DOWNTOWN HOUSTONJuly 13, 2011

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Theater District

Minute Maid Park

Discovery Green

Convention Center

Toyota Center

Harris County Complex

City Complex

Main StreetSt. Joseph Hospital

Macy’sHouston Pavilions

Historic District

Shops at HC

Soccer stadium (u/c)

New YMCA

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Devon, Plains

Hess (move 2011)

Lyondell

BG Group

Chevron

Exxon

El Paso Corp.,CenterPoint

KBR

Chevron

EOG

Hess, Kinder Morgan

Shell (behind)

NRG/ReliantShell, GenOn

Enterprise Products, Enbridge

Calpine, TransCanada, Plains Expl

Total, Hilcorp

Exxon

Milagro, Dynamic Offshore, Key Energy

Chevron

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E&Y, Jenkins

Fulbright

Continental Airlines KBR

Deloitte

Baker Botts

Waste Mgmt & Vinson & Elkins

Accenture

ChasePWC

Cooper Ind, Andrews Kurth, Locke Lord, Winstead

King & Spalding

Bank of America

Akin Gump

Bracewell Guiliani

Waste Mgmt

Latham Watkins

DEVELOPMENTS

DOWNTOWN DEVELOPMENT

Complete since 2000 $4.29 billion

Under construction + $.73 billion

Pre-development/design + $ .66 billion

Development since 2000 $5.68 billion

RECENTLY COMPLETED

INTOWN LIVING One Park Place

• 346 apartment units• ~90% leased• To have over 700 residents• 1/3 of tenants have a unit as

a second home.• Generally $2.40 – $3.00 / sf• 976 sf to 2,615 sf• Pool area modeled after

Ritz Carlton in Maui• 37 stories; 30 resid levels• Phoenicia grocery store

~July 2011

DOWNTOWN YMCA

107,000 sfOpened 10/2010

BALLET CENTER FOR DANCE

• 6-stories• 10,000+ sf• Offices,

classrooms, studio space, dormitory

• Gensler• One level

underground parking

PARKS – MARKET SQUARE PARK

PARKS – MARKET SQUARE PARK

UNDER CONSTRUCTION

PROGRESS

• Former Sheraton• Empty, boarded up for years• In process of deconstruction• Will be 3 levels of

underground parking, surface parking

• Build to new city parking standard

JULIA IDESON BUILDING

• New 24,500 sf, $38 million wing• Phase I open January 2010• Phase II (restoration of 1926 building) begins

spring 2010, takes 12-18 months

PHOENICIA

• Family-owned, gourmet international food store

• Offerings:– Fresh produce, fruits,

meats and seafood– Cheeses, dairy and frozen

foods– Wines, beers and beverages– Bakery, fresh breads and

pizza center– Prepared foods, dining space– Grocery essentials and dry

goods– Free parking– Delivery and catering

DYNAMO STADIUM

• Land, bldg owned/paid for by city & county, team pays $60m for the stadium, city and county add infrastructure outside the stadium. Total cost: $95m

• Seating: 22,000• Light rail stop• Construction 1Q11 – 2012 soccer season

HARRIS COUNTYJury Assembly Plaza

• Four 250-seat jury selection rooms below grade• $16 million, construction started 7/09, opens this month• Tunnel-connect to Criminal, Civil, Juvenile and Family Law Center

OPENINGS TIMELINE• 9/10– Market Square Park & new YMCA open• 4Q10 – NRG moved to Pavilions (262,000 sf)• 2/11 – Embassy Suites opens (262 rooms)• 2/11 – KPMG moves to MainPlace (100,000 sf)• 4/9/11 – Ballet Center for Dance• 5/11 – Hess moves to Hess Tower (844,000 sf)• 7/11 – Jury Assembly opens• 8/11 – BG Group moves in (350,000 sf)• 10/11 – Phoenicia opens – grocery store• 11/11 – Sundance opens• 4/12 – Dynamo Stadium opens• 2014 – Expanded light rail in operation

PROPOSED

BUFFALO BAYOU

• BBP & HC Flood Control District to move forward with White Oak Bayou Diversion Channel

• Purchasing more land

• Reshaping the Buffalo Bayou channel east of San Jacinto

• Sunset Coffee Bldg• Elysian Viaduct

CONVENTION COMPLEX

1111 RUSK

• Owner: Kimberly-Clark• Broker: CBRE/Mike

Hassler• Former proposed uses:

Ritz Carlton, Marriott Renaissance

• Most likely use: 315 apartments and condos

• ~$20 million• Built 1915, 1938

PROPOSED: HSPVA

• Current facility: • Montrose at Stanford• Outdated, overcrowded

• Est total cost $45-49 million for new downtown building• Potentially raise $15 million• 160,000+/- square feet

• Funding from various sources, including HISD• Several potential downtown sites identified• Accommodates 650 students• Parking required: up to 300 spaces• Two light rail lines: Main Street/ Southeast

806 MAIN

• Main & Rusk• Marriott branding• 250 rooms• 6,000 sf of meeting space• Construction: 18 months• $74 million

Residential Neighborhoods• Warehouse District “Sketch Pan”• Northeast Quadrant “Sketch Plan”• Southeast Quadrant “Sketch Plan”

Active Sidewalks• Lamar St. Ped Lighting Pilot• TIRZ 3:Travis-Fannin / Clay-Jefferson

• TXDOT/COH:Southeast Quadrant

New Attractions• Dynamo Stadium • Regional Tourism Center - ADLA• Schools: HSPVA, Houston Ballet• UH Downtown Masterplan

A Dynamic Economic Center• Mixed Use Retail Core Area• 806 Main Development• GRB Convention Center Masterplan• Convention Hotels• Other New Developments

Buffalo Bayou• Austin Street Portal Repairs• North Channelization• Sesquicentennial to Travis Portal• International Coffee Building• Buffalo Bayou Partnership Plan

Parks & Plazas• Tranquillity Park• Jones Plaza• Pockets & Pets

Public Services & Amenities• Louisiana LED Street Lighting Pilot• Main St OCS Pole Lighting Pilot• Theater Pole Relocation• Congress Street Bridge• LRT Capitol & Rusk Streets• Main Street Paver Repairs• Dallas Ave. Caroline to AdlA• Jury Assembly / 1910 Courthouse

Connected and Convenient• Bike Share Program• Downtown / EaDo Livable Centers• Wayfinding Improvements• GREENLINK Circulator• Elysian Viaduct Bridge & Gateways• Dynamo Stadium Sidewalks: TIRZ 15• Bastrop Promenade• Sister Cities / International Zone• North San Jacinto Extension

PLANNINING INITIATIVES 2011-2012

ASSETS

TUNNEL & SKYBRIDGE SYSTEM

• 6.5 miles• 81 buildings• Goods and services:

– Restaurants, gift shops, personal services, professional services

FITNESS CENTERS

Houston Center Club

Houstonian Lite (2)

Houston Club

Larry North Fitness

The Met

YMCA

THEATER DISTRICT

Theater District:• Six venues• Nine stages• 12,948 seats for performances

plus 1,480 movie seats• One of 5 in the US with four

permanent companies

DOWNTOWN Outdoors

DISCOVERY GREEN

SPECIAL EVENTS

PUBLIC ENVIRONMENTS

• Emphasis on public spaces– streets, squares, art, esplanades and street trees

PUBLIC SAFETY GUIDES

Training highlights:• First Aid/CPR• Crisis Intervention Training• Downtown 101• HPD• Coalition for the Homeless• METRO• Two-way Radio/Programmable Handheld Units• Parking: on-street meters, garages and surface lots• Map Training• Report Writing

HOTELS

EMBASSY SUITES

• $55 million, 19-stories, 262 rooms• American Liberty Hospitality• Architect: Houston-based Mitchell

Carlson Stone• Opened 2/2011• Faces Discovery Green;

1515 Dallas at LaBranch• On 99-year land lease• Avg room rates $200

Two-room suites with separate living area, bedroom and minikitchens. Meeting and event space, pool, sauna, fitness center, restaurant and lounge.

INTOWN LIVING

54,000 residents within a 2-mile radius of Macy’s

Nearby Residents

Gain of 6,519 (62%) college grad 25-34 year-olds within 3 miles 2000-2009

INTOWN LIVING

INTOWN LIVING

• Characteristics of downtown residents• Young, high wage• Empty-nesters• Affluent• Want to be close to cultural

and sports venues

• Those most likely to live downtown:• Have lived in another

downtown• One person works

downtown• Desire for less upkeep of

the home

TRANSPORTATION

TRANSIT USE

Single Occupant

Vehicle, 48%

Park & Ride, 29%

Local bus, rail or both,

8%

Carpool, 11%Other, 4%

Downtown Workforce Mode Split

TRANSIT

METRO SYSTEM EXPANSION

• Construction began 2009

• April 2010: relocation of utility lines begins

• Train in service in downtown Oct 2013 east of Main

• Train in service in downtown April 2014 west of Main

SYSTEM

DOWNTOWN TAXI

• $6.00 cab rides anywhere in downtown

• Up to four people can ride for one flat fee

• Hail a cab when you need it

OFFICE

WHY DOWNTOWN

• Want to be in the mainstream of deal flow; proximity to peers, clients, vendors

• Labor force

• Best transportation anywhere in Houston

• Heart of the city

• Prestige of a downtown address

• The “hip” factor – new, urban, cool

• Residential – opportunity to live close to office; to hire young workers who want to live “urban”

HOMELOCATIONS

Where downtown workers live

FORTUNE 500 COMPANY HQ

Houston MSA: 23 Fortune 500 headquartersDowntown: 11 Fortune 500 headquarters

Source: Fortune, April, 2011

Company

Fortune 500

Rank

Revenues

($millions)

Enterprise Products Partners 80 33,739Plains All American Pipeline 99 25,893Waste Management 196 12,515KBR 242 10,099CenterPoint Energy 279 8,785Kinder Morgan 294 8,191Enbridge Energy Partners 309 7,736Calpine 349 6,637EOG Resources 377 6,100Targa Resources* 416 5,469El Paso 481 4,616

OFFICE SPACE

• 44 million square feet, 30 million in competitive space• Few large blocks available• Vacancy: 3.5 million sf• Prices: soft, not in freefall

• Newest buildings:– Hess Tower– BG Group Place

• Brookfield, Hines, Crescent control ~1/2 the market

BUILDING SALES 2011

• Four Allen Center (1400 Smith)– Purchaser: Chevron– Price: $340-380 million (292/sf) – Cap rate 6.3%– SF: 1,300,000– Seller: Brookfield

• Wells Fargo Plaza – 49% interest– Purchaser: ING Clarion/NY Common Fund– Price: $255 million ($300/sf) – Seller: MetLife

MAJOR RELOCATIONS

Year Company Type From To Initial SF

2010 Ascend New to Houston n/a Chase Tower 20,0002010 BG Group Relocation Galleria BG Group Place 354,0002009 Latham Watkins New to Houston n/a 717 Texas 25,0002009 Accenture Relocation Allen Parkway 1301 Fannin 25,2002008 Breitburn New to Houston n/a Chase Tower 22,0002008 Vestas New to Houston n/a Heritage Plaza 28,0002008 Dynamic Offshore Relocation Greenspoint Fulbright Tower 49,0002008 McDermott Will New company n/a Wells Fargo Plaza 75,0002007 ACL Transportation Svcs New to Houston Indiana First City Tower 26,0002007 Liskow Lewis New to Houston New Orleans First City Tower 55,0002007 TransCanada Spinoff n/a 717 Texas 110,0002007 Plains All American (Pogo) Relocation Greenway Plaza 717 Texas 135,0002006 Linn Energy Relocation Pittsburgh Chase Tower 22,0002006 Teekay Shipping/Skaugen Relocation Galleria 2 Houston 23,0002006 NRG Relocation Greenway Plaza Fulbright Tower 50,0002006 Walter P Moore Relocation Greenway Plaza Fulbright Tower 63,0002005 Morris Architects Relocation Greenway Plaza First City Tower 22,0002005 Watkins, Hamilton Ross Relocation Greenway Plaza 1111 Louisiana 50,0002005 Total Relocation Greenspoint & Gessner 1201 Louisiana 150,0002005 EPCO family of companies Relocation Loop 610/290 area 1100 Louisiana 325,0002004 Chase Technology Center Relocation New York 1111 Fannin 60,0002004 Howery Simon Relocation Galleria 1111 Louisiana 100,0002003 Jones Day New to Houston Dallas 717 Texas 70,0002003 Burlington Resources Relocation Galleria 717 Texas 250,0002002 Halliburton Relocation Dallas 5 Houston Center 30,000

and new firms

OFFICE INFO(CBD Story):

56 Central Houston, Inc. 2011

Buildings Surveyed

Class A

Class B

Total

Number

24

20

44

Rentable SF

24,771,609

9,290,633

34,062,242

Buildings in the survey universe are those that have proven the ability to compete for tenants in the downtown Class A and B markets. The following owner-occupied buildings, therefore, are excluded: 800 Bell/Exxon, 1500 Louisiana/Chevron and El Paso Bldg.

Office Building Use by Industry

Including owner-occupied buildings

57 Central Houston, Inc. 2011

“Energy” is very broadly defined and includes exploration and production, pipelines, utilities and chemical companies.

Owner-occupied buildings are included in this slide –800 Bell/Exxon, 1500 Louisiana/Chevron and El Paso

FIRE = Finance, Insurance, Real Estate

Other includes Waste Management, Continental Airlines, KBR and others.

Energy, 56%

Legal, 19%

FIRE, 12%

Other, 13%

Large Tenants in Bldg Universe

58 Central Houston, Inc. 2011

Tenants by number of floorsOne or more floors 204Two or more floors 116Four or more floors 53

Tenants by square footage20,000+ sf 204100,000+ sf 48200,000+ sf 26500,000+ sf 8

10 tenants control 26% of the survey universe20 tenants control 35% of the survey universe55 tenants control 50% of the survey universe

Excludes Exxon’s 800 Bell, Chevron’s 1500 Louisiana, and El Paso

Summary Data

January 1, 2011

59 Central Houston, Inc. 2011

Space Being Marketed (Direct)

Percent Being Marketed (Direct)

Space Being Marketed (Sublease)

2010 Absorption (Direct)

2010 Leases Signed (Direct)

5,358,104

15.7%

1,002,601

- 237,727

5,064,912

Historical Availability

Direct space being marketed

60 Central Houston, Inc. 2011

Vacancy rate

0%

5%

10%

15%

20%

25%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

'85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

Perc

enta

ge V

acan

cy

Squ

are

Feet

, Mill

ions

Historical Leasing Activity

61 Central Houston, Inc. 2011

Direct, All Lease Types

0

1

2

3

4

5

6

7

'84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

Squ

are

Feet

, Milli

ons

Effective Blocks of Space

62 Central Houston, Inc. 2011

June 16, 2011 100,000 SF+

Red text indicates sublease space

Class Building Floors Total SF Comments

A Pennzoil (North Tower) 12-30 396,346 Current lease exp 7/2013A BG Group Place 11-21 294,295 187ksf is unencumberedA 2 Houston Center 4-10 280,181 Current lease exp 7/2013A 2 Allen Center 17-20; 22-24 198,500 Sublease thru 1/2020A 1 Allen Center 14-20 192,371B JPMorgan Chase Center 14, 15 (most), 19 187,720 Potential to 400ksfB 1300 Main 11, 13-18, 20 171,341B 919 Milam 11-16 130,000 Current lease exp 7/2013A JPMorgan Chase Tower 31-35 110,609 Floors 31-33 encumbered

Full-Floor Sublease Spaces

63 Central Houston, Inc. 2011

Class Building Description Exp SF

A 2 Allen Center 3-5, 17-20, 22-24 (10 floors) (Devon) Jan 2020 281,755

A 3 Allen Center 5-6, 21-23 (Devon) Jan 2020 118,593

A Bank of America 3rd floor (BOA) Sept 2019 38,945

A Wells Fargo Plaza 65-67 (Dynegy) Dec 2017 78,357

A Wells Fargo Plaza 60-61 (Dynegy) Dec 2017 49,917

A Pennzoil-North 6-7 (AEI/Cheniere) Sept 2017 40,866

A Fulbright Tower 32, part of 33 (Coronado Energy) Dec 2016 42,558

A 1600 Smith 48-49 (CRA International) Aug 2015 22,544

B 1111 Fannin 8, 9, 11th floors (Chase) Sept 2021 95,000

B One City Centre 16 & 18th floors (EDS) April 2015 42,532

B Wedge 23 & 26th floors (Dominion) Feb 2013 37,061

With term, not necessarily contiguous; as of 6/13/11

Lease Transactions

64 Central Houston, Inc. 2011

Direct

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

50,000+ 20-50,000 5-20,000 <5,000

Squ

are

Feet

Renewal Expan. New

55

36

108

41

23

48

5

6

15

4

1

8

65

Factors Affecting 2011+• Chevron reduced space from

461ksf to 311ksf in 1600 Smith

• Shell is trying to decrease space by 15-20%. Expected to exit Pennzoil Plaza, 437,000 sf. PZL and 2 Houston leases exp 2013.

• Continental Airlines will reduce space – by how much? Has 600ksf in leases between 1600 Smith and 600 Jefferson, expire 2014.

• Devon still has 281,755sf sublease in 2AC and 138,000sf sublease in 3AC on the market. Exp 2020

• Dynegy may go to Chapter 11; Has 207ksf/8 floors, put 128ksf/5 floors on sublease market (expires 2017)

Beyond 2012

• Exxon to vacate 800 Bell, which isn’t in the survey universe. Potential to decrease later in 1301 Fannin.

• No new buildings – earliest delivery early 2015.

THANK YOU!