1. Houston’s Office Market First Quarter 2010 Henry Hagendorf, CCIM, LEED AP VP, Office and Healthcare Investments

2. www.grubb-ellis.com Really Bad Things Effecting the Office Market Job Growth: A little locally but none nationally. Worse in other cities/states/countries Houston Recovery: Tied to the Texas recovery which is tied to the U.S. recovery which is tied to the Global economy – we seem to be getting better but the U.S. and Global economies are reportedly getting worse Credit Markets: Not fully recovered Continental Airlines Merger: Merger with United will be bad for the CBD and other submarkets

3. www.grubb-ellis.com Really Bad News Effecting The Office Market EXXON: Consolidation and relocation will hurt the Greenspoint submarket NASA: Apparently no longer a friend of Washington. Crucial to the Clear Lake area and surrounding submarkets Oil Prices: $80 per barrel is supposed to be really good news for Houston – right? Why no need for more office space? BP Oil Spill: HUGE but TBD Patient Protection and Affordable Care Act – dba: Healthcare Reform – Tax Increases?????

4. www.grubb-ellis.com Source: BLS, Grubb & Ellis 2008-09 2001 1981-82 Job Losses Related To Recessions 1990-91

5. www.grubb-ellis.com Source: BLS, Grubb & Ellis Unemployment Rate Houston 8.5% Note: Houston’s unemployment is lower than the National average

6. www.grubb-ellis.com Source: BLS, University of Houston Institute for Regional Forecasting Annual Job Gains / Lost, Houston

7. www.grubb-ellis.com Houston Office Statistics Source: Grubb & Ellis First Quarter 2010 ClassTotal SFVacant SFVacant % 1Q 2010 Net Absorption Average Asking Rent A84,305,02412,844,64015.2% (928,539) Chevron-Fluor-ABB $29.65 B66.979,75712,545,91918.7% 84,509 $19.85 C17,308,8442,920,85616.9% 114,397 $15.33 Total168,593,62528,31141516.8% (729,633) $23.53

8. www.grubb-ellis.com Net Absorption vs. Vacancy Rate

9. www.grubb-ellis.com Office Vacancy Rates by Class Source: Grubb & Ellis

10. www.grubb-ellis.com Performance by Top Office Building Owners OwnerRBADirect Available Direct Vacancy Annual % Change Hines8,778,0751,823,22411.0%+0.8% Brookfield8,465,430958,4916.0%-0.9% Behringer Harvard3,862,073655,27115.1%+7.4% Thomas Properties Group 3,823,021836,17310.9%+1.8%

11. www.grubb-ellis.com Source: Grubb & Ellis Office Vacancy Rates by Submarket 2010-Q1 Winners & Losers

12. www.grubb-ellis.com Average Citywide Asking Rents Average $/SF/Year Full Service Gross $29.65 * As of 1 st Quarter 2010 Note: Class A rates are $10/SF or 50% higher than Class B rates. There does not seem to be a noticeable flight to quality. $19.85 $15.66

13. www.grubb-ellis.com Office Asking Rents – Class A Average Class A $/SF/Year Full Service Gross * As of 1 st Quarter 2010 $36.54 $27.96 Note: Average overall $29.65

14. www.grubb-ellis.com Office Asking Rents – Class B Average Class B $/SF/Year Full Service Gross * As of 1 st Quarter 2010 $25.85 $18.86 Note: Average overall $19.85

15. www.grubb-ellis.com Houston Sublease Space Available 4.66 MM Note: Good News – The sublease market is not growing

16. www.grubb-ellis.com 16 Nearly 8.4 million SF (59 Buildings) of new construction has delivered since 2008 Leasing activity within these new projects have been steady but cumulative vacancy is 50.7 percent vacant Only 1.8 million square feet of speculative construction underway i.e. MainPlace (10% leased), EcoCentre at Lake Pointe (under construction). Numerous potential troubled assets that have been recently delivered with vacancy exceeding 50% Houston Office Construction Statistics

17. www.grubb-ellis.com Large Blocks of Space in New Projects Trophies or Train Wrecks Simmons Vedder Partners $22.50 NNN 168,621 SF 38.1% Aug 2009 272,361 SF Westchase Park Bldg 1 Granite PropertiesStream Realty PartnersCB Richard EllisTranswesternLeasing Company Granite PropertiesOpus WestBehringer HarvardTranswestern Owner $19.50 NNNNegotiable$22.50 NNN$22 – $24 NNN Quoted Rental Rate 123,906 SF192,771 SF305,528 SF350,000 SFDirect Space Available 39.5%19.4%0% Leased Sep 2009Mar 2009Oct 2009 Year Built 210,968 SF239,114 SF305,528 SF350,000 SF Square Feet Granite Towers Phase IIEnergy Crossing IThree Eldridge Place Eldridge Oaks – Phase I Sep 2009

18. www.grubb-ellis.com Houston Office Investment Trends

19. www.grubb-ellis.com Top 20 Office Investment Markets – Q1 2010 Source: Real Capital Analytics

20. www.grubb-ellis.com Houston Tenants Can Expect: Asking rents will hopefully bottom out late 2010 or early 2011. Net absorption: Remain in moderate negative territory as businesses cut overhead and/or reduce their SF. Very aggressive landlords: Don’t loose a tenant and roll out the red carpet for all good prospects. Sublease Options: Will continue to compete with landlords. Distressed Sales: Could have an impact on certain submarket rents. Lower investment basis could allow new owners to ask for even lower rents.

21. www.grubb-ellis.com Really Good News: Houston: Best office market in the U.S. Houston: Getting very positive press nationally and internationally and attracting global investor interest. Energy Prices: HIGH and getting HIGHER. Energy Demand: Increasing. Does the U.S. have the “@?<#$*%$” to meet the demand (offshore drilling?) U-Haul: Houston #1 out of 50 cities for one-way destination rentals. Labor Availability: Houston and Texas provide strong labor pools (and labor for your pools), strong infrastructure, low costs of living and a business friendly local and state government.

22. www.grubb-ellis.com Update on “Green” Buildings

23. www.grubb-ellis.com Houston LEED Office Building Inventory Inventory Breakdown

24. www.grubb-ellis.com Houston LEED Certified Office Space Trends Total # Projects Achieving Certification Per Year Total SF Achieving Certification per Year

25. www.grubb-ellis.com LEED Certified Office Buildings by Submarket 8 Buildings 3 Buildings 6 Buildings 9 Buildings 1 Building

26. www.grubb-ellis.com Chase Tower 1,683,893 SF LEED, Gold CBD Williams Tower 1,476,973 SF LEED, Gold Uptown/Galleria First City Tower 1,333,312 SF LEED, Gold CBD One & Two Shell 1,792,214 SF LEED, Gold CBD 919 Milam 542,919 SF LEED, Silver CBD Houston LEED Certified Office Buildings

27. Houston’s Office Market First Quarter 2010 Henry Hagendorf, CCIM, LEED AP VP, Office and Healthcare Investments