PHOENIX METROPOLITAN AREA FIRST QUARTER, 2016

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1 HEALTHCARE INVESTMENT GROUP PHOENIX METROPOLITAN AREA FIRST QUARTER, 2016 HEALTHCARE REAL ESTATE MARKET OVERVIEW Phoenix s Medical Office Sector ended 2015 in a strong position, and has continued that momentum into Activity is buoyed by the market s competitive pricing, job growth and population growth, which includes a significant piece of the nation s 65-and-older demographic. Together, these factors have pushed metro Phoenix s average medical office vacancy rate to sub-17%, continuing a seven-year trend of improving occupancy. Values have also remained strong, averaging approximately $ per-square-foot at year-end 2015 for medical office space and $ persquare-foot for condo space. Rents average approximately $22.00 per-square-foot full service, representing an almost 1.5 percent year-over-year growth. Recognizing the longevity of the Phoenix market, investors continue to place capital in single and multitenant medical buildings, and in local medical retail space (a sector that, at the end of 2015 boasted a median cap rate that was 15 basis points below the rest of the market). During the final quarter of 2015, Phoenix recorded $104 Million in medical office sales, with an average price of $ per-square-foot. Location remains a key differentiator in medical office space, with owners and investors placing high value on sites that can be easily accessed by patients in the 65-and-older category a demographic that the Center for Disease Control (CDC) says makes between 6.2 and 7.2 medical office visits each year. By locating in areas where these individuals live and shop, medical facilities can brand themselves as part of the community. This is a strong advantage for companies like Aetna, who significantly expanded its market footprint in 2015 with its acquisition of Humana Inc. In 2016, the Phoenix population is expected to grow by more than 2%. This will only further spur the need for local medical office and retail space, and already has medical-related entities searching high and low for new site options. Many are getting creative, considering urban addresses like MetroCenter, Fiesta Mall and Downtown Phoenix locations that are situated in the heart of high-density, highdemand populations and can be economically converted for medical use. With the nation s 65-and-older demographic expected to hit 17 million in the next decade, there is little doubt that these projects will remain in high demand for years to come.

2 VACANCY AND RENTAL RATES SALES VOLUME & AVERAGE PER SQUARE FOOT Medical Office Openings The Mahoney Group Professional Building N. 19 th Avenue, Phoenix, AZ Located on approximately 4 acres in North Phoenix, this Class A two story 46,942 office/medical professional building opened 4 th Quarter, 2015 and is currently leasing. The property is owned by The Mahoney Group and is one of the few new medical office buildings built in the Phoenix Metro Area in the last several years.

3 Medical Office Sales Thunderbird Wellness Centre Portfolio W. Thunderbird Road, Peoria, AZ Second City Real Estate sold this four property medical office/specialty retail portfolio totaling 56,413 SF on 8.59 acres for $15,500,000 ($ per SF) on October 14, 2015 to MedProperties Group. The property was 88% occupied with a 6.8% cap & 3333 N. 44 th Street Phoenix, AZ Physicians Realty Trust bought this 32,449 SF two building portfolio on November 13, 2015 for $ per SF ($7,162,720). Wayne and Judith Kuhl, c/o Aaron Kuhl of Arizona Medical Office Brokers, had bought the property in 1991 for $1.5M. Greenfield Medical/Dental Center 875 N. Greenfield Road, Gilbert, AZ On October 7, 2015, this 28,490 SF Class B medical office building sold for $7M ($ per SF) to American Realty Capital Properties. The building was 100% leased at the time of sale with a 7.1% cap. Arcadia Medical Plaza 4840 E. Indian School Road, Phoenix, AZ Arcadia Medical Complex, LLC sold this 16,973 SF medical office building on November 23, 2015 for $4.5M ($ per SF) to Eisenberg Company. This off-market property was 100% leased at the time of sale. Parkwood Professional Plaza 5501 N. 19 th Avenue, Phoenix, AZ This value-add 73,514 SF medical office building on 2.43 acres sold on March 18, 2016 for $3.2 Million ($43.53 per SF). The vacancy rate at the time of sale was 45.1% and was on the market for 764 days. The Buyer, Robert C. Penney from Anchorage, Alaska AKA Parkwood, LLC, bought the property from Below Price Market Realty, Inc. Power Road Medical Village 215 S. Power Road, Mesa, AZ This 42,994 RSF medical office complex consists of two, two story buildings of 24,921 SF built in 1987 on 3.52 acres. LNR Partners sold the property to Mahavir Investments, LLC for $2.73M or $63.50 per SF on December 29, 2015.

4 Bethany Place 727 E. Bethany Home Road, Phoenix, AZ Pomona Properties, LLC bought this 25,400 SF medical office complex consisting of four, one and two story building built in 1980 for $2,425,000 ($98.98 per SF) on December 16, 2015 from Hyperion Fund, LP. The property is 94.3% leased and sold with a 7.12% cap E. Camelback Road Phoenix, AZ This 10,300 SF medical office building sold on March 24, 2016 for $1,850,000 ($ per SF). The property is a mix of medical and dental tenants and was sold after 420 days on the market. Diversified Partners, LLC bought the property from Rodney Joffe N. 92 nd Street, Suite 101 Scottsdale, AZ The Seller, BS Medical Holdings, LLC, sold the property on December 22, 2015 for $1,575,000 ($ per SF) to the Wert Family Trust. The Buyers leased back the building for a nine-year lease. Heritage Park Medical Plaza E. Indian School Road, Phoenix, AZ Heritage Park is a 16,289 SF boutique medical office building close to the Camelback Corridor and surrounded by retirement and high density housing. David Chamberlin from Tempe, AZ sold the property on February 29, 2016 for $1.73M ($ per SF) to Mohammad C. Ghafouri of Great Falls, VA at 100% occupancy. Maryvale Medical Center 4550 N. 51 st Avenue, Phoenix, AZ Maryvale Medical Center was 100% vacant at the time of sale and has been reported that the property will be converted to an assisted living facility. Built in 1966, the property sold on January 25, 2016 for $1.25M ($26.55 per SF). The property is a 47,075 SF one story medical office building on 3.47 acres and sold to Maryvale Holdings, LLC (Cipriano B. Ionutescu). Shea Professional Plaza 3101 E. Shea Boulevard Shea Professional Plaza closed on December 24, 2016 and sold for $1.2M ($45.23 per SF). The 41 year old property was 63.5% vacant at the time of sale and sold in 177 days to Ashborne Holdings, LLC. The building was sold with some deferred maintenance, both cosmetic and structural with a reported cost to cure estimated to be about $35.00 per SF. The Buyer will continue to operate this property as an income generating property.

5 Pongratz Orthotics & Prosthetics 641 W. Southern Avenue, Mesa, AZ The Seller sold this property on October 12, 2015 for $975,000 ($96.13 per SF) to GRRO 245, LLC (Tots Unlimited Preschools) and will redevelop the property into a preschool. 601 W. Hatcher Road Phoenix, AZ David Cowles bought this 10,480 SF medical office building on December 1, 2015 for $700,000 ($66.79 per SF). The property was 0% leased and is on.42 acres. Julie A. Johnson, CCIM Principal Julie has been an expert in healthcare real estate in Arizona for about 27 years. She uses her strong analytic skills to assist clients with demographic and market studies, as well as investment and lease analysis. Her in-depth knowledge of healthcare properties, MOB s, Senior Housing, managed care, healthcare reform issues, and healthcare tenant improvements make her a valuable resource to her clients. Julie has been successful at Landlord and Tenant representation as well as investment sales throughout Arizona s healthcare real estate market. Direct: Mobile: julie.johnson@avisonyoung.com Alexandra Loye, Principal Alexandra provides real estate solutions for owners and occupants of medical office and office properties. Alexandra has advised her clients in various capacities including leasing and sales of medical and office buildings, tenant/buyer representation, and senior housing investment sales and site selection. Through market awareness, time-sensitive project management, prompt communication, and aggressive strategic negotiating tactics, Alexandra is able to provide her clients exemplary service while saving them time and money. Direct: Mobile: alexandra.loye@avisonyoung.com 2777 East Camelback Road Suite 230 Phoenix Arizona