Downtown Los Angeles Ends 2014 With Momentum

office downtown LOS ANGELES market report Downtown Los Angeles Ends 2014 With Momentum Market overview MARKET indicators - VACANCY 19.5% NET ABSORPTION 174,900 CONSTRUCTION 464,340 RENTAL RATE $35.77 P UNEMPLOYMENT 7.9% The Downtown Los Angeles market in the fourth quarter 2014 finished the year with some momentum as net absorption recorded at a positive 174,900 square feet (). The total overall vacancy rate decreased to 19.5% from 20.0% in the previous quarter; a 50 basis point decrease. As landlords position their building product for possible sale and some buildings have traded hands, it has reflected in increasing asking rental rates, and this quarter was no exception. Direct weighted average asking rents recorded an increase to $35.77 per square foot (P) in the fourth quarter 2014 compared to $33.84 P one year ago. New leasing activity in the fourth quarter of 2014 reflected the market s newfound momentum, recording 572,692 relative to 291,926 in the third quarter of 2014. Closed sales activity in the fourth quarter was active, as Beacon sold two properties and Morgan Stanley made a late move on 550 S Hope. The Aon Center sold to Shorenstein Properties from Beacon Properties for $268,520,000 ($242 P), 600 Wilshire Blvd sold to Onni Group from Beacon Properties for $78,000,000 ($251 P), and 550 S Hope traded to Morgan Stanley from LBA Realty for an undisclosed price. Figueroa Courtyard is under contract to sell to Rising Realty Partners from US Bank in the first quarter of 2015. MARKET trends - >> Total vacancy decreases to 19.5% from 20.0% >> Weighted average asking rental rate equates to $35.77 P >> Leasing activity at 572,692 >> Absorption of 174,900 recorded >> Construction activity at 464,340 $ P FSG PER ANNUM (WEIGHTED) HISTORICAL VACANCY VS RENTS Q4 2010 - RENTS VACANCY $38 $37 $36 $35 $34 $33 $32 $31 $30 4Q10 4Q11 4Q12 4Q13 4Q14 30% 25% 20% 15% 10% % VACANT (TOTAL) HISTORICAL net absorption & Construction COMPLETIONS Q4 2010-100,000 0 (100,000) () (300,000) NET ABSORPTION CONSTRUCTION COMPLETIONS (400,000) 4Q10 4Q11 4Q12 4Q13 4Q14 1 Colliers International continuously refines its database. As a result, data reflected in this report may not be consistent with data reported in previous quarters. www.colliers.com/losangeles

market Report OFFICE LOS ANGELES los angeles DEMOGRAPHICS >> Population: 10,063,995 (2014 Estimate) 10,423,669 (2019 Projection) 3.57% (Growth 2014-2019) >> Household income: $75,972 (Average) $53,125 (Median) >> Job growth: 2.5% (past 12 months) >> Unemployment rate: 7.9% (as of November 2014) VACANCY The total vacancy rate, including sublet space decreased to 19.5% compared to 20.0% last quarter, a 50 basis point decrease. A longer historical perspective of the total vacancy rate shows that the vacancy rate a year ago stood at 19.7%. Total vacancy rates were highest in the Financial District submarket (27.2%) and lowest in the South Park submarket (11.5%). rates were highest for Class B space (21.7%) and lowest for Class A space (18.0%) with Class C space in-between at 19.9%. NET ABSORPTION Net absorption was positive for the first time in the last 7 quarters, recording 174,900 square feet, but it did not come without a caveat. The main driver was the unforeseen move by Lewis Brisbois Bisgaard & Smith LLP to US Bank Tower due to fire damage at 221 N Figueroa St from the DaVinci Complex fire. Without this, Q4 absorption would have been negative, albeit still higher than third quarter. Still, the best performing submarket in the fourth quarter was the Financial District submarket, recording positive 652,100 square feet of net absorption. In addition to the Lewis Brisbois Bisgaard & Smith LLP move, Deloitte completed its move to the Gas Company Tower from 350 S Grand. The Bunker Hill submarket was the only submarket in Downtown Los Angeles to record negative net absorption at -590,000 square feet, which is not surprising given the aformentioned Financial District movements. Both South Park (57,000 ) and Greater Downtown (55,800 ) recorded positive absorption. The overall year-to-date net absorption for the Downtown Los Angeles market recorded at -111,000. UNEMPLOYMENT November 2014 figures for nonfarm employment in Los Angeles County showed a recovering job market. Over the past 12 months, Los Angeles County has gained 113,300 jobs for an increase of 2.5 percent. This gain in employment led to the unemployment lowering to 7.9% compared to 9.1% one year ago. Year-over-year job gains were most significant in Educational and Health Services (+22,900) and Professional and Business Services (+21,800). VACANCY BY SUBMARKET NET ABSORPTION BY SUBMARKET 30% SUBLEASE VACANCY DIRECT VACANCY 0.2% 800,000 600,000 652,100 25% 400,000 % VACANT 20% 15% 10% 5% 0.1% 11.3% 0.3% 12.9% 26.9% 0.0% 18.4% 0 () (400,000) (600,000) (590,000) 57,000 55,800 0% SOUTH PARK BUNKER HILL FINANCIAL (800,000) BUNKER HILL SOUTH PARK FINANCIAL p. 2 Colliers International

market Report OFFICE LOS ANGELES office OVERVIEW EXISTING PROPERTIES VACANCY ACTIVITY ABSORPTION CONSTRUCTION RENTS Submarket/ Class Bldgs Total Inventory Direct Sublease Total Total Prior Qtr Leasing Activity Current Qtr Leasing Activity YTD Net Absorption Current Qtr Net Absorption YTD Completions Current Qtr Under Construction Weighted Avg Asking Lease Rate FINANCIAL A 9 9,732,700 15.1% 0.0% 15.1% 20.2% 361,112 542,875 500,900 565,300 0 356,140 $40.44 B 25 8,388,400 22.1% 0.1% 22.2% 24.0% 86,590 326,768 144,800 107,100 0 0 $31.74 C 2 326,400 19.8% 0.0% 19.8% 21.8% 13,214 28,241 6,400 19,100 0 0 $25.14 Subtotal 36 18,447,500 18.4% 0.0% 18.4% 22.0% 460,916 897,884 652,100 691,500 0 356,140 $35.38 BUNKER HILL A 6 7,221,100 23.9% 0.2% 24.2% 20.5% 34,616 81,901 (264,600) (508,700) 0 0 $39.21 B 4 537,844 67.7% 0.0% 67.7% 6.7% 0 29,490 (328,100) (328,000) 0 0 $36.00 C 1 370,200 26.2% 1.0% 27.2% 27.9% 0 36,503 2,700 16,300 0 0 $25.01 Subtotal 11 8,129,144 26.9% 0.2% 27.2% 19.4% 34,616 147,894 (590,000) (820,400) 0 0 $38.05 SOUTH PARK A 2 1,144,200 3.3% 0.0% 3.3% 5.7% 0 55,704 26,700 21,000 0 78,500 $38.43 B 7 1,850,500 16.2% 0.2% 16.4% 17.4% 28,445 124,668 17,200 (86,200) 0 0 $32.41 C 2 266,400 11.9% 0.0% 11.9% 16.8% 10,694 26,944 13,100 40,400 0 0 $30.00 Subtotal 11 3,261,100 11.3% 0.1% 11.5% 13.2% 39,139 207,316 57,000 (24,800) 0 78,500 $32.82 B 6 1,828,500 10.9% 0.4% 11.3% 13.3% 38,021 115,040 36,400 42,400 0 29,700 $29.06 C 8 592,300 19.1% 0.0% 19.1% 22.4% 0 37,552 19,400 300 0 0 $24.57 Subtotal 14 2,420,800 12.9% 0.3% 13.2% 15.5% 38,021 152,592 55,800 45,600 0 29,700 $27.44 MARKET TOTAL A 17 18,098,000 17.9% 0.1% 18.0% 19.4% 395,728 795,520 263,000 77,600 0 434,640 $39.76 B 42 12,605,244 21.6% 0.2% 21.7% 20.4% 153,056 518,478 (129,700) (264,700) 0 29,700 $32.19 C 13 1,555,300 19.7% 0.2% 19.9% 22.6% 23,908 129,240 41,600 76,100 0 0 $25.39 Total 72 32,258,544 19.4% 0.1% 19.5% 20.0% 572,692 1,405,686 174,900 (111,000) 0 464,340 $35.77 Colliers International p. 3

market Report OFFICE LOS ANGELES >> Leasing activity increased 96% compared to third quarter 2014 >> Looking ahead, landlords are expected to continue to offer large concession packages >>Year to date office demand is negative overall; the fourth quarter s momentum is a positive sign for the market, but the sheer volume of absorption and leasing activity should be taken as an aberration CONSTRUCTION No new projects were delivered to the market in fourth quarter; however there is currently 464,340 square feet of office space under construction/renovation. These include 221 N Figueroa St (307,552 ), which will come back to market in late 2015 after being renovated for fire damage and the 356,140 square feet of Class A office space that is part of the Wilshire Grand Tower development. This is the largest project under construction and will be operated by InterContinental Hotel & Resorts. The development is expected to deliver in 2017. Creative space conversions continue to accumulate, as the 78,500 square foot office building at 425 W 11th St in South Park and the 29,700 square foot building at 353 S Broadway in Greater Downtown are expected to be completed by the second half of 2015. For proposals, the Fourth and Traction development at 963 E 4th will be converted to 150,000 of creative office space. Shorenstein s Seventh and Santa Fe redevelopment is also slated to break ground in 2015 with 271,000. activity New leasing activity during fourth quarter totaled 572,692 square feet compared to 291,926 square feet in third quarter 2014, a 96% increase. Legal, financial services and engineering firms continue to account for a large portion of the leasing activity. The leasing highlights were Lewis Brisbois Bisgaard & Smith LLP leasing 215,230 square feet at 633 W 5th St, Oaktree Capital Management, L.P. renewing/expanding to 182,088 square feet at 333 S Grand Ave, and Colony Capital leasing 54,510 square feet at 515 S Flower St. In creative news, WeWork signed for more than a third of 811 W 7th St, taking 44,500 square feet. rental rates As landlords position their building product for possible sale and anticipate a faster recovery for the market, it has reflected in increasing asking rental rates. Overall annual average asking rental rates for fourth quarter recorded at $35.77 P, a 2% increase from last quarter at $35.09 P. Average asking rents were highest in the Bunker Hill submarket ($38.05 P) and lowest in Greater Downtown submarket ($27.44 P). Class A asking rents were $39.76 P compared to Class B at $32.19 P and Class C at $25.39 P. WEIGHTED AVERAGE ASKING LEASE RATES BY SUBMARKET LEASING ACTIVITY BY SUBMARKET $ P PER ANNUM (FSG) $40 $35 $30 $25 $20 $15 $10 $38.05 $35.38 $32.82 $27.44 500,000 450,000 400,000 350,000 300,000 250,000 150,000 100,000 460,916 $5 50,000 38,021 39,139 34,616 $0 BUNKER HILL FINANCIAL SOUTH PARK 0 SOUTH PARK BUNKER HILL FINANCIAL p. 4 Colliers International

market Report OFFICE LOS ANGELES Outlook Larger tenants in the Downtown Los Angeles market will continue to have many options as there remains many large blocks of space over 50,000 square feet and larger. In regards to building sales, investment activity is expected to remain very active from overseas investors and buyers looking to take advantage of the economic market recovery and low interest rates. Downtown Los Angeles landlords are exploring more effective ways to attract technology and entertainment users as creative space demands continue to grow. This has already been seen in the Arts District from industrial space conversions to creative office space. market description Downtown LA is a moderately large office market comprised of 32.5 million square feet, representing 11% of the total office space over 25,000 square feet in the LA Basin. Approximately 52% of the space in this market was built prior to 1980, and is considered relatively old by Southern California standards. Downtown Los Angeles is the most dense market in the region with only one percent of the space contained within low-rise buildings, while 24% and 75% of the space are in mid-rise and high-rise structures, respectively. Downtown includes a large concentration of firms from the legal, utilities, accounting and financial services sectors, and is home to many federal, state, and local government agencies as well. HISTORICAL LEASING ACTIVITY Q4 2010 - UNEMPLOYMENT RATE United States, California & Los Angeles County November 2014 4,000,000 900,000 800,000 3,500,000 700,000 9.0% 8.0% 7.0% 7.1% 7.9% 3,000,000 600,000 6.0% 5.5% 500,000 2,500,000 400,000 5.0% 4.0% 2,000,000 300,000 3.0% 1,500,000 100,000 2.0% 1.0% 1,000,0000 4Q08 4Q10 4Q09 4Q11 4Q10 4Q12 4Q11 4Q13 4Q124Q14 0.0% United States California Los Angeles County RECENT TRANSACTIONS & MAJOR DEVELOPMENTS SALES ACTIVITY PROPERTY ADDRESS SIZE SALE PRICE PRICE P BUYER SELLER 707 Wilshire Blvd, Los Angeles 1,110,000 $268,520,000 $242 P Shorenstein Properties, LLC Beacon Capital Partners 600 Wilshire Blvd, Los Angeles 311,160 $78,000,000 $251 P Onni Real Estate LLC Beacon Capital Partners 550 S Hope St, Los Angeles 590,207 TBD TBD Morgan Stanley & Co. LLC LBA Realty LEASING ACTIVITY PROPERTY ADDRESS LEASED LEASE TYPE BLDG TYPE LESSEE LESSOR 633 W 5th St, Los Angeles 215,230 New A Lewis Brisbois Bisgaard & Smith LLP OUE 333 S Grand Ave, Los Angeles 182,088 Renewal A Oaktree Capital Management, L.P. Brookfield Office Properties 515 S Flower St, Los Angeles 54,510 New A Colony Capital CommonWealth Partners Management 811 W 7th, Los Angeles 44,500 New B WeWork Sorgente Group 555 S Flower St, Los Angeles 35,720 New A White & Case CommonWealth Partners Management MAJOR DEVELOPMENTS PROJECT DEVELOPER SIZE SUBMARKET STATUS ESTIMATED COMPLETION 900 Wilshire Blvd, Los Angeles Hanjin International Corp 356,140 Financial District Under Construction Q1 2017 221 N Figueroa St, Los Angeles The City of Los Angeles 307,552 Greater Downtown Under Renovation Q4 2015 425 W 11th St, Los Angeles Lincoln Property Company 78,500 South Park Under Renovation Q2 2015 353 S Broadway, Los Angeles Flatiron Development Co LLC 29,700 Greater Downtown Under Renovation Q1 2015 963 E 4th St, Los Angeles Atlas Capital Group, LLC 150,000 Greater Downtown Proposed TBD 2060 E 7th St, Los Angeles Shorenstein Properties, LLC 271,000 Greater Downtown Proposed TBD Colliers International p. 5

market Report OFFICE LOS ANGELES DEFINITIONS OF KEY TERMS USED IN THIS REPORT Total Rentable Square Feet: Office space in buildings with 25,000 or more of speculative office space. Includes competitive space in Class A, B and C singletenant and multi-tenant buildings. Excludes non-competitive owner-occupied buildings, buildings that include 30% or greater of medical or retail space, and space that is underconstruction, under-renovation or off-market. Net Absorption: Net change in occupied square feet from one period to the next (includes the impact of change in vacant space available for sublease). Leasing Activity: Square feet leased from all known transactions completed during the quarter. Excludes lease renewals. 485 offices in 63 countries on 6 continents United States: 143 Canada: 42 Latin America: 20 Asia Pacific: 195 EMEA: 85 >> $2.1 billion in annual revenue >> 1.46 billion square feet under management >> Over 15,800 professionals Class A Space: Space that an image-conscious company would lease for its headquarters. Typically, this space has a very high level of finish and an excellent location, and commands the highest rents in the market. Class B Space: Highly functional, attractive space, but less prestigious than Class A Space, and commanding lower rental rates. Class C Space: Functional, competitive space, but with a lower level of finish and/or a less desirable location than with Class B Space, and commanding lower rental rates. Low-Rise: Buildings with a total of 4 floors or less. Mid-Rise: Buildings with a total of 5 to 13 floors. High-Rise: Buildings with 14 or more floors. Direct : Space in existing buildings that is vacant and immediately available during the quarter for direct lease, plus space that is vacant but not available for direct lease or sublease (for example, that is being held for a future commitment). Total : Space in existing buildings that is vacant and immediately available during the quarter for direct lease or for sublease, plus space that is vacant but not available for direct lease or sublease. Weighted Average Asking Rental Rates: Weighted by the total square feet available for direct lease. Data is based on Full Service Gross rents, and includes all costs associated with occupying the space, including taxes, insurance, maintenance, janitorial service and utilities. Reported on a monthly, per basis. Space Added (Net): Total square feet added during the quarter via construction completions, including renovated space returned to market, less total square feet taken off-market due to demolitions or conversions. Under Construction: Includes buildings that are in some phase of construction, beginning with foundation work and ending with the issuance of a Certificate of Occupancy. Technical Note Colliers International is continuously refining its database. The data shown in the historical tables and graphics in this report have been adjusted to take into account these changes in the database. This report has been prepared by Colliers International for general information only. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Colliers International does not guarantee, warrant or represent that the information contained in this document is correct. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This report and other research materials may be found on our website at www.colliers.com/losangeles. united states: Downtown Los Angeles Office License No. 01908231 865 S. Figueroa Street, Suite 3500 Los Angeles, CA 90017 tel +1 213 627 1214 FAX +1 213 327 3200 ALGERMISSEN, STEPHEN Executive BAER, CHRISTOPHER Executive BISSELL, BRENT Associate DUMONT, CHRIS Senior DWIGHT, TIM Associate KIRK, TERENCE MARADEI, GREG MATTESON, CAITLIN Research Director Research Services MUMPER, HANS Executive Managing Director PELLOW, NATHAN Senior PUTNAM, RICK Managing Director Western Region Capital Markets ROBBINS, JAMES Associate SCHNELL, RICHARD C. Senior STANICH, KYLE Associate TARCZYNSKI, MARK Executive TISCHER, ADAM TUSZYNSKI, GREG VILGIATE, NICO Executive WALKER, SHADD G. Senior WOODS, RANDALL WONG, CHRISTOPHER Regional Analyst Research Services Accelerating success. p. 6 Colliers International www.colliers.com/marketname