1. Analysis. Answers. Analysis. Answers Beacon Economics, LLC The Economic Outlook Focus on Los Angeles February 2015

2. Analysis. Answers. 2014: Santa came to town 2014 Ended Strong – California one of the stronger economies in the nation – Growth has broadened to other parts of the state – Consumer spending doing great – Credit is expanding on many levels Economic growth to continue to accelerate through 2015 – Incomes about to start rising – Interest rates aren’t going anywhere – The stock market is not in a bubble – The housing market has a second wave of recovery – Gas Prices a net positive 2

3. Analysis. Answers. GDP 2014: Soft End 3 2014 IIIIIIV201220132014 GDP4.652.62.32.22.4 Consumption1.752.212.871.251.641.72 Durable goods0.990.670.540.520.490.51 Nondurable goods0.340.390.660.120.290.28 Services0.421.151.670.610.860.93 Investment2.871.181.21.330.760.95 Structures0.350.140.080.32-0.010.22 Equipment0.63 -0.110.370.260.35 IP0.210.340.270.150.130.18 Residential0.270.10.130.33 0.05 Inventories1.42-0.030.820.150.060.15 Net exports-0.340.78-1.020.040.22-0.22 Exports1.430.610.370.440.41 Imports-1.770.16-1.39-0.4-0.19-0.64 Government0.310.8-0.4-0.3-0.39-0.03 Federal-0.060.68-0.54-0.15-0.45-0.14 State and local0.380.130.14-0.150.060.11

4. Analysis. Answers. Consumer Spending 4

5. Analysis. Answers. Employment 5

6. Analysis. Answers. Consumer Credit 6 $166B

7. Analysis. Answers. Degrees Among 21-27 with Bachelor 7 Diploma’s Awarded PSYCHOLOGY289,968 BUSINESS MANAGEMENT AND A217,369 BIOLOGY178,560 GENERAL BUSINESS171,875 NURSING170,595 COMMUNICATIONS162,915 MARKETING AND MARKETING R160,309 ACCOUNTING146,322 ENGLISH LANGUAGE AND LITE132,367 CRIMINAL JUSTICE AND FIRE123,509 POLITICAL SCIENCE AND GOV123,106 FINANCE123,068 ELEMENTARY EDUCATION116,591 GENERAL EDUCATION111,969 ECONOMICS101,525 PHYSICAL FITNESS PARKS RE100,639 HISTORY96,637 SOCIOLOGY88,220 COMMERCIAL ART AND GRAPHI84,843 COMPUTER SCIENCE82,940 MECHANICAL ENGINEERING67,953 FINE ARTS56,589 ELECTRICAL ENGINEERING53,805 LIBERAL ARTS52,043 JOURNALISM51,500 Annual Income PETROLEUM ENGINEERING55,103 COMPUTER ENGINEERING50,542 CHEMICAL ENGINEERING48,668 COMPUTER SCIENCE46,060 AEROSPACE ENGINEERING44,651 INDUSTRIAL AND MANUFACTUR43,898 INDUSTRIAL AND ORGANIZATI43,804 MECHANICAL ENGINEERING43,495 ELECTRICAL ENGINEERING42,238 MATHEMATICS AND COMPUTER41,640 PHARMACY PHARMACEUTICAL S40,933 OPERATIONS LOGISTICS AND40,840 FINANCE40,236 GENERAL ENGINEERING40,179 MISCELLANEOUS ENGINEERING39,965 ACTUARIAL SCIENCE39,773 ARCHITECTURAL ENGINEERING39,522 BIOMEDICAL ENGINEERING39,098 COMPUTER ADMINISTRATION M38,760 BUSINESS ECONOMICS38,484 CONSTRUCTION SERVICES38,176 FOOD SCIENCE38,057 CIVIL ENGINEERING37,940 NURSING37,915 MISCELLANEOUS ENGINEERING37,594

8. Analysis. Answers. Weekly Earnings 8

9. Analysis. Answers. Gas Prices: Still Falling ~20,000 barrels per day in consumption – Gasoline: 45% – Jet Fuel: 20% – Other: 35% Annual US spending on refined products down $1,000b to $700b with consumption increase 9

10. Analysis. Answers. Marginal Cost Ceiling 10 JPMorgan

11. Analysis. Answers. Industry Outlook 11

12. Analysis. Answers. Interest Rates 12

13. Analysis. Answers. Where are rates heading? 13

14. Analysis. Answers. Construction Trends 14

15. Analysis. Answers. Housing 15

16. Analysis. Answers. Better Signs… 16

17. Analysis. Answers. Trade 17

18. Analysis. Answers. Global Situation 18

19. Analysis. Answers. China 19 (Bloomberg) -- Managing the yuan is turning into a different game for China’s policy makers these days. After more than a decade of curbing the currency’s gains to help turn the nation into a manufacturing colossus, there are signs the People’s Bank of China is now propping up the yuan to stem an exodus of capital that’s threatening the economy. A gauge of capital flows on the PBOC’s balance sheet fell by the most since 2003 last month in a sign it’s selling foreign currency, while the yuan’s reference rate set daily by policy makers is at its strongest-ever level compared with the market price.

20. Analysis. Answers. California fact versus fiction 20 California Hype:  High taxes, Over regulated  People/business fleeing Reality  Business Climate is not that important  State still outperforming  Certain industries more vulnerable than others, but others doing great  Real enemy: CEQA, dumb taxes “Looking back a few years (2009 / 2010) everyone was saying that CA would fail like Greece or Detroit, but things look different now. What has happened to turn things around?”

21. Analysis. Answers. Regional: Who’s Hot and Not

22. Analysis. Answers. Regional: Who’s Hot and Not North Dakota21.84.8% Texas441.23.9% Utah443.4% Florida229.93.0% Oregon50.83.0% Delaware13.23.0% Washington82.72.8% North Carolina106.42.6% Arizona66.72.6% South Carolina48.92.6% Georgia96.22.4% Colorado54.42.3% Nevada27.12.3% California344.12.2% Kentucky38.72.1% Oklahoma33.52.0% Indiana561.9% Maine6.91.1% Michigan39.31.0% Iowa15.71.0% New York83.80.9% West Virginia7.20.9% New Hampshire5.10.8% Wyoming2.40.8% South Dakota30.7% Pennsylvania33.20.6% Illinois32.40.6% Nebraska6.20.6% Maryland12.10.5% Kansas7.50.5% Virginia15.60.4% New Jersey11.50.3% Mississippi-1.3-0.1% Alaska-1.2-0.4%

23. Analysis. Answers. Job Estimates 23 ?

24. Analysis. Answers. Nonfarm Employment Growth 24 California Employment Growth by Metro, Year over Year RegionDec-13Dec-14Change (000s)Change (%) San Jose982.51,021.539.04.0 San Francisco (MD)1,088.01,128.840.83.8 San Diego1,320.51,364.644.13.3 Oakland (MD)1,043.21,068.024.82.4 Other Bay Area379.1388.08.92.3 Orange County (MD)1,469.51,502.733.22.3 Other Southern California341.0347.76.72.0 Inland Empire1,244.71,268.423.71.9 North Central Valley1,253.01,276.723.71.9 South Central Valley716.4729.613.21.8 Central Coast396.0403.17.11.8 Los Angeles (MD)4,146.84,216.669.81.7 Bakersfield253.3257.34.01.6 San Luis Obispo107.1108.61.51.4 California15,323.615,643.9320.32.1 Source: California EDD

25. Analysis. Answers. Labor Markets 25 Los Angeles County Household vs. Firm Employment Indicator Nonfarm Employment Household Employment Peak MonthMar-07Nov-07 Peak Employment (000s)4,235.64,649.1 Trough MonthFeb-10Dec-09 Trough Employment (000s)3,879.54,258.0 Peak to Trough Change (000s)-356.1-391.1 Peak to Trough Change (%)-8.4 Current MonthDec-14 Current Employment (000s)4,216.64,641.3 Trough to Current Change (000s)337.1383.2 Trough to Current Change (%)8.79.0 Remaining to Previous Peak (000s)-19.0-7.8 Remaining to Previous Peak (%)-0.4-0.2 Source: California EDD

26. Analysis. Answers. Employment by Industry 26 Los Angeles County Employment Growth by Major Industry, Year over Year IndustryDec-13Dec-14 Change (000s) Change (%) Management58.761.93.25.4 Construction121.3126.45.14.2 Admin Support262.3273.110.84.1 Education/Health723.4749.225.83.6 Information198.8204.85.93.0 Transport,Warehouse158.7162.84.12.6 Leisure and Hospitality441.8453.211.42.6 Real Estate74.976.81.92.5 NR/Mining4.74.80.12.2 Total Private3,597.43,671.173.72.0 Prof Sci and Tech280.5285.65.21.9 Retail Trade409.9416.86.91.7 Other Services146.9147.60.70.5 Wholesale Trade218.7218.4-0.3-0.1 Finance and Insurance135.2134.8-0.4-0.3 Government549.4545.5-3.9-0.7 Manufacturing361.5354.8-6.7-1.8 Total Nonfarm4,146.84,216.669.81.7 Source: California EDD

27. Analysis. Answers. Key Sectors 27 Sep-02Sep-13Sep-14 Civilian Employment4,472.94,518.24,652.2 Civilian Unemployment311.2478.8391.7 Fabricated Metal Product Manu52.843.643.7 Electronic Instrument Manu39.724.323.2 Aerospace Product & Parts Manu43.939.738.4 Furniture Mfg20.59.19.0 Food Manufacturing45.238.836.7 Apparel Manufacturing72.446.741.6 Plastics & Rubber Products Manu21.813.513.1 Motion Picture & Sound Recording113.3126.6133.6 Computer Systems Design26.328.627.6 Management, Scientific Consulting24.952.259.5 Scientific Research & Development16.016.617.1 Accommodation37.643.144.7 Local Government Education258.3207.0205.1

28. Analysis. Answers. Sales Tax Receipts by Category 28 Los Angeles County Sales Tax Receipts by Category, Q3 YTD vs Q3 TYD Category2013 YTD2014 YTDChange (%) Autos and Transportation156,146,902167,559,0757.3 Building and Construction64,094,80567,816,3215.8 Business and Industry133,962,543143,351,3117.0 Food and Drugs58,402,43159,684,0922.2 Fuel and Service Stations127,660,380127,625,7280.0 General Consumer Goods239,734,105245,752,5382.5 Restaurants and Hotels140,105,316149,985,8087.1 Total1,031,038,5781,085,155,9185.2 Source: HdL Companies

29. Analysis. Answers. Sales Tax by City/Submarket 29 Los Angeles County Taxable Sales by City/Submarket, Q3 YTD vs Q3 YTD City2013 YTD2014 YTDChange (%) Other2,333,7922,651,97613.6 Beverly Hills1,792,7302,028,81513.2 San Fernando Valley1,094,0761,210,43410.6 West Hollywood881,935960,8518.9 Tri-Cities6,062,2346,562,4028.3 Antelope Valley2,225,6452,348,2185.5 Los Angeles30,990,95932,580,5025.1 San Gabriel Valley13,015,19213,682,6115.1 South La County12,081,31812,663,3944.8 Santa Monica2,236,1262,323,0413.9 Santa Clarita2,125,3592,196,0683.3 Unincorporated16,505,03416,673,9671.0 Long Beach3,698,7123,679,882-0.5 South Bay9,271,1748,902,591-4.0 County Total104,314,286108,464,7514.0 Source: California State Board of Equalization

30. Analysis. Answers. LA Economic Structure 30 Los AngelesUS Met Portion Industry2013Share01-0808-13Share01-0808-13 All industry total77596721.5%-1.3%15.8%5.2% Construction207392.7%-9.4%-19.5%3.7%-12.0%-13.4%-1.0% Durable goods manufacturing456655.9%39.8%-5.4%6.8%38.8%7.3%-0.9% Nondurable goods manufacturing276963.6%12.7%-22.4%5.1%4.8%0.4%-1.6% Wholesale trade531326.8%23.7%-5.5%5.9%24.5%-5.4%0.9% Retail trade406995.2%5.3%-2.6%5.7%7.8%4.0%-0.4% Transportation and warehousing192242.5%16.0%-0.2%2.8%22.7%2.2%-0.3% Information9955812.8%53.4%24.6%5.5%55.5%10.2%7.3% Finance and insurance399145.1%-5.1%21.4%6.8%-3.2%20.3%-1.7% Real estate and rental and leasing13982718.0%40.2%-9.8%14.1%20.5%7.7%4.0% Professional, scientific, and technical services609547.9%25.7%-4.0%7.6%26.5%4.5%0.2% Management of companies and enterprises121261.6%-33.4%7.9%2.2%-3.3%18.5%-0.6% Administrative and waste management services259613.3%21.1%5.1%3.2%26.9%6.0%0.2% Educational services83781.1%24.9%9.9%1.1%21.9%6.0%0.0% Health care and social assistance449025.8%27.9%8.3%7.3%27.1%9.5%-1.5% Arts, entertainment, and recreation167102.2%17.9%7.2%1.0%17.6%9.3%1.1% Accommodation and food services200582.6%9.7%2.7%2.8%9.0%4.7%-0.2% Other services, except government153052.0%-8.4%-11.1%2.1%-3.7%-6.1%-0.1% Government715859.2%5.9%-5.9%12.2%8.2%-0.6%-3.0%

31. Analysis. Answers. Tourism 31 China36,782Taiwan3,493 Europe11,038Japan2,750 India 4,265S Korea1,833 Brazil 4,051Colombia1,511

32. Analysis. Answers. California Exports 32

33. Analysis. Answers. Goods Trade Movement 33

34. Analysis. Answers. Ag and the Drought 34

35. Analysis. Answers. The Role of Reservoirs

36. Analysis. Answers. Residential Real Estate 36 County/MSA2014Year over Year (%) Median Prices Santa Barbara462,50713.8 San Francisco MD982,86811.5 South Bay809,57211.1 Inland Empire272,2909.1 Monterey423,3658.0 Los Angeles478,6516.6 San Diego481,5485.6 Orange County652,5643.9 San Luis Obispo449,822-0.8 Existing Home Sales San Francisco MD11,194-7.3 San Luis Obispo2,912-7.6 South Bay12,856-8.7 San Diego24,347-10.2 Inland Empire50,330-10.8 Los Angeles52,953-11.0 Santa Barbara2,770-11.1 Orange County20,491-11.4 Monterey2,617-14.3 Source: DataQuick

37. Analysis. Answers. Real Estate Prices by City 37 Los Angeles County Residential Real Estate Market by City, 2013 vs 2014 City20132014Change (%) Median Prices Inglewood300,047372,92924.3 Palmdale191,098221,84016.1 Burbank588,117665,24613.1 Pomona284,112319,65812.5 El Monte352,131387,63710.1 Lancaster169,513184,8979.1 Norwalk339,074365,3187.7 Long Beach442,480469,8636.2 Santa Clarita456,814483,5805.9 Pasadena706,913743,1825.1 South Gate299,635314,8145.1 West Covina417,829438,0034.8 Glendale700,536722,5513.1 Torrance608,903624,5882.6 Downey424,045434,7892.5 Los Angeles540,542550,8951.9 County Total449,033478,6516.6 Source: DataQuick Los Angeles County Defaults and Foreclosures by City, 2013 vs. 2014 City20132014Change (%) Foreclosures Glendale7141-41.8 Burbank5735-37.5 Santa Clarita6641-37.2 Norwalk8454-36.5 Pasadena7246-36.1 Torrance8254-34.9 Pomona148106-28.3 Long Beach321230-28.3 Downey6044-26.8 Lancaster483368-23.9 Los Angeles926748-19.2 South Gate3933-16.8 Inglewood8975-15.6 Palmdale407344-15.5 El Monte2824-14.7 West Covina7469-6.6 County Total6,5124,700-27.8

38. Analysis. Answers. Bubble? No… 38

39. Analysis. Answers. Apartment Rental Market 39

40. Analysis. Answers. Permits and Prices 40

41. Analysis. Answers. Residential Permitting 41 City2013 YTD2014 YTDChange (%)City2013 YTD2014 YTDChange (%) Multi-Family UnitsSingle-Family Units Long Beach65298358.5West Hollywood1022120.0 San Fernando Valley1036260.0Santa Monica244795.8 South LA County318782145.9San Gabriel Valley62996553.4 Beverly Hills6913088.4Los Angeles1,0611,60251.0 San Gabriel Valley7981,30863.9Tri-Cities426350.0 Santa Monica426554.8Beverly Hills314132.3 South Bay26039050.0South Bay37847625.9 Tri-Cities8609358.7Santa Clarita2782904.3 Los Angeles9,42710,0686.8 San Fernando Valley24254.2 Unincorporated536363-32.3Antelope Valley167133-20.4 West Hollywood216120-44.4Unincorporated596466-21.8 Other80-100.0South LA County164127-22.6 Antelope Valley150-100.0Other6233-46.8 Santa Clarita031N/ALong Beach14825-83.1 County Total12,62414,52615.1County Total3,6144,31519.4

42. Analysis. Answers. In the Long Term? 42 1Alaska36.4% 2Wyoming22.2% 3New York18.7% 4Delaware18.1% 5North Dakota17.8% 6West Virginia17.0% 7New Mexico16.5% 8South Carolina16.4% 9Vermont16.2% 10Hawaii15.9% 11California15.7% 12Mississippi15.6% 13Wisconsin15.6% United States Total14.7% 2011 Taxes Fees Paid as share PI Under $25,000-192,061 $25,000 to $50,000-58,600 $50,000 to $99,99918,955 Over $100,0002,619 Total-229,087 Total Domestic Net Migration by Income 08-13 Texas Under $25,000-40070 $25,000 to $50,000-23741 $50,000 to $99,999-3433 Over $100,000599

43. Analysis. Answers. Nonres. Permitting by Type 43 Los Angeles County Nonresidential Building Permit Values by Type ($000s) Permit Type2013 YTD2014 YTDChange (%) New Commercial1,109,7211,512,13636.3 Office246,153272,59210.7 Retail398,367577,66945.0 Hotel145,40988,454-39.2 Industrial128,371129,7771.1 Other Nonres.460,7731,053,409128.6 Nonres. Alts./Adds.2,094,1383,187,96852.2 Total Nonres.3,793,0035,883,28955.1

44. Analysis. Answers. Nonres. Permitting by City 44 Los Angeles County Nonresidential Building Permit Values by City/Submarket, 2013 vs. 2014 City2013 YTD2014 YTDChange (%) Unincorporated270,679,7821,106,657,175308.8 Santa Monica42,661,47294,484,594121.5 Antelope Valley29,371,10860,260,815105.2 Tri-Cities198,744,068406,108,074104.3 West Hollywood52,491,96892,280,00075.8 San Fernando Valley40,371,02659,865,90548.3 Los Angeles1,690,894,7602,477,739,97646.5 South Bay286,837,043358,472,53825.0 San Gabriel Valley447,454,078501,533,92412.1 South LA County349,628,918383,348,2649.6 Other66,187,55470,532,1086.6 Beverly Hills75,084,05575,540,2950.6 Long Beach175,838,207144,228,603-18.0 Santa Clarita66,758,58252,237,216-21.8 County Total3,793,002,6405,883,289,45655.1

45. Analysis. Answers. California Office Properties 45

46. Analysis. Answers. California Retail Properties 46

47. Analysis. Answers. L.A. Office and Retail Submarkets 47 Submarket Vacancy Rate (%) Net Absorption (Thous. Sq. Ft. over last 4- quarters) Cost of Rent ($ Sq. Ft./Month West LA County (inc. Downtown) 12.61,74038.80 Antelope Valley14.19333.00 San Fernando Valley 14.1-2628.60 San Gabriel Valley 14.726126.70 Tri-Cities15.721233.40 South LA County20.5-4924.80 South Bay2210427.80 Office SubmarketsRetail Submarkets Submarket Vacancy Rate (%) Net Absorption (Thous. Sq. Ft. over last 4- quarters) Cost of Rent ($ Sq. Ft./Month West LA County12.6-523.90 Antelope Valley14.18233.70 San Fernando Valley 14.128627.30 San Gabriel Valley 14.74930.70 Tri-Cities15.76927.10 South LA County20.52532.70 South Bay22-1140.50

48. Analysis. Answers. L.A. Industrial Submarkets 48 Submarket Vacancy Rate (%) Net Absorption (Thous. Sq. Ft. over last 4- quarters) Cost of Rent ($ Sq. Ft./Month San Gabriel Valley 6.34306.40 South LA County6.71,9395.90 Antelope Valley7.2906.30 San Fernando Valley 7.43377.70 South Bay7.69286.90 Warehouse/Distribution SubmarketsFlex/R&D Submarkets Submarket Vacancy Rate (%) Net Absorption (Thous. Sq. Ft. over last 4- quarters) Cost of Rent ($ Sq. Ft./Month South LA County2.618412.24 Antelope Valley4.6-239.75 South Bay4.96210.73 San Gabriel Valley 5.97410.66 San Fernando Valley 7.6-4710.96

49. Analysis. Answers. The Revenue Outlook 49 But… Revenue Increases Short Term Pensions still underfunded Public employee unions pushing for big pay hikes Way behind on infrastructure investments Built up short term debt (unemployment, etc) Still overly sensitive to capital gains Rainy day fund? Not really…

50. Analysis. Answers. So what does it mean? Big Themes for the 2015  Labor markets reaching full recovery, incomes to rise  Consumers will continue to spend on better income, easier credit  Housing recovery to rebound again  Commercial rebound will continue, construction in hot spots  Business spending to grow steadily  Fed will move slow. long term rates to drift up slowly—flatter yield curve ahead  California still in the growth mix as long as there is still slack to work with 50 Future issues remain  Government investments constrained  Global economy still wobbly, uncertainty in the developing world  State short on housing / needs CEQA reform  State budget surplus in name only, need revenue reform  Long term issues: healthcare, pensions, entitlements  Growing inequality of income and wealth  Politics politics politics

51. Analysis. Answers. 51 For additional information visit www.beaconecon.com Our Services  Economic Forecasting  Regional Intelligence Reports  Business & Market Analysis  Real Estate Market Analysis  Ports & Infrastructure Analysis  Economic Impact Analysis  Public Policy Analysis To view or download this presentation please visit: www.BeaconEcon.com www.BeaconEcon.com Chris@BeaconEcon.com 310-571-3399