MELON STREET MELON STREET FAIRMOUNT AVENUE MEREDITH STREET PEROT STREET FAIRMOUNT AVENUE

26TH STREET BROWN STREET NORTH STREET OLIVE STREET

NORTH STREET 25TH STREET

FAIRMOUNT AVENUE WALLACE STREET WALLACE STREET

WALLACE STREET FAIRMOUNT AVENUE

LEMON STREET MOUNT VERNON STREET LEMON STREET CLAY STREET MOUNT VERNON STREET BROAD STREET 24TH STREET

GREEN STREET CLAY STREET 5TH STREET 5TH WILCOX STREET GREEN STREET

FRONT STREET 23RD STREET 4TH STREET 22ND STREET 21ST STREET 21ST 3RD STREET 6TH STREET 17TH STREET 16TH STREET 18TH STREET 19TH STREET 15TH STREET 20TH STREET 2ND STREET

BRANDYWINE STREET 7TH STREET 8TH STREET 8TH

12TH STREET SPRING GARDEN STREET BRANDYWINE STREET STREET 11TH 13TH STREET 9TH STREET MONTEREY STREET 10TH STREET

Spring Garden Street Spring Garden Street

Buttonwood Street Buttonwood Street

Hamilton Street Willow Street

76 Noble Street

Ridge Avenue Philadelphia market overview Callowhill Street

Wood Street Wood Street 95

Vine Street Vine Street Summer 2009 76

Schuylkill 20 The Philadelphia CBD continues to see its vacancy rate increase River Spring Street 676 and leasing activity slow. Recent sales transactions 21 Building Square feet Price/s.f. Leased Race Street Race Street Broad Street 3501 Market Street 145,000 $217 0.0% 42 1515 Market Street Suite 1000 7 22 Buyer: Drexel University Cherry Street Cherry Street Philadelphia, Pennsylvania 19102 Development stalled in the CBD as troubles in the credit market 1 Seller: Thomson Reuters 8 +1 215 988 5500 curtailed lending. 14 Unisys Technology Center 360,000 $54 50.0% Arch Street Arch Street www.us.joneslanglasalle.com Buyer: Exeter Property Group 23 Seller: Unisys Corporation Transaction activity remains severely constrained as a result of 15 24 John F Kennedy Boulevard John F Kennedy Boulevard Perspective on a Five Tower Bridge 223,736 $326 97.0% 9 10 25 31 the credit crisis and the nation’s most severe recession in Buyer: KBS REIT 2 3 16 17 6 11 12 26 40 Seller: Oliver Tyrone Pulver 27 32 decades. Market Street Market Street 1600 Callowhill Street 88,717 $180 100.0% 4 5 13 18 19 29 28 33 changing market Buyer: Urban America 34 39 Jones Lang LaSalle (NYSE:JLL) is corporate offices. The firm is an

Seller: Rubicon America Trust JV NGP Capital 22nd Street 21st Street 20th Street 19th Street 18th Street 17th Street 30 16th Street 15th Street 13th Street 12th Street 11th Street 10th Street 9th Street 8th Street 7th Street 6th Street 5th Street 4th Street 3rd Street 2nd Street 1st Street Christopher Columbus Boulevard 35 38 a financial and professional industry leader in property and Chestnut Street Chestnut Street services firm specializing in real corporate facility management estate. The firm offers integrated services, with a portfolio of Philadelphia Skyline Review

Sansom Street Sansom Street services delivered by expert teams approximately 1.4 billion square feet lenders are extending term or granting previous years. Magnifying this lack of liquidity worldwide to clients seeking worldwide. Supply vs. demand Development Walnut Street increased value by owning, borrowers forbearance. There are currently is the fact that underwriting standards and Walnut Street LaSalle Investment Management, Significant opportunities exist for tenants with Development stalled in the CBD as troubles in 37 43 occupying or investing in real95 estate. the company’s investment manage- good credit to renegotiate existing leases or the credit market curtailed lending. After over $300 billion in commercial mortgages mortgage terms have tightened for all active 36 With 2008 global revenue of $2.7 ment business, is one of the world’s achieve favorable economic and operating breaking ground in November 2007, estimated to mature each year from 2009 lenders. Locust Street Locust Street billion, Jones Lang LaSalle serves largest and most diverse in real lease terms. The Philadelphia CBD continues Brandywine Realty Trust suspended through 2011. 41 clients in 60 countries from 750 estate with more than $41 billion of to see its vacancy rate increase and leasing construction on the 600,000 square foot Cira Despite all of the above, we do forecast locations worldwide, including 180 assets under management. Spruce Street Spruce Street activity slow. There are five blocks of space Centre South. The City Council approved Pools of opportunistic equity have gathered moderate sales activity for the remainder of over 100,000 square feet available for lease. Walnut Street Capital’s plans for the 2.2 on the sidelines waiting for these distressed 2009. There is some product available for 76

Landlords are willing to negotiate on rental million square foot American Commerce assets to hit the market and create a sale, there are some sellers who have specific Broad Street Pine Street rate terms and concessions. Additionally, Center but no ground-breaking date has been perceived market “bottom”. As transaction motivation to sell assets, and there are some Pine Street tenants who wish to defray the costs set. activity begins to increase, data will be distressed assets that are already coming to Philadelphia market locations Lombard Street Lombard Street associated with moving, will be more provided to an information starved market. the market. Once a few of these transactions 1 2929 Arch, Cira Centre 12 1801 Market, Ten Penn Center 23 1650 Arch 34 1500 Market, Centre Square East

27th Street Taney Street 26th Street 25th Street 24th Street 23rd Street Naudain Street confident approaching their landlords to This will collectively provide effective trading have closed, and the recently passed fiscal 2 2005 Market, One Commerce Square 13 1818 Market 24 1617 JFK Blvd, One Penn Center 35 1 Penn Sq W, Graham Bldg South Street recast or renew their lease. Investment activity ranges for all assets, giving guidance to both stimulus package begins to have an impact on 3 2001 Market, Two Commerce Square 14 1717 SouthArch, Street Bell Atlantic Tower 25 1600 JFK Blvd, Four Penn Center 36 1525 Locust

KATER STREET Transaction activity remains severely buyers and sellers in the current environment. the economy, improving real estate 4 2000 Market 15 1701 JFK Blvd, Comcast Center 26 1635 Market 37 200 S Broad When these transactions occur, we will likely fundamentals, there should be a sustainable BAINBRIDGE STREET BAINBRIDGE STREET BAINBRIDGE STREET BAINBRIDGE STREET constrained as a result of the credit crisis and 5 1900 Market 16 1735 Market, Mellon Bank Center 27 1601 Market 38 1 S Broad see cap rates at least 250 to 300 basis points increase in real estate investment activity. PEMBERTON STREET KENILWORTH STREET Economics the nation’s most severe recession in MONROE STREET 6 1901 Market, Blue Cross 17 1701 Market, Six Penn Center 28 1650 Market, One Liberty Place 39 100 Penn Sq E, Wanamaker Bldg MONROE STREET SCHUYKILL AVENUE higher then their bottom in 2007. FITZWATER STREET FITZWATER STREET FITZWATER STREET PEMBERTON STREET February unemployment for the Philadelphia- decades. Overall volume was down 70% in 7 130 N 18th, One CLYMERLogan STREET Square 18 1760 Market 29 1600 Market, PNC Bank Bldg 40 1101 Market, Aramark Tower Camden-Wilmington area finished at 8.0 2008 and early results for 2009 show FITZWATER STREET 8 100 N 18th, Two STLogan ALBAN’S PLACE Square 19 1700 Market 30 50 South 16th, Two Liberty Place 41 230 W Washington Square GRAYS FERRY AVENUE CATHARINE STREET CATHARINE STREET CATHARINE STREET CATHARINE STREET A significant increase in activity will also Office outlook STREET SWANSON percent, a more than 3.0 percentage point significant further decreases in transaction FULTON STREET

9 1880 JFK Blvd KAUFMANN STREET RD MADISON STREET 20 1600 Vine, Three Franklin Plaza 31 1500 JFK Blvd, Two Penn Center 42 190 N Independence Mall W FULTON STREET MADISON STREET MADISON STREET CATHARINE STREET require an upsurge in liquidity in the debt The Philadelphia CBD will continue to NORFOLK STREET jump from one year ago. The Philadelphia activity year over year. A reversal in trend for STREET TANEY STILLMAN ST CHRISTIAN STREET CHRISTIAN STREET 10 1800 JFK Blvd CHRISTIAN STREET 21 200 N 16th,CHRISTIAN STREET One Franklin Plaza 32 1515 Market 43 510-530 Walnut markets. CMBS debt, which had steadily experience rising vacancy rates for the rest of CATHARINE STREET Suburbs and Southern New Jersey’s finance 2009 would require significantly increased QUEEN STREET MONTROSE STREET 11 1835 Market 22 1601 Cherry,MONTROSE STREET Three Parkway 33 1500 Market, Centre Square West MONTROSE STREET

increased over the last decade, so that at its 2009. Currently, asking rental rates remain BOULEVA COLUMBUS CHRISTOPHER CHRISTIAN STREET QUEEN STREET 23RD STREET and mortgage-based economies stagnated 22ND STREET

liquidity in the real estate debt markets or a STREET 21ST 25TH STREET 12TH STREET 24TH STREET 11TH STREET 11TH 19TH STREET 13TH STREET 17TH STREET 16TH STREET 15TH STREET 18TH STREET 20TH STREET CARPENTER STREET CARPENTER STREET CARPENTER STREET and led to increased unemployment. major increase in the velocity of distressed peak in 2007 it represented over $230 billion high but landlords will eventually lower them to 10TH STREET 9TH STREET KIMBALL STREET KIMBALL STREET BROAD STREET KIMBALL STREET MONTROSE STREET 8TH STREET KIMBALL STREET

of activity and was over 55% of the reflect actual taking deals. Fewer tenants in 7TH STREET

Comparatively, the education and healthcare- asset sales. 6TH STREET LEAGUE STREET LEAGUE STREET

5TH STREET CHRISTIAN STREET 4TH STREET commercial real estate debt market, is the market will result in negative absorptionPELTZ STREET CARPENTER STREET 3RD STREET FRONT STREET FRONT based economy insulated the Philadelphia 2ND STREET WASHINGTON AVENUE WASHINGTON AVENUE WASHINGTON AVENUE CBD from severe layoffs but current trouble in Distressed sales may take much of 2009 to currently almost non-existent. The remaining increasing. Long term renewals will be more the legal services industry (as evidenced by develop as the number of troubled loans debt options, commercial banks and frequent as tenants look to deflect the capital the dissolving of WolfBlock, LLP) could lead to approaching maturity increases. These sales insurance companies, have actually allocated costs of moving to new space and landlords future dismissals. could be pushed into 2010 or beyond as many lower amounts of debt capital in 2009 than in look to secure credit worthy tenants. Philadelphia Skyline Review Occupied Our Skyline Review of Philadelphia includes and analyzes the 43 Class A buildings over Direct available 100,000 square feet in the downtown Philadelphia market—the core buildings that truly Market Street West Sublease available move the market. Market Street East Independence Mall Future available (2009 - 2012)

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2929 Arch 2005 Market 2001 Market 2000 1900 Market 1901 Market 130 N 18th 100 N 18th 1880 JFK 1800 JFK 1835 1801 Market 1818 Market 1717 Arch 1701 JFK 1735 Market 1701 Market 1760 1700 Market 1600 Vine 200 N 16th 1601 Cherry 1650 Arch 1617 JFK 1600 JFK 1635 Market 1601 Market 1650 Market 1600 Market 50 South 16th 1500 JFK 1515 Market 1500 Market 1 Penn Sq W 1525 Locust 200 S Broad 1 S Broad 100 Penn Sq E 1101 Market 230 W 190 N 510-530 Walnut Cira Center One Commerce Two Commerce Market Blue Cross One Logan Two Logan Market Ten Penn Bell Atlantic Tower Comcast Mellon Bank Six Penn Market Three Franklin One Franklin Three Parkway One Penn Four Penn Seven Penn One Liberty Place PNC Bank Bldg Two Liberty Place Two Penn Centre Square Graham Bldg The Bellevue Wanamaker Bldg Aramark Tower Washington Independence Penn Mutual West East Sq Mall W Towers Total RBA (s.f.) 731,852 942,866 1,043,098 666,166 456,922 777,906 594,361 701,645 236,956 236,956 775,701 667,825 981,743 1,028,168 1,253,876 1,327,689 322,317 128,128 841,172 215,000 605,662 561,351 553,349 648,057 522,600 286,574 681,182 1,200,000 826,731 991,620 502,531 507,180 1,000,000 801,389 240,634 99,147 272,793 464,800 1,410,475 632,000 72,000 270,210 853,840 Total Vacant (s.f.) 14,098 75,579 220,480 168,324 33,930 0 10,000 43,680 7,139 23,930 176,836 157,195 276,289 8,053 0 213,396 0 32,272 204,493 0 0 110,221 175,000 116,921 66,406 67,588 60,520 131,886 113,473 103,234 109,618 63,770 481,903 84,116 25,288 3,771 5,888 68,632 42,516 25,645 0 12,900 47,440 Largest Block (s.f.) 0 30,000 33,572 78,795 28,400 0 12,016 6,567 12,640 12,640 185,191 88,827 40,000 33,212 0 4,843 15,173 0 0 19,822 5,000 20,197 13,000 9,622 14,856 24,116 22,681 222,377 25,800 25,276 85,104 25,442 12,393 3,633 14,310 25,000 3,549 0 0 31,346

Jones Lang LaSalle’s Skyline Review analyzes 43 Class A Lease restructure Financials in review Capital markets Philadelphia: market statistics Philadelphia market: rental rates / vacancy rate The nation’s current economic situation is having In a new trend, both landlords and tenants are The near total absence of liquidity in the debt Supply Rates Vacancy Vacancy 14% $25.00 buildings over 100,000 square feet in the Center City a direct impact on the corporate real estate focusing much more carefully than before on markets has exacerbated what would have been (average asking) (including sublease) market. Relocating has become less of an option each other’s respective financial strengths before reduced activity to the point where there was a Overall market 44,741,007 $24.31 10.0% 12.0% Philadelphia market—the core buildings that truly move the for many companies due to the cost associated completing a lease transaction. Landlords want virtual standstill in the investment sales market in 12% market. with moving. Lease restructuring is a more to be confident that their up-front investment in the beginning of the year. Sales transactions By submarket popular alternative, which is beneficial to the leasehold improvements provide the anticipated were down nationally by approximately 65 Market Street West 30,496,743 $25.28 10.7% 13.3% 10% tenant and the landlord. rate of return via rent paid by the tenant. percent from 2007 to 2008. At least one data Market Street East 8,357,143 $20.71 9.2% 10.0% $24.00 source has reported that activity is down an Independence Hall 5,887,121 $23.43 7.3% 8.20% 8% The Philadelphia CBD’s office market continues to see its Tenants who restructure their lease significantly On the other hand, tenants want to be as certain additional 85 percent year-over-year. *1Q 2009 Class A & B and immediately reduce their rent and possibly as possible that their landlord does not end up 6% vacancy rate increase and leasing activity slow. While asking reduce their square footage. They may also filing for bankruptcy or losing the property to their While the repricing of the market certainly secure a tenant improvement allowance or rent lender in foreclosure. Tenants also want to be effected velocity, many transactions have failed $23.00 4% rents continue to rise, landlords are willing to come down for abatement. assured that leasehold improvement allowances to close despite a motivated buyer and a Recent large leasing transactions promised by the property owner in the body of motivated seller due to a lack of financing actual taking deals. Fewer tenants in the market will result in Landlords also benefit from a lease restructure the lease are actually delivered. options. Financing for transactions of over $50 Location Tenant Square feet 2% because ownership is able to secure a tenant million is virtually non-existent. For sales of $20 1500 Spring Garden Thomas Reuters 123,453 negative absorption increasing. 0% $22.00 before they go out into the market. A long-term million or less, bank financing, with a full or partial 1600 John F Kennedy Blvd Flaster Greenberg 26,636 lease increases the value of the property and may guarantee, is an option. However, the capital End of ‘06 End of ‘07 End of ‘08 1Q ‘09 enable the landlord to refinance debt on the constraints in the market are such that even at building. these price levels it may require two or three participating banks to fund a transaction. Rental rate Vacancy rate