OFFICE MARKET ANALYSIS SUBURBAN CHICAGO. According to Costar Property, the Suburban Chicago office market is distributed as follows:

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1 OFFICE MARKET ANALYSIS SUBURBAN CHICAGO Market Composition & Distribution According to Costar Property, the Suburban Chicago office market is distributed as follows: Office Submarket Cluster Distribution - Suburban Chicago Class A Class B Class C Percent Percent Percent Submarket Square Feet Submarket Square Feet Submarket Square Feet Submarket Total East West Corridor 24,615,942 34% 34,631,290 49% 12,135,879 17% 71,383,111 Near West 125,000 2% 2,965,263 57% 2,069,689 40% 5,159,952 North 23,075,910 42% 24,907,752 45% 6,939,508 13% 54,923,170 Northw est 22,249,883 37% 30,636,825 50% 7,933,408 13% 60,820,116 O'Hare 8,415,120 45% 7,799,710 42% 2,539,081 14% 18,753,911 South Suburban 2,010,924 10% 12,213,127 58% 6,849,337 33% 21,073,388 Total Suburban 80,492,779 35% 113,153,967 49% 38,466,902 17% 232,113,648 Office Space by Class and Submarket Suburban Chicago ('000's) South Suburban Class A Class B Class C O'Hare Northwest North Near West East West Corridor - 20,000 40,000 60,000 80,000 Thousands Fifty four percent of the office space in the Chicago MSA is located in the suburban market. The East/West corridor is the largest submarket followed closely by the Northwest and North submarkets. Each of these submarkets has a fairly similar distribution in terms of class of space. These are the primary employment markets in the suburbs.

2 Vacancy Vacancy is a function of employment which translates into office workers. Vacancy reached a low point in the suburbs through the late 1990s and began to rise in late 1999/early 2000 as construction picked up and deliveries increased. The employment market weakened in 2000 and vacancy escalated to over 16 percent until the job market improved in 2004/2005. While employment returned to pre 9/11 levels in 2007, vacancy remained above 14 percent due in part to new deliveries. With nominal employment increases only recently taking place, the vacancy rate appears to have stabilized. With that said, we do not expect significant improvement in the vacancy rate until sustained office employment growth is demonstrated. It is important to note that CoStar surveys a larger inventory of office buildings compared to many other office surveys (CBRE, Grubb & Ellis, etc.). This larger survey includes more owner-occupied office buildings and has translated into a lower overall vacancy level than that reported by some of the office brokerage houses. Some of those surveys are showing vacancy rates of 20% or higher.

3 Absorption& Deliveries Job growth in the late 1990s/2000 led to positive absorption of space. The recessionary climate which began in 2000 and continuing through 2Q03 resulted in an extended period of negative absorption in the market. Absorption began picking up in early 2004 when the employment market started to turn positive. The level of absorption however has been on the decline since early Negative absorption had been significant in late 2008 in the depth of the recession. While some modest positive absorption took place between late 2009 and 2011, the most recent quarters have been essentially flat. Because of the time lag for new development including site acquisition, zoning approval, design and ultimately construction, deliveries lag changes in demand. Projects that were financed based on growth seen in the late 1990s delivered in late 2000 through 2002 after the market had turned downward. These factors contributed to the high vacancies previously illustrated during the period While new construction in picked up, there have been few deliveries over the past year. The most recent quarter demonstrated some modest positive absorption; however, if employment shows some strength, as expected, 2012 should see solid absorption.

4 New Construction New construction escalated dramatically from the mid 1990s through 2000 in response to the improved employment situation. The time lag to add new supply in the suburbs is relatively short in comparison to large scale projects in the downtown CBD. When the market went into recession, developers were quick to respond by halting new projects. In spite of the large growth in employment over the last expansion cycle, limited new construction (in comparison to the prior cycle) occurred. This was primarily due to the excessive vacancy in the market where new office space demand created by the employment growth was satisfied by existing space. With the limited availability of financing for new projects, we expect few new construction starts over the next months.

5 Rent Trends The correlation between rent and vacancy is illustrated below. With vacancy under 8 percent, owners pushed rents upward notably through 2000 where they leveled off until late 2002/early After creeping over 14 percent, owners finally responded with lower rental rates which declined through 2006 well into the start of the last building cycle. Vacancy has leveled off. Surprisingly, landlords have increased rents in the last quarter. This is not likely to last as the trend is still in favor of tenants.

6 Transaction Market A substantial run up in transaction volume across all property types occurred from 2004 through 2006 due in large part to very favorable loan terms (high leverage/low rates) and the expectation of increases in net income due to expected growth in demand. Weaknesses in the overall economy became apparent in early to mid The housing market was cooling in part due to the subprime mortgage market and a general over building in many markets. The collapse of numerous financial services firms led to a virtual shut down of the markets as noted below: Bear Sterns acquired by JP Morgan Chase March 2008 IndyMac taken over by FDIC July 2008 Lehman Brothers filed for Bankruptcy September 2008 Merrill Lynch acquired by Bank of America September 2008 AIG Bailout by US Treasury September 2008 Washington Mutual, Inc seized by OTS September 2008 Fannie Mae acquired by US Treasury September 2008 Freddie Mac acquired by US Treasury September 2008 Wachovia acquired by Wells Fargo October 2008 The ability to obtain financing for real estate was diminishing as banks began to stockpile cash for reserves. As financing became more costly with lower loan to values and higher debt coverage ratio requirements, equity investors were requiring higher rates of return resulting in a double hit to returns. Transaction Volume - Chicago MSA Multi-Family Retail Industrial Office Number of Sales $5,000,000,000 $4,500,000,000 $4,000,000,000 $3,500,000,000 $3,000,000,000 $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 $0 1q05 2q05 3q05 4q05 1q06 2q06 3q06 4q05 1q07 2q07 3q07 4q07 1q08 2q08 3q08 4q08 1q09 2q09 3q09 4q09 1q10 2q10 3q10 4q10 1q11 2q11 3q11 4q11 1q After running in the 2.5 to 4.5 billion range for several years, the transaction market has settled in the 0.5 to 1.5 billion range since late Reasons for the decline include a significant buy/sell price gap for most property types that has not yet been bridged. Debt levels on properties acquired in the

7 last up cycle are preventing re-trading of assets since a sale would often require the seller to bring funds to the closing table. Second, while many buyers believe the market is at or near the bottom, they cannot obtain financing at leverage levels that make the deals work. We note the 3q10 dollar volume was skewed by the $655M sale of 300 N LaSalle, a 1.2M+ square foot office building in downtown Chicago. Then in 4q10 the sales of 71 S Wacker, 353 N Clark and 300 S Riverside for a total of 1.2B accounted for 86% of the office dollar volume. The 3q11 office sales include 600 W Chicago ($390M), 70 W Madison ($344M) and 200 W Madison ($217.5M). Excluding these 3 sales, the net office volume was roughly $100M for the quarter. The 4q11 volume was driven by a flurry of large, institutional quality apartment deals that closed just before year end. Over the past several quarters the market appears to have settled into a total transaction volume range of 1.5 to 2.0 billion. With the exception of larger institutional quality deals, we do not expect to see transaction volume increase over at least the next six months as there does not appear to be a solution at this point to the lack of liquidity in the small to mid-size property market.

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