2012 report on capital markets in Washington, DC

1. State of the Capital Markets
Washington, DC

2. Dear Colleagues,
As I sit back and reflect on 2011, I can’t help but hear the Grateful Dead singing “What a Long Strange Trip it’s Been.” Last January, I was
sure we were on the path to strong upward growth where every sale transaction would establish stronger and better results than the one
before. I was correct through the first six months of the year, but then both domestic and foreign events seemed to give way to a major
loss of confidence which affected buyers, sellers and lenders alike. So what does 2012 portend? More of the same or more changes?
Optimism seems to be too strong a description for my current mood. Perhaps guarded optimism better describes my feelings right
now. We have the unknown of the presidential election hanging over our heads until later this year and the direction (and velocity?)
of federal spending attached to that outcome. No matter what the results, a decision will be made – something almost unheard
of in this town of late.
Average is what I expect in terms of results next year. Average sales activity, average leasing activity and average lending
activity. Average isn’t bad, but who likes to be average? I feel this could be the case for the next 24 months followed by a
prolonged strong recovery in both private and public spending. Predictions:
• Yes, we will have job growth and reduced unemployment which will be positive for all real estate product types.
• Investors and companies will find it more important than ever to be physically close to the federal actors for
both offensive and defensive reasons.
• The bulk of the sales activity will stay in core to core plus properties, but those investors willing to stray
from the safest bets and assume future leasing exposure will be rewarded three years from now as the
economy turns the corner and demand for space turns robust.
• The debt market will be fundamental to the success of the real estate market, but it will be very much
dependent on the return of a much healthier CMBS market.
So, my conclusion is markets are never as good or as bad as we might believe them to be, but one thing
that is certain is that the economy is making steady upward progress and those who take the position that
the glass is half full will be rewarded.
Best regards,
William M. Collins
Executive Managing Director, Principal
Capital Markets Group

3. DC - Top Performing Investment Market
The U.S. economy began – and ended – 2011 on an upbeat
– with robust job growth, a declining unemployment rate,
and improving consumer confidence. But 2011 was a
roller-coaster ride.
Throughout the year, a number of major political and economic Nevertheless, the unemployment rate fell to 5.4% – remaining
events shocked the U.S. economy including a volatile stock the lowest among major metros in the country.
market, the federal debt ceiling crisis, Moody’s downgrade of
In the first quarter of 2011, the District’s economy continued
U.S. credit, near shutdowns of the Federal Government, the
to benefit from the Federal Government’s expanded role in the
federal deficit debate, and the European sovereign debt crisis.
economy. As crisis after crisis hit in 2011, employment and
Nonetheless, the economy created jobs; full-time nonfarm
leasing activity from the public sector waned. Employment (and
payrolls increased by 842,000 in 2011 after having declined by
net leasing) shifted to the private sector which added enough
920,000 in 2010. The national unemployment rate decreased
nonfarm payrolls to offset the downturn in Federal Government
by 0.9% over the year to end 2011 at 8.5% on a seasonally
jobs. Of the 17,900 jobs added in 2011 (January through
adjusted basis. Real gross domestic product (GDP) increased
December, not seasonally adjusted), 16,900 were in the private
every single quarter of 2011 and ended the year at 2.8%.
sector. The DC economy continues to diversify as private sector
Still, despite the upbeat year-end, there are still many reasons corporations are attracted to DC’s status as a world capital, its
to be skeptical of any robust U.S. economy in 2012. Although cultural diversity, and a highly educated population. Among
the economy is creating jobs, there is still a long way to go the notable companies relocating their headquarters to the area
to recover the 9.4 million full-time payrolls lost in the three in 2011 were Bechtel’s global operations and Siemens USA.
years 2008 to 2010. With the ongoing saga of the European
sovereign debt crisis and upcoming U.S. presidential and
congressional elections in November, the U.S. economy will Job Growth By Metro
2011 Employment Gains / Losses, Non-Seasonally Adjusted
most likely have its set of ups and downs over the coming year.
70
During the Great Recession and into 2010, the DC Metro 60
50
Thousands of Jobs
economy outperformed other parts of the nation. The Federal
40
Government fueled economic expansion as the private sector 30
slowly gained steam. DC Metro has been one of the top 20
performers in terms of job creation during the past few years. In 10
2010, the DC Metro economy added 10,900 nonfarm payrolls, 0
NY City
Dallas
Santa Ana
Warren, MI
Seattle
Houston
Milwaukee
Fort Worth
Chicago
Phoenix
Pittsburgh
San Diego
Washington,
San Jose, CA
Los Angeles
ranking it #2 behind New York City for total job creation. The
DC
region is starting to function more like markets in the rest of
Total Nonfarm Job Growth
the nation. During 2011, the DC economy did add more jobs
Source: Bureau of Labor Statistics
– 17,900 – though its job-creation ranking fell to #10 behind
cities fueled by growth in the technology and energy sectors.
2 | Cassidy Turley

4. 1331 L Street, Washington, DC
Increased federal spending was a major driver of economic
growth during 2011. Indeed, the Federal Government
accounts for almost 40% of the DC regional economy, and
related government procurement accounts for 19% of the
region’s economy, according to research from George Mason
University (GMU). Total Federal Government spending rose to
$169 billion in 2010 – a resulting 5.4% annual increase for
the DC region. But growth in government spending has slowed.
While final figures for last year have not yet been released,
2011 is expected to show an increase of approximately 2%
according to GMU. Ambiguous federal deficit reduction plans
and uncertainties related to the 2012 presidential election
are hindering confidence in the local economy. The near-term
outlook for federal spending is that it will continue to slow
until there is more clarity on spending. GMU forecasts federal
outlays in the DC region to grow at a significantly slower pace
– from 0% to 1.5% annually through 2015 – compared to the
7.2% average annual growth rate over the past 25 years.
Despite uncertainty about Federal Government spending
activity, the resiliency of the DC economy continues to attract
highly educated people to the region. Net migration to the
DC area is expected to be 37,000 people over the next three
years. Additionally, the difference between local and national
incomes has continued to widen. The median DC household
income is currently $89,000 – 76% above the national median
income. That is good news for the region’s economy as its pool
of highly educated workers have money to spend, supporting
future demand for multifamily housing, retail, and office space.
cassidyturley.com | 3

5. Investment Sales - DC Metro
DC remains one of the top metros for real estate. The Urban
Land Institute’s Emerging Trends in Real Estate 2012 survey
ranked the DC market as the #1 “U.S. Market to Watch” for
commercial real estate investment. Due to the economic
volatility in 2011, investors remained focused on “gateway”
markets such as Washington, DC.
DC region office sales volume totaled $7.2 billion last year – Partners for a record-breaking $904 psf. The same downtown
an increase of 68% over 2010 while far exceeding the $5.4 submarket saw Liberty Place and the Executive Tower trade
billion historical average. DC metro ranked second – behind hands for $884 psf and $846 psf, respectively.
Manhattan – in sales volume among all office markets. The
Returns on commercial real estate proved to be a good choice
year ended with 73 transactions completed – a 33% increase
for investors as the spread above the risk-free rate increased
over 2010.
to reach 400 to 550 bps above the 10-year treasury (history
The region not only posted strong sales volume during the shows that the average spread is closer to 350 bps). While
year, but also performed well on a price per square foot (psf) most market watchers thought the 10-year treasury in 2010
basis. The average price for office property in DC Metro was was “as low as you can go,” it continued to decline to historic
$400 psf—the second highest per square foot price on record. lows ending 2011 at 1.98%. In comparison, cap rates for DC
Moreover, office prices in the District itself averaged $503 psf – office properties stabilized. The average office cap rate in the
the highest average price in any city in the U.S. Core downtown DC region was 6.8%, shrinking by only 10 basis points from
transactions set new records. Wells Real Estate acquired 6.9% in 2010. Cap rates in the District averaged 6.0%, those
Market Square in the District’s East End from Beacon Capital in Northern Virginia averaged 6.9%, and cap rates in suburban
Major Metros Dominate Sales Activity Office Sales Continue Climbing
2011 Office Sales Volume Washington, DC Metro Area
$18.0 10%
$16.0 9%
$16
$14.0 8% $14.1
$14
7% $12.5
$12.0 $12
6% $10.2
$10.0
Billions
$10
5%
Billions
$8.0 $8 $7.3 $7.2
4% Historical Avg = $5.4b
$6.4
$6.0 $6
Sales Vol Avg Cap Rate 3% $4.9
$4.3
$3.7 $4.0 $3.9
$4.0 2%
$4 $2.8
$3.4
$2.7
$2.0 $2.3
$2.0 1% $2 $1.1
$0.0 0% $0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Du s
At s
Ch ro
a
an
tl e
is
rk
on
An n
Ph r
o
Sa n ix
o
am
h/ ou i
Sa s
l la
an s
e
nt
eg
ag
o
ol
et
le
ga
nv
Yo
Fr
st
Lo ust
at
la
oe
Da
ap
rh
Di
M
ge
ic
l e t. L
Ve
Bo
De
Se
n
ew
o
DC
n
H
S
s
N
di
La
s
ig
In
Ra
Sources: Real Capital Analytics, Cassidy Turley
4 | Cassidy Turley

6. Waterfront Station, Washington, DC
Office Price Per Square Foot Office Cap Rates
District of Columbia Washington, DC Metro Area
$600 10.5%
$544
$503 9.5%
$500 $491
$461 $451
$423 8.5%
$403
$400
Price Per Square Foot
$363 7.5%
$323
$300
$267 $277 6.5%
$245
5.5%
$200
4.5%
$100
3.5%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
DC MD VA
Sources: Real Capital Analytics, Cassidy Turley
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7. Investment Sales - DC Metro
Maryland averaged 7.6%. Investors continued to show interest
Washington Metro
in well-located, close-in submarkets. Average cap rates inside
Office Leasing Fundamentals
the Beltway compressed 50 bps over the year, while outside the
Beltway rates increased by 50 bps.
18 16%
In 2011, institutional investors remained the dominant players 16
14%
14
in the region’s office building sales. Institutional investors 12 12%
Square Feet (millions)
accounted for 47% of DC Metro transactions last year, compared 10 10%
8
Vacancy
to a 36% share for the U.S. as a whole. Private investors 8%
6
made a comeback in DC last year, accounting for approximately 4 6%
one in four purchase transactions. With fiscal troubles in the 2 4%
0
Eurozone and the slowing growth in Asian markets, foreign 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2%
-2
investors again turned to the U.S. for investment alternatives. -4 0%
International (cross-border) buyers continued to show strong New Deliveries Net Absorption Vacancy Rate
interest in the DC Metro. The Association of Foreign Investors
in Real Estate (AFIRE) ranked DC as the #3 top global city for
foreign investment, behind New York City and London.
Composition of DC Metro Office Buyers
100%
90% 20%
31% Institutional
80%
46% 47%
70% 64% 23% Cross-Border
8%
60%
10%
50% 15%
Public
12% 12% Listed/REITs
40%
4% 12% Private
39% 17%
30% 7%
34%
20% 12%
23%
25% User/Other
10%
12% 12%
8% 5%
0% 2%
2007 2008 2009 2010 2011
Source: Real Capital Analytics
6 | Cassidy Turley

8. Office Leasing
Office demand in DC Metro departed from its accelerated smallest amount of new space delivered to the market since
level of 2010. Metro-wide, a net 1.2 million square feet 1994. New deliveries will continue to be limited over the
were absorbed in 2011 compared to 5.7 million square feet next two years, giving the market a chance to recover and
absorbed a year earlier. However, it should be remembered that absorb excess space. An average 2.5 million square feet will
2010 figures were inflated due to higher than normal leasing deliver annually in 2012/2013 metro-wide – that represents
activity by public sector tenants. Vigorous federal leasing approximately one-third of the 25-year annual average.
velocity continued into the first quarter of 2011, but private Additionally, the supply of available sublet space also declined
businesses accounted for a significant share of leasing activity – up to 20 bps metro-wide – as tenants placed less space on
from the second quarter through the end of the year. DC Metro the market in anticipation of future growth.
ended 2011 with almost 700,000 square feet of government
Asking rental rates for the region increased 1.5% during 2011
net absorption in privately owned buildings, while the private
to an average $35.45 psf. Still, this is well below the average
sector absorbed 530,000 square feet.
annual increase of 2.9%. With slow net demand in 2012,
Regional vacancy at year-end 2011 was 13.0% – exactly we expect asking rents to rise in the neighborhood of 1% to
where it was one year ago. Although net demand significantly 3%, metro-wide. Additionally, vacancy rates will not decrease
slowed compared to its level in 2010, vacancy rates were kept significantly over the next two years. Consequently, significant
in check by a thin development pipeline. Metro-wide new rental increases will not occur until the 2013-2014 timeframe.
building deliveries totaled only 1.3 million square feet—the
AnnuAL ABSORPtiOn – VACAnCy – RentAL RAteS: DC MetRO MARketS
2008 2009 2010 2011
WAShinGtOn DC
Absorption 755,000 116,000 3,873,000 799,000
Vacancy 7.8% 11.7% 10.4% 10.4%
Asking Rates $47.60 $47.50 $48.72 $49.53
nORtheRn ViRGiniA
Absorption 1,239,000 (1,713,000) 1,759,000 (120,000)
Vacancy 12.9% 14.8% 14.0% 14.2%
Asking Rates $31.24 $29.72 $29.56 $30.25
SuBuRBAn MARyLAnD
Absorption (900,000) (686,000) 107,000 553,000
Vacancy 12.9% 15.2% 15.2% 15.1%
Asking Rates $27.15 $26.77 $26.54 $26.57
cassidyturley.com | 7

9. Regional Markets
2011 will enter the books as a year of volatility and
uncertainty. As such, buyers were – and continue to
be – attracted to quality assets in core markets rather
than those in secondary or tertiary markets.
District
The District of Columbia was one such Compared to the District’s 3.9 million still signed the top three largest leases
market and it continued to build on square feet of net absorption in 2010, in 2011: the Office of the Comptroller
momentum from 2010. The District 2011 seemed like a slow year. The of the Currency (OCC) for 650,000
saw over $3.6 billion in office sales – a Washington, DC office leasing market square feet (backfilling some of the
$1 billion increase over the sales total in ended 2011 just shy of 800,000 square unneeded space signed by the SEC
2010. By the end of 2011, there were feet of net absorption – half of its 10- in 2010); NASA for almost 600,000
30 sales transactions in the District – year historical average. Leasing activity square feet; and the U.S. Department of
an increase of 25% from 2010. Buyers shifted from the public to private sector State consolidation for 463,000 square
chasing assets in core markets like after the second quarter of 2011. feet. Alternatively, law firm Howrey
DC drove up the average psf to $503 Whereas government leases accounted LLP’s dissolution left 320,000 square
– the second highest average price in for over 80% of all space absorbed feet in the East End submarket.
DC history. Three transactions over in 2010, only 52% of net leasing
Despite diminishing net demand over
$800 psf in the East End helped push in 2011 was from the public sector.
the year, limited new building deliveries
averages up. Nonetheless, the Federal Government
helped keep vacancy rates in check.
Vacancy ended the year exactly where
it started – at 10.4%. With moderate
demand, rental rates have flattened.
Average asking rates in DC rose a few
National Press Building, Washington, DC pennies over the past four quarters to
end the year at $49.39 psf compared to
$49.36 psf a year ago. Tenant incentive
packages increased slightly toward the
end of 2011, but are expected to remain
stable in 2012 with landlords offering
tenant improvements for new space in
the $65 to $85 psf range with three to
nine months of rental abatement.
8 | Cassidy Turley

10. One Virginia Square, Arlington, VA
northern Virginia
Northern Virginia sales volume increased significantly in
2011, totaling $3.2 billion in sales – more than double
2010’s volume. In the fourth quarter of last year, one portfolio
transaction of $1.2 billion accounted for most of the entire
year’s growth: Goldman Sachs acquired a 90% ownership of
ten properties from bankrupt Lehman Brothers. The average
$345 psf sales rate was up $91 compared to that in 2010, as
a mix of properties sold both inside and outside the Beltway.
Three properties exceeded the $500 psf range: the Verisign
Building in Reston ($533 psf), One Virginia Square in the
Rosslyn-Ballston Corridor ($533 psf), and 1300 N 17th Street
in Rosslyn ($529 psf).
Northern Virginia leasing activity was a mixed bag during 2011.
After what seemed like a positive recovery in the second and
third quarters, fourth quarter leasing hit a down note and brought
annual net absorption in the market to a negative 125,000
square feet. Verizon’s consolidation into DC and other Northern
Virginia locations left the Arlington submarket with 300,000
sf of vacant space in 1Q 2011. Additional consolidations
and moves at Accenture, the U.S. Postal Service, and Northrop
Grumman weighed heavily on net demand figures. Fortunately,
only 269,000 square feet of new building space delivered to
the market – the smallest amount in 17 years. With limited
new supply, vacancy increased to 14.2% by the end of 2011,
0.2% higher than one year ago. The dichotomy between
markets inside and outside the Beltway continued, but past
trends were reversed. Net absorption outside the Beltway was
positive, ending 2011 at 816,000 square feet; inside the
Beltway net absorption was a negative 941,000 square feet.
Reston Town Center and other toll road markets experienced
strong demand from the technology sector. Though BRAC-
related move-outs had a limited effect on market performance
in Arlington, consolidations and relocations were enough to
increase Arlington’s vacancy rate to 10.6% at the end of 2011,
up from 7.9% in 4Q 2010. Developers are still focused on
the long-term resiliency of the Northern Virginia markets as
evidenced by groundbreakings in Arlington and Tysons Corner.
Despite the bad news on net demand, Northern Virginia’s
average rental rate rose 2.3% to end the year at $30.25 psf.
cassidyturley.com | 9

11. Regional Markets
Northern Virginia will remain relatively quiet throughout 2012 feet, proof of the private sector continuing to lease up space
as defense contractors try to figure out the impact of proposed in suburban Maryland. As a result of these developments,
federal budget cuts on their businesses and space requirements. the vacancy rate inched down 0.1% over the year and stood
Technology and financial services will remain active players in at 15.1% at the end of 2011. After three years of declines,
the market. Additionally, Northern Virginia will continue to be asking rents increased slightly to $26.57 by the end of the
a magnet, attracting new private sector businesses to the region year, three pennies higher than they were a year ago.
as evidenced by Bechtel’s global operations relocation from
The suburban Maryland economy continues to recover slowly.
Frederick, MD to Reston. Still, until more certainty is gained
Suburban Maryland saw an additional 3,400 nonfarm payrolls
after the November elections, hiring (and, therefore, office
in 2011 – the most jobs added since 2006. The Education
space absorption) will be subdued for the next 12-18 months.
and Health sectors continued to lead local job growth, while the
Suburban Maryland Professional and Business Services sector added approximately
1,000 jobs over the year. Additionally, the Financial Activities
Momentum returned to the suburban Maryland market in 2011.
sector reversed its trend of consecutive annual job losses that
Office sales more than doubled from their pace in 2010. Sales
have been taking place since 2006. With continued, steady
volume ended 2011 with $507 million in transactions. Thirteen
job growth, measured office leasing activity, and limited supply,
deals closed during the year, although that number is well below
we expect vacancy rates to remain relatively flat over the next
the historical average of 24 transactions in a typical year. Price
three years. Mass transit and amenity-rich submarkets such as
psf increased significantly to $275 in 2011 compared to $178
Bethesda-Chevy Chase and the Rockville Pike corridor will lead
in 2010. Strength was particularly evident in well-located
Maryland’s recovery. Locations lacking public transportation
buildings closer to the urban core. The most notable deal was
access will struggle to compete.
JBG’s sale of One Bethesda Metro in Bethesda, which traded
hands for just over $90 million, or $500 psf. JBG purchased
the building two years ago for $71 million.
The suburban Maryland office leasing market saw marked
improvement last year. Absorption for 2011 totaled 553,000
square feet, outperforming its 10-year average by almost 50%.
The largest non-renewal transactions were preleases by the
National Institute of Allergy and Infectious Diseases (NIAID)
and Choice Hotels in new buildings yet to be delivered. Also
notable were a 105,000 square foot lease signed by Meso Scale
Diagnostics and one by IFC Macro that took 98,000 square
10 | Cassidy Turley

12. One Washingtonian Center, Gaithersburg, MD
cassidyturley.com | 11

13. Looking Ahead
With many changes in both the public and private sectors,
2011 can be summarized as both volatile and uncertain.
Even though the metro economy went through many ups
and downs in 2011, 17,900 jobs were added.
Still, this is about half of the historical average. Compared • Employment will continue to grow slowly throughout the
to prior years, job growth has been slower to translate into year (a year of a presidential election) and into 2013.
leasing activity. This is due to the large amount of “shadow Hiring will come primarily from the private sector as the
space” that businesses have had to absorb. The good news is Federal Government reduces payrolls through attrition and
that sublet inventory has declined – an indication that tenants retirement. Expect employment gains to reach a more
are absorbing their current space and planning expansions “normal” pace in the second half of 2013 and into 2014.
for the future. Additionally, investors continue to find DC • On average, total federal outlays in the DC area have
Metro an attractive area to invest due to its strong economic increased by 7.2% annually over the past 25 years.
fundamentals. Federal outlays have increased every single year for DC
Moving forward, we expect the region to continue a slow, but Metro, despite some years of decreases on a national
steady recovery: basis. With a focus on deficit reduction, regional spending
will definitely slow. The final outcomes of proposed
• As focus shifted some to core plus properties and federal spending cuts are uncertain. Federal agencies and
secondary / tertiary markets during 2011, momentum will contractors will be hesitant to make long-term decisions
gravitate back to core properties in prime locations due until deficit reduction details are ironed out and the
to uncertainties in the markets during 2012. Investors national election takes place in November.
will still focus on major metro areas such as Washington,
• With moderate demand in the near term coupled with
DC and New York, NY due to their market stability and
the DC region’s thin office supply pipeline over the next
potential for future growth. In DC Metro, expect the
three years (2012-2014), we expect office vacancy rates
majority of office sales to occur inside the Beltway and in
in metro DC to tick down moderately to 12.9% by the end
core markets during 2012.
of 2012.
• After $7.2 billion in office sales in 2011, strong market • Leasing concessions started to stabilize in most of the
fundamentals remain for the DC Metro market. We
DC metro area in 2011, though they increased slightly
forecast 2012 office investment sales volume to revert
by year’s end. With subdued leasing activity over the
back towards the historical average of $5.4 billion in sales,
near term, vacancy rates are not expected to decrease
metro-wide.
significantly. Thus, the region will not see sizable rental
• Cap rates appear to have stabilized with nowhere to increases across the board until the 2013 timeframe and
go but up. Still, with 10-year treasuries hovering beyond.
around 2%, some economists forecast a further
• Bush tax cuts are set to expire by year’s end, prompting
decline approaching 1.5% in 2012. If so, this
some investors to consider completing transactions in
provides more room for further cap rate compression.
2012 to take advantage of the lower tax rates.
12 | Cassidy Turley

14. 12061 Bluemont Way, Reston, VA
OFFiCe LeASinG VACAnCy FOReCASt
WAShinGtOn MetRO AReA MARketS
2011 2012 2013 10 year Average
DC 10.4% 10.1% 10.0% 8.0%
NoVA 14.2% 14.0% 13.7% 13.5%
Suburban MD 15.2% 15.1% 15.0% 12.1%
DC Metro 13.0% 12.9% 12.6% 11.2%
cassidyturley.com | 13

15. 2011 Office Sales Transactions
WASHINGTON, DC
Building Address Total Price Total SF Price / SF
1399 New York Avenue NW $104,000,000
2131 K Street NW $28,800,000
740 15th Street NW $69,250,000
1100 1st Street NE $180,000,000
1400 Eye Street NW $58,450,000
1100 17th Street NW $49,750,000
2600 Virginia Avenue NW $76,000,000
1130 Connecticut Avenue NW $105,500,000
1200 17th Street NW $39,650,000
700 13th Street NW $120,000,000
1301 Connecticut Avenue NW $25,309,622
1200 1st Street NE $149,500,000
529 14th Street NW $167,500,000
325 7th Street NW $139,000,000
700 6th Street NW $191,000,000
1140 & 1146 19th Street NW $39,500,000
1100 & 1101 4th Street SW $356,000,000
601 New Jersey Avenue NW $106,000,000
1227 25th Street NW $47,000,000
840 1st Street NE $90,000,000
1101 K Street NW $199,000,000
701 & 801 Pennsylvania Avenue NW $615,000,000
2115 & 2121 Wisconsin Avenue NW $66,500,000
1600 K Street NW $35,000,000
2300 N Street NW $140,000,000
1331 L Street NW $101,000,000
1331 H Street NW $23,000,000
1255 23rd Street NW $137,400,000
1155 15th Street NW $29,200,000
1140 Connecticut Avenue NW $80,250,000
2011 TOTAL (34 Buildings) $3,568,559,622
Notes:
1. Bold/Italic indicates Cassidy Turley transaction
2. The information contained in the 2011 Office Sales Transaction charts was obtained from sources deemed reliable, but no warranty or representation is made to the accuracy thereof.
This infromation is provided subject to correction of errors and omissions. Includes buildings 50,000 square feet or more.
14 | Cassidy Turley

16. Seller Buyer
Sales Transaction details
available in printed version
For copy of brochure, please click here and
include your full contact information.
cassidyturley.com | 15

17. 2011 Office Sales Transactions
NOrTHerN VIrGINIA
Building Address Total Price Total SF Price / SF
4050 & 4000 Legato Road $128,700,000
2675-2677 Prosperity Avenue $105,000,000
12061 Bluemont Way $118,000,000
1400 Wilson Boulevard $52,650,000
3601 Wilson Boulevard $61,850,000
12930 Worldgate Drive $65,000,000
1000, 1100, 1101, 1200, 1401,
1501 & 1515 Wilson Blvd; 1812 N Moore St, $1,221,650,419
1400 Key Blvd; 1701 N Fort Myer Dr
601 North Fairfax Street $21,000,000
1555 Wilson Boulevard $67,000,000
11130, 11180 & 11190 Sunrise Valley Drive $63,000,000
8283 Greensboro Drive $73,500,000
1310, 1320, 1330 & 1340 Braddock Place $101,000,000
14420, 14428 & 14426 Albemarle Point Place * $28,713,126
2000 & 2002 Edmund Halley Drive $50,500,000
1616 N Fort Myer Drive $145,500,000
1881 Campus Commons Drive $64,400,000
1764A, 1764, 1768, 1755-1757 & 1761 Old Meadow Road $138,550,000
7700 Leesburg Pike $15,000,000
6400 & 6402 Arlington Boulevard $81,526,000
44084 Riverside Parkway $8,250,000
12700 Sunrise Valley Drive $16,600,000
8000 Westpark Drive $27,200,000
45335 Vintage Park Plaza $5,284,000
1300 N 17th Street $205,000,000
700 S Washington Street $12,125,000
2050 Ballenger Avenue $24,696,000
4114 Legato Road $60,250,000
2300 Dulles Station Boulevard $58,800,000
2222 & 2216 Gallows Road $22,800,000
4755 Meadows Wood Lane $23,775,000
3150 Fairview Park Drive $89,250,000
2011 TOTAL (56 Buildings) $3,156,569,545
* Includes office portion only of WRIT portfolio sale. Sales price allocated as part of total portfolio transaction.
16 | Cassidy Turley

18. Seller Buyer
Sales Transaction details
available in printed version
For copy of brochure, please click here and
include your full contact information.
cassidyturley.com | 17

19. 2011 Office Sales Transactions
SuBurBAN MArYLAND
Building Address Total Price Total SF Price / SF
4800 Hampden Lane $90,300,000
3 Bethesda Metro Center $150,100,000
20271 Goldenrod Lane $15,035,688
11141 Georgia Avenue $8,280,000
1400 Spring Street $11,500,000
8301 Professional Place $23,300,000
15245 Shady Grove Road $32,036,000
540 Gaither Road $35,230,000
9801 Washingtonian Boulevard $90,000,000
6010 Executive Boulevard $14,350,000
8181 Professional Place $5,250,000
9841 Washingtonian Boulevard $32,000,000
2011 TOTAL (12 Buildings) $507,381,688
2011 TOTAL DC METRO $7,232,510,855
18 | Cassidy Turley

20. Seller Buyer
Sales Transaction details
available in printed version
For copy of brochure, please click here and
include your full contact information.
cassidyturley.com | 19

21. Multifamily
Multifamily investment performed extremely well in 2011.
With strong economic and employment fundamentals, large
metros like Washington, DC have attracted investors.
Real Capital Analytics reports that from January through types of renters. Additionally, strains on the current
December 2011, the DC Metro market saw 25,500 multifamily transportation infrastructure will not improve sufficiently,
units trade hands for $4.7 billion, thus ranking DC Metro thus demand for transit-oriented locations and those close
#1 nationally for total sales volume. DC investment sales to major work centers will remain high.
had a record year, surpassing 2006 totals by $600 million.
Institutional investors have helped fuel this growth, accounting
• Homeownership rates peaked several years ago. In the
near term, homeownership rates will remain at lower levels.
for 44% of multifamily purchases in the DC market. Average
Expect more households to rent by choice (especially true
cap rates have compressed, and they are delivering returns of
of the Gen-Y population). At least in the short to medium
350 to 400 bps above the ultra-low 10-year treasury.
term, many will continue to have difficulties qualifying for
Multifamily vacancy rates have been declining. Vacancy rates a mortgage, saving for a down payment, and struggling
were 3.5% in Northern Virginia, 4.5% in suburban Maryland, with home affordability. That supports increased demand
and 5.2% in the District. Strong market fundamentals have for rental units.
attracted not only investors but developers as well. After a
lull in activity, multifamily building permits in the DC region
are approaching levels not seen since 2006. The difference Composition of DC Metro Multifamily Buyers
between permits issued in 2006 compared to those issued in 100%
9%
2011 is that multifamily permits last year have been primarily 90%
29% 9% Institutional
for rental housing instead of for-sale condominiums. 80% 43% 44%
17%
70% Cross-Border
Outlook
60%
31% 1%
6% Public
• Market fundamentals remain strong for the DC multifamily 50%
Listed/REITs
40% 32%
market. With uncertainties in the economy and political 61%
25%
Private
30%
climate, investment dollars will be attracted to stable
38%
20%
metro markets such as DC. 19% User/Other
10% 24%
• Population supports multifamily demand in DC. Over 0% 2% 4% 6%
2008 2009 2010 2011
67,000 people are expected to migrate to the DC metro
Source: Real Capital Analytics
area over the next five years. Varying product types across
the region will be needed to accommodate different
20 | Cassidy Turley

22. Multifamily
Chris Doerr, Managing Director
Corner
After years of relative anonymity, multifamily has risen
2011 Multifamily Sales Volume to prominence as one of the top asset classes of choice
$5.0 9% among Washington DC Metro area investors. It seems
$4.5 8%
like every day we read about multifamily assets trading
$4.0 at very aggressive pricing. More and more buyers have
7%
$3.5 begun focusing on this asset type and the large majority
6%
$3.0
of them ask me the same question, “Are you worried
5%
about oversupply?” The short answer to this question is
Billions
$2.5
$2.0 Sales Vol Avg Cap Rate
4% “No I am not worried about oversupply,” and there are
3% three primary reasons why.
$1.5
$1.0 2%
The first reason I am not concerned with oversupply
$0.5 1%
is that there has been a drastic movement away from
$0.0 0%
homeownership. Homeownership rates peaked several
years ago and have been declining steadily ever since. By
s
ro
a
an
e
rk
on
er
on
go
o
x
s
l la
nt
ni
tl
eg
et
le
nv
Yo
Fr
a
st
st
at
la
oe
Da
M
Di
ge
ic
De
Bo
ou
Se
At
n
ew
Ch
Ph
An
the numbers, there were 33.7 million rental households
DC
Sa
n
H
Sa
N
s
Lo
Sources: Real Capital Analytics, Cassidy Turley in the U.S. in 2000 and there are expected to be 46.8
million rental households by 2015. I expect this trend
to continue and even accelerate in years to come. Gone
also is the stigma of being a “renter” as more people,
net Demand for Apartments increasing especially those in urban areas, have become “renters
DC Metro, Net Absorption by choice.” Renters love the flexibility of not being
9,000
tied down to a 30 year mortgage and the hassles and
responsibilities that come with home ownership. This
7,000
evolution toward renting makes it impossible to use past
5,000
performance as an indicator of the future. People focus
# of Units
3,000 on “future pipeline vs. past absorption” but that is not
1,000 an “apples to apples” comparison.
-1,000
The second reason I am not concerned with oversupply
-3,000
is that many of the predicted pipeline of units will never
-5,000 materialize. Delta Associates predicts that 34,500 units
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
are in the 36 month pipeline, which looks harrowing at
DC NoVA MD
first blush. However, when you dig a little deeper, a large
majority of projects in the pipeline are suburban / rural
deals that do not have any of their required approvals
in place. Also, a significant portion of the “approved”
deals in the pipeline are the wrong product type for
Apartment Vacancy Rates their submarket and will never be able to get financed.
DC Metro So after further review, when you consider the deals in
8.0% the pipeline that are likely to move forward, oversupply
7.0%
shouldn’t come into play.
The final, and perhaps most important reason, is that
6.0%
5.0%
urban / multifamily living is becoming the new normal.
4.0% The younger generation is looking for a 24/7 lifestyle
3.0% where they can live, work, and play in a single location.
2.0% Rising gas prices and long commutes have contributed
1.0%
to this change as well, as more young families seek
an urban lifestyle. The age of suburbanization and
0.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 growing homeownership is over. Those who fail to
understand these new trends will miss opportunities or
DC MD VA
find themselves building / buying what is no longer in
demand.

23. Finance
Debt Markets
Cassidy Turley’s debt specialists answer key questions affecting commercial real estate lending.
John Campanella & Christian Miles
Senior Managing Directors
Q: Who are the active borrowers in today’s debt markets? Q: Can properties that are still in lease-up or have significant
lease roll get financing?
JC: We are seeing strong activity from private equity funds. The
Opportunity and Core Plus funds are focused on securing short- CM: Cassidy Turley has had significant success financing
term debt (5 years or less) with maximum flexibility. properties still in lease-up or with potential lease roll in the
next 12 to 24 months. The secret for us has been tapping the
More specifically, the funds are looking for loans with no resources of our leasing and research teams and getting the
prepayment penalties or restrictions, flexible release provisions, “behind-the-scenes” story about how the property competes in
and additional proceeds that are funded over the loan term its submarket. Lenders really appreciate knowing the details
for the TI/LC or capital expenses necessary to complete their of a specific property’s competitive advantages. This gives
business plans. lenders a good feeling for the likely risks, and they will then
respond more forcefully with how they will structure the loan
In order to achieve that level of flexibility, we have been working
to address those risks. On five different transactions in 2011,
with bank balance sheets. The current macro environment has
our ability to provide insight to lenders about tenants in the
pushed the banks to be conservative on leverage, topping out at
market and specific tenant inclinations about staying or leaving
65% LTV. The pricing for these types of loans is 200-300 basis
a property was the difference in our ability to get good financing
points over Libor depending on the product type and market.
terms for our clients.
If a transaction requires leverage beyond 65% LTV, we are
Q: What do you expect out of the debt markets in 2012?
looking to the mezzanine market which can potentially push
the combined LTV to 80%. The pricing for these types of JC: The CMBS market will continue to tighten along with steady
mezzanine loans has been between 8% and 10%. increase in demand in 2012. The CMBS pricing has been
volatile this past year. In the first quarter of 2011, we saw
On the other end of the spectrum, the Core funds are targeting
pricing in the 5.25% - 5.50% range.
the lowest cost of capital at 50% LTV. They prefer the longer-
term money. Today, the lower leveraged 10-year loan is pricing Over the summer, the market became unstable and pricing
in the 4% range. The key strategy for the Core funds has been increased to 6.25% - 6.50%, then it started to stabilize in
to keep overall fund leverage in the 30% range. September. Since November, the 10-year pricing has dropped
back to the 5% range, showing that the market is stabilizing.
2011 FinAnCe PARAMeteRS
Product type LtV DSC Rate Amortization
Life Company 65% - 70% 1.25x 4.00% - 4.75% 25 - 30 years
Bank 70% - 75% 1.25x 2.75% - 3.25% I/O then 30 years
CMBS 70% - 75% 1.25x – 1.30x 5.25% - 5.75% I/O then 30 years
Agency 55% - 80% 1.25x- 1.55x 3.85% - 4.25% 30 years
22 | Cassidy Turley

24. 1001 Fleet Street, Baltimore, MD
For the most part, life companies have increased allocations for banks return to the market later this year. When you combine
2012. They will continue to dominate the larger transactions the capital-rich domestic banks and the reemergence of the
inside the beltway focusing on placing longer-term money. We international banks, the result should be a very competitive
will see 10-year pricing in the 4% - 4.5% range. loan environment in the second half of 2012.
The smaller life companies will become more creative with Q: Are historically strong lender appetites for Multifamily loans
structures by providing shorter-term loans (3-5 years) with ebbing in 2012?
floating and fixed rates. We expect them to begin pushing
CM: On the contrary, multifamily (MF) remains a highly sought-
leverage to win the higher quality suburban deals with good
after property type by many lenders. Freddie originated 15%
sponsorship. Pricing for 10-year deals will be in the 4.5% - 5%
more MF loans in 2011 (vs. 2010), and they are forecasting
range with LTV at 70% - 75%. Keep in mind, the larger life
another 10% jump in volume in 2012. Insurance companies
companies will continue to be conservative on leverage, but will
remain underweighted in MF loans, so they will be competing
win the larger Core deals, with the sweet spot at 60% LTV and
for this business. CMBS typically doesn’t try to compete with
4% pricing for 10-year money.
the agencies, but they are very effective financing student
Domestic Banks will continue to be active in 2012, as they housing and second-tier locations. The only cautionary note is
are flush with capital. The 5-year terms are more attractive that lenders know that Washington’s strong rental growth during
than ever with private equity funds, but the banks do have the first half of 2011 has slowed. Lenders are asking tough
size restrictions. The typical bank will only hold $30 to $50 questions about new supply. And lenders are also looking at
million and will syndicate out to other banks the remaining loan whether MF properties generate enough net operating income
balance. Today, the bank syndications are done post closing, to provide good coverage at loan maturity in a higher interest
protecting the borrower from little, if any exposure. For a bank rate environment – say 5.5% or 6.0%. For MF properties in
to stay competitive in 2012, they will need to be comfortable transition or being repositioned following a renovation, many
with mezzanine financing. of the banks are bidding aggressively for their business. The
banks bring some expertise and confidence to such programs
As long as we see CMBS staying healthy and providing the
if they have agency lending programs of their own. All-in-all,
market with liquidity, the domestic banks will continue to be
2012 should be another good year for MF finance.
an excellent source of capital. We expect to see the European
cassidyturley.com | 23