The Skyline market for Houston is defined as the Trophy market, which is further Occupied Direct vacant Sublease vacant defined as top-tier Class A product that is non-owner occupied, larger than 500,000 square feet, and located in a centralized core Houston location. Houston Skyline Future available Retail Parking, other use 80 70 60 50 40 30 20 10 Bank of Pennzoil BG Group Heritage One Allen Two Allen Three Allen One Shell Wells Fargo 1100 LyondellBasell 2 Houston Fulbright 5 Houston Pennzoil Place JP Morgan Place Plaza Center Center Center 1600 Smith 1001 Fannin America Plaza Plaza Louisiana 609 Main 1000 Main Tower Center Tower Center Place North South Chase 717 Texas Total Plaza Capitol Tower Center Tower Tower RBA (s.f.) 972,474 1,212,895 993,297 995,623 1,194,719 1,098,399 1,385,212 1,268,480 1,228,923 1,721,242 1,327,882 1,056,658 837,161 1,061,351 1,024,956 1,247,061 580,875 679,337 664,940 1,656,529 696,228 843,533 778,344 Percent leased 93.0% 99.0% 90.8% 90.9% 96.7% 85.2% 97.8% 92.5% 98.4% 87.4% 99.2% 50.9% 99.7% 95.1% 52.6% 90.3% 75.1% 64.4% 80.1% 93.6% 48.9% 74.0% 27.0% Year built/ renovated 2011 1986 1972/1992 1977/1992 1980 1984 1981/2005 1983/2001 1970/2012 1983 1980 2017 2003 1978/1996 1974/1996 1982/1999 2002 1975 1975 1982/2012 2003 1971/1999 2019 Skyline analysis Total vacancy (%) vs. annual net absorption (s.f.) 25.0% Skyline annual net absorption 1,200,000 Skyline total vacancy % High vacancy putting“ a damper on rents in 16.4% 1,000,000 Houston’s Skyline Direct vacant 20.0% 800,000 600,000 15.0% 400,000 Despite headwinds in the form of abundant available space 200,000 and erratic tenant demand, Houston’s Skyline inventory $46.46 10.0% Direct average 0 remains well-positioned to attract prime tenants in the asking rent ($ p.s.f.) market thanks to its well-capitalized owners and growing 5.0% -200,000 amenity base. -400,000 - Reid Watler 778,344 0.0% -600,000 Under construction 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 (s.f.) 2017 “ © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof. All data is represensentative of Q1 2017. Occupied Direct vacant Sublease vacant Houston square feet in a centralized core Houston location. The key indicator for inclusion or exclusion is based on rent levels. The current threshold Eli Gilbert Chrissy Wilson John Pruitt Future available Retail Parking, other use requires that buildings consistently garner rents greater than $27.00 NNN. Research Director Senior Vice President Executive Vice President 80 70 60 50 40 30 20 10 Pennzoil Pennzoil BG Group Heritage Plaza One Allen Two Allen Three Allen 1600 Smith 1001 Fannin Bank of America One Shell Wells Fargo 1100 Louisiana 609 Main 1000 Main LyondellBasell 2 Houston Fulbright Tower 5 Houston Place North Place South JP Morgan 717 Texas 1201 Louisiana Place Center Center Center Center Plaza Plaza Tower Center Center Tower Tower Chase RBA (s.f.) 972,474 1,212,895 993,297 995,623 1,194,719 1,098,399 1,385,212 1,268,480 1,228,923 1,721,242 1,327,882 1,056,658 837,161 1,061,351 1,024,956 1,247,061 580,875 679,337 664,940 1,656,529 696,228 843,533 Percent leased 98.5% 98.9% 87.3% 97.3% 94.1% 85.7% 98.5% 91.6% 97.6% 91.8% 99.4% % 98.0% 94.8% 58.4% 91.2% 91.1% 69.5% 78.0% 95.8% 97.5% 70.3% Direct rent (FS) $56.91 $55.28 $46.18 $45.01 $46.02 $38.43 $47.04 $50.32 $47.94 $50.96 $47.44 $54.00 $50.83 $44.46 $44.14 $45.37 $50.79 $44.60 $44.60 $49.49 $52.77 $41.55 Year built/ renovated 2011 1986 1972/1992 1977/1992 1980 1984 1981/2005 1983/2001 1970/2012 1983 1980 2016 2003 1978/1996 1974/1996 1982/1999 2002 1975 1975 1982/2012 2003 1971/1999 Houston Skyline leverage Skyline analysis Direct vacancy (%) vs. direct average asking rent ($ p.s.f.) 20.0% Skyline direct average asking rent $60.00 Tenants and landlords remain cautious in the face of Skyline direct vacancy % market volatility 9.4% -1.2% 18.0% Houston’s Skyline is characterized by contradictions. A 37.0 percent drop in leasing activity 2016 $50.00 DIRECT VACANT 2015 NET ABSORPTION 16.0% in 2015 set the stage for slight negative absorption to start 2016, yet asking rents remain (% OF INVENTORY) 14.0% below 10.0 percent even with deceleration in tenant activity. $40.00 12.0% Despite uncertainty facing the Skyline, two things remain clear. First, the Skyline continues 2017 $47.97 9.8% 10.0% $30.00 of 2016, the Skyline recorded a direct vacancy rate of 9.4 percent, lower than the Class DIRECT AVERAGE ASKING 2015 ASKING RENT 8.0% A market’s 15.5 percent. Additionally, higher asking rents were recorded for the seventh RENT ($ P.S.F.) GROWTH $20.00 consecutive quarter: $31.83 per square foot NNN in Skyline properties, versus $23.70 per 6.0% square foot NNN in overall Class A. 2018 4.0% $10.00 Second—and notwithstanding the superior occupancy and asking rent spread between 2.0% the Skyline and broader Class A market—leverage within the Skyline will continue to shift 1,056,658 $435.5m 0.0% $0.00 in favor of tenants in 2016. This will manifest as a widening delta between asking and strike Neutral market S.F. UNDER 2015 & 2016 CONSTRUCTION SALES VOLUME ($) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 2016 www.jll.com/Skyline | ©2016 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof. Licensed Real Estate Broker..