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

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

3. 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

4. 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

5. 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
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

6. 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.

7. 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.

8. 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.

9. 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.

10. 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

12. QUESTIONS?