Office Sector Outlook 2010

1. November 19th, 2009 Office Sector Outlook 2010 F. Antonio Puente, CCIM Senior Vice President

2. “An optimist stays up until midnight to see the New Year in. A pessimist stays up to make sure the old year leaves.” -Bill Vaughan, real estate investor "The US commercial property market is far from recovery and needs job growth, sustained low interest rates and further government support"  in addition " We think we are early in the game as far as real estate markets reaching stability.” - GE Capital Real Estate CEO, Ronal Pressman

3. State of the Market

4. Office Supply • In 2008/09 the market delivered over 1 million square feet of new buildings in the Miami area in several submarkets.  Most of these building have achieved little or no leasing results to date. • Buildings that were built as "for sale condo buildings"  are now offering spaces on a "for lease" basis, also.  Specifically in the Coral Gables/Ponce corridor and Coconut Grove. •  In 2010 the market will again deliver over 1.1 million square feet mainly in the Downtown/Brickell submarket.  These buildings will be delivered to the market with over 70% still available.  In fact one new 600,000 rsf office building on Brickell has slowed the construction process to a crawl due to lack of financing and leasing activity.  This building, Brickell Financial, will probably wait out for the strengthening of  the office market which could potentially take several years of positive absortion. • Most proposed buildings that did not already commence construction have been “put on hold”,  therefore, we now have a finite number of the total inventory of office space.

5. Miami Vacancy

6. Miami Historical Deliveries

7. Miami Tenants by Industry

8. Locally, Office Vacancies High and Rising

9. Office Market Fundamentals

10. Future Growth in Office Jobs

11. Market Statistics (% of Office Market) Significant New Construction Brickell / Downtown Size Delivery 1450 Brickell Ave. 570,000 SF 2010 680 Brickell Ave. 596,000 SF TBD Met 2 Tower, 301 SE 2nd Ave. 705,000 SF 2010 (late) Coral Gables Miami Green Building 100,000 SF completed Bacardi Headquarters 230,000 SF completed 396 Alhambra 150,000 SF 2011 Ponce de Leon Towers 203,000 SF no started Doral/Airport Area Doral Center 150,000 SF 2010 1000 Waterford 257,000 SF completed Park Square at Doral 231,000 SF completed Kendall / Dadeland Area BCI / TownCenter One 205,000 SF completed North Miami-Dade/Miami Lakes Parkside Corporate Center IV 40,000 SF completed City Place, 2950 Waterway Blvd. 50,000 SF completed Source: CoStar Property

12. Market Statistics Downtown / Brickell Under ConstructionSize Delivery 1450 Brickell Ave. 570,000 2010 680 Brickell Ave. 596,000 2011 ?? Met 2 Tower, 301 SE 2nd Ave. 705,000 2010 Recent Transaction Bilzin Sunmerg Baena 80,000 SF Greenberg Traurig 125,000 SF BankUnit 11,500 SF Boston Consulting Group 5,200 SF William J. Brown Law Firm 4,800 SF Cabrera Capital Markets, 4,700 SF SFET Publishing (Televisa) 4,700 SF THM Group 3,900 SF GSA - Omni 30,000 SF Average Rental Rates New Construction $40.00 - $50.00 Class A $38.00 - $46.00 Class B $32.00 - $38.00 Class C $22.00 - $28.00 Average Vacancies Class A 9..5 % Class B/C 15.5% Overall 16.5% Greatest Exposure to Potential Overdevelopment Source: CoStar Property

13. Market Statistics Airport West Under ConstructionSize Delivery Flagler Station 100,000 SF completed Crossroads 110,000 SF completed Downtown Doral Center 150,000 SF 2010 1000 Waterford 257,000 SF completed Park Square at Doral 231,000 SF completed Recent Transactions Caterpillar 26,000 rsf Parbell of Florida 25,0000 rsf Johnson & Johnson 19,600 rsf Phelps Dodge 17,000 rsf Average Rental Rates New Construction $30.00 - 36.00 Class A $29.00 Class B $23.00 Class C $21.00 Average Vacancies Class A 14.9 % Class B 18.4% Class C 13.6% Overall 16.1% City of Doral has been recently named as one of The 10 best places to retire in the US citing taxes And surrounding beauty. -US News and World Report Source: CoStar Property

14. Market Statistics Coral Gables / Coconut Grove Under ConstructionSize Delivery Miami Green Building 100,000 SF completed Bacardi Headquarters 230,000 SF completed Ponce de Leon Towers 203,000 SF 2012 Recent Transactions AECOM 23,000 SF BSS&S 20,000 SF Medical Business Services 17,000 SF DeMahy Labrador – GFB 14,000 SF Vision Strategic Services 15,000 SF Average Rental Rates New Construction $45.00 - $50,00 Class A $39.50 Class B $33.00 Class C $20.00 Average Vacancies Class A 15.5 % Class B/C 7.4% Overall 12 % “The Model Market” Trolley, downtown wireless Connectivity, historical preservation keep Coral Gables at the top of the list for office tenants looking to stay closer to home Source: CoStar Property

15. Market Statistics Kendall / Dadeland Under Construction Size Delivery Dadeland Centre II 113,000 SF completed Town Center One 210,000 SF completed Recent Transactions: Preferred Trust 5,000 SF Fold Financial Management 2,300 SF Keith Chasen, PA 2,200 SF Average Rental Rates New Construction $40.00-$45.00 Class A $34.00 Class B $26.00 Class C $22.00 Average Vacancies Class A 10.5 % Class B/C 10 % Overall 13.5 % The Dadeland / Kendall market continues to be a market of choice for business owners and executives who live in close proximity. The addition of residential condos and new retail establishments have added to the allure. Source: CoStar Property

16. Distressed Properties in Miami

17. Miami Property Clock

18. Conclusions and Forecast for 2010 • Slumping Office Market - Tenants have the upper edge in negotiations, but this round of office development is now coming to an end. Very few new Office projects planned. • Active Leasing Market -Tenants and Brokers are taking advantage of the soft market and looking for the best opportunities. Tenants are playing musical chairs. • EffectiveRents - The Gross Rents will remain depressed for the next two - three years. Rent abatement, tenant perks and higher Tenant Improvements will prevail. • Survival of the Fittest –Mature buildingsthat are financially stable and with quality ownership will perform better than most due to markets concerns about building performance and operations from unstable assets.

19. Conclusions and Forecast for 2008 • Office Investment Activity - has been very slow to date, but should increase in the form of “bank note sales” and “distressed asset transfers”. Cash buyers continue to dominate the marketplace and are hoping for lower prices. High initial cap rates and strong IRR of 25-35 % will continue to be the norm. • City’s mandate - Miami needs to continue to invest in roads, mass transportation, the ports, and maintain its place as the gateway to the Americas in order to attract and retain new business. • Green is the Color of Money - Both existing buildings and new construction are fully amerced in environmentally-friendly, energy conservative initiatives and construction standards. LEED certified professionals and buildings will be sought after.

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