijuana Industrial Real Estate November 16, 2011 ©Maquila Properties, Inc. All rights reserved 3 rd. Quarter 2011 Absorption is slowing, What’s next?

Bird’s Eye view of the Market (858)

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(858) Tijuana Market Overall Tijuana has about 53 million SF of Industrial Real Estate Currently available: 168 buildings down from 219 Buildings 12 months ago. Vacancy Rate is at 16% down from 6 months ago 17.6% down from 19% 12 months ago. Absorption is positive– so we are heading in the right direction - Just not very fast. We only absorbed 112,000 SF 3 rd quarter.

(858) Buildings > 100,000 SF 21 Buildings are available down from 25 buildings 6 months, down from 26 buildings 12 months ago and down from 28 buildings a 24 months ago. Average asking rent is $0.33 down from 6 months ago’s $0.38/SF NNN ($0.43/SF in 2007) Most buildings are offering free rent and other favorable terms. Actual rents are much lower. $0.29/SF NNN average.

(858) Where are the buildings over 100,000 SF?

Buildings over 100,000 SF (858) /2009 Tijuana Maquilas are trading in older Buildings for new.

Construction Still Very little new construction as good buildings are available for sale for much less than replacement cost. Example: Andrea is building a new 100,000 SF building in Otay – Has retail component making the $135/SM land price acceptable. Construction plus land cost more than $50/SF = $5 million. JVC sold for $22/SF. Asking Price for Pioneer was $6 Million = $20/SF. Ryerson (Metals) also built a new 80,000 SF building in El Florido. (858)

(858) Thanks to Jorge Solis at CBRE

(858) NET ABSORPTION By Industry

(858) Where are they being leased?

Branders Case Branders Inc. was looking for 35,000 SF with room to grow to 70,000 SF within years. They are in the promotional Items industry. They chose La Jolla Industrial Park after looking at all the alternatives due to its Laborhood and expansion flexibility as well as low cost. (858)

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Branders Options (858)

Class A (858) We looked at all the options – Class A

(858) We looked at Class B-

Ended Up at a stand- alone 70,000 SF B+ Former Fluidmaster facility in La Jolla Industrial Park (858)

(858) Conclusions Prices are coming up. Vacancy is dropping. The direction is slowly positive as we have stopped the negative absorption. Lower rents and other costs have improved Tijuana competitiveness vis a vis Asian manufacturers. Maquilas are looking at improving their buildings, and consolidating or growing. Others are tired of paying rent and are now buying with the low cost capital available. Assuming the security situation does not worsen, we expect to see continued 1 million SF per year absorption into 2012.