Estimated Value per Share

On January 4, 2017, the Board of Directors (the Board) of Highlands
REIT, Inc. (the Company) met and approved an estimated value of our
common stock equal to $0.35 per share on a fully diluted basis.

Methodology

The Board engaged Real Globe Advisors, LLC (Real Globe), an
independent third-party real estate advisory firm, to estimate the
per share value of our common stock on a fully diluted basis as of
December 31, 2016. Real Globe has extensive experience estimating
the fair values of commercial real estate. The report furnished to
the Board and the audit committee of the Board (the Audit
Committee) by Real Globe complies with the reporting requirements
set forth under Standard Rule 2-2(a) of the Uniform Standards of
Professional Appraisal Practice and is certified by a member of the
Appraisal Institute with the MAI designation. The Real Globe
report, dated as of December 31, 2016, reflects values as of
December 31, 2016. Real Globe does not have any direct or indirect
interests in any transaction with us or in any currently proposed
transaction to which we are a party, and there are no conflicts of
interest between Real Globe, on one hand, and the Company or any of
our directors, on the other.

To estimate our per share value, Real Globe utilized the net asset
value or NAV method which is based on the fair value of real
estate, real estate related investments and all other assets, less
the fair value of total liabilities, and also included certain
estimated corporate-level transaction costs that the Company would
expect to incur in connection with a future potential liquidity
event, further described below. The fair value estimate of our real
estate assets is equal to the sum of its individual real estate
values.

Generally, Real Globe estimated the value of the Companys
wholly-owned real estate and real estate-related assets, using a
discounted cash flow, or DCF, of projected net operating income,
less capital expenditures, for the ten-year period ending December
31, 2026 (or, to normalize net operating income at reversion due to
more than usual tenant rollover in the reversion year, for the
nine-year period ending December 31, 2025), and applying a market
supported discount rate and capitalization rate. In the unique
instances that a discounted cash flow methodology was not deemed to
be the most appropriate valuation methodology, including, but not
limited to, the valuation of land assets, a sales comparison
approach was utilized. For all other assets, comprised of working
capital (which includes cash and other current assets net of
current liabilities), fair value was determined separately. Real
Globe also estimated the fair value of the Companys long-term debt
obligations by comparing market interest rates to the contract
rates on the Companys long-term debt and discounting to present
value the difference in future payments.

The estimate of certain corporate-level transaction costs was
provided to Real Globe by the Company. As previously disclosed, the
Companys investment objectives are to preserve, protect and
maximize shareholder value. The Company is evaluating each of its
assets on a rigorous and ongoing basis in an effort to optimize the
value of its assets. As each of the Companys assets reaches what
the Company believes to be the assets optimum value, it will
consider disposing of the asset for the purpose of either
distributing the net sales proceeds to the Companys stockholders or
retaining the proceeds as part of a plan to achieve an optimal exit
value. Given that the Companys strategy involves a future potential
liquidity option for current stockholders, management and the Board
determined that the deduction of certain estimated corporate-level
transaction costs in connection therewith was appropriate in
determining its new estimated per share value. However, there are
no assurances that such costs will be incurred at the level
estimated by the Company. Additionally, the determination of when a
particular property should be sold or otherwise disposed of will be
made after consideration of all of the relevant factors, including
prevailing and projected economic and market conditions, the cash
flow being generated by a particular asset, tax implications of a
disposition, debt characteristics of the asset, whether the value
of the asset or other investment is anticipated to decline or
increase substantially, and whether the Company would receive an
acceptable value for such property if it were included in a
potential sale of the entire company. The timing of any future
potential liquidity event or events will depend upon then
prevailing economic and market conditions, which could result in
differing holding periods among the assets. As a result, the actual
fees and expenses incurred by the Company in connection with the
execution of its strategy could differ materially from the amount
provided to Real Globe.

Real Globe determined NAV in a manner consistent with the
definition of fair value under U.S. generally accepted accounting
principles (or GAAP) set forth in FASBs Topic ASC 820. Other than
the deduction of certain estimated corporate-level transaction
costs that the Company would expect to incur in connection with a
future potential liquidity event, the net asset valuation performed
by Real Globe complies with the Investment Program Association
Practice Guideline 2013-01 Valuation of Publicly Registered
Non-Listed REITS, dated April 29, 2013.

Generally, net asset value per share was estimated by subtracting
the fair value of our total liabilities from the fair value of our
total assets and dividing the result by the number of common shares
outstanding on a fully diluted basis as of December 31, 2016. Real

Globe then applied a discount rate and terminal capitalization rate
sensitivity analysis by adding and subtracting 50 basis points to
the terminal capitalization rate and discount rate for assets where
the concluded value was derived based on the discounted cash flow
methodology, resulting in a value range equal to $0.35 $0.40 per
share on a fully diluted basis. After rounding down to the nearest
penny, the mid-point in that range was $0.37.

The terminal capitalization rate and discount rate have a
significant impact on the estimated value under the net asset value
method. The following chart presents the impact of changes to our
share price based on variations in the terminal capitalization and
discount rates within the range of values determined by Real Globe.

In order to estimate the final range of value, Real Globe deducted
the $0.02 of certain estimated corporate-level transaction costs
that were provided by the Company from the range of value above.
The following chart presents the resulting final range of values,
net of certain estimated corporate-level transaction costs that the
Company would expect to incur in connection with a future potential
liquidity event.

On January 4, 2017, the Audit Committee met to review and discuss
Real Globes report. Following this review, and considering
managements support of Real Globes analysis, the Audit Committee
unanimously adopted a resolution accepting the Real Globe analysis.
The Audit Committee also unanimously adopted a resolution
recommending an estimate of per share value as of December 31, 2016
equal to $0.35 per share on a fully diluted basis.

At a full meeting of our Board held on January 4, 2017, the Audit
Committee made a recommendation to the Board that the Board adopt
and the Company publish an estimate of per share value as of
December 31, 2016 equal to $0.35 per share on a fully diluted
basis. The Board unanimously adopted this recommendation of
estimated per share value, which estimated value assumes a weighted
average terminal capitalization rate equal to 7.15% and a discount
rate equal to 8.26% and falls within the range of per share net
asset values for the Companys common stock that Real Globe provided
in its report.

The following table summarizes the individual components of the
Companys estimate of per share value, rounded:

The key assumptions (shown on a weighted average basis) that were
used by Real Globe for those properties evaluated by a discounted
cash flow analysis to estimate the midpoint of the value of the
properties are set forth in the following table. These weighted
averages exclude assets that have concluded values that are not
solely based on future cash flow projections, including, but not
limited to, land assets and correctional facilities.

(a) Includes one flex property.

We believe that the NAV method used to estimate the per share value
of our common stock is the methodology most commonly used by
non-listed REITs to estimate per share value. We believe that the
assumptions described herein to estimate value are within the
ranges used by market participants buying and selling similar
properties. The estimated value adopted by the Board, including the
deduction of certain estimated corporate-level transaction costs,
may not, however, represent the fair value as determined in
accordance with GAAP of the Companys assets less its liabilities or
current market values. Real properties are currently carried at
their amortized cost basis in the Companys financial statements.
The estimated value of our real estate assets reflected above does
not necessarily represent the value we would receive or accept if
the assets were marketed for sale. The market for commercial real
estate can fluctuate and values are expected to change in the
future. Further, the estimated per share value of the Companys
common stock does not reflect a liquidity discount for the fact
that the shares are not currently traded on a national securities
exchange, a discount for the non-transferable nature of or
prepayment obligations associated with certain of the Companys
loans and other costs that may be incurred.

As noted above, our estimated per share value does not reflect
enterprise value which may include an adjustment for:

Our estimated per share value as of April 28, 2016 was equal to
$0.36 per share on a fully diluted basis. The estimated value was
based solely upon the net asset value of our real estate assets and
liabilities. The following table compares the individual components
of estimated value, rounded, as of April 28, 2016 and December 31,
2016, respectively:

The number of shares outstanding and used in the calculation, on a
fully diluted basis as of December 31, 2016 was 864,890,967.

Limitations of the Estimated Value per Share

We are providing this estimated value per share to assist broker
dealers in meeting their customer account statement reporting
obligations.

As with any methodology used to estimate value, the methodology
employed by Real Globe and the recommendations made by the Company
were based upon a number of estimates and assumptions that may not
be accurate or complete. Further, different parties using different
assumptions and estimates could derive a different estimated value
per share, which could be significantly different from our
estimated value per share. The estimated per share value does not
represent (i) the amount at which our shares would trade at a
national securities exchange, (ii) the amount a stockholder would
obtain if he or she tried to sell his or her shares (iii) the
amount per share that stockholders would receive in a sale of the
entire Company in a single transaction or (iv) the amount
stockholders would receive if we liquidated our assets and
distributed the proceeds after paying all of our expenses and
liabilities. Accordingly, with respect to the estimated value per
share, we can give no assurance that:

The estimated value per share was accepted by our Board on January
4, 2017 and reflects the fact that the estimate was calculated at a
moment in time. The value of our shares will likely change over
time and will be influenced by changes to the value of our
individual assets as well as changes and developments in the real
estate and capital markets. We currently anticipate publishing a
new estimated share value within one year. Nevertheless,
stockholders should not rely on the estimated value per share in
making a decision to buy or sell shares of our common stock.

Forward-Looking Statements

This Current Report on Form 8-K contains forward-looking
statements, which are not historical facts, within the meaning of
the Private Securities Litigation Reform Act of 1995. These
forward-looking statements (including, without limitation,
statements concerning the estimated per share NAV and assumptions
made in determining the estimated per share NAV) are not historical
facts, but rather are predictions and generally can be identified
by use of statements that include phrases such as believe, expect,
estimate, will, likely or other words or phrases of similar import.
Similarly, statements that describe or contain information related
to matters such as the Companys intent, belief or expectation with
respect to its financial performance, investment strategy and
portfolio, cash flows, growth prospects and distribution rates and
amounts are forward-looking statements. These forward-looking
statements often reflect a number of assumptions and involve known
and unknown risks, uncertainties and other factors that could cause
the Companys actual results to differ materially from those
currently anticipated in these forward-looking statements. In light
of these risks and uncertainties, the forward-looking events might
or might not occur, which may affect the accuracy of
forward-looking statements and cause the actual results of the
Company to be materially different from any future results
expressed or implied by such forward-looking statements. Actual
results may differ materially from these forward-looking statements
due to a variety of risks, uncertainties and other factors,
including but not limited to the factors listed and described under
Risk Factors in the Registration Statement on Form 10 and other
risks discussed in the Companys filings with the SEC, which filings
are available from the SEC. We caution you not to place undue
reliance on any forward-looking statements, which are made as of
the date of this Current Report on Form 8-K. We undertake no
obligation to update publicly any of these forward-looking
statements to reflect actual results, new information or future
events, changes in assumptions or changes in other factors
affecting forward-looking statements, except to the extent required
by applicable laws. If we update one or more forward-looking
statements, no inference should be drawn that we will make
additional updates with respect to those or other forward-looking
statements.

2017 Annual Meeting of Stockholders

Meeting and Record Dates

The Board has determined that the 2017 Annual Meeting of
Stockholders of the Company (the “Annual Meeting”) will be held
on Friday, May 19, 2017. The Board has established the close of
business on March 31, 2017 as the record date for determining
stockholders entitled to vote at the Annual Meeting.

Stockholder Proposals

The Company has set a deadline for the receipt of any stockholder
proposals submitted to Rule 14a-8 under the Securities Exchange Act
of 1934, as amended (the Exchange Act) for the Annual Meeting. Any
such stockholder proposal must be submitted in writing and received
by the Secretary of the Company at 332 S Michigan Avenue, Ninth
Floor, Chicago, IL 60604, not later than 5:00 pm Central Time on
January 19, 2017, which the Company has determined to be a
reasonable time before it expects to begin to print and send its
proxy materials.

In addition, in accordance with the advance notice provisions set
forth in the Companys Amended and Restated Bylaws, stockholders who
wish to bring business before the Annual Meeting outside of Rule
14a-8 under the Exchange Act, or to nominate a person for election
as a director, must ensure that written notice of such proposal is
received by the Secretary of the Company at 332 S Michigan Avenue,
Ninth Floor, Chicago, IL 60604 not later than 5:00 pm Central Time
on January 19, 2017 and otherwise comply with the requirements set
forth in the Company’s Amended and Restated Bylaws.