14-081DC-0665 MLK Library & Air Rights

APPRAISAL REPORT MARTIN LUTHER KING JR. MEMORIAL LIBRARY 901 G Street, NW Washington, District of Columbia 20001 CBRE, Inc. File No. 14-081DC-0665

Jair Lynch Authorized Representative LYNCH DEVELOPMENT ADVISORS, LLC 1508 U Street, NW Washington, District of Columbia 20009

www.cbre.com/valuation

© 2014 CBRE, Inc.

VALUATION & ADVISORY SERVICES

1861 International Drive, Suite 300 McLean, VA 22102

T (703) 734-4759

F

www.cbre.com

August 12, 2014 Jair Lynch Authorized Representative LYNCH DEVELOPMENT ADVISORS, LLC 1508 U Street, NW Washington, District of Columbia 20009 RE: Appraisal of Martin Luther King Jr. Memorial Library 901 G Street, NW Washington, District of Columbia 20001 CBRE, Inc. File No. 14-081DC-0665

Dear Mr. Lynch:

At your request and authorization, CBRE, Inc. has prepared an appraisal of the market value of the referenced property. Our analysis is presented in the following Appraisal Report.

The subject is a 379,886 gross square foot, four-story library located at 901 G Street, NW in the East End office submarket of the District of Columbia. The improvements were constructed in 1972 and are situated on a 75,762 square-foot site. The improvements are currently the home of the Martin Luther King Jr. Memorial Library. The building and major interior public spaces were designated a Historic Landmark in 2007 and placed on the historic register. The building may be renovated subject to review by the DC Historic Preservation Review Board (HPRB), but cannot be demolished.

We have been instructed by the client to appraise the fee simple market value of the subject property. As noted in the analysis to follow, given the subject’s location and physical attributes, the subject’s most likely use is an office building with ground level retail space. Additionally, the subject’s existing improvements do not maximize the site’s allowable density within its zoning classification and the building is reportedly designed to accommodate additional floors. However, the subject has only one level of below-grade parking and requires development of a parking lift system or parking reduction/elimination from the DC Board of Zoning Adjustment (BZA) to permit development of the excess density.

Based on the analysis contained in the following report, the market value of the subject is concluded as follows:

© 2014 CBRE, Inc.

Jair Lynch August 12, 2014

Page 2

MARKET VALUE CONCLUSION

Appraisal Premise Interest Appraised Date of Value Value Conclusion

As Is * Fee Simple Estate July 7, 2014 $34,800,000

As Is - Excess Density Fee Simple Estate July 7, 2014 $27,750,000* Excludes value of the excess densityCompiled by CBRE

The report, in its entirety, including all assumptions and limiting conditions, is an integral part of, and inseparable from, this letter.

The following appraisal sets forth the most pertinent data gathered, the techniques employed, and the reasoning leading to the opinion of value. The analyses, opinions and conclusions were developed based on, and this report has been prepared in conformance with, the guidelines and recommendations set forth in the Uniform Standards of Professional Appraisal Practice (USPAP), the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.

The intended use and user of our report are specifically identified in our report as agreed upon in our contract for services and/or reliance language found in the report. No other use or user of the report is permitted by any other party for any other purpose. Dissemination of this report by any party to non-client, non-intended users does not extend reliance to any other party and CBRE will not be responsible for unauthorized use of the report, its conclusions or contents used partially or in its entirety.

It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CBRE can be of further service, please contact us.

Respectfully submitted, CBRE - VALUATION & ADVISORY SERVICES Joseph Nassau Jerrold Harvey, MAI, MRICS, CCIM Vice President Managing DirectorDistrict of Columbia Cert. No. 11639 District of Columbia Cert. No. 10016 Phone: 703-734-4774 Phone: 703-734-4759Fax: 703-734-3012 Fax: 703-734-3012Email: [email protected] Email: [email protected]

© 2014 CBRE, Inc.

Certification

i

Certification

We certify to the best of our knowledge and belief:

1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions

and limiting conditions and are our personal, impartial and unbiased professional analyses, opinions, and conclusions.

3. We have no present or prospective interest in or bias with respect to the property that is the subject of this report and have no personal interest in or bias with respect to the parties involved with this assignment.

4. Our engagement in this assignment was not contingent upon developing or reporting predetermined results.

5. Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

6. This appraisal assignment was not based upon a requested minimum valuation, a specific valuation, or the approval of a loan.

7. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice, as well as the requirements of the District of Columbia.

8. The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute.

9. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

10. As of the date of this report, Jerry Harvey, MAI has completed the continuing education program for Designated Members of the Appraisal Institute.

11. As of the date of this report, Joe Nassau has completed the Standards and Ethics Education Requirements for Candidates/Practicing Affiliates of the Appraisal Institute.

12. Joe Nassau and Jerry Harvey, MAI have made a personal inspection of the property that is the subject of this report.

13. No one provided significant real property appraisal assistance to the persons signing this report. 14. Valuation & Advisory Services operates as an independent economic entity within CBRE, Inc.

Although employees of other CBRE, Inc. divisions may be contacted as a part of our routine market research investigations, absolute client confidentiality and privacy were maintained at all times with regard to this assignment without conflict of interest.

15. Joe Nassau and Jerry Harvey, MAI have not provided any services, as appraisers or in any other capacity, regarding the property that is the subject of this report within the three-year period immediately preceding acceptance of this assignment.

Joseph Nassau Jerrold Harvey, MAI, MRICS, CCIM District of Columbia Cert. No. 11639 District of Columbia Cert. No. 10016

© 2014 CBRE, Inc.

Subject Photographs

ii

Subject Photographs

Aerial View (Approximate Boundary)

© 2014 CBRE, Inc.

Subject Photographs

iii

Exterior View Exterior View



© 2014 CBRE, Inc.

Subject Photographs

iv

Lobby View Lobby View

Typical Library Space Lower Level Space

Lower Level Space Hallway

© 2014 CBRE, Inc.

Subject Photographs

v

Typical Library Space Roof View

© 2014 CBRE, Inc.

Executive Summary

vi

Executive Summary

Property Name

Location

Highest and Best Use

As If Vacant

As Improved

Property Rights Appraised

Date of Report

Date of Inspection

Estimated Exposure Time

Estimated Marketing Time

Land Area (Improved) 1.74 AC 75,762 SF

Improvements

Property Type

Number of Buildings

Number of Stories (Above Grade)

Number of Stories (Below Grade) 2.5

Gross Building Area (Including Parking)

Parking Area 70,215 SF

Gross Building Area (Excluding Parking)

Gross Building Area (Above Grade) 241,467 SF

Net Rentable Area

Year Built 1972 Renovated: 0

Condition

Major Tenants

Martin Luther King Jr. Memorial Library

Buyer Profile

Financial Indicators

Current Occupancy 100.0%

Stabilized Occupancy w/ Credit Loss 90.0%

Overall Capitalization Rate 5.50%

Pro Forma Operating Data Total Per SF

Effective Gross Income $14,548,936 $66.60

Operating Expenses $5,301,487 $24.27

Expense Ratio 36.44%

Net Operating Income $9,247,448 $42.33

Developer

Average

4

218,461 SF

Martin Luther King Jr. Memorial Library

July 7, 2014

Fee Simple Estate

Interim library use; Redevelopment for higher density office use

Office development

901 G Street, NW, Washington, District of Columbia County, District of Columbia 20001

218,461 SF

309,671 SF

1

379,886 SF

August 12, 2014

12 Months

12 Months

Office (Currently operated as a library)

© 2014 CBRE, Inc.

Executive Summary

vii

VALUATION Total Per SF

Cost Approach* $33,200,000 $151.97

Sales Comparison Approach* $31,700,000 $145.11

Income Capitalization Approach* $34,800,000 $159.30

CONCLUDED MARKET VALUE

Appraisal Premise Interest Appraised Value

As Is* Fee Simple Estate $34,800,000

As Is - Excess Density Fee Simple Estate $27,750,000

* Excludes value of the excess densityCompiled by CBRE

Date of Value

July 7, 2014

July 7, 2014

STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS (SWOT)

Strengths/ Opportunities

• The subject is located in an office submarket achieving among the highest rents in the Washington DC office market;

• The subject has a strong location situated is one block west of the Verizon Center and across 9th Street, NW from an entrance to the Gallery Place/Chinatown Metrorail station (Orange, Blue and Red Lines) at 9th and G Street, NW;

• The subject’s existing improvements do not maximize the site’s allowable density and the building can accommodate two additional floors without any modification of foundations as long as the library’s fourth floor continues to be used for offices;

• The east and west portions of the first floor library space have glass storefront windows, which are well suited for ground level retail or restaurant space;

• The typical floor plate for the 2nd, 3rd and 4th floor office space is approximately 53,000 square-feet, which is above many competitive office buildings in the District of Columbia. Additionally, the building’s design allows for demolition of most of the interior walls, allowing for vast open areas for office use. The design in considered a benefit to the subject as repositioned to an office building;

Weaknesses/ Threats

• Based on our property inspection, discussions with a property representative, a Project Strategy Report prepared by Freelon (dated December 29, 2010) and a Pre-Design Building Evaluation prepared by GDG (dated December 20, 2013), there are several items in need of repair including the building façade, water-related defects, and HVAC system replacement. The costs to cure the deferred maintenance are significant;

• The building and major interior public spaces were designated a Historic Landmark in 2007 and placed on the historic register. As such, any improvements or renovations to the building will be subject to review by the DC Historic Preservation Review Board (DHPRB) and must be sensitive to the historic character and significance of the original structure. The building cannot be demolished;

• According to a Hazardous Materials Survey prepared by GDG dated December 20, 2013, asbestos and lead paint were identified in several areas of the building.

© 2014 CBRE, Inc.

Executive Summary

viii

EXTRAORDINARY ASSUMPTIONS

An extraordinary assumption is defined as “an assumption directly related to a specific

assignment, as of the effective date of the assignment results, which if found to be false, could

alter the appraiser’s opinions or conclusions.” 1

• It is an extraordinary assumption of the appraisal report that a lift system a parking lift system or parking reduction/elimination from the DC Board of Zoning Adjustment (BZA) could be developed or acquired to permit development of the excess density.

• The building and major interior public spaces were designated a Historic Landmark in 2007 and placed on the historic register. The building may be renovated subject to review by the DC Historic Preservation Review Board (HPRB), but cannot be demolished. It is an extraordinary assumption of the appraisal report that the approval to renovate the existing improvements can be approved. The use of the extraordinary assumptions may have affected the assignment results.

HYPOTHETICAL CONDITIONS

A hypothetical condition is defined as “a condition, directly related to a specific assignment,

which is contrary to what is known by the appraiser to exist on the effective date of the

assignment results, but is used for the purposes of analysis.” 2

• None noted

1 The Appraisal Foundation, USPAP, 2014-2015 ed., U-3.

2 The Appraisal Foundation, USPAP, 2014-2015 ed., U-3.

© 2014 CBRE, Inc.

Table of Contents

ix

Table of Contents

Certification ......................................................................................................................... i

Subject Photographs ............................................................................................................ ii

Executive Summary ............................................................................................................. vi

Table of Contents ................................................................................................................ ix

Introduction ........................................................................................................................ 1

Area Analysis ...................................................................................................................... 4

Neighborhood Analysis ..................................................................................................... 11

Site Analysis ...................................................................................................................... 17

Existing Improvements Analysis ......................................................................................... 27

Zoning .............................................................................................................................. 34

Tax and Assessment Data .................................................................................................. 38

Multi-Family Market Analysis ............................................................................................. 40

Office Market Analysis ....................................................................................................... 56

Highest and Best Use ........................................................................................................ 73

Appraisal Methodology ..................................................................................................... 77

Land Value ........................................................................................................................ 78

Excess Density Value ......................................................................................................... 83

Cost Approach .................................................................................................................. 84

Sales Comparison Approach ............................................................................................. 88

Income Capitalization Approach ........................................................................................ 95

Reconciliation of Value .................................................................................................... 113

Assumptions and Limiting Conditions .............................................................................. 114

ADDENDA A Land Sale Data Sheets B Improved Sale Data Sheets C Rent Comparable Data Sheets D Pre-Design Building Evaluation E Legal Description F Qualifications

© 2014 CBRE, Inc.

Introduction

1

Introduction

OWNERSHIP AND PROPERTY HISTORY

Title to the property is currently vested in the name of the District of Columbia. The building is

reportedly operated by the District of Columbia Public Library. Tax records did not show

information regarding any transfers of the subject property. To the best of our knowledge, there

has been no ownership transfer of the property during the previous three years and the property

is neither currently actively marketing for sale nor under contract for purchase.

INTENDED USE OF REPORT

This appraisal is to be used for purposes of Lynch Development Advisors, LLC providing real

estate development consulting services to the District of Columbia Public Library as an instrument

of the District of Columbia Government (“DCPL”), including, providing a copy of the work

product to DCPL and other instrumentalities and bodies of the District of Columbia as required by

DCPL, and no other use is permitted.

INTENDED USER OF REPORT

This appraisal is to be used by Lynch Development Advisors, LLC and District of Columbia Public

Library (“DCPL”) as an instrument of the District of Columbia Government for its use, including

providing copies of such Appraisals to other instrumentalities and bodies of the District of

Columbia Government as required by DCPL. There are no other intended users.

Intended Users - the intended user is the person (or entity) who the appraiser intends will use the results of the appraisal. The client may provide the appraiser with information about other potential users of the appraisal, but the appraiser ultimately determines who the appropriate users are given the appraisal problem to be solved. Identifying the intended users is necessary so that the appraiser can report the opinions and conclusions developed in the appraisal in a manner that is clear and understandable to the intended users. Parties who receive or might receive a copy of the appraisal are not necessarily intended users. The appraiser’s responsibility is to the intended users identified in the report, not to all readers of the appraisal report. 3

PURPOSE OF THE APPRAISAL

The purpose of this appraisal is to estimate the market value of the subject property.

DEFINITION OF VALUE

The current economic definition of market value agreed upon by agencies that regulate federal

financial institutions in the U.S. (and used herein) is as follows:

3 Appraisal Institute, The Appraisal of Real Estate, 14th ed. (Chicago: Appraisal Institute, 2013), 50.

© 2014 CBRE, Inc.

Introduction

2

The most probable price which a property should bring in a competitive and open market under

all conditions requisite to a fair sale, the buyer and seller each acting prudently and

knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this

definition is the consummation of a sale as of a specified date and the passing of title from seller

to buyer under conditions whereby:

1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own

best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements

comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special

or creative financing or sales concessions granted by anyone associated with the sale. 4

INTEREST APPRAISED

The value estimated represents the fee simple estate and defined as follows:

Fee Simple Estate - Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power and escheat. 5

Leased Fee Interest - A freehold (ownership interest) where the possessory interest has been granted to another party by creation of a contractual landlord-tenant relationship (i.e., a lease). 6

Leasehold Interest - The tenant’s possessory interest created by a lease. 7

SCOPE OF WORK

This Appraisal Report is intended to comply with the reporting requirements set forth under

Standards Rule 2 of USPAP. The scope of the assignment relates to the extent and manner in

which research is conducted, data is gathered and analysis is applied. CBRE, Inc. completed the

following steps for this assignment:

Extent to Which the Property is Identified

The property is identified through the following sources:

• postal address • assessor’s records

4 Interagency Appraisal and Evaluation Guidelines; December 10, 2010, Federal Register, Volume 75 Number 237,

Page 77472.

5 Dictionary of Real Estate Appraisal, 78.



© 2014 CBRE, Inc.

Introduction

3

Extent to Which the Property is Inspected

CBRE inspected both the interior and exterior of the subject, as well as its surrounding environs on

the effective date of appraisal. The interior inspection was limited to a representative sample of

the library spaces.

Type and Extent of the Data Researched

CBRE reviewed the following:

• applicable tax data • zoning requirements • flood zone status • demographics • income and expense data • comparable data

Type and Extent of Analysis Applied

CBRE, Inc. analyzed the data gathered through the use of appropriate and accepted appraisal

methodology to arrive at a probable value indication via each applicable approach to value. The

steps required to complete each approach are discussed in the methodology section.

Data Resources Utilized in the Analysis

DATA SOURCES

Item: Source(s):

Site DataSize Tax records

Improved DataBuilding Area BOMA Calculations prepared by Martinez + Johnson Architecture

(dated 3/18/14)Area Breakdown/Use BOMA Calculations & property inspectionNo. Bldgs. Property InspectionParking Spaces Property representativeYear Built/Developed Property representative

Economic DataDeferred Maintenance: n/aBuilding Costs: Property representativeIncome Data: n/aExpense Data: n/a

Compiled by CBRE

© 2014 CBRE, Inc.

Area Analysis

4

Area Analysis

REGIONAL INFLUENCES

This section of the analysis is designed to isolate and examine the discernible economic trends in

the metropolitan Washington area. The discussion below is broken down between the property's

regional and neighborhood influences followed by a market analysis. Within the metropolitan

Washington area, the subject property is situated in the District of Columbia.

The Washington MSA currently includes:

• The District of Columbia, • The Suburban Maryland counties of Calvert, Charles, Frederick, Montgomery and Prince

George's; • The Northern Virginia counties and jurisdictions of Alexandria, Arlington, Clarke, Fairfax,

Fairfax City, Falls Church, Fauquier, Fredericksburg City, Loudoun, Manassas City, Manassas Park City, Prince William, Spotsylvania, Stafford, and Warren, and

• The West Virginia county of Jefferson.

Population

The U.S. economy was in a recession from December 2007 until June 2009 according to the

National Bureau of Economic Research. During the recession, over 8.4 million jobs were lost,

several major financial institutions collapsed, companies across multiple industries required

federal bail-out money, the debt markets seized, and real estate values fell dramatically. Despite

© 2014 CBRE, Inc.

Area Analysis

5

progress in the economy, the unemployment rate remains approximately 170 basis points above

the Year End 2007 level of 5.0%.

Due to the presence of the Federal Government, the Washington, DC area generally outperforms

the national economy. As of February 2014, the national unemployment rate was 6.7%, while the

DC Metro unemployment rate was 5.1%. While job growth has been positive, the region is poised

for slower growth than prior cycles have indicated during expansion phases due continued

federal austerity measures.

Housing Prices

Washington, DC metro area average sold housing prices increased 6.28% from First Quarter

2013 to First Quarter 2014 according to information from a local market data provider. Sales

volume was relatively flat following several quarters of increases, while the average days-on-

market continued its downward trend and declined by 10% from 59 days to 53 days over the

same time period.

Record-low mortgage interest rates increased approximately 50 basis points in 2013 following

June comments by the Federal Reserve regarding the central bank's plans to gradually scale back

its stimulus measures in light of increased confidence in economic growth. However, rates are

still near historic lows and buyers may outnumber sellers to take advantage of historically low

rates. Overall, the metro area is expected to see price growth in the housing market in 2014,

albeit at a slower pace than 2013.

Employment

The dominant employment sectors in the Washington MSA are government and services, which

represent 78% of the region’s employment. The region has a limited manufacturing base of only

2%. Unlike other metropolitan areas, the government traditionally has been a large employer

with 23% of jobs provided by the Federal, state or local governments. Furthermore, many

thousands of private sector jobs are either affiliated with, or dependent upon, the government.

This includes government contractors to various federal agencies, law firms and lobbyists. The

following chart shows major employers in the Washington MSA.

© 2014 CBRE, Inc.

Area Analysis

6

EmployerMetro Area

Employees (2012)

District of Columbia Government 33,111

Fairfax County Public Schools 22,780

Montgomery County Public Schools 20,750

Prince George's County Public Schools 16,801

Inova Health System 16,000

Science Applications International Corp. 15,441

Northrop Grumman Corp. 15,053

MedStar Health 14,158

Booz Allen Hamilton Inc. 14,000

Lockheed Martin 12,000

Marriott International 13,727

University of Maryland, College Park 13,451

Verizon Communications Inc. 13,100

Giant Food LLC 12,110

Fairfax County Government 12,070

Washington Metropolitan Area Transit Authority 11,319

Montgomery County Government 9,036

General Dynamics Corp. 8,200

Safeway Inc. 8,000

Deloitte LLP 6,781

*Non-federal private and public sectorSource: WBJ Book of Lists 2013

MAJOR EMPLOYERS WASHINGTON, DC METRO AREA *

The following chart summarizes historical employment statistics.

% Change % Change Annual Change

INDUSTRY 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2012-2013 2004-2013 2004-2013

Construction & Mining 177.3 186.6 191.5 184.9 172.4 148.6 139.9 141.5 143.2 146.0 1.2% -17.7% -2.1%

Manufacturing 66.1 65.5 63.6 62.3 60.9 55.4 52.5 50.3 48.7 47.9 -3.2% -27.5% -3.5%

Trade, Transportation, Utilities 399.6 406.5 404.7 404.7 397.9 377.6 378.2 378.8 387.4 389.6 2.3% -2.5% -0.3%

Information 106.0 99.8 96.9 93.9 91.0 83.0 78.7 80.5 76.9 76.3 -4.5% -28.0% -3.6%

Financial Activities 157.4 160.4 161.6 159.4 154.3 148.1 146.7 145.7 148.1 151.1 1.6% -4.0% -0.5%

Prof'l & Business Services 619.4 646.3 664.6 675.1 681.8 674.1 681.7 688.7 702.3 706.8 2.0% 14.1% 1.5%

Educational & Health Services 302.8 309.1 317.5 328.6 338.6 349.3 357.8 368.7 378.1 393.6 2.5% 30.0% 3.0%

Leisure & Hospitality 237.8 245.3 249.4 254.3 261.8 258.1 259.5 267.6 279.7 291.4 4.5% 22.5% 2.3%

Other Services 165.5 165.9 176.7 180.6 184.7 183.7 181.3 182.6 186.8 189.3 2.3% 14.4% 1.5%

Government 623.1 632.1 640.5 646.6 659.8 674.9 687.7 691.2 688.7 687.1 -0.4% 10.3% 1.1%

TOTALS 2,855.0 2,917.5 2,967.0 2,990.4 3,003.2 2,952.8 2,964.0 2,995.6 3,039.9 3,079.1 1.3% 7.8% 0.8%

Annual Job Growth 70.3 62.5 49.5 23.4 12.8 -50.4 11.2 31.6 44.3 39.2

% Annual Change 2.5% 2.2% 1.7% 0.8% 0.4% -1.7% 0.4% 1.1% 1.5% 1.3%

Office Employment 856.7 875.4 890.3 895.5 897.6 880.4 889.7 905.2 908.8 911.3 0.3% 9.1% 1.1%

Office Employment as % of Total 30.0% 30.0% 30.0% 29.9% 29.9% 29.8% 30.0% 30.2% 29.9% 29.6%

*Reflects changes from February 2012 to February 2013

** Not seasonally adjusted.

Source: U.S. Bureau of Labor Statistics/Office Employment as indicated by CBRE Economic Advisors, Compiled by CBRE 4/2014

NON-AGRICULTURAL AVG ANNUAL EMPLOYMENT BY MAJOR INDUSTRY DIVISION**

WASHINGTON, D.C. MSA (000s)

© 2014 CBRE, Inc.

Area Analysis

7

According to March 2014 Bureau of Labor Statistics data, the Washington, DC MSA increased

employment by approximately 5,500 jobs from March 2013 to March 2014. The individual local

jurisdictions in the Washington MSA reported an increase in employment by approximately

11,900 jobs, an increase of 0.4%, as summarized in the following chart.

NON-AGRICULTURAL EMPLOYMENT BY LOCAL JURISDICTION

March 2013 to March 2014 Comparison - Not Seasonally Adjusted

WASHINGTON, DC, SUBURBAN MD, NORTHERN VA

Change % %

March 2013 (000's) SHARE March 2014 (000's) (000's) SHARE CHANGE

Washington DC MSA 3,059.2 3,064.7 5.5 0.2%

District of Columbia 741.5 24.4% 745.2 3.7 24.4% 0.5%

Suburban MD 945.1 31.0% 952.5 7.4 31.2% 0.8%

No. VA 1,357.5 44.6% 1,358.3 0.8 44.4% 0.1%

TOTALS 3,044.1 100% 3,056.0 11.9 100% 0.4%

Source: Bureau of Labor Statistics, Excludes Jefferson County, WVCompiled by: CBRE as of 4/2014

As of April 2014, Dr. Stephen Fuller, Director of the George Mason University Center for

Regional Analysis (GMU-CRA), forecasts regional employment as follows.

EMPLOYMENT FORECAST

WASHINGTON, DC MSA

Indicator 2014 2015 2016 2017 2018

Payroll Job Growth (000's) * 60.2 66.1 66.4 56.2 47.5

* Excludes self-employed, contract, and part time workers

and employees for business started up in the given year

Source: George Mason University Center for Regional Analysis, 4/2014

Unemployment Rates

The following chart summarizes unemployment rate statistics.

© 2014 CBRE, Inc.

Area Analysis

8

Annual PMSA Washington, DC U.S.Feb-2014 (P) 5.1% 7.4% 6.7%Jan-14 5.0% 7.4% 6.6%2013 5.4% 7.6% 6.7%2012 5.7% 8.7% 7.9%2011 6.1% 9.7% 8.5%2010 6.5% 10.1% 9.4%2009 6.2% 10.4% 9.9%2008 3.7% 8.0% 7.3%2007 2.9% 5.6% 5.0%2006 3.1% 5.5% 4.4%2005 3.4% 5.9% 4.9%2004 3.7% 7.2% 5.4%2003 3.9% 7.0% 5.7%2002 4.0% 6.8% 6.0%2001 3.4% 6.6% 5.7%2000 2.7% 5.8% 3.9%1999 2.6% 5.9% 4.0%

Source: Bureau of Labor Statistics, February 2014 (preliminary data)Compiled by: CBRE 4/22/14

UNEMPLOYMENT RATES

Income Levels and Consumer Expenditure

Average household income in the Washington, DC metro area exceeds most other metropolitan

areas due to a highly educated workforce and the high level of professional jobs in the region.

Consumer Expenditure per household is also high.

Area Average MedianAtlanta, GA $71,101 $50,852 $49,456 $48,400 -4.82% $51,082 3.29%

Baltimore, MD $90,071 $66,223 $55,253 $72,252 9.10% $60,269 9.08%

Boston, MA $96,241 $68,807 $59,532 $72,738 5.71% $63,609 6.85%

Chicago, IL $79,260 $56,806 $55,242 $56,856 0.09% $54,722 -0.94%

New York, NY $94,345 $62,878 $55,781 $65,915 4.83% $59,544 6.75%

Philadelphia, PA $82,582 $59,076 $54,356 $62,087 5.10% $58,250 7.16%

Washington, DC $119,125 $86,767 $63,092 $97,085 11.89% $69,077 9.49%

'Source: Claritas, 2013

Household IncomeConsumer

Expenditures (Annual Avg. Per HH)

Consumer Expenditures (Annual

Avg. Per HH)**

Median Household

Income*

Percentage Increase

from 2013

Percentage Increase

from 2013

2018 Projected2013 Estimate

MSA CONSUMER EXPENDITURE & INCOME STATISTICS

Washington Area Business Cycle Indicators

The George Mason University Center for Regional Analysis (GW-CRA) publishes two monthly

indices tracking the current and near-term performance of the Greater Washington area

economy. The Coincident Index is a monthly indicator of the economy’s current performance

while the Leading Index is an indicator of the region’s economic performance six months hence.

The following charts summarize the Washington Area Coincident and Leading Index, as reported

by the GW-CRA as of February 2014.

© 2014 CBRE, Inc.

Area Analysis

9

While the Coincident Index has declined year-over-year, the Leading Index has increased,

indicating some near-term optimism for the region's future economic performance.

CONCLUSION

In 2012 and 2013, the Washington, DC metro area’s economy showed signs of slow expansion

following recovery from the most recent recession and federal budget cuts. While the effects of

across-the-board Federal budget cuts mandated by the sequestration process were somewhat

muted and mass layoffs have so far been avoided, job growth was sluggish in 2013. Recent job-

growth has stemmed from growth in the private sector, rather than the Federal Government.

Regardless, employment growth has been weaker than previous expansion cycles and is expected

to remain limited in early 2014 with more robust growth later in the year. Locally, indices

tracking the current performance of the Washington DC metro area’s economy have indicated

some near-term optimism for the region's future economic performance.

© 2014 CBRE, Inc.

Area Analysis

10

While the Washington, DC metro area has been affected by the recent economic recession, its

unemployment rate is among the lowest among the nation’s largest metropolitan areas. The

area generally outperforms the national economy due to Federal procurement driving the local

economy; however, continued Federal budget cuts represent risk to the rate of recovery. Over

the long term, the area is expected to reduce its reliance on the federal government and job

creation is expected to continue to positively affect real estate values, although at a slower pace

than the robust markets of the late 1990s and mid-2000s.

© 2014 CBRE, Inc.

Neighborhood Analysis

11


LOCATION

The subject is located within the East End office submarket in the District of Columbia. The

subject is bounded by 9th Street, NW, G Street, NW and G Place, NW.

The subject is situated is one block west of the Verizon Center and across 9th Street, NW from an

entrance to the Gallery Place/Chinatown Metrorail station (Orange, Blue and Red Lines) at 9th

and G Street, NW.

BOUNDARIES

The neighborhood boundaries are detailed as follows:

North: Massachusetts Avenue, NW South: Pennsylvania Avenue, NW East: 5th Street, NW West: 15th Street, NW

LAND USE

The East End is generally recognized as the area east of 15th Street and North of Pennsylvania

Avenue, NW, west of 5th Street, NW and south of Massachusetts Avenue, NW. This area has

experienced tremendous growth as a result of a construction boom, which began in the late

© 2014 CBRE, Inc.


12

1980s. Neighborhood growth is primarily attributed to land assemblages that could

accommodate large office buildings, the lack of large space available in the CBD and the

development of the Metro Rail subway system; although the area surrounding the subject

property is primarily residential use with office buildings located further west and south near the

East End’s core.

The East End has become the focal point of new development in recent years. Catalysts for

revitalization were the construction of the Verizon Center (formerly known as the MCI Center),

followed by the development of the new Washington Convention Center. The “new” Washington

Convention Center, now known as the Walter E. Washington Convention Center, was completed

in March 2003 and is located just north of Mount Vernon Square between 7th and 9th Streets,

NW. The 2.3 million square foot convention center contains approximately 703,000 square feet

of exhibit space and 130,000 square feet of meeting space. Additionally, the Convention Center

provides 44,000 square feet of retail space.

The major new development in the subject’s neighborhood is CityCenterDC, a three-phased

mixed-use development on the site of the former DC convention center. The first phase was

recently completed and includes 185,000 square-feet of retail, 520,000 square-feet of office,

458 rental apartment units, 216 residential condominiums, and a plaza and park area. The

second and third phases will include hotel, retail and office uses.

The District and Marriott International completed the 1,175-room Marriott Washington Marquis

convention center headquarters hotel at 9th Street and Massachusetts Avenue, NW, just west of

the Washington Convention Center in May 2014. The $537 million hotel was developed by

Quadrangle Development and Capstone Development on land owned by the District and

Convention Center Authority. The new hotel includees 100,000 square feet of additional

meeting/ballroom space, 25,000 square feet of retail and 385 parking spaces. Construction

commenced in November 2010 and was completed in May 2014.

The presence of the Verizon Center has spurred additional restaurant and entertainment

development in the immediate area. In addition, the completion of the new convention center will

likely generate further residential development of existing infill locations in and around the area

north of Mount Vernon Square. The East End area has already experienced significant recent

residential development, with luxury apartments developed by Post Properties, JBG, and Avalon

Bay. Residential condominium projects have also been built by CarrAmerica, PN Hoffman, and

JPI.

The Newseum, at 555 Pennsylvania Avenue, NW, was completed in 2008. The project consists

of a six-level, 250,000 square foot interactive museum, office space, a 9,000 square foot

conference center, retail space and approximately 135 apartments.

© 2014 CBRE, Inc.


13

A mixed-use project, Gallery Place, located at 616 H Street NW, delivered in late 2004. Gallery

Place consists of approximately 220,000 square feet of office space, a 260,000 square foot retail

component, and 192 luxury residential condominiums.

While the predominant land use in the East End is comprised of class A and B office and hotel

properties, the Mount Vernon area, located north of the subject, is primarily storefront retail,

older low-density residential development and newer multi-family projects. Retail development is

concentrated on the ground level of multi-family and office buildings with some storefront retail

properties located along both primary and secondary roadways. New residential developments

in the Mount Vernon area include the CityVista, 440 K Street, 450 K Street, Yale Steam Laundry,

and Meridian at Mount Vernon projects.

Another major proposed project in the neighborhood is Louis Dreyfus Property Group’s Project I-

395 Air Rights Development, a 2.0 million square-foot multi-phase master-planned development

bound by Massachusetts Avenue to the north, E Street to the south, Third Street to the west and

Second Street to the east.

The nearest major grocery store to the subject is the Safeway grocery store at CityVista, located

approximately one-half mile northeast of the subject. A Whole Foods, located at 14th and P

Streets, NW is less than one mile northwest of the subject. A Harris Teeter grocery store is located

in NoMa, approximately one mile northeast of the subject. Many residents choose grocery

delivery through Peapod, an online grocery delivery service.

Growth Patterns

Major developments within recent years, namely the Verizon Center and the convention center,

have driven interest in speculative investment in the East End area. This has primarily transpired

in both the office and retail markets along with substantial development of multi-family

residential. The demand for office space in the District, along with low vacancies in new, high-

quality buildings, resulted in a level of proposed and under-construction office buildings that has

not been seen since the late 1980s. This new construction has put some upward pressure on

vacancy rates.

Currently within the East End, there are four concentrated areas of development activity: Franklin

Square, lower Pennsylvania Avenue, Metro Center, and the Ninth Street corridor. The area

around Franklin Square has been redeveloped with Class A and trophy quality office buildings.

The lower Pennsylvania Avenue section also includes trophy quality office buildings as well as

residential and retail development moving northward along 7th Street towards the Verizon and

Convention Center. As the availability of suitable development sites has diminished, office

development has expanded along the 9th Street corridor.

The Association of American Medical Colleges recently purchased a 31,629 square-foot (0.73-

acre) site from Douglas Development at the corner of New York Avenue and K Streets, NW

across from Mount Vernon Square. The organization will reportedly develop the site for a future

© 2014 CBRE, Inc.


14

285,000 square-foot headquarters. The site was occupied by several storefront retail buildings;

however, the structures were demolished and the office building is currently under construction.

Currently, the subject’s neighborhood is in the revitalization stage of its life cycle. Several office

buildings are functionally obsolete and have been acquired for renovation or readapted to hotel

use. Significant residential, retail and entertainment development has also occurred in recent

years and additional new projects are proposed or under construction in the area.

ACCESS

The subject is situated is one block west of the Verizon Center and across 9th Street, NW from an

entrance to the Gallery Place/Chinatown Metrorail station (Orange, Blue and Red Lines) at 9th

and G Street, NW.

K Street traveling east and west, Eye Street and L Streets traveling west and H Street traveling east

provide primary access. Eye Street and H Street were formerly two-way roads, but were changed

after the closing of Pennsylvania Avenue near the White House in 1995. Fourteenth and

Sixteenth Streets are the primary two-way traffic arteries extending North and South. K Street

provides access to various bridges and parkways that lead to Northern Virginia and suburban

neighborhoods in Maryland.

Access is considered good for downtown. However, with the closing of Pennsylvania Avenue near

the White House for security reasons in May of 1995, most local streets have become more

congested, particularly during rush hour.

DEMOGRAPHICS

Selected neighborhood demographics in a quarter-mile, half-mile, and one-mile radius from the

subject are shown in the following table:

© 2014 CBRE, Inc.


15

SELECTED NEIGHBORHOOD DEMOGRAPHICS

901 G Street, NWWashington, DC

Population

2019 Population 1,630 15,533 46,704

2014 Population 1,463 13,437 40,861

2010 Population 1,323 11,580 35,938

2000 Population 989 7,327 28,136

Annual Growth 2014 - 2019 2.19% 2.94% 2.71%

Annual Growth 2010 - 2014 2.55% 3.79% 3.26%

Annual Growth 2000 - 2010 2.95% 4.68% 2.48%

Households

2019 Households 1,061 9,533 26,447

2014 Households 963 8,237 23,106

2010 Households 886 7,075 20,260

2000 Households 623 3,800 13,654

Annual Growth 2014 - 2019 1.96% 2.97% 2.74%

Annual Growth 2010 - 2014 2.11% 3.87% 3.34%

Annual Growth 2000 - 2010 3.58% 6.41% 4.03%

Income

2014 Median HH Inc $123,051 $88,842 $82,076

2014 Estimated Average Household Income $151,929 $120,651 $117,007

2014 Estimated Per Capita Income $99,975 $73,963 $66,165

Age 25+ College Graduates - 2010 1,105 7,399 21,574

Age 25+ Percent College Graduates - 2014 82.1% 67.3% 64.8%

Source: Nielsen/Claritas

0.25 Mile Radius

0.5 Mile Radius

1 Mile Radius

CONCLUSION

The subject property is located in a good quality downtown office, entertainment and arts district

that is currently undergoing revitalization. The area immediately surrounding the subject includes

predominantly office uses with most new multi-family development, apart from the recently-

constructed CityCenterDC Apartments, concentrated further north near Mount Vernon Triangle.

We do not foresee a negative change in the character of neighborhood in the near future.

© 2014 CBRE, Inc.

Site Analysis

16

TAX/ZONING MAP

© 2014 CBRE, Inc.

Site Analysis

17

Site Analysis

The following chart summarizes the salient characteristics of the subject site.

SITE SUMMARY

Physical DescriptionGross Site Area 4.75 Acres 206,804 Sq. Ft.

Net Site Area 1.74 Acres 75,762 Sq. Ft.

Primary Road Frontage G Street, NW

Secondary Road Frontage 9th Street, NW

Additional Road Frontage G Place, NW

Excess Land Area 3.01 Acres 131,042 Sq. Ft.

Surplus Land Area None n/a

Shape

Topography

Zoning DistrictCensus Tract No. 11001-0058.00

Flood Map Panel No. & Date 1100010019C 27-Sep-10

Flood Zone Zone X

Adjacent Land Uses

Earthquake Zone

Comparative AnalysisVisibility

Functional Utility

Traffic Volume

Adequacy of Utilities

Landscaping

Drainage

Utilities AdequacyWater Yes

Sewer Yes

Natural Gas Yes

Electricity Yes

Telephone Yes

Mass Transit Yes

Other Yes No UnknownDetrimental Easements x

Encroachments x

Deed Restrictions x

Reciprocal Parking Rights x

Source: Various sources compiled by CBRE

RatingGood

Typical/Above Average

Average

Rectangular

Level

DD/C-4, Downtown Development - Central Business District

N/A

Commercial uses

WMATA

DC Water

Washington Gas

PEPCO

Verizon

Assumed adequate

Average

ProviderDC Water

Assumed adequate

INGRESS/EGRESS

Ingress/egress is available to the parking garage via an entrance along 9th Street, NW, which is a

one-way road travelling south. The main entrance to the library is located along G Street, NW.

© 2014 CBRE, Inc.

Site Analysis

18

ENVIRONMENTAL ISSUES

CBRE, Inc. is not qualified to detect the existence of potentially hazardous material or

underground storage tanks which may be present on or near the site. The existence of

hazardous materials or underground storage tanks may affect the value of the property. For this

appraisal, CBRE, Inc. has specifically assumed that the property is not affected by any hazardous

materials that may be present on or near the property.

ADJACENT PROPERTIES

The adjacent land uses are summarized as follows:

North: G Place, NW/Office development South: G Street, NW/Office development East: 9th Street, NW/Office development West: Office development

The northern adjacent land uses include The Victor Building, a 346,593 square-foot, nine-story

office building constructed in 2000.

The southern adjacent land uses include several office buildings including 900 G Street, NW, an

112,491 square-foot, nine-story office building with ground level retail space currently under

construction. The building was the site of a former YMCA building. The developer broke ground

in late 2012 and the building is scheduled for delivery in First Quarter 2015.

The eastern adjacent land uses include Edison Place, a 383,810 square-foot, ten-story office

building constructed in 2000. The building’s office space is occupied by PEPCO.

The western adjacent land use is 10th and G, a 169,271 square-foot, ten-story office building

constructed in 2011. The developer, Skanska, purchased the air rights to the office density from

First Congregational United Church of Christ in October 2009. The church now occupies a

portion of the ground level and second level space in the office building. The building was

completed in 2011 and sold in May 2012 to Jamestown for $140 million.

The surrounding land uses are predominantly office uses with ground level retail space. There

are few multi-family uses in the subject’s location.

CONCLUSION

The site is afforded good access and visibility from roadway frontage. The size of the site is

typical to somewhat larger for the area and use, and there are no known detrimental uses in the

immediate vicinity. Overall, there are no known factors which are considered to prevent the site

from development to its highest and best use, as if vacant, or adverse to the existing use of the

site.

© 2014 CBRE, Inc.

Site Analysis

19

FLOOD PLAIN MAP

© 2014 CBRE, Inc.

Improvements Analysis

20

IMPROVEMENTS LAYOUT

© 2014 CBRE, Inc.


21

IMPROVEMENTS LAYOUT

© 2014 CBRE, Inc.


22

IMPROVEMENTS LAYOUT – EXISTING IMPROVEMENTS

© 2014 CBRE, Inc.


23


© 2014 CBRE, Inc.


24


© 2014 CBRE, Inc.


25


© 2014 CBRE, Inc.


26


© 2014 CBRE, Inc.


27

Existing Improvements Analysis

The following chart shows a summary of the existing improvements.

IMPROVEMENTS SUMMARY

2.5

1972 Renovated:

241,467 SF

Component GBA (SF) NRA (SF)

B Level Parking 70,215 -

A Level Office 68,204 36,985

1st Floor 44,904 22,429

2nd Floor Office 65,521 52,124

3rd Floor Office 65,521 53,675

4th Floor Office 65,521 53,248

Total 379,886 218,461

Source: Various sources compiled by CBRE

Year Built

Property Type

Gross Building Area (Excluding Parking) 309,671 SF

Net Rentable Area

Number of Stories (Below Grade)

Parking Area 70,215 SF

Gross Building Area (Above Grade)

Floor Area Ratio (FAR)

1

379,886 SF

218,461 SF

4

Number of Buildings

Number of Stories (Above Grade)

Gross Building Area (Including Parking)

0.2 : 1

5.01

125.4%

0.73Parking Ratio (per 1,000 SF NRA )

160Parking Spaces (Reconfigured):

Office(Currently operated as a library)

Parking Spaces (Current): 100

Site Coverage

Land-to-Building Ratio

The property is currently operated as a library; however, considering the subject’s location and

physical characteristics, a library is not considered the highest and best use. The most functional

use for the subject would be for office use with ground level retail space. In the analysis to follow

later in the report, we have analyzed the subject as an office building.

YEAR BUILT

The subject was built in 1972.

CONSTRUCTION CLASS

Building construction class is as follows:

A - Fireproofed structural steel frames with reinforced concrete or masonry floors and roofs

© 2014 CBRE, Inc.


28

The construction components are assumed to be in working condition and adequate for the

building.

The overall quality of the facility is considered to be average for the neighborhood and age.

However, CBRE, Inc. is not qualified to determine structural integrity and it is recommended that

the client/reader retain the services of a qualified, independent engineer or contractor to

determine the structural integrity of the improvements prior to making a business decision.

FOUNDATION/FLOOR STRUCTURE

The foundation is a six-foot thick conventionally reinforced concrete mat and is assumed to be of

adequate load-bearing capacity to support the improvements. The floor structure is summarized

as follows:

Ground Floor: Concrete slab on compacted fill

Other Floors: Metal deck with light-weight concrete cover

EXTERIOR WALLS

The exterior curtain wall system consists of a combination of glass storefront window system on

the ground floor level and a steel-and-glass curtainwall system over the upper floors. Levels 2

through 4 consist of painted steel panels and painted steel cover plates. The first floor of the

building is set back from the upper levels by one column line on the east and west elevations and

two column lines on the south elevation. Most of the first floor exterior is a glass curtainwall

system.

ROOF COVER

The building has a flat roof consisting of a gravel surfaced built-up roof (BUR) membrane. The

roof was last replaced in 1991.

INTERIOR FINISHES - LIBRARY AREAS

The typical interior library finish of the property is summarized as follows:

Floor Coverings: Commercial grade short loop carpeting over concrete and

polished tile.

Walls: Textured and painted sheetrock.

Ceilings: Combination textured and painted sheetrock and

suspended acoustical tile.

© 2014 CBRE, Inc.


29

Lighting: Standard commercial fluorescent fixtures.

Summary: The interior library areas are functional for office use. The

spaces will likely require some significant tenant retrofit

prior to occupancy for office users.

INTERIOR FINISHES – COMMON AREAS

The interior common area finish of the property is summarized as follows:

Floor Coverings: Polished granite/terrazzo in the ground floor lobby and

commercial grade short loop carpeting over concrete in the

upper level corridors.

Walls: Textured and painted sheetrock.

Ceilings: Combination textured and painted sheetrock and

suspended acoustical tile.

Lighting: Standard commercial fluorescent and recessed

incandescent fixtures.

Summary: The interior common areas are in average to fair condition.

The subject’s common areas will likely require some

significant tenant retrofit prior to occupancy for office users.

ELEVATOR/STAIR SYSTEM

The building has 11 traction elevators. Two of the elevators are freight elevators, while the

remaining nine elevators are for passengers. The building has four interior stairwells providing

access to the upper levels and garage area.

HVAC

The building is cooled by one of two 650-ton refrigeration chillers. The chillers are redundant,

and the cooling tower for the chillers is located on the roof. There is a split system with reheat

and humidification for the backup HVAC system. Also, window A/C units are located on the

walls as a backup HVAC system. Self contained A/C units can also be found in the transformer

rooms. Condenser water is supplied to one blow-through cooling tower located on the main roof

level.

The original heating/cooling systems were designed as a 2-pipe system. This is still the current

system, which means there is no simultaneous heating and cooling.

© 2014 CBRE, Inc.


30

The HVAC system is assumed to be in good working order and adequate for the building.

ELECTRICAL

The electrical system is assumed to be in good working order and adequate for the building.

PLUMBING

The plumbing system is assumed to be in good working order and adequate for the building.

PUBLIC RESTROOMS

There are public restrooms on the 2nd, 3rd and 4th floors. They are regarded adequate for the

property and are assumed built to local code.

LIFE SAFETY AND FIRE PROTECTION

The sprinkler system is limited to the garage area, boiler room, trash room, and lobby. It is

assumed the improvements have adequate fire alarm systems, fire exits, fire extinguishers, fire

escapes and/or other fire protection measures to meet local fire marshal requirements. CBRE,

Inc. is not qualified to determine adequate levels of safety & fire protection, whereby it is

recommended that the client/reader review available permits, etc. prior to making a business

decision.

PARKING AND DRIVES

The building has one level of below-grade parking. There are currently approximately 100

spaces; however, a property representative noted that the parking area could be reconfigured to

be more efficient and allow for 160 parking spaces. The parking garage was in average

condition.

The zoning regulation requires (in excess of 2,000 square-feet) one parking space per 1,000

square-feet of gross floor area for community public libraries and one space per 1,800 square-

feet for general office uses. The number of parking spaces is legally non-conforming for the

existing use as a library, but is near the regulations for general office use.

Additionally, the subject’s existing improvements do not maximize the site’s allowable density

within its zoning classification and the building is reportedly designed to accommodate additional

floors. However, the subject has only one level of below-grade parking and requires

development of a parking lift system or parking reduction/elimination from the DC Board of

Zoning Adjustment (BZA) to permit development of the excess density. The parking lift system can

accommodate 475 cars at a cost of $7,250,000 according to an estimate provided in August

2012.

© 2014 CBRE, Inc.


31

FUNCTIONAL UTILITY

The overall layout of the property is considered functional in utility. The typical floor plate for the

2nd, 3rd and 4th floor office space is approximately 53,000 square-feet, which is above many

competitive office buildings in the District of Columbia. Additionally, the building’s design allows

for demolition of most of the interior walls, allowing for vast open areas for office use. The

design in considered a benefit to the subject as repositioned to an office building.

The east and west portions of the first floor library space have glass storefront windows, which are

well suited for ground level retail or restaurant space.

Overall, the building’s existing design is considered most functional for office and ground level

retail-related use.

ADA COMPLIANCE

The client/reader’s attention is directed to the specific limiting conditions regarding ADA

compliance.

FURNITURE, FIXTURES AND EQUIPMENT

Any personal property items contained in the property are not considered to contribute

significantly to the overall value of the real estate.

ENVIRONMENTAL ISSUES

According to a Hazardous Materials Survey prepared by GDG dated December 20, 2013,

asbestos and lead paint were identified in several areas of the building.

CBRE, Inc. is not qualified to detect the existence of any potentially hazardous materials such as

lead paint, asbestos, urea formaldehyde foam insulation, or other potentially hazardous

construction materials on or in the improvements. The existence of such substances may affect

the value of the property. For the purpose of this assignment, we have specifically assumed there

are no hazardous materials that would cause a loss in value to the subject.

DEFERRED MAINTENANCE

Based on our property inspection, discussions with a property representative, a Project Strategy

Report prepared by Freelon (dated December 29, 2010) and a Pre-Design Building Evaluation

prepared by GDG (dated December 20, 2013), there are several items in need of repair

including the building façade, water-related defects, and HVAC system replacement. The

executive summary for the recent Pre-Design Building Evaluation has been included in the

addenda.

The following chart shows the deferred maintenance items identified and their respective

estimated costs to cure, based upon all available information, as of the relevant dates.

© 2014 CBRE, Inc.


32

It

ANALYSIS OF DEFERRED MAINTENANCE

Category Cost PSF GBA

Base Building & Façade $56,000,000 $147.41

Parking Expansion/Reconfiguration $3,200,000 $8.42

Subtotal $59,200,000 $156

Plus: Developer Incentive/Profit @ 20% $11,840,000 $54

Total Deferred Maintenance: $71,040,000 $187

Source: Property representative (Building and parking costs)

Developer incentive represents the amount a developer expects to receive for the developer’s

contribution to a project and risk. In the case of the subject property, there is significant risk in

curing the deferred maintenance since the significant costs spent must provide adequate return to

compensate for the lease-up risk. Without the costs spent on the deferred maintenance, the

stabilized occupancy cannot be realized.

The total deferred maintenance estimate (including profit to reflect the developer’s incentive to

cure the deferred maintenance) will be deducted from each approach in order to conclude the

“as is” value for the subject.

As a cross-check to the repair costs we have also researched buildings which have been recently

gut-renovated in the District of Columbia. The following chart shows the comparable renovation

costs.

Property GBA NRA Renovation CostCost PSF

GBA Renovation Scope

CBD Office 216,000 205,886 $31,000,000 $144

Includes central chiller plant renovation, chiller replacement, elevator and stair extension to the penthouse, roof terrace, new roof, glass façade replacement, lobby renovation, lower

level renovation, new fitness center, and 9th & 10th Floor elevator lobby renovations.

East End Office 89,571 77,457 $16,500,000 $184Full gut renovation including new curtain wall,

HVAC, etc.Compiled by: CBRE

GUT RENOVATION COST COMPARABLE DATA

As shown above, the per square-foot costs to renovate were relatively consistent with the subject’s

costs. In addition to the base building cost above, we have also included a significant tenant

improvement allowance cost for the subject’s office and retail spaces.

ECONOMIC AGE AND LIFE

CBRE, Inc.’s estimate of the subject improvements effective age and remaining economic life is

depicted in the following chart:

© 2014 CBRE, Inc.


33


Actual Age 42 Years

Effective Age 30 Years

MVS Expected Life 55 Years

Remaining Economic Life 25 Years

Accrued Physical Incurable Depreciation 54.5%

Compiled by CBRE

Considering the significant investment to cure the deferred maintenance we have used an

effective age lower than the actual age for the subject.

The remaining economic life is based upon our on-site observations and a comparative analysis

of typical life expectancies as published by Marshall and Swift, LLC, in the Marshall Valuation

Service cost guide. While CBRE, Inc. did not observe anything to suggest a different economic

life, a capital improvement program could extend the life expectancy.

CONCLUSION

The improvements are in average overall condition, but require significant costs to renovate the

building for office use and to cure the deferred maintenance. Overall, there are no known factors

that adversely impact the marketability of the improvements.

© 2014 CBRE, Inc.

Zoning

34

Zoning

The following chart summarizes the subject’s zoning requirements.

ZONING SUMMARYCurrent zoning DD / C-4, Downtown Development - Central

Business DistrictLegally conforming Yes

Uses permitted Bank or other financial institution, Office, Retail stores, Hotel or Inn, High density residential and mixed-use developments.

Zoning change Not likely

Category Zoning Requirement

F. A. R. For residential uses an FAR of 8.5 is permittedby right; and for other commercial uses an FARof 8.5 is permitted by right, increasing to 10.0on a street not less than 110 feet wide betweenbuilding lines.

Front setback None required

Rear setback 2.5 feet per foot of vertical distance from themean finished grade at the middle of thestructures highest point of the main roof, butnot less than 12 feet.

Side yard setbacks None required

Height limit

110 Feet for C-4 with max. of 130 feet underDowntown Development (DD) District

Parking For office uses one parking space for each1,800 SF of gross floor area over 2,000 SF

No requirement for buildings built on a lothaving an area of 10,000 SF or less

Source: D.C. Zoning Department

The subject is zoned C-4 within the Downtown Development District and Downtown Shopping

District Overlays. The subject is not located in a Transferrable Development Rights (TDR)

Receiving Zone.

Downtown Development Overlay

The Downtown Development Overlay District (DD) is mapped in combination with other zoning

districts and was created to help accomplish land use development policies relating to downtown

sectors. The general purposes include:

© 2014 CBRE, Inc.

Zoning

35

• To create a balanced mixture of uses by means of incentives and requirements for critically important land uses identified in the Comprehensive Plan, including retail, hotel, residential, entertainment, arts, and cultural uses;

• To guide and regulate office development, which is generally favored by market forces over the other desired uses, so as to further the land use objectives for retail, hotel, residential, entertainment, arts, and cultural uses;

• To protect historic buildings and places while permitting sensitive and compatible new development subject to the historic preservation review process of the Historic Landmark and Historic District Protection Act of 1978;

• To substantially achieve the specific land use and development policies for the following Downtown subareas: Retail Core, Gallery Place, Convention Center, Chinatown, Pennsylvania Avenue West, Pennsylvania Quarter, Mount Vernon Square, and Judiciary Square;

• To guide the design of buildings to be generally consistent with the urban design, street orientation and design, and historic preservation policies of the Downtown Plan Element of the Comprehensive Plan;

• To foster growth opportunities for and retention of small and minority businesses; • To provide adequate and visually acceptable short-term parking and consolidated

loading facilities having access primarily from streets other than F, G, and 7th Streets.

Downtown Shopping District Overlay

The principal policies and objectives for the Downtown Shopping (SHOP) District, or Retail Core,

derived from the Comprehensive Plan, are to:

• Create the most concentrated area of retail, service, arts, and arts-related uses in Downtown, in excess of one floor of these uses, with the greatest retail concentration oriented to F and G Streets, N.W.; and

• Strengthen the character and identity of the Downtown Shopping District by means of physical design standards that ensure the following:

• New buildings constructed to the property line and primarily oriented to the street rather than to internal spaces;

• Continuous retail, service, and entertainment uses on the ground level of buildings, with ample display windows and frequent store entrances to the outdoor pedestrian circulation system; and

• A pedestrian environment with ample, sidewalks interrupted by a minimum of vehicular driveways, especially along F and G Streets.

Historic Preservation

The building and major interior public spaces were designated a Historic Landmark in 2007 and

placed on the historic register. As such, any improvements or renovations to the building will be

subject to review by the DC Historic Preservation Review Board (DHPRB) and must be sensitive to

the historic character and significance of the original structure.

The subject cannot be demolished and any changes proposed to the building’s exterior, including

landscape, as well as changes to the public spaces of the first floor interior, including great hall,

entry vestibule and reading rooms at either end of the great hall, are required to undergo review

by District agencies. Additionally, as a District of Columbia construction project, changes must be

reviewed by the US Commission on Fine Arts.

© 2014 CBRE, Inc.

Zoning

36

Allowable Density and Additional Development Density

The subject can accommodate development to 8.5 FAR since neither G Street, NW nor 9th Street,

NW are more than 110 feet in width. According to a Preliminary Zoning Analysis in a

Development Study prepared by Studios Architecture (dated March 2013), the subject’s current

above-grade built area is approximately 239,000 square-feet, which is relatively consistent with

the above-grade area noted earlier in the report’s Improvements Analysis. Based on the zoning

classification, the maximum allowable density is 8.5 FAR, or 643,977 square-feet. As such, the

total additional density available to the subject property is 404,977 square-feet.

However, according to the Pre-Design Building Evaluation prepared by GDG (dated December

20, 2013), “the combined geotechnical and structural evaluation conclude that two additional

floors of apartments and/or offices may possibly be added without any modification of

foundations as long as the library’s fourth floor continues to be used for offices and that the final

loading does not exceed the initial design load.”

Additionally, as noted in the Improvements Analysis, the subject has only approximately 100

parking spaces, although, a property representative noted that the parking area could be

reconfigured to be more efficient and allow for 160 parking spaces. The zoning regulation

requires (in excess of 2,000 square-feet) one parking space per 1,000 square-feet of gross floor

area for community public libraries and one space per 1,800 square-feet for general office uses.

The number of parking spaces is legally non-conforming for the existing use as a library, but is

near the regulations for general office use.

While two additional levels of development is possible, the subject has only one level of below-

grade parking and requires development of a parking lift system or parking

reduction/elimination from the DC Board of Zoning Adjustment (BZA) to permit development of

the excess density. The parking lift system can accommodate 475 cars at a cost of $7,250,000

according to an estimate provided in August 2012.

Based on the information above, the subject can reasonably accommodate two additional floors

of development, or approximately 131,042 SF (65,521 SF x 2) based on the gross building area

of the upper floors noted in the Improvements Analysis. The library was reportedly seeking, for

evaluation purposes, designs for an 115,000 square-foot addition, which is relatively consistent

with the analysis above. In the analysis, we have used an excess density area of 115,000

square-feet. We have deducted the cost of the parking lift system from the value of the excess

density to reflect an As-Is value.

ANALYSIS AND CONCLUSION

The improvements represent a legally-nonconforming use due to parking and, if damaged, may

be restored without special permit application. Additional information may be obtained from the

appropriate governmental authority. For purposes of this appraisal, CBRE has assumed the

information obtained is correct.

© 2014 CBRE, Inc.

Zoning

37

ZONING MAP

© 2014 CBRE, Inc.

Tax and Assessment Data

38


The following summarizes the local assessor’s estimate of the subject’s market value, assessed

value, and taxes, and does not include any furniture, fixtures or equipment. The CBRE estimated

tax obligation is also shown.

AD VALOREM TAX INFORMATION

Assessor's Market Value Parcel DescriptionTY 2014

10/13 - 9/14

TY 2015 (Proposed)

10/14 - 9/15 Pro Forma

0375 0825 Library $119,592,030 $122,944,320

Subtotal $119,592,030 $122,944,320 $150,000,000

Assessed Value @ 100% 100% 100%

$119,592,030 $122,944,320 $150,000,000

General Tax Rate (per $100 A.V.) 1.850000 1.850000 1.850000

Total Taxes Exempt Exempt $2,775,000

Source: Assessor's Office

The current tax rate for commercial property within Tax Class 2 is $1.65 per $100 of assessed

value for the first $3,000,000 of assessed value and $1.85 per $100 of assessed value for any

remaining assessed value.

The subject is currently exempt from real estate taxes since it is owned by the District of Columbia;

however, a new owner of the subject would be required to pay real estate taxes.

DELINQUENCY

For purposes of this analysis we are assuming any outstanding property tax liability has been

paid. CBRE assumes that all taxes are current.

TAX COMPARABLES

As a crosscheck to the subject’s applicable real estate taxes, CBRE, Inc. has reviewed the real

estate tax information according to the District of Columbia for comparable office properties in

the market area. The following table summarizes the comparables employed for this analysis:

© 2014 CBRE, Inc.


39

AD VALOREM TAX COMPARABLES

Comparable Rental733 10th

Street, NW799 9th Street,

NW700 13th Street NW

750 9th Street, NW

Subject

Year Built 2011 2001 1989 2000 1972NRA (SF) 171,171 204,025 255,150 345,018 218,461Tax Year 2015 2015 2015 2015 2015

Assessor's Market Value $139,999,990 $125,314,500 $151,231,200 $224,367,620 $122,944,320AV Per SF (NRA) $817.90 $614.21 $592.71 $650.31 $562.77

Source: Assessor's Office

TAX ANALYSIS AND CONCLUSION

The subject’s current tax assessment is below the range indicated by the office tax comparables.

In addition, we have analyzed commercial properties in the District of Columbia which sold in

2013 and were subsequently reassessed for 2015.

Sale Date PropertyProperty

Type ClassCBRE Adj. Sale

PriceRecordedSale Price

FY 2014 Assessment

10/13 - 9/14

FY 2015 (Proposed) Assessment

10/14 - 9/15 % Increase% of Sale

Price

Dec-13 2000 K Street, NW Office A $96,843,746 $89,000,000 $66,695,400 $85,219,200 27.8% 95.8%Dec-13 919 18th Street, NW Office B $52,750,000 $52,750,000 $39,606,230 $50,079,300 26.4% 94.9%Dec-13 55 M Street, SE Office A $148,332,506 $140,877,506 $118,410,620 $135,763,300 14.7% 96.4%Sep-13 2000 L Street, NW Office B $203,000,000 $192,000,000 $146,288,000 $185,128,800 26.6% 96.4%Aug-13 801 N. Capitol Street, NE Office A $53,500,000 $53,500,000 $29,206,510 $52,293,400 79.0% 97.7%Aug-13 1301 New York Avenue, NW Office B+ $135,000,000 $121,734,405 $87,514,000 $107,392,500 22.7% 88.2%Jul-13 701 13th Street, NW Office A $307,500,000 $307,500,000 $290,374,090 $291,018,000 0.2% 94.6%Jul-13 3000 & 3050 K Street, NW Office A $370,000,000 $370,000,000 $292,271,270 $369,253,420 26.3% 99.8%Jun-13 700 14th Street, NW Office A $198,200,000 $183,000,000 $73,512,250 $172,167,200 134.2% 94.1%May-13 2100 M Street, NW Office B $133,500,000 $133,500,000 $121,091,800 $134,028,700 10.7% 100.4%May-13 1200 19th Street, NW Office A $304,500,000 $296,000,000 $175,840,210 $231,705,900 31.8% 78.3%Apr-13 1090 Vermont Avenue, NW Office A $68,078,673 $62,750,000 $55,259,740 $68,861,300 24.6% 109.7%Mar-13 1400 New York Avenue, NW Office B $116,485,394 $102,785,394 $93,510,800 $97,889,700 4.7% 95.2%Feb-13 701 8th Street, NW Office A $98,035,000 $98,500,000 $88,984,710 $95,681,500 7.5% 97.1%

Minimum % of Sale Price: 78.3%Maximum % of Sale Price: 109.7%

Average: 95.6%Median 96.1%

Compiled by: CBRE, Inc.

DISTRICT OF COLUMBIA ASSESSMENT TRENDOFFICE PROPERTIES SOLD IN 2013

The above table indicates the assessments were raised from 78.3% to 109.7% of the sale price

with an average of 95.6%. The subject’s current assessment is approximately 89.2% of the value

derived later in this report, which is below the range. In the analysis we have used a pro-forma

tax assessment of $150,000,000 or $687 per square-foot, which is 89.2% of the stabilized value

derived later in the report.

© 2014 CBRE, Inc.

Multi-Family Market Analysis

40


APARTMENT MARKET TRENDS

An overview of local market conditions is a necessary aspect of the appraisal process. The market

analysis forms a basis for assessing market area boundaries, supply and demand factors, and

indications of financial feasibility. In this section, CBRE discusses the status of local market

conditions. The following regional apartment market analysis considers the regional market and

various delineated submarkets. Data utilized in this analysis was obtained from the following

sources:

• Delta Associates Inc.’s Mid-Atlantic Region Class A & B Rental Apartment Market Reports: Second Quarter 2014;

• PricewaterhouseCoopers Second Quarter 2014 Investor Survey (f/k/a Korpacz Investor Survey); • Real Capital Analytics US Capital Trends Apartment Month in Review (May 2014); • REIS Apartment First Glance Second Quarter 2014 Report; • CBRE-EA Second Quarter 2014 Apartment Flash Report; • Interviews with property managers and knowledgeable market participants; and • Data contained in our files specific to apartment projects in the Metropolitan Washington, DC

area.

INVESTMENT TRENDS

The following trends are evident in the National and the Washington DC economy:

• The Washington DC MSA continues to face challenges from Federal budget cuts. The

Washington DC MSA added approximately 6,300 new payroll jobs during the 12 months

ending April 2014, compared to a long term 20-year annual average of 42,600 jobs.

The top four sectors leading job growth are leisure/hospitality, education/health services,

state/local government and retail trade with 27,100 new jobs added in these four sectors

alone. Notably, the federal government sector lost 11,000 jobs over the same time

period, as agencies tighten spending due to budget cuts. The majority of these job cuts

occurred in the District of Columbia. It should be noted that the federal government is not

laying off workers; rather hiring freezes have prevented hiring for vacated positions due to

retirement or workers leaving for other positions outside the federal government.

• According to U.S. Bureau of Labor and Statistics data, the unemployment rate in the

Washington DC area, which reached a height of 7.0% in January 2010, has declined to

4.5% as of April 2014. Preliminary May 2014 shows an increase to 5.0%. While this rate

is elevated with regard to historical rates for the metro area, it remains among the lowest

in the nation among major markets.

• Despite 2013’s cuts mandated by the federal sequestration process, a government

shutdown and uncertainty over the debt ceiling, the metro area experienced, albeit

modest, growth. Job growth is expected to remain tempered for an expansion cycle with

© 2014 CBRE, Inc.


41

growth gaining momentum later in 2014. Delta Associates predicts health job growth in

2015 and 2016, though at a slower rate than previous expansion cycles. The federal

government is expected to continue strategic cuts; however, the private sector is expected

to pick up the slack to help stimulate the local economy.

• According to the US Commerce Department’s the Bureau of Economic Analysis, GDP

decreased 2.9% (annualized rate) during First Quarter 2014, after rising 2.6% during

Fourth Quarter 2013, 4.1% in Third Quarter 2013, and 2.5% in Second Quarter 2013.

The deceleration in real GDP growth was a result of a decrease in exports, non-residential

fixed investments, private inventory investment, residential fixed investment and state and

local government spending. The slower economy and especially the drop in exports can

be blamed on the harsh winter during the First Quarter of 2014. Despite the most recent

decline, Delta Associates predicts GDP growth at approximately 2.5% in 2014.

• According to Delta Reports, overall inflation in the Washington/Baltimore region was

1.6% during the 12 months ending March 2014, compared to the national inflation rate

of 1.5%. Delta Associates projects inflation at around 1.5% to 2.5%, as long as

appropriate monetary measures are in place.

• According to Delta Reports, housing prices increased 8.5% in the Washington area during

the 12 months ending March 2014. This compares to a 12.4% increase in the 20 MSA

Composite Index over the same time period.

• Average effective rents have begun to markedly decline in several submarkets, particularly

in those burdened with significant supply in the pipeline. Overall, rental rates for both

Class A and B apartments rose slightly over the past year with Class A rents unchanged

and Class B rents rising 0.7%.

• Data from REIS shows the national vacancy rate remained unchanged at 4.1% during

Second Quarter 2014 following several quarters of declines.

• Class A absorption was 9,366 units over the past 12 months in the DC metro area, above

the long-term average as the trend toward renting vs. owning appears to have resumed

its upward trend in 2013 and 2014. Absorption over the next 36 months may be

significantly higher than the region’s long term average of 5,846 units per annum with

Delta Associates estimating demand at approximately 8,500 units per annum over the

next three years. Over the coming quarters, job growth, demographic shifts (including

de-nesting and un-coupling of 25 to 34 year-olds) and renter/owner ratios at or above

current levels will be necessary for rental demand generation.

• According to data from the PricewaterhouseCoopers survey, average national overall

capitalization rates declined 20 basis points in the most recent survey from the prior

quarter, suggesting strong investor confidence in the national apartment. Average

capitalization rates in the Mid-Atlantic region were relatively flat from the prior quarter.

© 2014 CBRE, Inc.


42

The most recent PricewaterhouseCoopers survey notes that most investors foresee cap

rates holding steady over the next 12 months. According to Delta Associates,

capitalization rates in the Washington DC market increased slightly in 2013, as market

conditions became more competitive amid increased supply and muted job growth in the

region; however, apartments will remain in favor as an asset class. According to Delta

Associates, capitalization rate appear to be holding steady in 2014.

• The millennial generation, valuing walkability, Metrorail access, robust project amenity

packages, and more urban mixed-use settings, continue to drive trends and future growth

in new multi-family development in the Washington DC metro area. A large share of this

sizable generation continues to rent rather than own, creating demand for Class A

apartments in urban/mixed-use locations. Additionally, more wealthy seniors, empty-

nesters and divorcees have the ability to rent higher-priced, larger one, two and three

bedroom Class A product coming online. Some renters in this demographic share similar

values and prefer a more urban lifestyle in a smaller footprint.

• After limited construction in 2009 and 2010 following the recent recession, the pipeline

grew rapidly, with a record setting construction pace in 2011. After a plateau in 2012,

construction has edged upward in 2013 and 2014, and the pipeline is at 39,962 units at

Second Quarter 2014. The elevated production level will delay a return to

supply/demand equilibrium for the region through 2017. As rents have declined and

construction costs have increased, the pipeline is expected to shrink to a more healthy

level over the next 12 to 24 months. There have been 12,069 units delivered over the

past 12 months with an additional 19,103 units to come to market over the next 12

months (2Q14-2Q15) followed by 8,938 units during the following 12-month period

(2Q15-2Q16). As deliveries continue at elevated levels, market fundamentals will

continue to become more competitive over the next 24 months.

REGIONAL APARTMENT MARKET DYNAMICS

The Second Quarter 2014 market statistics for the Washington, DC region and its three major

submarkets (Northern Virginia, Suburban Maryland and Washington DC) are summarized in the

following chart:

Northern Virginia

Suburban Maryland The District

Washington Metro Area

Vacancy Rate at Second Quarter 2014 4.3% 4.0% 4.1% 4.2%

Vacancy Rate at Second Quarter 2013 3.7% 4.9% 2.6% 4.0%

Source: Delta Associates, Second Quarter 2014

WASHINGTON METRO APARTMENT MARKET STATISTICSINVESTMENT GRADE CLASS A AND B APARTMENTS

© 2014 CBRE, Inc.


43

The Washington, DC multi-family market continues to be one of the strongest markets in the

nation; however, vacancy rates have increased slightly over the past 12 months from 4.0% to

4.2%, as indicated above. Vacancy rates range from 4.0% in Suburban Maryland to 4.3% in

Northern Virginia.

The following chart summarizes the regional market statistics.

Vacancy Eff. Rent Vacancy Eff. Rent Vacancy Eff. Rent Vacancy Eff. RentClass A ApartmentsLow-Rise 3.3% $1,630 3.6% $1,621 n/a n/a 3.4% $1,626Mid & High-Rise 5.2% $2,241 5.9% $2,142 4.5% $2,546 5.1% $2,337Total Class A 3.9% $1,841 4.1% $1,727 4.5% $2,546 4.1% $1,905Comparison at Second Quarter 2013 (1-year) 3.4% $1,814 5.3% $1,721 2.9% $2,566 4.0% $1,879Comparsion at Second Quarter 2009 (5-years) 3.9% $1,583 4.4% $1,469 3.6% $2,218 4.0% $1,594

Class B ApartmentsLow-Rise 4.4% $1,534 3.6% $1,382 n/a n/a 4.1% $1,459Mid & High-Rise 5.5% $1,737 5.1% $1,723 3.0% $1,917 4.9% $1,766Total Class B 4.9% $1,623 3.9% $1,450 3.0% $1,917 4.4% $1,578Comparison at Second Quarter 2013 (1-year) 4.1% $1,619 4.4% $1,430 1.7% $1,939 4.0% $1,570Comparsion at Second Quarter 2009 (5-years) 4.7% $1,331 4.4% $1,273 4.6% $1,714 4.6% $1,335

Class A & B ApartmentsTotal Class A & B 4.3% $1,748 4.0% $1,609 4.1% $2,394 4.2% $1,772Comparison at Second Quarter 2013 (1-year) 3.7% $1,728 4.9% $1,589 2.6% $2,386 4.0% $1,746Comparsion at Second Quarter 2009 (5-years) 4.3% $1,473 4.4% $1,386 3.5% $2,033 4.3% $1,484Source: Delta Associates, Second Quarter 2014

WASHINGTON METRO APARTMENT MARKET STATISTICSINVESTMENT GRADE CLASS A AND B APARTMENTS

Northern Virginia Suburban Maryland The District Washington Metro Area

Projected Vacancy

A summary of the Delta projected vacancy rate estimates is illustrated in the following table.

© 2014 CBRE, Inc.


44

Northern Virginia



Inventory (Units)Stabilized Inventory at 6/14 52,016 35,786 14,433 102,235Pipeline through 6/17 (1) 16,567 12,092 11,303 39,962Inventory at 6/17 68,583 47,878 25,736 142,197

Supply vs. Demand (Units)Vacant Units at 6/14 (2) 2,055 1,456 649 4,160New Supply Through 6/17 16,567 12,092 11,303 39,962Available Units Through 6/17 18,622 13,548 11,952 44,122

Underlying Demand Through 6/17 (3) 11,475 7,395 6,630 25,500

Vacant Units at 6/17 7,146 6,153 5,323 18,622

Vacancy Rate Second Quarter 2014Stabilized Vacancy at 6/14 4.0% 4.1% 4.5% 4.1%Overall Vacancy at 6/14 (4) 8.0% 9.6% 15.1% 9.6%

Projected Vacancy Rate Second Quarter 2017Overall Vacancy at 6/17 (4)(5) 10.4% 12.9% 20.7% 13.1%Stabilized Vacancy at 6/17 4.3% 4.5% 5.0% 4.5%

(2) In stabilized projects only.


(3) Projected annual underlying demand: Northern Virginia -- approximately 3,825 units; Suburban Maryland - 2,465 units; The District - 2,210 units. Underlying demand projections are driven by job growth and other factors. 36-Month Average/Year for Metro Area is 8,500 units

(4) Includes vacant units in projects still in initial lease-up.

(5) Assumes an attrition rate averaging 81% for planned units in the 36-month pipeline in Northern Virginia, Suburban Maryland and the District.

PROJECTED SECOND QUARTER 2017 VACANCY RATESWASHINGTON METRO AREA CLASS A APARTMENT MARKET

AS OF SECOND QUARTER 2014

(1) Available units in apartment buildings currently under construction plus those planned to deliver by June 2017 totals 68,315 units. Delta Associates assumes 18% of these will materialize, making a 36-month pipeline of 39,962 units

© 2014 CBRE, Inc.


45

Rental Rate Growth

Annual rent growth for the DC metro area averaged 2.8% from 2004 to 2013 (ten years).

Historical and forecasted rent growth statistics are illustrated in the following chart:

2004 2,889.2 5,191.9 317 492,146 4,429 8,759 3.80 1,196.8 3.0

2005 2,938.2 5,247.8 327 498,161 6,015 8,024 3.30 1,247.3 4.2

2006 2,977.8 5,290.9 341 506,281 8,120 6,376 3.10 1,299.2 4.2

2007 3,002.1 5,352.7 344 514,712 8,431 11,328 3.80 1,333.6 2.6

2008 2,992.5 5,439.5 350 521,327 6,615 -3,600 4.50 1,379.2 3.4

2009 2,950.2 5,552.6 346 526,411 5,084 5,534 5.40 1,370.7 -0.6

2010 2,985.8 5,666.2 358 528,451 2,040 9,433 3.90 1,415.0 3.2

2011 3,022.8 5,764.8 365 530,206 1,755 13 4.00 1,481.4 4.7

2012 3,070.4 5,850.9 372 538,155 7,949 7,043 4.00 1,521.7 2.7

2013 3,089.9 5,932.8 369 549,608 11,453 7,137 4.50 1,531.7 0.7

Forecast 2014 3,119.9 6,007.2 375 562,669 13,061 7,265 5.10 1,548.3 1.1

2015 3,161.3 6,079.4 386 574,777 12,107 10,009 5.60 1,569.4 1.4

2016 3,198.6 6,149.1 395 584,233 9,455 8,780 5.70 1,606.3 2.4

2017 3,227.0 6,213.7 400 591,784 7,551 6,844 5.70 1,656.2 3.1

2018 3,249.2 6,278.2 406 598,044 6,260 5,540 5.80 1,706.7 3.0

2019 3,269.9 6,342.1 413 603,401 5,357 4,834 5.80 1,753.1 2.7

Source: CBRE-EA Outlook (data as of 1Q 2014)

Same-StoreRent Index

(Avg $/Unit)

PersonalIncome

($ billions)

RentInflation(Avg %)

NetAbsorption

(Units)

Completions(Units)

Stock(Units)

Population(x 1000)

WASHINGTON DC METRO MARKET TRENDS: FORECAST

YearTotal

Employment(Jobs x 1000)

VacancyRate

(Avg %)

Forecasted growth rates, based on the most recent market forecast performed by CBRE

Econometric Advisors, indicates rent growth from 2014 to 2019 will average 2.3% with lower

growth over the next two years due to the significant supply in the pipeline.

Rent growth in the DC Metro Area, per Delta Reports, was essentially unchanged from Second

Quarter 2013 to Second Quarter 2014 with a positive 3.6% five-year average. Class A rents

remained relatively unchanged over the past 12 months, while Class B rents increased 0.7% over

the same time period. Annual rental rate growth among the Class A & B product was relatively

flat in the Northern Virginia, while the District of Columbia and Suburban Maryland had slight

increases in average effective rents.

Northern Virginia



Rent Levels (Average for all Unit Sizes)Effecitve Rents (6/14) $1,748 $1,609 $2,394 $1,772Effecitve Rents (6/13) $1,728 $1,589 $2,386 $1,746Change in the Rental Rate * -0.20% 0.80% 1.10% 0.30%Since 6/09 3.50% 3.00% 3.30% 3.60%

* Excludes projects that were not marketing at date of previous survey


RENTAL RATE GROWTH FOR CLASS A AND B APARTMENTSWASHINGTON DC METRO AREA

SECOND QUARTER 2014

Market Indicator

© 2014 CBRE, Inc.


46

Overall, average effective rents have begun to markedly decline in several submarkets,

particularly in those burdened with significant supply in the pipeline. Additionally, demand has

slowed as the boost provided by households changing from owning to renting has largely run its

course and the market is relying solely on tepid job growth to generate demand for new units.

Given a robust delivery schedule for the significant supply in the pipeline, modest rent declines

are probable at the regional level in 2014 and 2015; however, stronger submarkets should

outperform market averages. Delta Associates expects rent growth to recover to the 3.0% level by

2017. General long-term expectations are for continued growth in the Washington Metro Area.

DISTRICT OF COLUMBIA CLASS A APARTMENT MARKET

The District of Columbia segment of the metro area posted an overall vacancy rate of 4.1% for

Class A and B product as of Second Quarter 2014, which is relatively consistent with the overall

region. The Class A mid/high-rise apartment market vacancy was 4.5% for stabilized inventory.

District of Columbia Class A mid/high-rise apartment statistics as of Second Quarter 2014 is

outlined in the following table:

WASHINGTON, DC CLASS A MID & HIGH RISE APARTMENT MARKET STATISTICSSECOND QUARTER 2014

Market IndicatorsUpper

Northwest Central

Columbia Heights/

ShawNoMa/H Street

Capitol Hill/ Riverfront Northeast

The District Total/

Weighted Average

Number of Units Surveyed: 1,107 5,945 2,424 3,499 1,929 1,035 15,939

Rent Levels Face Rents @ 6/14 $2,639 $2,855 $2,620 $2,376 $2,247 $2,081 $2,575 Concessions as a % of Face Rents 1.2% 0.3% 2.2% 1.3% 3.2% 0.0% 1.2% Effective Rents @ 6/14 $2,608 $2,847 $2,563 $2,344 $2,174 $2,081 $2,546 Effective Rents per SF @ 6/14 $2.97 $3.36 $3.36 $2.85 $2.62 $2.51 $3.07

Per Annum Effective Rent Increase to June 2014Since June 2013 -1.6% 2.1% 0.1% 6.1% -1.9% 0.7% 1.8%

VacancyStabilized Vacancy Rate June 2014 4.7% 4.1% 3.7% 3.7% 5.7% 8.0% 4.5%Stabilized Vacancy Rate June 2013 2.2% 3.0% 3.9% 2.9% 2.0% 3.2% 2.9%

Supply Projections*36-Month Market-Rate Unit Pipeline June 2014 1,100 2,151 2,119 4,186 5,021 1,381 17,11136-Month Market-Rate Unit Pipeline June 2013 887 1,788 3,010 3,705 3,341 1,470 15,511

* # Market rate units UC plus planned & likely to deliver in the next 36-months; Total may include some projects that do not fall into the identified sumarkets


The subject is located in the Central submarket. The following chart summarizes historical

submarket statistics.

© 2014 CBRE, Inc.


47

Market Area QuarterUnits Surveyed Face Rents % Change

Concessions as % of Face

RentsEffective

Rents % ChangeEffective Rents PSF

T-12 Effective

Rent Increase

Stabilized Vacancy

RateCentral 2Q 14 5,945 $2,855 1.5% 0.3% $2,847 2.9% $3.36 2.1% 4.1%Central 1Q 14 5,945 $2,812 n/a 1.6% $2,766 n/a $3.26 -1.9% 5.6%

Central 4Q 13 5,711 $2,863 0.2% 1.4% $2,822 1.5% $3.32 -0.2% 2.6%Central 4Q 12 5,345 $2,857 3.0% 2.7% $2,780 2.5% $3.27 2.5% 2.6%Central 4Q 11 4,739 $2,775 3.6% 2.3% $2,712 5.2% $3.19 3.5% 2.5%Central 4Q 10 4,449 $2,679 n/a 3.8% $2,578 n/a $3.02 4.4% 3.4%District Total 4Q 13 13,781 $2,614 -2.6% 2.2% $2,556 -1.2% $3.05 0.8% 3.7%District Total 4Q 12 11,466 $2,683 1.0% 3.6% $2,586 0.3% $3.04 0.6% 3.4%District Total 4Q 11 9,755 $2,657 3.0% 2.9% $2,579 5.1% $3.00 4.7% 3.5%District Total 4Q 10 9,329 $2,580 4.8% 4.9% $2,454 9.1% $2.86 5.9% 3.8%District Total 4Q 09 8,633 $2,462 0.6% 8.7% $2,249 -2.0% $2.62 -1.3% 3.6%District Total 4Q 08 7,713 $2,448 0.2% 6.3% $2,294 -3.0% $2.68 -0.7% 3.0%6-Year Average (District Only) 1.1% 4.8% 1.9% 3.5%

CENTRAL & DISTRICT OF COLUMBIA CLASS A HIGH-RISE SUMMARY

Note: Rents include/assume landlord-paid utilitiesNote: Delta Assoc. began tracking the District of Columbia submarkets 2Q 2010Source: Delta Associates; Compiled by: CBRE

DISTRICT OF COLUMBIA RENT CONTROL LAW

Properties situated within the District of Columbia, which imposes rent control may be subject to

the following guidelines. The Rent Control Reform Amendment Act of 2006 took effect in August

2006. As of August 4, 2006 all D.C. rental units that fell under the old rent control laws became

subject to a new law. Generally, rent control governs many of the housing units in the District that

were built before 1975. One of the most important alterations to the law is that rent ceilings were

abolished. Now landlords can raise rents according to the Consumer Price Index (CPI) plus 2%.

The primary exception is that the increase cannot exceed 10%. For elderly and disabled tenants,

rent adjustments are restricted to the inflation rate with a maximum increase of 5%. Another

aspect of the Rent Control Reform Amendment Act of 2006 is that landlords can raise rent only

once every 12 months.

As a new property, the subject would not fall under the restrictions of the Rent Control Reform

Amendment Act.

New Construction/Planned Projects

The following chart summarizes under construction and/or marketing projects and planned

projects likely to deliver over the next 36 months in the Washington, DC Metro area.

© 2014 CBRE, Inc.


48

Planned Projects Likely To Deliver Over The Next 36

Months Total

Location # of Mkt Rate Units

% of Total

# of Units Absorbed

# of Available Units

# of Mkt Rate Units

% of Total

# of Mkt Rate Units

District of Columbia

Upper Northwest 959 2% 0 959 141 0% 1,100

Columbia Heights/Shaw 2,297 5% 637 1,660 729 2% 2,389

Central 1,827 4% 221 1,606 463 1% 2,069

NoMa/H Street 3,066 7% 1,378 1,688 2,498 7% 4,186

Capitol Hill/Riverfront 2,848 7% 370 2,478 2,488 7% 4,966

Upper Georgia Avenue 344 1% 0 344 0 0% 344

Northeast 798 2% 79 719 1,022 3% 1,741

River East 216 0% 0 216 0 0% 216

Total District of Columbia 12,139 28% 2,685 9,454 7,341 21% 16,795

Suburban Maryland

Anne Arundel County 1,876 4% 995 881 916 3% 1,797

Calvert, Charles, St. Mary's Counties 213 0% 0 213 0 0% 213

Frederick County 743 2% 104 639 0 0% 639

Howard County 1,254 3% 423 831 2,548 7% 3,379

Montgomery County 6,818 16% 1,384 5,434 6,866 20% 12,300

Prince George's County 2,222 5% 467 1,755 5,263 15% 7,018

Total Suburban Maryland 13,126 30% 3,373 9,753 15,593 45% 25,346

Northern Virginia

City of Alexandria 3,081 7% 289 2,792 1,177 3% 3,969

Arlington County 4,642 11% 662 3,980 1,366 4% 5,346

Fairfax County/City of Fairfax/Falls Church 7,034 16% 2,045 4,989 6,250 18% 11,239

Loudoun County 670 2% 263 407 1,040 3% 1,447

Prince William County/Manassas/Manassas Park 2,789 6% 620 2,169 812 2% 2,981

Stafford/Spotsylvania/Fredericksburg 251 1% 228 23 888 3% 911

Total Northern Virginia 18,467 42% 4,107 14,360 11,533 33% 25,893

Total 43,732 10,165 33,567 34,467 68,034Source: Delta Associates Second Quarter 2014; Compiled by: CBRE

UNDER CONSTRUCTION AND/OR MARKETING & PLANNED APARTMENT PROJECTS LIKELY TO DELIVER OVER THE NEXT 36 MONTHS SUMMARYWASHINGTON, DC METRO AREA

Under Construction And/Or Marketing

The majority of the supply in the pipeline is located in the NoMa/H Street and Capitol

Hill/Riverfront submarkets of the District of Columbia, Fairfax County, (including the incorporated

cities of Fairfax and Falls Church), Montgomery County and Prince George’s County.

The following charts summarize properties currently under construction and/or marketing in the

subject’s submarket.

Project Name Project Type Location Sponsor(s) # of Mkt Rate Units

# of Units Absorbed

# of Available

Units

Date Pre-Lsg

Begins

Inital Occup. Date

Date Constr

Complete

Central

Bond Building Apartments High-Rise DuPont Circle Aria Investment Group, LLC 83 4 79 Aug-13 1Q 2014 1Q 2014

The Drake (First Baptist Parking Lot) High-Rise DuPont Circle Keener-Squire 201 0 201 Sep-14 Sep-14 Sep-14

Hilton Washington High-Rise DuPont Circle Lowe Enterprises 230 0 230 1Q 2016 2Q 2016 2Q 2016

Apartments at CityCenterDC High-Rise East End Hines 366 146 220 Oct-13 Dec-13 Feb-14

The Corcoran at 14th Mid-Rise Logan Circle FLGA, LLC 36 0 36 3Q 2015 3Q 2015 3Q 2015

The Bentley Mid-Rise Logan Circle Dubin Company 51 0 51 3Q 2015 3Q 2015 4Q 2015

Lyric at 440 K High-Rise Mt. Vernon Triangle Quadrangle 234 71 163 Nov-13 Jan-14 Dec-13

m.Flats Mount Vernon Triangle High-Rise Mt. Vernon Triangle Kettler 233 0 233 3Q 2014 3Q 2014 Sep-14

Meridian at Mt. Vernon Triangle - Phase II High-Rise Mt. Vernon Triangle Paradigm 393 0 393 3Q 2014 3Q 2014 4Q 2014

Total 1,827 221 1,606Source: Delta Associates Second Quarter 2014; Compiled by: CBRE

UNDER CONSTRUCTION AND/OR MARKETING - CENTRAL SUBMARKET

© 2014 CBRE, Inc.


49

Project Name Project Type Location # of Mkt

Rate Units Proper Zoning?

Initial Approvals?

Site Plan Approved

Bldg Pmts Issued?

Est. Constr. Start Date

Central

Patterson Mansion Mid-Rise DuPont Circle 92 Yes' Yes Yes No Jan-15

1400 14th Street Mid-Rise Logan Circle 30 Yes Yes Yes No 3Q 2014

Blagden Alley Micros Mid-Rise Mt. Vernon Square 125 Yes No No No Jan-15

1031 4th Street High-Rise Mt. Vernon Triangle 123 No No No No Sep-14

Square 37 - East High-Rise West End 93 Yes Yes Yes No 4Q 2014

Total 463Source: Delta Associates Second Quarter 2014; Compiled by: CBRE

PLANNED APARTMENT PROJECTS LIKELY TO DELIVER OVER THE NEXT 36 MONTHS - CENTRAL SUBMARKET

As shown above, there is only one property currently actively marketing in the East End. The

Apartments at CityCenterDC is a 458-unit (366 market-rate) high-rise property located north of

the subject within the CityCenterDC mixed-use development noted in the market analysis.

Leasing began in October 2013 with the first units occupied in December 2013.

As noted in the Neighborhood Analysis, the subject’s neighborhood is predominantly improved

with office uses.

Absorption

The following chart summarizes the absorption for actively marketing and recently stabilized Class A

apartment projects in the Washington, DC Metro area.

© 2014 CBRE, Inc.


50

Total Projects

Total Units

Lease-Up Pace (Min.)

Lease-Up Pace (Max.)

Lease-Up Pace (Avg.)

Actively Marketing Low-Rise VA 4 839 6 16 12.5MD 9 2,636 3 20 14.3

Low-Rise Total 13 3,475 3 20 13.8Mid-Rise DC 2 410 21 27 24.0

VA 4 1,351 12 43 21.3MD 5 1,498 11 39 18.8

Mid-Rise Total 11 3,259 11 43 20.6High-Rise DC 4 1,170 10 16 13.0

VA 6 1,675 4 23 11.7MD 2 471 6 11 8.5

High-Rise Total 12 3,316 4 23 11.6Actively Marketing Total/Avg. 36 10,050 3 43 15.1Recently Stabilized Low-Rise DC 1 257 12 12 12.0

VA 17 3,292 6 26 13.2MD 12 2,540 7 18 12.2

Low-Rise Total 30 6,089 6 26 12.7Mid-Rise DC 14 2,507 4 26 15.1

VA 13 3,355 9 28 17.2MD 4 804 8 26 14.3

Mid-Rise Total 31 6,666 4 28 15.9High-Rise DC 10 2,726 9 28 17.1

VA 6 1,746 8 15 11.7MD 5 1,494 10 20 15.4

High-Rise Total 21 5,966 8 28 15.1Recently Stabilized Total/Avg. 82 18,721 4 28 14.5

ABSORPTION SUMMARYACTIVELY MARKETING & RECENTLY STABILIZED CLASS A APARTMENT PROJECTS

WASHINGTON METROPOLITAN AREA

* Recently stabilized projects from 2Q11 - 2Q14* Actively Marketing excludes projects which recently began leasing with no lease-up dataSource: Delta Associates, Inc. (Second Quarter 2014); Compiled by: CBRE

Actively marketing apartment projects are leasing at a slightly faster pace relative to projects that

stabilized over the past three years; however, absorption will face downward pressure over the

next 36 months due to the large slate of deliveries compared to projected demand levels.

INVESTMENT TRENDS

According to data from Real Capital Analytics, sales of significant apartment properties totaled

$103.5 billion, up 18% over 2012. Prices also continued to rise, up 12% in 2013; however, the

increase was well below the office, retail and hotel sectors. Portfolio transactions are

proliferating, evidencing investors' growing appetite and access to capital. Nationally, average

cap rate changed little over 2013 notwithstanding further compression for trophy properties and

a 100 basis point increase in interest rates. With expectations of a rising interest rate

environment and cap rates near historic lows, it will be improving leasing fundamentals, and not

further cap rate compression, that will have to drive apartment prices higher in most markets.

Therefore, investors are growing circumspect of markets where the development pipeline

threatens to temper rent growth and occupancy levels.

© 2014 CBRE, Inc.


51

The following charts summarize year-end and year-to-date transaction volume information for

the Washington DC Metro area according to Real Capital Analytics.

Year-End 2013 $ Volume (Million) # PropsDC $2,096 46Suburban MD $2,134 53Northern VA $5,202 54Total $9,431 153

Year-End 2012DC $1,494 39Suburban MD $1,491 35Northern VA $2,965 48Total $5,950 122

Year-End 2011DC $625 22Suburban MD $1,076 35Northern VA $2,953 46Total $4,654 103

Year-End 2010DC $747 22Suburban MD $1,152 23Northern VA $1,521 29Total $3,420 74Source: Real Capital Analytics; Compiled by: CBRE

WASHINGTON, DC METRO AREAYEAR END TRANSACTION SUMMARY

$ Volume (Million) # Props $ Volume (Million) # PropsDC $606 30 $1,750 26Suburban MD $1,181 43 $1,123 27Northern VA $1,231 25 $4,489 40Total $3,018 98 $7,362 93Source: Real Capital Analytics; Compiled by: CBRE

WASHINGTON, DC METRO AREA - TRANSACTION SUMMARYMay 2014 YTD May 2013 YTD

Regionally, year-end sales volume in the Washington, DC metro area increased significantly from

2012 to 2013, but is skewed primarily due to the sale of Archstone properties in two portfolios to

Equity Residential and AvalonBay Communities. Regionally, investors continue to target well-

located Class A multi-family product, as well as Class B value-add deals. Despite the expansion

of the supply pipeline and continued risks to job growth, local brokers note that many recent

listings have been highly competitive with multiple offers.

Capitalization rates trended upward significantly between the end of 2007 and the end of 2009

due to declining market conditions and an ongoing deterioration of the credit markets. They

steadily climbed from their lowest levels of early 2008 and climbed steeply between late 2008

and mid 2009. They began to stabilize in late 2009 and compressed in 2010 and 2011, but

© 2014 CBRE, Inc.


52

have flattened in 2012 and 2013, with a slight uptick in Fourth Quarter 2013. This is further

supported by the graph below, which plots the average overall capitalization rates, residual

capitalization rates and discount rates (IRR) reported by the PricewaterhouseCoopers Real Estate

Investor Survey over the past several years.

Based on the national data, average apartment OARs, IRRs and residual cap rates are at or near

10-year lows. OARs were near all-time lows in 2Q 2008, but increased to 8.03% in 4Q 2009,

and then declined to 5.61% as of 3Q 2013. OARs had been relatively flat in 2012 and 2013 in

the mid to high 5% range, but increased slightly from 5.61% to 5.80% from 3Q 2013 to 4Q

2013 and remained relatively flat in 1Q 2014. OARs declined in 2Q 2014 to 5.59%. Residual

capitalization rates and IRRs have followed a similar pattern and the spread between OARs and

residual rates has been in the 40-55 basis point range over the past several quarters.

Discount rates (IRR) declined from 10.18% in 1Q 2010 to 7.98% as of 3Q 2013, and had

remained relatively flat in 2012 and 2013 in the high 7%/low 8% range. The average discount

rate increased from 7.98% to 8.17% from 3Q 2013 to 4Q 2013, but was relatively flat in 1Q

2014. The average IRR declined to 7.98% as of 2Q 2014. Residual rates, currently in the low 6%

range, declined from 8.19% in 4Q 2009 to 6.15% as of 3Q 2013, but increased from 6.15% to

6.29% from 3Q 2013 to 4Q 2013. The average residual rate decreased slightly from 4Q 2013

to 1Q 2014 from 6.29% to 6.23% and more significantly from 6.23% to 6.02% in 2Q 2014. The

spread between going-in and residual rates was +/- 100 basis points in 2005 and 2006, but

dropped to a 10-year low at 16 basis points in late 2009/early 2010 as economic conditions

declined and OARs increased. As of 2Q 2014, the spread is 43 basis points.

© 2014 CBRE, Inc.


53

The PricewaterhouseCoopers Real Estate Investor Survey began incorporating Regional

Apartment Market-specific results in their 4Q 2009 report. The Mid-Atlantic Region includes

Delaware, Maryland, Washington DC, Virginia, North Carolina, and South Carolina. This data

for the past five quarters is summarized as follows:

2Q 2014 1Q 2014 4Q 2013 3Q 2013 2Q 2013Discount Rate (IRR) Range 6.0% - 11.0% 5.0% - 11.0% 5.0% - 11.5% 5.0% - 13.0% 5.0% - 14.0% Average 8.08% 8.02% 8.13% 8.60% 8.69% Change (bps) 6 -11 -47 -9 0

Overall Cap Rate (OAR) Range 4.0% - 7.5% 4.0% - 7.5% 4.0% - 8.0% 4.0% - 7.5% 4.0% - 7.5% Average 5.46% 5.48% 5.77% 5.67% 5.67% Change (bps) -2 -29 10 0 0

Residual Cap Rate Range 4.5% - 9.75% 4.5% - 9.75% 4.5% - 9.75% 4.5% - 9.75% 4.5% - 9.75% Average 6.10% 6.00% 6.31% 6.31% 6.31% Change (bps) 10 -31 0 0 0 Spread (bps) 64 52 54 64 64

Expense Change Rate Range 1.0% - 3.0% 1.0% - 3.0% 1.0% - 3.0% 1.0% - 3.0% 1.0% - 3.0% Average 2.75% 2.75% 2.83% 2.83% 2.75% Change (bps) 0 -8 0 8 0

Average Marketing Time (Months) Range 2.0 - 8.0 2.0 - 6.0 2.0 - 18.0 1.0 - 18.0 1.0 - 18.0 Average 4.4 4.3 5.8 5.4 5.4Source: PWC Real Estate Investor Survey; Compiled by: CBRE

MID-ATLANTIC REGIONAL APARTMENT MARKET

IRRs, OARs and residual cap rates were relatively flat in the current quarter. Residual cap rate

spreads have remained relatively flat in 2012 and 2013 near 50-65 basis points.

Interest Rates

Market participants note that multi-family mortgage rates and overall capitalization rates in the

subject’s asset class are influenced by 10-year treasury yields. Most lenders, including FNMA and

FHLC, price their fixed rate loans based on a spread over the Treasury rate or yield. The spread

represents the risk premium that a lender will want for making the loan instead of buying

Treasury bonds. The following chart indicates yields for 10-year treasury notes over the past 12

months.

© 2014 CBRE, Inc.


54

Date 10-Year YieldJul-13 2.60%

Aug-13 2.78%Sep-13 2.64%Oct-13 2.57%Nov-13 2.75%Dec-13 3.04%Jan-14 2.67%Feb-14 2.66%Mar-14 2.73%Apr-14 2.67%May-14 2.48%Jun-14 2.53%

Source: US Treasury Dept.

HISTORICAL 10-YEAR TREASURY YIELDS

Treasury yields had been near or below 2% in early 2013; however, rates increased in mid-June

2013 following comments by the Federal Reserve regarding the central bank's plans to gradually

scale back its stimulus measures in light of increased confidence in economic growth. Treasury

yields have been in the mid 2% range in 2014. As of Second Quarter 2014, there has not been

evidence of declining market conditions or increased capitalization rates as a result of the spike

in interest rates since most investors had anticipated an increase in interest rates. Further

significant increases in interest rates may result in future upward pressure on overall capitalization

rates.

© 2014 CBRE, Inc.


55

CONCLUSION

The Washington, DC metro apartment market is exhibiting strong occupancy levels; however, the

region’s average effective rental rates have remained relatively flat over the past 12 months as

the supply pipeline has ballooned and market conditions have become more competitive.

Several submarkets, particularly in those burdened with significant supply in the pipeline, are

exhibiting rent declines. Despite the recent trends in absorption and expansion of the supply

pipeline, the local market area should maintain a stabilized occupancy position. The addition of

new product to the market will create downward pressure on occupancy and effective rental

rates. While job growth has been positive and the metro area’s unemployment rate is among the

lowest among major metro areas, the region is poised for slower growth than prior cycles have

indicated during expansion phases and job growth is expected to gain momentum in the latter

half of 2014 after a weak start. Due to a myriad of factors including demographic trends and

increased preferences to rent rather than own, the long-term projection for the Washington, DC

metro apartment rental market is for continued growth.

With respect to the subject in particular, we believe the subject is well located for an apartment

project. While it is in good proximity to employment centers, major roadways, significant retail

and entertainment amenities and Metrorail, most new apartment development is concentrated

further north near Mount Vernon Square given the higher rents for office space in the areas

immediately surrounding the subject. Based upon our analysis, an apartment rental project on

the subject site would enjoy good market acceptance.

© 2014 CBRE, Inc.

Office Market Analysis

56


REGIONAL OFFICE MARKET DYNAMICS

Overview

The Metropolitan Washington Region contains over 388 million square feet of competitive office

space as of Second Quarter 2014. The region’s office market is segmented into three broad

submarkets: the District of Columbia, Suburban Maryland and Northern Virginia. Of the three

submarkets Northern Virginia is the largest with approximately 47% of the inventory. As of

Second Quarter 2014, there were nearly 59 million square feet vacant (direct and sublet space),

indicating an overall vacancy rate of 15.2%. The market statistics as of Second Quarter 2014

are summarized in the following chart:

Market Inventory % of Mrkt Vacant w/SubletVacancy Rate

w/SubletNet Absorption

(YTD)

District of Columbia 125,186,473 32.2% 14,086,763 11.3% (658,879) Suburban Maryland 81,359,722 20.9% 13,979,899 17.2% (298,655) Northern Virginia 182,166,274 46.9% 30,921,381 17.0% (277,956)

Washington MSA 388,712,469 100.0% 58,988,043 15.2% (1,235,490)

Source: CBRE - Market Research

WASHINGTON, D.C. REGIONAL OFFICE MARKET OVERVIEWSECOND QUARTER 2014

All three major market areas have experienced an increase in vacancy since 2000, when the

region’s overall average vacancy of 4.7% was at a historical low. Overall, the region’s vacancy

(including sublet space) increased to 15.2% as of Second Quarter 2014 from 14.8% as of First

Quarter 2014. The District of Columbia vacancy rate increased from 11.2% to 11.3% over the

same period, while the Suburban Maryland vacancy rate (including sublet space) increased from

17.1% to 17.2%. The Northern Virginia vacancy rate increased from 16.3% to 17.0%.

Vacancy Rates

MSA vacancy rates have trended upward since 2006. The exception was 2010, a year where the

federal government absorbed significant amounts of space in the District. The Second Quarter

2014 vacancy rate of 15.2% is the highest level in the region over the past 15 years.

WASHINGTON, D.C. REGIONAL OFFICE MARKETHISTORICAL VACANCY RATES (WITH SUBLET) - SECOND QUARTER 2014

Market 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q2014

District of Columbia 5.8% 4.9% 6.0% 6.2% 6.9% 6.8% 6.4% 6.6% 6.6% 7.4% 11.8% 9.7% 9.8% 10.6% 10.7% 11.3%Suburban Maryland 7.6% 5.9% 10.1% 10.9% 11.6% 11.7% 9.3% 8.8% 9.8% 12.0% 15.0% 14.1% 14.9% 15.4% 16.5% 17.2%Northern Virginia 5.1% 3.9% 11.9% 16.0% 13.2% 11.4% 8.6% 8.6% 10.8% 12.9% 14.3% 13.2% 14.0% 15.3% 16.3% 17.0%

Washington MSA 5.9% 4.7% 9.5% 11.7% 10.9% 9.8% 8.1% 8.0% 9.2% 11.0% 13.6% 12.3% 12.8% 13.8% 14.5% 15.2%

Source: CBRE - Market Research

© 2014 CBRE, Inc.


57

Demand

Demand has been sluggish since December 2007 as the economy entered recession, followed by

a slow growth recovery with minimal expansion in office employment. While the unemployment

rate declined from a January 2010 peak of 7.0% to 5.0% (preliminary) in May 2014, office

employment growth remains sluggish, creating little demand for office space.

Statistics reveal an average of nearly 3.8 million square feet per year was absorbed since 1999

(15.5 years), with only 2.5 million square feet per year since 2004 (10.5 years). Positive

absorption is heavily weighted to the years preceding 2008. Since that time, average annual

absorption has been negative.

The exception was in 2010, led by the District of Columbia, with the DC Government and

General Services Administration (GSA) accounting for nearly all of the demand. The region

absorbed over 6.0 million square-feet, with the District of Columbia recording over 4.3 million

square-feet in positive absorption. Suburban Maryland experienced approximately 226,042

square-feet in positive absorption, while Northern Virginia recorded 1,485,589 square-feet in

positive absorption.

Despite positive employment growth in the region, the MSA posted over 2.3 million square feet of

negative absorption during 2011. This paradox is partially due to BRAC relocations to new

government developed facilities in Mark Center in Alexandria and Ft. Belvoir in Fairfax County,

along with “shadow vacancy”, where companies are consolidating and backfilling underutilized

office space under lease. As a result, Northern Virginia posted nearly 1.9 million square feet of

negative absorption, with Suburban Maryland and the District of Columbia at 385,000 square

feet and 66,295 square feet, respectively. Both the District of Columbia and Northern Virginia

posted negative absorption in 2012 with 605,118 square feet and 2,007,059 square feet,

respectively. Suburban Maryland posted modest positive absorption of 84,151 square feet.

During 2013, the District of Columbia posted modest positive absorption of 372,975 square feet,

while Suburban Maryland and Northern Virginia posted negative absorption of 335,324 square

feet and 910,243 square feet, respectively. Absorption was negative during the first half of

2014. The District of Columbia posted negative absorption of 658,879 square feet, while

Suburban Maryland and Northern Virginia posted negative absorption of 298,655 square feet

and 277,956 square feet, respectively. There is an additional 1.4 million square feet of BRAC

related move-outs pending in Northern Virginia over the next 12 months. This space is primarily

situated in the Rosslyn-Ballston Corridor and Crystal City submarkets.

© 2014 CBRE, Inc.


58

WASHINGTON, D.C. REGIONAL OFFICE MARKETHISTORICAL NET ABSORPTION (SF) - SECOND QUARTER 2014

Washington District of DC % Suburban Maryland % Northern Virginia %Year End MSA Columbia of Total Maryland of Total Virginia of Total

1999 11,293,170 2,203,242 19.5% 1,619,749 14.3% 7,470,179 66.1%2000 13,529,000 2,391,652 17.7% 2,275,313 16.8% 8,862,035 65.5%2001 (315,762) 2,618,574 NA (211,510) NA (2,722,826) NA2002 1,803,455 1,183,853 65.6% 535,410 29.7% 84,192 4.7%2003 6,519,115 911,322 14.0% 588,048 9.0% 5,019,745 77.0%2004 9,682,583 2,495,877 25.8% 1,676,298 17.3% 5,510,408 56.9%2005 8,049,369 2,254,958 28.0% 1,023,443 12.7% 4,770,968 59.3%2006 7,088,561 2,499,158 35.3% 683 0.0% 4,588,720 64.7%2007 2,036,908 563,316 27.7% 574,920 28.2% 898,672 44.1%2008 992,495 222,016 22.4% (387,818) NA 1,158,297 116.7%2009 (981,249) 35,301 NA (780,221) NA (236,329) NA2010 6,019,405 4,307,774 71.6% 226,042 3.8% 1,485,589 24.7%2011 (2,329,205) (66,295) NA (385,028) NA (1,877,882) NA2012 (2,528,026) (605,118) NA 84,151 NA (2,007,059) NA2013 (872,592) 372,975 NA (335,324) NA (910,243) NA

2Q2014 (1,235,490) (658,879) NA (298,655) NA (277,956) NATotal 58,751,737 20,729,726 35.3% 6,205,501 10.6% 31,816,510 54.2%

Annual Average (5.5 Years) (350,392) 615,592 NA (270,734) NA (695,251) NAAnnual Average (10.5 Years) 2,468,834 1,087,722 44.1% 133,190 5.4% 1,247,922 50.5%Annual Average (Since 1999) 3,790,435 1,337,402 35.3% 400,355 10.6% 2,052,678 54.2%

Source: CBRE

Absorption Projections

Office employment is generally measured by FIRE and service sectors which includes such

industries as legal services, accounting, insurance, banking, real estate, advertising, and

engineering to name a few. In the Washington Metro Area, the government is also a sizable user

of office space. Future office employment has been projected by CBRE Econometric Advisors.

The CBRE Econometric Advisors office employment excludes government employment in the

office sector; however, growth from this sector is expected to be negligible.

YearOffice-Using Fin. Act. Jobs

Office-Using Services Jobs

Total Office Jobs

Annual Office Growth

Actual2013 142,600 764,300 906,900 ---

Forecast2014 144,900 766,800 911,700 4,8002015 146,400 776,700 923,100 11,4002016 147,600 786,100 933,700 10,6002017 148,500 793,100 941,600 7,9002018 149,200 798,400 947,600 6,0002019 149,900 803,300 953,200 5,600

Source: CBRE Econometric Advisors, July 2014

OFFICE EMPLOYMENT GROWTH PROJECTIONS

We have estimated a capture rate of 10% for Suburban Maryland, which is slightly below the

annual historical average. Northern Virginia and the District of Columbia will capture 55% and

35% of the region’s office demand, respectively. Based on the projected regional employment

© 2014 CBRE, Inc.


59

growth and capture rates, the market will absorb about 1.5 million square feet per year with

Northern Virginia, Suburban Maryland and the District of Columbia capturing 825,000 square

feet, 150,000 square feet and 525,000 square feet, respectively.

WASHINGTON METROPOLITAN AREAEMPLOYMENT GROWTH AND DEMAND FOR OFFICE SPACE

Office-using Office-using Office-using Projected Demand for Office SpaceYear Fin. Act. Services Total Annual Office Low High CBREEnd (Jobs) (Jobs) (Jobs) Job Growth 175 SF / PP 200 SF / PP Projection

2013 142,600 764,300 906,900 ---2014 144,900 766,800 911,700 4,800 840,000 960,0002015 146,400 776,700 923,100 11,400 1,995,000 2,280,000

Total 16,200 2,835,000 3,240,000Annual Average 8,100 1,417,500 1,620,000 1,500,000

Estimated Capture Rates

Northern VA @ 55% 779,625 891,000 825,000

Suburban MD @ 10% 141,750 162,000 150,000

District of Columbia @ 35% 496,125 567,000 525,000

Source: CBRE EA & CBRE, Valuation & Advisory Services

NEW SUPPLY

The following chart summarizes the office space under construction and under gut renovation in

the Washington Metropolitan Area. The region has nearly 4.1 million square feet under

construction for delivery over the next 24 months and 532,651 square feet under renovation for

delivery in the next 24 months.

WASHINGTON, D.C. REGIONAL OFFICE MARKET OVERVIEWSECOND QUARTER 2014 UNDER CONSTRUCTION AND UNDER RENOVATION

Market Buildings Total SFUnder Construction

District of Columbia 8 1,662,217 Suburban Maryland 4 497,902 Northern Virginia 7 1,922,745

Washington MSA 19 4,082,864 Under Renovation

District of Columbia 1 204,025 Suburban Maryland 0 - Northern Virginia 1 328,626

Washington MSA 2 532,651 Washington MSA Under Construction and Under Renovation 4,615,515

Source: CBRE, Buildings over 30,000 SF

© 2014 CBRE, Inc.


60

REGIONAL VACANCY PROJECTIONS

The following chart projects office space vacancies over the next 24 months. The analysis is based

solely on space under construction and under renovation with our demand projections at 1.5

million square feet per year. Based on this analysis, the overall metropolitan area vacancy rate

will increase slightly from 15.2% to 15.4% by Second Quarter 2016 (assuming no new

construction starts). As noted, the District of Columbia vacancy rate is projected to increase

slightly to 11.7%. The Northern Virginia and Suburban Maryland markets will also experience a

slight increase in vacancy over the next 24 months. Overall, it appears the market will be

strained to accommodate new speculative development, as vacancies will remain above 10%.

VACANCY PROJECTIONS - WASHINGTON METROPOLITAN REGIONCategory Metro Area DC SUB MD NO VABeg. of Period Office Space 388,712,469 125,186,473 81,359,722 182,166,274 Beg. of Period Vacancy Rate 15.2% 11.3% 17.2% 17.0%

Beg. of Period Vacant SF 58,988,043 14,086,763 13,979,899 30,921,381

Excess Supply > 10% 20,116,796 1,568,116 5,843,927 12,704,754 Projected Annual Absorption 1,500,000 525,000 150,000 825,000 Yrs Current Excess Supply 13.41 2.99 38.96 15.40

Future Vacancy P rojectionsNew Supply UC over the next 24 months 4,615,515 1,866,242 497,902 2,251,371 Beg. of Period Vacant SF 58,988,043 14,086,763 13,979,899 30,921,381

Less 24 Mos of Net Absorption (3,000,000) (1,050,000) (300,000) (1,650,000) End of Period Vacancy 60,603,558 14,903,005 14,177,801 31,522,752 End of Period Inventory 393,327,984 127,052,715 81,857,624 184,417,645 End of Period Vacancy Rate 15.4% 11.7% 17.3% 17.1%Excess Supply > 10% 21,270,760 2,197,734 5,992,039 13,080,988 Yrs Excess Supply in 24 mos 14.18 4.19 39.95 15.86Source: CBRE Valuation & Advisory Services 7/2014

DISTRICT OF COLUMBIA OFFICE MARKET DYNAMICS

The District of Columbia office market consists of over 125 million square feet of office space

located in 668 competitive multi-tenanted buildings. As of Second Quarter 2014, there is nearly

14.1 million square feet of vacant space (including sublet space), indicating a vacancy rate of

11.3% for the competitive multi-tenanted properties. Demand in 2010, as measured by net

absorption, totaled the highest it has been since pre-recessionary levels, as a direct result of

several sizeable federal government leases. However, demand slowed in 2011 and 2012 with

negative net absorption for the first time in over 15 years. The market posted modest positive

absorption in 2013, however, the vacancy rate increased slightly due to significant new

development. Absorption was negative during 2014.

© 2014 CBRE, Inc.


61

WASHINGTON DC MARKET SUMMARY SECOND QUARTER 2014

Number of Buildings 668Total Rentable Square Feet 125,186,473Vacant Square Feet 13,267,322Vacant Square Feet incl. Sublet 14,086,763

Vacancy Rate Year-End 2003 6.9%Vacancy Rate Year-End 2004 6.8%Vacancy Rate Year-End 2005 6.4%Vacancy Rate Year-End 2006 6.6%Vacancy Rate Year-End 2007 6.6%Vacancy Rate Year-End 2008 7.4%Vacancy Rate Year-End 2009 11.8%Vacancy Rate Year-End 2010 9.7%Vacancy Rate Year-End 2011 9.8%Vacancy Rate Year-End 2012 10.6%Vacancy Rate Year End 2013 10.7%Vacancy Rate 2nd Quarter 2014 11.3%

Net Absorption Year-End 2003 911,322Net Absorption Year-End 2004 2,495,877Net Absorption Year-End 2005 2,254,958Net Absorption Year-End 2006 2,499,158Net Absorption Year-End 2007 563,316Net Absorption Year-End 2008 222,016Net Absorption Year-End 2009 35,301Net Absorption Year-End 2010 4,307,774Net Absorption Year End 2011 (66,295)Net Absorption Year-End 2012 (605,118)Net Absorption Year-End 2013 372,975Net Absorption YTD 2014 (658,879)

Additions to Inventory 2003 2,464,545Additions to Inventory 2004 2,070,570Additions to Inventory 2005 2,883,108Additions to Inventory 2006 5,090,094Additions to Inventory 2007 2,325,804Additions to Inventory 2008 1,507,906Additions to Inventory 2009 5,957,811Additions to Inventory 2010 2,914,907Additions to Inventory 2011 1,015,967Additions to Inventory 2012 667,130Additions to Inventory 2013 1,546,847Additions to Inventory YTD 2014 863,741

Compiled By: CBRE, Inc.

The inventory by submarket is shown below:

DISTRICT OF COLUMBIA OFFICE MARKET STATISTICS SECOND QUARTER 2014

Current Vacancy Total Deliveries** Under Net Absorption Avg. AskingSubmarket No. Buildings Inventory Rate Vacant Space* YTD 2014 Construction 2Q2014 YTD 2014 Rental RateCapitol Hill 32 5,068,780 7.8% 392,930 0 0 37,407 (12,671) $58.14Capitol Riverfront 11 3,713,258 14.3% 532,165 0 0 31,436 180,203 $45.00CBD 237 39,110,087 10.7% 4,196,378 0 446,402 77,105 8,316 $53.67East End 199 42,717,834 11.1% 4,725,035 863,741 793,491 58,644 (326,740) $56.77Georgetown 23 2,679,104 9.1% 243,030 0 0 (17,727) (24,775) $42.45NOMA 40 10,297,459 14.1% 1,456,379 0 0 17,176 48,657 $48.06Southwest 34 12,119,234 11.0% 1,336,829 0 552,000 4,753 (7,759) $48.17Uptown 72 6,425,630 13.7% 877,466 0 74,349 (526,996) (470,648) $39.51West End 20 3,055,087 10.7% 326,551 0 0 (75,028) (53,462) $50.56Total 668 125,186,473 11.3% 14,086,763 863,741 1,866,242 (393,230) (658,879) $52.59* Total vacant space includes direct and sublet vacant space.** Deliveries include newly constructed and renovated buildings.Source: CBRE, Inc. 7/2014

After reaching a low of 4.9% in 2000, the vacancy rate increased to 11.8% in 4th quarter 2009 as

new supply consistently outpaced annual absorption levels in those later years. The market

© 2014 CBRE, Inc.


62

registered over 4.3 million square feet of positive absorption during of 2010 and the vacancy

rate declined to the 9.7%. However, net absorption was negative during 2011 and 2012 and the

vacancy increased to 10.6%. Although there was modest positive absorption in 2013, the

vacancy rate increased slightly due to significant new construction deliveries. The vacancy rate

increased to 11.3% during 2014 due to negative absorption.

DISTRICT OF COLUMBIA HISTORICAL YEAR END VACANCY RATES Submarket 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q2014Capitol Hill 8.3% 4.2% 4.3% 4.7% 4.6% 2.6% 5.2% 7.1% 4.3% 12.9% 11.3% 7.3% 12.6% 7.5% 7.8%Capitol Riverfront -- -- -- -- -- -- -- -- 7.0% 16.0% 9.5% 18.9% 18.7% 19.2% 14.3%CBD 4.9% 6.3% 7.8% 8.1% 6.8% 5.5% 4.4% 5.8% 7.6% 11.3% 10.5% 11.2% 11.5% 10.4% 10.7%East End 4.2% 6.6% 6.4% 6.3% 9.2% 7.8% 5.6% 6.3% 6.8% 9.6% 8.8% 9.0% 10.0% 10.0% 11.1%Georgetown 2.0% 5.8% 8.2% 8.2% 1.9% 4.6% 11.6% 12.3% 12.0% 15.1% 12.0% 13.5% 14.1% 9.9% 9.1%NOMA -- -- -- -- -- -- -- -- 9.7% 13.9% 14.5% 9.2% 9.7% 14.6% 14.1%Southwest 7.5% 6.6% 2.2% 2.0% 4.8% 11.7% 21.1% 9.8% 8.2% 20.6% 7.6% 6.9% 7.6% 11.4% 11.0%Uptown 3.5% 4.3% 5.3% 5.4% 4.3% 5.0% 2.8% 4.6% 5.5% 7.5% 8.2% 8.8% 7.4% 8.3% 13.7%West End 1.2% 3.8% 3.3% 3.5% 4.7% 4.2% 5.1% 6.3% 8.8% 8.8% 7.6% 9.9% 12.3% 9.0% 10.7%Total District of Columbia 4.9% 6.0% 6.2% 6.9% 6.8% 6.4% 6.6% 6.6% 7.4% 11.8% 9.7% 9.8% 10.6% 10.7% 11.3%Source: CBRE, Inc., competitive multi-tenanted buildings only.

The following chart outlines historical vacancy rates by building class.

© 2014 CBRE, Inc.


63

DISTRICT OF COLUMBIA YEAR END HISTORICAL VACANCY RATES BY BUILDING CLASS

Total 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q2014District of Columbia

Capitol Hill Cluster* 8.3% 4.2% 4.3% 4.8% 4.6% 2.6% 5.2% 7.1% 7.5% 14.0% 12.9% -- -- -- --Capitol Riverfront** -- -- -- -- -- -- -- -- 7.1% 16.0% 9.5% 18.9% 18.7% 19.2% 14.3%NOMA** -- -- -- -- -- -- -- -- 9.8% 13.9% 14.5% 9.2% 9.7% 14.6% 14.1%Capitol Hill** -- -- -- -- -- -- -- -- 4.3% 12.9% 11.3% 7.3% 12.6% 7.5% 7.8%CBD 4.9% 6.3% 7.8% 7.4% 6.8% 5.5% 4.4% 5.8% 7.6% 11.3% 10.5% 11.2% 11.5% 10.0% 10.7%East End 4.2% 6.6% 6.4% 9.1% 9.2% 7.8% 5.6% 6.3% 6.8% 9.6% 8.8% 9.0% 10.0% 10.0% 11.1%Georgetown 2.0% 5.8% 8.2% 4.6% 1.9% 4.6% 11.6% 12.3% 12.0% 15.1% 12.0% 13.5% 14.1% 9.9% 9.1%Southwest 7.5% 6.6% 2.2% 2.6% 4.8% 11.7% 21.1% 9.8% 8.2% 20.6% 7.6% 6.9% 7.6% 11.4% 11.0%Uptown 3.5% 4.3% 5.3% 5.8% 4.3% 5.0% 2.8% 4.6% 5.6% 7.5% 8.2% 8.8% 7.4% 8.3% 13.7%West End 1.2% 3.8% 3.3% 4.4% 4.7% 4.2% 5.1% 6.3% 8.8% 8.8% 7.6% 9.9% 12.3% 9.0% 10.7%

District of Columbia Total 4.9% 6.0% 6.2% 6.9% 6.8% 6.4% 6.6% 6.6% 7.4% 11.8% 9.7% 9.8% 10.6% 10.7% 11.3%

Trophy 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q2014District of Columbia

Capitol Hill Cluster* -- -- -- -- -- -- -- -- -- -- -- -- -- -- --Capitol Riverfront** -- -- -- -- -- -- -- -- -- -- -- -- -- -- --NOMA** -- -- -- -- -- -- -- -- -- -- -- -- -- -- --Capitol Hill** -- -- -- -- -- -- -- -- -- -- 5.6% 3.7% 3.4% 2.1% 4.9%CBD -- -- -- -- -- -- -- -- -- -- 14.1% 18.8% 15.5% 12.4% 12.6%East End -- -- -- -- -- -- -- -- -- -- 8.3% 11.0% 12.5% 13.5% 12.1%Georgetown -- -- -- -- -- -- -- -- -- -- -- -- -- -- --Southwest -- -- -- -- -- -- -- -- -- -- -- -- -- -- --Uptown -- -- -- -- -- -- -- -- -- -- -- -- -- -- --West End -- -- -- -- -- -- -- -- -- -- -- -- -- -- --

District of Columbia Total -- -- -- -- -- -- -- -- -- -- 9.8% 13.0% 13.0% 12.3% 11.8%

Class A 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q2014District of Columbia



Class B 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q2014District of Columbia

Capitol Hill Cluster* 10.2% 3.0% 1.6% 2.0% 1.6% 1.5% 1.3% 1.2% 1.5% 12.8% 25.6% -- -- -- --Capitol Riverfront** -- -- -- -- -- -- -- -- -- -- -- -- -- -- --NOMA** -- -- -- -- -- -- -- -- 1.5% 10.2% 35.2% 22.9% 24.8% 22.8% 22.7%Capitol Hill** -- -- -- -- -- -- -- -- 1.5% 15.9% 13.9% 2.8% 5.2% 3.3% 5.2%CBD 3.1% 5.4% 5.7% 7.3% 7.0% 4.8% 4.3% 4.9% 5.5% 8.1% 9.0% 10.3% 9.3% 8.6% 10.1%East End 4.1% 4.5% 6.3% 9.2% 7.2% 13.6% 6.0% 6.7% 6.6% 7.9% 9.3% 9.3% 11.1% 13.3% 14.7%Georgetown 1.9% 7.3% 7.6% 6.0% 2.4% 5.0% 6.3% 5.9% 9.3% 12.9% 8.2% 9.2% 17.0% 12.6% 10.1%Southwest 10.5% 0.0% 4.0% 5.8% 0.6% 1.5% 3.0% 2.6% 0.8% 1.0% 0.5% 3.9% 6.4% 11.8% 10.8%Uptown 6.2% 4.6% 4.2% 4.2% 5.1% 4.5% 3.7% 4.7% 5.4% 8.2% 8.9% 8.8% 7.6% 8.6% 14.9%West End 1.7% 3.4% 1.0% 7.9% 6.7% 3.0% 2.3% 0.0% 9.6% 8.1% 6.1% 0.0% 0.0% 0.0% 0.0%


Class C 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q2014District of Columbia



* Capitol Hill Cluster includes Capitol Hill, NOMA and Capitol Hill Riverfront.** Capitol Hill, NOMA and Captiol Riverfront were created as individual submarkets in 2008.Source: CBRE Market Research

After a very strong year in 2010, demand turned negative in 2011 and 2012. Although the

emerging submarket of NOMA posted significant positive net absorption in 2011 as large

government and nonprofit tenants moved to new efficiently designed buildings that were cost

effective, the established East End and CBD submarkets posted negative net absorption primarily

due to tenant downsizing and the implosion of a large law firm, Howrey LLP. For 2012, the

submarkets posted either minimal or negative absorption. The market trended upward during

2013 with 372,975 square feet of positive absorption. The positive absorption was driven

primarily by the CBD and NOMA submarkets. The market posted negative absorption during

second quarter 2014, primarily due to Intelsat’s relocation from the Uptown submarket to Tysons

© 2014 CBRE, Inc.


64

Corner. This Uptown submarket posted nearly 527,000 square feet of negative absorption

during the second quarter of 2014. The Georgetown and West End submarkets also posted

negative absorption, while the remaining submarkets posted positive absorption.

DISTRICT OF COLUMBIA HISTORICAL ABSORPTION IN THOUSANDS OF SFSubmarket 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q2014Capitol Hill (109) 1,146 1,218 602 113 1,208 1,616 331 45 (175) 179 29 (36) 165 (13) Capitol Riverfront -- -- -- -- -- -- -- -- 3 204 189 82 6 (22) 180 CBD 1,039 257 (407) 366 246 354 372 (899) (428) (447) 244 (75) (36) 576 8 East End 1,421 1,400 698 (225) 1,717 699 1,196 1,104 478 (197) 628 (246) (475) (455) (327) Georgetown (13) (110) (68) 85 59 (73) (29) (18) 16 (40) 48 (89) (8) 92 (25) NOMA -- -- -- -- -- -- -- -- 61 478 936 453 (5) 493 49 Southwest (68) 89 (247) 170 255 37 (763) 210 190 392 2,081 (91) (72) (379) (8) Uptown 53 (71) (41) (39) 114 12 149 (120) (68) (171) (115) (70) 47 (173) (471) West End 69 (92) 32 (47) (7) 18 (41) (44) (76) (9) 119 (60) (26) 75 (53) Total District of Columbia 2,392 2,619 1,184 911 2,498 1,047 884 233 222 35 4,308 (66) (605) 373 (659) Source: CBRE, Inc., competitive multi-tenanted buildings only.

From 2004 to 2006, low vacancies and strong demand throughout the District of Columbia

placed upward pressure on rents, providing sufficient net income to achieve adequate returns on

speculative office building development. As expected, declining demand in 2007, 2008 and

2009 increased vacancy rates and abated rent growth.

Asking rates continued to remain elevated due to high concession packages. The average asking

rental rate is $52.59 per square foot as of Second Quarter 2014.

© 2014 CBRE, Inc.


65

AVERAGE RENTAL RATES - DISTRICT OF COLUMBIATotal 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q2014District of Columbia

Capitol Hill Cluster* $39.37 $39.21 $43.62 $48.41 N/A N/A N/A N/A N/A N/A N/ACapitol Riverfront** -- -- -- -- $48.00 $47.32 $47.66 $46.45 $48.52 $47.15 $45.00NOMA** -- -- -- -- $46.90 $41.69 $47.63 $46.23 $44.07 $44.53 $48.06Capitol Hill** -- -- -- -- $49.76 $63.03 $59.58 $55.11 $57.57 $57.63 $58.14CBD $37.71 $40.93 $44.03 $49.65 $51.46 $49.08 $53.20 $53.34 $54.32 $52.89 $53.67East End $42.70 $43.89 $45.20 $52.60 $50.88 $50.63 $52.24 $53.08 $56.12 $55.00 $56.77Georgetown $32.11 $37.17 $35.81 $48.03 $43.77 $41.17 $45.22 $44.56 $41.86 $40.77 $42.45Southwest $40.96 $48.72 $44.78 $49.36 $51.78 $49.83 $51.30 $47.99 $48.96 $49.18 $48.17Uptown $29.95 $32.02 $32.41 $34.48 $34.95 $36.29 $35.40 $35.91 $37.23 $38.75 $39.51West End $41.23 $43.19 $43.50 $49.08 $45.57 $43.91 $43.87 $45.66 $34.09 $49.59 $50.56

District of Columbia Total $39.83 $42.20 $44.21 $49.86 $49.61 $48.48 $51.19 $50.92 $52.08 $51.50 $52.59

Class A 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q2014District of Columbia

Capitol Hill Cluster* $40.00 $40.32 $44.19 $48.59 N/A N/A N/A N/A N/A N/A N/ACapitol Riverfront** -- -- -- -- $48.00 $47.43 $47.75 $46.56 $48.79 $47.32 $45.13NOMA** -- -- -- -- $45.36 $45.58 $51.12 $48.71 $47.02 $48.51 $51.13Capitol Hill** -- -- -- -- $49.50 $71.38 $58.33 $56.28 $58.89 $58.00 $59.29CBD $40.48 $43.76 $48.78 $53.36 $53.79 $51.37 $54.03 $52.82 $54.75 $53.74 $56.76East End $47.21 $47.34 $48.79 $58.75 $54.05 $52.46 $53.22 $52.94 $57.04 $55.28 $55.12Georgetown N/A $39.25 $38.51 $50.53 $45.54 $42.38 $47.44 $46.27 $46.05 $43.86 $46.32Southwest $42.19 $49.01 $46.07 $50.58 $53.07 $50.71 $53.55 $56.72 $51.04 $50.50 $50.99Uptown $36.59 $36.60 $37.73 $37.22 $38.97 $38.12 $39.85 $39.46 $48.91 $39.50 $45.42West End $41.63 $43.51 $46.59 $49.08 $46.55 $44.34 $44.53 $45.69 $43.89 $50.00 $50.92


Class B 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q2014District of Columbia

Capitol Hill Cluster* $34.28 $34.11 $37.39 $48.01 N/A N/A N/A N/A N/A N/A N/ACapitol Riverfront** -- -- -- -- N/A N/A N/A N/A N/A N/A N/ANOMA** -- -- -- -- $48.50 $38.11 $43.93 $41.94 $38.75 $40.00 $40.29Capitol Hill** -- -- -- -- $52.64 $46.74 $45.36 $44.52 $52.76 $51.99 $53.75CBD $35.31 $38.70 $38.55 $45.83 $45.74 $44.65 $45.06 $45.81 $44.85 $46.49 $45.91East End $37.45 $40.29 $42.67 $44.90 $44.28 $44.81 $44.62 $44.18 $44.37 $44.26 $45.73Georgetown $31.27 $33.20 $34.34 $43.74 $41.15 $39.56 $42.02 $41.91 $39.18 $38.65 $39.87Southwest N/A $39.00 $42.94 $43.92 $43.94 $36.25 $43.99 $46.06 $47.80 $46.67 $45.77Uptown $27.03 $27.13 $29.93 $30.86 $30.78 $33.19 $31.93 $32.92 $37.20 $39.07 $39.58West End N/A $38.73 $44.00 N/A $43.78 $42.21 $39.50 $42.00 N/A $47.00 $48.00


Class C 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2Q2014District of Columbia

Capitol Hill Cluster* N/A $28.82 N/A $43.00 N/A N/A N/A N/A N/A N/A N/ACapitol Riverfront** -- -- -- -- N/A $33.74 $33.00 $40.48 $32.40 $34.00 $34.00NOMA** -- -- -- -- N/A $33.00 N/A N/A $31.50 N/A N/ACapitol Hill** -- -- -- -- N/A N/A $47.00 $46.95 $46.00 $44.00 $45.48CBD N/A $32.05 $34.55 $32.56 $27.15 $28.81 $35.58 $37.16 $39.23 $38.98 $38.19East End $27.98 $27.96 $31.31 $39.92 $39.35 $38.39 $39.40 $39.97 $39.29 $41.50 $40.94Georgetown N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/ASouthwest N/A N/A N/A N/A N/A N/A $40.00 $40.00 $40.00 $39.00 $39.00Uptown $24.34 $32.31 $30.00 $37.88 $36.70 $35.49 $32.91 $34.60 $34.46 $30.79 $31.94West End N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A


* Capitol Hill Cluster includes Capitol Hill, NOMA and Capitol Hill Riverfront.** Capitol Hill, NOMA and Captiol Riverfront were created as individual submarkets in 2008.Source: CBRE Market Research

Scheduled deliveries for buildings under construction for 2014 through 2017 are summarized as

follows:

© 2014 CBRE, Inc.


66

UNDER CONSTRUCTION/RENOVATION 2014-2017

Submarket No. Buildings NRA Avail NRA % LeasedCapitol Riverfront 0 0 0 0.0%Capitol Hill 0 0 0 0.0%CBD 3 446,402 256,152 42.6%East End 3 793,491 331,126 58.3%Georgetown 0 0 0 0.0%NOMA 0 0 0 0.0%Southwest 2 552,000 551,000 0.0%Uptown 2 74,349 19,788 0.0%West End 0 0 0 0.0%Total 10 1,866,242 1,158,066 37.9%Source: Costar/CBRE, Inc. 7/2014

D.C. BUILDINGS UNDER CONSTRUCTION/RENOVATION FOR 2014 - 2017 DELIVERYProject Developer Delivery NRA SF Avail % Leased

Capitol Riverfront

Total Capitol Riverfront 0 0 0.0%

Capitol Hill

0 0 0.0%

CBD

1200 17th Street, NW First Potomac Jul-14 168,000 63,000 62.5%

900 16th Street, NW The JBG Cos Dec-15 125,190 40,725 67.5%

2000 K Street, NW N/A Dec-16 153,212 152,427 0.5%

446,402 256,152 42.6%

East End799 9th Street, NW Brookfield Office Properties Apr-14 204,025 116,660 42.8%900 G Street, NW MRP Realty Jan-15 111,466 111,466 0.0%601 Massachusetts Ave, NW (635 Mass Ave) Boston Properties Oct-15 478,000 103,000 78.5%

793,491 331,126 58.3%

Uptown

1525 14th Street, NW Furioso Development Sep-14 46,588 0 100.0%1728 14th Street, NW N/A Dec-14 27,761 19,788 28.7%

74,349 19,788 0.0%

Georgetown0 0 0.0%

NOMA0 0 0.0%

Total NOMA 0 0 0.0%

Southwest400 6th Street, SW Clark Construction/Trammell Crow Sep-15 342,000 342,000 0.0%800 Maine Avenue, SW Madison-Marquette Jul-17 210,000 209,000 0.5%

552,000 551,000 0.2%

West EndTotal West End 0 0 0.0%

Total District of Columbia 1,866,242 1,158,066 37.9%Source: CBRE, 7/2014

Total CBD

Total Southwest

Total Capitol Hill

Total Georgetown

Total Uptown

Total East End

Due to the uncertainty of the economy and pre-leasing requirements of lenders, many developers

have signed leases in buildings before beginning construction to reduce lease-up risk. Overall

pre-leased occupancy rate for the under construction supply was 37.9% as of the date of our

survey.

As of Second Quarter 2014, nearly 1.9 million square feet of office space are under construction

or renovation in the District of Columbia. This space is situated in 10 office buildings with

© 2014 CBRE, Inc.


67

calendar year 2014 through 2017 delivery dates. Current development is located in the core

submarkets of the CBD and East End, as well as Uptown and Southwest.

DISTRICT OF COLUMBIA CONCLUSION

As noted in the previous section, vacancies in the District of Columbia over the next 24 months

are expected to increase. The analysis is based solely on space under construction with our

demand projections at 525,000 square feet per year. Based on this analysis, the market’s

vacancy rate will increase 11.7% over the next 24 months (assuming no new construction starts).

EAST END OFFICE SUBMARKET

The East End submarket is the largest submarket in terms of square footage of the District of

Columbia office market with over 42 million square feet, or approximately 34% of the office

supply of the market. As of the Second Quarter 2014, the East End submarket had a vacancy

rate of 11.1%, in-line with the District of Columbia average of 11.3%. Net absorption during the

first two quarters of 2014 has been negative with 326,740 square feet. The average asking

rental rate of $56.77 per square foot is above the District of Columbia average of $52.59 per

square foot, and is the second highest submarket behind Capitol Hill’s $58.14 per square foot.

Asking rates at office properties currently under construction in the East End area typically range

from $35 to $55 per square foot, net of all expenses. Tenant improvement packages are

typically $65-$100 over shell (drop ceiling, painted wallboard without partitioning, and carpeted

tenant area) with ten to fifteen year lease terms for large tenants. Most leases include an annual

rent escalator of 2.25% to 2.50%, and often have mid-term steps on larger and longer-term

leases. Over the past two years it has become common for landlords to provide free rent on

longer deals.

The following chart summarizes the East End office submarket.

© 2014 CBRE, Inc.


68

EAST END OFFICE MARKET SUMMARYSECOND QUARTER 2014

Number of Buildings 199Total Rentable Square Feet 42,717,834Vacant Square Feet with Sublet 4,725,035

Vacancy Rate Year-End 2003 6.3%Vacancy Rate Year-End 2004 9.2%Vacancy Rate Year-End 2005 7.8%Vacancy Rate Year-End 2006 5.6%Vacancy Rate Year-End 2007 6.3%Vacancy Rate Year-End 2008 6.8%Vacancy Rate Year-End 2009 9.6%Vacancy Rate Year-End 2010 8.8%Vacancy Rate Year-End 2011 9.0%Vacancy Rate Year-End 2012 10.0%Vacancy Rate Year-End 2013 10.0%Vacant Rate 2nd Quarter 2014 11.1%

Net Absorption Year-End 2003 (225,000)Net Absorption Year-End 2004 1,717,000Net Absorption Year-End 2005 698,965Net Absorption Year-End 2006 1,195,575Net Absorption Year-End 2007 1,104,181Net Absorption Year-End 2008 477,853Net Absorption Year-End 2009 (196,669)Net Absorption Year-End 2010 627,524Net Absorption Year-End 2011 (245,622)Net Absorption Year-End 2012 (475,259)Net Absorption Year-End 2013 (455,192)Net Absorption YTD (326,740)

Additions to Inventory 2003 888,823Additions to Inventory 2004 1,875,954Additions to Inventory 2005 366,375Additions to Inventory 2006 1,422,312Additions to Inventory 2007 1,238,577Additions to Inventory 2008 1,184,036Additions to Inventory 2009 766,461Additions to Inventory 2010 363,041Additions to Inventory 2011 169,038Additions to Inventory 2012 0Additions to Inventory 2013 94,138Additions to Inventory YTD 2014 863,741

Under Construction Inventory 793,491

Compiled By: CBRE

© 2014 CBRE, Inc.


69

Overall, the submarket is stable and is expected to have positive, albeit slow, growth moving

forward given the uncertainty with respect to federal government spending.

There are two office buildings currently under construction and another building which was

recently renovated in the subject’s submarket.

• 601 Massachusetts Avenue, NW is a 478,000 square-foot office building currently under construction. The building broke ground in Second Quarter 2013 and is scheduled for delivery in Fourth Quarter 2015. The developer is Boston Properties.

• 900 G Street, NW is a 111,466 square-foot office building currently under construction just south of the subject property across G Street. The building broke ground in Second Quarter 2013 and is scheduled for delivery in First Quarter 2015. The developer is MRP Realty.

• 799 9th Street, NW is a 204,025 square-foot office building constructed in 2001. The property was recently renovated to include a full lobby and building entry renovation, new fitness center, new common areas and restrooms and new rooftop terrace. Quoted rents for office space range from $44 to $52 per square-foot on a triple net basis.

COMPETITIVE PROPERTIES

Comparable properties were surveyed in order to identify the current occupancy within the

competitive market. The comparable data is summarized in the following table:

SUMMARY OF COMPARABLE OFFICE RENTALS

Comp. No. Name Location Occupancy

1 733 10th Street, NW 733 10th Street, NW,Washington, DC

97%

2 900 G Street, NW 900 G Street, NW,Washington, DC

0%

3 799 9th Street, NW 799 9th Street, NW,Washington, DC

5%

4 City Center DC South 800 10th Street, NW,Washington, DC

100%

5 Metro Center I 700 13th Street NW,Washington, DC

84%

6 The Victor Building 750 9th Street, NW,Washington, DC

98%

Subject Martin Luther King Jr. Memorial Library

901 G Street, NW,Washington, District of Columbia

100%

Compiled by CBRE

© 2014 CBRE, Inc.


70

Comparable Two is a project currently under construction. Comparable Three is a project that

was recently renovated. These properties are in close proximity to the subject and will be direct

competitors.

SUBJECT ANALYSIS

The improvements are currently the home of the Martin Luther King Jr. Memorial Library;

however, as noted earlier in the report, the highest and best use of the subject is for office use

with ground level retail space.

Absorption

The following chart summarizes recently constructed and under construction competitive buildings

in the East End and CBD submarkets that have recently stabilized or are currently leasing.

COMPARABLE SPACE ABSORPTION - EAST END & CBD SUBMARKETS

Property Size (SF) StatusDate

CompletedDate

Stabilized%

Leased Major Tenant(s)Lease Up

Period

799 9th Street, NW 204,025 Lease-Up 2Q 2014 n/ap 73.2%Fulbright & Jaworski;

Nixon Peabody 36 Months

900 G Street, NW 111,466 Under Const. n/ap n/ap 0.0% n/ap n/ap

601 Massachusetts Ave. NW 478,000 Under Const. n/ap n/ap 78.5% Arnold & Porter, LLP n/ap

1200 17th Street, NW 168,769 Under Const. n/ap n/ap 59.6% Pillsbury Winthrop Shaw Pittman n/ap

CityCenterDC 517,891 Stabilized 4Q 2013 3Q 2014 96.5% Covington Burling, LLP 9 Months

1700 New York Avenue, NW 121,987 Stabilized 4Q 2013 3Q 2014 97.4% Sullivan & Cromwell 9 Months

733 10th Street, NW 169,271 Stabilized 4Q 2011 1Q 2013 97.3% NAM, CMGRP 15 Months

1000 Connecticut Ave., NW 385,791 Stabilized 2Q 2012 4Q 2012 99.0% Arent Fox, LLP 6 Months

Subject Property 218,461

Source: CoStar Group; Compiled by CBRE

The adjacent building, 733 10th Street, NW, was a newly constructed building that reached

stabilized occupancy in less than two years. Another building at 799 9th Street, NW was recently

renovated following the expiration of its leases in First Quarter 2013. The building was

renovated and is currently 73.2% leased, although it is only approximately 5% occupied. The

building sold in June 2012 and the broker estimated that it would take approximately four years

to stabilize the building.

Considering the subject’s location and physical characteristics, including its open floor plates, we

have estimated lease-up of the subject’s office space within three years.

CONCLUSION

As noted in the previous section, vacancies in the District of Columbia over the next 24 months

are expected to increase. The analysis is based solely on space under construction with our

demand projections at 595,000 square feet per year. Based on this analysis, the market’s

vacancy rate will increase 11.7% over the next 24 months (assuming no new construction starts).

© 2014 CBRE, Inc.


71

With respect to the subject, we believe the subject is well located for an office building. It is in

good proximity to employment centers, major roadways, Metrorail and retail amenities. It is

located in an office submarket achieving among the highest rental rates in the Washington, DC

Metro Area. Rental rates in the subject's submarket, currently about $55 per square-foot, are

considered sufficient to support an adequate return on cost. Additionally, there is an office

building currently under construction across the street from the subject. Overall, office

development on the subject site is considered feasible, particularly if a lease were signed for a

majority of the subject’s office density prior to completion.

Based on the foregoing analysis, CBRE, Inc.’s conclusion of stabilized occupancy for the subject is

illustrated in the following table. This estimate considers both the physical and economic factors

of the market.

OCCUPANCY CONCLUSIONS

Washington, DC Region 84.8%

District of Columbia 88.7%

East End Submarket 88.9%

Rent Comparables 95.0%

Subject's Current Occupancy 100.0%

Subject's Stabilized Occupancy 90.0%

Lease-up Period 3 Years

Compiled by CBRE

COSTS TO ACHIEVE STABILIZED OPERATIONS

A stabilized occupancy for the subject has been estimated to be 90.0%, while, assuming the

subject is operated as an office building with ground level retail space, the subject is currently

vacant. Consequently, an adjustment is warranted reflecting the rent loss, expense reimbursement

loss, tenant improvement allowance cost and leasing commission cost over the holding period.

Additionally, we have included profit to reflect the developer’s incentive to lease the property to

stabilization.

With the estimated lease-up period estimated in the preceding discussion, an adjustment for the

subject has been estimated. As noted earlier in the market analysis, we have estimated an

absorption period of three years. We have deducted 18 months of rent loss since leases will be

staggered over the absorption period. The Lease-Up Discount Analysis schedule is presented

below. This analysis will be deducted as a line item from each approach in order to render an

“as is” value estimate.

© 2014 CBRE, Inc.


72

Category CostEstimated Lease-Up Time Period 3 YearsRent Loss (18 months Blended) $15,334,073Expense Reimbursement Loss $7,083,277Tenant Improvement Allowances $21,846,100Leasing Commissions $7,667,036Subtotal $51,930,489Profit (20%) $10,386,098Total Lease-Up Discount $62,316,587Rounded $62,300,000Compiled by: CBRE

LEASE-UP DISCOUNT

© 2014 CBRE, Inc.


73


In appraisal practice, the concept of highest and best use represents the premise upon which

value is based. The four criteria the highest and best use must meet are:

• legally permissible; • physically possible; • financially feasible; and • maximally productive.

The highest and best use analysis of the subject is discussed below.

AS VACANT

Legally Permissible

The legally permissible uses were discussed in the Site Analysis and Zoning Sections.

Physically Possible

The subject is adequately served by utilities, and has an adequate shape and size, sufficient

access, etc., to be a separately developable site. There are no known physical reasons why the

subject site would not support any legally probable development (i.e. it appears adequate for

development).

Existing structures on similar sites provides additional evidence for the physical possibility of

development.

Financially Feasible

The determination of financial feasibility is dependent primarily on the relationship of supply and

demand for the legally probable land uses versus the cost to create the uses.

Lower density uses, such as retail development, do not maximize the site’s development potential.

A hotel development was also considered in the analysis; however, there have been few new

hotels developed in the subject’s neighborhood in the past several years and hotel development

is not considered feasible given current capitalization rates.

As discussed in the market analysis, the subject office market is generally stabilized. Development

of new office properties has occurred in the past few years, including a building currently under

construction across G Street, NW from the subject.

As discussed in the multi-family market analysis, the subject multi-family market is also generally

stabilized; however, apart from the multi-family component of the CityCenterDC project, new

multi-family development has been concentrated further north near Mount Vernon Triangle.

The following chart summarizes the alternative land uses.

© 2014 CBRE, Inc.


74

ALTERNATIVE USE COMPARISON - DIRECT CAPITALIZATIONProperty Type Office Multi-FamilyPotential Rental Income $75.00 $45.00Other/Parking Income $2.00 $5.00Vacancy & Credit Loss 10.00% 5.00%EGI $69.30 $47.50Operating Expense Ratio 35% 35%Indicated Operating Expenses $24.26 $16.63Net Operating Income $45.05 $30.88Capitalization Rate 5.00% 4.50%$/SF Value Indication $900.90 $686.11

Compiled by CBRE

* Multi-family rents estimated at $3.75 PSF; Office rental income represents a full service lease structure

ALTERNATIVE USE COMPARISON - COST ANALYSISMVS Sec/Page 15/17/B 11/15/BMVS Base Cost/SF $249.87 $227.05Current Cost Multiplier 1.01 1.08Local Cost Multiplier 1.10 1.10MVS Cost/SF $277.61 $269.74TI Allowance $100.00 $0.00Leasing Commissions @ 5.0% $37.50 $0.00Other Costs (Sprinkler) $2.00 $2.00Indirect Costs @ 20.0% $55.52 $53.95MVS Total Cost/SF $472.63 $325.68Profit @ 25.0% $118.16 $81.42Total Cost/SF $590.78 $407.10Compiled by CBRE

HIGHEST & BEST USE - RESIDUAL ANALYSISProperty Type Office Multi-Family$/SF Value Indication $900.90 $686.11Total Cost/SF $590.78 $407.10Residual Value $310.12 $279.01Compiled by CBRE

As shown above, both office and multi-family uses are financially feasible; however, office uses

yield the highest return to the land.

In addition to the residual analysis above, we have also considered recent land sales for multi-

family development in the subject’s market area. The following chart summarizes recent multi-

family sales in the District of Columbia.

© 2014 CBRE, Inc.


75

SUMMARY OF COMPARABLE MULTI-FAMILY LAND SALESActual Sale Adjusted Sale Size Allowable Price Price Per

No. Property Location Type Date Proposed Use Price Price 1 (SF) Bldg. Area (SF) Per SF Bldg. Area

1 1427 Rhode Island Avenue,NW, Washington, DC

Sale Jun-14 Multi-family (condo)

$7,275,000 $7,275,000 6,181 44,503 $1,176.99 $163.47

2 1711 Florida Avenue, NW,Washington, DC

Sale Feb-14 Multi-family $14,900,000 $15,400,000 25,921 90,723 $594.11 $169.75

3 2337 Champlain Street, NW,Washington, DC

Sale Nov-13 Multi-family (condo)

$5,280,000 $5,280,000 13,853 29,992 $381.14 $176.05

4 1101 Rhode Island Avenue,NW, Washington, DC

Sale Sep-13 Multi-family (condo)

$5,200,000 $5,200,000 11,172 33,516 $465.45 $155.15

5 1628 11th Street, NW,Washington, DC

Sale Aug-13 Multi-family $5,500,000 $5,500,000 10,200 35,000 $539.22 $157.14

6 1210 - 1214 9th Street, NW,Washington, DC

Sale Aug-13 Multi-Family $11,000,000 $11,000,000 24,279 60,000 $453.07 $183.33

7 1309-1313 13th Street, NW,Washington, DC

Sale Jul-13 Multi-family (Condominium)

$7,700,000 $7,700,000 14,269 60,000 $539.63 $128.33

8 1013 M Street, NW,Washington, DC

Sale May-13 Multi-family (condominium)

$8,000,000 $8,000,000 10,931 78,000 $731.86 $102.56

1 Adjusted sale price for cash equivalency and/or development costs (where applicable)Compiled by CBRE

Transaction

As noted later in the report, office density sales have ranged from $207.37 to $301.37 per FAR,

while, as noted in the chart above, multi-family density transacts at lower per-FAR pricing.

Maximally Productive - Conclusion

The final test of highest and best use of the site as if vacant is that the use be maximally

productive, yielding the highest return to the land.

Based on the information presented above and upon information contained in the market and

neighborhood analysis, we conclude that the highest and best use of the subject as if vacant

would be the development of an office property. More specifically, the subject would be

developed to maximize the site’s allowable density, which is typical of similar projects in this

market. Our analysis of the subject and its respective market characteristics indicate the most

likely buyer, as if vacant, would be a developer.

AS IMPROVED

Legally Permissible

The site has been improved with an office development that is a legal, nonconforming use.

As noted earlier in the report, the building and major interior public spaces were designated a

Historic Landmark in 2007 and placed on the historic register. The building may be renovated

subject to review by the DC Historic Preservation Review Board (HPRB), but cannot be

demolished.

© 2014 CBRE, Inc.


76

Physically Possible

The layout and positioning of the improvements are considered functional for office use. While it

would be physically possible for a wide variety of uses, based on the legal restrictions and the

design of the improvements, the leasing of the property for office users would be the most

functional use.

Financially Feasible

The financial feasibility of an office property is based on the amount of rent which can be

generated, less operating expenses required to generate that income; if a residual amount exists,

then the land is being put to a productive use. Based upon the income capitalization approach

conclusion, the subject is capable of producing a positive net cash flow and utilization of the

improvements for office purposes is considered financially feasible.

Maximally Productive - Conclusion

As shown in the applicable valuation sections, buildings that are leased to office tenants have

been acquired or continue to be used by office owners/tenants. None of the comparable

buildings have been acquired for conversion to an alternative use.

As noted earlier in the report, the building can accommodate two additional floors without any

modification of foundations as long as the library’s fourth floor continues to be used for offices.

Since office development is feasible,

Based on the foregoing, the highest and best use of the property, as improved, is for renovation

and leasing for office use.

© 2014 CBRE, Inc.

Appraisal Methodology

77

Appraisal Methodology

In appraisal practice, an approach to value is included or omitted based on its applicability to the

property type being valued and the quality and quantity of information available.

COST APPROACH

The cost approach is based on the proposition that the informed purchaser would pay no more

for the subject than the cost to produce a substitute property with equivalent utility. This approach

is particularly applicable when the property being appraised involves relatively new improvements

that represent the highest and best use of the land, or when it is improved with relatively unique

or specialized improvements for which there exist few sales or leases of comparable properties.

SALES COMPARISON APPROACH

The sales comparison approach utilizes sales of comparable properties, adjusted for differences,

to indicate a value for the subject. Valuation is typically accomplished using physical units of

comparison such as price per square foot, price per unit, price per floor, etc., or economic units

of comparison such as gross rent multiplier. Adjustments are applied to the physical units of

comparison derived from the comparable sale. The unit of comparison chosen for the subject is

then used to yield a total value. Economic units of comparison are not adjusted, but rather

analyzed as to relevant differences, with the final estimate derived based on the general

comparisons.

INCOME CAPITALIZATION APPROACH

The income capitalization approach reflects the subject’s income-producing capabilities. This

approach is based on the assumption that value is created by the expectation of benefits to be

derived in the future. Specifically estimated is the amount an investor would be willing to pay to

receive an income stream plus reversion value from a property over a period of time. The two

common valuation techniques associated with the income capitalization approach are direct

capitalization and the discounted cash flow (DCF) analysis.

METHODOLOGY APPLICABLE TO THE SUBJECT

In valuing the subject, all three approaches are applicable and have been utilized.

© 2014 CBRE, Inc.

Land Value

78

Land Value

The following map and table summarize the comparable data used in the valuation of the subject

site. A detailed description of each transaction is included in the addenda.

SUMMARY OF COMPARABLE LAND SALES

Actual Sale Adjusted Sale Allowable Price PerNo. Property Location Type Date Proposed Use Price Price 1 Bldg. Area (SF) SF (FAR)

1 2900 K Street, NW,Washington, DC

Sale Aug-13 Office $39,000,000 $39,000,000 133,000 $293.23


Sale May-12 Office building $33,275,795 $33,475,795 111,078 $301.37


Sale Oct-11 Office Building $39,600,000 $39,974,207 170,130 $234.96

4 New York Ave & 7th Street,NW, Washington, DC

Sale Aug-11 Office Building $59,000,000 $59,100,000 285,000 $207.37

Subject 901 G Street, NW,Washington, District of Columbia

--- --- Office development

--- --- 241,467 ---

1 Adjusted sale price for cash equivalency and/or development costs (where applicable)

Compiled by CBRE

Transaction

The sales utilized represent the best data available for comparison with the subject and were

selected from the District of Columbia. While Sales Three and Four are somewhat older

transactions, market conditions are considered relatively similar relative to the transaction dates.

© 2014 CBRE, Inc.

Land Value

79

It should be noted that, while there have been sufficient land sales to estimate market value by a

sales comparison approach, the volume of land sales has diminished somewhat since prior to the

most recent recession. The volume has declined primarily due to declining market conditions for

office development, federal austerity measures that have decreased demand for GSA tenants,

and a decline in the available land for office uses as projects are developed.

In the analysis we have used the subject’s above-grade FAR in the calculation of the land value,

which is relatively consistent with the Preliminary Zoning Analysis in the Development Study

prepared by Studios Architecture (dated March 2013).

DISCUSSION/ANALYSIS OF LAND SALES

Land Sale One

This comparable represents the sale of 133,000 square-feet of air rights supporting the office

component of a mixed-use property in Georgetown at 2900 K Street, NW. The property is

already built, and a 99-year ground lease has been drafted. The initial ground rent is

$1,375,000 which is flat for the first two years, and there are minimum annual increases that are

somewhat above the expected CPI ranging from 3.95% - 5% over years 3-16. There is a

repurchase option in year 15 based on the 16th year rent divided by 5.95%. An overall ground

lease cap rate of 3.5% is indicated.

The property sold in August 2013 for $39,000,000 or $293.23 per FAR. The pricing was based

on the market value of the ground lease.

Land Sale Two

This comparable represents the sale of a 13,068 square-foot site at 624 9th Street, NW (also

known as 900 G Street, NW). The site was improved with a Class C office building at the time of

the sale. Demolition costs have been included in the adjusted sale price. A 9-story office

building is currently under construction on the site including a below-grade parking garage and

7,000 square-feet of ground level retail space. Rental rates were projected in the low $50 per

square-foot range (NNN).

The property sold in May 2012 for $33,475,795 or $301.37 per FAR.

Land Sale Three

This comparable represents the sale of a 17,013 square-foot site at 1200 17th Street, NW.

Improvements at the time of the sale included an 83,157 square-foot office building, which was

demolished. Demolition costs have been included in the adjusted sale price. The site was zoned

SP2 at the time of the sale; however, the zoning was changed to C-4 following the sale. The new

zoning classification allows development to 10.0 FAR, which is relatively consistent with the

building developed. Pro-forma rental rates were estimated at $52 per square-foot (NNN).

The property sold in October 2011 for $39,974,207 or $234.96 per FAR.

© 2014 CBRE, Inc.

Land Value

80

Land Sale Four

This comparable represents the assemblage of 15 lots from four owners (transferred on four

deeds) of approximately 285,000 SF in density for office development in the District of

Columbia's East End submarket near Mount Vernon Triangle. The buyer, the Association of

American Medical Colleges, will reportedly develop the site for a future headquarters. The site

features a corner location and good frontage and visibility. The site was occupied by several

storefront retail buildings at the time of the sale. The property owner had sufficient CLDs to allow

for a 100% commercial development. The CLDs have already been acquired, requiring no

adjustment. We have estimated demolition costs at $100,000 and included the cost in the

adjusted sale price.

The property sold in August 2011 for $59,100,000 or $207.37 per FAR.

ANALYSIS OF COMPARABLE OFFICE LAND SALES

The unadjusted sale prices range from $207.37 to $301.37 per FAR and all transferred since

August 2011.

Conditions of Sale

This adjustment accounts for extraordinary conditions of sale, such as transactions between

related properties that would alter the cash value transaction of an improved sale. Each of the

sales are considered market value transactions and do not warrant adjustment.

Market Conditions (Time)

While Sales Two, Three and Four are slightly older transactions, market conditions for office

development are considered relatively similar since the dates of sale, requiring no adjustment for

market conditions.

Size/Shape

Based on the principle of economies of scale, a larger site with respect to development density

would most likely sell for a lower price per square foot. Additionally, larger sites may be phased

for future development over a holding period. Although there is some variance in size, no

adjustments are considered warranted.

Corner/Frontage/Views

No adjustments are necessary for corner/frontage/views.

Zoning/Density/Entitlements

Land Sale Three requires an upward adjustment since a zoning change was required to develop

the office building. The remaining comparables are located in zoning classifications allowing for

office development, requiring no adjustment.

© 2014 CBRE, Inc.

Land Value

81

Location

Sale One is located in Georgetown, which has lower rental rates relative to the subject, requiring

an upward adjustment. Sale Two is located adjacent to the subject, requiring no adjustment.

Sales Three and Four have inferior locations relative to the subject, requiring upward

adjustments.

SUMMARY OF ADJUSTMENTS

Based on our comparative analysis, the following chart summarizes the adjustments warranted to

each comparable.

LAND SALES ADJUSTMENT GRID

Comparable Number 1 2 3 4 Subject

Transaction Type Sale Sale Sale Sale ---

Transaction Date Aug-13 May-12 Oct-11 Aug-11 ---

Proposed Use Office Office building Office Building Office Building Office development

Actual Sale Price $39,000,000 $33,275,795 $39,600,000 $59,000,000 ---

Adjusted Sale Price 1 $39,000,000 $33,475,795 $39,974,207 $59,100,000 ---

Size (Acres) 0.76 0.30 0.39 0.73 1.74

Size (SF) 33,269 13,068 17,013 31,629 75,762

Allowable Bldg. Area (SF) 133,000 111,078 170,130 285,000 241,467

Price Per Bldg. Area $293.23 $301.37 $234.96 $207.37 ---

Price ($ PSF FAR) $293.23 $301.37 $234.96 $207.37

Property Rights Conveyed 0% 0% 0% 0%Financing Terms 1 0% 0% 0% 0%

Conditions of Sale 0% 0% 0% 0%

Market Conditions (Time) 0% 0% 0% 0%

Subtotal $293.23 $301.37 $234.96 $207.37Size/Shape 0% 0% 0% 0%Corner/Frontage/Views 0% 0% 0% 0%Zoning/Density/Entitlements 0% 0% 5% 0%Location 5% 0% 10% 10%Zoning/Density 0% 0% 0% 0%

Total Other Adjustments 5% 0% 15% 10%

Value Indication for Subject $307.89 $301.37 $270.20 $228.11

Absolute Adjustment 5% 0% 15% 10%1 Adjusted sale price for cash equivalency and/or development costs (where applicable)

Compiled by CBRE

CONCLUSION

Based on the preceding analysis, Comparable Two was the most representative of the subject

site, and warranted greatest consideration because it required the least gross adjustment and is

located adjacent to the subject. In conclusion, a price per FAR indication towards the higher end

of the range was most appropriate for the subject. The following table presents the valuation

conclusion:

© 2014 CBRE, Inc.

Land Value

82

CONCLUDED LAND VALUE

$ PSF FAR Subject FAR Total

$300.00 x 241,467 = $72,440,100$305.00 x 241,467 = $73,647,435

Indicated Value: $73,000,000

(Rounded $ PSF FAR) $302.32

Compiled by CBRE

© 2014 CBRE, Inc.

Excess Density Value

83

Excess Density Value

In the analysis of the subject’s excess density we have used similar comparable data relative to

the land value.

As noted in the Zoning Analysis, we have assumed the subject can accommodate two additional

floors of development, or approximately 131,042 SF (131,042 SF x 2) based on the gross

building area of the upper floors noted in the Improvements Analysis.

As noted earlier in the report, the subject has only one level of below-grade parking and requires

development of a parking lift system or parking reduction/elimination from the DC Board of

Zoning Adjustment (BZA) to permit development of the excess density. The parking lift system can

accommodate 475 cars at a cost of $7,250,000 according to an estimate provided in August

2012. In the analysis we have deducted the cost of the lift system from the excess density to

derive an As-Is value for the subject’s excess density.

The following chart summarizes the value of the subject’s excess density.

CONCLUDED EXCESS DENSITY VALUE

$ PSF FAR Subject FAR Total

$300.00 x 115,000 = $34,500,000$305.00 x 115,000 = $35,075,000

Rounded: $35,000,000

Less Parking Lift System ($7,250,000)

Concluded Excess Density Value $27,750,000

(Rounded $ PSF FAR) $241.30

Compiled by CBRE

© 2014 CBRE, Inc.

Cost Approach

84

Cost Approach

In estimating the replacement cost new for the subject, the following methods/data sources have

been utilized (where available):

• the comparative unit method has been employed, utilizing the Marshall Valuation Service (MVS) cost guide, published by Marshall and Swift, LLC;

MARSHALL VALUATION SERVICE

Direct Cost

Salient details regarding the direct costs are summarized in the Cost Approach Conclusion at the

end of this section. The MVS cost estimates include the following:

1. average architect’s and engineer’s fees for plans, plan check, building permits and survey(s) to establish building line;

2. normal interest in building funds during the period of construction plus a processing fee or service charge;

3. materials, sales taxes on materials, and labor costs; 4. normal site preparation including finish grading and excavation for foundation and

backfill; 5. utilities from structure to lot line figured for typical setback; 6. contractor’s overhead and profit, including job supervision, workmen’s compensation,

fire and liability insurance, unemployment insurance, equipment, temporary facilities, security, etc.;

7. site improvements (included as lump sum additions); and 8. initial tenant improvement costs are included in MVS cost estimate. However, additional

lease-up costs such as advertising, marketing and leasing commissions are not included.

Base building costs (direct costs) are adjusted to reflect the physical characteristics of the subject.

Making these adjustments, including the appropriate local and current cost multipliers, the direct

building cost is indicated.

Additions

Items not included in the direct building cost estimate include parking and walks, signage,

landscaping, and miscellaneous site improvements. The cost for these items is estimated

separately using the segregated cost sections of the MVS cost guide.

Indirect Cost Items

Several indirect cost items are not included in the direct building cost figures derived through the

MVS cost guide. These items include developer overhead (general and administrative costs),

property taxes, legal and insurance costs, local development fees and contingencies, lease-up

and marketing costs and miscellaneous costs. The concluded indirect cost allowance is 20.0%.

© 2014 CBRE, Inc.

Cost Approach

85

MVS Conclusion

The concluded direct and indirect building cost estimates obtained via the MVS cost guide are

illustrated as follows:

MARSHALL VALUATION SERVICE COST SCHEDULE

Primary Building Type: Height per Story: 21'-9 3/8" (1st); 15'-8" (2-4)

Effective Age: Number of Buildings: 1Condition: Gross Building Area: 379,886 SFExterior Wall: Net Rentable Area: 218,461 SFNumber of Stories: Average Floor Area: 94,972 SF

MVS Sec/Page 15/17 15/18Quality/Bldg. Class Good/A Average/A-BBuilding Component Office ParkingComponent Sq. Ft. 333,481 SF 46,405 SFBase Square Foot Cost $203.03 $61.13

Square Foot RefinementsHeating and Cooling $0.00 $0.00Sprinklers $0.00 $2.00Other $0.00 $0.00Other $0.00 $0.00Subtotal $203.03 $63.13

Height and Size RefinementsNumber of Stories Multiplier 1.005 1.000Height per Story Multiplier 1.000 1.000Floor Area Multiplier 0.950 0.950Subtotal $193.84 $59.97

Cost MultipliersCurrent Cost Multiplier 1.04 1.04Local Multiplier 1.09 1.09

Final Square Foot Cost $219.74 $67.99

Base Component Cost $73,279,216 $3,154,888

Base Building Cost (via Marshall Valuation Service cost data) $76,434,104Additions

Signage, Landscaping & Misc. Site Improvements (not included above) $250,000Parking/Walks (not included above) $500,000Other $0

Direct Building Cost $77,184,104

Indirect Costs 20.0% of Direct Building Cost $15,436,821Direct and Indirect Building Cost $92,620,925Rounded $92,621,000

Compiled by CBRE

4

Office30 YRSAverageGlass & Steel Panels

ENTREPRENEURIAL PROFIT

Entrepreneurial profit represents the return to the developer, and is separate from contractor’s

overhead and profit. The concluded entrepreneurial profit is 30.0%.

© 2014 CBRE, Inc.

Cost Approach

86

ACCRUED DEPRECIATION

There are essentially three sources of accrued depreciation:

1. physical deterioration, both curable and incurable; 2. functional obsolescence, both curable and incurable; and 3. external obsolescence.

Physical Deterioration

The following chart provides a summary of the remaining economic life.


Actual Age 42 Years

Effective Age 30 Years

MVS Expected Life 55 Years

Remaining Economic Life 25 Years

Accrued Physical Incurable Depreciation 54.5%

Compiled by CBRE

As noted in the Improvements Analysis, considering the significant investment to cure the deferred

maintenance we have used an effective age lower than the actual age for the subject.

Functional Obsolescence

Based on a review of the design and layout of the improvements, no forms of curable functional

obsolescence were noted. Because replacement cost considers the construction of the subject

improvements utilizing modern materials and current standards, design and layout, functional

incurable obsolescence is not applicable.

External Obsolescence

Based on a review of the local market and neighborhood, no forms of external obsolescence

affect the subject.

COST APPROACH CONCLUSION

The value estimate is calculated as follows.

© 2014 CBRE, Inc.

Cost Approach

87

COST APPROACH CONCLUSION

Primary Building Type: Height per Story: 21'-9 3/8" (1st); 15'-8" (2-4)

Effective Age: Number of Buildings: 1Condition: Gross Building Area: 379,886 SFExterior Wall: Net Rentable Area: 218,461 SFNumber of Stories: Average Floor Area: 94,972 SF

Direct and Indirect Building Cost $92,621,000

Entrepreneurial Profit 30.0% of Total Building Cost $27,786,300

Replacement Cost New $120,407,300

Accrued DepreciationUnfinished Shell Space $0Incurable Physical Deterioration 54.5% ($26,927,618)

Functional Obsolescence $0External Obsolescence $0

Total Accrued Depreciation 22.4% of Replacement Cost New ($26,927,618)

Contributory Value of FF&E $0

Depreciated Replacement Cost $93,479,682

Land Value $73,000,000Indicated Stabilized Value $166,479,682Rounded $166,500,000

Curable Physical Deterioration ($71,040,000)Lease-Up Discount ($62,300,000)

Indicated As Is Value $33,160,000Rounded $33,200,000Value Per SF $151.97

Compiled by CBRE

of Replacement Cost New less Curable Physical Deterioration

4

Office30 YRS

Glass & Steel PanelsAverage

© 2014 CBRE, Inc.

Sales Comparison Approach

88


The following map and table summarize the comparable data used in the valuation of the

subject. A detailed description of each transaction is included in the addenda.

SUMMARY OF COMPARABLE OFFICE SALES

Year NRA Actual Sale Adjusted Sale Price NOINo. Name Type Date Built (SF) Price Price 1 Per SF 1 Occ. Per SF OAR

1 Army and Navy Club Building,1627 Eye Street, NW,Washington, DC

Sale Mar-14 1913 109,000 $79,000,000 $79,000,000 $724.77 100% $41.67 5.75%

2 Metro Center I,700 13th Street NW,Washington, DC

Sale Mar-14 1989 255,150 $222,000,000 $237,000,000 $928.87 84% $41.15 4.43%

3 Westbridge Office Buildng,2550 M Street, NW,Washington, DC

Sale Feb-14 1976 207,081 $136,689,070 $156,000,000 $753.33 100% $39.43 5.23%

4 One Metro Center ,701 13th Street, NW,Washington, DC

Sale Jul-13 2003 421,235 $307,500,000 $307,500,000 $730.00 100% $42.26 5.79%

5 Washington Harbour,3000 & 3050 K Street, NW,Washington, DC

Sale Jul-13 1986 561,135 $370,000,000 $370,000,000 $659.38 95% $37.48 5.68%

6 1200 19th Street, NW,1200 19th Street, NW,Washington, DC

Sale May-13 2009 329,986 $296,000,000 $304,500,000 $922.77 86% $46.97 5.09%

Subj.Pro

Forma

Martin Luther King Jr. Memorial Library,901 G Street, NW,Washington, District of Columbia

--- --- 1972 218,461 --- --- --- 90% $42.33 ---

1 Adjusted sale price for cash equivalency, lease-up and/or deferred maintenance (where applicable)

Compiled by CBRE

Transaction

© 2014 CBRE, Inc.


89

The sales utilized represent the best data available for comparison with the subject. They were

selected from our research of comparable improved sales in the District of Columbia, assuming

the subject has been renovated.

DISCUSSION/ANALYSIS OF IMPROVED SALES

Improved Sale One

This comparable represents a 109,000-square-foot, Class A multi-tenant office property, which is

situated on a 0.36-acre parcel at 1627 Eye Street, NW, Washington, DC. This building is located

on the northeast corner of 17th and Eye Streets, NW with views facing Farragut Square park. The

12-story improvements were originally constructed in 1913, renovated in 1987 and were in good

condition at the time of sale. The property features below-grade, garage parking. The property

sold in March 2014 for $79,000,000, or $724.77 per square foot. The cap rate was reportedly

below 5.75%, but the buyer did not want provide the specific pro forma NOI. Occupancy at the

time of sale was 100%.

The Army and Navy Club occupies the first four floors of the building. The property was leased

near market rental rates. Cozen O'Conner occupies the top three floors with lease rollover in

2016. The buyer indicated that they were expecting flat rent growth for the next 2-3 years.

No adjustment is necessary for property rights conveyed. The buyer assumed $53 million in debt

at a 3.45% interest rate. This reportedly had no significant impact on the sale price. Hence, no

adjustment for financing is necessary. The sale represented an arm’s length transaction, and no

adjustment is necessary for conditions of sale. This comparable represents a recent transaction

and, therefore, no adjustment is necessary for market conditions.

As compared to the subject, this sale is generally similar with respect to location, frontage and

tenancy, requiring no adjustments. This comparable has park views warranting a downward

adjustment. An upward adjustment is warranted for this sale’s inferior age/quality/condition

relative to the subject as-renovated.

Improved Sale Two


situated on a 0.65-acre parcel at 700 13th Street NW, Washington, DC. This building is located

across an intersection from the Metro Center metro station. The 12-story improvements were

constructed in 1989, renovated in 2012 and were in good condition at the time of sale. The

property has below-grade, garage parking. The property sold in March 2014 for $237,000,000,

or $928.87 per square foot. Pro Forma net operating income at the time of sale was

$10,500,000, or $41.15 per square foot, for an overall capitalization rate of 4.43%. Occupancy

at the time of sale was 84%.

The difference between the Actual Sale Price and Adjusted Sale Price reflects an adjustment of

$15,000,000 for leasing and capital costs. Planned elevator modernization costs of $1,500,000

© 2014 CBRE, Inc.


90

were added to the sale price. Additionally, estimated lease up costs of $13,500,000, which

represents TIs, LCs, and rent loss from downtime were added. The indicated financials are based

on year 2 stabilized estimates. Year 3 estimates have been reported to reflect a low 5.0% yield,

but this assumed no stabilized vacancy rate, understated management fee and more aggressive

rent growth. There is nominal lease expiration until 2023 when 36% of the space expires,

primarily due to the expiration of Perkins Cole, LLP.

No adjustment is necessary for property rights conveyed. The sale transferred on cash or cash

equivalent terms. Hence, no adjustment for financing is necessary. The sale represented an

arm’s length transaction, and no adjustment is necessary for conditions of sale. This comparable

represents a recent transaction and, therefore, no adjustment is necessary for market conditions.


tenancy, requiring no adjustments. A downward adjustment is necessary for this sale’s superior

age/quality/condition as it was built in 1989 and renovated in 2012. The comparable requires a

downward adjustment for views since the upper floors achieve higher rents.

Improved Sale Three

This comparable represents a 207,081-square-foot, Class A- single tenant office property, which

is situated on a 0.74-acre parcel at 2550 M Street, NW, Washington, DC. The property is

located in the West End submarket just east of Georgetown at the corner of M Street and 26th

Street. The 9-story improvements were constructed in 1976 and were in average condition at the

time of sale. The property has below-grade, garage parking. The property sold in February

2014 for $156,000,000, or $753.33 per square foot. Pro Forma net operating income at the

time of sale was $8,164,659, or $39.43 per square foot, for an overall capitalization rate of

5.23%. Occupancy at the time of sale was 100%. The difference between the Actual Sale Price

and Adjusted Sale Price reflects an adjustment of $19,310,930 for leasing and capital costs.

This office building is 100% occupied by the law firm Patton Boggs, LLP who recently extended

their lease through April 2032. The lease commences January 1, 2014 for 18.33 years at

$36.80 per square foot, on a triple net basis with annual escalations. Included in the lease were

base building improvements of approximately $6.5 million as well as a TI allowance of $75 per

square foot. The remaining costs ($19.3 million) related to these two cost centers that had yet to

be allocated were to be credited by the seller at closing. The building was considered leased at

market.





As compared to the subject, this sale is generally similar with respect to age/quality/condition and

tenancy, requiring no adjustments. This comparable is situated in the West End submarket which

© 2014 CBRE, Inc.


91

achieves lower average rental rates as compared to the subject’s submarket and has inferior

metro rail access. As a result, an upward adjustment is warranted for this sale’s inferior location.

No adjustment for age/quality/condition is considered warranted since the sale price includes an

adjustment for significant base building and TI costs associated with the recent lease renewal.

The comparable requires a downward adjustment for views since the upper floors achieve higher

rents.

Improved Sale Four


situated on a 0.486593-acre parcel at 701 13th Street, NW, Washington, DC. The 12-story

improvements were constructed in 2003 and were in good condition at the time of sale. There

are three levels of garage parking on site and an easement with a building across the street for

approximately 175 additional spaces. There is valet parking. The property sold in July 2013 for

$307,500,000, or $730.00 per square foot. Pro Forma net operating income at the time of sale

was $17,800,000, or $42.26 per square foot, for an overall capitalization rate of 5.79%.

Occupancy at the time of sale was 100%.

Rental rates were reportedly near market with balanced lease rollover. Approximately 30% of the

leases expire in 2015 and 2017 with the majority of the remaining leases expiring in 2019 and

beyond. The buyer was not projecting any significant rent spikes. Average rent growth was near

3.0%.

This building is located on a small site plus air rights over the Hecht's department store at Metro

Center. The buyer indicated it is a condominium structure with minimal shared expenses.

Therefore, an upward adjustment is necessary for property rights conveyed. The sale transferred

on cash or cash equivalent terms. Hence, no adjustment for financing is necessary. The sale

represented an arm’s length transaction, and no adjustment is necessary for conditions of sale.

This comparable represents a recent transaction and, therefore, no adjustment is necessary for

market conditions.


tenancy, requiring no adjustments. The comparable requires a downward adjustment for views

since the upper floors achieve higher rents. The building was constructed in 2003 and is superior

to the subject with respect to age/quality/condition, requiring a downward adjustment. This

comparable does not have sufficient on-site parking and, therefore, an upward adjustment is

necessary.

Improved Sale Five


situated on a 5.03-acre parcel at 3000 & 3050 K Street, NW, Washington, DC. The 6-story

improvements were originally constructed in 1986 and were in good condition at the time of sale.

The property has below-grade, garage parking. The property sold in July 2013 for

© 2014 CBRE, Inc.


92




This is the sale of two, Class A office buildings with ground floor retail located along the Potomac

River in the Georgetown neighborhood of Washington, DC. The top three floors of 3050 K Street

are individually owned condominiums, which are not included in this sale. The property includes

restaurants with outdoor seating and a fountain that is converted to an ice rink in the winter. The

buildings feature two major law firm tenants. There is low rollover until 2023 and 2025 when

the law firms expire. The seller is crediting all rent loss in relation to a few vacant spaces.





As compared to the subject, this sale is generally similar with respect to age/quality/condition,

frontage and tenancy, requiring no adjustments. An upward adjustment is warranted to this sale

for its inferior location in Georgetown which achieves significantly lower average rental rates and

has inferior metro rail access. A downward adjustment is warranted for this sale’s superior views.

Improved Sale Six


situated on a 0.86-acre parcel at 1200 19th Street, NW, Washington, DC. The 11-story

improvements were originally built in 1963 and gut renovated in 2009 and included the addition

of three floors, a new glass curtain wall and all new energy efficient mechanical, electrical, and

plumbing systems. The building has a LEED Platinum designation for Core & Shell. The building

has window exposure on all four sides; street exposure to the south and east and alley exposure

to the north and west. The property has a below-grade parking garage. The improvements

were in excellent condition at the time of sale. The property sold in May 2013 for




The average rental rates were in the mid $40's per square foot. There is minimal lease rollover

in the near future. Major tenants include Squire Sanders (December 2025 expiration), Womble

Carlyle (August 2021 expiration), Navigant Consulting (February 2022 expiration), and McKinsey

& Company (December 2019 expiration). The sale price has been adjusted for lease-up costs

which include rent loss, TIs, LCs and profit at 20%.



© 2014 CBRE, Inc.


93



As compared to the subject, this sale is generally similar with respect to location, frontage,

parking and tenancy, requiring no adjustments. A downward adjustment is necessary for this

sale’s superior age/quality/condition as it was built in gut renovated in 2009 with the addition of

three floors. The renovation is considered superior to the subject’s finish following renovation.

SUMMARY OF ADJUSTMENTS

Based on our comparative analysis, the following chart summarizes the adjustments warranted to

each comparable.

OFFICE SALES ADJUSTMENT GRID

Comparable Number 1 2 3 4 5 6Subj.Pro

FormaTransaction Type Sale Sale Sale Sale Sale Sale ---Transaction Date Mar-14 Mar-14 Feb-14 Jul-13 Jul-13 May-13 ---

Year Built 1913 1989 1976 2003 1986 2009 1972

NRA (SF) 109,000 255,150 207,081 421,235 561,135 329,986 218,461Actual Sale Price $79,000,000 $222,000,000 $136,689,070 $307,500,000 $370,000,000 $296,000,000 ---Adjusted Sale Price 1 $79,000,000 $237,000,000 $156,000,000 $307,500,000 $370,000,000 $304,500,000 ---Price Per SF 1 $724.77 $928.87 $753.33 $730.00 $659.38 $922.77 ---

Occupancy 100% 84% 100% 100% 95% 86% 90%

NOI Per SF $41.67 $41.15 $39.43 $42.26 $37.48 $46.97 $42.33

OAR 5.75% 4.43% 5.23% 5.79% 5.68% 5.09% ---

Adj. Price Per SF $724.77 $928.87 $753.33 $730.00 $659.38 $922.77

Property Rights Conveyed 0% 0% 0% 5% 0% 0%Financing Terms 1 0% 0% 0% 0% 0% 0%

Conditions of Sale 0% 0% 0% 0% 0% 0%

Market Conditions (Time) 0% 0% 0% 0% 0% 0%

Subtotal - Price Per SF $724.77 $928.87 $753.33 $766.50 $659.38 $922.77

Location 0% 0% 5% 0% 25% 0%

Frontage 0% 0% 0% 0% 0% 0%

Views -5% -5% -5% -5% -10% -5%

Age/Quality/Condition 5% -10% 0% -10% 0% -10%

Parking 0% 0% 0% 5% 0% 0%

Tenancy 0% 0% 0% 0% 0% 0%

Total Other Adjustments 0% -15% 0% -10% 15% -15%

Indicated Value Per SF $724.77 $789.54 $753.33 $689.85 $758.29 $784.35

Absolute Adjustment 10% 15% 10% 25% 35% 15%1 Adjusted for cash equivalency, lease-up and/or deferred maintenance (where applicable)

Compiled by CBRE

SALE PRICE PER SQUARE FOOT CONCLUSION

Overall, Comparables One, Two and Three were given greatest consideration because they were

the most recent sales and required the least gross adjustment. The following chart presents the

valuation conclusion:

© 2014 CBRE, Inc.


94

SALES COMPARISON APPROACH

GLA/GBA (SF) X Value Per SF = Value

218,461 X $740.00 = $161,661,140

218,461 X $760.00 = $166,030,360

VALUE CONCLUSION

Indicated Stabilized Value $165,000,000

Deferred Maintenance ($71,040,000)

Lease-Up Discount ($62,300,000)

Indicated As Is Value $31,660,000

Rounded $31,700,000

Value Per SF $145.11

Compiled by CBRE

© 2014 CBRE, Inc.

Income Capitalization Approach

95


The following map and table summarize the primary comparable data used in the valuation of

the subject. A detailed description of each transaction is included in the addenda.

SUMMARY OF COMPARABLE OFFICE RENTALS

Comp. No.

Property Nameand Location

Year Built Occ. NRA (SF)

Typical Floor Size (SF)

TenantName

LeaseArea (SF)

LeaseDate

LeaseTerm Base Rent

NNN Equivalent

Tenant Improvements Escalations

1 2011 97% 171,171 21,070 Confidential (FS, Lower Level) 4,600 Jun-14 10.0 Yrs. $34.00 PSF $14.00 PSF $45.00 PSF 2.50%

Confidential (FS) 42,000 Apr-12 10.0 Yrs. $69.50 PSF $49.50 PSF Shell 2.25%

Confidential (NNN) 29,000 Apr-12 10.0 Yrs. $51.00 PSF $51.00 PSF Shell 2.50%

Confidential (NNN) 71,000 Jan-12 10.0 Yrs. $45.00 PSF $45.00 PSF Shell 2.25%

2 2015 0% 111,466 13,277 Quoted --- --- --- $55.00 PSF $55.00 PSF $0.00 PSF Neg.

3 2001 5% 204,025 21,900 Norton Rose Fulbright (NNN) 65,000 Jan-14 12.0 Yrs. $48.75 PSF $48.75 PSF $105.00 PSF 2.50%

4 2014 100% 261,918 24,744 Qatar Foundation Int'l, LLC 15,188 Sep-13 15.0 Yrs. $53.35 PSF $53.35 PSF $90.00 PSF 2.25%

American Hospital Association 42,000 Mar-13 14.0 Yrs. $55.00 PSF $55.00 PSF $120.00 PSF 2.30%

5 1989 84% 255,150 22,785 Au Bon Pain (Retail, Ren, NNN) 3,249 Dec-14 10.0 Yrs. $70.00 PSF $70.00 PSF $18.47 PSF 2.5% yrs 1-5, 3% yrs 6-10

Leydig (FS, Ren) 9,125 Sep-14 5.0 Yrs. $62.50 PSF $42.50 PSF $45.00 PSF 2.50%

Landon Butler (FS, Ren) 8,111 Jul-14 5.0 Yrs. $65.50 PSF $45.50 PSF $85.00 PSF 2.50%

Freshfields Bruckhaus (FS, New) 37,445 Jul-14 15.0 Yrs. $63.00 PSF $43.00 PSF $100.00 PSF 2.25%

6 2000 98% 345,018 36,862 Akerman Senterfitt (FS) 11,503 Dec-10 8.5 Yrs. $49.10 PSF $29.10 PSF $70.00 PSF 2.50%

Board Source (FS) 15,840 May-10 11.6 Yrs. $53.00 PSF $33.00 PSF $80.00 PSF 2%; $2.25

Health Care Council (FS) 6,959 May-10 11.8 Yrs. $51.00 PSF $31.00 PSF $85.00 PSF 2%; $2.25

Akerman Senterfitt (NNN) 3,813 Jun-09 10.3 Yrs. $38.00 PSF $38.00 PSF $75.00 PSF 2.50%

Quoted --- --- --- $40.00 PSF $40.00 PSF $75.00 PSF 0

Subj. Martin Luther King Jr. Memorial Library901 G Street, NW

1972 100% 218,461 53,000 ---

Compiled by CBRE

733 10th Street, NW 733 10th Street, NW,Washington, DC

The Victor Building750 9th Street, NW,Washington, DC

900 G Street, NW900 G Street, NW,Washington, DC

799 9th Street, NW799 9th Street, NW,Washington, DC

City Center DC South800 10th Street, NW,Washington, DC

Metro Center I700 13th Street NW,Washington, DC

© 2014 CBRE, Inc.


96

The rental data utilized represent the best data available for comparison with the subject. They

were selected from our research of comparable office buildings, assuming the subject has been

renovated, within the East End submarket. Market participants noted that, as renovated, the

subject would compete directly with the surrounding newer space in new buildings and recently

renovated buildings. As shown above, the subject’s typical floor size is well above the rent

comparables. Additionally, the building’s design allows for demolition of most of the interior

walls, allowing for vast open areas for office use. The design in considered a benefit to the

subject as repositioned to an office building.

The following table shows a summary of the space allocation for the subject.

MARKET RENT CATEGORIES

Space Allocation Size

Office Space (Above Grade) 159,047 SF

Office Space (Below-Grade) 36,985 SF

Ground Level Retail Space 22,429 SF

Compiled by CBRE

DISCUSSION/ANALYSIS OF OFFICE RENT COMPARABLES

Rent Comparable One

This comparable represents a 171,171-square-foot, Class A multi tenant office property at 733

10th Street, NW. The 10-story improvements were constructed in 2011 and were in excellent

condition at the time of our research. The building is LEED Gold certified and is within one block

of the Metro Center station. The structure's exterior walls are glass and the building has a below-

grade parking garage. According to a representative for this property, asking base rent is

approximately $50 per square foot annually, based upon a triple net structure. Tenant

improvement allowances and rent abatement are typically negotiated based on tenant-credit and

lease term. The property is currently 97.3% leased.

The office leases signed in 2012 were in the $50 per square-foot range on a triple net basis in

shell condition with significant tenant improvement allowances and rent abatement. A lease was

signed in June 2014 for lower level space at $34 per square-foot on a full service basis, or about

$14 per square-foot triple net. The tenant received a $45 per square-foot tenant improvement

allowance.

As compared to the subject As-Renovated, this comparable has a similar location and Metrorail

proximity, but is superior with respect to age/quality/condition.

As noted in the Improvements Analysis, the typical floor plate for the subject’s 2nd, 3rd and 4th

floor office space is approximately 53,000 square-feet, which is above many competitive office

buildings in the District of Columbia. Additionally, the building’s design allows for demolition of

most of the interior walls, allowing for vast open areas for office use. The design in considered a

© 2014 CBRE, Inc.


97

benefit to the subject as repositioned to an office building. The comparable’ s typical floor size is

about 21,000 square-feet, which is inferior to the subject.

Rent Comparable Two

This comparable represents an 111,466-square-foot, Class A multi tenant office property

currently under construction at 900 G Street, NW. The 9-story improvements broke ground in

Second Quarter 2013 and are scheduled for delivery in First Quarter 2015. The structure's

exterior walls are glass and the building has a below-grade parking garage. According to a

representative for this property, asking base rent is $55 per square foot annually, based upon a

typical lease term of 10 years. Expenses are based upon a triple net structure. Tenant

improvement allowances and rent abatement will be negotiated based on tenant credit and

lease-term. The property is currently 0% pre-leased.


proximity, but is superior with respect to age/quality/condition. The comparable’ s typical floor

size is about 13,300 square-feet, which is inferior to the subject.

Rent Comparable Three


9th Street, NW. The 10-story improvements were originally constructed in 2001 and were

renovated in 2013/2014 following the expiration of the office tenants including a rooftop deck,

updated lobbies, restroom upgrades and elevator cab upgrades. Furthermore, the office space

was brought to shell condition. The structure's exterior walls are precast concrete and the

building has a parking garage. According to a representative for this property, asking base rent

ranges from $44 to $52 per square foot annually, based upon a typical lease term of 10 years.

Expenses are based upon a triple net structure. Tenant improvement allowances and rent

abatement are typically negotiated based on tenant-credit and lease-term. The building is 5%

occupied, but 73% leased.

A lease was signed in January 2014 for 65,000 square-feet at $48.75 per square-foot on triple

net basis with a 2.5% annual escalation. The tenant signed for 12 years and received a $105

per square-foot tenant improvement allowance and 12 months of rent abatement.




Rent Comparable Four


10th Street, NW within the CityCenterDC mixed use development. The 11-story improvements

were constructed in 2014 and were considered in new/excellent condition at the time of our

research. The structure's exterior walls are glass and the building has a below-grade parking

© 2014 CBRE, Inc.


98

garage. Covington & Burling occupy about 60% of the office space on a 20-year lease. The

property is currently 100% leased.

A lease was signed in September 2013 for 15,188 square-feet at $53.35 per square-foot on a

triple net basis with a 2.25% annual escalation. The tenant signed for 15 years and received a

$90 per square-foot tenant improvement allowance. Another lease was signed in March 2013

for 42,000 square-feet at $55 per square-foot on a triple net basis with a 2.3% annual

escalation. The tenant signed for 14 years and received a $120 per square-foot tenant

improvement allowance and four months of free rent.




Rent Comparable Five


13th Street NW. The 12-story improvements were originally constructed in 1989 and were

renovated in 2012. The structure's exterior walls are concrete and the building has a below-

grade parking garage. According to a representative for this property, asking base rent is $66

per square foot annually based upon a full service lease structure with pass throughs over base

year expense stops. Tenant improvement allowances and rent abatement are typically negotiated

based on tenant-credit and lease-term. The property is currently 83.80% leased.

The most recent leases have been in the $59 to $63 per square-foot range, or about $39 to $43

per square-foot triple net with 2.5% annual escalations. The leases have tenant improvement

allowances ranging from $45 to $100 per square-foot over 5-6 year terms with 0-5 months of

rent abatement.


proximity. The building is relatively similar to the subject with respect to age/quality/condition

upon renovation of the subject. The comparable’ s typical floor size is about 23,000 square-feet,

which is inferior to the subject.

Rent Comparable Six


9th Street, NW. The 9-story improvements were constructed in 2000 and were considered in

good condition at the time of our research. The structure's exterior walls are precast concrete and

the property has a below-grade parking garage. According to a representative for this property,

asking base rent for prime office spaces in the building rent in the low $40 per square-foot range

on a triple net basis with a typical tenant improvement allowance of $65-$80 per square-foot. A

4,400 square-foot space in the back of the building is currently listed at $48 to $49 per square-

foot on a full service basis with a slightly lower allowance in the $50-$65 per square-foot range.

A lower level windowless space is also available at $33 per square-foot on a full service basis, or

© 2014 CBRE, Inc.


99

about $10-$15 per square foot on a triple net basis. An allowance for this space is

approximately $15-$20 per square-foot. Expenses are based upon a Full Service structure with

pass throughs over base year expense stops. Tenant improvement allowances and rent

abatement are typically negotiated based on tenant-credit and lease term. The property is

currently 98.4% leased. This building is located at the southwest corner of H & 9th Streets, NW.


proximity. The building is relatively similar to the subject with respect to age/quality/condition

upon renovation of the subject. The comparable’ s typical floor size is about 36,900 square-feet,

which is inferior to the subject.

BELOW-GRADE SPACE

The subject includes 36,985 SF of below-grade office space, which rents at a discount to above-

grade space. The following chart summarizes rent differentials between above and below-grade

space within office buildings in the District of Columbia.

COMPARABLE UPPER/LOWER LEVEL OFFICE LEASING ACTIVITY

# ADDRESS/BUILDING TENANTSTART DATE SIZE TERM (YRS) RENT PSF

EXPENSE BASIS FREE RENT T.I.s/SF

UPPER/LOWER LEVEL

DIFFERENTIAL (RENT)

1 1900 K Street, NW Dechert Feb-13 50,215 10.5 $47.00 NNN 6 $90.00 55.3%Washington, DC (Above Grade)

Dechert Feb-13 6,574 10.5 $21.00 NNN 6 $40.00

2 One Farragut Square South Asking Rent Mar-11 1,579 7 $43.50 Base Year 0 $25.00 28.2%1634 Eye Street, NW (Above Grade)Washington, DC Confidential LOI Mar-11 3,000 7 $31.25 Base Year 3.5 $25.00

(Below Grade)3 1020 19th Street, NW Asking Rent Mar-11 2,118 10 $43.50 Base Year 0 $30.00 36.8%

1020 19th Street, NW (Above Grade)Washington, DC Confidential LOI Mar-11 2,800 10 $27.50 Base Year 4 $27.50

(Below Grade)4 City Center Vacant Space N/A Various 10.0 $37.00 NNN Neg. $60.00 48.6%

1401 H Street, NW (Above Grade)Washington, DC 20,641 10.0 $19.00 NNN Neg. $35.00

(Below Grade)

5 1120 20th Street, NW Jackson & Campbell Jun-08 43,209 12.0 $48.00 Base Yr. 6 $53.04 41.7%Washington, DC (Above Grade)Class A Jun-08 4,698 12.0 $28.00 Base Yr. 6 $53.04

(Below Grade)

6 2101 L Street, NW Greenburg Traurig Nov-07 112,286 15.0 $40.00 NNN 0 $65.00 40.0%Washington, DC (Above Grade)Class A Greenburg Traurig Nov-07 3,029 15.0 $24.00 NNN 0 $45.00

(Below Grade)

7 Atlantic Building Alston & Bird Apr-06 199,726 15.0 $40.75 NNN 0 $60.00 41.1%950 F Street, NW (Above Grade)Washington, DC Alston & Bird Apr-06 40,277 15.0 $24.00 NNN 0 $40.00Class A/Trophy (Below Grade)

Compiled by: CBRE

As shown in the chart above, below-grade space typically rents for 28.2% to 55.3% below above-

grade space. As noted earlier within the analysis of Rent Comparable One, a lower level space

was recently leased at a triple net equivalent rent of $14 per square-foot, while the above grade

space was leased at about $50 per square-foot, reflecting a 72% lower rent. However, this large

© 2014 CBRE, Inc.


100

differential is considered an outlier and a differential near 50% is considered reasonable for the

subject’s space.

RETAIL RENT COMPARABLES

As noted earlier in the improvements analysis, the east and west portions of the first floor library

space have glass storefront windows, which are well suited for ground level retail or restaurant

space.

The following chart summarizes the retail rental comparables used in the valuation of the subject

property.

Property Date Term Size (SF) Rent EscalationsTI

AllowanceConfidentialTenant:Confidential Jul-14 10 2,875 $100.00 $5.00; Yrs. 4 & 8 $100Confidential Dec-13 10 1,335 $50.00 $5.00; Yr. 2; 3.0% TA $80

Metro Center ITenant:Au Bon Pain (Ren.) Dec-14 10 3,249 $70.00 2.5%, Yrs. 1-5; 3.0% TA $18

1001 Pennsylvania Ave., NWTenant:Tadich Grill Feb-13 15 7,378 $46.50 $4.25 PSF; Yrs. 6 & 8 $105Central Restaurant Jul-11 11 7,525 $39.39 3.0% $0

1701 Pennsylvania Ave., NWTenant:Potbelly (Ren.) Feb-14 5 2,300 $70.00 2.5% $0Caribou Coffee (Ren.) Jan-14 5 1,602 $85.00 6%; Yr. 4 $0

1200 19th Street, NWTenant:Teddy & The Bully Bar May-12 10 8,167 $39.10 2.5% $96Minimum 1,335 $39.10 $0Maximum 8,167 $100.00 $105Average 4,304 $62.50 $50Various Sources; Compiled by: CBRE

RETAIL RENT COMPARABLES

Given the subject’s location near the Verizon Center, a rental rate near the higher end of the

range indicated by the comparable data is considered reasonable.

MARKET RENT ESTIMATE

Base Rental Rate

The estimate of base rental rates is shown in the following chart.

© 2014 CBRE, Inc.


101

BASE RENTAL RATES

Category ($/SF/Yr.)

Rent Comparable Data $4-$8.00 $14.00 $39.10-$100

CBRE Estimate $50.00 $25.00 $60.00

Compiled by CBRE

Ground Level Retail Space

Office Space (Above Grade)

Office Space (Below-Grade)

Concessions

The estimate of concessions is shown in the following chart.

CONCESSIONS

Category

Rent Comparable Data None None None

CBRE Estimate None None None

Compiled by CBRE




Reimbursements

The estimate of reimbursements is shown in the following chart.

REIMBURSEMENTS

Category

Rent Comparable Data NNN, BY NNN, BY NNN

CBRE Estimate NNN NNN NNN

Compiled by CBRE




Escalations

At the present time, annual escalations in the range of 2.0% to 2.5% are common in the local

market. As such, we have concluded market rental escalations of 2.25% annually over the term

of the lease.

Tenant Improvements

The estimate of tenant improvements is shown in the following chart.

© 2014 CBRE, Inc.


102

TENANT IMPROVEMENTS

Category

Rent Comparable Data

New Tenants (Shell) $70-$120 $45.00 $0-$105

Renewals $45-$85 n/a $0.00

CBRE Estimate

New Tenants (Shell) $100.00 $100.00 $100.00

Renewals $25.00 $10.00 $0.00

Compiled by CBRE




Lease Term

The estimate of lease terms is shown in the following chart.

LEASE TERM

Category

Rent Comparable Data 5-15 YRS 10 YRS 10 YRS

CBRE Estimate 10 YRS 10 YRS 10 YRS

Compiled by CBRE




MARKET RENT CONCLUSIONS

The following chart shows the market rent conclusions for the subject:

MARKET RENT CONCLUSIONS

Category

NRA (SF) 159,047 36,985 22,429

Percent of Total SF 72.8% 16.9% 10.3%

Market Rent ($/SF/Yr.) $50.00 $25.00 $60.00

Concessions None None None

Reimbursements NNN NNN NNN

Annual Escalation 2.25% 2.25% 2.25%

Tenant Improvements (New Tenants) (Shell) $100.00 $100.00 $100.00

Tenant Improvements (Renewals) $25.00 $10.00 $0.00

Average Lease Term 10 Years 10 Years 10 Years

Compiled by CBRE




The market rent conclusions represent stabilized estimates.

POTENTIAL RENTAL INCOME CONCLUSION

Within this analysis, potential rental income is estimated based upon forward looking market

rental rates upon stabilization.

© 2014 CBRE, Inc.


103

POTENTIAL RENTAL INCOME

Year Total $/SF

CBRE Estimate $10,222,715 $46.79

Compiled by CBRE

VACANCY AND CREDIT LOSS

The subject’s estimated stabilized occupancy rate was previously discussed in the market analysis.

The credit loss estimate is an allowance for nonpayment of rent or other income. The subject’s

vacancy and credit loss is detailed as follows:

VACANCY

Year Total % PGI

Current ----- 0%

CBRE Estimate #N/A 10%

Compiled by CBRE

PARKING INCOME

Parking income is supplemental to that derived from standard rent and includes collections from

sources such as reserved covered parking. The following table provides a summary of

comparable properties, subject quoted rates, and the CBRE, Inc. pro forma parking rate

estimates.

Garage($/Month)

733 10th Street, NW 0.74 n/a

900 G Street, NW 0.55 n/a

799 9th Street, NW 0.80 n/a

City Center DC South 0.67 n/a

Metro Center I 0.88 n/a

The Victor Building 0.67 $255

901 15th Street, NW 0.67 $290 (Unreserved); $580 (Reserved)

1401 Eye Street 0.71 $240 (Covered); $330 (Reserved)

900 7th Street, NW 1.00 $230

555 13th Street, NW 0.71 $275 (Covered); $550 (Reserved)

700 14th Street, NW 0.60 $274

Subject Quoted Rates 0.73 n/a

CBRE Estimate 0.73 $275

Source: CoStar Group; Compiled by CBRE

Parking Ratio (Per 1,000 SF)

Comparable

SUMMARY OF COMPARABLE PARKING RATES

The estimated potential gross parking income for the subject is estimated as follows:

© 2014 CBRE, Inc.


104

Component No. SpacesMonthly

RateOccupancy

MonthlyTotal

AnnualTotal

Garage 160 Spaces $275.00 100.0% $44,000 $528,000

Total Parking Income $44,000 $528,000

Compiled by CBRE

POTENTIAL GROSS PARKING INCOME

Considering the subject’s location and Metrorail proximity, we have concluded a 100% garage

occupancy upon renovation and stabilization of the subject property. The subject’s parking

income is detailed as follows:

PARKING INCOME

Year Total $/SF

CBRE Estimate $528,000 $2.42

Compiled by CBRE

OTHER INCOME

Other income is supplemental to that derived from leasing of the improvements. This includes

categories such as forfeited deposits, antennae income, storage income, late charges, after hour

utility charges, et cetera.

To estimate Other Income for the subject property, we have researched comparable data. The

following chart summarizes comparable Other Income for competitive properties.

Comp. Expense Year PSF Income

1 2014 Budget $0.27

2 2013 $0.65

3 2013 $0.54

4 2013 $0.56

5 2013 $0.20

Average $0.44

Compiled by: CBRE

OTHER INCOME COMPARABLES

Overall, an Other Income estimate near the average of the comparable data is considered

reasonable. The subject’s income is detailed as follows:

OTHER INCOME

Year Total $/SF


Compiled by CBRE

© 2014 CBRE, Inc.


105

EXPENSE REIMBURSEMENTS

The market rental rates used in the analysis are based on a triplet net lease structure whereby the

tenant reimburses the owner for a pro rata share of the operating expenses. The subject’s

expense reimbursements are detailed as follows:

EXPENSE REIMBURSEMENTS

Year Total $/SF

CBRE Estimate $4,722,185 $21.62

Compiled by CBRE

EFFECTIVE GROSS INCOME

The subject’s effective gross income is detailed as follows:

EFFECTIVE GROSS INCOME

Year Total $/SF

CBRE Estimate $14,548,936 $66.60

Compiled by CBRE

The concluded effective gross income represents a stabilized estimate.

OPERATING EXPENSE ANALYSIS

Expense Comparables

The following chart summarizes expenses obtained from recognized industry publications and/or

comparable properties.

© 2014 CBRE, Inc.


106

EXPENSE COMPARABLES

Comparable Number 1 2 3 Subject

Location DC DC DC Washington, D.C

NRA (SF) 121,545 383,795 142,276 218,461

Expense Year 2014 Budget 2013 Budget 2013 Budget Pro Forma

Revenues $/SF $/SF $/SF $/SFEffective Gross Income $47.40 $69.51 $57.85 $66.60

Expenses

Real Estate Taxes $8.37 $13.82 $13.04 $12.70

Property Insurance 0.35 0.39 0.54 0.40

Utilities 2.65 2.41 2.14 2.50

General Operating 1.81 0.66 1.71 1.00

Repairs & Maintenance 3.30 2.05 3.22 3.00

Landscaping & Security 0.72 1.32 0.97 1.00

Janitorial 1.67 1.77 1.79 1.75

Management Fee ¹ 1.16 1.76 1.02 1.66

Non-Reimbursable Landlord Expense 0.24 0.44 0.33 0.25

Reserves for Replacement - - - -

Operating Expenses $20.26 $24.61 $24.76 $24.27

Operating Expense Ratio 42.7% 35.4% 42.8% 36.4%¹ (Mgmt. typically analyzed as a % of EGI) 2.4% 2.5% 1.8% 2.5%

Compiled by CBRE

A discussion of each expense category is presented on the following pages.

Real Estate Taxes

The comparable data and projections for the subject are summarized as follows:

REAL ESTATE TAXES

Year Total $/SF

Expense Comparable 1 N/A $8.37



CBRE Estimate $2,775,000 $12.70

Compiled by CBRE

Property Insurance

Property insurance expenses typically include fire and extended coverage and owner’s liability

coverage. The comparable data and projections for the subject are summarized as follows:

PROPERTY INSURANCE

Year Total $/SF





Compiled by CBRE

© 2014 CBRE, Inc.


107

Our estimate is within the range indicated by the expense comparables.

Utilities

Utilities expenses typically include electricity, natural gas, water, sewer and trash removal. The

comparable data and projections for the subject are summarized as follows:

UTILITIES

Year Total $/SF





Compiled by CBRE

Upon renovation, the subject is assumed to have an HVAC system commensurate with its

competitors. Our estimate is within the range indicated by the expense comparables.

General Operating

General operating expenses typically include all payroll and payroll related items for all directly-

employed administrative personnel such as building managers, secretaries, and bookkeepers.

Leasing personnel are not included nor are the salaries or fees for off-site management firm

personnel and services. This expense category also typically includes administrative expenses

such as legal costs pertaining to the operation of the building, telephone, supplies, furniture,

temporary help, etc. The comparable data and projections for the subject are summarized as

follows:

GENERAL OPERATING

Year Total $/SF





Compiled by CBRE


Repairs and Maintenance

Repairs and maintenance expenses typically include all payroll and payroll related items for all

directly employed maintenance personnel. This expense category also typically includes all

outside maintenance service contracts and the cost of maintenance and repairs supplies. The


© 2014 CBRE, Inc.


108

REPAIRS & MAINTENANCE

Year Total $/SF





Compiled by CBRE


Landscaping and Security

Landscaping and security expenses are typically handled through outside service contracts. The


LANDSCAPING & SECURITY

Year Total $/SF





Compiled by CBRE


Janitorial

Janitorial expenses typically include the outside service contract for cleaning. The comparable

data and projections for the subject are summarized as follows:

JANITORIAL

Year Total $/SF





Compiled by CBRE


Management Fee

Management expenses are typically negotiated as a percentage of collected revenues (i.e.,

effective gross income). The comparable data and projections for the subject are summarized as

follows:

© 2014 CBRE, Inc.


109

MANAGEMENT FEE

Year Total % EGI

CBRE Estimate $363,723 2.5%

Compiled by CBRE

The expense comparables have management fee expenses ranging from 1.8% to 2.5% of

effective gross income. Given the subject’s size and the competitiveness of the local market area,

we believe an appropriate management expense for the subject would be towards the higher end

of the range.

Reserves for Replacement

Reserves for replacement have been estimated based on market parameters. Based on the

subject’s age and condition, reserves for replacement have been estimated at $0.20 per square

foot. Consistent with market practices, reserves for replacement have not been included in the

Direct Capitalization:

OPERATING EXPENSE CONCLUSION


OPERATING EXPENSES

Year Total $/SF




CBRE Estimate $5,301,487 $24.27

Compiled by CBRE

The subject’s per square foot operating expense pro forma is within the range indicated by the

expense comparables. The concluded operating expenses represents a stabilized estimate.

NET OPERATING INCOME CONCLUSION


NET OPERATING INCOME

Year Total $/SF

CBRE Estimate $9,247,448 $42.33

Compiled by CBRE

The concluded net operating income represents a stabilized estimate.

© 2014 CBRE, Inc.


110

DIRECT CAPITALIZATION

Direct capitalization is a method used to convert a single year’s estimated stabilized net operating

income into a value indication. The following subsections represent different techniques for

deriving an overall capitalization rate.

Comparable Sales

The overall capitalization rates (OARs) confirmed for the comparable sales analyzed in the sales

comparison approach are as follows:

COMPARABLE CAPITALIZATION RATES

Sale Sale Price

Sale Date $/SF Occupancy OAR Basis OAR

1 Mar-14 $724.77 100% Existing 5.75%

2 Mar-14 $928.87 84% Pro-Forma 4.43%

3 Feb-14 $753.33 100% Pro-Forma 5.23%

4 Jul-13 $730.00 100% Pro-Forma 5.79%

5 Jul-13 $659.38 95% Pro-Forma 5.68%

6 May-13 $922.77 86% Pro-Forma 5.09%

Indicated OAR: 90% 4.43%-5.79%

Compiled by: CBRE

The overall capitalization rates for these sales were derived based upon the actual or pro-forma

income characteristics of the property. Sale Nos. One, Two and Three transpired within the past

six months, while Sale Nos. Four, Five and Six represent slightly older transaction dates.

Therefore, primary emphasis has been placed upon the more recent data, which is generally

reflective of current market trends, interest rates, and buyer’s expectations and motivation in the

market.

Published Investor Surveys

The results of the most recent investor surveys are summarized in the following chart.

OVERALL CAPITALIZATION RATES

Investment Type OAR Range Average

CBRE Capital Markets Urban Office

Class A 4.50% - 6.00%

Class B 5.25% - 7.50%

PwC CBD Office

National Data 3.75% - 8.00% 6.30%

Washington, DC 4.25% - 6.50% 5.48%

Indicated OAR: 5.50%

Compiled by: CBRE

© 2014 CBRE, Inc.


111

Capitalization Rate Conclusion

The following chart summarizes the OAR conclusions.

OVERALL CAPITALIZATION RATE - CONCLUSION

Source Indicated OAR

Comparable Sales 4.43%-5.79%

Published Surveys 5.50%

CBRE Estimate 5.50%

Compiled by: CBRE

Overall, an OAR in the higher portion of the range of the comparable sales is considered

appropriate for the following reasons:

STRENGTHS/ OPPORTUNITIES

• The subject is located in an office submarket achieving among the highest rents in the Washington DC office market;

• The subject has a strong location situated is one block west of the Verizon Center and across 9th Street, NW from an entrance to the Gallery Place/Chinatown Metrorail station (Orange, Blue and Red Lines) at 9th and G Street, NW;

• The subject’s existing improvements do not maximize the site’s allowable density and the building can accommodate two additional floors without any modification of foundations as long as the library’s fourth floor continues to be used for offices;

• The east and west portions of the first floor library space have glass storefront windows, which are well suited for ground level retail or restaurant space;

• The typical floor plate for the 2nd, 3rd and 4th floor office space is approximately 53,000 square-feet, which is above many competitive office buildings in the District of Columbia. Additionally, the building’s design allows for demolition of most of the interior walls, allowing for vast open areas for office use. The design in considered a benefit to the subject as repositioned to an office building;

WEAKNESSES/ THREATS

• Based on our property inspection, discussions with a property representative, a Project Strategy Report prepared by Freelon (dated December 29, 2010) and a Pre-Design Building Evaluation prepared by GDG (dated December 20, 2013), there are several items in need of repair including the building façade, water-related defects, and HVAC system replacement. The costs to cure the deferred maintenance are significant;

• The building and major interior public spaces were designated a Historic Landmark in 2007 and placed on the historic register. As such, any improvements or renovations to the building will be subject to review by the DC Historic Preservation Review Board (DHPRB) and must be sensitive to the historic character and significance of the original structure. The building cannot be demolished;

• According to a Hazardous Materials Survey prepared by GDG dated December 20, 2013, asbestos and lead paint were identified in several areas of the building.

Direct Capitalization Summary

A summary of the direct capitalization is illustrated in the following chart.

© 2014 CBRE, Inc.


112

DIRECT CAPITALIZATION SUMMARY

Income $/Door/Mo. $/SF/Yr Total Potential Rental Income $8,519 $46.79 $10,222,715Vacancy and Credit Loss 10.00% (852) (4.68) (1,022,272)

Net Rental Income $7,667 $42.11 $9,200,444

Parking Income 440 2.42 528,000 Other Income 82 0.45 98,307 Expense Reimbursements 3,935 21.62 4,722,185

Effective Gross Income $12,124 $66.60 $14,548,936

ExpensesReal Estate Taxes $12.70 $2,775,000Property Insurance 0.40 87,384 Utilities 2.50 546,153 General Operating 1.00 218,461 Repairs & Maintenance 3.00 655,383 Landscaping & Security 1.00 218,461 Janitorial 1.75 382,307 Management Fee 2.50% 1.66 363,723 Non-Reimbursable Landlord Expense 0.25 54,615 Reserves for Replacement 0.00 -

Operating Expenses $24.27 $5,301,487

Operating Expense Ratio 36.44%

Net Operating Income $42.33 $9,247,448

OAR / 5.50%

Indicated Stabilized Value $168,135,427

Rounded $168,100,000

Deferred Maintenance (71,040,000)

Lease-Up Discount (62,300,000)

Indicated As Is Value $34,795,427

Rounded $34,800,000

Value Per SF $159.30

Compiled by CBRE

© 2014 CBRE, Inc.

Reconciliation of Value

113

Reconciliation of Value

The value indications from the approaches to value are summarized as follows:

SUMMARY OF VALUE CONCLUSIONSLand Value $73,000,000

Cost Approach $33,200,000

Sales Comparison Approach $31,700,000

Income Capitalization Approach $34,800,000

Reconciled Value $34,800,000

Compiled by CBRE

The cost approach typically gives a reliable value indication when there is strong support for the

replacement cost estimate and when there is minimal depreciation. Considering the substantial

amount of depreciation present in the property, the reliability of the cost approach is considered

somewhat diminished. Therefore, the cost approach is considered less applicable to the subject

and is used primarily as a test of reasonableness against the other valuation techniques.

In the sales comparison approach, the subject is compared to office properties that have been

sold recently or for which listing prices or offers are known. The sales used in this analysis are

considered comparable to the subject as leased to office tenants, and the required adjustments

were based on reasonable and well-supported rationale. In addition, market participants are

currently analyzing purchase prices on investment properties as they relate to available substitutes

in the market. Therefore, the sales comparison approach is considered to provide a reliable

value indication, but has been given secondary emphasis in the final value reconciliation.

The income capitalization approach is applicable to the subject since it is capable of being an

income producing property leased in the open market. Market participants are primarily

analyzing properties based on their income generating capability. Therefore, the income

capitalization approach is considered a reasonable and substantiated value indicator and has

been given primary emphasis in the final value estimate.

Based on the foregoing, the market value of the subject has been concluded as follows:

MARKET VALUE CONCLUSION

Appraisal Premise Interest Appraised Date of Value Value Conclusion

As Is * Fee Simple Estate July 7, 2014 $34,800,000

As Is - Excess Density Fee Simple Estate July 7, 2014 $27,750,000* Excludes value of the excess densityCompiled by CBRE

© 2014 CBRE, Inc.

Assumptions and Limiting Conditions

114


1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to title that would adversely affect marketability or value. CBRE, Inc. is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CBRE, Inc., however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject’s title should be sought from a qualified title company that issues or insures title to real property.

2. Unless otherwise specifically noted in the body of this report, it is assumed: that the existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that the improvements, as currently constituted, conform to all applicable local, state, and federal building codes and ordinances. CBRE, Inc. professionals are not engineers and are not competent to judge matters of an engineering nature. CBRE, Inc. has not retained independent structural, mechanical, electrical, or civil engineers in connection with this appraisal and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CBRE, Inc. by ownership or management; CBRE, Inc. inspected less than 100% of the entire interior and exterior portions of the improvements; and CBRE, Inc. was not furnished any engineering studies by the owners or by the party requesting this appraisal. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this appraisal. Accordingly, if negative findings are reported by engineering consultants, CBRE, Inc. reserves the right to amend the appraisal conclusions reported herein.

3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property was not observed by the appraisers. CBRE, Inc. has no knowledge of the existence of such materials on or in the property. CBRE, Inc., however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the appraisal.

4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CBRE, Inc. This report may be subject to amendment upon re-inspection of the subject subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation.

5. It is assumed that all factual data furnished by the client, property owner, owner’s representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the appraisal report. Unless otherwise specifically noted in the appraisal report, CBRE, Inc. has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, Assessor’s Parcel Numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact

© 2014 CBRE, Inc.


115

on the conclusions reported. Thus, CBRE, Inc. reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CBRE, Inc. of any questions or errors.

6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the American Dollar on that date. This appraisal is based on market conditions existing as of the date of this appraisal. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the appraisal. However, CBRE, Inc. will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject.

7. CBRE, Inc. assumes no private deed restrictions, limiting the use of the subject in any way.

8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this appraisal, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this appraisal report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred.

9. CBRE, Inc. is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject.

10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market.

11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CBRE, Inc. does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CBRE, Inc.

12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CBRE, Inc. to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form.

13. Also, unless otherwise noted in the body of this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated.

14. This study may not be duplicated in whole or in part without the specific written consent of CBRE, Inc. nor may this report or copies hereof be transmitted to third parties without said consent, which consent CBRE, Inc. reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this appraisal was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CBRE, Inc. which consent CBRE, Inc. reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a “sale” or “offer for sale” of any “security”, as such terms are defined and used in the Securities Act of 1933, as amended. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CBRE, Inc. shall have no accountability or responsibility to any such third party.

15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report.

© 2014 CBRE, Inc.


116

16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or appraisal and are invalid if so used.

17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report.

18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CBRE, Inc. unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CBRE, Inc. assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. An agent for the Federal Flood Insurance Program should be contacted to determine the actual need for Flood Hazard Insurance.

19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client’s designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CBRE, Inc. assumes responsibility for any situation arising out of the Client’s failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate appraisal/consulting profession if so desired.

20. CBRE, Inc. assumes that the subject analyzed herein will be under prudent and competent management and ownership; neither inefficient or super-efficient.

21. It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the appraisal report.

22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist.

23. The Americans with Disabilities Act (ADA) became effective January 26, 1992. Notwithstanding any discussion of possible readily achievable barrier removal construction items in this report, CBRE, Inc. has not made a specific compliance survey and analysis of this property to determine whether it is in conformance with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the ADA. If so, this fact could have a negative effect on the value estimated herein. Since CBRE, Inc. has no specific information relating to this issue, nor is CBRE, Inc. qualified to make such an assessment, the effect of any possible non-compliance with the requirements of the ADA was not considered in estimating the value of the subject.

24. Client shall not indemnify Appraiser or hold Appraiser harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate appraisal results to others, which acts of the Client approximately result in damage to Appraiser. Notwithstanding the foregoing, Appraiser shall have no obligation under this Section with respect to any loss that is caused solely by the active negligence or willful misconduct of a Client and is not contributed to by any act or omission (including any failure to perform any duty imposed by law) by Appraiser. Client shall indemnify and hold Appraiser harmless from any claims, expenses, judgments or other items or costs arising as a result of the Client's failure or the failure of any of the Client's agents to provide a complete copy of the appraisal report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover, from the other, reasonable attorney fees and costs.

© 2014 CBRE, Inc.

LAND SALE No. 1Harbourside North Air RightsLocation DataLocation: 2900 K Street, NW

Washington, DC 20007

County: District of Columbia

Parcel No: 1171, 2001-2005

Atlas Ref:

Physical DataType: Office

Land Area: Gross Usable

Acres: 0.764 0.764

Square Feet: 33,269 33,269

Topography: Level, At Street Grade

Shape: Rectangular

Utilities: Available

Zoning: W-2

Allowable Bldg Area: 133,000 SF

Floor Area Ratio: 4.00

No. of units:

Max FAR: 4.00

Frontage: K Street, NW - ;29th Street, NW - ;

AnalysisUse At Sale: Office

Proposed Use or Dev. Office

Price Per Acre: $51,060,487

Price Per SF of Land: $1,172.26

Price Per Unit:

Price Per SF of Bldg: $293.23

Financial DataTransaction Type: Sale

Date: 8/2013

Marketing Time: NA

Grantor: Armada/Hoffler Holding Co.

Grantee: Allegiance Investment Advisors

Document No.: 2013090985

Sale Price: $39,000,000

Financing: All Cash

Cash Eq.Price: $39,000,000

Onsite/Offsite Costs: $0

Adj. Sale Price: $39,000,000

Verification: Lender, public records

CommentsThis is the sale of air rights supporting the office component of a mixed-use property in Georgetown. The property is already built, and a 99-year ground lease has been drafted. The initial ground rent is $1,375,000 which is flat for the first two yeasr, and there are minimum annual increases that are somewhat above the expected CPI ranging from 3.95% - 5% over years 3-16. There is a repurchase option in year 15 based on the 16th year rent divided by 5.95%. An overall ground lease cap rate of 3.5% is indicated.

© 2014 CBRE, Inc.

LAND SALE No. 2624 9th Street, NW (AKA 900 G Street)Location DataLocation: 624 9th Street, NW



Parcel No: 0376-0068

Atlas Ref:



Acres: 0.300 0.300

Square Feet: 13,068 13,068

Topography: Generally Level

Shape: Rectangular

Utilities: All to Site

Zoning: C-4



No. of units:

Max FAR: 8.50

Frontage: G Street, NW - ;9th Street, NW - ;

AnalysisUse At Sale: Office building

Proposed Use or Dev. Office building



Price Per Unit:



Date: 5/2012

Marketing Time: NA

Grantor: RP MRP 900 G, LLC

Grantee: ASB MRP 900 G Street LLC

Document No.: 56429

Sale Price: $33,275,795

Financing: Not Available


Onsite/Offsite Costs: $200,000


Verification: Buyer

CommentsAt the time of sale, this site was developed with a Class C office building which was less than 70% occupied. The remaining tenants vacated within the next few months. The existing building was demolished and construction has commenced on a 9-story, trophy office building with approximately 112,000 square feet of net rentable area. The building will include a below-grade garage with approximately 57 spaces, a fitness center, rooftop terrace, 9 to 10 foot ceilings, and 7,000 square feet of ground floor retail space. The building is expected to achieve LEED Gold certification. Rental rates are projected in the low $50's NNN. The building is expected to deliver 3rd Qtr 2014. The transaction represents the recapitalization of the ownership structure. ASB Real Estate Investments purchased Rockpoint Group's stake in the property. MRP Realty is maintaining their stake in the property. The property previously sold in March 2010 for $21,000,000. The building was 79.5% leased at the time.

© 2014 CBRE, Inc.

LAND SALE No. 31200 17th Street, NWLocation DataLocation: 1200 17th Street, NW

Washington, DC



Atlas Ref:



Acres: 0.391 0.391

Square Feet: 17,015 17,013

Topography: Generally Level

Shape: Irregular

Utilities: All to site

Zoning: SP2, changing to C-4



No. of units: 0

Max FAR: 10.00

Frontage: 17th Street - ;Rhode Island Avenue and M Street - ;

AnalysisUse At Sale: Office Building

Proposed Use or Dev. Office Building



Price Per Unit: $0



Date: 10/2011

Marketing Time: NA

Grantor: National Restaurant Association

Grantee: First Potomac Realty Trust/Akridge

Document No.:

Sale Price: $39,600,000

Financing: Cash to Seller




Verification: Contract purchaser

CommentsThis is the current 83,157 square foot office building that is owned by the National Restaurant Association. It had been under contract since January 2011 and sold to a joint venture between First Potomac Realty Trust and Akridge. The buyers are pursuing a zoning change to C-4 which would allow a 10 FAR. Obtaining the new zoning is not considered a hurdle due to the zoning on the rest of the block and at nearby buildings. The seller will likely lease back the building for about 5 months after the sale closes and before they move. The purchaser plans to demolish the building as soon as the tenant moves out, which is estimated at $4 to $5 PSF of existing building. A 170,000 square foot office building is planned. Pro forma rental rates are $52 NNN.

© 2014 CBRE, Inc.

LAND SALE No. 4AAMC SiteLocation DataLocation: New York Ave & 7th Street, NW



Parcel No: Square 0451

Atlas Ref:



Acres: 0.726 0.726

Square Feet: 31,629 31,629

Topography: Level, At Street Grade

Shape: Irregular

Utilities: All to site

Zoning: DD/C-2-C



No. of units: 0

Max FAR: 0.00

Frontage:

AnalysisUse At Sale: Storefront retail

Proposed Use or Dev. Office Building



Price Per Unit: $0



Date: 8/2011

Marketing Time: NA

Grantor: Multiple

Grantee: AAMC

Document No.: 90111, 2, 3 & 4

Sale Price: $59,000,000

Financing: Not Available




Verification: Seller, public records

CommentsThis comparable represents the assemblage of 15 lots from four owners (transferred on four deeds) of approximately 285,000 SF in density for office development in the District of Columbia's East End submarket. The buyer, the Association of American Medical Colleges, will reportedly develop the site for a future headquarters. The site features a corner location and good frontage and visibility. The site is currently occupied by several storefront retail buildings. The property owner has sufficient CLDs to allow for a 100% commercial development. The CLDs have already been acquired, requring no adjustment. We have estimated demolition costs at $100,000 and included the cost in the adjusted sale price.

Square/Lots: 0451-0002, 0003, 0004, 0031, 0820

© 2014 CBRE, Inc.

OFFICE SALE No. 1Army and Navy Club BuildingLocation DataLocation: 1627 Eye Street, NW




Atlas Ref:

Physical DataType: Multi Tenant

Land Area: 0.360 Acres

Gross Building Area: 0 SF

Net Rentable Area: 109,000 SF

Usable Bldg Area:

Year Built: 1913, Ren. 1987

No. of Stories 12

Parking: Garage

Condition: Good

Exterior Walls: Masonry

Class: A

Amenities: LEED Gold, balconies/terraces, park views

Sales DataTransaction Type: Sale

Date: 3/2014

Marketing Time: NA

Grantor: 1627 Eye Street Property LLC (Beacon)

Grantee: Washington Real Estate Investment Trust

Document No.: 32530

Sale Price: $79,000,000

Financing: See Comments

Cash Eq. Price: $79,000,000

Req. Capital Cost: $0


Verification: Broker, Buyer

Financial DataSource: Broker

Occupancy at Sale: 100%

Based On: Existing Income

Total Per SF

Potential Gross Inc: $0 $0.00

Vacancy & Credit Loss: $0 $0.00

Effective Gross Inc: $0 $0.00

Expenses & Reserves: $0 $0.00

Net Operating Inc: $4,542,500 $41.67

AnalysisUnderwriting Criteria:

Overall Cap Rate (OAR): 5.75%

Projected IRR: 0.00%

Eff Gross Inc Mult (EGIM):

Op Exp Ratio (OER): 0.00%

Price Per SF: $724.77

CommentsThis building is located on the northeast corner of 17th and Eye Streets, NW with views facing Farragut Square park. The Army and Navy Club occupies the first four floors of the building.The property was leased slightly above market rental rates. Cozen O'Conner occupies the top three floors (36,574 SF) with lease rollover in April 2016. Other major tenants include The New York Times Company (23,515 SF) expiring June 2022, The Williams Companies (13,414 SF) expiring March 2019, and Institute of Transportation Engineers (12,267 SF) expiring in April 2026. The cap rate was reportedly below 5.75%, but the buyer did not want provide the specific pro forma NOI. The buyer indicated that they were expecting flat rent growth for the next 2-3 years. Approximately $1.5 to $2.0 was needed in cap ex for items such as HVAC and elevator.The buyer assumed $53 million in debt at a 3.45% interest rate. This reportedly had no signifcant impact on the sale price.

© 2014 CBRE, Inc.

OFFICE SALE No. 2Metro Center ILocation DataLocation: 700 13th Street NW




Atlas Ref:





Usable Bldg Area: 0 SF

Year Built: 1989, Renovation 2012

No. of Stories 12

Parking: Garage

Condition: Good

Exterior Walls: Concrete

Class: A

Amenities: Rooftop terrace, fitness center, concierge, Energy Star


Date: 3/2014

Marketing Time: 2 Months

Grantor: BCSP 700 13th St LLC (Beacon)

Grantee: Fosterlane Management


Sale Price: $222,000,000


Cash Eq. Price: $222,000,000

Req. Capital Cost: $15,000,000


Verification: Selling Broker, Knowledgable third party

Financial DataSource: Appraiser


Based On: Pro Forma Income

Total Per SF

Potential Gross Inc: $17,800,000 $69.76

Vacancy & Credit Loss: $0 $0.00

Effective Gross Inc: $17,100,000 $67.02

Expenses & Reserves: $6,600,000 $25.87


AnalysisUnderwriting Criteria: DCF


Projected IRR: 6.00%


13.86



CommentsThis building is located across an intersection from the Metro Center metro station. Union Pacific moved from a nearby building in late 2012. The property underwent renovations in 2012. The property was marketed by Eastdil Secured and received multiple offers. Planned elevator modernization costs of $1,500,000 were added to the sale price. Additionally, estimated lease up costs of $13,500,000, which represents TIs, LCs, and rent loss from downtime were added. The indicated financials are based on year 2 stabilized estimates. Year 3 estimates have been reported to reflect a low 5.0% yield, but this assumed no stabilized vacancy rate, understated management fee, and more aggressive rent growth. There is nominal lease expiration until 2023 when 36% of the space expires, primarily due to the expiration of Perkins Cole, LLP.

© 2014 CBRE, Inc.

OFFICE SALE No. 3Westbridge Office BuildngLocation DataLocation: 2550 M Street, NW




Atlas Ref:

Physical DataType: Single Tenant


Gross Building Area: 209,866 SF


Usable Bldg Area:

Year Built: 1976, 2015

No. of Stories 9

Parking: Garage

Condition: Average

Exterior Walls: Masonry

Class: A-

Amenities:


Date: 2/2014


Grantor: CARR CRHP DC/VA Properties LLC (Tishman)

Grantee: Mirae Asset Global Investments


Sale Price: $136,689,070

Financing:

Cash Eq. Price: $136,689,070



Verification: Buyer




Total Per SF

Potential Gross Inc:

Vacancy & Credit Loss:

Effective Gross Inc:

Expenses & Reserves:




Projected IRR:




CommentsThis office building is 100% occupied by the law firm Patton Boggs, LLP who recently extended their lease through April 2032. The lease commences January 1st, 2014 for 18.33 years at $36.80 per square foot, on a triple net basis with annual escalations. Included in the lease were base building improvements of approximately $6.5 million as well as a TI allowance of $75 per square foot. The remaining costs ($19.3 million) related to these two cost centers that had yet to be allocated were to be credited by the seller at closing. The property is located in the West End submarket just east of Georgetown at the corner of M Street and 26th Street. The building was considered leased at market.

© 2014 CBRE, Inc.

OFFICE SALE No. 4One Metro Center Location DataLocation: 701 13th Street, NW



Parcel No: 0288-7001 & 0846

Atlas Ref:



Gross Building Area:


Usable Bldg Area:

Year Built: 2003

No. of Stories 12

Parking: Garage

Condition: Good

Exterior Walls: Precast Concrete

Class: A

Amenities: Direct access to metro, concierge, fitness center, Energy Star


Date: 7/2013

Marketing Time: NA

Grantor: ClPF-One Metro, LP

Grantee: Jamestown Premier One Metro Center

Document No.: 98223

Sale Price: $307,500,000

Financing: Market Terms

Cash Eq. Price: $307,500,000

Req. Capital Cost: $0


Verification: Buyer

Financial DataSource: Buyer



Total Per SF






AnalysisUnderwriting Criteria: Other


Projected IRR:




CommentsThis building is located on a small site plus air rights over the Hecht's department store at Metro Center. The buyer indicated it is a condominium structure with minimal shared expenses. There are three levels of garage parking on site and an easement with a building across the street for approximately 175 additional spaces. There is valet parking.Rental rates were reportedly near market with balanced lease rollover. Approximately 30% of the leases expire in 2015 & 2017 with the majority of the remaining leases expiring in 2019 and beyond. The buyer was not projecting any significant rent spikes. Average rent growth was near 3.0%.

© 2014 CBRE, Inc.

OFFICE SALE No. 5Washington HarbourLocation DataLocation: 3000 & 3050 K Street, NW




Atlas Ref:





Usable Bldg Area: 561,135 SF

Year Built: 1986, and 1987, Ren. 2012

No. of Stories 6

Parking: Garage

Condition: Good

Exterior Walls: Brick

Class: A

Amenities: Fitness Center, restaurants, retail


Date: 7/2013


Grantor: MRP Realty

Grantee: Principal Financial


Sale Price: $370,000,000


Cash Eq. Price: $370,000,000

Req. Capital Cost:


Verification: Seller, Buyer, Broker

Financial DataSource: Buyer



Total Per SF

Potential Gross Inc: $34,287,000 $61.10

Vacancy & Credit Loss: $222,866 $0.40

Effective Gross Inc: $34,064,135 $60.71

Expenses & Reserves: $13,736,000 $24.48


AnalysisUnderwriting Criteria: Direct Cap and DCF


Projected IRR:


10.86



CommentsThis is the sale of two, Class A office buildings with ground floor retail located along the Potomac River in the Georgetown neighborhood of Washington, DC. The top three floors of 3050 K Street are individually owned condominiums, which are not included in this sale. The property includes restaurants with outdoor seating and a fountain that is converted to an ice rink in the winter. The buildings feature two major law firm tenants. There is low rollover until 2023 and 2025 when the law firms expire. The seller is crediting all rent loss in relation to a few vacant spaces. There is a vacant pad site on the east side of the property that is approved for a hotel or residential use containing 70,050 square feet. The buyer did not allocate any value to the density.The property flooded in April 2011, and the property was subsequently repaired and renovated.

© 2014 CBRE, Inc.

OFFICE SALE No. 61200 19th Street, NWLocation DataLocation: 1200 19th Street, NW




Atlas Ref:





Usable Bldg Area:

Year Built: 2009, 1963 (Gut Ren. 2009)

No. of Stories 11

Parking: Garage

Condition: Excellent

Exterior Walls: Glass

Class: A

Amenities: Rooftop terrace, fitness center, retail


Date: 5/2013

Marketing Time: NA

Grantor: Hines 1200 19th Street LLC

Grantee: 1200 Nineteenth Street LLC (Kuwait Inv Auth)


Sale Price: $296,000,000


Cash Eq. Price: $296,000,000



Verification: Reliable Third Party




Total Per SF








Projected IRR:




CommentsThis building is located at the northwest corner of 19th & M Streets, NW. The property was originally built in 1963 and gut renovated in 2009 and included the addition of three floors, a new glass curtain wall and all new energy efficient mechanical, electrical, and plumbing systems. The building has a LEED Platinum designation for Core & Shell. The building has window exposure on all four sides; street exposure to the south and east and alley exposure to the north and west. The average rental rates were in the mid $40's per square foot. There is minimal lease rollover in the near future. Major tenants include Squire Sanders (December 2025 expiration), Womble Carlyle (August 2021 expiration), Navigant Consulting (February 2022 expiration), and McKinsey & Company (December 2019 expiration).The sale price has been adjusted for lease-up costs which include rent loss, TIs, LCs and profit at 20%.

© 2014 CBRE, Inc.

OFFICE COMPARABLE No. 1733 10th Street, NW Location DataLocation: 733 10th Street, NW



Parcel No:

Atlas Ref:




Usable Building 0 SF

Loss Factor: 100.00%

Year Built: 2011

# of Stories: 10

Parking: Garage

Condition: Excellent


Class: A

Amenities: Rooftop terrace, fitness center, LEED Gold

Occupancy / Lease DataOccupancy: 97%

Typical Size: 0 SF

Term:

Base Rent PSF: $50.00

Rent Escalations: Neg.

Basis: NNN

Expense Pass-Thru: N/A

Free Rent:

Tenant Improvement:

Leasing Agent: CBRE

Phone No.:

Survey Date: 7/14

Date Size (SF) Tenant Rent (PSF) TI (PSF) Free Rent (Months)

Escalation Term (Yrs)

4/28/2012 29,000 Confidential (NNN) $51.00 8 2.5% 10.00

4/30/2012 42,000 Confidential (FS) $69.50 8 2.25% 10.00

1/31/2012 71,000 Confidential (NNN) $45.00 10 2.25% 10.00

6/30/2014 4,600 Confidential (FS, Lower Level)

$34.00 $45.00 0 2.5% 10.00

Recent Leases

CommentsThis property consists of a 171,171 square foot class A office building that delivered in 2011. The building is LEED Gold certified and is within one block of the Metro Center station. The property consists of 12 parcels. Most of these parcels are vertical air rights parcels that consist of each floor of the building as the building is built above a church. The church consists of a portion of the ground floor and all of the second floor and was developed as part of the subject improvements. The church is owned by a separate entity. The leases signed in 2012 had significant tenant improvement allowances; however, the amount was not disclosed. The lease signed in June 2014 was lower level space, which rents at a discount to above-grade space.

© 2014 CBRE, Inc.

OFFICE COMPARABLE No. 2900 G Street, NWLocation DataLocation: 900 G Street, NW



Parcel No: 0376 0068

Atlas Ref:




Usable Building

Loss Factor:

Year Built: 2015, (Under Const.)

# of Stories: 9

Parking: Garage

Condition: New


Class:

Amenities: Fitness center, rooftop terrace, LEED Gold


Typical Size: 13,277 SF

Term: 120 Months



Basis: NNN


Free Rent:

Tenant Improvement:

Leasing Agent: Cassidy Turley

Phone No.:

Survey Date: 7/14

CommentsThis property is a new Class A office building currently under construction at 900 G Street, NW in the East End submarket of Washington, DC. The building broke ground in Second Quarter 2013 and is scheduled for delivery in First Quarter 2015. The developer is MRP Realty. Quoted rents are in the mid $50 per square-foot range on a triple net basis. No leases have been signed.

© 2014 CBRE, Inc.

OFFICE COMPARABLE No. 3799 9th Street, NWLocation DataLocation: 799 9th Street, NW

District of Columbia, DC 20001



Atlas Ref:




Usable Building

Loss Factor:

Year Built: 2001, 2014 (Ren.)

# of Stories: 10

Parking: Garage

Condition: Average


Class: A

Amenities:


Typical Size:

Term: 120 Months



Basis: NNN


Free Rent:

Tenant Improvement:

Leasing Agent: Brookfield Office Properties

Phone No.:

Survey Date: 7/14



1/1/2014 65,000 Norton Rose Fulbright (NNN)

$48.75 $105.00 12 2.5% 12.00

Recent Leases

CommentsThis class A office property is located approximately one block west of the Gallery Place/Chinatown Metro Station in the East End Submarket of Washington, D.C. The building was renovated in 2013/2014 following the expiration of the office tenants including a rooftop deck, updated lobbies, restroom upgrades and elevator cab upgrades. Furthermore, the office space was brought to shell condition. The ground floor is leased to Z-Pizza, Five Guys and OYA Restaurant through 2019/2025. Quoted rates for office space range from $44 to $52 per square-foot on a triple net basis. The building is 5% occupied, but 73% leased.

© 2014 CBRE, Inc.

OFFICE COMPARABLE No. 4City Center DC SouthLocation DataLocation: 800 10th Street, NW



Parcel No:

Atlas Ref:






Year Built: 2014, February 2014

# of Stories: 11

Parking: Garage

Condition: Good


Class: A+

Amenities: Parking, Park views


Typical Size: 0 SF

Term:

Base Rent PSF:

Rent Escalations:

Basis: NNN

Expense Pass-Thru: NNN

Free Rent:

Tenant Improvement:

Leasing Agent: Hines

Phone No.:

Survey Date: 5/14



3/20/2013 42,000 American Hospital Association

$55.00 $120.00 4 2.30% 14.00

9/19/2013 15,188 Qatar Foundation Int'l, LLC

$53.35 $90.00 0 2.25% 15.00

Recent Leases

CommentsThis trophy-quality building is located on the north side of H Street occupying the southern part of the block between 9th and 10th Streets. It will deliver in early 2014 and will be LEED Gold. It is part of the City Center mixed-use development. The building will have first floor retail space and below-grade parking. Covington & Burling will occupy about 60% of the office space in the building as of June 2014 on a 20-year lease.

© 2014 CBRE, Inc.

OFFICE COMPARABLE No. 5Metro Center ILocation DataLocation: 700 13th Street NW




Atlas Ref:






Year Built: 1989, Renovation 2012

# of Stories: 12

Parking: Garage

Condition: Good

Exterior Walls: Concrete

Class: A

Amenities: Rooftop terrace, fitness center, concierge, Energy Star


Typical Size:

Term:


Rent Escalations:

Basis: Full Service

Expense Pass-Thru: Base Year

Free Rent:

Tenant Improvement:

Leasing Agent: Jones Lang LaSalle

Phone No.:

Survey Date: 2/14



1/1/2014 22,828 Perkins Coie (Expansion, NNN)

$42.50 $85.50 8 2.25%; $2.00 Yr 6 Step 10.00

9/1/2012 6,366 Union Pacific (BY, New) $66.00 $45.00 8 2.5%;$2.50 Yr 6 10.80

10/12/2012 10,585 Capitol Counsel (FS, New)

$61.50 $80.00 12 2.5% 10.50

6/27/2013 29,288 Hyman Phelps & Mcnamara (FS)

$69.00 $75.00 7 2.25%; $2.00 10.00

12/1/2014 3,249 Au Bon Pain (Retail, Ren, NNN)

$70.00 $18.47 0 2.5% yrs 1-5, 3% yrs 6-10

10.00

7/1/2014 37,445 Freshfields Bruckhaus (FS, New)

$63.00 $100.00 16 2.25% 15.00

9/1/2014 9,125 Leydig (FS, Ren) $62.50 $45.00 5 2.50% 5.00

7/1/2014 8,111 Landon Butler (FS, Ren) $65.50 $85.00 5 2.50% 5.00

1/1/2014 3,005 Travelers (FS, New) $59.00 $0.00 9 2.50% 5.75

Recent Leases

CommentsThis building is located across an intersection from the Metro Center metro station.

© 2014 CBRE, Inc.

OFFICE COMPARABLE No. 6The Victor BuildingLocation DataLocation: 750 9th Street, NW




Atlas Ref:






Year Built: 2000

# of Stories: 9

Parking: Garage

Condition: Good


Class: A

Amenities: Concierge, fitness center


Typical Size: 0 SF

Term:


Rent Escalations:

Basis: NNN

Expense Pass-Thru: $20.00

Free Rent:

Tenant Improvement: $75.00

Leasing Agent: Brookfield

Phone No.:

Survey Date: 7/14



12/1/2010 11,503 Akerman Senterfitt (FS) $49.10 $70.00 6 2.5% 8.50

5/1/2010 15,840 Board Source (FS) $53.00 $80.00 7 2%; $2.25 11.60

5/1/2010 6,959 Health Care Council (FS) $51.00 $85.00 9 2%; $2.25 11.75

6/1/2009 3,813 Akerman Senterfitt (NNN) $38.00 $75.00 3 2.5% 10.25

Recent Leases

CommentsThis building is located at the southwest corner of H & 9th Streets, NW. Prime spaces in the building rent in the low $40 PSF range on a triple net basis (mid $60 PSF range on a full service basis) with a typical tenant improvement allowance of $65-$80 PSF. A 4,400 SF space in the back of the building is currently listed at $48 to $49 per square-foot on a full service basis with a slightly lower allowance in the $50-$65 PSF range. A lower level windowless space is also available at $33 PSF on a full service basis, or about $10-$15 PSF NNN. An allowance for this space is approximately $15-$20 PSF.

© 2014 CBRE, Inc.

MLK LIBRARY

EXECUTIVE SUMMARYPRE-DESIGN BUILDING EVALUATION

PAGE | 3FINAL REPORT

GDG and its professional project team prepared a first draft Pre-Design Building Evaluation of the Martin Luther King, Jr. Memorial Library during the period of August 6 - September 20, 2013. The document was subsequently reviewed, edited, and finalized during the period of September 21-December 9, 2013.

The intent of this study is to provide the references needed to gain a firm understanding of the existing conditions and challenges associated with the MLK Jr. Memorial Library building and its possible renovation and expansion.

The geotechnical study in the report is based on existing foundation and soil data. The study indicates that two types of foundations were used for building support: mat foundation and piles. A 6ft thick concrete mat foundation was used for the Mechanical Level while piles with 120 kip capacity were used under Level B.

The report includes a detailed assessment of the building’s structure. The structural system was examined and evaluated per the information obtained from the original structural design drawings and the visual survey of the building. The evaluation was intended to determine the building’s general physical conditions and its ability to support future additional stories above the existing structure.

The building has been found to be generally structurally sound and in good condition but numerous water related defects were observed during the inspection. The study includes findings and recommendations to avoid further damage.

According to available information the initial building design included a 150 psf allowance for an additional library floor. The combined geotechnical and structural evaluation conclude that two additional floors of apartments and/or offices may possibly be added without any modifi-cation of foundations as long as the library’s fourth floor continues to be used for offices and that the final loading does not exceed the initial design load.

If future loads were to exceed the maximum design column loads, new piles and structural modifications will be required to support the additional loads.

The building study includes the evaluation of the waterproofing system, which includes the roof, exterior above ground sealants, and below ground waterproofing.

Martin Luther King Jr. Memorial LibraryPre-Design Building Evaluation

901 G Street NWWashington DC 20001

Final Report 12/20/2013

EXECUTIVE SUMMARY

© 2014 CBRE, Inc.

MLK LIBRARY



The main building roof is a multi-ply modified bitumen with gravel ballast. There are four mechanical penthouses above the main roof with the same type of roofing. The main roof and penthouses have gravel stops with aluminum flashing. Screen walls have been installed on the roof and are anchored to the building system. Some flashing and roof conditions are in need of urgent attention.

The building was erected with three levels below grade. The below grade levels have con-crete walls which were waterproofed during the original construction 43 years ago. Some leaks were observed in various locations and need to be addressed to avoid further damage.

The exterior façades of the building consist of a custom metal curtain wall with large glazed window sections and pronounced mullions. There is visable discoloration and corrosion of the surface of the metal curtain wall and mullions. The damage is most visible when it is raining. The glazing is set in gasket frames that are caulked at the joints where the glazing meets with the framing. Much of the caulking has hardened and is contributing to an increase in the num-ber of broken glass panes. Both conditions require immediate attention. The building’s main electrical system is functional but primarily consists of the original instal-lation. It is in a general state of disrepair and various age related defects, damaged compo-nents, and non-code compliant conditions need to be addressed. During the inspection, one of the high-voltage transformers was found to be leaking.

Both the high and low voltage distribution systems are operational. An extensive infrared power survey did not detect major power anomalies but the building’s electrical system is far beyond its normal life cycle. Several items identified in the report need to be checked and remedied as soon as possible. The system as whole should be replaced in the context of a major renovation. The current fire prevention system is limited and consists of few visual and audible alarms. A new system that was installed a few years ago provides partial additional coverage through the building. The system includes a few new pull stations dispersed throughout the building, along with old pull stations that are reported to be inoperable. As a whole, the current devices do not meet code requirements.

Substantial tests and upgrades are needed to bring the fire prevention system up to code and to give the library effective and code-compliant coverage throughout. In the context of a major renovation and expansion the system would need to be fully overhauled.

The sprinkler system is limited to the garage area, boiler room, trash room, and lobby. The balance of the structure is protected by a stand pipe system. A major renovation would initiate the need to have the entire building sprinklered.

Cooling is supplied by two Trane centrifugal chillers. The chillers are cooled by a multiple cell cooling tower located on the roof. The cooling tower and its related pumps have some signifi-cant useful life. The chillers, however, are approaching the end of their useful life.

Heating is provided by the GSA’s steam system that services many federal and DC buildings. The steam is piped to fan coil units and heat exchangers which convert the energy to hot water which is then circulated to the perimeter of the building under the glazing and supplied by baseboard convector units. The system has undergone various uneven modifications over the years.

© 2014 CBRE, Inc.

MLK LIBRARY



There are four main air handling units dividing the building into four main zones. Each air han-dling unit has both cooling and heating coils. The air handling units have had their air control surfaces manually bypassed or disconnected. The fans are beyond their useful life.

Air distribution is from the lower level through shafts to each floor. Maintenance functions such as duct cleanings have left fire dampers inoperative in both open and closed positions.The original automatic temperature control system was initially pneumatic and is currently in very limited operation. The system was partially abandoned and is now mostly controlled on a manual basis by the engineering staff.

The elevator machine rooms in the penthouse were originally cooled by ventilation fans. Since the elevator controls became electronic, refrigeration systems were added. Many of the ventilation and exhaust fans are in disrepair, and many of the refrigeration cooling systems are inoperable.

Toilet exhaust and other ventilation systems are handled by dedicated exhaust fans, and sev-eral of these fans are in various states of disrepair.

Considering that a major renovation would not take place before three to four years these items need to be addressed as soon as possible.

Domestic water is supplied to the building in the basement mechanical room via 6” iron piping connecting to a duplex city water booster pump station. Hot water primarily used in the restrooms is produced by means of two free standing electric hot water heaters. The first floor does not have any staff or public restrooms. Restrooms on the other floors are generally antiquated and not ADA compliant. The entire system is in need of being overhauled.

Sanitation piping throughout the building is original cast iron piping of various sizing. Some of the piping has been repaired with PVC schedule 40 piping. There are two sanitation receiver tanks with two sewage ejector pumps at each station. Two sump pump stations are also locat-ed in the boiler room to collect rain water and ground water from lower areas and pipe it out of the structure. During the inspection, one of the pumps was reported to be inoperable.The environmental inspection included a Hazmat survey and a Phase I environmental site assessment. The Hazmat survey was intended to identify both friable and non-friable asbes-tos-containing materials (ACMs), lead-based paint (LBP) Polychlorinated biphenyls (PCBs), elevated fungal spore levels, and mercury containing fluorescent light tubes.

During the inspection for asbestos containing materials the inspectors collected a total of (243) suspected building material bulk samples for asbestos. A total of (41) samples tested positive. Although limited in scope the asbestos survey covered about 90% of the building’s readily-accessible areas.

The inspection for lead-based paint included a total of three hundred twenty nine (329) XRF readings of painted building components. One hundred forty seven (147) of the readings gave a positive result for lead based paint (LBP).

The study also included testing for Polychlorinated biphenyls (PCBs) that were commonly used as insulating and cooling fluids in electrical equipment. The (13) collected samples did not test positive.

© 2014 CBRE, Inc.

MLK LIBRARY



During the inspection for fungal spores a total of twelve (12) air samples and an additional five (5) bulk vacuum or swab samples were collected. The laboratory results revealed that at least one sample had elevated mold spore levels greater than the comparable outdoor levels.

The Phase I Environmental Site Assessment (ESA) was intended to identify Recognized Envi-ronmental Concerns (REC) in connection with the site through a site visit, interviews, and the review of ascertainable regulatory and historical documentation. The assessment finds that a possible heating oil leak and historic dry cleaners that once occupied the site may be RECs in connection with the MLK Library Buiding. The Phase I assessment therefore recommends the performance of a Phase II ESA which would include the advancement of soil borings, and the collection and analysis of groundwater and soil samples to further evaluate identified RECs.

The Hazmat survey and Phase I ESA conclude that in the context of a major renovation the building will need to be fully abated prior to construction.

The title search included a 60-year search and did not uncover any liens, easements, cov-enants, conditions and restrictions, etc. that affect the MLK Jr. Memorial Library property. The boundary and topography survey was also consistent with the 1968 building plans.

In 1970 the library’s lot lost 3.08’ along its Westside boundary to widen the public alley along its west boundary from 15’ to 18.08’. When the public alley was closed in 2007 it was subse-quently divided (as required) into two 9.04’ wide lots: lot 831 and 832.

The property (lot 823) on the west side of the MLK Library was merged with “its” half of the alley (lot 831) and became the new combined lot 127. The library (lot 825) should have also been merged with “its” alley half of the alley (lot 832) but there is no record of such a merger and the two lots therefore remain as separate properties. Although the District owns the two adjoining lots (825 and 832) it would be preferable to have two lots merged prior to proceed-ing with the library’s expansion plans

© 2014 CBRE, Inc.

PAGE | 3 FINAL REPORT

LEGAL DESCRIPTION: Property is identified as Martin Luther King Jr. Library located at 1901 G Street, NW, Occupying Lots 825 and 832 in Square 375, part of the Original City of Washington Established in 1893 by an Act of Congress. Lot 825 is more particularly described as beginning at a point 9.04 feet West of the Southeast comer of A&T Lot 832; thence continuing N 0.03'W for a distance of 203.75 feet to a point on the South line of G Place, NW; thence continuing along the South Line of G Place, East for a distance of 371.84 feet to a point on the West line of 9th Street, NW; thence continuing S 0.06'30" E , for a distance of 203.75 feet to a point on the North line of G Street, NW; continuing West along the North line of G Street, NW, for a distance of 371.84 feet to the place of beginning. Lot 832 is described as beginning at the Southwest comer of Lot 127 in Square 375, and continuing along the dividing line of Lots 127 and 832 N 0.08' W for a distance of 203.75 feet to the Northeast comer of Lot 127; said point being located on the South line of G Place, NW; thence continuing East for a distance of 9.04 feet to the Northeast comer of Lot 8321, being also the Northwest corner of Lot 825; thence continuing S 0.08' E for a distance of 203.75 feet to a point on the North line of G Street 9.04 feet to the place of beginning, DEED OF TRUST: None found JUDGMENT/LIEN SEARCH: None found BUILDING RESTRICTION LINE: None found COVENANTS, CONDITIONS & RESTRICTIONS: None found EASEMENTS, RESERVATIONS & RIGHTS OF WAY: None found URBAN RENEWAL PLAN: None found LEASE: None found ABSTRACTORS NOTES’: Please See Summary Attached. TAX INFORMATION: See Print-out attached for taxes and assessments and special assessments. Please note that only a Tax certificate will accurately show any outstanding taxes and special assessments. GOOD THROUGH DATE: December 20th, 2013 Sincerely, Benjamin Soto

© 2014 CBRE, Inc.

JERROLD HARVEY, MAI, MRICS, CCIM Managing Director

CBRE, Inc. – Valuation & Advisory Services

1861 International Drive, Suite 300 McLean, Virginia 22102 Voice (703)-734-4759 Fax (703)-734-3012

E-Mail [email protected]

EDUCATIONAL Bachelor in Business Administration, Emory University, Atlanta, Georgia Successfully completed all the necessary courses to qualify for the MAI and CCIM designation. Graduate course work at various institutions in real estate law, commercial leasing, finance and investment, construction cost analysis and valuation of fractional interests.

PROFESSIONAL Designated Member, Appraisal Institute (MAI) #8935, Current on Continuing Education Member, Royal Institute of Chartered Surveyors Member, Commercial Investment Real Estate Institute President, Washington DC Chapter, Appraisal Institute, 2013 Vice President, Washington DC Chapter, Appraisal Institute, 2012 Treasurer, Washington DC Chapter, Appraisal Institute, 2011 Secretary, Washington DC Chapter, Appraisal Institute, 2010 Member, Board of Directors - Washington DC Chapter, Appraisal Institute, 2008-2009 Former Member, Local Appraisal Institute Chapter Admissions Committee. Former Member, Regional Appraisal Institute Ethics and Counseling Panel. Qualified Expert Witness - Superior Court of the District of Columbia Qualified Expert Witness - United States Bankruptcy Court

LICENSES/CERTIFICATIONS Certified General Real Estate Appraiser: District of Columbia (10016, expiration 2/29/16) Certified General Real Estate Appraiser: State of Maryland (10086, expiration 2/25/16) Certified General RE Appraiser: Commonwealth of Virginia (4001-001321, exp 1/31/16) Certified General Real Estate Appraiser: State of West Virginia (268, expiration 9/30/14)

EXPERIENCE Thirty (30) years of Real Estate Appraisal, Consulting and Brokerage experience throughout the United States specializing in the Washington DC, Baltimore, Richmond and Hampton Roads metropolitan areas. 1995 - Present CB Richard Ellis, Inc. - Valuation & Advisory Services Washington, D.C. 1987 - 1994 Chase National Corporate Services - Real Estate Washington, D.C. 1982 - 1987 Chase Manhattan Bank, N.A. - Real Estate New York, New York 1981 - 1982 KDL Real Estate Company New York, New York Assignments span a wide variety of properties and markets, including office buildings, community retail centers, regional malls, industrial buildings, residential and commercial subdivisions, apartment buildings and hotels.

© 2014 CBRE, Inc.

QUALIFICATIONS OF

JOSEPH NASSAU, LEED AP Vice President

CBRE, Inc.

Valuation and Advisory Services 1861 International Drive, Suite 300

McLean, Virginia 22102 Voice (703) 734-4774 Fax (703)-734-3012

E-mail: [email protected]

EDUCATIONAL Bachelor of Science – Finance and Political Science American University, Washington, DC

LICENSES/CERTIFICATIONS

Certified General Real Estate Appraiser: Commonwealth of Virginia (License No. 4001 014620, Exp. 01/31/2016) Certified General Real Estate Appraiser: District of Columbia (License No. GA11639, Exp. 02/28/2016) Certified General Real Estate Appraiser: State of Maryland (License No. 27569, Exp. 04/28/2016)

PROFESSIONAL

Candidate for Designation, Appraisal Institute LEED Accredited Professional (LEED AP), U.S. Green Building Council

Certified General Required Core Curriculum Appraisal Institute Course 510: Advanced Income Capitalization Appraisal Institute Course 530: Advanced Sales Comparison and Cost Approaches Appraisal Institute Course 540: Report Writing and Valuation Analysis Appraisal Institute Course 550: Advanced Applications CCIM Institute 101 - Financial Analysis for Commercial Investment Real Estate CCIM Institute 102 - Market Analysis for Commercial Investment Real Estate CCIM Institute 103 - User Decision Analysis for Commercial Investment Real Estate CCIM Institute 104 - Investment Analysis for Commercial Investment Real Estate

EXPERIENCE June 2007 - Present CBRE, Inc., Valuation and Advisory Services Washington, D.C. Assignments span a wide variety of properties and markets, including office buildings, industrial properties, retail centers, residential subdivisions, and apartment buildings. April 2002 – May 2007 CoStar Group, Inc. Bethesda, MD

© 2014 CBRE, Inc.

14-081DC-0665 MLK Library & Air Rights

Documents

Transcript of 14-081DC-0665 MLK Library & Air Rights