Hedge fund fundactivity in today’stoday’s changing changing market market AugustDecember 2014 2016 Year-End Summary

Our 2016 year-end report examines the trophy market performance over the past year, including:

• New highs achieved in Hudson Yards and submarkets • Deal volume with starting rents above $100 per sq. ft. • Top tier buildings and landlords that outperformed the market

At year-end 2016, the vacancy rate for Midtown’s trophy building submarket increased to 8.8% from 7.0% at the end of last year. The Midtown Class A vacancy rate also increased steadily throughout the year to 11.8%, representing a 1.4% increase from year-end 2015.

As expected, rents in the high-end sector of the held steady throughout the year. The average asking rent for direct space in Midtown trophy buildings increased just 1% year-over-year from $103.61 per sq. ft. to $104.41 per sq. ft.

Midtown Trophy Market Direct Rents and Vacancy by Quarter

Midtown Trophy Asking Rent Midtown Trophy Vacancy Rate $110 15% 13.0% 12.1%

$100 10.5%

$104.41 $104.41

$104.02 $104.02 $103.61 $103.61

$103.30 $103.30 10%

$102.69 $102.69

$102.31 $102.31

$101.32 $101.32

8.4% $99.58

$100.53 $100.53

$98.27 $98.27 $98.11 $98.11

$90 $98.10

$97.73 $97.73

$97.33 $97.33 $97.29 $97.29

$97.10 $97.10 8.8%

$96.24 $96.24

$95.37 $95.37

$93.99 $93.99

$93.81 $93.81

$92.57 $92.57 $92.43 $92.43 8.5% $91.98 8.0% $80 $90.36 7.0%

$84.82 $84.82 5%

$84.65 $84.65

Vacancyrate

$84.03 $84.03 $83.28 $83.28

$70 $80.28 Askingrent per square foot $60 0% Hedge fund fundactivity in today’stoday’s changing changing market market AugustDecember 2014 2016 Deal Trends - $100 per sq. ft. Transactions Despite hedge fund industry volatility and economic- and election-related uncertainty of 2016, many tenants had an appetite for trophy quality office space, for which landlords maintained strong rents. These strong rental achievements were often accompanied by very robust concessions (i.e. tenant improvement allowance/buildout and free rent) afforded to tenants. In 2016, 106 transactions were completed at starting rents of $100 per sq. ft. or higher. While this number falls short of the 2015 peak of 138 transactions, it surpasses the 97 deals signed in 2014. These $100+ deals represent approximately 2.1 million sq. ft., or 9% of the 24 million sq. ft. leased in Midtown and Midtown South in 2016.

There were 44 buildings in the $100 club in 2016, a slight drop from the 50 buildings on last year’s list. Several new entrants include new construction such as 55 West 46th Street, 7 Bryant Park and 425 in traditional Midtown submarkets, as well as 10 Hudson Yards and 30 Hudson Yards. Demand for new construction was strong in 2016, particularly in the Hudson Yards submarket, where over 871,000 sq. ft. was leased this year. For the first time ever, Hudson Yards signed five deals (totaling 141,954 sq. ft.) at rents exceeding $100 per sq. ft., solidifying this submarket as a destination for forward- thinking and high-end tenants who value the new construction in this dynamic neighborhood. As we discussed last month, 91% of the tenants lured to Hudson Yards will vacate space in more traditional Midtown submarkets, such as the large financial user who agreed to lease 850,000 sq. ft. at Related Companies’ . Other highlights include:

• A record setting 26%, or 572,628 sq. ft., of the $100+ deals was leased in new construction.

• 375 Park Avenue (The ) completed twelve $100+ transactions in 2016 and has achieved the most high priced transactions per year since 2010. Tied for second place, and 767 (GM Building) both attained 7 transactions.

• Landlords who leased the most space at $100+ per sq. ft. rents are Boston Properties (437,840 sq. ft. – 18 deals), Vornado (394,898 sq. ft. – 11 deals), Oxford Properties (220,906 sq. ft. – 15 deals), L&L Holding Company (211,000 sq. ft. – 1 deal) and Related Companies (201,854 sq. ft. – 6 deals).

• For the second year in a row, 767 Fifth Avenue (GM Building) has achieved the highest starting rent in Midtown at $220 per sq. ft.

• The majority of these deals involved financial services tenants (79%), however, 2016 saw an increase in the number of technology and other non-traditional office users seeking high-end space in both Midtown and Midtown South. The decline from 138 deals to 106 deals was attributed to decreased demand from hedge funds and private equity firms.

26 hedge funds 8 private equity firms 50 other financial 22 non-financial (compared to 42 38% (compared to 28 29% (investment banks, 16% (legal, consulting, 0% in 2015) in 2015) wealth management, software, technology, venture capital) real estate) (compared to 42 (compared to 22 in 2015) in 2015)

• In 2016, the average size of these transactions increased from last year’s average of 15,000 sq. ft. to 20,342 sq. ft. The largest leases of the year included a hedge fund that leased 211,000 sq. ft. at , a financial tenant that renewed at 731 for 191,780 sq. ft. and two financial users who renewed at , both for approximately 100,000 sq. ft. Hedge fund fundactivity in today’stoday’s changing changing market market AugustDecember 2014 2016 Deal Trends - $100 per sq. ft. Transactions

• This year’s transactions were the most geographically diverse. Midtown South outperformed, leasing more than twice as much space at $100+ rents than in 2015 (269,453 sq. ft. vs. 115,015 sq. ft. last year). Once again, Plaza District buildings leased the majority of space at premium rents – 62% of the 2.1MM sq. ft. total. The geographic divisions were:

 1,336,000 sq. ft. in the Plaza District  141,954 sq. ft. in Hudson Yards  292,643 sq. ft. in Bryant Park  95,662 sq. ft. in Midtown West  269,453 sq. ft. in Midtown South  20,552 sq. ft. in Grand Central

RSF by Submarket

Grand Midtown Central West

Hudson Yards Midtown South

Bryant Park

Plaza

RSF by Landlord – Top 10 RSF by Building – Top 10

Landlord RSF Building RSF

Boston Properties 437,840 399 Park Avenue 225,728 Vornado 394,898 425 Park Avenue 211,000 Oxford Properties 220,906 1095 Avenue of the Americas 210,847 L&L Holding Company 211,000 191,789 Related Companies 201,854 10 Hudson Yards 96,954 SL Green 124,465 375 Park Avenue 96,406 RFR 96,406 767 Fifth Avenue 75,020 Bank of China 81,796 601 Lexington Avenue 65,775 Romanoff Equities 60,110 450 Park Avenue 65,636 Paramount Group 39,175 860 Washington Street 60,110 Hedge fund fundactivity in today’stoday’s changing changing market market AugustDecember 2014 2016

$100+ per sq. ft. Transactions Completed in 2016 - by Building 14 12 12

10

8 7 7 6 6 5 5 4 4 4 4 3 3 3 3 3 2 2 2 2 2 2 Number of Deals of Number 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

0

7 BryantPark 7

770Broadway

9 W 57th W 9

860 Washington 860

767 Fifth Avenue 767Fifth Avenue 712Fifth Avenue 717Fifth Avenue 745Fifth

85 85 Avenue Tenth

280 Park Avenue Park 280 375 Park Avenue 375Park Avenue 450Park Avenue 350Park Avenue 399Park Avenue 299Park Avenue 425Park Avenue 277Park Avenue 499Park Avenue 230Park

10 Hudson 10 Yards Hudson 30 Yards Hudson

641 Sixth 641Avenue Sixth

25055thStreet W

111 Eighth Avenue111 Eighth

65 East 65 55th East

10 Street10 53rd East

55 West 46th Street 55 46th West

40414th Street West

660 Madison 660 510 Madison Avenue 510Madison Avenue 667Madison Avenue 650Madison Avenue 590Madison Avenue 520Madison Avenue 437Madison Avenue 645Madison

601 Lexington 601Avenue Lexington 731Avenue Lexington 450Avenue Lexington

315 Park Avenue South 315 Park

1095 Avenue of the 1095the AvenueAmericas of 1330the AvenueAmericas of 1114the AvenueAmericas of 1350the AvenueAmericas of

Top-Tier Transactions - $100+ Starting Rents 160

138 140

120 106 97 100 91 81 80 80

60 56 Number of Deals of Number 50 51

40

18 18 19 20

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Hedge fund fundactivity in today’stoday’s changing changing market market AugustDecember 2014 2016

$100+ per sq. ft. Transactions Deal Size

35 33

30 29

25

20 18

15 11 10 8 Number of Deals of Number 7 20,342 sq. ft. 5 average size

0 < 5,000 sf 5,000-10,000 sf 10,001-15,000 sf 15,001-30,000 sf 31,000-50,000 sf > 50,000 sf