RETAIL SECTOR REMAINED SLUGGISH; MEANWHILE, FORECASTS SHOW POSITIVE MOMENTUM

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1 RETAIL MARKET REPORT: 4Q2015 RETAIL SECTOR REMAINED SLUGGISH; MEANWHILE, FORECASTS SHOW POSITIVE MOMENTUM Prepared by: KEY INDICATORS: Key retail market indicators showed minimal acceleration in economic growth. Real gross domestic product increased by 1.0 percent in the fourth quarter according to the "second" estimate released. The University of Michigan s consumer sentiment index rose 1.3 points to 92.6 in December, the third straight monthly incline. In the fourth quarter of 2015 retail sales totaled $975.2 billion and increased by 0.3 percent year-over-year. VACANCY: Overall vacancy rates remained above 10.0 percent during the fourth quarter, with minimal fluctuation in vacancy rates over the course of the year. It is still expected that overall vacancy will decline through 2020 and dip below 10.0 percent. Over last quarter, Power Center and Shopping Center vacancy rates declined by 10 basis points to 4.4 percent and 8.8 percent, respectively, while Malls remained unchanged at 5.6 percent. SUPPLY: Starts and deliveries remained at low levels. Construction starts decreased by 4.6 msf or 28.6 percent, compared to last quarter, totaling only 11.4 msf, and are down by 15.3 percent annually. Deliveries of 18.7 msf have remained about the same compared to last quarter. Year-over-year, deliveries are still down by 2.2 percent. Over the course of 2015, such low levels of starts and deliveries have been unable to help push overall vacancy rates down. DEMAND: According to CoStar, net absorption for the fourth quarter was reported at approximately 31.8 msf, down 3.1 msf from the same timeframe last year and down 2.9 msf from the previous quarter. Average net retail absorption for this year remained stagnant when compared to last year. Although results were positive nationally, as well as at the market level, wide variations were apparent for the top U.S retail markets. RENTAL RATES: CBRE and Reis reported that effective rent on an annualized basis increased by approximately 1.0 percent to 2.0 percent in the fourth quarter of Looking ahead, effective rent growth through 2020 is expected to continue to increase, reaching and even surpassing rent growth levels of 4.0 percent. Ana Savic CAPITALIZATION RATES: Retail investment was $20.5 billion in 4Q2015, a 20.4 percent Real Estate Market Analytics increase from 3Q2015, but a 5.9 percent decrease YOY. Mall properties led the retail PNC Real Estate segment volume this quarter at $10.9 billion, a 32.9 percent increase from 3Q15, but Fifth Avenue percent lower than a year ago. Volume for strip properties improved 8.9 percent this Pittsburgh, PA quarter to $9.6 billion and is down 9.1 percent YOY. (412) Ana.Savic@pnc.com PNC and PNC Bank are registered service marks of The PNC Financial Services Group, Inc. PNC Bank and certain of its affiliates, including PNC TC, LLC, an SEC registered investment advisor wholly-owned by PNC Bank, do business as PNC Real Estate. PNC Real Estate provides commercial real estate financing and related services. Through its Tax Credit Capital segment, PNC Real Estate provides lending services, equity investments and equity investment services relating to low income housing tax credit ( LIHTC ) and preservation investments. PNC TC, LLC provides investment advisory services to funds sponsored by PNC Real Estate for LIHTC and preservation investments. Registration with the SEC does not imply a certain level of skill or training. This material does not constitute an offer to sell or a solicitation of an offer to buy any investment product. This document is for general informational purposes only and is not intended as specific advice or recommendations. The information contained herein is gathered from public sources believed by PNC to be accurate and reliable at time of publication, but neither PNC nor any of its affiliates is providing any guaranty or warranty as to the accuracy, completeness or reliability of that information or of the conclusions presented in this document. Forecasts and other forward looking statements are based on current expectations and serve as an indication of what may occur. In addition, markets do change. Given the inherent uncertainties and risks associated with forecasts and forward looking statements, actual events and results may differ materially from those reflected or contemplated. Opinions expressed herein are subject to change without notice. The information set forth herein does not constitute legal, tax or accounting advice. You should obtain such advice from your own counsel or accountant. Any reliance upon the information provided herein is solely and exclusively at your own risk The PNC Financial Services Group, Inc. All rights reserved.

2 Retail Sector Remained Sluggish; Meanwhile, Forecasts Show Positive Momentum 2 KEY RETAIL INDICATORS According to the Bureau of Economic Analysis, real gross domestic product (GDP) increased by 1.0 percent in the fourth quarter of 2015, according to the "second" estimate released. PNC s National Economic Outlook for December/January forecasted, for 2016, another moderate year of overall economic growth with real GDP up by an expected 2.0 percent. Areas of strength in 2016 will continue to include consumer spending, housing construction and sales, auto sales and production, as well as state and local government infrastructure spending. Overall, it is believed the positive forces will outweigh the negative ones, and thus another year of moderate economic and job growth lies ahead. As illustrated in the U.S. Retail Sales chart, retail sales (excluding motor vehicles and parts) in the fourth quarter of 2015 were up 8.9 percent when compared to last quarter. Retail sales totaled $975.2 billion for this quarter and increased by only 0.3 percent year-over-year. However, PNC Economics stated in their National Economic Outlook Report for December/January that the holiday shopping season started off decent, and a strong finish was expected in the week that led up to Christmas as well as the week after (gift card redemptions and exchanges). On-line shopping grew by close to 10 percent from last year, with brick and mortar store sales up by only 2-3 percent, for a total holiday sales gain of percent from The University of Michigan s Chief Economist stated in the Survey of Consumers report (December 2015) that consumer confidence rose to its highest level since July, with the December reading nearly equal to the 2015 average of 92.9, which was the highest since 2004 (see Index of Consumer Sentiment Chart). Importantly, the gain was concentrated in current rather than expected conditions. The latest gain was largely due to lower inflation, which bolstered real incomes and brightened buying plans for household durables. Moreover, given the continued weakness in the global economy and the strong dollar, consumers can be expected to become even more demanding of price discounts in the year ahead. Overall, the data points toward gains of 2.8% in real personal consumption expenditures during 2016.

3 Retail Sector Remained Sluggish; Meanwhile, Forecasts Show Positive Momentum 3 RETAIL MARKET TRENDS Vacancy As illustrated in the adjacent chart, overall vacancy rates were still above 10.0 percent during 4Q2015. CBRE and Reis reported minimal fluctuation in vacancy rates over the course of the year, and from the previous quarter. It is still expected that overall vacancy will decline through 2020 dipping below 10.0 percent (CBRE, Reis). The U.S. Retail Vacancy by Segment chart shows that vacancy rates have made minimal improvements (if any) over the course of Vacancy rates for Malls remained unchanged at 5.6 percent and have only declined by 10 basis points since 4Q2014. Power Center vacancy rates declined by 10 basis points to 4.4 percent and declined by 30 basis points year-overyear, while Shopping Centers also declined by 10 basis points to an average of 8.8 percent over last quarter and declined by 50 basis points year-over-year. Traditionally, many Shopping Centers are grocery anchored, and as grocers continued to struggle in a highly competitive market with tight profit margins, they ve also continued to shed locations. Walmart, although not your traditional grocer, announced it will be closing 154 locations in the U.S. The majority will be Walmart Express locations (102), 23 Neighborhood Markets, 12 Supercenters, 7 Amigo stores (Puerto Rico), 6 traditional Walmart s, and 4 Sam s Clubs. As for the real estate, only three appear to be in the REIT portfolios. According to CoStar, the fifteen Leading Markets shown in the chart on the right all showed vacancy rates below 4.3 percent. Year-over-year, vacancy rate compression continued for most Leading and Lagging markets. Markets such as San Francisco, Miami, Hawaii, and Pittsburgh continued to hold their place at the top of the list proving healthy fundamentals. Meanwhile, markets with the highest retail vacancy are dispersed throughout the U.S. Las Vegas, Phoenix, Memphis, and Detroit continued to report the highest vacancy rates ranging between 8.2 percent and 9.4 percent. Newcomers to the Lagging Markets list for the fourth quarter of 2015 include: Jacksonville, Cincinnati, and Columbia. TOTAL RETAIL VACANCY RATES - 4Q Largest U.S. Retail Markets bp Change over Vacancy 4Q2014 LAGGING MARKETS Vacancy bp Change over 4Q2014 LEADING MARKETS San Francisco 2.1% 0 Las Vegas 9.4% 20 Hawaii 2.5% -30 Phoenix 9.3% -50 Miami-Dade County 3.3% -20 Memphis 8.4% -20 Pittsburgh 3.3% -40 Detroit 8.2% -60 East Bay/Oakland 3.4% -50 Inland Empire (NY) 8.2% 0 Albany/Schenectady 3.6% -90 Fresno 8.1% 20 Long Island (NY) 3.6% -60 Sacramento 7.9% -60 Austin 3.7% -100 Rochester 7.8% -40 Little Rock 3.7% -100 Chicago 7.8% -50 Boston 3.8% -10 Kansas City 7.7% -40 Salt Lake City 3.9% -40 Atlanta 7.1% -130 Raleigh/Durham 4.2% -90 Dayton 6.8% -40 Orange County (California) 4.2% -50 Jacksonville (Florida) 6.7% -60 North Bay/Santa Clara 4.3% NAV Cincinnati 6.7% -40 Washington 4.3% -10 Columbia 6.6% -100 Sources: CoStar; PNC Real Estate Market Analytics

4 Retail Sector Remained Sluggish; Meanwhile, Forecasts Show Positive Momentum 4 Supply As shown in the Construction Starts & Deliveries chart on the right, retail starts and deliveries continued to remain at low levels. Construction starts decreased by 4.6 msf or 28.6 percent, compared to last quarter, totaling only 11.4 msf and are down by 15.3 percent annually. Deliveries have stayed about the same, compared to last quarter at 18.7 msf. Year-over-year, deliveries are down by 2.2 percent. Still, such low levels of starts and deliveries, over the course of 2015, have been unable to help push overall vacancy rates down. Markets Represented in the Construction Activity Top Construction Markets chart are the 15 markets with the greatest amount of square footage under construction. Together these 15 markets make up 49 percent of total construction currently underway, according to CoStar. New construction in these markets during the fourth quarter of 2015 totaled 30.5 msf, up 1.0 msf since last quarter. As a percentage of existing supply, New York City continued to surpass all Top Construction Markets for having the most space under construction at 5.3 percent or approximately 2.7 msf in total. As mentioned the previous quarter, the majority of the construction in NYC is due to the 17.4 msf Hudson Yards mixed-use development on Manhattan s West Side that is expected to be delivered in Newcomers to make the list include, Oklahoma City, Milwaukee, Minneapolis, and Westchester. One notable market to leave the Top Construction Markets is Hawaii with the Ala Moana Expansion that included the completion of over 650,000 sf of retail space. Overall, ten of the fifteen Top Construction Markets (by GLA) are at least 75.0 percent pre-leased. Throughout 2015, the Miami-Dade market is the only market to remain on the list that has continued to have considerably weak preleasing at 52.9 percent. Two large developments impacted the level of preleasing in the Miami-Dade market. Brickell City Centre, a Swire Properties mixed-use development, will include approximately 520,000 sf of retail space. Currently, the retail portion is only 40.0 percent preleased and is confirmed to be anchored by a three-story Saks Fifth Avenue. The project is expected to deliver in the fall of 2016 according to CoStar. In addition, the development will include three office buildings, two residential towers, and a 264 room hotel. Midtown Doral is the other large-scale mixed-use development that will include 300,000 sf of retail. Currently, the property is not showing any preleasing, according to CoStar, and is expected to deliver in June of The development will also include residential units, 100,000 sf of office space, and a hotel.

5 Retail Sector Remained Sluggish; Meanwhile, Forecasts Show Positive Momentum 5 Demand Nationally, retail absorption has been positive over the past six years. Net absorption for 4Q2015 was reported at approximately 31.8 msf, down 3.1 msf from 4Q2014 and down 2.9 msf from the previous quarter. The average quarterly net retail absorption for this year remained stagnant when compared to last year (see adjacent chart). Although results were positive nationally, as well as at the market level, wide variations were apparent for the top U.S retail markets (see bottom chart). Markets All of the 20 top U.S. retail markets (by total GLA), continued to experience positive absorption over the last 12 months and eight of the top markets experienced even greater absorption rates when compared to the same timeframe last year. Once again, the Dallas-Fort Worth market saw the highest level of annual retail absorption at 5.3 msf, up from 3.8 msf compared to a year ago. Other markets that reported large increases from a year ago include Detroit, which was up by 1.6 msf annually and has experienced greater absorption since mid-year Long Island has also experienced greater absorption rates each quarter in 2015, compared to 2014 and was up by almost 900k sf this quarter when compared to the same timeframe last year. The other twelve retail markets reported similar or weaker levels of retail absorption in 2015, compared to a year ago. Three markets in particular, Las Vegas, Chicago, and Los Angeles, all showed absorption decreased by more than 1.0 msf in 2015 compared to the previous year. Although Los Angeles showed a slowdown in retail absorption, it reported a healthy market vacancy rate of 4.6%. Chicago and Las Vegas, however, are more concerning with market vacancy rates much higher at 7.8% and 9.4% respectively.

6 Retail Sector Remained Sluggish; Meanwhile, Forecasts Show Positive Momentum 6 Rental Rates As illustrated in the chart on the right, effective rent on an annualized basis increased approximately 1.0 percent to 2.0 percent in the fourth quarter of Looking ahead, effective rent growth through 2020 is expected to continue to increase, reaching and even surpassing rent growth levels of 4.0 percent. Over the course of 2015, much like vacancy rates, rental rates have shown minimal improvement. In the fourth quarter, the average Power Center asking rental rate was $16.71 per sf, up by 1.5 percent sequentially and by 1.4 percent year-overyear. Malls asking rates declined by 0.3 percent over last quarter to $16.82 psf, but still increased by 3.8 percent year-overyear. The Shopping Center segment, which has consistently posted the highest vacancy rate has rental rate averages that fluctuated the least over the past year at a rate of $14.37 per square foot. That is more than $2.00 lower than Malls or Power Centers. The average rate for Shopping Centers, however, was up 0.4 percent against the previous quarter and up 1.2 percent yearover-year. Markets CoStar reported that 55 of the 75 largest U.S. retail markets saw year-over-year increases in asking rates for the fourth quarter. For the first time during the fourth quarter the Leading Markets as shown in the Total Rental Rates - 4Q2015 chart did not hit double digit increases for any market. San Francisco, however, has remained on the Leading Markets list throughout 2015 and maintained a sub-5.0% vacancy, which suggests healthy fundamentals. The greatest decreases in retail asking rates ranged from -0.9 percent to -4.4 percent. Lagging Markets this quarter have shown wide distribution throughout the U.S. The Columbus market saw the greatest decline in average retail rental rates by 4.4 percent year-over-year, and has remained at the bottom of the Lagging Markets list over the past three quarters. New Orleans and San Diego also remained at the bottom of the list and reported a drop in rental rates of 3.0 percent or greater. Rental Rate (NNN) Pct. Chg. Over 4Q2014 Pct. Chg. Over 4Q2014 Rental Rate LEADING MARKETS LAGGING MARKETS (NNN) Nashville $ % Baltimore $ % Louisville $ % St. Louis $ % San Francisco $ % Sacramento $ % Orange County ( California) $ % Cincinnati $ % Boston $ % Syracuse $ % Omaha/Council B. $ % Pittsburgh $ % Rochester $ % Memphis $ % Austin $ % Northern New Jersey $ % Los Angeles $ % Philadelphia $ % Salt Lake City $ % Dayton $ % Tulsa $ % Atlanta $ % Greenville/Spartanburg $ % San Diego $ % Long Island (NY) $ % Little Rock $ % Hawaii $ % New Orleans/Metairie/Kenner $ % Buffalo/Niagara. $ % Columbus $ % Sources: CoStar; PNC Real Estate Market Analytics TOTAL RETAIL RENTAL RATES - 4Q Largest U.S. Retail Markets

7 Retail Sector Remained Sluggish; Meanwhile, Forecasts Show Positive Momentum 7 Cap Rates Overall retail investment was $20.5B in 4Q15, a 20.4% increase from 3Q15, but a 5.9% decrease YOY. Mall properties led the retail segment volume this quarter at $10.9B, a 32.9% increase from 3Q15, but 2.9% lower from a year ago. Volume for strip properties improved 8.9% this quarter to $9.6B and was down 9.1% YOY. Despite the declining volume, RCA noted that individual asset sales are healthy and growing as one-off transactions tend to have a more diverse pool of buyers. Individual asset sales in the retail sector are at record levels, ahead of the previous peak in 2006 and 2007 per RCA. Transaction Volume > $5M Retail CPPI & Transaction Volume Retail Through Fourth Quarter 2015 Billions ($) Major Retail $30 Non-Major Retail 300 Source: PwC Real Estate Investor Survey, Real Capital Analytics, PNC Real Estate Market Research $25 $20 Source: PwC Real Estate Investor Survey, Real Capital Analytics, PNC Real Estate Market Research $15 $10 $ Index (4Q00 = 100) The Moody s/rca CPPI index indicated that prices are up 11.9% YOY, but are still 4.1% off peak levels reached in Portfolio transactions made up the largest transactions for the quarter. In 4Q15, Macerich Co. divested its minority stakes in eight US malls to Singapore-based sovereign wealth fund GIC Real Estate and investment firm Heitman for a total of $2.3B. Additionally, JLL Income Property Trust acquired a stake in a 15 building retail portfolio owned by Madison International Realty for $1.3B. Cap rates across the retail sector continue to post improvements on a quarterly and annual basis. PwC reported that cap rates among all retail asset classes have either posted improvements or are flat. RCA noted that malls and strip center cap rates have worsened or have remained flat; however, power center cap rates have improved on a quarterly and annual basis. $ Source: PwC Real Estate Investor Survey, Real Capital Analytics, PNC Real Estate Market Research Top performing primary markets with strong Sources: PwC Real Estate Investor Survey, Real Capital Analytics, American Council of Life Insurers, PNC Real Estate Market Analytics leasing fundamentals continued to experience value appreciation per JLL. Strongly-positioned, well-tenanted urban product has seen strong rent growth, and JLL reported that rent growth in this 10% 6.81% - PwC space has surpassed prior peak levels, whereas Strip Center 3 bps, +0.4% suburban rent growth lags. Markets such as San 9% 6.81% - RCA Francisco, Hawaii, and Miami have experienced Strip Center low vacancy rates and strong rent growth, representative of top performing markets. Online 8% 3 bps, +0.4% 6.31% - PwC Power Center shopping has started to replace in-store selling, 0 bps, 0.0% and the growing e-commerce segment has led 7% 6.39% - RCA traditional brick and mortar stores to adopt e- Total Retail commerce into their operations. This has resulted in fewer power center investors, who are focused on the correct tenant mix, location, and renovation potential per PwC. JLL noted that power centers anchored by prominent big box tenants (Bed Bath & Beyond, Ross, PetSmart, Kohl s, and Target) 6% 5% Sources: PwC Real Estate Investor Survey, Real Capital Analytics, American Council of Life Insurers, PNC Real Estate Market Analytics 4 bps, -0.6% 6.08% - ACLI Retail 29 bps, -5.0% drove investment activity in Buyer demand for strip properties remained strong as this sector continues to recover Note: Major Retail Markets are Boston, Chicago, Washington DC, New York, San Francisco, and Los Angeles Sources: Real Capital Analytics, PNC Real Estate Market Analytics 10% 9% 8% 7% 6% 5% Capitalization Rates Retail Mall - United States Through Fourth Quarter % - PwC Mall 0 bps, 0.0% 5.71% - RCA Mall 8 bps, -1.5% 6.39% - RCA Total Retail 4 bps, -0.6% 6.08% - ACLI Retail 29 bps, -5.0% Capitalization Rates Retail Power and Strip Center - United States Through Fourth Quarter 2015