MEMBER Oncor International Lease Accounting Standards & Proposed Regulations The Effects on Leasing & Buying in the Washington, D.C. Metropolitan Area Prepared by: Mr. Eric H. West, LEED AP, Principal Mr. Richard F. Siegel, Principal

New Lease Accounting Standards & Proposed Regulations Strategic Real Estate Discussion State of the Washington, D.C. Market All indicators suggest that the Washington, D.C. office market is in a strong recovery phase: The vacancy rate peaked 12.7% in early 2009 and is currently at 9.3% Since 2009, the total amount of available space has declined by 3M square feet There is less than 2.4M square feet of space under construction Net absorption was 4.0M square feet in 2010, up from negative 615,000 square feet in *All numbers reflect Class A office space.

New Lease Accounting Standards & Proposed Regulations Strategic Real Estate Discussion Vacancy Rates – Washington, D.C.

New Lease Accounting Standards & Proposed Regulations Strategic Real Estate Discussion Absorption – Washington, D.C.

New Lease Accounting Standards & Proposed Regulations Strategic Real Estate Discussion Average Rental Rates & Average PSF Sales Prices – Washington, D.C.

New Lease Accounting Standards & Proposed Regulations Strategic Real Estate Discussion Office Volume & User Purchases – Washington, D.C. Year Total User Sales Avg. PPSF PPSF Range HighLow 20106$383$658$ $455$588$ $597$839$ $550$796$ $250$644$ $360$533$ $197$238$ $270$326$ $278$425$ $344$404$282 Total/Avg. 56$368$545$246 User Purchases – Washington, D.C Office Sales Volume ($ Billions)

New Lease Accounting Standards & Proposed Regulations Strategic Real Estate Discussion Leasing vs. Buying – Washington, D.C.

New Lease Accounting Standards & Proposed Regulations Strategic Real Estate Discussion Leasing vs. Buying – Washington, D.C. LeasingBuying + Organizational flexibility - The space layout and design can evolve to meet organization needs - Take advantage of market downturns - Renegotiate lease to reduce rent, occupancy, or both + Maintains organization’s liquidity + Focus on core mission, not real estate operations + Control & reduce long term occupancy costs + Potential to build equity through appreciation + Image & prestige – Susceptible to rental spikes – Long term real estate costs are higher than owning – Lack of liquidity – Equity not serving mission – Asset management & risk