12-164CH-3516 Century Shopping Center, Chicago, IL Final

VALUATION REPORT CENTURY SHOPPING CENTER 2828 N. Clark Street Chicago, Cook County, Illinois 60657 CBRE, Inc. File No. 12-164CH-3516

Eyal Bartov Chief Financial Officer AVIV ARLON LTD 7 Jabotinsky Street Ramat Gan

V A L U A T I O N & A D V I S O R Y S E R V I C E S

311 South Wacker Drive, 4th Floor Chicago, IL 60606 T (312) 233-8662 F (312) 233-8660

www.cbre.com March 22, 2013 Mr Eyal Bartov, CFO Aviv Arlon Ltd. 7 Jabotinsky St. Ramt Gan Israel

To Whom It May Concern RE: Appraisal for Century Shopping Center We understand that the appraisals carried out by our firm dated January 31, 2013 ("Appraisal Report") will be used by Aviv Arlon Ltd. (“Aviv Arlon”) for the preparation of its annual financial statements for 2012. We consent to the use of our Appraisal Report in Aviv Arlon financial statements and to its publication should Aviv Arlon be required to do so. However, we take no responsibility or liability for any misrepresentation of the appraisal information in the financial statements or any other publication for public disclosure. Best regards,

Kristin Johnson Lesley Linder, MAI, CCIM Vice President Managing Director Phone: 312-233-8654 Phone: (312) 233-8665 Fax: 312-233-8660 Fax: (312) 233-8660 [email protected] [email protected] State Certified General Real Estate Appraiser State of Illinois License No. 553.0001635 Expires: September 30, 2013

State Certified General Real Estate Appraiser State of Illinois License No. 553.001947 Expires: September 30, 2013

V A L U A T I O N & A D V I S O R Y S E R V I C E S

311 South Wacker Drive, 4th Floor Chicago, IL 60606 T (312) 233-8662 F (312) 233-8660

www.cbre.com

January 31, 2013 Eyal Bartov Chief Financial Officer AVIV ARLON LTD 7 Jabotinsky Street Ramat Gan RE: Appraisal of Century Shopping Center 2828 N. Clark Street Chicago, Cook County, Illinois 60657 CBRE, Inc. File No 12-164CH-3516

Dear Mr. Bartov:

At your request and authorization, CBRE, Inc. has prepared an appraisal of the market value of the referenced property. Our analysis is presented in the following Self-Contained Appraisal Report.

The subject is a 170,106-square foot, eight-story vertical retail center located at 2828 N. Clark Street in Chicago’s Lincoln Park neighborhood. The improvements were originally constructed in 1925 as a live theater. In 1975 it was renovated into a vertical shopping center, expanded in 1985 with the addition of a health club, and renovated and expanded with a movie theater again in 2000. The improvements are situated on an approximate 1.39-acre site. The property is currently 71.7% occupied, anchored by LA Fitness and Landmark Theater, a seven-screen movie theater. CVS took occupancy in September 2012, leasing approximately 10,531 square feet or 6.2% of the overall center. The subject also includes a 450-space parking garage. The subject is more fully described, legally and physically, within the enclosed report.

Based on the analysis contained in the following report, the market value of the subject is concluded as follows:

MARKET VALUE CONCLUSION

Appraisal Premise Interest Appraised Date of Value Value ConclusionAs Is Leased Fee Interest December 31, 2012 $26,100,000

Compiled by CBRE

Data, information, and calculations leading to the value conclusion are incorporated in the report following this letter. The report, in its entirety, including all assumptions and limiting conditions, is an integral part of, and inseparable from, this letter.

Eyal Bartov January 31, 2013 Page 2

The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, our interpretation of the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. It also conforms to Title XI Regulations and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) updated in 1994 and further updated by the Interagency Appraisal and Evaluation Guidelines promulgated in 2010.

The intended use and user of our report are specifically identified in our report as agreed upon in our contract for services and/or reliance language found in the report. No other use or user of the report is permitted by any other party for any other purpose. Dissemination of this report by any party to non-client, non-intended users does not extend reliance to any other party and CBRE will not be responsible for unauthorized use of the report, its conclusions or contents used partially or in its entirety.

It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CBRE, Inc. can be of further service, please contact us.

Respectfully submitted, CBRE, Inc. - VALUATION & ADVISORY SERVICES

Kristin Johnson Lesley Linder, MAI, CCIM Vice President Managing Director Phone: 312-233-8654 Phone: (312) 233-8665 Fax: 312-233-8660 Fax: (312) 233-8660 [email protected] [email protected] State Certified General Real Estate Appraiser State of Illinois License No. 553.0001635 Expires: September 30, 2013

State Certified General Real Estate Appraiser State of Illinois License No. 553.001947 Expires: September 30, 2013

CENTURY SHOPPING CENTER | CERTIFICATION OF THE APPRAISAL

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CERTIFICATION OF THE APPRAISAL

We certify to the best of our knowledge and belief:

1. The statements of fact contained in this report are true and correct.

2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are our personal, impartial and unbiased professional analyses, opinions, and conclusions.

3. We have no present or prospective interest in or bias with respect to the property that is the subject of this report and have no personal interest in or bias with respect to the parties involved with this assignment.

4. Our engagement in this assignment was not contingent upon developing or reporting predetermined results.

5. Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

6. This appraisal assignment was not based upon a requested minimum valuation, a specific valuation, or the approval of a loan.

7. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice, as well as the requirements of the State of Illinois.

8. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.

9. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

10. As of the date of this report, Lesley Linder, MAI, CCIM has completed the continuing education program of the Appraisal Institute.

11. As of the date of this report, Kristin Johnson has completed the Standards and Ethics Education Requirement of the Appraisal Institute for Associate Members.

12. Kristin Johnson has and Lesley Linder, MAI, CCIM has not made a personal inspection of the property that is the subject of this report.

13. Steven Ogasawara, MAI provided an internal review of the report. Otherwise, no one provided significant real property appraisal assistance to the persons signing this report.

14. Valuation & Advisory Services operates as an independent economic entity within CBRE, Inc. Although employees of other CBRE, Inc. divisions may be contacted as a part of our routine market research investigations, absolute client confidentiality and privacy were maintained at all times with regard to this assignment without conflict of interest.

15. Kristin Johnson and Lesley Linder, MAI, CCIM have provided services, as an appraiser, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment.

Kristin Johnson Lesley Linder, MAI, CCIM State of Illinois License No. 553.0001635 State of Illinois License No. 553.001947

CENTURY SHOPPING CENTER | SUBJECT PHOTOGRAPHS

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SUBJECT PHOTOGRAPHS

AERIAL VIEW


iii

TYPICAL VIEW OF THE SUBJECT

TYPICAL VIEW OF THE SUBJECT


iv

VIEW OF THE PARKING LOT ENTRANCE

VIEW OF THE COMMON ELEVATORS


v

VIEW OF THE INTERIOR ATRIUM

VIEW OF THE ATM


vi

VIEW OF CLARK STREET FACING NORTH

VIEW OF CLARK STREET FACING SOUTH

CENTURY SHOPPING CENTER | SUMMARY OF SALIENT FACTS

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SUMMARY OF SALIENT FACTS

Property Name

Location

Assessor’s Parcel Number

Highest and Best Use

As If Vacant

As Improved

Property Rights Appraised

Land Area 1.39 AC 60,669 SF

Improvements

Property Type Retail

Number of Buildings

Number of Stories

Gross Leasable Area

Year Built 1925 Renovated: 2000

Condition

Major Tenants

LA Fitness

AMC Theater

Estimated Exposure Time

Financial Indicators

Current Occupancy 71.7%

Stabilized Occupancy 88.0%

Overall Capitalization Rate 8.00%

Discount Rate - As Is 10.00%

Discount Rate - As Stabilized 9.50%

Terminal Capitalization Rate 8.50%

Pro Forma Operating Data Total Per SF

Effective Gross Income $4,741,143 $27.87

Operating Expenses $2,183,506 $12.84

Expense Ratio 46.05%

Net Operating Income $2,557,637 $15.04

Multiple (See Tax Section)

32,122 SF

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1

Century Shopping Center

Leased Fee Interest

Mixed-Use Commercial

Hold for Future Mixed-Use Development

2828 N. Clark Street, Chicago, Cook County, Illinois 60657

(Neighborhood/Community Center)

9 Months

Average

50,779 SF

170,106 SF

CENTURY SHOPPING CENTER | SUMMARY OF SALIENT FACTS

viii

VALUATION Total Per SF

Sales Comparison Approach $26,200,000 $154.02

Income Capitalization Approach $26,100,000 $153.43

CONCLUDED MARKET VALUE

Appraisal Premise Interest Appraised Value

As Is Leased Fee Interest $26,100,000

Compiled by CBRE

Date of Value

December 31, 2012

STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT)

Strengths and weaknesses are internal to the subject; opportunities & threats are external to the subject

Strengths

The subject is well located within a densely populated neighborhood with strong demographics.

The subject features an attached 450-space parking garage, which is somewhat unique to commercial properties within the neighborhood retail node.

Weaknesses

The subject is 71.7% occupied. The subject is finished as a vertical mall, which is unique to the neighborhood, and access

and visibility to the spaces considered a limiting factor.

Opportunities

Disposable income within a three-mile radius of the subject is considered above average for the MSA

Lease-up of the vacant space provides up-side potential for an investor.

Threats

The weakened overall economy has contributed to depressed levels of consumer spending.

EXTRAORDINARY ASSUMPTIONS

None noted

HYPOTHETICAL CONDITIONS

None noted

CENTURY SHOPPING CENTER | TABLE OF CONTENTS

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TABLE OF CONTENTS

CERTIFICATION OF THE APPRAISAL ........................................................................................ i

SUBJECT PHOTOGRAPHS ......................................................................................................... ii

SUMMARY OF SALIENT FACTS ................................................................................................ vii

TABLE OF CONTENTS ............................................................................................................... ix

INTRODUCTION .......................................................................................................................... 1

AREA ANALYSIS .......................................................................................................................... 6

NEIGHBORHOOD ANALYSIS ................................................................................................... 14

MARKET ANALYSIS .................................................................................................................. 18

SITE ANALYSIS ......................................................................................................................... 32

IMPROVEMENTS ANALYSIS .................................................................................................... 41

ZONING ...................................................................................................................................... 47

TAX AND ASSESSMENT DATA ................................................................................................ 48

HIGHEST AND BEST USE ......................................................................................................... 51

APPRAISAL METHODOLOGY ................................................................................................... 54

SALES COMPARISON APPROACH .......................................................................................... 55

INCOME CAPITALIZATION APPROACH .................................................................................. 60

RECONCILIATION OF VALUE ................................................................................................... 89

SENSITIVITY ANALYSIS ........................................................................................................... 90

ASSUMPTIONS AND LIMITING CONDITIONS ......................................................................... 91

ADDENDA A Legal Description B Improved Sale Data Sheets C Rent Comparable Data Sheets D ARGUS Supporting Schedules E Engagement Letter F Qualifications

CENTURY SHOPPING CENTER | INTRODUCTION

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INTRODUCTION

PROPERTY IDENTIFICATION

The subject is a 170,106-square foot, eight-story vertical retail center located at 2828 N. Clark

Street in Chicago’s Lincoln Park neighborhood. The improvements were originally constructed

in 1925 as a live theater. In 1975 it was renovated into a vertical shopping center, expanded in

1985 with the addition of a health club, and renovated and expanded with a movie theater again

in 2000. The improvements are situated on an approximate 1.39-acre site. The property is

currently 71.7% occupied, anchored by LA Fitness and Landmark Theater, a seven-screen

movie theater. CVS took occupancy in September 2012, leasing approximately 10,531 square

feet or 6.2% of the overall center. The subject also includes a 450-space parking garage.

A copy of the legal descriptions is included in the addendum.

OWNERSHIP AND PROPERTY HISTORY

Built in 1925, The Century Shopping Centre began as “The Diversey Theatre”, a 3,000 seat

vaudeville and photoplay theatre where live acts and circuses once entertained. Shortly before

World War II, Chicago’s dominant movie tycoons Balaban and Katz acquired The Diversey

Theatre. Re-naming it The Century, it went on to become one of Chicago’s great movie houses

of the North Side.

As movie trends changed, large theatres such as The Century became unprofitable. When The

Century’s lease expired in the early 1970’s, it was rumored to be torn down. Local Chicago

developers acquired the property, and transformed The Century into a seven level unique

vertical shopping centre, and named it The Century Shopping Centre. In addition, they built a

seven level 450-space parking garage. In 1999 / 2000, The Century Shopping Centre again

transformed with an interior remodel, new escalators and the addition of Landmark's Century

Centre Cinema, a seven-screen state of the art theatre complex located on the upper floors of

the centre.

According to public records, title to the property is currently vested in the name of BAI Century

LLC, who acquired title to the property in December 2010, as improved for $17,500,000. The

buyer is a joint venture between two Israel-based companies, Aviv Arlon and Bon Investments.

According to information provided, the acquisition was a short sale, while it was actively

marketed.

To the best of our knowledge, there has been no other ownership transfer of the property during

the previous three years.

The current owners have indicated they intend to renovate the project with both interior and

exterior work over the next twelve to 18 months. As of the date of appraisal the renovation is

preliminary and no plans or estimates have been provided. According to a representative of the


2

owner, renovation costs were roughly estimated at about $2,000,000. In our analysis, we do not

model any renovation costs. However, we consider ownerships plans to reposition the center

into a more commercial-service/medical office use from a traditional retail center.

Our estimate of market value is approximately 46% above the December 2010 purchase price.

We believe the increase in value is reasonable and accounts for a combination of acquisition of

a distressed asset/short sale, an improving overall market, the consummated lease and

occupancy of CVS (verses pending LOI), rental rate increases and the repositioning of the

subject from a retail center to a more commercial-service/medical-use project, and capital

improvements to the parking garage.

PREMISE OF THE APPRAISAL

The following table illustrates the various dates associated with the valuation of the subject, the

valuation premise(s) and the rights appraised for each premise/date:

PREMISE OF THE APPRAISAL

Item Date Interest Appraised

Date of Report: January 31, 2013

Date of Inspection: January 15, 2013

Date of ValueAs Is: December 31, 2012 Leased Fee Interest

Compiled by CBRE

PURPOSE OF THE APPRAISAL

The purpose of this appraisal is to estimate the market value of the subject property. The

current economic definition of market value agreed upon by agencies that regulate federal

financial institutions in the U.S. (and used herein) is as follows:

The most probable price which a property should bring in a competitive and open market under

all conditions requisite to a fair sale, the buyer and seller each acting prudently and

knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this

definition is the consummation of a sale as of a specified date and the passing of title from seller

to buyer under conditions whereby:

1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own

best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements

comparable thereto; and


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5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. 1

INTENDED USER/USE OF REPORT

This appraisal is to be used by Aviv Arlon LTD for financial reporting purposes.

Intended Users - the intended user is the person (or entity) who the appraiser intends will use the results of the appraisal. The client may provide the appraiser with information about other potential users of the appraisal, but the appraiser ultimately determines who the appropriate users are given the appraisal problem to be solved. Identifying the intended users is necessary so that the appraiser can report the opinions and conclusions developed in the appraisal in a manner that is clear and understandable to the intended users. Parties who receive or might receive a copy of the appraisal are not necessarily intended users. The appraiser’s responsibility is to the intended users identified in the report, not to all readers of the appraisal report. 2

SCOPE OF WORK

The scope of the assignment relates to the extent and manner in which research is conducted,

data is gathered and analysis is applied, all based upon the following problem-identifying factors

stated elsewhere in this report:

Client Intended use Intended user Type of opinion Effective date of opinion Relevant characteristics about the subject Assignment conditions

This appraisal of the subject has been presented in the form of a Self-Contained Appraisal

Report, which is intended to comply with the reporting requirements set forth under Standards

Rule 2-2(a) of USPAP. That is, this report incorporates, to the fullest extent possible, practical

explanation of the data, reasoning and analysis that were used to develop the opinion of value.

This report also includes thorough descriptions of the subject and the market for the property

type. CBRE, Inc. completed the following steps for this assignment:

1 Office of Comptroller of the Currency (OCC), 12 CFR Part 34, Subpart C – Appraisals, 34.42 (g); Office of Thrift

Supervision (OTS), 12 CFR 564.2 (g); Appraisal Institute, The Dictionary of Real Estate Appraisal, 5th ed. (Chicago: Appraisal Institute, 2010), 122-123. This is also compatible with the RTC, FDIC, FRS and NCUA definitions of market value as well as the updated Interagency Appraisal and Evaluation Guidelines promulgated in 2010.

2 Appraisal Institute, The Appraisal of Real Estate, 13th ed. (Chicago: Appraisal Institute, 2008), 132.


4

Data Resources Utilized in the Analysis

RESOURCE VERIFICATION

Site Data Source/Verification:

Size Rent Roll and Leases

Improved Data Source/Verification:

Gross Size/Units Listing InformationNet Size/Units Rent Roll and LeasesArea Breakdown/Use Rent Roll and LeasesNo. Bldgs. Physical InspectionParking Spaces Property ManagerYOC Public Records

Economic Data Source/Verification:

Income Data: Operating StatementsExpense Data: Operating Statements

Compiled by CBRE

Extent to Which the Property is Identified

CBRE, Inc. collected the relevant information about the subject from the owner (or

representatives), public records and through an inspection of the subject property. The

property was legally identified through the following sources:

postal address assessor’s records legal description

Extent to Which the Property is Inspected

CBRE, Inc. inspected the interior and exterior of the subject, as well as its surrounding environs.

Type and Extent of the Data Researched

CBRE, Inc. reviewed the micro and/or macro market environments with respect to physical and

economic factors relevant to the valuation process. This process included interviews with

regional and/or local market participants, available published data, and other various resources.

CBRE, Inc. also conducted regional and/or local research with respect to the following:

applicable tax data zoning requirements flood zone status demographics income and expense data comparable data


5

Type and Extent of Analysis Applied

CBRE, Inc. analyzed the data gathered through the use of appropriate and accepted appraisal

methodology to arrive at a probable value indication via each applicable approach to value. The

steps required to complete each approach are discussed in the methodology section.

EXPOSURE/MARKETING TIME

Current appraisal guidelines require an estimate of a reasonable time period in which the

subject could be brought to market and sold. This reasonable time frame can either be

examined historically or prospectively. In a historical analysis, this is referred to as exposure

time. Exposure time always precedes the date of value, with the underlying premise being the

time a property would have been on the market prior to the date of value, such that it would sell

at its appraised value as of the date of value. On a prospective basis, the term marketing time

is most often used. The exposure/marketing time is a function of price, time, and use. It is not

an isolated estimate of time alone. In consideration of these factors, we have analyzed the

following:

exposure periods for comparable sales used in this appraisal; exposure/marketing time information from the CBRE, Inc. National Investor Survey

and the PwC Real Estate Investor Survey; and the opinions of market participants.

The following table presents the information derived from these sources.

EXPOSURE/MARKETING TIME INFORMATION

Exposure/Mktg. (Months)Investment Type Range Average

Comparable Sales Data 3.0 - 9.0 6.0

CBRE Neighborhood Centers

Class A 2.0 - 10.3 5.7

Class B 2.0 - 10.3 5.7

Class C 2.0 - 10.3 5.7

PwC Strip Shopping Center

National Data 2.0 - 18.0 7.0

Local Market Professionals 6.0 - 12.0 N/A

CBRE Exposure Time Estimate

Source: CBRE National Investor Survey & PwC Real Estate Investor Survey

9 Months

CENTURY SHOPPING CENTER | AREA ANALYSIS

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AREA ANALYSIS

The dynamic nature of economic relationships within a market area has a direct bearing on real

estate values and the long-term quality of a real estate investment. In the market, the value of a

property is not based on the price paid for it in the past or the cost of its creation, but on what

buyers and sellers perceive it will provide in the future. Consequently, the attitude of the market

toward a property within a specific neighborhood or market area reflects the probable future

trend of that area.

Since real estate is an immobile asset, economic trends affecting its location quality in relation

to other competing properties within its market area will also have a direct effect on its value as

an investment. To accurately reflect such influences, it is necessary to examine the past and

probable future trends, which may affect the economic structure of the market and evaluate their

impact on the market potential of the subject. This section of the report is designed to isolate

and examine the discernible economic trends in the region, which influence and create value for

the subject property.

GEOGRAPHIC LOCATION

The subject property is located in the geographic area generally referred to as the Chicago

metropolitan area, which is centrally located in the Midwestern United States. Other major

metropolitan areas in the region include Milwaukee, Wisconsin (90-miles north), Indianapolis,

Indiana (185-miles southeast) and Detroit, Michigan (279-miles east).


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POPULATION

Current and historical population figures for the fourteen counties comprising the Chicago MSA

are summarized in the following table.

County1990

Census2000

Census% Change 1990-2000

2012 Estimate

% Change 2000-2012

2017 Projection

% Change 2012-2017

Cook (IL) 5,105,067 5,376,741 5.3% 5,181,135 -3.6% 5,149,578 -0.6%DeKalb (IL) 77,932 88,969 14.2% 107,130 20.4% 112,556 5.1%DuPage (IL) 781,666 904,161 15.7% 919,942 1.7% 929,099 1.0%Grundy (IL) 32,337 37,535 16.1% 51,645 37.6% 55,906 8.3%Jasper (IN) 24,960 30,043 20.4% 34,099 13.5% 35,486 4.1%Kane (IL) 317,471 404,119 27.3% 529,803 31.1% 569,857 7.6%Kendall (IL) 39,413 54,544 38.4% 123,577 126.6% 147,912 19.7%Kenosha (WI) 128,181 149,577 16.7% 168,694 12.8% 175,028 3.8%Lake (IL) 516,418 644,356 24.8% 711,758 10.5% 734,974 3.3%Lake (IN) 475,594 484,564 1.9% 496,761 2.5% 499,306 0.5%McHenry (IL) 183,241 260,077 41.9% 315,418 21.3% 333,829 5.8%Newton (IN) 13,551 14,566 7.5% 14,243 -2.2% 14,254 0.1%Porter (IN) 128,932 146,798 13.9% 166,918 13.7% 174,087 4.3%Will (IL) 357,313 502,266 40.6% 700,868 39.5% 764,807 9.1%TOTAL 8,104,144 9,098,316 12.3% 9,521,991 4.7% 9,696,679 1.8%

CHICAGO AREA POPULATION STATISTICS

Source: CBRE Fast Report

The population of the fourteen-county region increased significantly between 1990 and 2000,

highlighted by collar counties including Will and McHenry. Cook County, on the other hand,

experienced far less growth than the surrounding counties, at 5.3%. This is indicative of the

outward migration pattern within the metropolitan area rather than an outflow of residents to

other metropolitan areas. Overall, the MSA population expanded by 12.3% between 1990 and

2000.

Population growth is expected to continue through 2017, albeit at a slower rate. Each of the

fourteen counties is expected to expand, with the exception of Cook (with an anticipated

population decline of -0.6%). The largest anticipated growth between 2012 and 2017 is

forecasted for Grundy, Kendall and Will Counties, at 8.3%, 19.7%, and 9.1%, respectively. Kane

and McHenry Counties are projected to grow by more than 7.6% and 5.8% over the coming five

years.

TRANSPORTATION

Chicago is one of the primary transportation hubs in the United States. Its extensive

transportation facilities give local firms ready access to national and international markets and

suppliers, as well as provide travelers with convenient traveling alternatives.


8

Highways

Several major interconnected expressways and interstate highways pass through the Chicago

area. Interstates 88 and 290 are the main east-west routes, providing access to the CBD to the

east and the Quad Cities to the west. Interstate 55 provides access to the southwestern

suburban areas and eventually the city of St. Louis. Communities to the north and northwest

are accessed via Interstates 90 and 94. North-south travel between the western suburbs is

facilitated by Interstates 294 and 355. With ten interstate freeways consisting of some 630

miles, Chicago is one of the best connected cities in the nation and a primary hub of the trucking

industry.

Airports

From an international perspective Chicago is globally accessible via air traffic. The two primary

airports serving the area are O’Hare International Airport and Chicago Midway International

Airport.

Rail

Rail access to and from suburban communities is provided by the Northeast Illinois Regional

Commuter Railroad Corporation better known as Metra. Metra provides twelve rail lines which

reach as far north as Kenosha, Wisconsin and as far east as northwest Indiana and South

Bend. As the largest commuter rail system in the United States, Metra covers nearly 500 miles

of tracks servicing over 230 individual stations throughout the Chicagoland area.

Within the city of Chicago itself, light rail is

provided via the Chicago Transit Authority’s

elevated train system, which as mentioned

previously is better known as the “El.” These

elevated trains provide inexpensive rapid

transit service to nearly 500,000 passengers

each day to all corners of the city, as well as

some 40 nearby suburbs and both major

airports. These eight rail lines are

supplemented by a fleet of nearly 2,000

buses which service approximately 1 million

passengers at 12,000 bus stops daily, making

the CTA the second largest transit system in

the nation. As a result of these multiple

extensive mass transit systems, as well as a

grid system street layout, Chicago has been

continually rated by various institutions as one

of the top ten most walkable cities in the nation.


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EMPLOYMENT

The Chicago metropolitan area has a large and well-diversified economic structure, which has

allowed it to remain among the strongest economic centers in the nation. Due to its economic

diversification, the Chicago metropolitan area tends to experience fewer seasonal and cyclical

peaks and valleys than do many single-industry areas. The table below shows employment

levels of major industry groups in the fourteen-county Chicago Metropolitan Statistical Area as

of various dates over the past ten years.

2002 Oct - 2012*Industry Group Employment % Employment % Employment %

Mining and Logging 2,300 0.1% 2,300 0.1% 1,600 0.0%

Construction 216,000 4.8% 215,000 4.7% 150,500 3.4%

Manufacturing 548,600 12.3% 483,400 10.6% 423,100 9.7%

Trade, Transportation and Utilites 921,300 20.7% 930,700 20.4% 863,300 19.7%

Information 108,300 2.4% 91,000 2.0% 76,500 1.7%

Financial Activities 322,300 7.2% 328,300 7.2% 284,600 6.5%

Professional and Business Services 677,600 15.2% 743,200 16.3% 752,600 17.2%

Educational and Health Services 528,200 11.9% 591,000 13.0% 663,900 15.2%

Leisure and Hospitality 370,100 8.3% 407,100 8.9% 413,900 9.5%

Other Services 191,000 4.3% 198,800 4.4% 189,900 4.3%

Government 568,200 12.8% 566,400 12.4% 552,300 12.6%

Total Non-Farm 4,453,900 100.0% 4,557,200 100.0% 4,372,200 100.0%

CHICAGO PMSA NON-AGRICULTURAL EMPLOYMENT BY INDUSTRY

*Preliminary Figures

Source: Bureau of Labor Statistics, Illinois Department of Employment Security

2007

As shown above, the local economy has contracted since 2002. The number of non-farm jobs in

the Chicago area decreased from 4,453,900 in 2002 to 4,372,200 by October 2012, a -1.83%

reduction.

The Trade, Transportation and Utilities industry is the largest in terms of employment, followed

by Professional & Business Services, Educational and Health Services, and Government.

While manufacturing was at one time the dominant employment category in the region, it has

shown a slow, steady decline over the past ten years. This is consistent with the trend

throughout the nation.

As a percentage of total employment, Educational and Health Services have shown the largest

growth at a 3.2% increase from their base in 2002. The Manufacturing sector had the largest

decrease at a negative -2.6%, from 12.3% of the employment base as of 2002 to its current

level of 9.7% as of October 2012.

Illinois, and primarily the Chicago area, is home to 40 Fortune 500 companies with employment

at these major firms contributing to the stability of the local economy. The presence of such


10

firms is also indicative of the strength of the local support network and generally positive

business climate in the area.

Major private employers in the area include Wal-Mart Stores, Advocate Health Care System,

University of Chicago, Walgreen Co., AT&T, Inc., and UAL Corp, A more comprehensive list of

major employers is presented in the following table:

Rank Company Employees1 U.S. Government 49,5732 Chicago Public Schools 40,8833 City of Chicago 35,2374 State of Illinois 35,7005 Cook County 23,0836 Wal-Mart Stores Inc. 21,3297 Advocate Health Care 14,8738 J.P. Morgan Chase & Co 13,6399 Walgreen Co. 13,122

10 Abbott Laboratories 13,00011 United Continential Holdings 13,00012 AT&T Inc. 12,20013 Motorola Inc. 10,00014 American Airlines 9,76615 University of Illinois at Chicago 9,76616 Chicago Transit Authority 9,52017 University of Chicago 8,79118 Allstate Corp. 8,63219 Resurrection Health Care 8,20120 Archdiocese of Chciago 8,16921 Comcast Corp. 8,10022 Rush University Medical Center 8,09523 Jewel-Osco 8,00024 Northwestern University 7,82625 Bank of America N.A. 7,800

CHICAGO AREA LARGEST EMPLOYERS

Source: Crain’s Chicago Business 2011

This diversified labor pool of skilled workers helps to maintain a relatively strong level of

employment in the Chicago area.

The following table provides a comparison of unemployment rates since 1997.


11

YearCook

County (IL)DeKalb

County (IL)DuPage

County (IL)Grundy

County (IL)Kane

County (IL)Kendall

County (IL)Lake

County (IL)McHenry

County (IL)Will

County (IL)

Jasper County

(IN)

Lake County

(IN)

Newton County

(IN)

Porter County

(IN)

Kenosha County

(WI)

Chicago MSA

State of Illinois

U.S.

1997 5.3% 3.9% 3.1% 7.1% 4.5% 3.3% 3.4% 3.8% 4.7% 4.3% 4.3% 4.1% 2.8% 3.4% 4.7% 4.8% 4.7%

1998 5.0% 3.6% 2.8% 6.7% 4.1% 3.0% 3.5% 3.6% 4.3% 3.7% 3.9% 3.3% 2.6% 3.2% 4.4% 4.5% 4.4%

1999 5.0% 3.7% 2.9% 6.9% 4.1% 3.0% 3.2% 3.5% 4.3% 3.8% 4.0% 3.5% 2.9% 3.3% 4.4% 4.5% 4.4%

2000 4.8% 3.6% 3.3% 5.2% 4.3% 3.3% 3.7% 3.6% 4.1% 3.3% 3.6% 2.8% 2.7% 4.0% 4.3% 4.5% 4.3%

2001 6.1% 4.6% 4.4% 6.0% 5.3% 4.1% 4.4% 4.6% 4.9% 4.7% 4.8% 4.2% 3.8% 5.1% 5.5% 5.4% 5.5%

2002 7.4% 5.5% 5.5% 7.3% 6.5% 5.3% 5.4% 5.7% 6.1% 5.7% 6.4% 5.5% 5.0% 6.0% 6.7% 6.5% 6.7%

2003 7.4% 5.8% 5.6% 7.9% 6.7% 5.4% 5.7% 5.9% 6.3% 5.7% 6.1% 5.4% 5.1% 6.2% 6.8% 6.7% 6.8%

2004 6.8% 5.4% 5.0% 7.8% 6.0% 4.8% 5.3% 5.2% 5.9% 5.7% 6.3% 5.1% 4.8% 5.9% 6.2% 6.2% 6.2%

2005 6.5% 5.3% 4.7% 7.3% 5.7% 4.7% 4.5% 5.1% 5.5% 5.6% 6.1% 5.3% 4.7% 5.7% 5.9% 5.7% 5.9%

2006 4.7% 3.9% 3.4% 5.1% 4.3% 4.0% 4.2% 3.7% 4.3% 5.1% 5.8% 4.9% 4.4% 5.4% 4.4% 4.5% 4.6%

2007 5.1% 4.6% 3.8% 5.7% 4.8% 4.5% 5.0% 4.3% 4.7% 4.8% 5.2% 5.2% 3.9% 5.2% 4.9% 5.0% 5.0%

2008 7.1% 7.4% 5.4% 9.4% 7.5% 7.5% 8.3% 6.9% 7.2% 8.7% 8.6% 8.8% 7.4% 6.7% 7.1% 7.4% 7.2%

2009 10.8% 10.5% 8.6% 13.7% 11.2% 11.1% 11.6% 10.4% 11.0% 10.6% 10.2% 11.6% 8.9% 10.3% 10.6% 10.8% 10.0%

2010 10.5% 9.7% 8.3% 12.4% 10.3% 9.8% 10.5% 9.6% 10.4% 10.3% 11.0% 11.0% 8.9% 10.8% 10.2% 10.3% 9.4%

2011 9.6% 8.6% 7.3% 11.2% 10.0% 8.8% 9.6% 8.9% 9.4% 8.3% 9.7% 10.4% 7.6% 7.8% 9.3% 9.3% 8.5%

Oct-12* 9.0% 7.4% 6.9% 8.3% 7.8% 7.1% 7.8% 7.5% 8.1% 7.1% 8.7% 8.4% 6.9% 7.6% 8.3% 8.4% 7.9%

*Denotes Preliminary Figure

Note: The 1997 through 2000 Chicago MSA figures include the six county SMSA as well as DeKalb, Kendall, and Grundy Counties.

Source: Illinois Department of Employment Security, Bureau of Labor Statistics

AVERAGE ANNUAL UNEMPLOYMENT RATES

Unemployment rates in the Chicago MSA began to rise as the economy began to slow in 2007.

The unemployment rate within the MSA has risen from 4.9% in 2007, to the current figure of

8.3% as of October 2012.

In addition to being the center of commerce in the Midwest, Chicago is a world leader in the

trading of commodities, stock options and currency and interest rate futures. The city has four

major exchanges: the CME Group, the Chicago Board Options Exchange, the Mid-America

Commodity Exchange and the Chicago Stock Exchange. Also adding strength to the financial

market is the Federal Reserve Bank and the region's 130 domestic and 70 foreign banks.

Chicago's financial services and products are exported nationally and internationally.

Therefore, the area's financial infrastructure is not wholly dependent upon activity in Chicago,

which reinforces an already stable economy.

TRADE AND COMMERCE

Chicago is also home to four major exchanges (Chicago Mercantile Exchange, Chicago Board

Options Exchange, Mid-America Commodity Exchange and Midwest Stock Exchange)

representing over 80% of the world’s trade in commodities. The Chicago Board of Trade and

Mercantile Exchange merged companies in July 2007, creating the largest derivatives market

ever.

The Chicago Board of Trade is a leading futures/options exchange with more than 3,600

members trading over 50 different products. The Chicago Mercantile Exchange is the largest

futures exchange in the United States, and operates the largest futures clearing house in the

world, while the CBOE is the world’s largest options market. The Chicago Stock Exchange

provides for the trading of over 3,500 NYSE, AMEX, NASDAQ and CHX-exclusive issues.


12

EDUCATION

Chicago is home to fifteen major public and private universities including the highly regarded

Northwestern University and University of Chicago. Other major educational institutions include

University of Illinois at Chicago, which has the largest local enrollment, as well as Loyola

University and DePaul University. These institutions offer a variety of undergraduate and

graduate fields of study. The total enrollment of these Chicago area universities is

approximately 151,000 students. Prominent MBA programs in the Chicago area include

Northwestern University’s Kellogg School of Management, University of Chicago’s Graduate

School of Business and DePaul University’s Kellstadt Graduate School of Business.

While in the surrounding areas of Chicago there are a number of private liberal arts colleges

and universities including North Central College, Wheaton College, Elmhurst College, North

Park University, Benedictine University and Lake Forest College. Additionally, many of the

major universities have established satellite campuses in the suburban areas. DePaul University

has suburban campuses located in Naperville, Oak Forest, O’Hare and Rolling Meadows.

Northern Illinois University has suburban campuses in Hoffman Estates and Naperville.

The Chicago area also has an extensive community college system comprised of twelve two-

year colleges with a total enrollment of 145,000 students. Courses range from vocational

training to classes in liberal arts, science, business and pre-professional studies. There are also

seven City Colleges of Chicago with an enrollment of over 65,000 students.

HEALTH CARE

Chicago hospitals are credited with being among the leading health care facilities in the country

as well as some of the nation’s best teaching and children’s hospitals. Within the Chicago

metropolitan area, there are 121 hospitals with over 24,700 beds. The Chicago healthcare

market has been changing drastically in the past few years due to hospital system acquisitions,

mergers, and partnerships. In order to satisfy newly generated demand caused by an

expanding population, Chicago’s primary hospital systems are expanding considerably; over $1

billion in new facilities have opened since 2000 and an additional $2.5 billion in projects are

currently underway.

The two largest hospitals in the Chicago metropolitan area are Northwestern Memorial Hospital

and University of Chicago Medical Center. In addition to being the two largest in terms of net

revenue, these two hospitals rank nationally as premiere health care institutions in the nation.

Located on Chicago’s Near West Side, the Illinois Medical District (IMD) is the nation’s largest

urban medical district. Founded in 1941, the IMD is comprised of 560 acres, houses 2,200

hospital beds, has 20,000 employees, and receives some 75,000 visitors daily. The district also

houses the Chicago Technology Park and provides incubation for approximately 30 emerging

technology-based companies.


13

CONCLUSION

In summary, the interaction of the environmental, social, and economic forces has contributed to

the diversified economic base of Chicago. Job growth is considered the primary force that

drives housing demand, retail sales and commercial construction. The recovery of the metro

Chicago economy is expected to continue in the coming quarters though it will lag behind the

national pace of expansion. The area will continue to capitalize on its core strengths: its

business and professional services, transportation-distribution and tourism/convention

industries. Generally, the area is expected to maintain a relatively stable growth pattern in the

foreseeable future.

CENTURY SHOPPING CENTER | NEIGHBORHOOD ANALYSIS

14

NEIGHBORHOOD ANALYSIS

LOCATION

The subject property is located at the northern edge of the Lincoln Park neighborhood of

Chicago’s north side, approximately three miles north of the Central Business District. Lincoln

Park is a gentrified neighborhood named for the city’s largest park. The park itself features the

world-renowned Lincoln Park Zoo and a botanical conservatory. The nationally recognized

Children’s Memorial Hospital was founded in Lincoln Park as the Maurice Porter Hospital in

1882, and DePaul University started here in 1898 as St. Vincent’s College, and has grown to an

enrollment of more than 20,000 students. It one of the most densely populated and affluent

neighborhoods in Chicago.

Just north of Lincoln Park is the Lakeview neighborhood, which extends from the lakefront west

to Ashland and between Diversey Street and Irving Park Road. Lakeview is more recently

gentrified and has become an extension of the Lincoln Park neighborhood as a restaurant and

shopping destination. At the heart of Lakeview is Wrigley Field, home of the Chicago Cubs

baseball team. West of Wrigley Field, the Southport corridor has emerged as a shopping and

restaurant district similar to Armitage Avenue in Lincoln Park and features clothing boutiques,

home décor shops and a number of restaurants.

The major commercial thoroughfares in the Lincoln Park and Lakeview neighborhoods include

Halsted and Clark Streets, and Diversey, Broadway and Belmont Avenues.


15

BOUNDARIES

The Lincoln Park neighborhood boundaries are detailed as follows:

North: Addison Street South: Fullerton Parkway East: Lake Michigan West: Ashland Avenue

LAND USE

The immediate area surrounding the subject consists primarily of commercial, street-level retail

and multi-family residential uses typical of the Chicago landscape. The main commercial node

within the subject’s immediate area is located along Halsted, Clark and Broadway near their

intersections at Diversey and along Diversey between Halsted and the lake. This retail node is

primary comprised of national tenants including Home Depot, Walgreens, Bed, Bath & Beyond,

PetsMart, T.J. Maxx and Cost Plus World Market. Trader Joe’s and Urban Outfitters both

recently located within this retail node with new stores opening in 2011. Opposite the subject is

a former Border’s Books. This retail space has been leased to Walgreens who is currently

building out its space.

Located along Fullerton Avenue is DePaul University. DePaul University is situated on 36 acres

in the heart of Lincoln Park. There are three hospitals within a four-mile radius of the subject

with includes Advocate Illinois Masonic Medical Center, Resurrection St. Joseph Hospital and

Thorek Memorial Hospital.

The interior streets off Clark, Halsted and Diversey consist of a mature residential area. The

residential uses include both single-family and multi-family developments and consist of both

new and vintage buildings. According to Claritas, Inc., the majority of residential properties

were developed before 1940. Within a one-mile radius approximately 40% of the homes were

built prior to 1940. The 2012 median owner-occupied housing value within a 0.5- and 1-mile

radius is $364,134 and $370,917, respectively.

GROWTH PATTERNS

The subject corridor is a stable thoroughfare, which is densely populated and consists mainly of

street level commercial properties with upper level residential similar to the subject. The

immediate has not seen an abundance of new construction. Any recent development generally

consists of redevelopment of older and under-improved properties to street level retail and

residential and condominium developments to accommodate the influx of young urban

professionals and empty nesters into the city. Most specifically, just west of the subject’s

intersection of Diversey and Clark Street, a new Trader Joe’s was developed on the site of a

previous surface lot and a commercial building.


16

ACCESS

Primary access to the neighborhood is provided by Diversey and Fullerton Avenue, traversing

east-west and Clark and Halsted Streets traversing north-south. Fullerton Avenue has a full

interchange to Interstate 90/94 west of the subject.

The neighborhood is also serviced by the “el” system with a Brown and Red Line stop at

Fullerton and Sheffield. The el provides access to Chicago’s “Loop.” Additionally, cabs

frequent the area and the neighborhood is dominated by pedestrian traffic.

The commute to the Chicago Central Business District is about three miles to the south or a 15-

minute commute with minimal traffic by car and approximately 15-minutes by el. The subject is

approximately 16 miles southeast of O’Hare International Airport and approximately 13 miles

north of Midway International Airport.

DEMOGRAPHICS

Selected neighborhood demographics in a 0.5-mile, 1.0- and 1.5-mile radius from the subject

are shown in the following table:


17

SELECTED NEIGHBORHOOD DEMOGRAPHICS

2828 North Clark Street

Chicago, IL

Population

2017 Population 32,362 83,527 141,986

2012 Population 32,767 84,576 142,520

2000 Population 34,317 87,231 143,118

1990 Population 33,059 81,930 135,769

Annual Growth 2012 - 2017 -0.25% -0.25% -0.08%

Annual Growth 2000 - 2012 -0.38% -0.26% -0.03%

Annual Growth 1990 - 2000 0.37% 0.63% 0.53%

Households

2017 Households 21,200 48,655 80,023

2012 Households 21,244 48,949 79,961

2000 Households 22,960 52,498 84,174

1990 Households 21,784 49,740 79,472

Annual Growth 2012 - 2017 -0.04% -0.12% 0.02%

Annual Growth 2000 - 2012 -0.65% -0.58% -0.43%

Annual Growth 1990 - 2000 0.53% 0.54% 0.58%

Income

2012 Median HH Inc $58,963 $65,461 $68,232

2012 Estimated Average Household Income $86,953 $98,771 $102,723

2012 Estimated Per Capita Income $56,414 $57,585 $58,014

Age 25+ College Graduates - 2000 21,017 50,977 82,579

Age 25+ Percent College Graduates - 2012 73.2% 72.4% 70.0%

Source: CBRE

0.5 Mile Radius

1.0 Mile Radius

1.5 Mile radius

CONCLUSION

Lincoln Park is one of Chicago’s leading shopping areas with an array of boutiques, specialty

shops and nationwide retail chains. Lincoln Park is home to three major cultural institutions; the

Chicago Historical Society, the Peggy Notebaert Nature Museum and the Lincoln Park Zoo.

Lincoln Park is one the wealthiest and most densely populated neighborhood’s within Chicago.

Since 2000, population has remained nearly unchanged, which is a result of its stable, built-up

nature. Retail and commercial uses target the dense population and pedestrian traffic. The

outlook for the neighborhood is for stable performance with continued improvement over the

next several years. As a result, the demand for existing developments is expected to be good.

CENTURY SHOPPING CENTER | MARKET ANALYSIS

18

MARKET ANALYSIS

The market analysis forms a basis for assessing market area boundaries, supply and demand

factors, and indications of financial feasibility. Primary data sources utilized for this analysis

include CBRE Markerview Fourth Quarter 2012, Claritas and PwC Investor Survey Report.

The subject is a vertical retail center located in the Chicago retail market and the City North

submarket.

DEMOGRAPHIC ANALYSIS

Demand for additional commercial property is a direct function of population change and

household income. Retail and commercial properties are products of a clearly definable

demand relating directly to population shifts and income patterns.

Housing, Population and Household Formation

The following table illustrates the population and household changes for the subject

neighborhood.

POPULATION AND HOUSEHOLD PROJECTIONS

Population

2017 Population 32,362 83,527 141,986

2012 Population 32,767 84,576 142,520

2000 Population 34,317 87,231 143,118

1990 Population 33,059 81,930 135,769

Annual Growth 2012 - 2017 -0.25% -0.25% -0.08%

Annual Growth 2000 - 2012 -0.38% -0.26% -0.03%

Annual Growth 1990 - 2000 0.37% 0.63% 0.53%

Households

2017 Households 21,200 48,655 80,023

2012 Households 21,244 48,949 79,961

2000 Households 22,960 52,498 84,174

1990 Households 21,784 49,740 79,472

Annual Growth 2012 - 2017 -0.04% -0.12% 0.02%

Annual Growth 2000 - 2012 -0.65% -0.58% -0.43%

Annual Growth 1990 - 2000 0.53% 0.54% 0.58%

Source: CBRE

0.5 Mile Radius

1.0 Mile Radius

1.5 Mile radius

As shown, the subject’s neighborhood is experiencing stability with less than 0.25% change in

both population and households.


19

Income Distributions

Household income available for expenditure on consumer items is a primary factor in

determining the retail supply and demand levels in a given market area. In the case of this

study, a projection of household income identifies (in gross terms) the market from which the

subject submarket draws. The following table illustrates estimated household income

distribution for the subject neighborhood.

HOUSEHOLD INCOME DISTRIBUTION

Households by Income Distribution - 2012

Less than $15K 9.99% 9.58% 9.35%

$15K - $25K 7.38% 6.48% 6.32%

$25K - $35K 8.42% 7.42% 7.10%

$35K - $50K 16.00% 14.41% 13.71%

$50K - $75K 20.25% 18.34% 17.75%

$75K - $100K 11.80% 12.00% 12.17%

$100K - $150K 13.92% 15.50% 15.85%

$150K - $250K 4.44% 5.72% 6.19%

$250K - $500K 5.78% 7.93% 8.80%

$500K or more 2.01% 2.63% 2.76%

Source: CBRE

0.5 Mile Radius

1.0 Mile Radius

1.5 Mile radius

The following table illustrates the median and average household income levels for the subject

neighborhood.

HOUSEHOLD INCOME LEVELS

Income

2012 Median HH Inc $58,963 $65,461 $68,232

2012 Estimated Average Household Income $86,953 $98,771 $102,723

2012 Estimated Per Capita Income $56,414 $57,585 $58,014

Source: CBRE

0.5 Mile Radius

1.0 Mile Radius

1.5 Mile radius

An analysis of the income data indicates that the submarket is generally comprised of upper-

middle and high-income economic cohort groups, which include the target groups to which the

subject is oriented.

Retail Sales Volumes

The following table illustrates retail sales for the subject’s market area at given radii intervals

from the subject.


20

RETAIL EXPENDITURES ($000's)SUBJECT'S SUBMARKET

0.5 Mile Radius 1.0 Mile Radius 1.5 Mile radius

Product Sample 2012 2017 %/ Yr 2012 2017 %/ Yr 2012 2017 %/ Yr

All Retail Stores 588,216 621,001 1.1% 1,506,130 1,600,827 1.2% 2,488,370 2,646,077 1.2%

Grocery Stores 94,404 97,797 0.7% 236,908 246,370 0.8% 389,790 405,434 0.8%

Eating Places 61,725 62,414 0.2% 153,052 155,768 0.4% 248,553 253,114 0.4%

Drinking Places 1,773 1,795 0.2% 4,470 4,560 0.4% 7,230 7,379 0.4%

Health and Personal Care Stores 40,810 44,023 1.5% 100,733 109,157 1.6% 165,446 179,580 1.7%

Building Material & Garden Equipment & Supplies 14,357 15,152 1.1% 37,194 39,437 1.2% 62,962 66,820 1.2%

Hardware Stores 1,978 2,086 1.1% 5,129 5,442 1.2% 8,604 9,135 1.2%

Lawn & Garden Equipment & Supplies Dealers 2,386 2,518 1.1% 6,128 6,504 1.2% 10,299 10,951 1.2%

Furniture Stores 12,368 13,110 1.2% 32,591 34,729 1.3% 54,719 58,337 1.3%

Other Home Furnishing Stores 8,085 8,541 1.1% 21,115 22,413 1.2% 35,454 37,652 1.2%

Household Appliance Stores 2,540 2,833 2.2% 6,420 7,204 2.3% 10,722 12,031 2.3%

Radio/ TV/ Other Electronics Stores 11,020 14,987 6.3% 28,348 38,813 6.5% 46,549 63,719 6.5%

Department Stores (Excluding Leased) 52,218 57,569 2.0% 134,564 149,237 2.1% 223,031 247,440 2.1%

Clothing and Clothing Accessory Stores 44,645 48,532 1.7% 117,288 128,244 1.8% 194,680 212,915 1.8%

Shoe Stores 5,518 6,071 1.9% 14,222 15,745 2.1% 23,517 26,044 2.1%

General Merchandise Stores 100,065 109,297 1.8% 256,011 281,299 1.9% 423,442 465,458 1.9%

Warehouse Clubs and Superstores 48,852 52,940 1.6% 124,058 135,216 1.7% 204,719 223,213 1.7%

Full Service Restaurants 21,507 21,778 0.3% 53,660 54,696 0.4% 87,283 89,043 0.4%

Fast Food Restaurants 17,521 17,724 0.2% 43,068 43,857 0.4% 69,590 70,873 0.4%

Jewelry Stores 12,156 12,871 1.2% 32,232 34,333 1.3% 53,866 57,407 1.3%

Book Stores 6,546 7,275 2.1% 17,655 19,783 2.3% 28,226 31,617 2.3%

Gift, Novelty, and Souvenir Shops 2,329 2,499 1.4% 5,956 6,433 1.6% 9,821 10,614 1.6%

Florists 6,794 7,161 1.1% 17,532 18,580 1.2% 29,497 31,332 1.2%

Hobby, Toy, and Game Shops 4,106 4,374 1.3% 10,480 11,253 1.4% 17,324 18,619 1.5%

Sporting Goods Stores 5,923 7,428 4.6% 16,105 20,318 4.8% 27,066 34,116 4.7%

Camera/ Photographic Supply Stores 810 1,045 5.2% 2,092 2,709 5.3% 3,448 4,466 5.3%

Luggage and Leather Goods Stores 764 813 1.2% 2,016 2,156 1.4% 3,358 3,593 1.4%

Sew/ Needlework/ Piece Goods Stores 1,336 1,438 1.5% 3,445 3,726 1.6% 5,755 6,227 1.6%

Convenience Stores 5,383 5,611 0.8% 13,426 14,063 0.9% 21,905 22,953 0.9%

Home Centers 6,937 7,331 1.1% 18,035 19,147 1.2% 30,461 32,351 1.2%

Nursery and Garden Centers 2,207 2,324 1.0% 5,654 5,988 1.2% 9,488 10,066 1.2%

Computer and Software Stores 4,557 6,291 6.7% 11,786 16,392 6.8% 19,234 26,743 6.8%

Clothing Accessory Stores 737 799 1.6% 1,939 2,115 1.8% 3,206 3,500 1.8%

Auto Dealers 102,489 98,730 -0.7% 268,321 261,499 -0.5% 444,837 434,111 -0.5%

Automotive Part, Accessories & Tire Stores 4,299 4,355 0.3% 11,201 11,420 0.4% 18,648 19,021 0.4%

Gasoline Stations with Convenience Stores 47,529 46,458 -0.5% 118,201 116,152 -0.3% 193,888 190,571 -0.3%

Gasoline Stations without Convenience Stores 13,689 12,974 -1.1% 34,126 32,533 -1.0% 56,185 53,590 -0.9%

Electronic Shopping and Mail Order 28,305 33,314 3.3% 73,086 86,733 3.5% 120,097 142,552 3.5%

Total Accommodation and Food Services 89,762 90,873 0.2% 225,280 229,551 0.4% 368,050 375,277 0.4%

Source: CBRE

The annual rate of change for All Retail Stores is indicated as 1.1%, 1.2% and 1.2% on 0.5-,

1.0-, and 1.5-mile radii, respectively. As noted, demand for most retail products is expected to

increase over the next five years with the exception of auto dealers and gas stations.

Outlook

Based on this analysis, the immediate area surrounding the subject is projected to experience

stability and growth relative to households, population, income levels and retail expenditures

into the near future. Given the area demographics, it appears that demand for both comparable

surrounding area retail properties and the subject will continue to be favorable.


21

RETAIL INVESTMENT TRENDS

National Retail Overview (PwC Investor Survey – Fourth Quarter 2012)

According to the PwC Fourth Quarter 2012 retail report, when it comes to investing in strip

shopping centers, population density and high barriers to entry are key motivations behind

investment decisions. “We are looking to buy in select demographics and little room for new

development,” shares a participant. While focusing on these two characteristics is not new to

most buyers, it has become more important for investors of grocery-anchored centers in the

wake of a rapidly expanding grocer market.

In addition to the "traditional" grocer, many big-box stores, like Target, and drugstores, such as

Walgreens, are adding grocery aisles to their formats. While some investors feel this growing

competition is straining the appeal of buying grocery-anchored shopping centers, others remain

steadfast in their desire to acquire not only grocery- anchored centers, but also community

shopping centers.

In fact, 52.7% of respondents in the recently released Emerging Trends in Real Estate®2013,

published by PwC and ULI, recommend buying U.S. neighborhood/community shopping centers

in the year ahead. In contrast, 28.0% propose holding them while 19.3% recommend selling.

This sector's "buy" rating significantly outshines the other two retail formats (11.9% for power

centers and 16.0% for regional malls).


22

Investment Trends

The following table provides a summary of the retail capitalization rates quarterly over the last

several years as reported in the PwC Real Estate Investor Survey.

Low High Average Change Low High Average Change Low High Average Change Low High Average Change

2006 5.00% 9.50% 6.86% N/ A 5.50% 9.00% 7.14% N/ A 5.80% 9.00% 7.27% N/ A 6.00% 10.00% 7.65% N/ A

2007 5.00% 9.50% 6.68% -2.6% 5.50% 9.00% 7.13% -0.1% 5.80% 9.00% 7.24% -0.4% 6.00% 10.00% 7.60% -0.7%

2008 5.00% 9.50% 6.96% 4.2% 6.00% 10.00% 7.57% 6.2% 5.80% 9.00% 7.49% 3.5% 6.00% 10.00% 7.85% 3.3%

2009 5.00% 11.00% 8.06% 15.8% 7.50% 10.00% 8.60% 13.6% 7.25% 11.00% 8.53% 13.9% 7.00% 10.00% 8.94% 13.9%

2010 5.00% 10.50% 7.81% -3.1% 7.00% 10.00% 8.08% -6.0% 5.50% 9.50% 7.63% -10.6% 6.25% 12.00% 8.69% -2.8%

2011 4.75% 10.50% 7.23% -7.4% 6.00% 11.00% 8.31% 2.8% 5.00% 9.50% 7.16% -6.2% 5.00% 10.25% 7.59% -12.7%

1Q2012 4.75% 10.50% 7.23% 0.0% 6.25% 9.00% 7.32% -11.9% 5.50% 9.50% 7.18% 0.3% 6.00% 8.75% 7.46% -1.7%

2Q2012 4.75% 10.50% 7.23% 0.0% 6.00% 9.00% 7.14% -14.1% 5.50% 9.50% 7.18% 0.3% 6.00% 8.75% 7.40% -2.5%

3Q2012 4.50% 10.50% 7.06% -2.4% 6.00% 8.75% 7.04% -15.3% 5.25% 9.50% 7.06% -1.4% 6.00% 8.75% 7.44% -2.0%

4Q2012 4.50% 10.00% 6.83% -5.5% 6.00% 8.75% 6.98% -16.0% 5.25% 9.50% 7.06% -1.4% 6.00% 8.75% 7.35% -3.2%

OVERALL CAPITALIZATION RATE SUMMARY

Source: PwC Real Estate Investor Survey™

National Regional Mall Market National Power Center Market National Strip Center Market National Net Lease Market


23

As illustrated in the previous table, the average capitalization rate for all retail properties have

declined significantly since peaking in the first and second quarter quarters of 2010. This

followed steep increases in late 2008 and 2009 resulting from the credit crunch and economic

recession, coupled with declining consumer confidence. The credit markets have softened and

there is more liquidity in the market for core assets, which has filtered down to lower required

rates of return. Challenged properties, however, will continue to exhibit longer marketing period

without significant discount to compensate for the risk associated with lease up and near term

tenant rolls.

CHICAGO RETAIL MARKET OVERVIEW

During the fourth quarter of 2012, the Chicago retail market posted an 8.7% vacancy rate, a 180

basis point decrease from year-end 2011 when the vacancy rate was at 9.5%.

A niche of fast-growing value chain stores is moving into the Chicago market for the first time

this year as the retail industry rebounds. The welcomed newcomers include Five Below, Savers,

Ross Dress for Less and Charming Charlie. Instead of building stores from the ground up, these

value chains are taking advantage of discounted real estate by moving their new stores into

vacant shops left behind by Borders, Circuit City, Blockbuster and Linens ‘N Things.

Market statistics for the Chicago area and the twelve submarkets are shown in the following

table. The subject property is located within the City North submarket.


24

CHICAGO METRO RETAIL MARKET SUMMARY

SubmarketTotal

Inventory2002

InventoryPercent Change

VacantVacancy

RateNet Base

Rent ($/ SF)

Far Northwest Suburbs (1) 12,984,828 7,942,364 63.5% 1,006,352 7.8% $14.73

Northwest Suburbs (2) 15,272,376 13,997,804 9.1% 1,678,461 11.0% $17.82

Far North Suburbs (3) 8,350,901 7,831,543 6.6% 640,321 7.7% $16.05

North Suburbs (4) 9,830,624 7,613,971 29.1% 664,590 6.8% $22.85

Far West Suburbs (5) 21,724,807 18,950,362 14.6% 2,169,814 10.0% $17.80

West Suburbs (6) 7,890,112 7,117,774 10.9% 352,494 4.5% $14.81

City North (7) 7,749,291 6,165,115 25.7% 445,447 5.7% $20.61

City South (8) 5,750,019 4,040,886 42.3% 412,493 7.2% $18.90

Far Southwest Suburbs (9) 11,061,232 6,476,156 70.8% 694,622 6.3% $15.88

Southwest Suburbs (10) 8,509,366 7,904,288 7.7% 486,330 5.7% $16.22

South Suburbs (11) 6,977,230 6,717,728 3.9% 1,378,372 19.8% $14.03

Kane County (14) 10,878,034 7,257,989 49.9% 1,090,221 10.0% $15.44

Chicago Metro Area 126,978,820 102,015,980 24.5% 11,019,517 8.7% $16.16

Source: CBRE MarketView Retail Report Fourth Quarter 2012

As the above table shows, the Chicago MSA has grown 24.5% since 2002. The City North

submarket, with roughly 7.7 million square feet, has expanded 25.7% over the same time frame.

The largest growth in inventory has been experienced in the fringe communities of the region,

such as the Far Southwest Suburbs, Kane County and Far Northwest Suburbs submarkets.

These areas are experiencing dramatic housing development that is fueled by the migration of

people to the region as well as the relocation of residents within the Chicago MSA to the outer

boundaries.

Vacancy

The following table details retail vacancy rates in Chicago’s Metropolitan Area and the City

North submarket since 2005.

HISTORICAL RETAIL VACANCY

Chicago MSA City North

Period Overall Overall

2005 7.6% 4.2%

2006 7.2% 4.1%

2007 7.9% 4.9%

2008 10.2% 6.7%

2009 11.6% 6.5%

2010 10.8% 8.0%

2011 9.5% 6.5%

Historic Average 9.2% 5.8%

2012 8.7% 5.7%


As of fourth quarter 2012, vacancy rates within the Chicago area submarkets range between

4.5% in the West Suburbs submarket and 19.8% in the South Suburbs submarket. The metro

area’s overall vacancy rate is 8.7%. The subject submarket vacancy rate is below the MSA

average as of the current quarter at 5.7%.


25

Absorption

In the following table, net absorption is measured as a function of total occupied space in the

market.

HISTORICAL RETAIL ABSORPTION

PeriodTotal Occupied

Space (SF) NetTotal Occupied

Space (SF) Net2005 103,863,229 108,252 7,390,861 (83,168)

2006 106,314,989 2,451,760 7,535,569 144,708

2007 109,355,204 3,040,215 7,418,773 (116,796)

2008 113,299,923 3,944,719 7,474,868 56,095

2009 112,954,573 (345,350) 7,551,551 87,569

2010 113,851,636 897,063 7,433,759 315,402

2011 115,529,666 1,678,030 7,365,410 (68,349)

Historic Average 1,682,098 47,923

2012 115,959,303 429,637 7,303,844 (61,566)



As of fourth quarter 2012, overall net absorption for the Chicago MSA continues to follow the

positive trend experienced since 2010. As a result of the positive absorption and slowing

development pipeline, the region’s overall vacancy rate has declined over the past two years.

Going forward, net absorption is projected to remain positive but (at times) modest over the next

few quarters due to the uncertain demand.

In contrast, the City North posted negative absorption for the past two years, albeit at modest

levels.

Rental Rates

The following table illustrates the change in base rent in the Chicago area and the City North

submarket.

HISTORICAL RETAIL BASE RENTS


Period Overall Overall

2005 $15.58 $22.23

2006 $17.18 $26.84

2007 $17.84 $28.14

2008 $16.63 $26.81

2009 $15.81 $25.40

2010 $15.30 $27.02

2011 $16.34 $22.31

Historic Average $16.38 $25.54

2012 $16.16 $20.61



26

The current submarket rate of $20.61 per square foot is higher than the MSA total of $16.16.

The subject submarket has asking rental rates that are well above average, owing to above

average income totals and strong occupancy rates in most portions of the submarket.

However, at $20.61 per square foot it remains nearly $8.00 off its 2007 peak.

CITY NORTH SUBMARKET OVERVIEW

Vacancy Rates

The current quarter’s retail vacancy for the region and the subject submarket by property type is

presented in the following table.

Zone Category Properties Total SF Vacant SF % Vacant

City North Community/ Neighborhood 43 6,889,769 359,730 5.2%

7 Strip/ Inline 7 644,522 85,717 13.3%

Free Standing Center 2 215,000 0 0.0%

Total 52 7,749,291 445,447 5.7%

CHICAGO Community/ Neighborhood 532 101,378,095 8,694,045 8.6%

MSA Strip/ Inline 143 13,019,290 1,705,992 13.1%

Free Standing Center 83 12,581,435 619,480 4.9%

Total 758 126,978,820 11,019,517 8.7%

Note: Retail centers 50,000 square feet and greater are tracked


VACANCY BY PROPERTY TYPE

Rental Rates

The current quarter’s retail rental rates for the region and the subject submarket by property

type is presented in the following table.

Zone Category Average Low Average High Average Base

City North Community/ Neighborhood $19.29 $21.24 $20.27

7 Strip/ Inline $21.59 $26.82 $24.21

Free Standing Center $0.00 $0.00 $0.00

Total $19.49 $21.72 $20.61

CHICAGO Community/ Neighborhood $14.89 $18.45 $16.67

MSA Strip/ Inline $13.87 $17.79 $15.83

Free Standing Center $12.13 $12.66 $12.39

Total $14.51 $17.81 $16.16

Note: Retail centers 50,000 square feet and greater are tracked


CHICAGO MSA RENTAL RATES

COMPETITIVE PROPERTIES

Comparable properties have been surveyed in order to identify the occupancy trends within the

immediate submarket. The comparable data is summarized in the following table:


27

SUMMARY OF COMPARABLE RETAIL RENTALS

Comp. No. Name Location Occupancy

1 The Pointe at Clark Street 3131 North Clark Street,Chicago, IL

95%

2 Belden Centre 2301 N. Clark Street,Chicago, IL

99%

3 Webster Place 1435-1471 W Webster Ave,Chicago, IL

97%

4 Clybourn Galleria 1840 North Clybourn,Chicago, IL

78%

5 1466 N. Halsted Mixed-Use Development

1466 N Halsted St,Chicago, IL

93%

6 Clark & Maple 1030 North Clark Street,Chicago, IL

93%

Subject Century Shopping Center 2828 N. Clark Street,Chicago, Illinois

72%

Compiled by CBRE

The comparable properties surveyed reported occupancy rates of 78% or better, and all are

currently in average to good condition. Comparable Four at 78% occupancy is a multi-story,

mixed-use facility that, similar to the subject, has been more heavily impacted by the overall

economic condition given its unique configuration and layout. It is the unique projects that are

often the last to recovery.

SUBJECT ANALYSIS

Subject’s Historical Trends

The subject has exhibited a mixed occupancy pattern in recent years, while under-performing

submarket rates, and is currently 72.5% occupied. It is currently being repositioned in the

market and the upper/interior spaces are being marketed to commercial-service and medical

office users.

Conclusion

Based on the foregoing analysis, CBRE, Inc.’s conclusion of stabilized occupancy for the

subject is illustrated in the following table. This estimate considers both the physical and

economic factors of the market.


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VACANCY / OCCUPANCY CONCLUSIONS

Vacancy Occupancy

Chicago Area 8.7% 91.3%

City North Submarket 5.7% 94.3%

Rent Comparables 10.6% 89.4%

Subject's Current Occupancy 71.7%Subject's Stabilized Occupancy 88.0%Lease-up Period 24 Months

Compiled by CBRE

Although our concluded stabilized occupancy is slightly lower than the overall market and

submarket, this discount appears reasonably justified for the following reasons:

The weighted average of the direct competitors (previously shown) indicate an occupancy level below the local submarket level; and

The subject’s unique configuration and layout justifies a lower occupancy rate.

Even so, we note the subject is well located within the City North Submarket and within a

neighborhood that consistently performs in the upper 90% range. Moreover, the repositioning of

the subject and synergies from commercial service and medical office use should be well

received given the subject’s parking attribute.

ABSORPTION AND LEASE-UP DISCOUNT

As previously stated, the subject property is currently 71.7% occupied. Occupancy has been

underperforming the market and remained in the 70% range over the past few years. As a

vertical mall in a pedestrian targeted urban location, the center is unique and has been

impacted by the economic downturn.

Considering the improving market and trends in absorption, current activity at the subject,

repositioning the space from retail mall users to medical office tenants, as well as the limited

amount of available space in the neighborhood, we estimate the first available space to begin in

six months with one space leasing up semiannually for the first 24 months and then begin

leasing up two spaces semiannually thereafter. Given the activity occurring on the third floor

space, we lease-up this block of space as one unit in twelve months. The other spaces lease-

up as currently demised. As such, the center reaches a stabilized occupancy position in 24

months. Accordingly, February 1, 2015 is utilized as our “as stabilized” date of value.

As the subject property is not stabilized it is necessary to estimate a lease up discount to derive

an as is value estimate. The lease up discount is based on the difference between the as

stabilized and as is value indications via the discounted cash flow analysis, which equals

($6,100,000). This amount will be deducted from each approach to value.


29

While basic lease-up costs such as tenant improvements, leasing commissions, rent loss and

expense reimbursement loss could be calculated manually and applied in the sales comparison

approach and the direct capitalization analysis, we believe that applying the difference between

the “as is” and “as stabilized” DCF is the best way to account for the varying amounts of risk

associated with the property in its current position as opposed to a stabilized position, as the “as

is” DCF utilizes a higher rate of return to reflect greater risk associated with a non-stabilized.

CONCLUSION

The subject property is situated within the densely populated, urban Lincoln Park neighborhood.

In general, the area retail market and the local submarket are exhibiting stabilized occupancy

levels and flat to upward trending rental rates, yet remain off their peak achieved in 2007 and

2008. Considering the recent trends in absorption, the local market area should maintain a

stabilized occupancy position. The addition of new product to the market may create minor

downward pressure on occupancy and on owners’ ability to obtain the effective rental increases

in the near term. However, the long-term projection for the subject submarket is for continued

growth.

With respect to the subject in particular, we believe the subject is well located for a mixed-use

project. It is in reasonable proximity to employment centers, public transportation and major

traffic carriers, and the surrounding developments are experiencing average to above average

levels of demand. We believe the subject will benefit from its reposition and should regain

market acceptance alongside a market recovery.

CENTURY SHOPPING CENTER | IMPROVEMENTS ANALYSIS

30

SURVEY


31

FLOOD PLAIN MAP


32

SITE ANALYSIS

The following chart summarizes the salient characteristics of the subject site.

SITE SUMMARY

Physical DescriptionGross Site Area 1.39 Acres 60,669 Sq. Ft.

Net Site Area 1.39 Acres 60,669 Sq. Ft.

Primary Road Frontage Clark Street 320 Feet

Secondary Road Frontage Orchard Street 189 Feet

Excess Land Area None

Surplus Land Area None

Zoning District

Flood Map Panel No. & Date 17031C0417J 19-Aug-08

Flood Zone Zone X

Source: Various sources compiled by CBRE

Business Planned Development No 139

INGRESS/EGRESS

Ingress and egress is available to the site via an access point to the parking garage along Clark

Street.

FLOOD ZONE

According to flood hazard maps published by the Federal Emergency Management Agency

(FEMA), the site is within Zone X, as indicated on Community Map Panel No. 17031C0417J.

FEMA defines the flood zone(s) as follows:

Zones C and X (unshaded) are flood insurance rate zones used for areas outside

the 0.2-percent-annual-chance floodplain. No Base Flood Elevations (BFEs) or

depths are shown in this zone, and insurance purchase is not required.

ENVIRONMENTAL ISSUES

CBRE is not qualified to detect the existence of potentially hazardous material or underground

storage tanks which may be present on or near the site. The existence of hazardous materials

or underground storage tanks may affect the value of the property. For this appraisal, CBRE

has specifically assumed that the property is not affected by any hazardous materials that may

be present on or near the property.

A Phase 1 Environmental Site Assessment (ESA) was not provided for purposes of this

analysis.


33

CONCLUSION

The site is well-located and is afforded average access and visibility from roadway frontage.

The size of the site is typical for the area and proposed use, and there are no known detrimental

uses in the immediate vicinity. Overall, there are no known factors which are considered to

prevent the site from development to its highest and best use, as if vacant, or adverse to the

proposed use of the site.


34

IMPROVEMENTS LAYOUT


35

IMPROVEMENTS LAYOUT


36

IMPROVEMENTS LAYOUT


37

IMPROVEMENTS LAYOUT


38

IMPROVEMENTS LAYOUT


39

IMPROVEMENTS LAYOUT


40

IMPROVEMENTS LAYOUT


41

IMPROVEMENTS ANALYSIS

The following chart shows a summary of the improvements.

IMPROVEMENTS SUMMARY

Retail

1925

Source: Various sources compiled by CBRE

(Neighborhood/Community Center)

32,122 SF

21,713 SF

15,609 SF

50,779 SF

32,122 SF

Property Type

Interior

Street Front

Garden

Fitness Center

Theater

LA Fitness

AMC Theater

49,883 SF

35.0%

1

170,106 SF

8

Number of Buildings

Number of Stories

Gross Leasable Area

Year Built

Area Breakdown by Market Rent Categories

Major Tenants

0.36 : 1

2.65Parking Ratio (per 1,000 SF GLA )

Total Spaces:

Garage

450

Site Coverage

Land-to-Building Ratio

Parking Improvements

50,779 SF

Expanded and Renovated: 1975, 1985 and 2000

BUILDING AREA

Please refer to the Resource Verification table in the Scope of Work for the source of the

building area size. The following is a description of the subject improvements and basic

construction features derived from CBRE’s inspection.

YEAR BUILT

The subject was built in 1925 as a live theater. In 1975 it was renovated and expanded into a

vertical shopping mall. In 1985 it was expanded again with the fitness center and it was

expanded and renovated again most recently in 2000, which included the movie theater, new

HVAC, escalators, an elevator dedicated to LA Fitness, new carpet and railings among other

cosmetic items.

FOUNDATION

The foundation is assumed to be of adequate load-bearing capacity to support the

improvements.

CONSTRUCTION COMPONENTS

The construction components are assumed to be in working condition and adequate for the

building.


42

FLOOR STRUCTURE

The floor structure is summarized as follows:

Ground Floor: Concrete slab on compacted fill

EXTERIOR WALLS

The exterior wall structure is a combination of brick, concrete block and a decorative terra cotta

veneer finish on the lower four floors of the main façade.

ROOF COVER

The building has a flat roof with an assumed built-up composition.

INTERIOR FINISHES

The typical interior finish of the retail shop space is summarized as follows:

Floor Coverings: Commercial grade short loop carpeting and vinyl tile over concrete.

Walls: Textured and painted sheetrock.

Ceilings: Combination textured and painted sheetrock and suspended acoustical tile.

Lighting: Standard commercial fluorescent fixtures.

Summary: The interior areas are typical building standard retail showroom finish, and are commensurate with competitors in the area. The occupied space is in good condition, while vacant spaces will likely require some tenant retrofit prior to occupancy.

STAIRS AND ELEVATORS

The subject features interior stairs as well as two common elevators accessing each of the

floors and an elevator dedicated to Bally’s. Additionally, there are four escalators that connect

to the first four floors in the atrium.

HVAC

The HVAC system is assumed to be in good working order and adequate for the building.

ELECTRICAL

The electrical system is assumed to be in good working order and adequate for the building.


43

PLUMBING

The plumbing system is assumed to be in good working order and adequate for the building.

RESTROOMS

The restrooms are adequate and are assumed built to local code.

FIRE PROTECTION

It is assumed the improvements have adequate fire alarm systems, fire exits, fire extinguishers,

fire escapes and/or other fire protection measures to meet local fire marshal requirements.

CBRE is not qualified to determine adequate levels of safety & fire protection, whereby it is

recommended that the client/reader review available permits, etc. prior to making a business

decision.

SECURITY

The security is specific to each tenant suite. Additionally, there is 24-hour manned security for

the building.

PARKING AND DRIVES

The property features a six-story connected 450-space parking garage. The parking garage is

outside managed by Standard Parking.

LANDSCAPING

The subject property encumbers the entire site, typical of urban properties. As such, any

landscaping is minimal.

QUALITY AND STRUCTURAL CONDITION

The overall quality of the facility is considered to be average for the neighborhood and age.

However, CBRE is not qualified to determine structural integrity and it is recommended that the

client/reader retain the services of a qualified, independent engineer or contractor to determine

the structural integrity of the improvements prior to making a business decision.

FUNCTIONAL UTILITY

The overall layout of the property is considered functional in utility and provides adequate

accessibility and visibility to the individual retail spaces. Even so, a vertical retail center is

unique to the neighborhood and less well received.


44

ADA COMPLIANCE

The client/reader’s attention is directed to the specific limiting conditions regarding ADA

compliance.

FURNITURE, FIXTURES AND EQUIPMENT

Any personal property items contained in the property are not considered in to contribute

significantly to the overall value of the real estate.

ENVIRONMENTAL ISSUES

CBRE is not qualified to detect the existence of any potentially hazardous materials such as

lead paint, asbestos, urea formaldehyde foam insulation, or other potentially hazardous

construction materials on or in the improvements. The existence of such substances may affect

the value of the property. For the purpose of this assignment, we have specifically assumed

that any hazardous materials that would cause a loss in value do not affect the subject.

DEFERRED MAINTENANCE

Our inspection of the property and conversations with the property manager did not indicate any

significant items of deferred maintenance and none are assumed to exist.

ECONOMIC AGE AND LIFE

CBRE’s estimate of the subject improvements effective age and remaining economic life is

depicted in the following chart:

ECONOMIC AGE AND LIFE

Actual Age 88 Years

Effective Age 20 Years

MVS Expected Life 55 Years

Remaining Economic Life 35 Years

Accrued Physical Incurable Depreciation 36.4%

Compiled by CBRE

The overall life expectancy is based upon our on-site observations and a comparative analysis

of typical life expectancies reported for buildings of similar construction as published by Marshall

and Swift, LLC, in the Marshall Valuation Service cost guide. While CBRE did not observe

anything to suggest a different economic life, a capital improvement program could extend the

life expectancy.


45

CONCLUSION

The improvements are in average overall condition. Overall, there are no known factors that

adversely impact the marketability of the improvements, while as a vertical mall it is unique.

CENTURY SHOPPING CENTER | TAX AND ASSESSMENT DATA

46

ZONING MAP


47

ZONING

The following chart summarizes the subject’s zoning requirements.

ZONING SUMMARYCurrent Zoning Business Planned Development No 139

Legally Conforming Yes

Uses Permitted Offices, commercial uses servingneighborhoods and community needs orresidential

Zoning Change Not likely

Source: Planning & Zoning Dept.

ANALYSIS AND CONCLUSION

The improvements represent a legally-conforming use and, if damaged, may be restored

without special permit application. Additional information may be obtained from the appropriate

governmental authority.


48

TAX AND ASSESSMENT DATA

COOK COUNTY REAL ESTATE TAX STRUCTURE

The subject property is located in the city of Chicago and is currently assessed by Cook County.

Real estate in Cook County is assessed at different levels of the assessor’s estimated market

value based on property class.

In 2009, at the Cook County Chief Assessors recommendation, the Cook County Board of

Commissioners passed a new law simplifying assessments. This law, the 10/25 ordinance,

reduced and clarified assessment levels. It created two assessment levels where there had

formerly been six. Under the new ordinance, the assessed value of a residential property,

except apartments, represents 10% of its market value and the assessed value of a commercial

or industrial property represents 25% of market value.

In Cook County, assessed values are multiplied by the State Equalization Factor (required by

the Illinois Department of Revenue to produce an average assessment ratio of 33% of the total

of all properties in Cook County) and then by the tax rate in order to derive real estate taxes,

which are payable one year in arrears, meaning that property owners pay taxes each year

based on the prior year’s assessment and tax rates. The annual tax bill is due in two

installments. The first installment is equal to 55% of the prior year’s tax total and is due in

March. The second installment contains all of the adjustments as calculated by the various

taxing authorities and is typically due in September but can be as late as November.

Cook County is on a triennial assessment cycle (properties are re-assessed on a mass basis

every three years). The last reassessment was in 2012.

The real estate tax liability changes annually even during years when the assessment does not

change due to changes in the equalization factor and/or the tax rate.

The subject’s market value, assessed value, and taxes are summarized below, and do not

include any furniture, fixtures and equipment or personal property.


49

AD VALOREM TAX INFORMATION

Assessor's Market Value 2010 Pay 2011 2011 Pay 2012 2012 Pay 2013

14-28-119-024-0000 Mall $5,447,508 $5,447,508 $4,016,668

14-28-119-035-0000 Mall $308,416 $308,416 $222,564

14-28-119-038-0000 Mall $178,616 $178,616 $149,996

14-28-119-042-0000 Mall $178,616 $178,616 $149,796

14-28-119-036-0000 Mall & Garage $4,009,692 $4,009,692 $2,883,316

14-28-119-041-0000 Mall & Garage $1,161,716 $1,161,716 $842,708

14-28-119-030-0000 Garage $3,294,076 $3,294,076 $2,797,564

14-28-119-031-0000 Garage $277,308 $277,308 $250,224

14-28-119-043-0000 Garage $1,018,020 $1,018,020 $864,552

14-28-119-044-0000 Garage $92,340 $92,340 $83,312

14-28-119-008-0000 Vacant Lot/Garage $316,968 $316,968 $289,884

14-28-119-032-0000 Health Club $696,092 $696,092 $907,532

14-28-119-033-0000 Health Club $204,816 $204,816 $267,032

14-28-119-034-0000 Health Club $990,940 $990,940 $1,289,964

14-28-119-037-0000 Health Club $747,008 $747,008 $973,888

14-28-119-039-0000 Health Club $25,456 $25,456 $33,176

14-28-119-040-0000 Health Club 401,244 401,244 532,460

14-28-119-045-0000 Health Club 229,560 229,560 299,260

14-28-119-046-0000 Health Club 189,744 189,744 243,776

Subtotal $19,768,136 $19,768,136 $17,097,672

Assessed Value @ 25% 25% 25%$4,942,034 $4,942,034 $4,274,418

State Equalization Factor 3.3000 2.9706 NAVEqualized Value $16,308,712 $14,680,806

Effective Tax Rate (per $100 A.V.) 4.931000 5.798000 NAV

Total Taxes $804,183 $851,193 NAV

Source: Assessor's Office

According to the Cook County Treasurer’s Office, there are no delinquent taxes encumbering

the subject. The subject’s 2010 and 2011 assessments represent a partial assessment for

occupancy. Furthermore, the property was reassessed in 2012 and appealed, which was

successful. The 2012 assessment is indicated above. The equalization factor and tax rate are

not yet available for taxes payable in 2013.

According to the subject’s tax attorney, real estate taxes are estimated to be $535,479 in 2013.


50

TAX COMPARABLES

In order to estimate the subject’s applicable real estate taxes on a stabilized basis, CBRE has

reviewed the real estate tax information according to Cook County for comparable properties in

the market area. The following table summarizes the comparables employed for this analysis.

We have focused on multi-story properties that include a parking garage component.

AD VALOREM TAX COMPARABLES

Comparable Rental Joffco Square The PointeElston Logan

CenterSubject Pro Forma

Year Built 2008 1996 1922/2007 1925GLA (SF) 95,204 95,455 49,473 170,106Tax Year 2012 2012 2012 2012

Total Taxes $483,651 $910,502 $455,656 $851,193Per SF (GLA) $5.08 $9.54 $9.21 $5.00

Source: Assessor's Office

As illustrated, the comparable properties indicated real estate taxes ranging between $5.08 and

$9.54 per square foot. As mentioned, at $5.00 per square foot, the subject’s assessment

reflects a partial assessment for occupancy.

CONCLUSION

Based on the above analysis, on a stabilized basis we estimate taxes at $7.00 per square foot

of gross leasable area or $1,190,742. Our estimate is concluded below the average indicated

by the comparables as it reflects the subject’s age/quality/condition and a stabilized occupancy

position of 88%, which are below market averages in the subject’s taxing district. We assume

real estate taxes grow at 3% annually.

In the discounted cash flow, we recognize the subject will be partially assessed until it reaches a

stabilized occupancy position. Therefore, in Year One real estate taxes are estimated at

$535,479 or $3.15 per square foot based on the tax attorney’s estimate and reflective of the

recent appeal. In Year Two we estimate taxes at $3.93 per square foot, which is a 25%

increase from Year One and at $5.90 per square foot in Year Three, a 50% increase, and $7.00

per square foot in Year 4 the stabilized amount paid in arrears (increased by 3% annually from

Year One). We believe the slow increase best reflects the subject’s real estate tax burden.

CENTURY SHOPPING CENTER | HIGHEST AND BEST USE

51

HIGHEST AND BEST USE

In appraisal practice, the concept of highest and best use represents the premise upon which

value is based. The four criteria the highest and best use must meet are:

legally permissible; physically possible; financially feasible; and maximally productive.

The highest and best use analysis of the subject is discussed on the following pages.

AS VACANT

Legal Permissibility

The legally permissible uses were discussed in the Site Analysis and Zoning Sections.

Physical Possibility

The subject is adequately served by utilities, and has an adequate shape and size, sufficient

access, etc., to be a separately developable site. There are no known physical reasons why the

subject site would not support any legally probable development (i.e. it appears adequate for

development).

Existing structures on nearby sites provides additional evidence for the physical possibility of

development.

Financial Feasibility

The determination of financial feasibility is dependent primarily on the relationship of supply and

demand for the legally probable land uses versus the cost to create the uses. As discussed in

the market analysis of this report, while the subject retail market is generally stabilized, it has

trended downward and new retail/mixed-use projects have not been developed in this market

due to economic conditions. Specifically, there has been inadequate construction financing and

market conditions (increasing vacancy, declining effective rental rates, higher cap rates, etc.).

Overall, there is some risk in the retail market and most investors would not move forward with

new construction at this time unless there was significantly pre-leasing in-place or a build-to-suit

basis.

Maximum Profitability

The final test of highest and best use of the site as if vacant is that the use be maximally

productive, yielding the highest return to the land. In the case of the subject as if vacant, the

analysis has indicated that a new retail project would be most appropriate.


52

CONCLUSION: HIGHEST AND BEST USE AS VACANT

As noted, new development is not financially feasible at this time. Therefore, the highest and

best use of the site, as vacant, would be to hold for future retail and office development when

economic conditions improve.

AS IMPROVED

Legal Permissibility

As discussed, the subject site’s zoning and legal restrictions permit a variety of land uses. The

site has been improved with a mixed-use retail development that is a legal, conforming use.

Physical Possibility

The physical characteristics of the subject improvements were discussed in detail in the

improvements analysis. Both the layout and positioning of the improvements are considered

functional for retail and office use. While it would be physically possible for a wide variety of

uses, based on the legal restrictions and the design of the improvements, the continued use of

the property for retail/commercial users would be the most functional use.

Financial Feasibility

The determination of financial feasibility is dependent primarily on the relationship of supply and

demand for the legally probable land uses versus the cost to create the uses. As discussed in

the market analysis of this report, the overall retail and office markets are currently

oversupplied. While there has been significant development of new retail and office properties

in the last few years many are not performing to pre-construction pro forma with prolonged

lease-up periods and lower achievable rents. Subsequently, vacancy rates are up and market

rents are down. These factors indicate that it would not be financially feasible to complete a

speculative project at this time unless there is significant pre-leasing and if the site acquisition

cost was low enough to provide an adequate developer’s profit.

Maximum Profitability

The maximally profitable use of the subject as improved should conform to neighborhood trends

and be consistent with existing land uses. Although several uses may generate sufficient

revenue to satisfy the required rate of return on investment and provide a return on the land, the

single use that produces the highest price or value is typically the highest and best use. As

shown in the applicable valuation sections, buildings that are similar to the subject have been

acquired or continue to be used by retail and office owners/tenants. None of the comparable

buildings have been acquired for conversion to an alternative use. These comparables would

indicate that the maximally productive use of the property is consistent with the existing use as a

commercial mixed-use property.


53

CONCLUSION: HIGHEST AND BEST USE AS IMPROVED

Based on the foregoing, the highest and best use of the property, as improved, is consistent

with the existing use as a commercial mixed-use development.

CENTURY SHOPPING CENTER | APPRAISAL METHODOLOGY

54

APPRAISAL METHODOLOGY

In appraisal practice, an approach to value is included or omitted based on its applicability to the

property type being valued and the quality and quantity of information available.

COST APPROACH

The cost approach is based on the proposition that the informed purchaser would pay no more

for the subject than the cost to produce a substitute property with equivalent utility. This

approach is particularly applicable when the property being appraised involves relatively new

improvements that represent the highest and best use of the land, or when it is improved with

relatively unique or specialized improvements for which there exist few sales or leases of

comparable properties.

SALES COMPARISON APPROACH

The sales comparison approach utilizes sales of comparable properties, adjusted for

differences, to indicate a value for the subject. Valuation is typically accomplished using

physical units of comparison such as price per square foot, price per unit, price per floor, etc., or

economic units of comparison such as gross rent multiplier. Adjustments are applied to the

physical units of comparison derived from the comparable sale. The unit of comparison chosen

for the subject is then used to yield a total value. Economic units of comparison are not

adjusted, but rather analyzed as to relevant differences, with the final estimate derived based on

the general comparisons.

INCOME CAPITALIZATION APPROACH

The income capitalization approach reflects the subject’s income-producing capabilities. This

approach is based on the assumption that value is created by the expectation of benefits to be

derived in the future. Specifically estimated is the amount an investor would be willing to pay to

receive an income stream plus reversion value from a property over a period of time. The two

common valuation techniques associated with the income capitalization approach are direct

capitalization and the discounted cash flow (DCF) analysis.

METHODOLOGY APPLICABLE TO THE SUBJECT

In valuing the subject, only the sales comparison and income capitalization approaches are

applicable and have been used. The cost approach is not applicable in the estimation of market

value for the following reasons:

the age and resulting amount of and physical depreciation present in the property; and, typical investors do not utilize the cost approach as a primary valuation technique for income

producing properties such as the subject.

The omission of the cost approach does not diminish the credibility of the analysis.

CENTURY SHOPPING CENTER | SALES COMPARISON APPROACH

55


The following map and table summarize the comparable data used in the valuation of the

subject. A detailed description of each transaction is included in the addenda.

SUMMARY OF COMPARABLE RETAIL SALES

Year GLA Actual Sale Adjusted Price NOINo. Name Type Date Built (SF) Price Sale Price 1 Per SF 1 Occ. Per SF OAR

1 Belden Centre,Chicago, IL

Contract Jan-13 1991 51,117 $19,537,400 $19,537,400 $382.21 98% $30.58 8.00%

2 Belden Centre,Chicago, IL

Sale Apr-11 1991 51,117 $7,000,000 $10,600,000 $207.37 21% $23.43 11.30%

3 Joffco Square,Chicago, IL

Sale Jan-11 2008 95,204 $23,800,000 $23,800,000 $249.99 83% $17.65 7.06%

4 Century Shopping Center,Chicago, IL

Sale Dec-10 1925 170,109 $17,500,000 $17,500,000 $102.88 73% $11.42 11.10%

5 The Point at Clark,Chicago, IL

Sale Jun-10 1996 95,455 $28,816,000 $28,816,000 $301.88 65% $20.61 6.83%

Subj.Pro

Forma

Century Shopping Center,Chicago, Illinois

--- --- 1925 170,106 --- --- --- 88% $15.04 ---

1 Transaction amount adjusted for cash equivalency and/or deferred maintenance (where applicable)Compiled by CBRE

Transaction

The subject property is a mixed-use retail/vertical plus garage development. The subject is a

relatively unique property and there are limited comparable sales. The sales utilized represent

the best data available for comparison with the subject as they all generally represent mixed-

use properties that including parking garages. A description of each sale is presented below.


56

DISCUSSION/ANALYSIS OF IMPROVED SALES

Improved Sale One

This estimated contract represents the acquisition of a 51,117 square foot mixed-use retail

center that represents the first and second floor commercial component of a seven-story

residential/commercial property built in 1991 and situated on a 0.93-acre site. The property is

located at 2301-2315 N. Clark Street and specifically at the northeast corner of Clark Street and

Belden Avenue in Chicago’s Lincoln Park neighborhood. The property includes 38 surface

parking spaces and 22 below grade garage spaces. According to knowledgeable sources, the

property is currently under contract at an 8% cap rate. The cap rate reflects the property’s

strong location, but secondary tenancy. Based on pro forma income and expenses, this results

in an estimated purchase price of $19,537,400 or $382.21 per square foot. At the time of

contract the center was 98% leased. The majority of leases reflect new seven and ten-year

deals. The largest tenant is Little Gems Academy, and the majority of tenants are local/regional

tenants. Approximately $8,100,000 in capital improvements have been spent over the past

twelve to 24 months and the center leased up from 21% in 2010 to the current level of 98%.

Improved Sale Two

This sale represents the April 2011 sale of Belden Centre (Sale One). In April 2011 the property

was purchased for $7,000,000 or $146.94 per square foot. At the time of sale the center was

20.9% occupied by six tenants. There were five vacant suites, which included the two anchor

spaces, formerly occupied by Tower Records and clothing store The Limited/Structure. Based

on pro forma income and expenses and an estimated $3,600,000 to reposition and lease-up the

center, an 11.3% cap rate is implied. The in-place NOI at the time of sale was $181,700. This

was a distressed sale, but it was actively marketed and as such we believe it reflects a market-

oriented transaction.

Improved Sale Three

This sale represents the acquisition of a 95,204-square-foot retail center located along

Roosevelt Road between Jefferson and Clinton Streets in Chicago’s South Loop retail node.

The property was completed in 2008 and consists of five-stories containing 45,001 square feet

of street level retail space and 50,571 square feet of upper level retail space situated between

the second and fifth floors. Floors three, four and the majority of five contain 323 parking

spaces. In January 2011 the property was purchased for $23,800,000 or $249.99 per square

foot. At the time of sale the property was 82.2% leased to three tenants. Best Buy occupies the

street level retail space over a long-term lease extending a minimum 15 years (approximately

13 years remaining), and Bed Bath & Beyond occupies 27,482 square feet on the second floor

over a long-term lease extending a minimum of ten-years (approximately eight years

remaining). Core Power Yoga occupies the retail space on the fifth floor, also with a ten-year

lease. Based on budget NOI of $1,680,229 a 7.06% cap rate is implied.


57

Improved Sale Four

This sale represents the acquisition of the subject property. In December 2010 the property

was purchased for $17,500,000 or $102.88 per square foot. At the time of sale the property

was about 73% occupied and anchored by Bally Total Fitness and Landmark Theaters.

Additionally, at the time of sale the CVS deal was a pending LOI. Based on existing income and

expenses an 11.1% cap rate is implied. The property was a short sale while it was actively

marketed, and as such we believe it represented a market-oriented transaction.

Improved Sale Five

The Point at Clark is an urban power center located on a triangular site that is bound by North

Clark Street on the west, North Halsted Street on the east and West Belmont Avenue on the

north, in the Lakeview neighborhood of Chicago, Cook County, Illinois. The property is a two-

story, plus basement, retail building with 95,455 square feet of gross leasable area, that

features two levels of structured parking garage above the retail stores. The property was

constructed in 1996 and is situated on a 0.90-acre site.

At the time of sale, the center was 100% leased and 65.3% occupied. Linens ’N Things (LNT)

had previously occupied 33,140 square feet on the street and lower levels, but declared

bankruptcy and vacated the space at the end of 2008. However, LNT parent company, CVS,

guaranteed the lease, which extends through January 2017. Michael’s has leased 28,140

square feet of the former LNT space, and is projected to take occupancy in July 2010. The

guarantee states that CVS will pay the difference between the rent due under the LNT lease

and the rent due under the Michael’s lease or any other lease executed on the former LNT

space. The center's in-place tenants are DSW and Marshall’s.

On June 23, 2010, the Point at Clark sold for $28,816,000 or $301.88 per square foot. The

center's net operating income is $20.61 per square foot, which implies a capitalization rate of

6.83%. However, the NOI excludes the CVS-guaranteed revenue of approximately $390,000

annually, or $4.09 per square foot, which is handled as a below-the-line item in the cash flow

analysis. Based on the center's overall income of $24.70 per square foot, a capitalization rate of

8.18% is implied.

NET OPERATING INCOME ANALYSIS

Because net lease properties like the subject are purchased based on the income generated,

the appraisal will not attempt to adjust the sales using the traditional adjustment grid. Instead,

the net operating income (NOI) being generated by the comparable sales as compared to the

subject’s NOI that was estimated in the Income Capitalization Approach has been analyzed. In

general, it is a fundamental assumption that the physical characteristics of a property (e.g.,

location, access, design/ appeal, condition, etc.) are reflected in the net operating income being


58

generated, and the resultant price per square foot paid for a property has a direct relationship to

the NOI being generated.

By developing a ratio between the subject’s stabilized net operating income and comparable’s

stabilized net operating income, an adjustment factor can be calculated for each of the

individual sales. This adjustment factor can then be applied to the comparable’s price per

square foot unit of comparison to render an indication for the subject property. This

methodology represents an attempt to isolate the economic reasoning of the buyers.

Given the preceding considerations, we have not adjusted each improved sale to the subject

property in order to account for specific physical and locational characteristics. Rather, we have

extracted a significant unit of comparison from the improved sales after analyzing each

comparable property and then have applied the appropriate unit of comparison to the subject

property. In this case, we have identified a relationship between the net operating income and

the sales price of the property i.e. the higher the net operating income per square foot generally

corresponds to a higher sales price per square foot.

The equation for the net income multiplier (NIM), which is the inverse of the equation for the

capitalization rate (OAR), is calculated as follows:

NIM = Sales Price/Net Operating Income

Valuation of the subject property utilizing the net income multipliers (NIM) from the comparable

properties accounts for the disparity of the net operating incomes ($NOI’s) per square foot

between the comparables and the subject. Within this technique, each of the adjusted NIM’s

are multiplied by the $NOI per square foot of the subject, which produces an adjusted value

indication for the subject.

The following chart depicts the calculations involved in developing adjustment factors to be

applied to the respective price per square foot indications developed from the comparables

employed.

NOI Per SF Comp Sale IndicatedComparable Subject / Comp = Multiplier x Price (per SF) = Price (per SF)

1 $15.04 / $30.58 = 0.49 x $382.21 = $187.922 $15.04 / $23.43 = 0.64 x $207.37 = $133.073 $15.04 / $17.65 = 0.85 x $249.99 = $212.964 $15.04 / $11.42 = 1.32 x $102.88 = $135.455 $15.04 / $20.61 = 0.73 x $301.88 = $220.23

Low $133.07High $220.23Average $177.93

Compiled by CB Richard Ellis, Inc.

NET OPERATING INCOME ANALYSIS

The foregoing analysis results in an indicated price per square foot for the subject ranging from

$133.07 and $220.23 to per square foot and averages per square foot $177.93 per square foot.


59

At the low end, Comparables Two and Four represent distressed assets. Excluding these sales

results in an average of $207.04 per square foot.

SALE PRICE PER SQUARE FOOT CONCLUSION

Overall, considering the above discussion and adjustment analysis, on a stabilized basis a price

per square foot indication near the middle to upper end of the range is considered appropriate.

The following chart presents the valuation conclusion:


GLA (SF) X Value Per SF = Value

170,106 X $180.00 = $30,619,080170,106 X $200.00 = $34,021,200

VALUE CONCLUSION

Indicated Stabilized Value $32,300,000Deferred Maintenance $0Lease-Up Discount ($6,100,000)Value Indication $26,200,000Rounded $26,200,000Value Per SF $154.02

Compiled by CBRE

CENTURY SHOPPING CENTER | INCOME CAPITALIZATION APPROACH

60

INCOME CAPITALIZATION APPROACH

The Income Capitalization Approach reflects the subject’s income-producing capabilities. This

approach is based on the assumption that value is created by the expectation of benefits to be

derived in the future. Specifically estimated is the amount an investor would be willing to pay to

receive an income stream plus reversion value from a property over period of time. The two

common valuation techniques associated with the Income Capitalization Approach are direct

capitalization and the discounted cash flow (DCF) analysis. For this analysis, we have utilized

both valuation techniques.

MARKET RENT ANALYSIS

The subject property is a mixed-use property that currently represents a vertical retail mall with

a theater and fitness center, as well as attached parking garage. It is situated within an urban

infill location drawing demand from the rooftops. The center has recently under-performed the

market and is unique as a vertical mall. It is currently being repositioned with the interior/upper

levels being marketed to commercial-service and medical office users. Synergies between

health and wellness have been identified. Additionally, the property is in close proximity to a

number of hospitals in the north side neighborhoods and the repositioning seems appropriate.

The following map and table summarize the comparable data used in the valuation of the

subject. A detailed description of each transaction is included in the addenda. We have

included multi-story properties that feature a parking garage, which is somewhat unique to the

urban neighborhood. The majority of comparables include retail users at street level with

commercial-service or medical office users on the upper floors. All of the comparables are

located within the City North submarket.


61

SUMMARY OF COMPARABLE RETAIL RENTALS

Comp. No.

Property Nameand Location

Year Built Occ.

GLA (SF)

Expense Basis

TenantName

LeaseArea (SF)

LeaseDate

LeaseTerm Base Rent

1 1996 95% 95,455 NNN Michael's 28,140 Jul-10 10.0 Yrs. $21.00 PSFDSW 23,600 Apr-06 10.0 Yrs. $22.50 PSF

Quoted --- --- --- $21.00 - $22.50 PSF

2 1991 99% 51,117 NNN Little Gems Academy 35,250 May-12 15.0 Yrs. $28.00 PSFThe Daily Method 2,285 Aug-12 5.0 Yrs. $30.00 PSFEleven City Diner 5,222 Apr-13 3.0 Yrs. $24.00 PSF

Quoted --- --- --- $14.00-$52.00 PSF

3 1988 97% 134,329 NNN Confidential 1,738 Mar-10 5.0 Yrs. $33.98 PSFBally's Total Fitness 32,315 Dec-04 10.0 Yrs. $20.90 PSFLoews Theater 49,500 Apr-98 20.0 Yrs. $16.39 PSF

Quoted --- --- --- $16.40 - $34.00

4 1938 78% 312,000 Varies Chicago Children's Clinic 564 Jul-10 3.0 Yrs. $27.00 PSFBanco Research 2,029 May-11 7.0 Yrs. $24.00 PSF

Quoted --- --- --- $18.00 to $29.50 PSF

5 2008 93% 223,912 NNN REI 28,672 Oct-08 10.0 Yrs. $34.00 PSFPhysical Sciences Institu 2,134 Apr-11 10.0 Yrs. $28.00 PSFAssociated Allergists 2,398 May-11 9.0 Yrs. $25.74 PSFNorthwestern Memorial (Ex 1,525 Jun-11 10.0 Yrs. $26.00 PSF

Quoted --- --- --- $23.00 - $36.00 PSF

6 1991 93% 146,306 NNN/Gross Office User 1,782 Jun-12 2.0 Yrs. $21.00 PSFDr. Herron 2,756 Aug-11 2.0 Yrs. $18.00 PSF

Swerve Salon 2,650 Mar-11 5.0 Yrs. $40.00 PSFFitness Formula Club (Ren 58,165 Jul-12 5.0 Yrs. $10.50 PSF

Quoted --- --- --- $10.50 - $40.00 PSF

Subj. Century Shopping Center2828 N. Clark Street,Chicago, Illinois

1924 73% 170,106 --- ---

Compiled by CBRE

Belden Centre2301 N. Clark Street,Chicago, IL

Webster Place1435-1471 W Webster Ave,Chicago, IL

Clybourn Galleria1840 North Clybourn,Chicago, IL

1466 N. Halsted Mixed-Use Development1466 N Halsted St,Chicago, IL

The Pointe at Clark Street3131 North Clark Street,Chicago, IL

Clark & Maple1030 North Clark Street,Chicago, IL

DISCUSSION/ANALYSIS OF RENT COMPARABLES

Rent Comparable One

The Point at Clark is an urban power center located on a triangular site that is bound by North

Clark Street, North Halsted Street, and West Belmont Avenue in Chicago's Lakeview

neighborhood. The property is a two-story, plus basement, retail building with 95,455 square

feet of gross leasable area, that features two levels of structured parking garage above the retail

stores. The property was constructed in 1996 and is situated on a 0.90-acre site that features

excellent visibility. It is currently 94.8% occupied. In-place rental rates range between $21.00

and $22.50 per square foot, triple net. The most recent leased commenced in July 2010 when

Michael's leased the majority of the former Linens ’N Things space consisting of 28,140 square

feet at an initial rental rate of $21.00 per square foot, triple net over an approximate ten-year

term. Terms of the lease included a tenant improvement allowance of $40.00 per square foot

and approximately $2.00 per square foot escalations every two years. Expenses are estimated

to be $14.61 per square foot.


62

Rent Comparable Two

This comparable, Belden Centre is a 51,117 square foot retail center comprised of a lower level,

first and second floor commercial component of a seven-story mixed-use residential/commercial

property built in 1991. The property is located at the northeast corner of Clark Street and

Belden Avenue in Chicago’s Lincoln Park neighborhood. The property is currently 98% leased,

and has experienced a strong lease-up over the past two years improving from 21% occupied in

2010 following its largest tenant Tower Records vacating along with a number of other tenants

during the downturn. The property includes 38 surface parking spaces and 22 below grade

garage spaces, which is somewhat unique to retail properties in the neighborhood. The in-place

rental rates range between $14.00 and $52.00 per square foot with suite size and location within

the center the most notable variants. New leases have been signed between $24.00 and $30.00

per square foot. Tenant improvement allowances have ranged from nothing to $40.00 per

square foot and up to twelve months free rent has been negotiated. Lease terms range

between three and ten years. The majority of leases include rental rate escalations between

1.5% and 3% annually and are structured on a triple net basis. Operating expenses are

estimated to be $8.18 per square foot.

Rent Comparable Three

Webster Place is a 134,329 square foot retail center situated at the southwest corner of North

Clybourn and Webster Avenues in the Lincoln Park neighborhood of Chicago. The two-story

center was developed in 1988 with two structured parking garages and lies on 4.60 acres.

Webster Place is anchored by Loews Theaters, LA Fitness (formerly Bally Total Fitness, Barnes

& Noble and Bank One. The center is currently 97% leased. In-place rental rates range

between $16.40 and $34.00 per square foot on a triple net basis. The leasing agent estimated

pass-through expenses to be $14.25 per square foot. Leases are typically signed over a five-

year term for small shop space and ten to 20 years for the anchor spaces.

Rent Comparable Four

This comparable represents a five-story, 312,000 square foot mixed/use retail/office building

with attached parking located along N. Clybourn in Chicago's Lincoln Park neighborhood. This

property was developed in 1938, and renovated from 2002 to 2004. It is currently 74.8%

leased. The configuration of the center has impacted its occupancy. In down markets, it is the

unique properties that are the most impacted (and the last to recover). The center is anchored

by Trader Joe's, ALDI and Crate & Barrel Outlet. The retail space is situated on the first two

floors. Crate & Barrel Outlet leased 12,640 square feet of street level space over a ten-year

term at an initial rate of $26.52 per square foot net. Trader Joe's leased 11,915 square feet of

second floor space for $31.47 per square foot net over a 10-year term. Office space rental rates

generally range between $18.00 and $29.50 per square foot on either a triple net or modified

gross basis. Some free rent has been negotiated as well as a TI allowance up to $25.00 per

square foot.


63

Rent Comparable Five

This comparable is a 223,912-square-foot mixed-use property, which includes street level retail

space, upper level retail and professional/medical office space, a private school and an

approximate 534-space parking garage. The property is located between Halsted and Dayton

Streets in Chicago’s Lincoln Park neighborhood. The property is situated in two buildings,

which are separated by a pedestrian corridor and the attached parking garage. The first

building was completed in 2007 and consists of the British School of America situated in 82,901

square feet on floors one through five, as well as street level retail. The second building and

parking garage were completed in 2008. The second building contains REI which occupies

28,793 square feet on floors one and two, with additional street level and second level retail and

upper floors of office space, primarily built out for medical office use. The property is 93%

leased. REI leased its space at $34.00 per square foot net over a 10-year term. The office

space, which is built-out primarily as medical/dental space and a school is leased between

$23.00 and $36.00 per square foot. All of the rental rates are structured on a triple net basis.

All tenants represent first generation tenants and a tenant improvement allowance between

$10.00 and $75.00 per square foot was negotiated.

Rent Comparable Six

This comparable is a 146,306-square foot mixed-use retail/office property and 150-space

parking garage within a larger 35-floor residential condo building. The comparable represents

the first seven floors of the residential condo building that was built in 1991. The property is

located at 1030 N. Clark Street in Chicago’s Gold Coast neighborhood. The property is

currently 93% leased. It is anchored by Fitness Formula Club and Dave & Busters, both original

tenants of the building. The in-place rental rates vary significantly ranging and between $10.50

and $40.00 per square foot. At the low end of the range, Fitness Formula Club has been an

original tenant of the building and leases the largest anchor space at $10.50 per square foot,

net, which represents the first of two five year renewal options that commenced in July 2012.

The other anchor space is leased at $12.00 per square foot. Terms of the lease are flat and on

a net basis. At the high end of the range, Swerve Salon leased a 2,650-square foot street level

retail space at $40.00 per square foot on a gross basis. The space was provided “as is” and

terms of the lease include six months free rent and 3% annual escalations. The asking rent for

the available street retail space is $45.00 per square foot net. The office space is leased on

both a net and gross basis. The largest office user leases its space at $13.71 per square foot

net, flat over its lease term, while the smaller users lease their space between $18.00 and

$25.00 per square foot on a gross basis. The asking rental rate for the available office space

ranges between $22.50 and $25.50 per square foot on a gross basis. The leasing agent

indicated that either a TI allowance consistent with the rental rate could be negotiated or free

rent in lieu of a TI allowance with approximately one month free for each lease year. Annual

increases of 3% were quoted.


64

SPECIAL-USER COMPARABLES

As discussed, the subject’s anchor tenants include a fitness center and movie theater. As such,

we have included additional comparable rental information for both fitness centers and movie

theaters. Additionally, we have included restaurant comparables considering the lower level is

being marketed to a restaurant user and medical office/second floor office comparables. A

summary of the comparables are as follows.

Fitness Center Comparables

SUMMARY OF COMPARABLE FITNESS CENTER RENTALS

Comp. No.

Property Nameand Location Year Built

LeaseArea (SF) Location

TenantN ame

LeaseDate

LeaseTerm

Expense Basis Base Rent

1 New City Development, North Clybourn and Halstead, Chicago, IL

Proposed 48,779 2nd Level LA Fitness 2010 10.0 Yrs. NNN $20.00 PSF

2 NA 110,000 Free-Standing Lakeshore Athletic Dec-10 25.0 Yrs. NNN $10.00 PSF

Floors 1 - 3 Club

3 Elson Logan Plaza, 2306 Logan Blvd., Chicago, IL

Redev. 2008 42,770 First and Second Xsport Fitness Jul-08 10.0 Yrs. NNN $28.00 PSF

6 2007 49,000 Lower Level LA Fitness Apr-08 15.0 Yrs. NNN $22.00 PSF

Compiled by CBRE

Southgate Market, Canal Street and Roosevelt Road, Chicago, IL

Lakeshore Athletic Club, 1320 W. Fullerton, Chicago, iL

As illustrated, in addition to the two fitness center comps included in the primary table, rental

rates for fitness center space ranges between $10.00 and $28.00 per square foot on a triple net

basis over a ten-to 25-year term.

Movie Theater Comparables

Property Tenant Date Term (Yrs) Area (GLA) Rental Rate

Expense Structure

Roosevelt CollectionsKerosotes

Showplace Theater Nov-09 20 90,000 $27.00 NNN

River East Centre AMC Theater Nov-02 20 113,649 $24.92 NNN

SUMMARY OF COMPARABLE MOVIE THEATER RENTALS

Compiled by CB Richard Ellis, Inc.

As illustrated, in addition to the Lowe’s theater comp included in the primary rent table, rental

rates for movie theaters ranges between $16.39 and $27.00 per square foot on a triple net basis

over a 20-year term.


65

Restaurant Comparables

Tenant Location Start Date Size Rent $ PSF TERM (YRS)

Last Bay Beer Co. 3155 N. Broadway Sep‐12 2,898 22.43$ 5

Eleven City Diner 2301 N. Clark Nov‐11 5,222 24.00$ 5

State Farm Café 651 W. Diversey Mar‐11 6,389 22.50$ 5

Zapatista 444 N. Fullerton Apr‐10 5,000 30.00$ 5

Burger Bar 1578 N. Clybourn Mar‐10 7,000 36.00$ 5

Low 2,898 22.43$ 5

High 7,000 36.00$ 5

Average 5,302 26.99$ 5

Source: Leasing Agents and Actual Leases

CITY NORTH RESTAURANT RENT COMPARABLES

As illustrated, the recent restaurant rental rates range between $22.43 and $36.00 and average

$26.99 per square foot. Please note, these rates represent net deals.

Medical Office/Second Floor Office Comparables

Tenant Location Start Date Size Rent $ PSF Basis TERM (YRS)

Transportation Solutions Enterprises 1765 N. Elston Dec‐12 23,008 14.00$ Net 7.5

Back on My Feet 1467 N. Elston Apr‐12 845 17.27$ Gross 2

Ameriprise Financial 939 W. North Aug‐11 2,335 28.50$ Net 5

Resurrection MRI Facility 1416 N. Halsted Jul‐11 3,112 30.00$ Net 10

Associated Allergists 1416 N. Halsted May‐11 2,398 25.74$ Net 7.5

Physical Sciences Institute 1416 N. Halsted Apr‐11 2,134 28.00$ Net 10

Inner Life Psychological Services 1030 N. Clark Dec‐10 1,890 25.00$ Gross 3

Low 845 14.00$ 2

High 23,008 30.00$ 10

Average 5,103 24.07$ 6

Source: Leasing Agents and Actual Leases

CITY NORTH OFFICE RENT COMPARABLES

Office rental rates range between $14.00 per square foot net to $30.00 per square foot net. The

gross leases are $17.27 and $25.00 per square foot.

SUBJECT RENTAL INFORMATION

The following chart shows the subject’s in-place rental rates.


66

RENT ROLL ANALYSIS

Suite Lease Lease Term Size (GLA) Contract Rental Rate ExpenseNo. Start Expiration (Mos.) SF % Total $/SF/Yr. $/Yr. Basis

001,110, 114, 300

Jul-01 Dec-19 222 14,772 8.7% $21.64 $319,710 NNN + 15% Admin

107, 208 Sep-12 Jan-38 304 10,531 6.2% $35.40 $372,797 Modified Net

201 Feb-12 Feb-13 11 1,489 0.9% $2.01 $3,000 Gross

211 Aug-85 Jan-14 342 4,424 2.6% $10.56 $46,738 Gross

217 Feb-10 M-to-M NA 300 0.2% $20.00 $6,000 Gross

305 Sep-10 Sep-13 37 1,066 0.6% $90.66 $96,644 NNN

401 Mar-05 Jun-13 99 976 0.6% $30.75 $30,012 NNN + 15% Admin

408 Apr-04 Dec-13 117 1,400 0.8% $14.14 $19,796 NNN + 15% Admin

415 Jul-02 Feb-17 174 4,089 2.4% $9.13 $37,333 NNN + 10% Admin

500,600 Mar-00 Mar-20 240 32,122 18.9% $15.57 $500,000 Gross

700,800 Jan-87 Dec-13 324 50,779 29.9% $7.44 $378,028 Modified Gross

ATM Aug-09 M-to-M NA $9,600 Gross

Occupied Subtotals 121,948 71.7% $14.92 $1,819,657

Compiled by CBRE

As illustrated, the subject’s rental rates vary significantly. At $2.01 per square foot, the low end

represents a temporary tenant. At the upper end, a car rental agency pays $90.66 per square

foot. However, for this space, in addition to the 1,066 square foot retail suite, this tenant’s lease

includes 20 parking spaces for its rental cars. At the low end, a traditional mall retailer is

currently paying percentage rent in lieu of a base rate, which represents 3% of gross sales. The

amount indicated in the rent roll reflects 3% of the 2012 gross sales. In general, the rental rates

range between $14.14 and $30.75 per square foot for the interior space on a triple net basis

with a 15% administrative fee on CAM including insurance. However, a number of tenant rental

rates are structured on a gross basis.

The asking rental rate for the available space is negotiable. The landlord is currently negotiating

with various commercial-service uses. There are no pending LOIs.

MARKET RENT ESTIMATE

Considering the various size suites and the layout of the subject project, five market rent

categories are warranted. The following table shows a summary of the space allocation for the

subject.

MARKET RENT CATEGORIES

Space Allocation Size

Fitness Center 50,779 SF

Theater 29,724 SF

Street Front 15,609 SF

Interior 52,281 SF

Garden 21,713 SF

Compiled by CBRE


67

Base Rental Rate

The estimate of base rental rates is shown in the following chart.

BASE RENTAL RATES

Category

Subject's Actual/Quoted Terms $7.44 $15.57 $19.74 - $35.40 $14.14 - $41.92 NARent Comparable Data $10.50 - $28.00 $16.39 - $27.00CBRE Estimate $12.00 $16.00 $35.00 $25.00 $20.00

Compiled by CBRE

Theater GardenStreet Front InteriorFitness Center

$18.00 - $34.00

Our concluded market rents consider the rental rates being achieved at the comparable

properties as well as the subject’s actual rates and the subject’s position in the market. In

general, it is considered a lower-tier property given its configuration and functionality as a

vertical mall in an urban retail node that benefits from local foot traffic. As such, we conclude

near the lower end of the indicated range. At $25.00 per square foot for the interior space, as

will be discussed, this is a gross rate, which results in a net rate of $10.36 per square foot based

on our estimate operating expenses. Based on conversations with market participants, as much

as a $10 to $15 discount off traditional space rates is often reflected in interior or upper floor

space.

For street front space, we believe this space competes competitively in the market and conclude

near the upper end of the range.

The subject’s garden space represents the lower level, with the available space finished for a

restaurant user. This space is being marketed to a restaurant user.

Concessions

The market rental rate for the subject is an effective rate, net of any leasing concessions. While

concessions have re-entered the market, the lease terms of the most comparable properties do

not include leasing concessions, and we have not included any concessions in our analysis.

However, we have concluded a tenant improvement allowance in lieu of any free rent,

consistent with the subject’s current lease terms.

Reimbursements

The leases for the subject are both triple net, whereby the tenant is responsible for reimbursing

the landlord for their pro rata share of real estate taxes and common area maintenance (CAM)

including insurance, and gross. The most common reimbursement schedule for retail properties

like the subject is triple net and this has been assumed in our analysis for the retail space (street

front, fitness center, and theater). For the interior space, the majority of upper floor office and

medical office space in the submarket and neighborhood is based on a gross basis. Therefore,

we conclude on a gross basis, consistent with the market.


68

The estimate of reimbursements is shown in the following chart.

REIMBURSEMENTS

Category

Subject's Actual Terms Modified Gross Gross NNN NNN/Gross NARent Comparable Data NNN NNN NNN NNN/Gross NNN/GrossCBRE Estimate NNN NNN NNN Gross Gross

Compiled by CBRE

Fitness Center Theater Street Front Interior Garden

Escalations

Rental escalations are fairly typical in the market but are negotiable depending on the other

terms of the lease. They can range from zero to 3% per year in this market and are sometimes

10% every five years for longer term leases. We estimate annual escalations of 3% for the

retail and interior spaces and a 10% midterm escalations for the fitness center and theater.

Tenant Improvements

The estimate of tenant improvements is shown in the following chart.

TENANT IMPROVEMENTS

Category

Rent Comparable DataNew TenantsRenewals

CBRE EstimateFirst Generation Medical/Service Use $50.00 New Tenants $25.00 $25.00 $25.00 $25.00 $25.00 Renewals $0.00 $0.00 $0.00 $0.00 $0.00

Compiled by CBRE

As Is - $50.00As Is - $5.00

GardenFitness Center Theater Street Front Interior

Tenant improvement allowances account for potential alteration expenses to maintain or attract

new tenants. Tenant improvements vary on a tenant-by-tenant basis. Tenant improvements

are estimated at $25.00 per square foot for new tenants. However, for the interior space, given

this space is being marketed to commercial-service / medical office users, we believe there are

significant costs associated with retrofitting the space and estimate a TI allowance for first

generation medical office or commercial-service space at $50.00 per square foot, which is inline

with first generation space at the comparables.

Lease Term

The estimate of lease terms is shown in the following chart.


69

LEASE TERM

Category

Rent Comparable DataCBRE Estimate 10 YRS 10 YRS 10 YRS 5 YRS 5 YRS

Compiled by CBRE

5 - 25 YRS 5 - 10 YRS


MARKET RENT CONCLUSIONS

The following chart shows the market rent conclusions for the subject:

MARKET RENT CONCLUSIONS

Category

GLA (SF) 50,779 29,724 15,609 52,281 21,713Percent of Total SF 29.9% 17.5% 9.2% 30.7% 12.8%Market Rent ($/SF/Yr.) $12.00 $16.00 $35.00 $25.00 $20.00Concessions None None None None NoneReimbursements NNN NNN NNN Gross GrossAnnual Escalation 10% Midterm 10% Midterm 3.0% 3.0% 3.0%Tenant Improvements (1st Gen Medical) $50.00Tenant Improvements (New Tenants) $25.00 $25.00 $25.00 $25.00 $25.00Tenant Improvements (Renewals) $0.00 $0.00 $0.00 $0.00 $0.00Average Lease Term 10 Years 10 Years 10 Years 5 Years 5 Years

Compiled by CBRE


RENT ROLL ANALYSIS

The subject’s rent roll is illustrated as follows:

RENT ROLL ANALYSIS

Suite Lease Lease Term Size (GLA) Contract Rental Rate ExpenseNo. Start Expiration (Mos.) SF % Total $/SF/Yr. $/Yr. Basis

001,110, 114, 300

Jul-01 Dec-19 222 14,772 8.7% $21.64 $319,710 NNN + 15% Admin

107, 208 Sep-12 Jan-38 304 10,531 6.2% $35.40 $372,797 Modified Net

201 Feb-12 Feb-13 11 1,489 0.9% $2.01 $3,000 Gross

211 Aug-85 Jan-14 342 4,424 2.6% $10.56 $46,738 Gross

217 Feb-10 M-to-M NA 300 0.2% $20.00 $6,000 Gross

305 Sep-10 Sep-13 37 1,066 0.6% $90.66 $96,644 NNN

401 Mar-05 Jun-13 99 976 0.6% $30.75 $30,012 NNN + 15% Admin

408 Apr-04 Dec-13 117 1,400 0.8% $14.14 $19,796 NNN + 15% Admin

415 Jul-02 Feb-17 174 4,089 2.4% $9.13 $37,333 NNN + 10% Admin

500,600 Mar-00 Mar-20 240 32,122 18.9% $15.57 $500,000 Gross

700,800 Jan-87 Dec-13 324 50,779 29.9% $7.44 $378,028 Modified Gross

ATM Aug-09 M-to-M NA $9,600 Gross

Occupied Subtotals 121,948 71.7% $14.92 $1,819,657110 Vacant Garden --- --- 15,000 8.8% $20.00 $300,000 Gross

111 Vacant Interior --- --- 33,158 19.5% $25.00 $828,950 Gross

Property Totals - Contract Rent 170,106 100.0% $17.33 $2,948,607

Property Totals - Market Rent 170,106 100.0% $19.70 $3,350,950

*Tenant pays percentage rent in lieu of base rate. Indicated amount reflects 2012 percentage rent estimate.

Compiled by CBRE


70

Anticipated Changes/Rollover to Rent Roll

The leasing agent and building manager reported no significant anticipated changes to the rent

roll due to tenant defaults and/or non-renewals. There are a few renewal leases out for

signature and we model the pending renewals.

As mentioned, there are no pending leases for the current vacant space. There is one deal in

negotiations, while there is currently no LOI or draft lease and we have not modeled this

negotiation. However, we have considered the rates being discussed in our concluded market

rents and space absorption.

A few tenants are on month-to-month leases. In our analysis we assume the spaces continue

to remain leased for twelve months, at which time we model them to roll to market.

A number of the tenant leases include renewal options. Where advantageous, we exercise the

renewal.

Lease Expiration Schedule

The subject’s scheduled lease expiration for the holding period is shown as follows:

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8For the Year Ending Jan-2014 Jan-2015 Jan-2016 Jan-2017 Jan-2018 Jan-2019 Jan-2020 Jan-2021

976 1,066 1,400

50,779 4,424

1,489 300 1 1,066 4,089 14,772 32,122

Total SF Expiring 58,645 1,789 1 1,066 4,089 0 16,272 32,122Percent Expiring 34.48% 1.05% 0.00% 0.63% 2.40% 0.00% 9.57% 18.88%Cumlative Expiring 34.48% 35.53% 35.53% 36.15% 38.56% 38.56% 48.12% 67.01%Compiled By: CB Richard Ellis

LEASE EXPIRATION SCHEDULE

Lease expiration/rollover for the subject appears to be high in the immediate future. However,

as discussed, the majority of tenants set to expire are currently in negotiations with lease

renewals and much of the near term risk mitigated. Thereafter, rollover is considered low and

balanced. These rollovers may be viewed in the Argus supporting schedule for lease expiration.

The low rollover risk has been considered in our overall rate selections.

ABSORPTION AND LEASE-UP DISCOUNT

As previously stated, the subject property is currently 71.7% occupied. Occupancy has been

underperforming the market and remained in the 70% range over the past few years. As a


71

vertical mall in a pedestrian targeted urban location, the center is unique and has been

impacted by the economic downturn.

Considering the improving market and trends in absorption, current activity at the subject,

repositioning the space from retail mall users to medical office tenants, as well as the limited

amount of available space in the neighborhood, we estimate the first available space to begin in

six months with one space leasing up semiannually for the first 24 months and then begin

leasing up two spaces semiannually thereafter. As such, the center reaches a stabilized

occupancy position in 24 months. Accordingly, February 1, 2015 is utilized as our “as

stabilized” date of value.

As the subject property is not stabilized it is necessary to estimate a lease up discount to derive

an as is value estimate. The lease up discount is based on the difference between the as

stabilized and as is value indications via the discounted cash flow analysis, which equals

($6,100,000). This amount will be deducted from each approach to value.

While basic lease-up costs such as tenant improvements, leasing commissions, rent loss and

expense reimbursement loss could be calculated manually and applied in the sales comparison

approach and the direct capitalization analysis, we believe that applying the difference between

the “as is” and “as stabilized” DCF is the best way to account for the varying amounts of risk

associated with the property in its current position as opposed to a stabilized position, as the “as

is” DCF utilizes a higher rate of return to reflect greater risk associated with a non-stabilized.

POTENTIAL RENTAL INCOME CONCLUSION

Within this analysis, potential rental income is estimated based upon the forward looking market

rental rates. The subject is not currently stabilized and given the repositioning the center we

believe this is the most approach method.

OPERATING HISTORY

The following table presents the available operating data for the subject.


72

OPERATING HISTORY

Year 20112012

Annualized2013

Budget

Total $/SF Total $/SF Total $/SFIncome

Rental Income $1,824,089 $10.72 $1,572,692 $9.25 $1,771,296 $10.41Percentage Rent Income 466,987 2.75 215,457 1.27 269,119 1.58 Parking Income 751,884 4.42 694,458 4.08 643,385 3.78 Other Income 37,366 0.22 20,574 0.12 15,062 0.09 Expense Reimbursements 751,645 4.42 664,584 3.91 719,780 4.23 Effective Gross Income $3,831,970 $22.53 $3,167,765 $18.62 $3,418,642 $20.10

ExpensesReal Estate Taxes $844,593 $4.97 $901,103 $5.30 $603,700 $3.55Property Insurance 50,341 0.30 56,472 0.33 58,176 0.34 Common Area Maintenance 756,738 4.45 677,896 3.99 756,690 4.45 Management Fee 73,164 0.43 68,546 0.40 62,500 0.37 Nonreimbursable Landlord Expense 115,572 0.68 91,182 0.54 34,100 0.20 Operating Expenses $1,840,408 $10.82 $1,795,199 $10.55 $1,515,166 $8.91

Net Operating Income $1,991,562 $11.71 $1,372,566 $8.07 $1,903,476 $11.19

Annualized Amounts Represent Eleven Months (January through November)

Source: Operating statements

VACANCY AND COLLECTION LOSS

The subject’s estimated stabilized occupancy rate was previously discussed in the market

analysis. We conclude a stabilized occupancy/vacancy rate of 88%/12%.

PERCENTAGE RENT INCOME

According to the lease documents, some of the leases have a provision requiring percentage

rent payments. That is, in addition to the base rental charges, the tenant is responsible for

paying the landlord additional rent equal to a specified percentage of the tenant’s gross sales

made in, upon, or from the premises. Typically, percentage rent is paid only if the gross sales

exceed a breakpoint factor, usually calculated based on the annual basic rental charge divided

by the percentage rent amount. Percentage rent clauses are negotiable, however, and can vary

significantly between tenants and shopping centers.

Percentage rents are not typically included in discounted flow analyses performed by investors

in the current market when analyzing perspective centers for acquisition, unless substantial

historical data supports otherwise. The subject’s historical and pro forma percentage rent

income is detailed as follows:


73

PERCENTAGE RENT INCOME

Year Total $/SF 2011 $466,987 $2.75 2012 Annualized $215,457 $1.27 2013 Budget $269,119 $1.58 CBRE Estimate - Year One DCF $220,000 $1.29 CBRE Estimate - Stabilized Direct Cap $0 $0.00

Compiled by CBRE

As previously discussed, Victoria Secret pays percentage rent in lieu of a base rent. We include

this in the potential rental income. A few other tenants pay percentage rent; Landmark Theater

and Aveda. In our analysis, on a stabilized basis we utilize market rates and therefore do not

estimate any percentage rent in the direct cap. In the DCF, we estimate that the percentage

rent continues as the tenants roll to market. The Year One DCF amount is generally inline with

the budget less the Victoria Secret amount.

PARKING INCOME

The subject property has an attached 450-space parking garage. The garage is managed by

Standard Parking, a private parking garage operator, via a parking management agreement.

Many of the tenant leases have various parking agreements including validation or a dedicated

number of spaces for use. Parking income is also generated from a number of sources

including validation from nearby retailers, daily transient parkers and monthly parkers. The

subject’s historical and pro forma net parking income is detailed below.

PARKING INCOME

Year Total $/SF 2011 $751,884 $4.42 2012 Annualized $694,458 $4.08 2013 Budget $643,385 $3.78 CBRE Estimate - Year One DCF $645,000 $3.79 CBRE Estimate - Stabilized Direct Cap $730,785 $4.30

Compiled by CBRE

On a stabilized basis, we estimate net parking income at $730,785. This is below the amount

generated in 2011, but above the most recent historical amounts and reflects the property

operating at a stabilized level of 88% occupancy. Further, it considers the repositioning of the

subject to commercial-service/medical office, which are additional demand generators for

parking. Our estimate equates to approximately $1,624 per space. As a test of

reasonableness, we have examined the net income per space at comparable properties, which

is detailed below.


74

Project Location Number of Spaces Year Per Space

Belden Centre 2301 N. Clark St. 76 2013 Budget 3,433$

The Market Place 521 W. Diversey 45 2011 3,667$

Restoration Hardware/Z Gallery Center 938 W. North Ave. 42 2010 1,032$

Clark & Maple Center 1030 N. Clark St. 150 2009 1,089$

Low 1,032$

High 3,667$

Average 2,305$

Source: Actual Operating Statements and Budgets

CITY NORTH SUBMARKET PARKING INCOME COMPARABLES

Given the number of spaces, high at 450, the location and the demand generators at the

subject, we believe net income per space slightly below the average is appropriate.

OTHER INCOME

Other income is supplemental to that derived from leasing of the improvements. This includes

categories such as storage income, late charges, etc. The subject’s ancillary income is detailed

as follows:

OTHER INCOME

Year Total $/SF 2011 $37,366 $0.22 2012 Annualized $20,574 $0.12 2013 Budget $15,062 $0.09 CBRE Estimate $15,000 $0.09

Compiled by CBRE

Our estimate is inline with the budget amount.

EXPENSE REIMBURSEMENTS

The subject’s leases are based on a triple net structure whereby the tenant reimburses the

owner for a pro rata share of real estate taxes, CAM and insurance including an administrative

fee. Some are also based on a gross basis. In our analysis, as previously discussed, we

estimate triple net reimbursements for the retail spaces and gross rates for the medical office

suites, consistent with market. The subject’s expense reimbursements are detailed as follows:

EXPENSE REIMBURSEMENTS

Year Total $/SF 2011 $751,645 $4.42 2012 Annualized $664,584 $3.91 2013 Budget $719,780 $4.23 CBRE Estimate - Year One DCF $662,731 $3.90 CBRE Estimate - Stabilized Direct Cap $1,046,522 $6.15

Compiled by CBRE


75

The Year One amount reflects the subject’s current operating position and has modeled the

recoveries according to each tenants’ leases. It is generally inline with the 2012 annualized

amount. The stabilized direct cap amount utilizes the stabilized amount in the DCF.

EFFECTIVE GROSS INCOME

The subject’s effective gross income is detailed as follows:

EFFECTIVE GROSS INCOME

Year Total $/SF 2011 $3,831,970 $22.532012 Annualized $3,167,765 $18.622013 Budget $3,418,642 $20.10CBRE Estimate - Year One DCF $3,476,720 $20.44CBRE Estimate - Stabilized Direct Cap $4,741,143 $27.87

Compiled by CBRE

The Year One DCF reflects the current position. The stabilized direct cap reflects the property

operating at a stabilized level of 88%.

OPERATING EXPENSE ANALYSIS

Expense Comparables

The following chart summarizes expenses obtained from comparable properties.

EXPENSE COMPARABLES

Comparable Number 1 2 3

Location Lincoln Park Lincoln Park Lincoln ParkGLA (SF) 52,806 223,912 95,455Expense Year 2013 Budget 2011 Budget 2011

Effective Gross Income $2,012,544 $38.11 $8,766,922 $39.15 $4,288,998 $44.93

Expenses Total $/SF Total $/SF Total $/SF

Real Estate Taxes $255,000 $4.83 $1,722,804 $7.69 $922,062 $9.66

Property Insurance 25,200 0.48 54,832 0.24 32,345 0.34

Common Area Maintenance 292,620 5.54 743,763 3.32 470,222 4.93

Management Fee 36,000 0.68 114,000 0.51 63,754 0.67 (as a % of EGI) 1.8% 1.3% 1.5%

Nonreimbursable Landlord Expense 11,900 0.23 11,200 0.05 9,005 0.09 Operating Expenses $620,720 $11.75 $2,646,599 $11.82 $1,497,388 $15.69

Operating Expense Ratio 30.8% 30.2% 34.9%

Source: Actual Operating Statements and Budget

The following subsections represent the analysis for the pro forma estimate of each category of

the subject’s stabilized expenses.


76

Real Estate Taxes

The real estate taxes for the subject were previously discussed. The subject’s expense is

detailed as follows:

REAL ESTATE TAXES

Year Total $/SF 2011 $844,593 $4.97 2012 Annualized $901,103 $5.30 2013 Budget $603,700 $3.55 Expense Comparable 1 N/A $4.83 Expense Comparable 2 N/A $7.69 Expense Comparable 3 N/A $9.66 CBRE Estimate $1,190,742 $7.00

Compiled by CBRE

As discussed in the real estate tax section, we gross up real estate taxes to a stabilized level

over the absorption period in the DCF.

Property Insurance

Property insurance expenses typically include fire and extended coverage and owner’s liability

coverage. The subject’s expense is detailed as follows:

PROPERTY INSURANCE

Year Total $/SF 2011 $50,341 $0.30 2012 Annualized $56,472 $0.33 2013 Budget $58,176 $0.34 Expense Comparable 1 N/A $0.48 Expense Comparable 2 N/A $0.24 Expense Comparable 3 N/A $0.34 CBRE Estimate $59,537 $0.35

Compiled by CBRE

Our estimate is consistent with the historical and budget amount and inline with the

comparables.

Common Area Maintenance

Common area maintenance expenses typically include utilities, parking lot sweeping and

maintenance, and routine repairs and maintenance of the building and site improvements. The

subject’s expense is detailed as follows:


77

COMMON AREA MAINTENANCE


Compiled by CBRE

Our estimate is consistent with the budget amount and within the range indicated by the

comparables.

Management Fee

Management expenses are typically negotiated as a percentage of collected revenues (i.e.,

effective gross income). The subject’s expense is detailed as follows:

MANAGEMENT FEE

Year Total % EGI 2011 $73,164 1.9% 2012 Annualized $68,546 2.2% 2013 Budget $62,500 1.8%

CBRE Estimate $142,234 3.0%

Compiled by CBRE

Professional management fees in the local market range from 3.0% to 5.0% for comparable

properties. Historically, the subject has incurred a management fee ranging between 1.8% and

2.2%. Given the subject’s size and the competitiveness of the local market area, we believe an

appropriate management expense for the subject would be towards the lower end of the market

range.

Non-Reimbursable Landlord Expense

Landlord expenses that are not eligible for tenant reimbursement typically include legal and

accounting fees, marketing and utility expenses on any vacant space. The subject’s expense is

detailed as follows:


78

NONREIMBURSABLE LANDLORD EXPENSE


Compiled by CBRE

On a stabilized basis we estimate a nominal non-reimbursable expense.

Reserves for Replacement

Reserves for replacement have been estimated based on discussions with knowledgeable

market participants who indicate a range from $0.10 to $0.25 per square foot for comparable

properties and is dependent upon use. We have utilized reserves of $0.15 per square foot.

Reserves are deducted after calculating NOI in the DCF and are not included as an expense

item in the Direct Capitalization Technique, per local market practice.

OPERATING EXPENSE CONCLUSION

The subject’s expense is detailed as follows:

OPERATING EXPENSES

Year Total $/SF 2011 $1,840,408 $10.82 2012 Annualized $1,795,199 $10.55 2013 Budget $1,515,166 $8.91 Expense Comparable 1 N/A $11.75 Expense Comparable 2 N/A $11.82 Expense Comparable 3 N/A $15.69 CBRE Estimate $2,183,506 $12.84

Compiled by CBRE

The subject’s per square foot operating expense pro forma is in line with the total per square

foot operating expenses indicated by the expense comparables and published data. It also is

supported by the actual operating history trend indicated above, while below the budget as a

result of stabilized taxes. As mentioned, the Year One DCF amount reflects lower taxes as a

result of a partial assessment for occupancy, our analysis increases taxes as occupancy

improves.

NET OPERATING INCOME CONCLUSION

The subject’s net operating income is detailed as follows:


79

NET OPERATING INCOME

Year Total $/SF 2011 $1,991,562 $11.71 2012 Annualized $1,372,566 $8.07 2013 Budget $1,903,476 $11.19 CBRE Estimate - Year One DCF $1,986,409 $11.68 CBRE Estimate - Stabilized Direct Cap $2,557,637 $15.04

Compiled by CBRE

The Year One DCF amount reflects the subject’s current operating position while the stabilized

amount reflects the property operating at a stabilized level of 88%.

DIRECT CAPITALIZATION

Direct capitalization is a method used to convert a single year’s estimated stabilized net

operating income into a value indication. The following subsections represent different

techniques for deriving an overall capitalization rate for direct capitalization.

Comparable Sales

The overall capitalization rates (OARs) confirmed for the comparable sales analyzed in the

sales comparison approach are as follows:

COMPARABLE CAPITALIZATION RATES

Sale Sale PriceSale Date $/SF Occupancy OAR

1 Jan-13 $382.21 98% 8.00%2 Apr-11 $207.37 21% 11.30%3 Jan-11 $249.99 83% 7.06%4 Dec-10 $102.88 73% 11.10%5 Jun-10 $301.88 65% 6.83% - 8.18%

Indicated OAR: 88% 7.06% - 11.3%

Compiled by: CBRE

The overall capitalization rates for these sales were derived based upon the actual or pro-forma

income characteristics of the property. Sales Two and Four reflect non-stabilized assets, which

is reflected in the cap rates. Sale One is most indicative of the current market and has been

given primary emphasis in our conclusion. This sale is located within the subject’s Lincoln Park

market and is considered somewhat similar with respect to configuration and layout. Moreover,

it is primarily occupied by secondary tenants. Accordingly, a cap rate near an 8% is reasonable.

Published Investor Surveys

The results of the most recent investor surveys are summarized in the following chart.


80

OVERALL CAPITALIZATION RATES

Investment Type OAR Range Average

CBRE Neighborhood CentersClass A 5.00% - 9.50% 6.74%Class B 6.00% - 12.00% 7.89%Class C 7.00% - 14.00% 9.38%


National Data 5.25% - 9.50% 7.06%

Indicated OAR: 8.00%

Compiled by: CBRE

The subject is considered to be a Class B property in a Class A, core location. Because of the

subject’s location, tenancy and occupancy, an OAR above of the range indicated in the

preceding table is considered appropriate.

Market Participants

In deriving an appropriate overall capitalization rate for the subject, numerous market

participants were interviewed and consulted to gather applicable information. The general

consensus is that cap rates for the best quality assets continue to trend downward; available

financing coupled with pent up demand have compressed rates back to levels experienced near

the peak in 2007. However, the market participants went on to say that it is a bifurcated market

and that well occupied Class A assets in core markets are being well received and receiving a

lots of offers, while Class B/C properties in second-tier and tertiary markets continue to

experience a lack of demand and a disconnect between buyers and sellers remains. For the

subject property specifically, the respondents indicated that the subject features a very good

core location with strong demographics, and it features parking, a positive attribute. However,

its functionality as a vertical center with non-traditional tenants are considered negative aspects,

and it would be viewed less favorable than other available properties. Even so, on a stabilized

basis they would anticipate pro forma OARs in the low 8% range to be reasonable.

Capitalization Rate Conclusion

The following chart summarizes the OAR conclusions.

OVERALL CAPITALIZATION RATE - CONCLUSION

Source Indicated OARComparable Sales 7.06% - 11.3%National Investor Survey 8.00%Market Participants Low 8% Range

CBRE Estimate 8.00%

Compiled by: CBRE


81

Direct Capitalization Summary

A summary of the direct capitalization at stabilized occupancy is illustrated in the following chart.

DIRECT CAPITALIZATION SUMMARY

Income $/Door/Mo. $/SF/Yr Total Potential Rental Income $2,792 $19.70 $3,350,950Vacancy and Collection Loss 12.00% (335) (2.36) (402,114)

Net Rental Income $2,457 $17.34 $2,948,836

Percentage Rent Income - 0.00 - Parking Income 609 0.00 730,785 Other Income 13 0.09 15,000 Expense Reimbursements 872 6.15 1,046,522

Effective Gross Income $3,951 $27.87 $4,741,143

ExpensesReal Estate Taxes $7.00 $1,190,742Property Insurance 0.35 59,537 Common Area Maintenance 4.45 756,972 Management Fee 3.00% 0.84 142,234 Nonreimbursable Landlord Expense 0.20 34,021

Operating Expenses $12.84 $2,183,506

Operating Expense Ratio 46.05%

Net Operating Income $15.04 $2,557,637

OAR / 8.00%

Indicated Stabilized Value $31,970,459

Rounded $32,000,000

Deferred Maintenance -

Lease-Up Discount (6,100,000)

Value Indication $25,870,459Rounded $25,900,000Value Per SF $152.26

Matrix Analysis Cap Rate Value7.75% $26,901,8008.00% $25,870,5008.25% $24,901,700

Compiled by CBRE


82

DISCOUNTED CASH FLOW ANALYSIS (DCF)

The DCF assumptions concluded for the subject are summarized as follows:

SUMMARY OF DISCOUNTED CASH FLOW ASSUMPTIONS

General Assumptions

Start Date Feb-13Terms of Analysis 10 YearsSoftware ARGUS

Growth Rate Assumptions

Income Growth 3.00%

Expense Growth 3.00%

Inflation (CPI) 3.00%Real Estate Tax Growth 3.00%

Market Leasing Assumptions

Category Fitness Center Theater Street Front Interior GardenMarket Rent ($/SF/Yr.) $12.00 $16.00 $35.00 $25.00 $20.00Concessions None None None None NoneReimbursements NNN NNN NNN Gross GrossAnnual Escalation 10% Midterm 10% Midterm 3.0% 3.0% 3.0%Tenant Improvements (First Gen. Medical Office Retrofit) $50.00 Tenant Improvements (New Tenants) $25.00 $25.00 $25.00 $25.00 $25.00Tenant Improvements (Renewals) $10.00 $0.00 $0.00 $0.00 $0.00Average Lease Term 10 Years 10 Years 10 Years 5 Years 5 YearsRenewal Probability 70% 70% 70% 70% 70%Leasing Commissions (Cashed-Out)

New Leases 6.0% 6.0% 6.0% 6.0% 6.0%Renewal Leases 3.0% 3.0% 3.0% 3.0% 3.0%

Down Time Before New Tenant Leases 12 Months 12 Months 12 Months 12 Months 12 MonthsBlended Down Time Between Leases 4 Months 4 Months 4 Months 4 Months 4 Months

Occupancy Assumptions

Total Operating Expenses ($/SF/Yr.) $12.84

Current Occupancy 71.69%Stabilized Occupancy (w/Credit Loss) 88.00%Estimated Lease-up Period 24 Months

Financial Assumptions

Discount Rate - As Is 10.00%

Discount Rate - As Stabilized 9.50%Terminal Capitalization Rate 8.50%

Other Assumptions

Cost of Sale 3.00%Capital Expenses (Deferred Maintenance) $0

Compiled by CBRE

Provided on the following pages is a discussion of the leasing assumptions used in the

discounted cash flow analysis that were not analyzed in the direct capitalization approach.


83

General Assumptions

The DCF analysis utilizes a 10-year projection period. This is consistent with current investor

assumptions.

Growth Rate Assumptions

The inflation and growth rates for the DCF analysis have been estimated by analyzing the

expectations typically used by buyers and sellers in the local marketplace. Published investor

surveys, an analysis of the Consumer Price Index (CPI), as well as CBRE, Inc.'s survey of

brokers and investors active in the local market form the foundation for the selection of the

appropriate growth rates. The compilation is shown in the following chart.

SUMMARY OF GROWTH RATES

Investment Type Rent Expenses Inflation

U.S. Bureau of Labor Statistics (CPI-U)10-Year Snapshot Average as of Dec-12 2.47%

PwC Strip Shopping CenterNational Data 1.73% 3.03% n/a

CBRE Estimate 3.00% 3.00% 3.00%

Compiled by: CBRE

Leasing Assumptions

The contract lease terms for the existing tenants are utilized within the DCF analysis, with

market leasing assumptions applied for renewals and absorption tenants. All subsequent years

vary according to the growth rate assumptions applied to the Year 1 estimate.

Leasing Commissions

The following table presents the leasing commissions quoted for the subject, those prevalent in

the market as derived through the comparable properties, and our pro forma estimate.

LEASING COMMISSIONS

Category

Rent Comparables and/or Broker DataNew TenantsRenewals

CBRE EstimateNew Tenants 6.0% 6.0% 6.0% 6.0% 6.0%Renewals 3.0% 3.0% 3.0% 3.0% 3.0%

Compiled by CBRE

4.0% - 6.0%2.0% - 3.0%

Theater GardenStreet Front InteriorFitness Center


84

Renewal Probability

The renewal probability incorporated within the market leasing assumptions has been estimated

at 70%. This rate is considered reasonable based on the rent comparable data, a survey of

market participants, and our analysis of actual leasing activity at the subject.

Downtime Between Leases

The downtime estimate at lease rollover incorporated within the market leasing assumptions

has been estimated at twelve months. This rate is considered reasonable based on the rent

comparable data, a survey of market participants, and our analysis of actual leasing activity at

the subject.

Occupancy Assumptions

The occupancy rate over the holding period is based on the subject’s estimated stabilized

occupancy rate and estimated lease-up period to achieve a stabilized occupancy position.

Vacancy, Credit Loss and Absorption

Please refer to the market analysis of this report for a detailed discussion of these elements.

Financial Assumptions

Discount Rate Analysis

The results of the most recent investor surveys are summarized in the following chart.

DISCOUNT RATES

Investment Type Rate Range Average

CBRE Neighborhood Centers

Class A 6.60% - 20.80% 9.38%

Class B 6.60% - 20.80% 9.38%

Class C 6.60% - 20.80% 9.38%


National Data 6.50% - 12.50% 8.43%

CBRE Estimate - As Is 10.00%

CBRE Estimate - As Stabilized 9.50%

Compiled by: CBRE

The above table summarizes the investment parameters of some of the most prominent

investors currently acquiring similar investment properties in the United States. We realize that

this type of survey reflects target rather than transactional rates. Transactional rates are usually

difficult to obtain in the verification process and are actually only target rates of the buyer at the

time of sale. The property’s performance will ultimately determine the actual yield at the time of

sale after a specific holding period.


85

We assume different discount rates for the as is and as stabilized value scenarios. 10.0%

discount rate is concluded for the as is value scenario which takes into account the subject’s

current occupancy situation and the need to spend capital to lease vacant space. A lower

discount rate of 9.5% (50 basis points) is concluded for the as stabilized value scenario due to

the reduced risk going forward. This scenario essentially assumes that the subject is leased at

market rates and that the needed capital has been spent, which reduces the risk to the cash

flows.

Terminal Capitalization Rate

The reversionary value of the subject is based on an assumed sale at the end of the holding

period based on capitalizing the Year 11 NOI at a terminal capitalization rate. Typically, for

properties similar to the subject, terminal capitalization rates are 50 to 100 basis points higher

than going-in capitalization rates (OARs). This is a result of the uncertainty of future economic

conditions and the natural aging of the property. For the subject, we have concluded a load

factor of 50 basis points to be appropriate.

TERMINAL CAPITALIZATION RATES

Investment Type Rate Range Average

PwC Strip Shopping CenterNational Data 6.00% - 12.00% 7.69%

CBRE Estimate 8.50%

Compiled by: CBRE

DCF Analysis “As Stabilized”

In addition to the “as is” discounted cash flow, a stabilized discounted cash flow was performed.

This cash flow shows the subject’s future income projection, once it achieves a stabilized

operating level. For purposes of our analysis, all assumptions remain consistent with the “as is”

scenario with the exception of a lower discount rate, and a second, “PV as of” cash flow was

generated via ARGUS for the prospective stabilized value.

Discounted Cash Flow Conclusion

The DCF schedule(s) and value conclusions are depicted on the following page(s).

Cen

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3,

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3,

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3,

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3,

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3,

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337

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4,

970,

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5,

399,

168

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5,

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490,

311

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438,

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4,30

7,53

5 $

4,70

1,57

5 A

bsor

ptio

n &

Tur

nove

r V

acan

cy

(

157,

103)

(

41,1

45)

(

38,3

52)

(

99,2

31)

(

263,

698)

(

333,

943)

(

52,2

44)

(

56,0

51)

(

107,

736)

(

603,

709)

(

366,

855)

Sch

edul

ed B

ase

Ren

tal R

even

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3,

166,

807

3,

301,

409

3,

407,

526

3,

405,

934

3,

376,

828

3,

472,

826

3,

833,

255

3,

926,

857

3,

946,

322

3,

703,

826

4,

334,

720

Exp

ense

Rei

mbu

rsem

ent R

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Rea

l Est

ate

Tax

es

493

,326

593

,042

577

,770

591

,650

599

,516

747

,553

904

,016

931

,155

921

,677

860

,824

982

,503

Insu

ranc

e

34,9

16

35,4

54

34,6

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35,4

52

35,9

10

44,9

23

54,4

50

56,0

85

55,4

85

51,7

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59,1

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443

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450

,788

440

,136

450

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456

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571

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692

,285

713

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705

,430

657

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752

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agem

ent F

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74,3

48

75,3

83

76,2

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77,7

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1

24,8

92

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28,2

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24,6

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1

15,5

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40,5

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1,

046,

522

1,

154,

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1,

128,

768

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155,

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167,

327

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463,

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775,

643

1,

828,

573

1,

807,

207

1,

686,

023

1,

934,

261

Par

king

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me

7

30,7

85

7

52,7

09

7

75,2

90

7

98,5

49

8

22,5

05

8

47,1

80

8

72,5

96

8

98,7

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9

25,7

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9

53,5

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9

82,1

14

Per

cent

age

Ren

t

2

33,3

98

2

40,4

00

2

47,6

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2

55,0

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15

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16

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16

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17

,389

17

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18

,448

19

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19

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20

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20

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,386

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al P

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ross

Rev

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5,

193,

426

5,

465,

576

5,

576,

079

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632,

480

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384,

571

5,

801,

475

6,

500,

496

6,

673,

775

6,

699,

425

6,

364,

122

7,

272,

481

Gen

eral

Vac

ancy

(

484,

960)

(

619,

662)

(

635,

380)

(

588,

574)

(

414,

094)

(

402,

307)

(

734,

085)

(

751,

528)

(

709,

123)

(

232,

431)

(

549,

865)

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ctiv

e G

ross

Rev

enue

4,

708,

466

4,

845,

914

4,

940,

699

5,

043,

906

4,

970,

477

5,

399,

168

5,

766,

411

5,

922,

247

5,

990,

302

6,

131,

691

6,

722,

616

Ope

ratin

g E

xpen

ses

R

eal E

stat

e T

axes

1,00

4,02

3

1,22

6,46

4

1,26

3,25

8

1,30

1,15

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1,34

0,19

1

1,38

0,39

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1,42

1,80

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1,46

4,46

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8,39

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1,55

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63

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65

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67

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71

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77

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51,9

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141

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177

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36

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2,

047,

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301,

238

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368,

758

2,

438,

471

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504,

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588,

416

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672,

226

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751,

877

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831,

147

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931

3,

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Ope

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2,66

0,86

2

2,54

4,67

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2,57

1,94

1

2,60

5,43

5

2,46

5,59

5

2,81

0,75

2

3,09

4,18

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3,17

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0

3,15

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3,70

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216

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1,27

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34,5

48

24,0

35

30,0

34

28,2

16

1

77,3

66

3

52,2

43

37,2

32

34,8

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5

24,7

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4

90,9

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erve

s fo

r R

epla

cem

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27,0

70

27,8

82

28,7

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29,5

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30,4

67

31,3

81

32,3

23

33,2

92

34,2

91

35,3

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36,3

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ng &

Cap

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osts

2

78,4

21

2

02,8

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1

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78

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8

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756,

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axes

=

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==


88

For the P.V. of P.V. of P.V. of P.V. of P.V. of Analysis Year Annual Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Period Ending Cash Flow @ 9.50% @ 9.75% @ 10.00% @ 10.25% @ 10.50% Year 1 Jan-2014 ($71,584) ($65,374) ($65,225) ($65,076) ($64,929) ($64,782) Year 2 Jan-2015 1,940,998 1,618,814 1,611,447 1,604,130 1,596,864 1,589,647 Year 3 Jan-2016 2,382,441 1,814,595 1,802,224 1,789,963 1,777,814 1,765,774 Year 4 Jan-2017 2,341,853 1,628,933 1,614,141 1,599,518 1,585,059 1,570,763 Year 5 Jan-2018 2,426,159 1,541,164 1,523,690 1,506,453 1,489,451 1,472,678 Year 6 Jan-2019 2,506,757 1,454,211 1,434,449 1,414,999 1,395,856 1,377,015 Year 7 Jan-2020 2,000,777 1,059,985 1,043,198 1,026,715 1,010,528 994,632 Year 8 Jan-2021 1,967,835 952,085 934,873 918,010 901,488 885,300 Year 9 Jan-2022 2,970,685 1,312,592 1,285,925 1,259,860 1,234,381 1,209,473 Year 10 Jan-2023 3,051,815 1,231,450 1,203,686 1,176,607 1,150,197 1,124,438

Total Cash Flow 21,517,736 12,548,455 12,388,408 12,231,179 12,076,709 11,924,938 Property Resale @ 8.5% Cap 36,051,533 14,547,305 14,219,308 13,899,427 13,587,444 13,283,146

Total Property Present Value $27,095,760 $26,607,716 $26,130,606 $25,664,153 $25,208,084 Total Property Present Value Rounded $27,100,000 $26,610,000 $26,100,000 $25,660,000 $25,210,000

Analysis Prepared by CBRE

AS IS NET PRESENT VALUE ANALYSIS

For the P.V. of P.V. of P.V. of P.V. of P.V. of Analysis Year Annual Cash Flow Cash Flow Cash Flow Cash Flow Cash Flow Period Ending Cash Flow @ 9.50% @ 9.75% @ 10.00% @ 10.25% @ 10.50% Year 1 Jan-2016 $2,382,441 $2,175,745 $2,170,789 $2,165,855 $2,160,944 $2,156,055 Year 2 Jan-2017 2,341,853 1,953,131 1,944,243 1,935,416 1,926,648 1,917,940 Year 3 Jan-2018 2,426,159 1,847,893 1,835,294 1,822,809 1,810,437 1,798,177 Year 4 Jan-2019 2,506,757 1,743,636 1,727,803 1,712,149 1,696,672 1,681,369 Year 5 Jan-2020 2,000,777 1,270,949 1,256,539 1,242,325 1,228,304 1,214,471 Year 6 Jan-2021 1,967,835 1,141,574 1,126,060 1,110,792 1,095,764 1,080,973 Year 7 Jan-2022 2,970,685 1,573,830 1,548,905 1,524,431 1,500,398 1,476,797 Year 8 Jan-2023 3,051,815 1,476,540 1,449,846 1,423,694 1,398,072 1,372,967 Year 9 Jan-2024 3,124,864 1,380,715 1,352,665 1,325,247 1,298,446 1,272,245 Year 10 Jan-2025 1,377,643 555,898 543,365 531,141 519,219 507,591

Total Cash Flow 24,150,829 15,119,911 14,955,509 14,793,859 14,634,904 14,478,585 Property Resale @ 8.5% Cap 42,315,132 17,074,756 16,689,772 16,314,315 15,948,128 15,590,962

Total Property Present Value $32,194,667 $31,645,281 $31,108,174 $30,583,032 $30,069,547 Total Property Present Value Rounded $32,200,000 $31,650,000 $31,110,000 $30,580,000 $30,070,000

Analysis Prepared by CBRE

AS STABILIZED NET PRESENT VALUE ANALYSIS

CONCLUSION OF INCOME CAPITALIZATION APPROACH

The conclusions via the valuation methods employed for this approach are as follows:

INCOME CAPITALIZATION APPROACH VALUESDirect Capitalization Method $25,900,000 Discounted Cash Flow Analysis $26,100,000

Reconciled Value $26,100,000

Compiled by CBRE

Primary emphasis has been placed on the discounted cash flow. This method is considered to

best reflect the actions of buyers and sellers currently active in this market.

CENTURY SHOPPING CENTER | RECONCILIATION OF VALUE

89

RECONCILIATION OF VALUE

The value indications from the approaches to value are summarized as follows:

SUMMARY OF VALUE CONCLUSIONSSales Comparison Approach $26,200,000 Income Capitalization Approach $26,100,000 Reconciled Value $26,100,000

Compiled by CBRE

In the sales comparison approach, the subject is compared to similar properties that have been

sold recently or for which listing prices or offers are known. The sales used in this analysis are

considered somewhat comparable to the subject, yet the required adjustments were based on

reasonable and well-supported rationale. In addition, market participants are currently

analyzing purchase prices on investment properties as they relate to available substitutes in the

market. Therefore, the sales comparison approach is considered to provide a reliable value

indication, but has been given secondary emphasis in the final value reconciliation.

The income capitalization approach is applicable to the subject since it is an income producing

property leased in the open market. Market participants are primarily analyzing properties

based on their income generating capability. Therefore, the income capitalization approach is

considered a reasonable and substantiated value indicator and has been given primary

emphasis in the final value estimate.

Based on the foregoing, the market value of the subject has been concluded as follows:

MARKET VALUE CONCLUSION

Appraisal Premise Interest Appraised Date of Value Value ConclusionAs Is Leased Fee Interest December 31, 2012 $26,100,000

Compiled by CBRE

CENTURY SHOPPING CENTER | SENSITIVITY ANALYSIS

90

SENSITIVITY ANALYSIS

At the request of the client, required by the Israeli SEC regulation, we have included a sensitivity

analysis with a + / -5% change in occupancy and a + / - 5% change if income from base rent.

The following summarizes the sensitivity conclusions.

Implied Value

+5% Change in Occupancy $28,000,000

-5% Change in Occupancy $23,800,000

+5% Change in Income From Base Rent $29,900,000

-5% Change in Income From Base Rent $22,000,000

Compiled by CBRE

SENSITIVITY ANALYSIS

Please note the sensitivity analysis holds all other assumptions constant.

CENTURY SHOPPING CENTER | ASSUMPTIONS AND LIMITING CONDITIONS

91

ASSUMPTIONS AND LIMITING CONDITIONS

1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to title that would adversely affect marketability or value. CBRE, Inc. is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CBRE, Inc., however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject’s title should be sought from a qualified title company that issues or insures title to real property.

2. Unless otherwise specifically noted in the body of this report, it is assumed: that the existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CBRE, Inc. professionals are not engineers and are not competent to judge matters of an engineering nature. CBRE, Inc. has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CBRE, Inc. by ownership or management; CBRE, Inc. inspected less than 100% of the entire interior and exterior portions of the improvements; and CBRE, Inc. was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CBRE, Inc. reserves the right to amend the appraisal conclusions reported herein.

3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CBRE, Inc. has no knowledge of the existence of such materials on or in the property. CBRE, Inc., however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal.

4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CBRE, Inc. This report may be subject to amendment upon re-inspection of the subject subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation.

5. It is assumed that all factual data furnished by the client, property owner, owner’s representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CBRE, Inc. has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor’s Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CBRE, Inc. reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all


92

assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CBRE, Inc. of any questions or errors.

6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CBRE, Inc. will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject.

7. CBRE, Inc. assumes no private deed restrictions, limiting the use of the subject in any way.

8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred.

9. CBRE, Inc. is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject.

10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market.

11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CBRE, Inc. does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CBRE, Inc.

12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CBRE, Inc. to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form.

13. Also, unless otherwise noted in the body of this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated.

14. This study may not be duplicated in whole or in part without the specific written consent of CBRE, Inc. nor may this report or copies hereof be transmitted to third parties without said consent, which consent CBRE, Inc. reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CBRE, Inc. which consent CBRE, Inc. reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a “sale” or “offer for sale” of any “security”, as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CBRE, Inc. shall have no accountability or responsibility to any such third party.

15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report.

16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used.


93

17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report.

18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CBRE, Inc. unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CBRE, Inc. assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance.

19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client’s designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CBRE, Inc. assumes responsibility for any situation arising out of the Client’s failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired.

20. CBRE, Inc. assumes that the subject analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient.

21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report.

22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist.

23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Notwithstanding any discussion of possible readily achievable barrier removal construction items in this report, CBRE, Inc. has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CBRE, Inc. has no specific information relating to this issue, nor is CBRE, Inc. qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject.

24. Client shall not indemnify Appraiser or hold Appraiser harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client approximately result in damage to Appraiser. Notwithstanding the foregoing, Appraiser shall have no obligation under this Section with respect to any loss that is caused solely by the active negligence or willful misconduct of a Client and is not contributed to by any act or omission (including any failure to perform any duty imposed by law) by Appraiser. Client shall indemnify and hold Appraiser harmless from any claims, expenses, judgments or other items or costs arising as a result of the Client's failure or the failure of any of the Client's agents to provide a complete copy of the appraisal report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover, from the other, reasonable attorney fees and costs.

25. As part of the client’s requested scope of work, an estimate of insurable value is provided herein. CBRE, Inc. has followed traditional appraisal standards to develop a reasonable calculation based upon industry practices and industry accepted publications such as the Marshal Valuation Service handbook. The methodology employed is a derivation of the cost approach which is primarily used as an academic exercise to help support the market value estimate and therefore is not reliable for Insurable Value estimates. Actual construction costs and related estimates can vary greatly from this estimate.

This analysis should not be relied upon to determine proper insurance coverage which can only be properly estimated by consultants considered experts in cost estimation and insurance underwriting. It is provided to aid the client/reader/user as part of their overall decision making process and no representations or warranties are made by CBRE, Inc. regarding the accuracy of this estimate and it is strongly recommend that other sources be utilized to develop any estimate of insurable value.

CENTURY SHOPPING CENTER | ADDENDA

ADDENDA


ADDENDUM A

LEGAL DESCRIPTION


ADDENDUM B

IMPROVED SALE DATA SHEETS

RETAIL SALE No. 1

2301-2315 N. Clark StreetChicago,ILCook

Financial Data

Appraiser98%Pro Forma

N/AN/AN/AN/A

$1,562,992

TotalN/A

Per SF

Analysis

Overall Cap. Rate (OAR):

Direct Cap8.00 %N/A %N/AN/A %$382.21

Comments

This estimated contract represents the acquisition of a 51,117 square foot mixed-use retail center that represents the first andsecond floor commercial component of a seven-story residential/commercial property built in 1991 and situated on a 0.93-acre site.The property is located at 2301-2315 N. Clark Street and specifically at the northeast corner of Clark Street and Belden Avenue inChicago’s Lincoln Park neighborhood. The property includes 38 surface parking spaces and 22 below grade garage spaces.According to knowledgable sources, the property is currently under contract at an 8% cap rate. The cap rate reflects the propertiesstrong location, but secondary tenancy. Based on pro forma income and expenses, this results in an estimated purchase price of$19,537,400 or $382.21 per square foot. At the time of contract the center is 98% leased. The majority of leases reflect newten-year deals. The largest tenant is Little Gems Academy, and the majority of tenants are local/regional tenants. Approximately$8,100,000 in capital improvements have been spent over the past twelve to 24 months and the center leased up from 21% in 2010to the current level of 98%.

Belden Centre

N/AN/AN/A

$30.58

Buyers Underwriting Criteria.:

Source:Occupancy at Sale:Existing or ProForma Inc:

Potential Gross Income:Vacancy and Credit Loss:Effective Gross Income:Expenses and Reserves:

Net Operating Income:

Location:

County:

Location Data

Physical Data

Sale Data Contract

VTH 3 LLCConfidential1113131015

Market Terms$19,537,400

$19,537,400$0$19,537,400

Broker

Neighborhood/CommunityType:

6 months1/2013

Transaction Type:

Sale Price:

Date:Marketing Time:Grantor:

Grantee:Document No.:

Req.Capital Cost:

Financing:Cash Eq.Price:

Adj. Sale Price:Verification:

14-33-106-014, -015

N/AAtlas Ref:

Assessor's Parcel No:

Eff. Gross Multiplier (EGIM):

Oper. Expense Ratio (OER):Price Per Square Foot:

Land Area: 0.93 Acres

Projected IRR:

Excess Land:

Year Built:

Condition:Exterior Walls:

Parking:

Gross Leasable Area:

Anchor Tenant GLA:

GLA Purchased:

Total GLA:

Local Tenant GLA:

None

1991

AverageBrick

38 Surface and 22 Garage Space

N/A

51,117 SF

51,117 SF

51,117 SF

RETAIL SALE No. 2

2301-2315 N. Clark StreetChicago,ILCook

Financial Data


N/AN/AN/AN/A

$1,197,741

TotalN/A

Per SF

Analysis



Comments

This sale represents the acquisition of a 51,117 square foot mixed-use retail center that represents the first and second floorcommercial component of a seven-story residential/commercial property built in 1991 and situated on a 0.93-acre site. Theproperty is located at 2301-2315 N. Clark Street and specifically at the northeast corner of Clark Street and Belden Avenue inChicago’s Lincoln Park neighborhood. The property includes 38 surface parking spaces and 22 below grade garage spaces. InApril 2011 the property was purchased for $7,000,000 or $146.94 per square foot. At the time of sale the center was 20.9%occupied by six tenants. There were five vacant suites, which includes the two anchor spaces, formerly occupied by Tower Recordsand clothing store The Limited/Structure. Based on pro forma income and expenses and an estimated $3,600,000 to reposition andlease-up the center, an 11.3% cap rate is implied. The in-place NOI at the time of sale was $181,700. This was a distressed sale,but it was activity marketed and as such we believe it reflects a market-oriented transaction.

Belden Centre

N/AN/AN/A

$23.43





Location:

County:

Location Data

Physical Data

Sale Data Sale

Belden Centre Condominium LLCVTH 3 LLC1113131015


$7,000,000$3,600,000$10,600,000

Public Records, broker


6 months4/2011

Transaction Type:

Sale Price:



Req.Capital Cost:



14-33-106-014, -015

N/AAtlas Ref:





Projected IRR:

Excess Land:

Year Built:


Parking:


Anchor Tenant GLA:

GLA Purchased:

Total GLA:

Local Tenant GLA:

None

1991

AverageBrick

38 Surface and 22 Garage Space

N/A

51,117 SF

51,117 SF

51,117 SF

RETAIL SALE No. 3

555 West Roosevelt RoadChicago,IL 60607Cook

Financial Data


N/AN/AN/AN/A

$1,680,229

TotalN/A

Per SF

Analysis



Comments

This sale represents the acquisition of a 95,204 square foot retail center located along Roosevelt Road between Jefferson andClinton Streets in Chicago’s South Loop retail node. The property was completed in 2008 and consists of five-stories containing45,001 square feet of street level retail space and 50,571 square feet of upper level retail space situated between the second andfifth floors. Floors three, four and five contain 323 parking spaces. In January 2011, the property was purchased for $23,800,000,or $249.99 per square foot. At the time of sale the property was 82% leased to three tenants. Best Buy occupies the street levelretail space over a long-term lease extending a minimum 15 years (approximately 13 years remaining at the time of sale) and BedBath and Beyond occupies 27,482 square feet on the second floor over a long-term lease extending a minimum of ten-years(approximately eight years remaining at the time of sale). Core Power Yoga occupies the retail space on the fifth floor, also with aten-year lease. Based on budgeted NOI of $1,680,229, or $17.65 per square foot, a 7.06% cap rate is indicated. Though this wasa distressed sale, the acquisition price was reported to represent market levels.

Joffco Square

N/AN/AN/A

$17.65





Location:

County:

Location Data

Physical Data

Sale Data Sale

River West Plaza (JoffcoInland Real Estate GroupN/A


$23,800,000$0$23,800,000

Public Records, Appraiser


N/A1/2011

Transaction Type:

Sale Price:



Req.Capital Cost:



17-21-102-022, -025

N/AAtlas Ref:





Projected IRR:

Excess Land:

Year Built:


Parking:


Anchor Tenant GLA:

Anchors:

GLA Purchased:

Best BuyBed Bath & Beyond

Total GLA:

Local Tenant GLA:

None

2008

GoodConcrete

323 Garage Spaces

72,483 SF

45,001 SF27,482 SF

95,204 SF

95,204 SF

22,721 SF

RETAIL SALE No. 4

2828 N. Clark StreetChicago,ILCook

Financial Data

Buyer73%Existing

N/AN/AN/AN/A

$1,942,080

TotalN/A

Per SF

Analysis



Comments

This sale represents the acquisition of a 170,109-square foot eight-story vertical retail center and attached 450-space parkinggarage. The property is located at 2828 N. Clark Street, just south of Diversey in Chicago's Lincoln Park neighborhood. It was builtin 1925 as a live theater and renovated and redeveloped in 1975, expanded in 1985 and expanded and renovated again in 2000. InDecember 2012 the property was purchased for $17,500,000 or $102.88 per square foot. At the time of sale the property was about73% occupied and anchored by Bally Total Fitness and Landmark Theaters. Additionally, at the time of sale there was a pendingLOI with CVS to occupy currently encumbered space over a new long-term lease. Based on existing income and expenses an11.1% cap rate is implied. The property was a short sale, while it was activitly marketed and as such we believe it represented amarket-oriented transaction.

Century Shopping Center

N/AN/AN/A

$11.42





Location:

County:

Location Data

Physical Data

Sale Data Sale

Century Mall LLCBAI Century LLCN/A


$17,500,000$0$17,500,000

Public Records

Regional MallType:

6 months12/2010

Transaction Type:

Sale Price:



Req.Capital Cost:



N/A

N/AAtlas Ref:





Projected IRR:

Excess Land:

Year Built:


Parking:


Anchor Tenant GLA:

Anchors:

GLA Purchased:

Bally Total FitnessLandmark Theatre

Total GLA:

Local Tenant GLA:

None

1925

AverageConcrete and terra c

450 Garage Spaces

N/A

170,109 SF

170,109 SF

170,109 SF

RETAIL SALE No. 5

3131 North Clark StreetChicago,IL 60657Cook

Financial Data

Appraiser65%Existing

N/AN/AN/AN/A

$1,967,645

TotalN/A

Per SF

Analysis



Comments

The Point at Clark is an urban power center located on a triangular site at 3131 North Clark Street in Chicago, Cook County, Illinois.The property is a two-story, plus basement, retail building with 95,455 square feet of gross leasable area that features two levels ofstructured parking garage space. The property was constructed in 1996 and is situated on a 0.90-acre site. At the time of sale, thecenter was 100% leased and 65% occupied. Linens ’N Things had previously occupied 33,140 square feet on the street and lowerlevels, but declared bankruptcy and vacated the space at the end of 2008. However, the parent company, CVS, guaranteed thelease, which extends through January 2017. Michael’s has leased 28,140 square feet of the former Linens space, and wasprojected to take occupancy in July 2010. The center's in-place tenants were DSW and Marshall’s. In June 2010, the property soldfor $28,816,000, or $301.88 per square foot. The center's net operating income is $20.61 per square foot, which implies acapitalization rate of 6.83%. However, the NOI excludes the CVS-guaranteed revenue of approximately $390,000 annually, or$4.09 per square foot, which is handled as a below-the-line item in the cash flow analysis. Based on the center's overall income of$24.70 per square foot, a capitalization rate of 8.18% is implied.

The Point at Clark

N/AN/AN/A

$20.61





Location:

County:

Location Data

Physical Data

Sale Data Sale

Point Clark St LLC (Principle RealInland Point Clark LLC (InlandN/A


$28,816,000$0$28,816,000

Seller, Buyer, Broker

Power CenterType:

N/A6/2010

Transaction Type:

Sale Price:



Req.Capital Cost:



See notes

N/AAtlas Ref:





Projected IRR:

Excess Land:

Year Built:


Parking:


Anchor Tenant GLA:

Anchors:

GLA Purchased:

Marshall's (Upper)Michael's (Street)DSW (Lower Level)Vacant LL (CVS

Total GLA:

Local Tenant GLA:

None

1996

AverageStructured garage

95,455 SF

38,715 SF28,140 SF23,600 SF

95,455 SF

5,000 SF

95,455 SF

N/A


ADDENDUM C

RENT COMPARABLE DATA SHEETS

RETAIL COMPARABLE No. 1

Comments

The Point at Clark is an urban power center located on a triangular site that is bound by North Clark Street, North Halsted Street, andWest Belmont Avenue in Chicago's Lakeview neighborhood. The property is a two-story, plus basement, retail building with 95,455square feet of gross leasable area, that features two levels of structured parking garage above the retail stores. The property wasconstructed in 1996 and is situated on a 0.90-acre site that features excellent visibility. It is currently 94.8% occupied. In-placerental rates range between $21.00 and $22.50 per square foot, triple net. The most recent leased commenced in July 2010 whenMichael's leased the majority of the the former Linens ’N Things space consisting of 28,140 square feet at an initial rental rate of$21.00 per square foot, triple net over an approximate ten-year term. Terms of the lease included a tenant improvement allowanceof $40.00 per square foot and approximately $2.00 per square foot escalations every two years. Expenses are estimated to be$14.61 per square foot.

The Pointe at Clark Street

Physical Data

Lease Data


Recent Leases

3131 North Clark StreetChicago,IL 60657Cook

Location:

County:

Location Data

See Notes

N/AAtlas Ref:


Occupancy:94.8%

N/AN/AN/AN/A$14.61 PSF

Yes

10 - 20 YearsN/A

$21.00 - $22.50 PSF

NNN

09/2010

Typical Size:

Term:Base Rent PSF:Rent Escalations:Basis:Expense Pass-Thru:Free Rent (months):Tenant Improvement:Leasing Agent:Phone No.:Survey Date:

Escalations Free Rent(Months)

TI(PSF)

Rent(PSF)Tenant

Size(SF)Date

Term(Yrs)

$2.00 PSF / 2 yNA $40.00$21.00Michael's07/2010 10.00

NA $0.00$22.50DSW04/2006 10.00

28,140

23,600

95,455 SF1996

Good

Gross Leaseable Area:Year Built:


Parking: 170

94.8%Local:Overall:

Anchor Tenant GLA:

Anchors:DSWMarshallsMichael's

Total GLA:

Local Tenant GLA:

90,455 SF

23,600 SF38,715 SF28,140 SF

95,455 SF

5,000 SF


Comments

This comparable, Belden Centre is a 51,117 square foot retail center comprised of a lower level, first and second floor commercialcomponent of a seven-story mixed-use residential/commercial property built in 1991. The property is located at the northeast cornerof Clark Street and Belden Avenue in Chicago’s Lincoln Park neighborhood. The property is currently 98% leased, and hasexperienced a strong lease-up over the past two years improving from 21% occupied in 2010 following its largest tenant TowerRecords vacating along with a number of other tenants during the downturn. The property includes 38 surface parking spaces and22 below grade garage spaces, which is somewhat unique to retail properties in the neighborhood. The in-place rental rates rangebetween $14.00 and $52.00 per square foot with suite size and location within the center the most notable variants. Lease termsrange between three and ten years. The majority of leases include rental rate escalations between 1.5% and 3% annually and arestructured on a triple net basis. Operating expenses are estimated to be $8.18 per square foot. New leases have been signedbetween $24.00 and $30.00 per square foot. Tenant improvement allowances have ranged from nothing to $40.00 per square footand up to twelve months free rent has been negotiated.

Belden Centre

Physical Data

Lease Data


Recent Leases

2301 N. Clark StreetChicago,ILCook

Location:

County:

Location Data

14-33-106-014, -015

N/AAtlas Ref:


Occupancy:98.7%

N/ACBRE03-12$8.18 PSF

10%/5yrs

3 - 10 YRSN/A

$14.00-$52.00 PSF

NNN

01/2013

Typical Size:



TI(PSF)

Rent(PSF)Tenant

Size(SF)Date

Term(Yrs)

1.5% Annual12 $40.00$28.00Little Gems Academy05/2012 15.00

Flat5 $25.00$30.00The Daily Method08/2012 5.00

3% AnnualNone $0.00$24.00Eleven City Diner04/2013 3.00

35,250

2,285

5,222

51,117 SF1991

AverageMasonry



Parking: Underground and street level l

98.7%Local:Overall:

Anchor Tenant GLA:

Total GLA:

Local Tenant GLA:

N/A

51,117 SF

51,117 SF


Comments

Webster Place is a 134,329 square foot retail center situated at the southwest corner of North Clybourn and Webster Avenues in theLincoln Park neighborhood of Chicago. The two-story center was developed in 1988 with two structured parking garages and lies on4.60 acres. Webster Place is anchored by Loews Theaters, LA Fitness (formerly Bally Total Fitness, Barnes & Noble and Bank One.The center is currently 97% leased. In-place rental rates range between $16.40 and $34.00 per square foot on a triple net basis. Theleasing agent estimated pass-through expenses to be $14.25 per square foot. Leases are typically signed over a five-year term forsmall shop space and ten to 20 years for the anchor spaces.

Webster Place

Physical Data

Lease Data


Recent Leases

1435-1471 W Webster AveChicago,ILCook

Location:

County:

Location Data

N/A

N/AAtlas Ref:


Occupancy:97.4%

N/ASynicated Equities$0 - $20 PSF2$14.25 PSF

2.5% - 3% annually

5 - 10 Yrs2,000 SF

$16.40 - $34.00

NNN

01/2013

Typical Size:



TI(PSF)

Rent(PSF)Tenant

Size(SF)Date

Term(Yrs)

$0.00$33.98Confidential03/2010 5.00

10% Midterm $0.00$20.90Bally's Total Fitness12/2004 10.00

NA $0.00$16.39Loews Theater04/1998 20.00

NA $0.00$16.37Barnes 'N Noble04/1997 15.00

1,738

32,315

49,500

29,957

134,329 SF1988

GoodMasonry



Parking: 479 Spaces

97.4%Local:Overall:

Anchor Tenant GLA:

Anchors:Barnes & NobleBally's Total FitnesLoews Theatres

Total GLA:

Local Tenant GLA:

95,037 SF

29,888 SF31,956 SF33,193 SF

134,329 SF

39,292 SF


Comments

This comparable represents a 5-story, 312,000 square foot mixed/use retail/office building with attached parking located along N.Clybourn in Chicago's Lincoln Park neighborhood. This property was developed in 1938, and renovated from 2002 to 2004. It iscurrently 74.8% leased. The configuration of the center has impacted its occupancy. In down markets, it is the unique propertiesthat are the most impacted (and the last to recover). The center is anchored by Trader Joe's, ALDI and Crate & Barrel Outlet. Theretail space is situated on the first two floors. Crate & Barrel Outlet leased 12,640 square feet of street level space over a ten-yearterm at an initial rate of $26.52 per square foot net. Trader Joe's leased 11,915 square feet of second floor space for $31.47 persquare foot net over a 10-year term. Office space rental rates generally range between $18.00 and $29.50 per square foot on eithera triple net or modified gross basis. Some free rent has been negotiated as well as a TI allowance up to $25.00 per square foot.

Clybourn Galleria

Physical Data

Lease Data


Recent Leases

1840 North ClybournChicago,ILCook

Location:

County:

Location Data

N/A

N/AAtlas Ref:


Occupancy:78.4%

N/AN/ANegotiableNegotiableVaries

Negotiable

5 to 15 Years4,000 SF

$18.00 to $29.50 PSF

Varies

01/2013

Typical Size:



TI(PSF)

Rent(PSF)Tenant

Size(SF)Date

Term(Yrs)

3% Annual2 $0.00$27.00Chicago Children's Clinic07/2010 3.00

NANA $23.16$24.00Banco Research05/2011 7.00

564

2,029

312,000 SF1938

GoodBrick



Renovated from 2002 to

Parking: 184 Covered

78.4%Local:Overall:

Anchor Tenant GLA:

Anchors:Children's MemorialCrate & BarrelTrader JoesAldi

Total GLA:

Local Tenant GLA:

86,901 SF

41,622 SF14,830 SF14,060 SF16,389 SF

312,000 SF

225,099 SF


Comments

This comparable is a 223,912-square-foot mixed-use property, which includes street level retail space, upper level retail andprofessional/medical office space, a private school and an approximate 534-space parking garage. The property is located betweenHalsted and Dayton Streets in Chicago’s Lincoln Park neighborhood. The property is situated in two buildings, which are separatedby a pedestrian corridor and the attached parking garage. The first building was completed in 2007 and consists of the BritishSchool of America situated in 82,901 square feet on floors one through five, as well as street level retail. The second building andparking garage were completed in 2008. The second building contains REI which occupies 28,793 square feet on floors one andtwo, with additional street level and second level retail and upper floors of office space, primarily built out for medical office use. Theproperty is 93% leased. REI leased its space at $34.00 per square foot net over a 10-year term. The office space, which is built-outprimarily as medical/dental space and a school is leased between $23.00 and $36.00 per square foot. All of the rental rates arestructured on a triple net basis. All tenants represent first generation tenants and a tenant improvement allowance between $10.00 to$75.00 per square foot was negotiated.

1466 N. Halsted Mixed-Use Development

Physical Data

Lease Data

Big BoxType:

Recent Leases

1466 N Halsted StChicago,ILCook

Location:

County:

Location Data

N/A

N/AAtlas Ref:


Occupancy:93.3%

N/AMid AmericaNegotiableN/AN/A

2% - 3% Bumps

10 YRS28,672 SF

$23.00 - $36.00 PSF

NNN

01/2013

Typical Size:



TI(PSF)

Rent(PSF)Tenant

Size(SF)Date

Term(Yrs)

$0.00$34.00REI10/2008 10.00

2% AnnuallyNA $0.00$28.00Physical Sciences Institu04/2011 10.00

3% AnnuallyNA $0.00$25.74Associated Allergists05/2011 9.00

3% AnnuallyNA $0.00$26.00Northwestern Memorial (Ex06/2011 10.00

28,672

2,134

2,398

1,525

223,912 SF2008

GoodMasonry



Parking: Adequate

93.3%Local:Overall:

Anchor Tenant GLA:

Anchors:REI

Total GLA:

Local Tenant GLA:

28,672 SF

28,672 SF

223,912 SF

195,240 SF


Comments

This comparable is a 146,306-square foot mixed-use retail/office property and 150-space parking garage within a larger 35-floorresidential condo building. The comparable represents the first seven floors of the residential condo building that was built in 1991.The property is located at 1030 N. Clark Street in Chicago’s Gold Coast neighborhood. The property is currently 93% leased. It isanchored by Fitness Formula Club and Dave & Busters, both original tenants of the building. The in-place rental rates varysignificantly ranging and between $9.25 and $40.00 per square foot. At the low end of the range, Fitness Formula Club has been anoriginal tenant of the building and leases the largest anchor space at $10.50 per square foot, net, which represents the first of twofive year renewal options, that commenced in July 2012. The other anchor space is leased at $12.00 per square foot. Terms of thelease are flat and on a net basis. At the high end of the range, Swerve Salon leased a 2,650-square foot street level retail space at$40.00 per square foot on a gross basis. The space was provided “as is” and terms of the lease include six months free rent and 3%annual escalations. The asking rent for the available street retail space is $45.00 per square foot net. The office space is leased onboth a net and gross basis. The largest office user leases its space at $13.71 per square foot net, flat over its lease term, while thesmaller users lease their space between $18.00 and $25.00 per square foot on a gross basis. The asking rental rate for the available

Clark & Maple

Physical Data

Lease Data


Recent Leases

1030 North Clark StreetChicago,ILCook

Location:

County:

Location Data

17-04-422-038-0000

N/AAtlas Ref:


Occupancy:93%

N/AN/AFree rent in lieu of TIUp to 1 mo/leasNAV

3% Annual

5 - 10 YearsN/A

$10.50 - $40.00 PSF

NNN/Gross

01/2013

Typical Size:



TI(PSF)

Rent(PSF)Tenant

Size(SF)Date

Term(Yrs)

NAVNAV $0.00$21.00Office User06/2012 2.00

Flat2 $0.00$18.00Dr. Herron08/2011 2.00

3% Annually6 $0.00$40.00Swerve Salon03/2011 5.00

FlatNone $0.00$10.50Fitness Formula Club (Ren07/2012 5.00

1,782

2,756

2,650

58,165

146,306 SF1991

GoodConcrete and Glass



Parking: 150 Garage Spaces

93%Local:Overall:

Anchor Tenant GLA:

Anchors:Fitness FormulaDave & Buster

Total GLA:

Local Tenant GLA:

N/A

146,306 SF

146,306 SF


ADDENDUM D

QUALIFICATIONS

QUALIFICATIONS OF

LES LINDER, MAI, CCIM Managing Director

CBRE Inc., Valuation and Advisory Services

311 South Wacker, Suite 400 Chicago, IL 60606

(312) 233-8665 [email protected]

EDUCATIONAL Bachelors of Science Degree, Business – Real Estate Administration Indiana University, Bloomington, Indiana

CERTIFICATION State Certified General Real Estate Appraiser: State of Michigan (No. 1201003343) State Certified General Real Estate Appraiser: State of Illinois (No. 553.001947) State Certified General Real Estate Appraiser: State of Indiana (No. CG-40801085)

PROFESSIONAL Designated Member, Appraisal Institute (MAI), Member No. 37831 Member of the Commercial Investment Real Estate Institute (CCIM), Certificate No. 11264

EMPLOYMENT EXPERIENCE 1987-1994 Oetzel-Hanton-Williams, Inc. Appraiser Troy, MI 1994-1994 National Realty Advisors

Senior Appraiser Troy, MI 1994-1996 Laurencelle Appraisal Company Senior Appraiser Birmingham, MI 1996-2004 Bank One Inc. Vice President Detroit, MI 2004-2008 CB Richard Ellis, Inc Managing Director Southfield, MI 2008-Present CBRE, Inc Managing Director Chicago, IL Valuation assignments included all types of existing as well as proposed commercial, industrial, multiple-family residential and special purpose properties throughout the mid-west, including apartments, office buildings, industrial manufacturing and warehouse facilities, shopping centers, restaurants, hotels, motels, manufactured home communities and a wide variety of investment and special purpose properties and unimproved land. In addition I have testified as an Expert Witness for US Bankruptcy court.

QUALIFICATIONS OF

Kristin Johnson Vice President

CBRE, Inc.

Valuation and Advisory Services 311 South Wacker Drive, Suite 400

Chicago, IL 60606 T: 312 233 8654 F: 312 233 8660

[email protected]

EDUCATION

Bachelor of Science, Finance - University of Illinois, Champaign-Urbana, IL Significant Number of Appraisal Institute Courses

LICENSES/CERTIFICATIONS

Certified General Real Estate Appraiser: State of Illinois (553.001635, Exp. 09/30/13) Associate Member Appraisal Institute

EMPLOYMENT EXPERIENCE August 1996 – January 2000 Hewitt Associates, Project Manager

Lincolnshire, IL April 2000 – May 2001 Salomon Smith Barney, Associate Regional Sales Director Chicago, IL August 2001 - Present CBRE, Inc., Vice President Chicago, IL Kristin Johnson has been involved in the valuation of various property types throughout the Midwest United States. Assignments include retail properties including neighborhood/community center, regional malls and life-style centers, office buildings, industrial facilities, apartment properties, manufactured home communities, residential and office condominiums, parking garages, self-storage facilities, net leased investments and mixed-use properties.

Valuation Report on

Aviv Park, Pancevo, Serbia

12 Milosa Obrenovica Street, Pancevo, Serbia

January 2013

Bulevar Mihajla Pupina 6, Novi Beograd,

Srbija

tel. +381 11 2200 101

fax +381 11 2200 102

PIB 100347859

Jones Lang LaSalle d.o.o Bulevar Mihajla Pupina 6, Novi Beograd

Raiffeisen Bank 265-1100310000111-07

Registrovan u Agenciji za privredne registre pod brojem 1-86293-00

Matični Broj 17371436

5th March, 2013

Mr Eyal Bartov, CFO Aviv Arlon Ltd. 7 Jabotinsky St. Ramt Gan Israel

To Whom It May Concern RE: Appraisal for Aviv Park in Pancevo We understand that the appraisals carried out by our firm dated 31

st December 2012 ("Appraisal Report") will

be used by Aviv Arlon Ltd. (“Aviv Arlon”) for the preparation of its annual financial statements for 2012. We consent to the use of our Appraisal Report in Aviv Arlon financial statements and to its publication should Aviv Arlon be required to do so. However, we take no responsibility or liability for any misrepresentation of the appraisal information in the financial statements or any other publication for public disclosure. Best regards,

Bryan Beaton, MRICS Head of Capital Markets Jones Lang LaSalle d.o.o. Serbia

Valuation Report of Aviv Park, Pancevo, Serbia

COPYRIGHT © JONES LANG LASALLE IP, INC. 2013. All Rights Reserved 1

15 January 2013

Dear Madam,

VALUATION OF THE AVIV PARK, PANCEVO, SERBIA

We have pleasure in reporting to you in accordance with our valuation engagement letter dated 14 January 2013

regarding the above property. We understand that the valuation is required for Financial Reporting purposes.

We inspected the property on 5th June 2012 and have carried out all the necessary enquiries with regard to investment

value, planning issues and investment considerations.

We have not been instructed to carry out a building survey or environmental risk assessment. We have been provided

with floor areas by the Client and have assumed that these have been prepared in accordance with SRPS standard.

Basis of Valuation

Our Valuation has been prepared in accordance with the RICS Valuation Standards - Global (7th Edition). The basis of

valuation is the Market Value of the property, as at the date of valuation, defined by the RICS as:

“The estimated amount for which an asset or liability should exchange on the valuation date between a willing

buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each

acted knowledgeably, prudently and without compulsion.”

For the subject purposes the above Market Value definition under RICS meets the Fair Value measurement requirement

under IFRS 40.

The full interpretive commentary on this definition is attached at Appendix 3. The report is subject to, and should be read

in conjunction with, the attached General Terms and Conditions of Business and our General Principles Adopted in the

Preparation of Valuations and Reports, which are attached in the Appendices 1 and 2.

Having regard to the contents of this Report, we are of the opinion that the Market Value of the Aviv Park Pancevo ,

located at Milosa Obrenovica Street, Pancevo, Serbia, subject to the assumptions outlined in the following Report, as at

31 December 2012, was in the region of:

Aviv Arlon Holding d.o.o. Vladimira Popovića 6 11000 Belgrade Serbia For the attention of: Mr. Nir Saar

Jones Lang LaSalle d.o.o. Bulevar Mihajla Pupina 6

Novi Beograd, Srbija

Bryan Beaton Petar Jovanovic

Tel. +381 11 2200 101

Fax +381 11 2200 102

[email protected] [email protected]



MARKET VALUE OF THE AVIV PARK PANCEVO STANDING INVESTMENT

€24,700,000

(Twenty Four Million Seven Hundred Thousand Euro)

MARKET VALUE OF THE AVIV PARK PANCEVO SURPLUS LAND

€5,400,000

(Five Million Four Hundred Thousand Euro)

Market Value is understood as the value of the property estimated without regard to cost of sale or purchase, and

without offset for any associated taxes. Therefore no allowances have been made for any expenses of realisation, or for

taxation, which might arise in the event of a disposal. The property is considered as if free and clear of all mortgages or

other charges which may be secured thereon.

The above value assumes Klupko d.o.o. has 100% share in the property

Transaction costs typically comprise the following:

(a) Stamp duty is 2.5%; however it is not applicable for the transfer of shares of an asset holding company. However, if

the shares of a company are sold to acquire real estate i.e. and Special Purpose Vehicle (SPV) then the Stamp

Duty is 0.3% of the Market Value.

(b) Court registration and Notarial fees: vary according to transaction, however these are not significant.

(c) VAT is chargeable on first transaction of a property improved after 1 January 2005 and it is not charging on any later

transaction. VAT rate is 20% with exception for residential properties where is 8%. Sale of share is VAT exempt for

the first sale.

(d) Agent’s fees at 1-3% of purchase price plus VAT. It is more likely that a fee of 2% would be charged on an

investment disposal and a higher fee around 3% charged on the acquisition of land.

This Report on the Aviv Park Pancevo has been prepared for and only for Aviv Arlon Holding d.o.o. for financial reporting

purposes. The property has been valued as at 31 December 2012 on the basis of Market Value for financial reporting

and for no other purposes. To the fullest extent permitted by law, we do not accept or assume responsibility or liability in

respect of the whole or any part of the report or valuation for any other purpose or to any other person or entity to whom

the report or valuation is shown or disclosed or into whose hands it may come, whether published with our consent or

otherwise, except where expressly agreed by our prior consent in writing.



Finally, and in accordance with our normal practice we confirm that this report is confidential to the party to whom it is

addressed for the specific purpose to which it refers. No responsibility whatsoever is accepted to any third party and

neither the whole of the report, nor any part, nor references thereto, may be published in any document, statement or

circular, nor in any communication with third parties without our prior written approval of the form and context in which it

is to appear.

Yours faithfully,

Bryan Beaton MRICS Head of Capital Markets

Jones Lang LaSalle d.o.o.



Contents

1 Executive Summary ............................................................................................................................................... 2

2 Location .................................................................................................................................................................. 5

2.1 Macro Location ........................................................................................................................................................ 5

2.2 Micro Location.......................................................................................................................................................... 6

3 Description ............................................................................................................................................................. 7

3.1 Site ........................................................................................................................................................................... 7

3.2 Services ................................................................................................................................................................... 8

3.3 Property Description, Construction and Condition ................................................................................................... 8

3.4 Accommodation ....................................................................................................................................................... 9

3.5 Soil Conditions and Contamination .......................................................................................................................... 9

4 Legal ..................................................................................................................................................................... 10

4.1 Tenure ................................................................................................................................................................... 10

4.2 Title No. ................................................................................................................................................................. 10

4.3 Tenancy ................................................................................................................................................................. 10

4.4 Planning ................................................................................................................................................................. 11

5 Market Commentary ............................................................................................................................................ 13

5.1 Serbian Economy ................................................................................................................................................... 13

5.2 Pancevo Retail Market ........................................................................................................................................... 17

6 Valuation Commentary ........................................................................................................................................ 19

6.1 Valuation Methodology .......................................................................................................................................... 19

6.2 Valuation Approach - Income Approach ................................................................................................................ 19

6.3 General Valuation Assumptions ............................................................................................................................. 19

6.4 Specific Valuation Assumptions ............................................................................................................................. 20

6.5 SWOT Analysis ...................................................................................................................................................... 21

6.6 Valuation Summary – Standing Investment ........................................................................................................... 21

6.7 Valuation Approach - Residual Method.................................................................................................................. 21

6.8 General Valuation Assumptions ............................................................................................................................. 22

6.9 Specific Valuation Assumptions – Residual Method .............................................................................................. 23

6.10 SWOT Analysis ...................................................................................................................................................... 25

6.11 Valuation Summary – Surplus Land....................................................................................................................... 25

7 List of Documents Used in Valuation Report .................................................................................................... 27



Appendices

Appendix 1 ......................................................... General Principles Adopted in the Preparation of Reports and Valuations

Appendix 2 ........................................................................................................ General Terms and Conditions of Business

Appendix 3 ................................................................................................................................... Definition of Market Value

Appendix 4........................................................................................................................................................Location Map

Appendix 5............................................................................................................................................................... Site Plan

Appendix 6.................................................................................................................................. Extract from Land Register

Appendix 7......................................................................................................................................................... Photographs

Appendix 8......................................................................................................................................................... Calculations



1 Executive Summary

Address 12 Milosa Obrenovica Street, Pancevo, Serbia

Location The subject property is located in Pancevo, in the province of Vojvodina,

approximately 15km northeast from the capital city of Belgrade. Pancevo is

located on the left bank of Danube River.

The subject property is located east from the centre of Pancevo, 1,900 m

from the main square (Trg Slobode) in the centre of the city

The subject property is located within a block bordered by Prvomajska

Street, Milosa Obrenovica Street and Bore Stankovica Street. Prvomajska

Street is also part of international highway route E70 (Belgrade –

Timisoara – Bucharest).Milosa Obrenovica Street is also an important road

and it connects the subject property with the city centre.

Description In total there is 73,647 sq m of land area. The existing retail park takes up

approximately 47,000 sq m.

Aviv Park in Pancevo is big box format retail park. So far all phases of this

development have been finished except the last phase. First phase of the

development comprised of the big box supermarket which is currently

occupied by DIS d.o.o. Krnjevo. All buildings have only ground floor. Other

phases comprised of retail units, some of which are big box format.

Buildings are extending from north to south. North side of the plot

represents the main entrance from Milosa Obrenovica Street. There is also

an entrance on the southern side of the plot from Prvomajska Street. There

is a central parking area which is located between two buildings. Each of

the buildings has numerous retail units facing the parking lot located in the

middle. There are two retail units, cafe and food retailer, located in the

middle of the parking lot.



Accommodation Current accommodation is 18,921 sq m GLA for the existing part of the

development.

Tenure The land and existing are held in freehold ownership by Klupko d.o.o.

Tenancy The total GLA of the Aviv Park is 18,921 m2. According to the Tenant list,

we were provided with all of the retail units are leased (18,126 m2), also

the playground and car wash are leased (795 m2). So far (four phases

completed) there are 38 retail units, distributed among retailer types as

shown in the table below. There are also 38 different brands, some of

which are held by the same retailer. The biggest part of the retail park are

occupied by DIS Supermarket (24%), different fashion retailers (29%) such

as C&A, New Yorker and Takko; and DIY “Uradi Sam” (10%).

Key Assumptions Standing Investment – Income Approach DCF

(a) After expiry of the current lease agreements we have adopted the

annual indexation according to HICP at the level of 2.5%, applied on

the anniversary of signing the lease agreement;

(b) A 3-month void period has been adopted after the current lease

agreements expiry. The expiry void covers the leasing void as well

as the leasing costs, utilities costs for vacant areas and the

incentives for new tenants;

(c) We have also adopted an allowance in respect of unpaid rent and

other non-recoverable operating expenses at 1% and 2% of total

gross income respectively;

(d) We have applied 2% on-going vacancy rate starting from the 2nd

year of our calculations;

(e) We have applied 9.50% discount rate in our calculations.

(f) We have applied 9.00% exit yield in our calculations.

Surplus Land – Residual Valuation

(a) We have assumed a total of 15,000 sq m will be built in the future,

(b) The total projected Gross Market Rental Income assuming 100%

occupancy is €1.71 million. We have adopted total non-recoverable

costs of 5.0%, which include Loss of Rent of 3% and non-

recoverables at 2.0%. Therefore the Total Net Income (assuming

Fully Let) is €1.63 million.

(c) Based on the previous phases we have assumed that the property

is 100% pre-let.

(d) We have applied an initial yield of 10.00%.

(e) This indicates a GDV less letting fees of €16.3 million.

(f) Construction period 2 years.

(g) We have adopted a finance rate of 7%.



(h) We have adopted a developer’s cost of 17% (€1.5 million) to reflect

the level of profit that be required by a purchaser to undertake the

development project.

(i) We deduct interest on the site (€782 thousand) to give a Residual

Site Value of (€5.4 million).

Valuation at 31 December 2012 Having regard to the contents of this Report, we are of the opinion that the

Market Value of the part of the Aviv Park located in Pančevo, Serbia

subject to the assumptions outlined in the following Report, as at 31

December 2012, was in the region of:

MARKET VALUE OF THE AVIV PARK PANCEVO STANDING

INVESTMENT

€24,700,000



€5,400,000




2 Location

2.1 Macro Location

The subject property is located in Pancevo, in the province of Vojvodina, approximately 15km northeast from the

capital city of Belgrade. Pancevo is located on the left bank of Danube River.

Pancevo is the centre of petrochemical industry of Serbia. Three very important petrochemical companies are

located in Pancevo – “NIS Petrol” petroleum refinery, “HIP Petrohemija” and “HIP Azotara”. Danube Port, one of

the most important river ports in Serbia, is located in Pancevo.

Pancevo has an urban population of around 74,000 inhabitants, while the whole municipality has around

122,000 inhabitants. The total area of the municipality is 148.8 km2. Pancevo is also the administrative centre of

the South Banat district of Serbia.

Pancevo is connected to the capital City of Belgrade through international highway route E70 (Pancevacki drum)

and Pancevacki Bridge. Pancevo also has a very good connection with other major cities and towns in

Vojvodina – Novi Sad, Vrsac and Zrenjanin.

Map 1: Location of Pancevo in national context of the Serbia

Source: Jones Lang LaSalle



2.2 Micro Location

The subject property is located east from the centre of Pancevo, 1,900 m from the main square (Trg Slobode) in

the centre of the city.

Pancevo is composed of mostly middle to lower class residential neighbourhoods with couple of large industrial

developments. The municipality of Pancevo is bordered by the municipalities of Opovo, Kovacica, Alibunar,

Kovin and the City of Belgrade. The city of Pancevo is actually closer that some Municipalities of Belgrade

already and has better transport routes.

The subject property is located in the central part of Pancevo. The subject property is located within a block

bordered by Prvomajska Street, Milosa Obrenovica Street and Bore Stankovica Street. Prvomajska Street is

also part of international highway route E70 (Belgrade – Timisoara – Bucharest).Milosa Obrenovica Street is

also an important road and it connects the subject property with the city centre. The shape of the block is

triangular and there are Roda big box supermarket and park located within the same block. The subject property

is bordered by “FMZ Pancevo” industrial development in the east, residential neighbourhoods in the south and

the north and Roda supermarket and NIS Petrol warehouses further on in the west. Other important sites are:

Pancevo railway station (1,600 m), the Municipality of Pancevo (1,900 m) and Belgrade Airport (38 km). The

subject property is also located in the close proximity of heavy industry – Glass factory (1 km) and “NIS Petrol”

petroleum refinery (4.5 km).



3 Description

3.1 Site

Characteristics

The subject property has good visibility and exposure having in mind that it is located between two important

roads in Pancevo. It benefits from frontage on Prvomajska Street and Milosa Obrenovica Street. The main

entrance is located on Milosa Obrenovica Street and the frontage is 200 m. The visibility from Milosa

Obrenovica Street is partial decreased by the green area planted with trees on the sidewalk. The frontage on the

Prvomajska Steet is 170 m, but looking from the main entrance to the retail park, this is a back part of the land

plot which is still undeveloped. The terrain is flat.

The subject property is located in the Cadastral Municipality of Pancevo. The land plot comprises of cadastral

parcel number 4733. The total size of the land plot is 73,647 m2 according to the land book number 11835.

The shape of the land plot is irregular – polygonal. This shape of the land plot is adequate for the multi-phase

development with several buildings, where each phase would comprise of new building in different part of the

land plot, what is the case of the Aviv Park.

The subject property is located in the middle of the block bordered by Prvomajska Street, Milosa Obrenovica

Street and Bore Stankovica Street. Rest of the block is occupied by Roda supermarket and park in the west and

“FMZ Pancevo” industrial development in the east.

According to the previously provided Extract of Act on Urban Planning, maximum allowed gross area of the

buildings can be 156,000 m2. According to the same document, the subject building should have 700 parking

places. According to the same document, the site coverage allowance is up to 80%.

Klupko d.o.o. Pancevo has been granted a construction permit for the fifth phase of the complex – Business

centre. New phase of the development will comprise 4,066.52 m2 GBA and 3,910.66 m2 of net area. It will

comprise two separate functional parts. First building will be in a shape of a horse shoe (GF + 1), while the

second building will be of rectangular shape (GF). The construction will be reinforced concrete columns put on

12x12m grid. The construction will be laid on reinforced concrete slab. Vertical communication will be provided

by RC staircases and elevator. Roof will be done in iron construction covered in trapezoidal tin panels. Front

side of the building will be improved with an overhang (3.5 m wide, 4 m high). Façade will be done in thermo-

insulated sandwich panels on an iron sub construction, covered in tin panels. Doors and windows will be

aluminium with thermo pan glass. West side of the building will have glass shop windows. Floors in common

areas will be done in granite tiles; technical facilities in ceramic tiles. New development will provide 84 parking

places in the outside parking.

Access

The general accessibility to the retail park is good since it is located between two very important roads, one of

which is a connection to city centre – Milosa Obrenovica Street, and the other is part of international highway

route E70 (Belgrade – Timisoara – Bucharest) – Prvomajska Street, and it can be accessed from both of them.

There is an access from the north through Prvomajska Street, while from Milosa Obrenovica Street cars can

access the property from both directions.



The subject site has a really good connection to city centre (Trg Sloboda, 1,900 m) through Milosa Obrenovica

Street. The site is located 2.4 km from Danube River port, 3.5 km from railway cargo terminal, 150m from

passenger railway terminal of “Beovoz” and 38 km from Belgrade Airport.

There are three bus lines passing the sight through Milosa Obrenovica Street: 2 (Kotez II – Dolovo), 3 (Jabuka

III – Stari Tamis) and 6 (Snezana – Rafinerija Nafte Pancevo). Frequency of the buses is every half an hour

during workdays.

3.2 Services

We understand that all mains services are available to the property including electricity, water and main

drainage. We have assumed that the capacity of the services is adequate for the future use of the property but

have been unable to verify that this is the case.

3.3 Property Description, Construction and Condition

Aviv Park in Pancevo is big box format retail park. So far all phases of this development have been finished

except the last phase. First phase of the development comprised of the big box supermarket which is currently

occupied by DIS d.o.o. Krnjevo. All buildings have only ground floor. Other phases comprised of retail units,

some of which are big box format. Buildings are extending from north to south. North side of the plot represents

the main entrance from Milosa Obrenovica Street. There is also an entrance on the southern side of the plot

from Prvomajska Street. There is a central parking area which is located between two buildings. Each of the

buildings has numerous retail units facing the parking lot located in the middle. There are two retail units, cafe

and food retailer, located in the middle of the parking lot. There is a sidewalk, 4.8 m wide, along each building in

front of the entrances. Sidewalk is made of interlocking concrete paving tiles. There is a roof overhang above

the sidewalk. The height of the overhang is 4 m and the width is 3.4 m. There are two public toilets located on

each side of the park (one in each building). Around 90% of the units have WC within the unit. There is

announcement system and video surveillance in the park.

Construction

Buildings are made of prefabricated concrete structure with reinforced concrete slab with an insulated

corrugated tin panel facade.

The height of the ceiling is approximately 6.2 m (sample measure: Deichman warehouse, height to the bottom of

the beam is 5.6 m). The clear ceiling height in retail units is around 3.4 m. The roof is made of prefabricated

beams covered in insulated corrugated tin panels with hydro insulation covering. Most of the units have

suspended gypsum ceilings. Some of the units have gypsum boards.

The flooring depends on retail unit. In the hypermarket and DIY unit it is treated finished concrete. In other retail

units it is covered in ceramic tiling or combination of ceramic tiling and laminate. Entrance areas and the WC

also have tiled floors.

Retail frontage is made of aluminum framed large glass shop windows. Each retail unit entrance has automatic

door with ventilation unit above the door.

Each retail unit has an air-condition system with different solutions depending on the unit. Each unit has fire

alarm and protection system. Some of the units have video surveillance.



Warehouse areas do not have ceilings, while floors are treated finished concrete with large bay doors for goods

receipt at the back of each unit.

The construction structure is appropriate for this kind of development.

3.4 Accommodation

We have relied upon the floor areas according to the client and confirm that we have not made any check

measures. We understand that noted areas are according to the Serbian standard SRPS.U.C2.100 from 2002

(former JUS standard).

The planned building areas according to JUS standard are given in tables below:

Table 1: Accommodation Schedule

Accomodation Use Share

Rentable Area

(sqm)

Ground Floor Retail 100.00%

18,921.00

Total 100%

18,921.00

3.5 Soil Conditions and Contamination

We have not been provided with a soil test report for construction purposes.

We have not been provided with any formal information on the environmental conditions of the site, however our

inspection did not disclose and abnormalities.



4 Legal

4.1 Tenure

According to the Ownership document number 11835, which was provided to us, there is a freehold ownership

over the subject land plot (cadastral parcel number 4733 in the cadastral municipality of Pancevo), and over the

buildings built on the land.

4.2 Title No.

According to the Ownership document number 11835, which was provided to us, the subject site consists of one

cadastral parcel number 4733, Cadastral Municipality of Pančevo, whose area is 73,647 m2. The property is

registered to belong to Klupko d.o.o.

There is a mortgage over the property and lease agreements to Erste registered in the Netherlands.

4.3 Tenancy

The total GLA of the Aviv Park is 18,921 m2. According to the Tenant list, we were provided with all of the retail

units are leased (18,126 m2), also the playground and car wash are leased. So far (four phases completed)

there are 39 retail units, distributed among retailer types as shown in the table below. There are also 39

different brands, some of which are held by the same retailer. The biggest part of the retail park are occupied by

DIS Supermarket (24%), different fashion clothing retailers (24%) such as C&A, New Yorker and Takko; and

DIY “Uradi Sam” (10%).

Table 2: List of tenants by categories

Retailer type Nr of units

Area Percentage

Supermarket 1 4,427 23%

Fashion 11 4,530 24%

Shoes 3 1,231 7%

Cosmetic/Drogerie 3 1,047 6%

Home 1 1,170 6%

Electronics 2 820 4%

Food/Café 5 622 3%

Kiosk/Exchange office

2 267 1%

DIY 1 1,862 10%

Books 1 129 1%

Sport equipment 3 1,003 5%

Kids (fashion&toys)

5 1,268 7%

Leisure 1 545 3%

Total 39 18,921



Size # Units

not rented area

% Area not rented

actually rented area total area MGR

% of Total Area

0-49m2

6 0.00 0% 197.00 197 € 37,404 1.04%

100-199m2

8 0.00 0% 1,094.00 1,094 € 148,524 5.78%

200-299m2

8 0.00 0% 1,992.00 1,992 € 236,676 10.53%

300-399m2

5 0.00 0% 1,771.00 1,771 € 229,452 9.36%

400-499m2

3 0.00 0% 1,231.00 1,231 € 140,250 6.51%

500-749m2

4 0.00 0% 2,307.00 2,307 € 239,364 12.19%

750-999m2

2 0.00 0% 1,793.00 1,793 € 234,048 9.48%

1000-1499m2

2 0.00 0% 2,247.00 2,247 € 255,042 11.88%

>1500m2

2 0.00 0% 6,289.00 6,289 € 645,960 33.24%

40 0.00 0% 18,921.00 18,921 € 2,166,720 100%

Graph 1 – Lease Expiration Schedule

Source: Aviv Arlon

The WALL is 5.8 years. This is above the average in Serbia and the Capital City Belgrade.

Table 3 – Retailer Profile by Store Size

Source: Aviv Arlon

Currently the whole retail park is leased.

4.4 Planning

The property lies within the jurisdiction of the Municipality of Pančevo Council whose planning policies are

contained within the General plan of Pančevo.

Summary of conditions of Act on Urban Planning Conditions:



Footprint can be 80%.

Scheme can have 2 basement levels + GF + 6

Max. GBA is 156,000 m2 (max. build up index is 2.1.)



5 Market Commentary

5.1 Serbian Economy

Serbian economy faces serious risks at the end of 2012 and will continue to struggle in 2013. The pace of

economic recovery was already slowing sharply during the course of 2011, after a promising first half of the

year. In 2012, economic risks have heightened further, given the uncertainty elsewhere in Europe, combined

with the considerable domestic challenges. The new government that took office in late July faces a range of

obstacles, as it struggles to restore growth amid a difficult domestic and international environment.

In October, the National Bank of Serbia (NBS) further reduced its GDP growth outlook for 2012, putting the

expected decline at 1.5%. GDP fell 1.8% year-on-year (y/y) in the first three quarters, but fourth quarter results

could be somewhat better thanks to rising car production at the country’s Fiat plant.

Serbia's International Monetary Fund (IMF) loan was interrupted in February amid a sharp deterioration of public

deficits and debt under the pre-election cabinet. In September, the government adopted a draft budget revision,

together with a package of 12 laws aimed at reducing the consolidated budget gap from the current 7.1% of

GDP to 6.7% by the end of 2012, still far above the original target of 4.25%. The Serbian government has

adopted a set of accompanying laws, envisaging savings of one billion euros, which will enable regular payment

of salaries in the public sector and pensions. The adopted measures are aimed at stopping further economic

decline and then at creating conditions for development and also to distribute the crisis burden evenly. The

government has also taken measures aimed at boosting industry and agriculture, with a minimal increase of

taxes and excise taxes. The measures boost value-added tax from 18% to 20% and scrap several state

agencies in order to cut expenditures. The excise tax on cigarettes and oil derivatives was increased as well.

However, an IMF mission to Serbia stressed that before it would consider opening talks on a new loan, the

government must rein in spending and restores central bank independence.

The slow economy and uncertain political situation consequently raised the unemployment rate which, according

to Labour Survey in April 2012 reached 25.5% on the country level. The unemployment rate in Belgrade stands

at 22.7% and in Vojvodina 27.2%. An IHS prediction for the unemployment rate for full year 2012 is 26.1%.

Driven by food prices, the year-on-year inflation growth continued in the third quarter and into October as well.

The strongest increase was registered for processed food prices because of the extremely bad agricultural

season and higher production costs. The upward revision of excise duties and of the general VAT rate from 18%

to 20% triggered in October a one-off increase in prices of a large number of products and services. Inflation

rose more intensively mainly because of a higher than expected rise in food prices. Y-o-y inflation reached

12.9% in October 2012.

In the 3rd quarter of 2012, GDP at previous year prices decreased by 2.2% in comparison to the corresponding

period of the previous year.

The average net monthly salary in October 2012 in Serbia amounted to €364and in Belgrade €452.

Serbia's future economic development will depend largely on the country's foreign policy approach.

Encouragingly, the leaders of the 27 EU member states unanimously agreed on 2 March 2012 to grant Serbia

candidate status, providing a clear roadmap for the achievement of full-fledged membership. Nevertheless, as

was the case in gaining candidate status, further progress in bilateral talks with Kosovo will be a precondition for

launching official accession negotiations. In its latest report on Serbia's progress toward integration, published

on 10 October, the European Commission refused to recommend a timeframe for the start of accession



negotiations, calling for a "visible and tangible" improvement of relations with Kosovo. Therefore the negotiations

are not expected to start before late 2013.

Table 1: Serbian Economic Key Market Indicators

Serbia 2008 2009 2010 2011 2012f 2013f 2014f 2015f

GDP - % YOY Growth 3.8 -3.5 1.0 1.6 -1.5 2.0 3.7 4.2

CPI/Inflation - % YOY Growth 12.4 8.1 6.1 11.1 7.3 10.7 5.2 5.3

Fiscal Balance (% of GDP) -2.3 -4.5 -4.7 -5.0 -6.8 -3.5 -3.2 -3.0

Unemployment Rate - % 14.4 16.9 20.0 23.6 26.1 24.7 23.5 22.3

Source: IHS Global Insight, December 2012

Political Situation

The Serbian Progressive Party (SNS), the Socialist Party of Serbia (SPS) and the pro-business United Regions

of Serbia (URS) entered a coalition government in July 2012. The previous pro-Western administration led by

the Democratic Party (DS) and the SPS demonstrated surprising political stability and saw out a full term in

office. The current administration is pursuing some similar policy initiatives such as advancing EU integration

and economic development, while preserving territorial integrity, as their predecessors. However the severe

economic challenges facing the country present a serious risk to political stability

Serbia has been actively pursuing closer ties with the EU since applying for membership in 2009. These efforts

were rewarded with the implementation of the Interim Trade Agreement in February 2010 and the unblocking of

the whole pre-membership Stabilisation and Association Agreement (SAA) with the EU which was originally

signed in May 2008. The decision in March 2012 to award Serbia candidate status to begin accession

negotiations on joining the EU was a major political achievement for the DS party; the increased eligibility for

investment and financial assistance should also provide an economic boost. Serbia has received vocal support

for its membership aspiration from existing EU countries and from neighbouring Croatia, which is set to join in

mid-2013.

Catchment Area and Spending Power

Primary catchment area for Aviv Park includes approximately 279,000 inhabitants and secondary catchment

area includes approximately 117,000 inhabitants living in 9 municipalities on the territory which occupies 4,696

km2.

Table 5: Catchment Area for Aviv Park

Municipality Area km2 Population census 2011 Catchment area Average Net Salary

(January – November 2012)

Pancevo 755 122,252 122,252 €414

Kovin 730 33,725 33,725 €331

Alibunar 602 19,780 19,780 €256 Kovacica 419 25,259 25,259 €237

Opovo 203 10,475 10,475 €283

Total 2,709 211,491 211,491 €304

Source: Jones Lang LaSalle



Primary Catchment area includes the whole population of the City of Pancevo and the whole population of

bordering municipalities of Alibunar, Kovacica, Kovin and Opovo.

Graph 2: Retail Spending in Vojvodina in Q3 2012

Source: Statistical Office of the Republic of Serbia, Available Budget and Individual Consumption of households in the Republic of Serbia

According to the official statistical data, in Q3 2012 Vojvodina households spent 54% of total expenditure on

retail goods. In terms of the structure of the retail spending, 71% was spent on food and non-alcoholic

beverages, 8% on alcoholic drinks and tobacco, 10% on clothes and footwear, 8% on home furniture, equipment

and maintenance and 3% on restaurants and hotels. In Q3 2012, a household in Catchment Area spent

€211/per month on average for retail goods.

Serbian Retail Market Overview

The retail market has experienced a fair degree of modernization in recent years with formats such as regional

shopping centres, community centres and shopping galleries opening across the country. However, compared

to most CEE markets overall supply of these modern retail channels remains limited and small outlets, kiosks,

markets and bazaars still represent the mainstay of the Serbian retail market. This is a consequence of the fact

that Serbia started transition process almost ten years after other ex communist CEE countries and was late in

modernization of its property supply.

At around 43 m² of modern shopping centre space per 1,000 inhabitants Serbia ranks amongst the lowest in

Europe. The city of Belgrade, despite the huge market counting app 1.7 million people is undersupplied with

modern retail schemes as well, especially compared to the cities in CEE and SEE in region. Considering only

three modern shopping centers in Belgrade (Ušće, Delta City and Mercator), the capital city’s shopping centre

density stands at 60 m2 per 1,000 citizens.



Chart 1: Shopping Center Density in the CEE and SEE capital cities

Source: Jones Lang LaSalle, Q3 2012

Following current ICSC’s new European standard for classifying shopping centers, Belgrade has 146,000 m2

GLA of the retail space accomodated in the shopping centers, regional and neighbourhood, above 5,000 m2

GLA. According to the same classification, total country shopping center stock stands at 298,000 m2 GLA.

However, Serbia at the moment has four modern shopping centers constructed according to the western

standards - Ušće, Delta City, Kragujevac Plaza and Mercator.

Apart from the shopping centers, Serbia has been experiencing other type of retail schemes. It has three retail

parks – Aviv Park in Pančevo (18,000 m2 GLA), developed in phases by the Israeli investor Aviv Arlon, Delta

Park in Kragujevac (14,000 m2 GLA) developed by the local company Delta Real Estate and recently opened

BIG Shopping Center in Novi Sad (10,000 m2 GLA). In spring 2012, the first factory outlet fashion Park Outlet

was opened in Indjija, approximately 40 km from Belgrade. The first phase of the Fashion Park Outlet occupies

the area of 15,000 m2 GLA. The second phase of 5,000 m2 will be completed in 2014 and the completion of the

last one of 15,000 m2 is announced for 2016.

Prime retail assets continue to attract the highest retailer demand in both segments - expansions and new

entries. Since the country is quite undersupplied with prime schemes to satisfy the standards and requirements

of international brands, the vacancy rates in modern and high quality schemes are close to zero and the on-

going crisis seems to mainly affect secondary retail assets.

Brands that have entered the market recently have mainly mid to up-market positioning, whilst the luxury

brands, being very quality sensitive, will need to wait for the overall economic recovery of the market and the

delivery of new prime shopping centre schemes. The newcomers generally target prime Belgrade assets and

existing brands are now showing more interest in both modern existing and future retail schemes outside of the

capital city.

Since the beginning of 2012, many new entrants appeared on the retail market. Among the long awaited was

C&A that opened the stores in Ušće shopping center and Delta City in Belgrade, BIG CEE center in Novi Sad

and Aviv Park in Pančevo. The renovated Mercator center in Belgrade attracted the brands such as Lindex,

Sons and Daughters, Monnalisa. Italian shoe brand Cinti opened the store in Knez Mihailova Street, English

brand New Look chose a high street store to present its collection to Serbian customers and Delta City received

French kids brand Z-Enfant.



Retail parks are a relatively new retail format in Serbia and are gaining popularity both in existing schemes and

those under development. The tenants that show particular interest in such assets are hypermarkets, since the

tenant mix of retail parks provide a very high inflow of customers.

However, in the last two years, shopping center development has remained subdued whilst a growing interest

for retail parks has been observed in the market. There are several reasons for this. Firstly, the operating

schemes show positive results. In the current market with its financial constraints, retail parks are easier to

construct, take less time and allow construction in phases. The last advantage is important as the lettable area

is smaller and financing can be obtained more easily. The construction costs of such single level assets are

lower compared to the costs of shopping center development and the rents are consequently lower and

affordable for the brands, especially for newcomers that are positioning themselves in the market.

Since the first factory outlet has only recently opened in Serbia, it is still too early to comment on demand for

such retail product. However, the interest of local customers that used to visit the outlets abroad must not be

neglected. Nevertheless, expansions of outlet schemes will generally follow shopping centre and retail parks

supply in future as these retail formats show the best performance in highly developed and well supplied

markets.

Future Projects

The increasing demand from the retailers, particularly foreign ones as well as underdeveloped retail market,

has directly moved an investment that was pretty inactive in last two years. Many investors, particularly

foreigners, that had secured the land sites for retail scheme developments in Belgrade and in the secondary

Serbian cities before the crisis, decided to start developing or have already started the development of the

postponed projects.

Table 2: Selected Major Retail Schemes in Pipeline in Serbia

City Project Investor Size m2 Estimated

Delivery

Belgrade Delta Planet Delta Real Estate 75,000 2015

Belgrade Stadium Center

Voždovac

Krammer&Wagner&Illmaier 35,000 2013

Belgrade Višnjička Plaza Plaza Centers 48,000 after 2014

Belgrade Belgrade Plaza Plaza Centers 9,000 n/a

Belgrade Ada Mall GTC 31,800 n/a

Belgrade Delta Mall BPK site Delta Real Estate 35,000 n/a

Novi Sad BIG Shopping Center

phase II BIG CEE 30,000 after 2014

Jagodina Vivo Shopping Park local 9,800 2014 Source: Jones Lang LaSalle, October 2011

5.2 Pancevo Retail Market

Modern retail stock in Pančevo is practically non-existing, with the exception of Aviv Retail Park, modern retail

scheme developed in phases. With the completion of the last phase the retail park will have ca. 23,000 m2 GLA.

The tenants in Aviv Retail Park are DIS supermarket - the 1st phase tenant which occupies 4,000 m2 GLA and

some of well-known new market entrants such as New Yorker, C&A, H&O,Jysk, Deichmann etc.



In terms of other retail schemes there are two Roda supermarkets, two Idea supermarkets and two Maxi

supermarkets.

The high street, however, remains the mainstay of the retail segment in this city, as it is the case in all

secondary Serbian cities.



6 Valuation Commentary

6.1 Valuation Methodology

Market Value Definition

Market Value is defined by the Royal Institution of Chartered Surveyors (RICS) as the following:

“The estimated amount for which an asset or liability should exchange on the valuation date between a

willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties

had each acted knowledgeably, prudently and without compulsion.”

For the subject purposes the above Market Value definition under RICS meets the Fair Value measurement

requirement under IFRS 13.

In our valuation, we have adopted two valuation approaches: Income Approach and discounted cash flow

technique for the standing investment and Residual Approach for the surplus land.

6.2 Valuation Approach - Income Approach

The Income Approach is a method used to convert the anticipated economic benefits of property ownership into

a value estimate through a capitalisation approach.

The two most common methods of converting net income into value are the discounted cash flow technique

(DCF) wherein anticipated future income streams and a reversionary value are discounted to a present value

estimate and the direct capitalisation technique, where an overall rate is extracted directly from pertinent market

sales.

For the purposes of valuation of Aviv Park we have adopted the Income Approach, Discounted Cash flow technique, analysed over a 10-year period. The cash flow assumes a ten-year hold period with the exit value calculated on 10th year income. We have adopted a discount rate and terminal capitalisation rate for the subject property having regard to recent investment sales evidence known to us together with our general knowledge and opinion based on discussions with investors within the Central and Eastern European region. This opinion is also based on prevailing interest rates and relative yields on 10-year Government bonds. In formulating our opinion we have also had regard to investment rates recorded by Jones Lang LaSalle in other major Eastern European countries.

6.3 General Valuation Assumptions

Our valuation was prepared in accordance with the information obtained from the Client and specifically on the

basis of the following assumptions:

(a) We have relied upon the information provided to us by the Client as being complete and correct as to

tenure, tenancies, measurements and capacities of properties, planning consents and other relevant

information;

(b) There are no Rights of Way, easements, outgoings of an onerous nature or restrictions on use affecting the

property, except for ones mentioned in the report, which may have a material effect on the value;



(c) The premises are constructed and used in accordance with all necessary building and planning

permissions, and there are no disputes with neighbouring owners or occupiers nor with the local municipal

authorities;

(d) The site is not subject to any form of environmental contamination;

(e) That the property complies with any fire and life security codes, environmental codes and any other

regulatory requirements that may exist;

(f) No structural surveys of the buildings have been undertaken. We are therefore unable to report that they

are free of structural faults, rot, infestation or defects of any other nature, including inherent weakness due

to the use of construction materials now suspect. No tests were carried out on any of the services;

(g) Forecasts and projections contained in the valuation must be read strictly in conjunction with the

explanations, qualifications and assumptions set out in the text. Such forecasts and projections involve a

significant element of subjective judgement and are designed to assist buyers in considering possible

outcomes. They are not intended to give any assurance that any particular result or outcome will occur. The

assumptions on which forecasts and projections are based are considered reasonable at the time of issue

of the valuation, but no assurance is given that they are correct or exhaustive or that they will continue to be

so in the future;

(h) We have valued the subject property on the assumption that Klupko d.o.o. has 100% share in the property.

6.4 Specific Valuation Assumptions

Estimating the Market Value of the subject property we have made allowances and assumptions for the

following:

(a) Our valuation is made on 31st December 2012;

(b) The exchange rate that has been adopted is 113.7183 RSD/EUR according to the National Bank of Serbia

as of 31st December 2012;

(c) We have not carried out building’s measurement. We have obtained the tenancy schedule dated December

2012 by Aviv Park Pancevo for the subject property and based our calculations on the assumption that total

gross lettable area of the building is 18,921 m2;

(d) The rents are subject to annual indexation according to HICP adopted at the level of 2.5% per annum;

(e) All lease contracts are concluded for the definite period of time (5 or 10 years). We are not aware of any

break options specified.

(f) Rent is received monthly which is reflected in our calculations;

(g) The retail park is very new and the ERVs are essentially the same as the contract rents and therefore the

ERVs are neither significantly under nor over-rented.

(h) After expiry of the current lease agreements we have adopted the annual indexation according to HICP at

the level of 2.5%, applied on the anniversary of signing the lease agreement;

(i) A 3-month void period has been adopted after the current lease agreements expiry. The expiry void covers

the leasing void as well as the leasing costs, utilities costs for vacant areas and the incentives for new

tenants;

(j) We have also adopted an allowance in respect of unpaid rent and other non-recoverable operating

expenses at 1% and 2% of total gross income respectively;

(k) We have applied 2% on-going vacancy rate starting from the 2nd year of our calculations;



(l) We have applied 9.50% discount rate in our calculations; having in mind that retail park is relatively new

concept in Serbia. There are only three retail parks in Serbia – BIG CEE in Novi Sad, Aviv Park in Pancevo

and Delta Park in Kragujevac, thus the competition within this format is really low. Aviv Park is the only retail

park in wider Belgrade area, thus secondary catchment area comprises also some parts of Belgrade’s

municipality of Palilula. In addition, Aviv Park has a strong tenant mix.

(m) We have applied 9.00% exit yield in our calculations.

Detailed calculations are attached in Appendix 8 of this Report.

6.5 SWOT Analysis

In considering subject property as investment opportunity, we would draw your attention to the following SWOT

analysis:

Table 7: SWOT analysis

Strengths Weaknesses

Location is good on road from Belgrade

Higher than average remaining lease lengths;

Sustainable base rents;

Increasing turnover rents;

Indexing and step rents still to be applied;

High occupancy rate and tenants doing well

Best performing DIS Hypermarket in Serbia

Could be some tenant type overlap that may have to

be replaced.

Opportunities Threats

No retail projects in pipeline for more than two years.

Waiting list of tenants

New tenants inbound to Serbia still

Increase in NIS production after modernisation which

translates into higher paying jobs.

Increasing in borrowing rates

6.6 Valuation Summary – Standing Investment

Having regard to the contents of this Report, we are of the opinion that the Market Value of the Aviv Park

Pancevo, Pancevo subject to the assumptions outlined in the Report, as at 31st December 2012, was in the

region of:

MARKET VALUE OF THE AVIV PARK PANCEVO STANDING INVESTMENT

€24,700,000


Market Value is understood as the value of the property estimated without regard to cost of sale or purchase,

and without offset for any associated taxes. Therefore no allowances have been made for any expenses of

realisation, or for taxation, which might arise in the event of a disposal. The property is considered as if free and

clear of all mortgages or other charges which may be secured thereon.


6.7 Valuation Approach - Residual Method



We have adopted the standard approach for the valuation of developments; the Residual Method of Valuation in

accordance with the Practice Statements as set out in the RICS Valuation Standards. The residual value or site

value as it is also known is the surplus after total costs including construction, fees, contingency, finance costs

and developer's profit are deducted from an estimate of the gross development value (GDV) upon completion.

This surplus or residual value represents the amount that a purchaser would be willing to pay for the site.

A standardised approach is therefore important to the valuation of an Investment Property under Construction

(IPUC) throughout the development to ensure that it is only certain variables that can change and not the

approach. We continue to value the development in this way throughout the phases of construction from site

acquisition to the point where all risks are removed and therefore any element of developer’s profit is also

removed. At this stage the IPUC can be valued as a standing investment.

The level of profit reasonably required by a purchaser (and therefore reflected in arriving at fair value) will

diminish as each stage is passed and the risk associated in realising the value of the completed development is

reduced. The amount of profit is typically measured as profit on cost or value and will be influenced by the level

of pre-lets / pre-sales. Typically profit on cost varies between 10% for de-risked 100% pre-let / pre-sold IPUCs

and 25% for 100% speculative IPUCs. We have assumed in our valuation a profit on total cost of 20% at the

subject development.

As the development progresses the value of the site (the residual) should increase as remaining costs are

reduced, the level of risk and therefore required profit also fall and the remaining time prior to the IPUC

becoming income producing and being converted into an investment property is reduced.

We have valued the site based on the plans for the site provided by Klupko d.o.o. on the assumption that the

building permit and full planning permission have been granted. The Total Gross Lettable Area for the shopping

centre is 18,671 sq m. We have calculated the Gross Development Value of the shopping centre on completion

and deducted the costs relating to the entire development.

6.8 General Valuation Assumptions

Our valuation was prepared in accordance with the information obtained from the Client and specifically on the

basis of the following assumptions:

(a) We have relied upon the information provided to us by the Client as being complete and correct as to

tenure, tenancies, measurements and capacities of properties, planning consents and other relevant

information;

(b) There are no Rights of Way, easements, outgoings of an onerous nature or restrictions on use affecting the

property, except for ones mentioned in the report, which may have a material effect on the value;

(c) The premises are constructed and used in accordance with all necessary building and planning

permissions, and there are no disputes with neighbouring owners or occupiers or with the local municipal

authorities;

(d) The site is not subject to any form of environmental contamination;

(e) That the property complies with any fire and life security codes, environmental codes and any other

regulatory requirements that may exist;

(f) No structural surveys of the buildings have been undertaken. We are therefore unable to report that they

are free of structural faults, rot, infestation or defects of any other nature, including inherent weakness due

to the use of construction materials now suspect. No tests were carried out on any of the services;



(g) Forecasts and projections contained in the valuation must be read strictly in conjunction with the

explanations, qualifications and assumptions set out in the text. Such forecasts and projections involve a

significant element of subjective judgement and are designed to assist buyers in considering possible

outcomes. They are not intended to give any assurance that any particular result or outcome will occur. The

assumptions on which forecasts and projections are based are considered reasonable at the time of issue

of the valuation, but no assurance is given that they are correct or exhaustive or that they will continue to be

so in the future;

(h) We have valued the subject property on the assumption that Klupko d.o.o. has 100% share in the property.

6.9 Specific Valuation Assumptions – Residual Method

6.9.1 Gross Development Value (GDV)

Even though planning of the site states that 156,000 sq. m of gross external area can be built, we are of the

opinion that it is not feasible to build such an amount of area. We have considered the catchment area and

the existing area. We have assumed a total of 15,000 sq m will be built which gives a total area of 33,671

sq m (21.5% of total allowable build up). Klupko d.o.o. Pancevo has been granted a construction permit for

the fifth phase of the complex – Business centre. New phase of the development will comprise 4,066.52 sg

m GBA and 3,910.66 sq m of net area. We have assumed that Aviv Arlon will build an extra 11,000 sq m.

However, there are currently no development plans. The planning documents allow the building of

commercial building and it can therefore be retail, hotels, and office. Due to this fact, we think it is most

reasonable to build a small amount of retail. This also reflects the future value implicitly of the land having

such favourable building conditions. We also understand that NIS is the largest employer in the city which

has higher wages than other industries in the area. Even though many companies such as Plaza Centres

and Delta Holdings are repeatedly announcing the start of their project for the last few years, not one

developer has a building permit on the old side of Belgrade.

The total projected Gross Market Rental Income assuming 100% occupancy is €1.71 million. We have

adopted total non-recoverable costs of 5.0%, which include Loss of Rent of 3% and non-recoverables at

2.0%. Therefore the Total Net Income (assuming Fully Let) is €1.63 million.

Based on the previous phases we have assumed that the property is 100% pre-let.

We have applied an initial yield of 10.00%.

This indicates a GDV less letting fees (€136 thousand) of €16.3 million.

6.9.2 Timing Assumptions

Klupko d.o.o. Pancevo has been granted a construction permit for the fifth phase of the complex – Business

centre. New phase of the development will comprise 4,066.52 sq m GBA and 3,910.66 sq m of net area.

However, we have instead opted to reflect the development of 15,000 sq m over the next two years. This is

fairly consistent with the previous phases.

6.9.3 Construction / Development Costs

We have adopted the costs of construction as we understand the company has incurred over the previous

phases. The Total Investment Cost payable by Klupko d.o.o. to €8.2 million excluding finance.

The adopted cost are listed in the following table:

Table 8: Total Costs to Completions

Total Costs to Completion

Construction Costs

Hard Costs @ €425 sqm €6,375,000



Developer’s Contribution to Fit Out @ €75 sqm €1,125,000

Sub-Total €7,500,000

Soft Costs

Letting Fees €130,507

Professional Services €382,500

Contingencies @ 2% €150,000

Sub-Total €663,007

Total Costs Outstanding € 8,163,007

There are some notes on costs: the developer has essentially built 4 phases of the project and this warrants a

lower contingency fee due to their experience and the assumption is that the developer will build the same

product. Moreover, we did not include a marketing fees as generally all marketing fees are being paid by the other

tenants currently and the project is so far quite successful which is marketing in itself.

6.9.4 Finance Costs

We have adopted a finance rate of 7%.

The interest on the development costs amounts to €591 thousand.

There is also interest on the site of €782 thousand

6.9.5 Developer’s Profit

We have adopted a developer’s cost of 17% (€1.5 million) to reflect the level of profit that would be required

by a purchaser to undertake the development project.

6.9.6 Residual Value

Total Development Costs (€8.7 million) and the developer’s profit (€1.5 million) amount to €10.1 million. Net

Disposal Proceeds (€16.3 million) less total costs (€10.1 million) give a residual value of €6.2 million.

We deduct interest on the site (€782 thousand) to give a Residual Site Value of (€5.4 million).

A copy of our appraisal is attached at Appendix 8.

6.9.7 Liquidity (Saleability)

The continued turmoil and instability in the financial markets is continuing to cause volatility and uncertainty

in the world’s capital markets and real estate markets. There are low levels of liquidity in the real estate

market and transaction levels are significantly reduced, resulting in a lack of clarity as to pricing levels and

the market drivers. This, combined with a weakening of sentiment towards real estate, has resulted in a

continual reappraisal of commercial property prices. Many transactions that are occurring involve vendors

who are more compelled to sell, or purchasers who will only buy at discounted prices. In addition, prices

agreed during negotiation are frequently reduced prior to exchange of contracts as purchasers bring to bear

their greater negotiating position and ability to complete transactions in the current uncertain market. In this

environment, prices and values are going through a period of heightened volatility whilst the market

absorbs the various issues and reaches its conclusions. As a result there is less certainty with regard to

valuations with the result that market values can change rapidly in the current market conditions.

However, it is our opinion that the property has many upside risks that overwhelm the downside risks. It

must be remembered that one initial yield is not same as another initial yield. This property has future step

rents for some tenants, indexing and turnover rents that the purchaser would have to account for by

reducing the yield. However, transparency is clouded by the fact this is a one of a kind property, the first

retail park in Serbia, and no other large retail properties have been sold thus far except brown field projects.



Generally speaking, retail centre investments make good security for senior debt. They have a variety of

different income streams and covenants, and can often respond well to active management.

While our advice is focused on the fully completed scheme, we would comment that development

properties do not, in our opinion, constitute ideal security for loan purposes, given the volatility of the

development market, which can cause large fluctuations in site values. Bids for development sites of this

type are generating downward pressure Detailed calculations are attached in the Appendices to this report.

6.10 SWOT Analysis

In considering subject property as investment opportunity, we would draw your attention to the following SWOT

analysis:

Table 9: SWOT analysis

Strengths Weaknesses

Location is excellent beside a retail park

Positioning of land on the main road

High build up ratios

Current developer experience

Good leasing history of retail park

Existing Retail Park will help lease future parts

If sold separately would require reparcelisation.

Opportunities Threats

High build up and coverage ratio.

Flexible planning guidelines allow for other commercial

purposes

Increase NOI

RoE should be better in each phase due to economies

of learning.

Increase in NIS production after modernisation

Increasing in borrowing rates

6.11 Valuation Summary – Surplus Land

Having regard to the contents of this Report, we are of the opinion that the Market Value of the Aviv Park

Pancevo, Pancevo subject to the assumptions outlined in the Report, as at 31stDecember 2012, was in the

region of:


€5,400,000


Market Value is understood as the value of the property estimated without regard to cost of sale or purchase,

and without offset for any associated taxes. Therefore no allowances have been made for any expenses of

realisation, or for taxation, which might arise in the event of a disposal. The property is considered as if free and

clear of all mortgages or other charges which may be secured thereon.


Transaction costs typically comprise the following:



(a) Stamp duty is 2.5%; however it is not applicable for the transfer of shares of an asset holding company. However, if the shares of a company are sold to acquire real estate i.e. and Special Purpose Vehicle (SPV) then the Stamp Duty is 0.3% of the Market Value.

(b) Court registration and Notarial fees: vary according to transaction, however these are not significant.

(c) VAT is chargeable on first transaction of a property improved after 1 January 2005 and it is not charging on any later transaction. VAT rate is 20% with exception for residential properties where is 8%. Sale of share is VAT exempt for the first sale.

(d) Agent’s fees at 1-3% of purchase price plus VAT. It is more likely that a fee of 2% would be charged on an investment disposal and a higher fee around 3% charged on the acquisition of land.



7 List of Documents Used in Valuation Report

The following documents were used in the Valuation Report on of the Aviv Park Pancevo located in Pancevo,

Serbia

Copy of the Ownership document number 11835, Cadastral Municipality of Pancevo, issued on 8th June

2012;

Copy of the Site plan, issued on 28th June 2010.

Urban design for the cadastral parcel number 4733.

Tenancy Schedule / Rent Roll


General Principles Adopted In The Preparation Of Valuations And Reports

These General Principles should be read in conjunction with the firm’s General Terms and Conditions of Business.

It is our objective to discuss and agree the terms of our instructions and the purpose and basis of the valuation, at the outset, to ensure that we fully understand and meet our client’s requirements. Following are the general principles upon which our Valuations and Reports are normally prepared; they apply unless we have agreed otherwise and specifically mentioned the variation in the body of the report. Where appropriate, we will be pleased to discuss variations to suit any particular circumstances, or to arrange for the execution of structural or site surveys, or any other more detailed enquiries. 1. Valuation Standards: All work is carried out in accordance with: (a) The Practice Statements contained in the RICS Valuation Standards published by the Royal Institution of Chartered Surveyors (Seventh Edition), by valuers who conform to the requirements thereof; (b) The Approved European Property Valuation Standards of the European Group of Valuers Associations (TEGoVA).

The standard adopted is set out in our report. 2. Valuation Basis: Our reports state the purpose of the valuation and unless otherwise noted, the basis of valuation is as defined in the appropriate valuation standard. The full definition of the basis which we have adopted is either set out in our report or appended to these General Principles. 3. Source of Information: We accept as being complete and correct the information provided to us by the sources listed, as details of tenant, tenancies, tenant's improvements, planning consents and other relevant matters, as summarised in our report. 4. Disposal Costs and Liabilities: No allowances are made for any expenses of realisation, or for taxation which might arise in the event of disposal. All property is considered as if free and clear of all mortgages or other charges which may be secured thereon. 5. Documentation: We do not normally read leases or documents of title. We assume, unless informed to the contrary, that each property has a good and marketable title, that all documentation is satisfactorily drawn and that there are no encumbrances, restrictions, easements or other outgoings of an onerous nature which would have a material effect on the value of the interest under consideration, nor material litigation pending. Where we have been provided with documentation we recommend that reliance should not be placed on our interpretation without verification by your lawyers. 6. Tenants: Although we reflect our general understanding of a tenant’s status in our valuations, enquiries as to the financial standing of actual or prospective tenants are not normally made unless specifically requested. Where properties are valued with the benefit of lettings, it is therefore assumed, unless we are informed otherwise, that the tenants are capable of meeting their financial obligations under the lease and that there are no arrears of rent or undisclosed breaches of covenant. 7. Measurements: We do not normally measure premises unless specifically requested and base our valuation on the information made available to us. Where measurement is undertaken this is carried out in accordance with either the relevant local codes or the Code of Measuring Practices issued by the Royal Institution of Chartered Surveyors except in the case of agricultural properties or where we specifically state that we have relied on another source. 8. Town Planning and Other Statutory Regulations: Information on town planning is, wherever possible, obtained verbally from the local planning authority and, if confirmation is required, we recommend that verification be obtained from lawyers that:- (a) the position is correctly stated in our report; (b) the property is not adversely affected by any other discussions made or conditions prescribed by public authorities; (c) that there are no outstanding statutory notices.


Our valuations are prepared on the basis that the premises (and any works thereto) comply with all relevant statutory and EC regulations, including enactments relating to fire regulations. 9. Structural Surveys: Unless expressly instructed, we do not carry out a structural survey, nor do we test the services and we therefore do not give any assurance that any property is free from defect. We seek to reflect in our valuations any readily apparent defects or items of disrepair which we note during our inspection or costs of repair which are brought to our attention.

10. Deleterious Materials: We do not normally carry out investigations on site to ascertain whether any building was constructed or altered using deleterious materials or techniques (including, by way of example high alumina cement concrete, wood wool as permanent shuttering, calcium chloride or asbestos). Unless we are otherwise informed, our valuations are on the basis that no such materials or techniques have been used. 11. Site Conditions: We do not normally carry out investigations on site in order to determine the suitability of ground conditions and services for the purposes for which they are, or are intended to be, put; nor do we undertake archaeological, ecological or environmental surveys. Unless we are otherwise informed, our valuations are on the basis that these aspects are satisfactory and that, where development is contemplated, no extraordinary expenses or delays will be incurred during the construction period due to these matters. 12. Environmental Conditions: Unless expressly instructed, we do not carry out site surveys or environmental assessments, or investigate historical records, to establish whether any land or premises are, or have been, contaminated. Therefore, unless advised to the contrary, our valuations are carried out on the basis that properties are not affected by environmental contamination. However, should our site inspection and further reasonable enquiries during the preparation of the valuation lead us to believe that the land is likely to be contaminated we will discuss our concerns with you. 13. Value Added Tax Valuations are prepared and expressed exclusive of VAT payments, unless otherwise stated.

14. Outstanding Debts: In the case of property where construction works are in hand, or have recently been completed, we do not normally make allowance for any liability already incurred, but not yet discharged, in respect of completed works, or obligations in favour of contractors, subcontractors or any members of the professional or design team. 15. Confidentiality: Our Valuations and Reports are confidential to the party to whom they are addressed for the specific purpose to which they refer, and no responsibility whatsoever is accepted to any third parties. Neither the whole, nor any part, nor reference thereto, may be published in any document, statement or circular, nor in any communication with third parties, without our prior written approval of the form and context in which it will appear.


Appendix 2

General Terms and Conditions of Business


GENERAL TERMS AND CONDITIONS OF BUSINESS INTRODUCTION 1 When the Terms Apply

These Terms of Business (the “Terms”) apply where Jones Lang LaSalle provides a service to a client and there is no written agreement for the provision of that service or if there is, to the extent that these Terms do not conflict with the terms of that written agreement. In the case of conflict between these Terms and the terms of any written agreement, the terms of the written agreement shall prevail to the extent of the conflict. Reference in these Terms to the agreement means the written or informal agreement that incorporates these Terms (the “Agreement”).

2 Jones Lang LaSalle Jones Lang LaSalle means Jones Lang LaSalle d.o.o Beograd, with its seat at Usce Tower, 6 Mihajla Pupina Boulevard, 11070 New Belgrade, Serbia or any other member of the Jones Lang LaSalle group of companies that provides services or the relevant part of the services.

SERVICE LEVEL 3 Services

Jones Lang LaSalle is to provide all services to the specification and performance level stated in writing or, if none is stated, to the specification and performance level that it ordinarily provides in accordance with Jones Lang LaSalle’s duty of care as set out below. Any variations must be agreed in writing.

4 What is not included Jones Lang LaSalle has no responsibility for anything that is beyond the scope of the service so defined. In particular, it has no obligation to provide nor liability for:

• an opinion on price unless specifically instructed to carry out a formal valuation; • advice, or failure to advise, on the condition of a property unless specifically instructed to carry out a formal

survey; • the security or management of property unless specifically instructed to arrange it; the safety of those visiting a property, unless that is specified in its instructions.

5 Valuations

Jones Lang LaSalle must comply with professional requirements for the rotation of valuers, and the implications of this are to be agreed in writing with those clients who require valuation services.

LIABILITY AND DUTY OF CARE 6 Duty of Care

Jones Lang LaSalle owes to the client a duty to act with reasonable skill and care in providing services, complying with the client’s instructions where those instructions do not conflict with (a) these Terms, (b) the Agreement or (c) applicable law and professional rules. Jones Lang LaSalle is not obliged to carry out any instructions of the client which conflict with the applicable law, regulations and professional rules.

7 Liability to the Client Jones Lang LaSalle has no liability for the consequences including delay in or failure to provide the services, of any failure by the client or any agent of the client:

promptly to provide information or other material that Jones Lang LaSalle reasonably requires, or where that information or material is inaccurate or incomplete. The client warrants that, where it provides information or material to Jones Lang LaSalle, Jones Lang LaSalle is entitled to rely on its accuracy.

to follow Jones Lang LaSalle’s advice or recommendations.


The liability of Jones Lang LaSalle to the client for its own negligence causing death or personal injury or for fraud is unlimited, but otherwise its liability is:

limited to 2 (two) times the fixed fees amount agreed with Jones Lang LaSalle per occurrence or series of occurrences arising from one event,

excluded to the extent that the client, or someone on the client’s behalf for whom Jones Lang LaSalle is not responsible is responsible,

excluded if caused by circumstances beyond Jones Lang LaSalle’s reasonable control,

excludes loss of profit, revenue and anticipated savings,

excludes indirect, special and consequential loss,

(where Jones Lang LaSalle is but one of the parties liable) limited to the share of loss reasonably attributable to Jones Lang LaSalle on the assumption that all other parties pay the share of loss attributable to them (whether or not they do),

not (so far as permitted by law) increased by any condition or warranty prescribed by law,

in any case limited to a maximum of EUR 1,000,000 (one million euro) in aggregate. Jones Lang LaSalle shall not be liable for any hidden defects in any real property sold, bought or leased, unless Jones Lang LaSalle was aware of these defects and did not inform the client hereof.

8 Liability to Third Parties

Jones Lang LaSalle owes no duty of care and has no liability to anyone but its client. No third party has any rights unless there is specific written agreement to the contrary.

9 Liability for Third Parties

Jones Lang LaSalle has no liability for products or services that it reasonably needs to obtain from others in order to provide services. Jones Lang LaSalle may delegate to a third party the provision of any part of services, but if it does so: (a) without the client’s approval, Jones Lang LaSalle is responsible for what that third party does; (b) with the client’s approval or at the client’s request, Jones Lang LaSalle is not responsible for what that

third party does. 10 Protection of Employees

Apart from for fraud or a criminal conduct no employee of the Jones Lang LaSalle group of companies has any personal liability to the client, and that neither the client nor anyone representing the client will make a claim or bring proceedings against an employee or former employee personally.

11 Complaints Resolution Procedure

The client agrees that it will not take any action or commence any proceedings against Jones Lang LaSalle before it has first referred its complaint to Jones Lang LaSalle in accordance with Jones Lang LaSalle’s complaints procedure, details of which are available upon request.

12 Liability to Jones Lang LaSalle The client agrees to indemnify Jones Lang LaSalle against all third party claims (including without limitation all third party actions, claims, proceedings, loss, damages, costs and expenses) that relates in any way to the provision of services, except a liability that a court of competent jurisdiction decides (or Jones Lang LaSalle agrees) was caused by the fraud, willful default or negligence of Jones Lang LaSalle or of a delegate for whom Jones Lang LaSalle is responsible under the Agreement.

DELIVERING THE SERVICE

13 Timetable Jones Lang LaSalle is to use reasonable endeavours to comply with the client’s timetable, but is not responsible for not doing so unless specifically agreed in writing. Even then, Jones Lang LaSalle is not liable for delay that is beyond its control.


14 E-mail and On-line Services

Jones Lang LaSalle may use electronic communication and systems to provide services, making available to the client any software required that is not generally available.

15 Insurance

Jones Lang LaSalle agrees to purchase and maintain appropriate insurance policies, in particular professional indemnity insurance. Upon request Jones Lang LaSalle may provide evidence of such insurance.

16 Conflict of Interest

If Jones Lang LaSalle becomes aware of a conflict of interest it is to advise the client promptly and recommend an appropriate course of action.

17 Publicity

Neither Jones Lang LaSalle nor its client may publicise or issue any specific information to the media about services or its subject matter without the written consent of the other.

18 Intellectual Property

All intellectual property rights in material supplied by the client belong to the client and in material prepared by Jones Lang LaSalle belong to Jones Lang LaSalle, unless otherwise agreed in writing. Each has a non-exclusive right to use the material provided for the purposes for which it is supplied or prepared. No third party has any right to use it without the specific consent of the owner.

19 Confidential Information

Each party must keep confidential all confidential information and material of commercial value to the other party of which it becomes aware, but it may: (a) use it to the extent reasonably required in providing services, (b) disclose it if the other party agrees, (c) disclose it if required to do so by law, regulation or other competent authority. Jones Lang LaSalle will comply with personal data protection regulations. This obligation continues for a period of two years after termination of the agreement.

20 The effect of Termination on Client Material

On termination of the Agreement Jones Lang LaSalle may, to comply with legal, regulatory or professional requirements, keep one copy of all material it then has that was supplied by or on behalf of the client in relation to the service. The client may request the return or destruction of all other client material (save for electronic back-ups).

REMUNERATION 21 Not specified

Where the fees and expenses payable for services are not specified in writing, Jones Lang LaSalle is entitled to: (a) a fair and reasonable fee by reference to time spent, and (b) reimbursement of expenses properly incurred on the client’s behalf.

22 Part Performance Where services are not performed in full, Jones Lang LaSalle is entitled to a reasonable fee proportionate to services provided as estimated by Jones Lang LaSalle.

23 VAT and Withholding

The client must pay VAT at the rate then current on issue of a valid VAT invoice and any applicable withholding tax. 24 Interest on Overdue Amounts


If an invoice is not paid in full within 7 days (or such other period as agreed in writing between the parties), Jones Lang LaSalle may charge interest on the balance due at the then applicable daily rate as set by the National Bank of Serbia.

MISCELLANEOUS 25 Assignment

The client may assign the benefit of the Agreement, but must first obtain the written consent of Jones Lang LaSalle, which will not be unreasonably withheld.

26 Termination

The client or Jones Lang LaSalle may terminate the Agreement immediately by written notice to the other, if the other:

has not satisfactorily rectified a substantial or persistent breach of the agreement within the reasonable period specified in an earlier notice to rectify it.

is insolvent according to the laws of its country of incorporation. 27 Effect of Termination on Claim

Termination of the Agreement does not affect any claims that arise before termination or the entitlement of Jones Lang LaSalle to its proper fees up to the date of termination or to be reimbursed its expenses.

28 Waiver and Severance Failure to enforce any of these Terms is not a waiver of any right to subsequently enforce that or any other term of the Agreement. The invalidity, illegality and unenforceability in whole or in part of any provisions of the Agreement shall not affect the validity, legality or enforceability of its remaining provisions which shall remain in full force and effect.

29 Notices

A notice is valid if in writing addressed to the last known address of the addressee and is to be treated as served:

when delivered, if delivered by hand during normal business hours,

at the time of receipt upon delivery confirmation, if sent by registered mail,

at the time of receipt upon delivery confirmation, if sent by fax or electronic mail. 30 Governing Law and Jurisdiction

These General Terms and Conditions of Business and the terms of the instruction shall be governed and construed in accordance with the laws of Serbia. All disputes shall be finally settled by the appropriate and relevant court in Belgrade.


Appendix 3

Definition of Market Value


The Basis of Valuation

Our valuation is carried out on the basis of the property’s Market Value. For the subject purposes the below Market Value definition under RICS meets the Fair Value measurement requirement under IFRS 13.

The Market Value is defined in the RICS Red Book as:

‘The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion’.

Interpretive Commentary, as published in the RICS Valuation – Professional Standards (incorporating the International Valuation Standards):

1. In applying market value, regard must also be had to the conceptual framework set out in paragraphs 31–35 of the IVS Framework, including the requirement that the valuation amount reflects the actual market state and circumstances as of the effective valuation date.

2. The basis of market value is an internationally recognised definition. It represents the figure that would appear in a hypothetical contract of sale at the valuation date. Valuers need to ensure that in all cases the basis is set out clearly in both the instructions and the report.

3. Market value ignores any existing mortgage, debenture or other charge over the property.

4. Notwithstanding the disregard of special value (see definition in paragraphs 44–47 of the IVS Framework) where the price offered by prospective buyers generally in the market would reflect an expectation of a change in the circumstances of the property in the future, this element of ‘hope value’ is reflected in market value. Examples of where the hope of additional value being created or obtained in the future may have an impact on the market value include:

• the prospect of development where there is no current permission for that development; and

• the prospect of synergistic value (see definition in paragraph 48 of the IVS Framework) arising from merger with another property, or interests within the same property, at a future date.


Appendix 4

Location Map


Appendix 5

Site Plan


Appendix 6

Extract from Land Register


Appendix 8

Calculations


30.41666667

RSD 0.0100 EUR

EUR 113.7183 RSD

Ty pe Rate

2.50%

0.00%

0.00%

1.00%

0.00%

0.00%

0.00%

2.50%

Gross rental income p.a.* Valuation date 12/31/12 EURO

€ 2,295,947 CF start date 1/1/2013 €

RSD 261,091,204 Exit Yield 9.00%

EURO

Net rental income p.a. Discount Rate 9.50% €

€ 2,227,069

RSD 253,258,468 Initial Yield 9.02%

RSD

Minimum Guaranteed Rent Yield on EMRV 8.31%

€ 2,225,947

RSD 253,258,468 Vacant duration 3 months EURO

€ 1,305

Annual EMRV Residual Value on Passing Rent RSD

€ 2,095,680 RSD 148,451

RSD 238,317,167 Valuation Currency EURO

* Estimated income in the first year of Calculations

Indexation

24,700,000

HICP

1 Fixed at

2 Fixed at

MUCIP

Local country CPI

EMRV Indexation

3 Fixed at

4 Fixed at

MV / sq m

MV / sq m

Market Value

Cash Flow Input Assumptions

2,808,800,000

Gross Market Value

24,700,000

Market Value

Exchange Rates at 31 December 2012

according to the NBS

Aviv Park Pancevo, Pancevo

Cash Flows calculated Monthly All figures shown are annuities

2013-01-01 2014-01-01 2015-01-01 2016-01-01 2017-01-01 2018-01-01 2019-01-01 2020-01-01 2021-01-01 2022-01-01 2023-01-01

2013-12-31 2014-12-31 2015-12-31 2016-12-31 2017-12-31 2018-12-31 2019-12-31 2020-12-31 2021-12-31 2022-12-31 2023-12-31

YEAR 7 8 9 10 11

INCOME

MINIMUM GUARANTEED RENT 2,225,947 2,282,834 2,242,605 2,200,460 2,339,653 2,354,220 2,237,515 2,358,949 2,299,369 2,184,287 2,277,971

TEMPORARY LEASE 0.00% 0 0 0 0 0 0 0 0 0 0 0

TURNOVER GROWTH 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

VARIABLE RENT 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000 70,000

% VARIABLE INCOME 3.14% 3.07% 3.12% 3.18% 2.99% 2.97% 3.13% 2.97% 3.04% 3.20% 3.07%

TOTAL INCOME 2,295,947 2,352,834 2,312,605 2,270,460 2,409,653 2,424,220 2,307,515 2,428,949 2,369,369 2,254,287 2,347,971

EXPENSES % on rents

Management fees 0.00% 0 0 0 0 0 0 0 0 0 0 0

Vacancy 2.00% 0 47,057 46,252 45,409 48,193 48,484 46,150 48,579 47,387 45,086 46,959

Unpaid rent 1.00% 22,959 23,528 23,126 22,705 24,097 24,242 23,075 24,289 23,694 22,543 23,480

Other non-recoverable costs 2.00% 45,919 47,057 46,252 45,409 48,193 48,484 46,150 48,579 47,387 45,086 46,959

Other Costs amount 0 0 0 0 0 0 0 0 0 0 0

TOTAL EXPENSES 5.00% 68,878 117,642 115,630 113,523 120,483 121,211 115,376 121,447 118,468 112,714 117,399

Aviv Park Pancevo, Pancevo

NET OPERATING INCOME € 2,227,069 € 2,235,193 € 2,196,975 € 2,156,937 € 2,289,171 € 2,303,009 € 2,192,139 € 2,307,502 € 2,250,901 € 2,141,572 € 2,230,572

RUNNING YIELD (Before CAPEX) 8.98% 9.02% 8.86% 8.70% 9.23% 9.29% 8.84% 9.31% 9.08% 8.64% 9.00%

RUNNING YIELD (After CAPEX) 9.02% 9.05% 8.90% 8.74% 9.27% 9.33% 8.88% 9.35% 9.12% 8.67% 9.04%

DISCOUNT RATE 9.50%

NPV MGR INCOME PAID IN ADVANCE Monthly 2,135,997 2,000,506 1,797,561 1,607,194 1,561,771 1,434,946 1,247,517 1,199,119 1,068,846 925,118

NPV ADDITIONAL INCOME PAID IN ADVANCE 67,171 61,343 56,021 51,161 46,722 42,669 38,967 35,586 32,499 29,679

NPV MGR COST PAID IN ADVANCE (in arrear) -66,095 -103,093 -92,539 -82,971 -80,418 -73,885 -64,226 -61,741 -55,001 -47,790

10,076,671undiscounted ex it 24,784,135

NPV NET INCOME PAID IN ADVANCE Monthly 2,137,073 1,958,756 1,761,043 1,575,384 1,528,076 1,403,730 1,222,258 1,172,964 1,046,343 907,008

(in arrear)

EXIT YIELD 9.00%

YIELD on EMRV 8.31%

Average YIELD 9.03%

CAPEX + Fit-out + Letting (nominal) Amount 0 0 40,752 25,152 4,308 0 42,739 0 35,368 19,334

CAPEX + Fit-out + Letting (discounted) Amount 0 0 32,614 18,383 2,876 0 23,792 0 16,420 8,198

24,700,000 EURO € 1,305 / per sqm

24,700,000 EURO € 1,305 / p sq.m

(purchaser's cost 0.00% )

MARKET VALUE (after capex)

MARKET VALUE (after capex)

Bryan Beaton MRICS

Head of Capital Markets

Professional Services Department


6 Mihajla Pupina Boulevard

11070 Belgrade

+381 11 2200 109

[email protected]

Petar Jovanovic

Junior Valuer

Professional Services Department


6 Mihajla Pupina Boulevard

11070 Belgrade

+381 11 2200 116

[email protected]

COPYRIGHT © JONES LANG LASALLE IP, INC. 2013.

This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without

the prior written consent of Jones Lang LaSalle IP, Inc.

The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the

accuracy of this information. We would like to be informed of any inaccuracies so that we may correct them.

Jones Lang LaSalle does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.

12-164CH-3516 Century Shopping Center, Chicago, IL Final

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