1. Milwaukee Industrial Market Year in Review 2010 By: Todd J. Delahunt Appraisal Institute – Wisconsin Chapter November 11, 2010 The Nicholson Group LLC

2. Industrial Market Discussion Outline Market Conditions Cap Rate Analysis Sale Transaction Activity Regression Analysis – Physical Adjustments –Back by Popular Demand –Added “Recession Sales” to the Data Set The Nicholson Group LLC

3. Market Conditions 3Q 2009 vs. 3Q 2010 The Nicholson Group LLC

4. Vacancy Rates 3Q 2009 vs. 3Q 2010 County/Submarket Vacancy Q3 2009 (%) Vacancy Q3 2010 (%) Milwaukee Downtown13.0%13.6% North Central9.6%11.6% North Shore12.6%15.4% Northwest9.0%10.1% South8.0%13.0% South Central10.1%9.6% West10.7%12.8% Milwaukee Total10.0%12.2% Waukesha Northeast6.7%7.0% Northwest7.0%7.8% Southeast5.6%6.6% Southwest2.5%4.7% Waukesha Total5.6%6.6% Ozaukee9.9%10.9% Racine5.6%7.0% Sheboygan2.6%4.2% Kenosha9.7%11.0% Walworth7.8%7.4% Washington7.7%7.3% Grand Total7.7%9.1%

5. Market Conditions by Type Warehouse & Flex Warehouse vacancy up (8.2% vs. 7.2% in 3Q 2009) –Driven by negative absorption Flex vacancy flat (4.5% vs. 4.2% in 3Q 2009) –Small businesses are continuing to lease rather than buy. Market uncertainty Tight credit markets The Nicholson Group LLC

6. Historical Rental Rates Asking rental rates have remained relatively flat over the past several years. Rental market being propped up by landlord concessions –Tenant’s Market –Receptive to short term deals –Free rent prevalent in the market (1 month free per year of lease term) –Higher TI Allowance (Landlord’s that can afford it) The Nicholson Group LLC

7. CAP Rates National Investor Survey CAP rates increased dramatically between Q4 2008 and Q1 2010 (8.28% to 10.98%). Participants were not pursuing non-institutional investments in Q4 2009. CAP Rates have dropped slightly in the last 6 months. –Back to Q3 2009 Levels. Expect CAP Rates to decrease slightly into 2011. The Nicholson Group LLC SURVEY CAPITALIZATION RATES National Warehouse Time PeriodInstitutionalChange in BPS (1) Non- Institutional Change in BPS (1) Q3, 20108.38%-2210.63%-22 Q2, 20108.60%-1310.85%-13 Q1, 20108.73%-710.98%N/Ap Q4, 20098.80%34See (2) N/Ap Q3, 20098.46%5310.79%56 Q2, 20097.93%8010.23%139 Q1, 20097.13%408.84%56 Q4, 20086.73%108.28%25 Q3, 20086.63%78.03%-2 Q2, 20086.56%-8.05%- Total BPS Change182239 (1)Over previously listed time period; BPS = Basis Points (2)Participants were not pursuing non-institutional investments at this time. Source: PriceWaterhouseCoopers

8. Transaction Activity (10,000 + Sq. Ft. Buildings) Slight decrease in industrial sales activity in 2010. Average sale price about the same. +/- 10% increase in average sale price per square foot. Increase in days on market. Slight decrease in price to asking ratio.

9. Regression Analysis Building Age Adjustment Average # of Sales$/SF Building Size Clear Height Year Built % Office % Change/Yr. All Sales214$33.8650,41717197114% 50+ yrs. Old55$24.3050,19714193910% 40-49 yrs. Old24$28.7519,78314196413%1.5% 30-39 yrs. Old45$30.5067,83717197519%0.6% 20-29 yrs. Old39$35.1750,04217198415%1.3% 10-19 yrs. Old43$45.9647,96720199415%2.3% 1998-Present8$62.4460,84626200015%2.6% Building age adjustment of 1.5% per year is appropriate. –All else being equal, a building constructed in 1989 will sell for +/- 1.5% less than a building constructed in 1990. The Nicholson Group LLC

10. Regression Analysis Clear Height Adjustment Average # of Sales$/SF Building Size Clear Height Year Built % Office% Change All Sales214$33.8650,41717197114% < 16 ft.93$29.5727,25013195614% 16-18 ft.59$36.7137,43617198015%19.5% 19-21 ft.27$36.2060,36920198417%-1.4% 22-24 ft.15$37.01117,91322198616%2.2% 25-28 ft.9$39.91140,39327198711%7.3% 29+ ft.11$39.94125,8263219798%0.1% Market doesn’t pay more for clear heights greater than 28 feet. –Incurable functional obsolescence. Heavy discount for clear heights less than 16 feet. –Only older buildings have clear heights less than 16 feet. Larger buildings tend to have higher clear heights. The Nicholson Group LLC

11. Regression Analysis Office Space Adjustment The Nicholson Group LLC Average # of Sales$/SF Building Size Clear Height Year Built % Office % Change/ Add. % All Sales192$33.6649,72017197213% 0-5% Office35$21.4390,4561719593% 6-10% Office59$28.1047,0321719708%4.7% 11-15% Office44$38.2635,26317197813%5.3% 16-20% Office21$42.9828,80216197218%2.2% 21-25% Office17$44.4240,76017197923%0.6% 26-40% Office16$44.6347,24918198032%0.1% Note: Excluded sales with >40% Office Space Market does not pay more for office space beyond 25% of the GBA. Large increase in value for office space between 6% and 15%. –Typical user requires office space in that range. Older buildings tend to have less office space.

12. Regression Analysis Exterior Wall Type Adjustment Average Wall Type # of Sales$/SF Building Size Clear Height Year Built % Office% Change Block115$37.4842,68417197414% Metal49$33.3248,35219198410%-12.5% Note: Excluded sales with other wall types (brick, etc.) All else being equal, buildings with concrete block exterior walls sell for 10% to 15% more than buildings with metal exterior walls. The Nicholson Group LLC

13. Contact Information Todd J. Delahunt Senior Appraiser The Nicholson Group, LLC 555 S. Industrial Drive Suite 207 Hartland, WI 53029 (262) 369-5400 ext. 22 tdelahunt@nicholson-group.com The Nicholson Group LLC