Queen Anne Square Offering Memorandum by heidi waggoner

Queen Anne Square INVESTMENT OFFERING 2 Building Office Portfolio

155,766 RSF

200-220 Mercer STREET, Seattle, WA

Queen Anne Square

Q UEEN ANNE S Q UARE

TABLE OF CONTENTS

EXECUTIVE SUMMARY

FINANCIAL OVERVIEW

The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Cash Flow Assumptions . . . . . . . . . . . . . . .

Investment Highlights. . . . . . . . . . . . . . . . . . . . . 6

Schedule of Prospective Cash Flow. . . . . . 17

Property Highlights. . . . . . . . . . . . . . . . . . . . . . . 8

Cash Flow Assumption Notes. . . . . . . . . . . . . . 18

Market Highlights . . . . . . . . . . . . . . . . . . . . . . . . 9

Rent Roll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Tenant Profiles. . . . . . . . . . . . . . . . . . . . . . . . . . 27 PROPERTY OVERVIEW Property Description. . . . . . . . . . . . . . . . . . . . . 10

MARKET OVERVIEW

Building Summary. . . . . . . . . . . . . . . . . . . . . . . 12

Puget Sound Investment Market. . . . . . . . .

Representative Floor Plates . . . . . . . . . . . . . . . 14

Downtown Seattle Office Market. . . . . . . . .

2007-2008 Capital Improvements. . . . . . . . . . . 15

Queen Anne Office Market . . . . . . . . . . . .

Sale Comparables . . . . . . . . . . . . . . . . . . . . . . 34 Lease Comparables . . . . . . . . . . . . . . . . . . . . . 35 Competitive Properties . . . . . . . . . . . . . . . . . . 36 Puget Sound Regional Overview . . . . . . . . 37

E X ECUTI V E S U M M AR Y

THE OFFERING

Pacific Real Estate Partners, Inc., as exclusive marketing agent, is pleased to present the opportunity to acquire Queen Anne Square in Seattle, Washington. This attractive two-building office project located on the northern border of downtown Seattle is minutes from Seattle’s financial district. Dramatic lobby and common area improvements, as well as other extensive capital improvements were completed in 2007-2008 totaling over $7 million. This stunning Class A office complex is over 95% leased with a quality tenant roster. Located just northwest of Seattle Center and the iconic Space Needle, the complex is part of the dynamic Queen Anne District that will be home to the 1.3 million square foot campus for The Bill & Melinda Gates Foundation. The Queen Anne Square complex is best of class in the “for lease” category of this submarket and provides a live-work-play environment that appeals to the technology oriented tenant base in the area as well as to existing tenants in the building. Spectacular views of the Olympic Mountains, Mt. Rainier, and Elliott Bay are enjoyed from the upper floors.

E X ECUTI V E S U M M AR Y

THE OFFERING

Net Rentable Area

155,766 SF

Year Built

1982 (Ren. 2007-2008)

Percent Leased

95%

Number of Floors

Parking

227 spaces

NOI

$2,476,366

Conditions of Sale

Property Tours

Queen Anne Square is being offered for sale without an asking price. All investors should

Available with advance appointment through offer date.

base their offer on an â&#x20AC;&#x153;as-isâ&#x20AC;? condition of the property. Transaction Timetable and Procedures

Offer Due Date Wednesday, 1/26/11 (Estimated)

Financial information: In order to expedite underwriting, a financial summary with assumptions are included in this package.

E X ECUTI V E S U M M AR Y

INVESTMENT HIGHLIGHTS

E X ECUTI V E S U M M AR Y

INVESTMENT HIGHLIGHTS

INVESTMENT HIGHLIGHTS Over 95% Occupancy Provides Strong In-Place Cash Flow With occupancy over 95%, Queen Anne Square provides an investor with attractive stabilized cash flow. As the Seattle office market continues to gain momentum, the prospect of improving NOI increases as well. The Seattle market will experience positive absorption this year lead by the expansion of companies in the technology, biotechnology and medical sectors. Growth is planned for many of these companies including Amazon.com, Isilon Systems, F5 Networks and Fred Hutchinson Cancer Research Center. Despite a recovering market and a difficult economy, 705 leases transactions were signed in 2010 totaling over 3.7 million square feet. Staggered Lease Expirations Create Opportunity to Capture Market Upside The lease expiration schedule will allow the new owner to adjust rents to market on 70% of the project over the first five years of ownership. The staggered schedule and multi-tenant nature of the property also provides protection against major vacancy exposure. There is additional income upside in the covered parking as Mercer Street is redesigned to exclude street parking. High Tenant Retention Minimizes Re-tenanting Exposure Live-work-play character of the property assures high tenant retention minimizing the re-tenanting exposure of the building owner. Also, Queen Anne Squareâ&#x20AC;&#x2122;s Best in Class status provides an insulation factor based on the needs of the discriminating tenant. Additional factors that encourage tenant retention are the competitive building set which caters to the larger tenant profile and the lack of prospects for new development.

E X ECUTI V E S U M M AR Y

PROPERTY HIGHLIGHTS

PROPERTY HIGHLIGHTS » Two-building complex featuring two floor plate sizes maximizing leasing flexibility in the small to mid-size tenant market » Attractive brick exterior with bronze reflective glass further enhanced by new sleek entries and signage contribute to the best of class appeal » Lush landscaping surrounds the central plaza with outdoor seating and wireless internet for tenant enjoyment » Dramatic views of Elliott Bay and the Olympic Mountains invite occupancy on the upper floors » Abundant area amenities include cafés and fine dining restaurants, retail shops, the Space Needle and Seattle Center » Minutes from Seattle’s CBD and convenient access to I-5 and Highway 99 » The Mercer Corridor Project will enhance the street presence and improve car, bike and pedestrian access to the building

E X ECUTI V E S U M M AR Y

Market HIGHLIGHTS

PROPERTY HIGHLIGHTS » The Puget Sound region has historically been one of the nation’s most vibrant and stable real estate markets and Seattle is expected to rebound ahead of the rest of the U.S. in most economic sectors. Year-over-year job growth is expected to rise almost five percent by 2012, and the local information (tech) and manufacturing industries are expected to grow as much as 15 percent by 2014 (Source: Moody’s Economy.com) » The Property is located in the dynamic Queen Anne submarket which stretches from Highway 99 to the waterfront. The proximity to attractive amenities and to desirable residential neighborhoods makes this submarket one with strong appeal to the small and mid-sized tenant base » The Queen Anne office submarket has seen 98 lease transactions in 2010 YTD totaling 581,000 square feet » Average asking rents in this submarket have been continually increasing since first quarter 2010, and currently are at $28.58 per square foot Full Service

P R O P ERT Y O V ER V IE W

PROPERTY DESCRIPTION

Queen Anne Square (â&#x20AC;&#x153;Propertyâ&#x20AC;?) is a two-building mid-rise office complex occupying the southern half of a full city block. It is located on the north side of West Mercer Street between Second and Third Avenue West. Both buildings are five stories with the East Tower sized at 100,661 SF and the smaller West Tower at 55,105 SF. These best of class office towers are distinct in their submarket with warm brick exterior clad buildings built around a central courtyard featuring dramatic water and mountain views. EAST TOWER The East Tower is an L-shaped building that derives its main access from the central plaza located between the two buildings. It includes a three-bank elevator and two stairways servicing each of the five office floors. WEST TOWER The West Tower is the smaller of the two five-story structures. The main floor, like the East Tower, derives its primary access from the central plaza located between the two buildings. It has a lobby area, two passenger elevators, two restrooms, and two sets of stairways providing access to all five floors. In addition, there is a stairway leading down to the subterranean parking garage. INTERIOR FINISH The lobby and common area upgrades completed during the 2007-2008 renovation results in an impressive first impression when entering each of the buildings. The balances of the finishes are typical office build-out for this submarket, including wall-to-wall carpet, dropped acoustical tile ceilings, recessed fluorescent lighting, oak doors and frames, and a substantial amount of re-lights. The bay-depth-to-window ratio is very good and there are views of Elliott Bay, the Olympic Mountains, and the Seattle skyline from portions of each of the towers.

P R O P ERT Y O V ER V IE W

PROPERTY DESCRIPTION

WEST TOWER

EAST TOWER

P R O P ERT Y O V ER V IE W Address

200-220 W. Mercer Street, Seattle, WA

Year Built

1982 (Renovated 2007-2008)

Plaza Renovations

Completed major renovation of the exterior courtyard in 2008 with the installation of reinforced rubberized liquid membrane underneath a

BUILDING SUMMARY

new raised paver system. Zoning

NC3-65’, which is a Neighborhood Commercial zoning administered by the City of Seattle. This zoning classification has three major categories, of which the Property is located in the most intensive. Permitted uses in this classification include office buildings, mixed-use commercial, multi-family, light industrial, and retail. Development standards under this zoning classification include a maximum building height of 65 feet and a maximum FAR of 5. There are no setback requirements or required minimum or maximum lot sizes or coverage restrictions. Landscaping is required on street frontages and in parking areas. Parking requirements are one stall per 1,000 square feet of gross building area for office uses.

Number of Floors

5 floors in each tower over 2 level full site footprint basement parking podium

Site Size

48,008 SF

Net Rentable Area

East Tower – 100,661 SF West Tower – 55,105 SF (Storage - 3,042 SF) Total: 155,766 SF

Floor Size

EAST TOWER: FLOOR

NET RENTABLE SF

18,546

19,491

19,901

20,317

20,454

Storage

1,952

WEST TOWER: FLOOR

NET RENTABLE SF

9,751

10,899

10,918

11,226

11,221

Storage

1,090

Type Construction

Type I, partially sprinkled, reinforced concrete structure

Foundation/Subfloor

Both office towers are situated on full-site footprint podium supported by a structural concrete two level parking garage that serves as the foundation.

Roof Structures & Cover

The roof is a bondable-type built-up system.

P R O P ERT Y O V ER V IE W

BUILDING SUMMARY

Address

200-220 W. Mercer Street, Seattle, WA

Year Built

1982 (Renovated 2007-2008)

Plaza Renovations

Completed major renovation of the exterior courtyard in 2008 with the installation of reinforced rubberized liquid membrane underneath a new raised paver system.

Zoning

NC3-65â&#x20AC;&#x2122;, which is a Neighborhood Commercial zoning administered by the City of Seattle. This zoning classification has three major categories, of which the Property is located in the most intensive. Permitted uses in this classification include office buildings, mixed-use commercial, multi-family, light industrial, and retail. Development standards under this zoning classification include a maximum building height of 65 feet and a maximum FAR of 5. There are no setback requirements or required minimum or maximum lot sizes or coverage restrictions. Landscaping is required on street frontages and in parking areas. Parking requirements are one stall per 1,000 square feet of gross building area for office uses.

Number of Floors

5 floors in each tower over 2 level full site footprint basement parking podium

Site Size

48,008 SF

P R O P ERT Y O V ER V IE W

Representative Floor Plates

West Tower floor plate

ELEV

ELEV UP

East Tower floor plate

P R O P ERT Y O V ER V IE W

2007-2008 Capital Improvements

Capital Expenditures 2007-2008

cost

Site Monument Signage

$44,493

Exterior Furniture and Accessories

$20,884

Exterior Common Area Improvements

$59,233

Plaza Reconstruction

$751,055

Mechanical, Electrical & Plumbing Tranformer Anchorage

$1,126

Mechanical Upgrade

$256,552

Cooling Tower Roof Eyebolts

$27,928

Building Exteriors Sidewall Systems

$193,805

Exterior Cornice

$215,602

Vertical Transportation Elevator Modernization

$737,688

Roof Mechanical Room Roof

$20,482

Building Interiors Interior Common Area Improvements

$1,688,310

Electronic Directory

$25,621

Interior Signage

$45,296

Furniture & Artwork

$52,944

Building Conference Room

$14,987

capital

$4,156,006

market ready

$1,236,170

tenant improvements

$1,607,920

grand total

$7,000,096

FINANCIAL O V ER V IE W

Cash Flow Assumptions

Cash Flow Start Date:

FSG Market Rents ($ per SF):

April 1, 2011 Year

Rent

$21.00

$22.00

Growth

MLA

2011

0.0%

$21.00

$22.00

2012

5.0%

$22.05

$23.10

2013

10.0%

$24.26

2014

15.0%

2015

New:

$25.00

Renew

$10.00

Blended:

$13.75 Office

New:

$1.50/SF/Year

$25.41

Renew:

$1.00/SF/Year

$27.89

$29.22

Blended:

$1.13/SF/Year

10.0%

$30.68

$32.14

2016

5.0%

$32.22

$33.75

2017+

3.0%

$33.18

$34.76

Leasing Commissions ($ per SF):

General Vacancy:

5% of Potential Gross Revenue. Reduced by absoprtion and turnover vacancy.

Rollover Lease Term:

5 Years

Capital Reserves:

$0.15 per SF commencing in 2011

Rent Increases During Term:

$1 per SF per year

Management Fee:

3.0% of Effective Gross Income (EGI)

Reimbursable Expense:

FSG - Tenants pay their pro rata share of expenses over a Base

General Inflation:

3% per year

Year Renewal Probability:

Downtime:

Free Rent (months):

Tenant Improvements ($ per SF):

75% renewal probability assumed on all future tenant rollover 6 months Year

New

Renew

2011

2012

2013

2014

2015+

RSF

Lease Start

Suite E114

1,370

6/1/2011

Suite E100

1,061

7/1/2011

Suite E503

3,307

12/1/2011

Suite W350

1,225

6/1/2012

5/31/2015 $21.00

Speculative Leasing Assumptions:

Lease End

Rent

Free Rent

5/31/2014 $20.00

$0.00

3 mo.

6/30/2016 $20.00

$7.00

5 mo.

11/30/2016 $21.00

$25.00

5 mo.

$15.00

3 mo.

Office

FINANCIAL O V ER V IE W

SCHEDULE OF PROSPECTIVE cash flow

In Inflated Dollars for the Fiscal Year Beginning 04/01/11 Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Year 11

Mar-2012

Mar-2013

Mar-2014

Mar-2015

Mar-2016

Mar-2017

Mar-2018

Mar-2019

Mar-2020

Mar-2021

Mar-2022

Weighted Avg. Market Rent PSF/YR

$21.49

$22.83

$25.39

$28.81

$31.29

$32.68

$33.65

$34.66

$35.69

$36.75

$37.85

Weighted Average Contract Rent PSF/YR

$24.44

$24.75

$24.39

$24.57

$25.27

$27.90

$29.64

$31.40

$33.23

$34.01

$35.50

Total Operating Expenses PSF/YR

$8.22

$8.49

$8.69

$8.99

$9.29

$9.63

$9.95

$10.28

$10.61

$10.93

$11.24

Absorption & Turnover Vacancy

5.77%

1.67%

6.35%

3.44%

3.63%

5.93%

1.53%

4.51%

3.21%

1.82%

6.60%

For the Years Ending

Potential Gross Revenue

Yr. 1/Sq. Ft.

Base Rental Revenue

$24.44

$3,806,724

$3,855,518

$3,798,944

$3,826,715

$3,936,901

$4,345,636

$4,616,329

$4,890,633

$5,176,563

$5,297,163

$5,529,340

Absorption & Turnover Vacancy

($1.41)

($219,629)

($64,282)

($241,082)

($131,789)

($142,794)

($257,748)

($70,751)

($220,752)

($166,403)

($96,353)

($365,108)

Base Rent Abatements

($1.00)

($155,781)

($89,357)

($231,490)

($79,656)

$22.03

$3,431,314

$3,701,879

$3,326,372

$3,615,270

$3,794,107

$4,087,888

$4,545,578

$4,669,881

$5,010,160

$5,200,810

$5,164,232

$13,591

$49,106

$108,524

$198,464

$253,844

$282,766

$303,580

$290,169

$338,658

$272,847

Scheduled Base Rental Revenue Base Rental Step Revenue

$0.00

Expense Reimbursement Revenue

$0.11

$16,386

$42,016

$59,476

$87,681

$115,214

$100,571

$116,438

$123,983

$119,935

$136,365

$113,750

Misc Revenue

$0.19

$29,770

$30,150

$30,895

$32,879

$34,798

$35,219

$35,656

$36,534

$38,893

$41,177

$41,667

In Place Parking Revenue

$1.49

$232,617

$239,594

$246,782

$254,185

$261,812

$269,665

$277,755

$286,088

$294,670

$303,511

$312,616

Spec Parking Revenue

$0.25

$39,704

$93,508

$99,045

$102,015

$105,077

$108,228

$111,476

$114,820

$118,264

$121,814

$125,466

$24.07

$3,749,791

$4,120,738

$3,811,676

$4,200,554

$4,509,472

$4,855,415

$5,369,669

$5,534,886

$5,872,091

$6,142,335

$6,030,578

($78,239)

($82,679)

($197,733)

($55,991)

($127,201)

($210,764)

$24.00

$3,749,791

$3,978,983

$3,811,676

$4,122,315

$4,426,793

$4,855,415

$5,171,936

$5,478,895

$5,744,890

$5,931,571

$6,030,578

Management Fee

$0.72

$112,494

$119,368

$114,350

$123,670

$132,804

$145,663

$155,157

$164,367

$172,347

$177,947

$180,916

Recoverable Project Admin

$0.42

$65,048

$66,999

$69,008

$71,080

$73,210

$75,407

$77,671

$80,000

$82,399

$84,872

$87,418

Payroll & Buden

$0.41

$64,193

$66,118

$68,102

$70,145

$72,249

$74,418

$76,649

$78,949

$81,318

$83,757

$86,271

Utilities

$1.17

$181,786

$187,241

$192,856

$198,642

$204,603

$210,740

$217,061

$223,574

$230,283

$237,188

$244,306

Building Services & Supplies

$3.23

$502,831

$517,917

$533,452

$549,458

$565,941

$582,919

$600,406

$618,420

$636,971

$656,081

$675,763

Grounds & Maintenance

$0.35

$55,010

$56,659

$58,360

$60,110

$61,915

$63,770

$65,684

$67,655

$69,685

$71,775

$73,927

Repairs & Maintenance

$0.43

$67,703

$69,734

$71,825

$73,982

$76,200

$78,486

$80,840

$83,267

$85,764

$88,337

$90,987

Taxes

$1.24

$192,487

$198,261

$204,207

$210,334

$216,646

$223,144

$229,838

$236,733

$243,835

$251,151

$258,685

Insurance

$0.25

$39,293

$40,471

$41,685

$42,936

$44,224

$45,552

$46,916

$48,325

$49,775

$51,268

$52,806

$8.22

$1,280,845

$1,322,768

$1,353,845

$1,400,357

$1,447,792

$1,500,099

$1,550,222

$1,601,290

$1,652,377

$1,702,376

$1,751,079

$15.85

$2,468,946

$2,656,215

$2,457,831

$2,721,958

$2,979,001

$3,355,316

$3,621,714

$3,877,605

$4,092,513

$4,229,195

$4,279,499

Tenant Improvements

$3.22

$501,245

$157,952

$668,363

$364,390

$241,561

$755,482

$204,038

$485,514

$412,804

$144,197

$690,981

Leasing Commissions

$1.23

$190,985

$62,614

$239,419

$149,067

$98,821

$309,061

$83,472

$198,620

$168,872

$58,991

$282,673

Reserves

$0.15

$23,540

$24,247

$24,974

$25,722

$26,494

$27,290

$28,108

$28,951

$29,820

$30,716

$31,634

$4.60

$715,770

$244,813

$932,756

$539,179

$366,876

$1,091,833

$315,618

$713,085

$611,496

$233,904

$1,005,288

$11.26

$1,753,176

$2,411,402

$1,525,075

$2,182,779

$2,612,125

$2,263,483

$3,306,096

$3,164,520

$3,481,017

$3,995,291

$3,274,211

Total Potential Gross Revenue General Vacancy Effective Gross Revenue

$0.00

($141,755)

Operating Expenses

Total Operating Expenses Net Operating Income Leasing & Capital Costs

Total Leasing & Capital Costs Cash Flow Before Debt Service & Taxes

FINANCIAL O V ER V IE W

cash flow ASSUMPTION Notes

REVENUES All revenues, expenses and capitals items are modeled based on the assumptions and information outlined below: SQUARE FOOTAGE INCREASES

The Property was recently measured using the 1996 BOMA standards with increase in rentable office square footage from 151,836 to 152,683 and the addition of 3,083 SF of rentable storage space. The leased area based on current leases plus vacant space (all converted to ADJ BOMA SF) totals 155,398 SF leaving 368 SF yet to be picked up with new and renewal leasing activity.

BASE RENT ABATEMENTS

Rent Abatement between three to five months is assumed as currently vacant spaces lease up. The ARGUS model assumes three months of free rent in the rollover assumptions for all new and renewing office tenants before the end of 2013; two months for those in 2014 and none thereafter.

EXPENSE REIMBURSEMENT

The office tenants at the Property lease space on a Full Service Gross (FSG) basis paying their pro rata share of all reimbursable expenses attributed to the office portion of the Property over a fixed base year amount. All new and renewing office tenants are assumed to lease on a FSG basis. The storage tenants do not pay operating expenses so the pro rata share is determined using the office square footage only (152,724 RSF). Leases contain a provision to gross up variable operating expenses to 95% occupancy for the purpose of avoiding distortion of the amount of such expenses to be attributed to Tenant by reason of variation in total occupancy of the Property. Please refer to the ARGUS model, rent roll and leases for specific tenant reimbursement methods.

MISCELLANEOUS REVENUE

Includes revenue collected for roof transmission towers.

IN PLACE PARKING

Reflects the net parking revenue currently generated by the garage. The garage consists of 308 stalls; 81 of which are designated for condo owners and 227 of which are designated for the office building. Currently, 161 of the 227 stalls are leased. Annual net parking revenue of $230,864 for 2011 is assumed with 3% annual increases.

SPEC PARKING

Reflects speculative parking revenue associated with the 66 stalls that are currently not leased. Demand for these stalls is expected to increase with the construction of the Mercer Corridor Project and the elimination of street parking along Mercer. The model assumes the 66 stalls are leased up over the next 18 months at $117 (+tax) per stall.

STORAGE

The building contains 3,083 RSF of storage space in 20 units. All units are located in the parking garage except for one, 41 RSF unit located on the 4th floor of the east building. The model contains one line in the rent roll with the 2011 projection of total storage revenue. The Rent Roll on pages 22-26 details specific terms of current storage agreements.

FINANCIAL O V ER V IE W

cash flow ASSUMPTION Notes

OPERATING EXPENSES Year 1 projected Operating Expenses are based on 2010 budget figures provided by management for the Property and inflated by 3.0% unless otherwise noted. MANAGEMENT FEE

Calculated as 3.0% of effective gross income.

RECOVERABLE PROJECT ADMINISTRATION

Consists of office rent, dues and subscriptions, office supplies, postage and telephone expenses.

PAYROLL & BURDEN

Includes property management salaries and benefits.

UTILITIES

Includes electricity and water.

BUILDING SERVICES & SUPPLIES

Includes security, fire & safety, repair and replacement of HVAC, elevator, electrical and plumbing as well as janitorial and engineering.

GROUNDS MAINTENANCE

Includes landscaping and common area trash.

LANSCAPING

Includes contract service for landscaping and holiday decorations.

REPAIR & MAINTENANCE

Includes roof, painting, keys & locks and the association dues.

PROPERTY TAXES

2010 King County Real Estate Taxes for the Property were $254,311. King County has lowered the assessed value of the property by 24% for 2011. The estimated property taxes for 2011 are $191,053 based on 2010’s levy rate of 9.0418 per 1,000 of assessed value and the new 2011 assessed value. Historically, King County’s assessor’s office reassesses property taxes the February following a sale by applying the levy rate to the assessed value. Each assessment is reflected on the following year’s tax bill. Prospective investors should make their own assumption as to the effect of the sale on real estate taxes and adjust accordingly.

INSURANCE

Insurance estimate includes property and liability. Prospective investors must make their own assumptions as to the cost of insurance.

NO JANITORIAL

A reference account is included and used for subtracting out janitorial expenses that cannot be passed through to Pinnacle Processing. They process credit card information in their suite and therefore cannot allow after-hours janitorial.

GARAGE PASS THROUGH

A reference account is included to reflect the portion of the garage expenses that can be passed through to tenants. Amount includes 25% of 2011 budgeted garage expenses net of the Condo Association’s reimbursement.

FINANCIAL O V ER V IE W

RENT ROLL

Suite No.

Tenant Name

RSF per Lease

RSF per BOMA

E100

AVAILABLE

1,061

E101

Richard J Waling

1,519

Start

Expire

1/1/2009

4/30/2014

Base Year

2009

Current RenT/Mo.

$3,291

Current Rent Annual

$39,494

Current Annual Rent PSF

$26.00

Rental Rate Date

Increase $/SF

Comments

Jan-2012

$26.75 No option to renew

Jan-2013

$27.50

Jan-2014

$28.25

E102

Janice Donley

1,477

2/1/2008

4/30/2013

2008

$3,508

$42,095

$28.50

Feb-2012

$29.50 No option to renew

E103

Republic Parking Northwest

3,806

4/1/2010

3/31/2016

2010

$6,343

$76,120

$20.00

Apr-2012

$20.75 One 5-year option to renew at greater of

Apr-2013 Apr-2014

$21.50 FMR or last annual base rent of term with 11 $22.25 months notice

Apr-2015

$23.00

Jul-2011

$28.00 One 5-year option to renew at FMR with 9

Jul-2012

$29.00 months notice

Jul-2013

$30.00

E104

Queen Anne Medical

2,634

1/1/2009

6/30/2014

2009

$5,927

$71,118

$27.00

Asociates E106

Management Office

838

1/1/2007

12/31/2011

2010

$1,816

$21,788

$26.00

929

3/1/2006

5/31/2011

2006

$1,548

$18,580

$20.00

Right to terminate with 30 days notice,

(Legacy Partners Commercial) E107A

Marianne Lewis

amended to include sale of property No option to renew

E108

American Cultural Exchange

1,661

3/1/2008

2/28/2013

2008

$3,945

$47,339

$28.50

Mar-2012

$29.50 No option to renew

E111

Hartford Fire Insurance Co.

2,658

12/1/2010

11/30/2015

2011

$4,430

$53,160

$20.00

Dec-2011

$20.75 One 3-year option to renew at FMR with

Dec-2012

$21.50 11 months notice. One-time option to $22.25 terminate effective 11/30/13 with 9 months

Dec-2013 Dec-2014

$23.00 notice with penalty payment of 1 month rent and unamortized costs of TIâ&#x20AC;&#x2122;s, rent and concessions. Landlord will escrow funds to cover rent abatement in April 2011

E112

James Sable

E114

AVAILABLE

E201

Kashmir Companies

E202

GACO Western

588

593

5/1/2007

4/30/2012

2007

$1,231

$14,776

$25.13

May-2011

1,370

909 4,423

$25.89 No option to renew

909

8/1/2010

12/31/2011

2007

$1,894

$22,725

$25.00

4,423

1/1/2011

12/31/2015

2011

$4,884

$58,605

$13.25

Jan-2012

$20.50 No option to renew

Jan-2013

$21.25

Jan-2014

$22.00

Jan-2015

$22.75

- No option to renew. Lease ends 1/31/2011. Model assumes MTM through 12/31/11

E204

Brightcove Inc.

2,355

2,361

4/1/2008

4/30/2011

2008

$5,593

$67,118

$28.50

No option to renew. Tenant in discussions with Landlord for short term renewal

E205

Dr. Ryan Tennant

3,644

3,704

7/1/2006

6/30/2013

2006

$7,227

$86,727

$23.80

Two 5-year options to renew at FMR with 12 months notice

FINANCIAL O V ER V IE W

RENT ROLL

Suite No.

E207

Tenant Name

DECA WA

RSF per Lease

1,649

RSF per BOMA

1,649

Start

Expire

7/1/2008

9/30/2013

Base Year

2008

Current RenT/Mo.

$3,779

Current Rent Annual

$45,348

Current Annual Rent PSF

$27.50

E208

Longboat Technology Group

1,990

2,004

10/1/2007

12/31/2011

2007

$4,726

$56,715

$28.50

E209

Visto Corporation

2,440

12/1/2008

4/30/2014

2009

$5,592

$67,100

$27.50

Rental Rate Date

Increase $/SF

Comments

Jul-2011

$28.50 No option to renew

Jul-2012

$29.50 No option to renew

Dec-2011

$28.50 One 5-year option to renew at FMR with

Dec-2012

$29.50 11 months notice. One-time right to terminate at month 36 with 9 months notice with payment of full abated rent plus unamortized TI’s and commission plus 8% interest

E210

Gateway EDI, LLC

2,001

3/1/2009

6/30/2012

2009

$4,419

$53,027

$26.50

E300

Express Metrix, LLC

4,510

1/1/2009

3/31/2014

2009

$9,772

$117,260

$26.00

E301

NISH Northwest

9,152

9,173

8/1/2004

7/31/2011

2004

$16,397

$196,768

$21.50

No option to renew Jan-2012

$27.00 No option to renew

Jan-2013

$28.00 One 5-year option to renew at FMR with 9 months notice. Right of first offer to lease contiguous space on the 3rd floor with 7 days written notice

E302

World Pack, LLC

E303

Goodwin/Lions Bay

1,247

3/1/2008

5/31/2013

2008

$2,962

$35,540

$28.50

Mar-2012

$29.50 No option to renew

387

424

11/1/2007

12/31/2012

2008

$903

$10,836

$28.00

Nov-2011

$29.00 No option to renew

Properties E304

Array Health Solutions

733

6/1/2009

5/31/2011

2008

$1,680

$20,158

$27.50

E305

Array Health Solutions

648

1/1/2010

5/31/2011

2008

$1,485

$17,820

$27.50

E307

Kari Kiomi Mount, Janeen

618

1/1/2011

12/31/2013

2011

$1,185

$14,214

$23.00

Feley and Michael W.

No option to renew No option to renew Jan-2012

$23.75 No option to renew

Jan-2013

$24.50

Tibbetts E310

Hertog & Coster (LOFS)

2,548

10/1/2006

9/30/2011

2006

$5,308

$63,700

$25.00

One 5-year option to renew at FMR with 9 months notice. Right to terminate at months 36 and 48 wth 9 months notice with payment of 2 months rent plus unamortized TI’s and commission with 10% interest per annum

E401

Windward Environmental

1,748

11,748

3/1/2002

2/29/2016

2011

$19,580

$234.960

$20.00

Oct-2012

$21.50 One 5-year option to renew at FMR with

Oct-2013

$22.25 10 months notice. Right of first offer on

Oct-2014

$23.00 contiguous space on the 4th floor through

Oct-2015

$23.75 9/30/13. If before 9/30/13 then $15.00 TI allowance divided by % of remaining term, with 5 days notice

FINANCIAL O V ER V IE W

RENT ROLL

Suite No.

Tenant Name

E407

Kerwin-Beley & Associates

E410

J. Mark Weiss

E411 E412

Ben C Gerwick Windward Environmental

RSF per Lease

RSF per BOMA

Start

Expire

Base Year

Current RenT/Mo.

Current Rent Annual

Current Annual Rent PSF

Comments

792

9/1/2007

11/30/2013

2011

$1,485

$17,820

$22.50

Dec-2011

$23.25 No option to renew

1,250

6/1/2009

5/31/2014

2009

$2,396

$28,750

$23.00

Jun-2011

$24.00 Termination right with death or disability of

Jun-2012

3,216 3,270

9/1/2000 8/1/2009

2/28/2013 2/29/2016

2010 2011

$5,092 $5,450

$61,104 $65,400

$19.00 $20.00

Keynote Systems

3,453

3,462

6/1/2008

6/30/2013

2008

$8,489

$101,864

$29.50

E501

Keynote Systems

2,220

7/1/2010

6/30/2013

2010

$3,885

$46,620

$21.00

Jones Lang LaSalle

Increase $/SF

792

E500

E502

Rental Rate Date

2,111

1/1/2009

12/31/2013

2009

$4,486

$53,831

$25.50

Jun-2013

$25.00 tenant with payment of unamortized TIâ&#x20AC;&#x2122;s, $26.00 commission and abated rent

Sep-2011

$20.00 One 1-year option to renew at $23/SF with 6

Sep-2012

$22.00 months notice

Oct-2011

$20.75 One 5-year option to renew at FMR with

Oct-2012 Oct-2013

$21.50 10 months notice. Right of first offer on $22.25 contiguous space on the 4th floor through

Oct-2014

$23.00

Oct-2015

$23.75

Jun-2011

$30.50 One 5-year option to renew for all leased SF

Jun-2012

$31.50 at FMR with 12 months notice

9/30/13. If before 9/30/13 then $15.00 TI allowance divided by % of remaining term, with 5 days notice

Jul-2011

$21.75 One 5-year option to renew for all leased SF

Jul-2012

$22.50 at FMR with 12 months notice

Jan-2012

$26.25 No option to renew. Right to terminate

Jan-2013

$27.00 based on real estate services agreement with BNSF. If agreement with BNSF is terminated, Tenant with notice on later of termination date of BNSF agreement or 120 after landlord receives notice. Termination fee of 2 months rent plus any unamortized free rent

E503

AVAILABLE

3,307

E504

Pinnacle Processing Group

2,759

10/1/2005

1/31/2016

2011

$4,828

$57,939

$21.00

Feb-2012

$21.75 One 5-year option to renew at FMR with 11

Feb-2013 Feb-2014

$22.50 months notice. Landlord will escrow funds $23.25 to cover rent abatement in April 2011

Feb-2015

$24.00

E505

David Zimmar

788

8/1/2010

7/31/2012

2008

$1,510

$18,124

$23.00

Aug-2011

$24.00 Termination right with death of tenant

E506

Chamberlain Properties

360

2/1/2011

1/31/2012

2011

$660

$7,920

$22.00

E507

Onteractive, LLC

400

7/1/2010

7/31/2012

2010

$700

$8,400

$21.00

Jul-2011

E508

Open Adoption and Family

1,025

2/1/2010

1/31/2015

2010

$1,943

$23,319

$22.75

Feb-2012

$23.50 No option to renew. Rent is abated in the

Feb-2013

$24.25 month of February each year

Feb-2014

$25.00

Services

$21.75 No option to renew

FINANCIAL O V ER V IE W

RENT ROLL

Suite No.

E510

Tenant Name

Goodenough Co.

E511

Conlon & Dart

E515

Open Adoption and Family

RSF per Lease

1,231

RSF per BOMA

1,231

Start

Expire

2/1/2010

3/31/2014

Base Year

2010

Current RenT/Mo.

$2,231

Current Rent Annual

$26,774

Current Annual Rent PSF

$21.75

Rental Rate Date

Increase $/SF

Comments

Feb-2012

$22.50 One 3-year option to renew at FMR with 9

Feb-2013

$23.25 months notice

Feb-2014

$24.00

2,315

7/1/2007

9/30/2012

2007

$5,402

$64,820

$28.00

Oct-2011

$29.00 No option to renew

476

2/1/2010

1/31/2015

2010

$902

$10,829

$22.75

Feb-2012

$23.50 No option to renew

Feb-2013

$24.25

Feb-2014

$25.00

Services W100

Jet Parts Engineering

5,917

6/1/2006

5/31/2011

2006

$10,355

$124,257

$21.00

One 5-year option to renew at FMR with 3%

W110

Dr. Susan Petcoff

2,270

1/1/2002

12/31/2011

2002

$6,715

$80,585

$35.50

W120

Easter Seals Washington

1,564

12/1/2007

1/31/2013

2008

$3,715

$44,574

$28.50

Dec-2011

$29.50 No option to renew

W200

OCLC Online Computer

10,899

10/1/2008

10/31/2014

2009

$24,977

$299,723

$27.50

Oct-2011

$28.50 One 5-year option to renew at FMR with 10

Oct-2012

$29.50 months notice. Right of first refusal on all of

Oct-2013

$30.50 3rd floor, not during last 2 years of term

May-2011

$27.00 One 5-year option to renew at FMR with

May-2012

$27.50 9 months notice. Right of first offer on

May-2013

$28.50 remaining RSF within the building; should

May-2014

$29.25 this right be executed on or after the last

May-2015

$30.00 day of the 60th month of the term, Tenant

increases Two 5-year options to renew at 95% MR with 9 months notice

Library Center W300

Sedgwick Claims

9,045

5/1/2009

4/30/2016

2009

$19,786

$237,431

$26.25

Management Services

must have previously exercised its option to extend the term W305

VISTO SERVER ROOM

648

12/1/2008

4/30/2014

2009

$1,485

$17,820

$27.50

Dec-2011

$28.50 One 5-year renewal option at FMR with

Dec-2012

$29.50 11 months notice. One-time right to terminate at month 36 with 9 months notice with payment of full abated rent plus unamortized TIâ&#x20AC;&#x2122;s and commission plus 8% interest

W350

AVAILABLE

1,225

W400/

Ekman, Bohrer & Thulilin

7,579

7,761

8/1/2006

7/31/2015

2006

$17,684

$212,212

$28.00

Aug-2011

$28.75 No option to renew

Public Safety Employees

1,132

5/1/2008

6/30/2013

2008

$2,783

$33,394

$29.50

May-2011

$30.50 No option to renew

May-2012

$31.50

W4 W420

Union W430

De Haan PLLC

W500

Unitus, Inc.

2,333

2/1/2008

1/31/2013

2008

$5,930

$71,157

$30.50

Feb-2012

$31.50

11,221

1/1/2008

5/31/2013

2008

$29,455

$353,462

$31.50

Jan-2012

$32.50 One 5-year renewal option at FMR with 8 months notice

FINANCIAL O V ER V IE W

RENT ROLL

Suite No.

Tenant Name

RSF per Lease

RSF per BOMA

Start

Expire

Base Year

Current RenT/Mo.

Current Rent Annual

Current Annual Rent PSF

Rental Rate Date

Increase $/SF

Comments

STORAGE

E-P111 E510

Easter Seals Goodenough Co.

E511

Conlon & Dart

E515

Open Adoption and Family

186

193

1,231

1/1/2008 2/1/2010

$186.00 3/31/2014

2010

$2,231

Month-to-month $26,774

$21.75

Feb-2012

$22.50 One 3-year option to renew at FMR with 9

Feb-2013

$23.25 months notice

Feb-2014

$24.00

2,315

7/1/2007

9/30/2012

2007

$5,402

$64,820

$28.00

Oct-2011

$29.00 No option to renew

476

2/1/2010

1/31/2015

2010

$902

$10,829

$22.75

Feb-2012

$23.50 No option to renew

Feb-2013

$24.25

Feb-2014

$25.00

Services W100

Jet Parts Engineering

5,917

6/1/2006

5/31/2011

2006

$10,355

$124,257

$21.00

One 5-year option to renew at FMR with 3%

W110

Dr. Susan Petcoff

2,270

1/1/2002

12/31/2011

2002

$6,715

$80,585

$35.50

W120

Easter Seals Washington

1,564

12/1/2007

1/31/2013

2008

$3,715

$44,574

$28.50

Dec-2011

$29.50 No option to renew

W200

OCLC Online Computer

10,899

10/1/2008

10/31/2014

2009

$24,977

$299,723

$27.50

Oct-2011

$28.50 One 5-year option to renew at FMR with 10

Oct-2012

$29.50 months notice. Right of first refusal on all of

Oct-2013

$30.50 3rd floor, not during last 2 years of term

May-2011

$27.00 One 5-year option to renew at FMR with

May-2012

$27.50 9 months notice. Right of first offer on

May-2013

$28.50 remaining RSF within the building; should

May-2014

$29.25 this right be executed on or after the last

May-2015

$30.00 day of the 60th month of the term, Tenant

increases Two 5-year options to renew at 95% MR with 9 months notice

Library Center W300

Sedgwick Claims Management Services

9,045

5/1/2009

4/30/2016

2009

$19,786

$237,431

$26.25

must have previously exercised its option to extend the term

FINANCIAL O V ER V IE W

TENANT PROFILES

Queen Anne Square consists of 46 tenants, ranging in size from 360 RSF to 15,018 RSF. A breakdown in size of the tenants is as follows:

Size RSF

Number of Tenants*

0 - 999

1,000 - 2,999

3,000 - 4,999

5,000 - 9,999

10,000 plus

*Does not include “roof and storage” tenants

WINDWARD ENVIRONMENTAL, LLC www.windwardenv.com 15,018 RSF Seattle-based consulting firm Windward Environmental, LLC specializes in aquatic environmental science serving a growing group of clients in the regulated community. The organization has developed innovative tools and techniques to solve problems and meet clients’ needs. Windward’s focus is in the following areas: ecological and human health risk assessment, contaminated sediment assessment and management, natural resource damage assessment, criterion interpretation and development, regulatory policy, litigation support, liability management and habitat restoration. A tenant since 2001, Windward’s space is comprised solely of office space and has no laboratory or sample handling areas. OCLC www.oclc.org 10,899 RSF OCLC Online Computer Library Center, Inc. has been a tenant at Queen Anne Square since 2008 and occupies the entire second floor of the west tower. A nonprofit, international library cooperative, OCLC is committed to expanding access to information and lowering information costs. Founded in 1967, OCLC is a member-owned and member managed enterprise. Today, it provides services to over 27,000 member libraries around the world.

FINANCIAL O V ER V IE W

TENANT PROFILES

NISH, INC. www.nish.org 9,152 RSF NISH, a national nonprofit agency, has ten locations around the country. Its Pacific Northwest regional office has been located at Queen Anne Square since 1989. NISH’s mission is to create employment opportunities for people with severe disabilities by securing federal contracts through the Javits-Wagner-O’Day (JWOD) Program. Providing employment opportunities to more than 45,000 people. The JWOD Program is the largest single source of employment in the country for people who are blind or have other severe disabilities. More than 600 participating nonprofit organizations employ these individuals and provide quality goods and services to the federal government at a fair price. NISH offers its agencies regulatory assistance, information technology support, engineering, financial and technical assistance, communications, public relations expertise and an extensive training program. Sedgwick CMS www.sedgwickcms.com 9,045 RSF Sedgwick Claims Management Services, Inc. (Sedgwick CMS) provides customized claims and productivity management solutions to major companies. With a network of over 150 office and 6,400 colleagues in the U.S. and Canada, Sedgwick CMS is the largest independent North American provider in its industry. The companies state-of-the-art information management and delivery system distinguishes it from other third party administrators by streamlining and simplifying the claims management process. Ekman, Bohrer & Thulin, P.S. www.ekmanbohrer.com 7,579 RSF Ekman, Bohrer & Thulin, P.S. has been a tenant at Queen Anne Square since 1989. Founded in 1980 by Richard A. Ekman, Robert A. Bohrer and Charles H. Thulin, the law firm maintains a practice focused on issues encountered by employee benefit plans, including tax, legislative, regulatory and adversarial issues. The firm’s clients include employers, employer associations, unions and other plan fiduciaries including independent and joint labor and management boards of trustees.

M AR K ET O V ER V IE W

puget sound investment market

The Puget Sound Region is one of the most dynamic real estate investment markets in the country. It benefits from a combination of strict land use planning, topographical constraints on supply, and employment growth that consistently ranks above the national average. A diversified economic base of technology, manufacturing and service industry leaders generates the demand for space in the Puget Sound Region. Blue chip firms such as Microsoft, Amazon.com, Boeing, Starbucks, Safeco, Nintendo, REI, PACCAR, Puget Sound Energy, and Weyerhaeuser stabilize the regional economy and provide consistent demand for support services. Joining this illustrious group are newcomers Google and Yahoo!, and the growth of the Bill and Melinda Gates Foundation demonstrates the Region’s appeal and economic strength. In addition, as the closest American port to all Pacific Rim trading partners, the Seattle metro area continues to experience robust growth in the wholesale and retail trade sectors. Imports entering the United States’ distribution system at the Ports of Tacoma and Seattle also factor into the region’s economic health. Looking forward, the Puget Sound leading index reflects an increase in manufacturing hours, improvement in the Boeing backlog-delivery ratio and growth in real durable goods spending from the third quarter of 2010. The current Economic Forecaster is also predicting the creation of approximately 26,000 jobs in 2011(Puget Sound Economic Forecaster, September 2010). While the region experienced economic woes in the recent downturn, these figures show that we are still on track for recovery; and while it will be a gradual recovery but one that will outpace the national trend.

M AR K ET O V ER V IE W

puget sound investment market

PUGET SOUND INVESTMENT MARKET The Puget Sound has perennially been one of the strongest office markets nationally. With a large contingency of high-tech companies in the region, as well as business professionals, the Puget Sound office market has flourished in the last decade and is home to many of the worldâ&#x20AC;&#x2122;s most successful Fortune 500 companies and despite the recent economic recession, is poised to be at the forefront of the national recovery. The Puget Soundâ&#x20AC;&#x2122;s dedication towards environmentally friendly building has enabled it to achieve nearly 18 million LEED certified square feet in 70 buildings, three of which are certified LEED Platinum. While regional Class-A vacancy has increased 8.8% over the last eight quarters with a corresponding decrease in full service rental rates of $6.96/SF over this same time period, regional Class-A annual office positive net absorption has shown a strong turn-around in 2010 with over 1.3 million square feet of positive net absorption.

Submarket

Total RBA

Direct Vacant

Total Vacant

Absorption YTD

Downtown Seattle

52,922,749

14.5%

15.7%

1,137,151

Eastside

30,491,679

12.9%

14.8%

-26,554

Northend

11,433,274

16.2%

16.9%

49,958

Southend

11,018,111

17.5%

19.9%

-29,781

Tacoma

9,417,346

13.1%

13.5%

2,242

Total Puget Sound

115,283,159

14.4%

15.7%

1,336,133

Data as of 4Q 2010 - Class A & B - Owner User Excluded Source: CoStar

M AR K ET O V ER V IE W

DOwntown seattle office market

DOWNTOWN SEATTLE OFFICE MARKET The Downtown Seattle office market has been recovering since the recession. Thanks to strong market fundamentals and resilient businesses, it has been able to revive itself and is expected to see as much as 7.5% decrease in vacancy by Q4 2014 according to PPR (Property and Portfolio Research). Seattleâ&#x20AC;&#x2122;s office market saw vacancy rise 5.9% to 16.8% in 2009, but has dropped steadily since then to sit currently at 15.7%, down 1.1%. Despite a recovering market and a difficult economy, there have been nearly 705 lease transactions in 2010 totaling 3,707,819 square feet. The Seattle Office market has a positive future with the expansion of Amazon.com to their 1.7 million square foot south Lake Union campus. The campus will be delivered in multiple phases in a build-to-suit by Vulcan. The delivery of this campus will mark the resurrection of development and construction in the Seattle area. YTD Absorption

YTD Deliveries

Under Construction SF

Quoted Rental Rates (FS)

15.4%

-57,292

3,770

$27.53/SF

14.1%

165,617

$25.26/SF

311,312

8.4%

261,637

$30.90/SF

1,349,073

21.3%

729,294

728,575

$32.74/SF

1,180,111

23.0%

-254,745

287,851

$26.29/SF

545,600

555,944

15.5%

-51,869

$28.32/SF

398,033

18.6%

14,838

217,058

$23.56/SF

24,421,832

3,090,349

3,403,917

13.9%

329,671

$29.07/SF

Total 572 52,922,749 Data as of 4Q 2010 - Class A & B - Owner User Excluded Source: CoStar

7,670,044

8,331,415

15.7%

1,137,151

1,237,254

$27.96/SF

Submarket

Bldgs

Total RBA

Direct SF

Total SF

Vac %

Ballard/U-District

2,701,133

251,072

416,223

Belltown/Denny Regrade

4,907,395

656,563

716,802

Capitol Hill/Central District

3,701,810

302,036

Lake Union

6,337,412

1,327,669

Pioneer Square/Waterfront

5,130,874

1,098,722

Queen Anne

3,577,311

South Seattle

2,144,982

Seattle CBD

M AR K ET O V ER V IE W

QUEEN ANNE OFFICE MARKET

QUEEN ANNE OFFICE MARKET The Queen Anne Submarket of the Downtown Seattle Office market stretches northward to the ship canal and the southern border is Denny Way. On the east is Aurora Ave (Highway 99, which is part of the West Coast’s Pacific Coast Highway) and to the west is Elliott Avenue West, which becomes 15th Avenue West. The Queen Anne submarket is soon to be home to the Bill and Melinda Gates Foundation’s newly constructed office campus. This 3-building office property will feature sustainable green buildings, open space and has a campus like environment. The Gates Foundation is the world’s largest charitable foundation with an asset trust endowment of over $36.5 billion. Queen Anne is also home to the Seattle Center, the region’s major cultural hub which encompasses the Pacific Science Center, Space Needle, Experience Music Project, Pacific Northwest Ballet, Seattle Opera and the Seattle Repertory Theatre, among others. The submarket encompasses a highly desirable close-in residential neighborhood with a median income level of $87,926 and tends to be a strong draw for small to mid-sized office tenants. The Queen Anne office market consists of approximately 3.56 million square feet of space in 64 buildings. Vacancy currently sits at 15.5% down 0.8% since the second quarter of this year. While negative absorption has occurred in the market, it has only been in small blocks and limited to just over 50,000 square feet in 2010. Average asking direct rental rates in this market have been increasing and are up nearly $6.45/SF Full service since just a year ago, now at $28.32/SF. So far in 2010 there have been approximately 98 lease transactions totaling 581,000 square feet. Currently there are no buildings under construction in this market, which means that it will not have to combat any added supply to the inventory as market demand returns. Overall, the Queen Anne submarket ranks fourth among Seattle’s 8 office submarkets in terms of vacancy.

Submarket

Queen Anne

Bldgs

Total RBA

Direct SF

Total SF

Vac %

YTD Absorption

YTD Deliveries

Under Construction SF

Quoted Rental Rates (FS)

3,577,311

545,600

555,944

15.5%

-51,869

$28.32/SF

M AR K ET O V ER V IE W

Sale COmparables

Address

Sale Date

12/10

Seattle, WA

174,400

$36,000,000

2008

$206

Cap Rate

Buyer / Seller

Comments

N/A

Fred Hutch / Blume Company

Center acquired troubled asset as shell office and will convert for own use adding est. $80-$125 psf

7th & Madison 701 Madison Street

Sale Price $/SF

Fred Hutchinson Cancer Research

1100 Eastlake 1100 Eastlake Avenue E

Total SF Year Built

11/10

Seattle, WA

205,148

$30,750,000

2009

$150

N/A

HAL / US Bank

Bank sale of building in shell condition; Buyer will convert building to medical for user (est. Âą$150 psf), The Polyclinic

Suburban Seattle office property 44% Lake View at Fremont 659-837 N 34th Street

11/10

Seattle, WA

111,305

$19,450,000

2008

$175

N/A

Stockbridge / Bank of America

leased at time of sale with 16,000 SF vacating 5/2012; 56% of building in shell condition (est. stabilized cost at $230-$240 psf)

Waterfront Place 5209 Lake Washington Blvd

10/10

Kirkland, WA

Reedo Building 542 1st Avenue S

5.2%

2008

$414

(In-Place)

1904 2004 R

Legacy 1-90 Bellevue, WA

$21,500,000

53,601 5/10

Seattle, WA

3350 & 3460 161st Avenue SE

51,841

4/10

$14,500,000 $271

90,725

$27,000,000

1982

$298

8.25%

Talon Capital /

Building was 84% leased at time of

Goodman Real

sale. Stabilized cap rate estimated at

Estate

Reedo LP / Urban Visions

TA Associates / Legacy Partners

7.0 %

Major tenant is Starbucks who no longer occupies their space in the building

100% leased to Research in Motion (Blackberry) with 8 years remaining on the lease

M AR K ET O V ER V IE W

lease COmparables

Building

World Trade Center East 2211 Elliott Avenue Seattle, WA

World Trade Center North 2401-2415 Elliott Avenue Seattle, WA

AGC Building 1200 Westlake Avenue N Seattle, WA

Eastlake Center II 2815 Eastlake Avenue E Seattle, WA

200 West Thomas 200 W Thomas Street Seattle, WA

Elliott West - Buildings 1, 2, & 3 351, 401, 501 Elliott Avenue N Seattle, WA

Tenant

EMC Corporation (new lease)

Pacific Market International (renewal)

Ameriprise Financial (new lease)

AK Productions (renewal)

Harris Group (renewal)

F5 Networks (renewal)

Size

Term (MONTHS)

Floor

20,000 SF

45,000 SF

132

3-4

1,305 SF

1,500 SF

13,155 SF

300,000 SF

120

1-4

Rate Annual Increases

$28.00/FS $1.00

$22.00/NNN 3%

TI Allowance

$52.00

$19.25 (4th) $50.00 (3rd) (shell cond.)

$25.00/FS

Turnkey

$0.75

($25.00)

$20.50/FS 3%

None

$20.00/FS None

$22.00/NNN $1.00

M AR K ET O V ER V IE W

Competitive Properties

Address

Seattle P-I Building 101 Elliott Avenue W Seattle, WA 98119

Elliott Bay Office Park 300 Elliott Avenue W Seattle, WA 98119

200 West Thomas Street 200 W Thomas Street Seattle, WA 98119

West Harrison - North Tower 100 W Harrison Street

RBA Year Built

100,056 SF 1986

220,447 SF 1981

67,798 SF 1973

1970 (ren. 1989)

West Harrison - South Tower

69,940 SF

Seattle, WA 98119

3131 Elliott Avenue 3131 Elliott Avenue Seattle, WA 98121

Asking Rents (FULL SERVICE)

21.1%

$29.00

1970

Comments

Newly remodeled lobby, conference room and bathrooms. Views of Puget Sound. Executive conference center

Large floor plates. Elliott Bay views. Across from new 2.6%

$24.00

skybridge to be built over to Myrtle Edwards Park. Walking distance to lower Queen Anne shopping

19.1%

$21.00 - $23.00

21.8%

$21.00 - $22.00

68,521 SF

Seattle, WA 98119

100 W Harrison Street

Vacancy

Skybridge with access to Myrtle Edwards park to be built within one block. Fitness center across the street

Two blocks to Key Arena, Seattle Center and monorail services to downtown. One block to the lower Queen Anne shopping district. Excellent off-street parking

Two blocks to Key Arena, Seattle Center and Monorail 0.0%

$22.00

(ren. 1989)

service to downtown. One block to the lower Queen Anne shopping district

Adjacent to Olympic Sculpture Park and Myrtle Edwards 197,294 SF 1986

0.0%

$26.00

Park. Unobstructed Elliott Bay views. Outside decks on each floor. Walking distance to waterfront transit line and restaurants/shops

M AR K ET O V ER V IE W

Puget Sound Regional Overview

POPULATION The Puget Sound region is composed of four counties with a total population of approximately 3.58 million residents. The greater Seattle metro area is located within King County, and with 1.88 million people living in 39 cities, this area is the heart of the Puget Sound region. EMPLOYMENT Regional employment has dropped by 1% for 2010. Aerospace employment is expected to decline over the next decade while Technology is expected to steadily increase. Unemployment is expected to drop by 2.4% by 2015 and per capita personal income to increase by $11,000.

SEATTLE CUMULATIVE GROWTH GRAPH (2010-2014) 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00%

on tru

vit

cti lA

cia

cti

ies

nt me rn

Tra

de ,T ra

Fin

rta po

tio

ilit

vic er

tu ac uf

an M

ies

g rin

y n io

Ho &

re Le

isu

(Te

ita sp

h alt He

& n io at

lit

re Ca

es vic er sS es sin Bu

uc Ed

l& na sio es of Pr

)

-10.00%

Source: Moodyâ&#x20AC;&#x2122;s Economy.com

M AR K ET O V ER V IE W

Puget Sound Regional Overview

TECHNOLOGY Puget Sound is a global technology leader and as a dominant research and commercial force in markets such as information technology, telecommunications, and biomedical technology, Seattle is ranked fifth in the nation for highest concentration of high-tech companies. The software and internet-related industry is a $30 billion business, and is backed by world-class research and educational institutions, large-scale service and manufacturing industries skilled in supporting technology companies and a strong and growing local venture capital community. Microsoft Corporation, the world’s leading personal computer software company, is one of 2,500 software development firms in the state with approximately 39,824 employees in the Puget Sound region and over 88,000 worldwide. Microsoft owns nearly 9.8 million SF and lease nearly 5.2 million SF in the Puget Sound region alone. BIOTECHNOLOGY AND MEDICAL TECHNOLOGY The Seattle region is a world-class center for biotechnology and has been ranked as the 5th largest biotechnology cluster in the United States by a recent study from the Milliken Institute. The region is now becoming increasingly well known as one of the premier biotechnology centers in the world. This is due to the area’s world-class research institutions, entrepreneurial spirit, governmental assistance and the region’s dynamic economy. According to the Brookings Institution, Greater Seattle’s research and development alliances are worth in excess of $690 million. Research centers and institutions are the most important factors in incubating high-tech industries. Two form the technology foundation for Washington State’s biotechnology industry: the University of Washington and the Fred Hutchinson Cancer Research Center. INTERNATIONAL TRADE Because of its deep water port and the fact that it is one shipping day closer to major Asian Pacific Rim ports, the Port of Seattle handles over 25% of all Pacific Rim imports into the United States. China and Japan are Seattle’s top waterborne trading partners and on a per capita basis, Washington conducts more international trade than any other state in the nation. Nearly 75% of Washington’s trade traffic passes through the Ports of Seattle and Tacoma. The Port of Seattle is ranked in the top ten in total dollar value of exports and among the Top 25

M AR K ET O V ER V IE W

Puget Sound Regional Overview

TRANSPORTATION Seattle’s economy is supported by a well-developed distribution network which offers excellent access to regional, national and international markets. Combined, the Ports of Seattle and Tacoma comprise one of the nation’s largest containerized port systems. The SeattleTacoma International Airport, also under the direction of the Port of Seattle, is a major gateway joining Asia and Europe with the United States and is ranked among the five best U.S. airports by the International Airline Passengers Association. The airport is also consistently one of the top 25 busiest cargo airports in the country. The Seattle area is well served by a network of surface transportation routes, including two transcontinental railroads. In addition, Metro and Sound Transit bus systems serve the greater Puget Sound area with approximately 1,200 buses and the largest public vanpool fleet in the country with over 700 vans. Sound Transit is responsible for connecting regional employment and population centers through a network of trains, buses and transit projects. Key features of this planned system include 25 miles of electric light-rail, 81 miles of commuter rail, more than 100 miles of HOV expressways, 20 new regional express bus routes and region-wide coordination of all schedules and fares among all local and regional transit services. In 2005, the Washington State Legislature passed a transportation package that will invest $7.1 billion in 274 projects throughout the state over the next 16 years. Which recently include the 520 Expansion Project and the SR-167 expansion. TOURISM Tourism is Washington State’s fourth largest industry with

SUMMARY FORECAST: THE PUGET SOUND ECONOMIC FORECASTER

Annual Percentage of Change

2008

2009

2010

2011

Employment

.09

-4.9

-0.7

1.9

Personal Income (cur.$)

3.1

-2.0

3.0

5.2

Consumer Price Index

4.3

0.6

1.8

Washington State Convention and Trade Center, that a $146 million,

-43.0

-49.9

30.5

22.8

500,000 SF expansion was warranted. With approximately 7,000

1.4

1.5

0.9

0.8

hotel rooms in downtown Seattle, and 20,000 in the Seattle-King

GDP ($05)

0.4

-2.4

3.2

3.1

Employment

-0.6

-4.3

-0.5

1.7

Puget Sound Region

Housing Permits Population United States*

and restaurants having gained a reputation as exciting venues for conferences and conventions. Demand has been so strong at the

County area, the area also welcomes over 170 cruise ship visits each

Personal Income

2.9

-1.7

3.2

5.1

Consumer Price Index

3.8

-0.3

2.0

1.9

-32.9

-38.5

24.5

36.7

Housing Starts

the Seattle Center (site of the 1962 World’s Fair) and local hotels

year.

*Source: Blue Chip Economic Indicator September 2010

M AR K ET O V ER V IE W

Puget Sound Regional Overview

Shoreline

522

Woodinville

Bothell

Duvall

202

Kingsgate Northgate Greenwood

Juanita 522

Avondale 405

Kirkland

305

908

Redmond

513

Fremont

520 202

520

Queen Anne

Bellevue

Seattle 99 90

202

Eastgate

West Seattle

Mercer Island

Issaquah 90

Newcastle

900

EXCLUSIVELY OFFERED BY:

ANN CHAMBERLIN (206) 971-7013 ann.chamberlin@pacific-re.com

LORI Hill (206) 971-7006 lori.hill@pacific-re.com

STUART WILLIAMS (206) 971-7008 stuart.williams@pacific-re.com

www.pacific-re.com 1700 Seventh Avenue, Suite 2050, Seattle, WA 98101 (206) 971-7000 office (206) 971-7001 fax

This statement with the information it contains is given with the understanding that all negotiations relating to the purchase, renting or leasing of the property described above shall be conducted through Pacific Real Estate Partners, Inc. The above information, while not guaranteed, has been secured from sources we believe to be reliable.