2 ACRES - GALLERIA

O F F E R I N G M E M O R A N D U M

U R B A N D E V E L O P M E N T O P P O R T U N I T Y I N H O U S T O N , T E X A S

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WEST UNIVERSITY PLACERESIDENTIAL NEIGHBORHOOD

WEST UNIVERSITY PLACERESIDENTIAL NEIGHBORHOOD

AFTON OAKS RESIDENTIAL NEIGHBORHOOD

AFTON OAKS RESIDENTIAL NEIGHBORHOOD

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BELLAIRERESIDENTIAL NEIGHBORHOOD

BELLAIRERESIDENTIAL NEIGHBORHOOD

ST. MICHAEL’S CHURCHST. MICHAEL’S CHURCH

SUBJECT PROPERTYSUBJECT PROPERTY

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ST. MICHAEL’S CHURCH

ST. MICHAEL’S CHURCH


SAGE PLAZASAGE PLAZA



RIVER OAKS DISTRICTRIVER OAKS DISTRICT

12 ACRES-GALLERIAHFF

HFF is pleased to offer qualified investors an exceptional development opportunity of ± 87,120 square feet (the “Property”) located at the NWC of South Post Oak Lane and Ambassador Way in the heart of Houston’s exclusive Galleria/Uptown District. Currently positioned as a condominium complex known as the Ambassador at Post Oak, the location is adjacent to the under construction BLVD Place featuring a new Whole Foods Market along with the proposed Apache Tower. The site offers developers an ideal redevelopment opportunity for office, hotel, residential, or mixed-use development.

PROPERTY INFORMATION

Address 5050 Ambassador Way, Houston, Texas 77056

Total SF 87,120

Current Structure Three story residential with basement parking

Future Use No restrictions

INVESTMENT HIGHLIGHTSPROPERTY• Located right off Post Oak Boulevard, the Property provides excellent access throughout the Uptown District.• Perfect size for a variety of development including office, hotel, residential, and mixed-use.• Unobstructed views across west Houston.

LOCATION• Adjacent to the under construction BLVD Place, an upscale mixed-use development featuring 205,000 SF of retail, which will include Whole Foods and multiple upscale boutique shops, and a 750,000 SF 33-story office building to-be-built as Apache’s new office tower.• Positioned within the 500 acre Galleria/Uptown District, Houston’s ultimate 24/7 Live-Work-Play environment with 25 million SF of office, 5 million SF of retail, 7,100 hotel rooms, and a daytime population of 200,000.• Surrounded by some of the densest development in all of Texas.• Highly walkable to nearby offices, retailers, and dining venues and is in close proximity to the 1,500 acre Memorial Park, one of Houston’s best natural resources.

OPPORTUNITY• Capitalize on the current development of BLVD Place and the popularity of the Galleria/Uptown District.• Houston has the highest projected population growth through 2016.• Houston’s status as one of the nation’s leading economies.• Featuring Galleria Class A Office rents of $33.82 PSF, Class A Apartment rents of $1.65 PSF, and one of the highest average hotel REVPars of any submarket in Houston.

Executive Summary

UPTOWN PARKDEVELOPMENT SITE

LakeHouston

San Jacinto

Bay

SheldonReservoir

GalvestonBay

SmithersLake

ClearLake

George BushPark

LakeHouston

State Park

ArmandBayouPark

WilliamP. HobbyAirport

George BushIntercontinentalAirport

HARRISCOUNTY

LIBERTYCOUNTY

FORT BENDCOUNTY

MONTGOMERYCOUNTY

BRAZORIACOUNTY

GALVESTONCOUNTY

Downtown Galleria

TexasMedical Center

Westpark Tollway

Katy Frwy

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SharpstownPark

Country Club

WestwoodCountry Club

BraeburnCountry Club

HoustonCountry

Club

Memorial Park

Memorial ParkGolf Course

River OaksCountry

Club

BaylandPark

ReliantPark

SabinePark

SteinPark

HermannPark

BuffaloBayou

Bayou

Whiteoak

Bayou

Brays

Buffalo

Bayou

River Oaks

MontroseTanglewood

Galleria

HoustonHeights

ReliantStadium

RICEUNIVERSITY

TexasMedicalCenter

The Galleria

MemorialCity Mall

SharpstownMall

UNIV. OF TEXASHEALTH SCIENCESCENTER

HoustonZoo

HoustonAstrodome

Six FlagsAstroworld

HOUSTONBAPTISTUNIVERSITY

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THE DEVELOPMENT

NEW DEMAND DRIVERSThe Galleria/Uptown District is Houston’s most active development market with $1 billion in new commercial activity planned and under way for the next five years. These developments include:

• Skanska USA recently completed a 20-story 302,000 square foot office tower at 3009 Post Oak Blvd.

• Redstone Companies recently completed a 22-story office tower with Stream Realty at 2200 Post Oak Blvd. BBVA Compass is moving 800 of its employees into this office tower.

• BLVD Place has begun construction on Phase II, which will be anchored by a 48,500 square foot Whole Foods Market and Frost Bank’s 53,000 square foot regional headquarters.

• BHP Billiton is developing a 30-story 560,000 square foot office tower that will serve as the company’s petroleum headquarters and will house an estimated 3,000 employees at the site on Post Oak Blvd., only a short walk from the Property.

• Hanover Companies is building a 29-story high-rise residential tower that is expected to deliver 355 luxurious for rent units to the Galleria/Uptown market.

24/7 “LIVE, WORK, PLAY”The Galleria/Uptown District is the Houston’s most dynamic, urban mixed-use, pedestrian-friendly environment – densely populated with Class A office space, luxury retail, and affluent residences. It is Houston’s third largest employment center and the 15th largest business district in the US with more than 23 million SF of office space, 2,000 multi-national companies, and 80,000 employees. There is more than five million square feet of upscale retail in the district, which is the largest concentration in the city. As the premier dining and entertainment area of Houston, it is

home to over 100 restaurants, including four of the seven AAA ranked “4 Diamond Restaurants” in the city.

HIGHLY WALKABLE

The Property is located in one of the most walkable areas in all of Houston. Food and groceries can be purchased from the nearly completed Whole Foods Market which is located ajacent to the Property. Other errands can be accomplished on foot as first class retail and entertainment venues can be found within the Galleria/Uptown District, as well as exquisite dining options. In addition, it is a quick connection to Memorial Park and a close walk to and from major employers and office towers.

SUPERIOR DEMOGRAPHICSThe Property has surrounding demographics that prove the area is primed for additional upscale development, with key measures that far exceed Houston MSA averages.

2 ACRES 1M RADIUS 5M RADIUS HOUSTON MSA

Population 18,081 467,818 6,290,000

Avg HH Income $128,566 $102,306 $78,862

% Avg HH Income >$100K 39% 28% 24%

% College Educated 71% 55% 34%

VISIBILITYThe Property is well positioned with excellent access throughout the Galleria/Uptown District. It also possesses prime visibility next to the BLVD Place Development. Being only a stone’s throw away from both Post Oak Blvd. and San Felipe St., two of the most iconic addresses in all of Houston, the Property is in the perfect location, tucked off the main road to provide relief from traffic and noise, but close to provide easy access and excellent visibility. On top of the ideal Galleria location, the Property is also near the I-610 Loop which intersects with I-10 and US-59, two of the most heavily traveled intersections in all of Texas.

Executive Summary


Executive SummaryBLVD PLACE OVERVIEWBLVD Place is a 22 acre, high-end, mixed-use development in the Galleria/Uptown District with luxury boutiques, fine dining, and premium office space. Located adjacent to the Property, BLVD Place will create a development synergy by providing Houston’s new upscale “hotpot”. Phase 1 of BLVD Place was completed in 2009 with its four-level, 70,000 SF retail/office building that includes Festari, Hermes of Paris, Philippe Restaurant, and RDG+Bar Annie Restaurant. Successive phases are expected to include several hundred thousand square feet of restaurants, shops, and offices, as well as Apache’s corporate headquarters campus, residences, a theatre, and a health club. Currently, a major retail and office phase is nearing completion, with a 48,500 SF Whole Foods Market anchoring the retail portion and Frost Bank with 53,000 SF anchoring the office portion.

With the construction of BLVD Place underway, the Property is in an ideal position to be redeveloped into a number of different uses. In many ways, the Property can be seen as an extension of BLVD Place due to its immediate proximity. Additionally, BLVD Place will be bringing multiple new amenities to the Property’s doorstep.


OFFICEThe Galleria District is second only to the Central Business District in terms of its concentration of office space in the Houston MSA, totaling approximately 31.9 million square feet in 171 buildings. In fact, the Galleria District is one of the largest business centers outside a historic core in the United States. The District is comparable in size to the CBDs of Baltimore, Denver, and Pittsburgh.

The recent growth of the District stems from the strength of the Houston economy. Houston has been rated highly on a variety of lists recently, with many number one rankings including the Best Cities for Your Career in 2013, with one of the most important statistics being the number of jobs created. Houston was the first city to return all of the jobs it lost in the recent economic downturn; and it is projected to add 445,000 jobs from 2011-2016 (according to Moody’s Analytics May 2013) second to only New York City.

The Galleria District is the corporate or regional headquarters location for numerous national and international companies, including AON, Apache Corporation, Baker Hughes, BHP Billiton, Bechtel, Cameron International, Christus Health, Southern Union, GDF Suez Energy North America, Duke Energy, Hines, Marathon Oil, Parsons Engineering, Schlumberger, Stewart Information Services, Weatherford International, Landry’s Restaurants, and the Williams Company. The Galleria District is also home to many major commercial real estate firms in the city. Approximately 2,000 companies call Galleria Houston home, drawn to the area’s rich amenities, convenient access, and proximity to Houston’s most sought-after residential neighborhoods.

Houston’s strengthening office market is being led by a demand for quality Class A space. With current Class A office space in the Galleria renting for $33.82 PSF, the area continues to be one of Houston’s most popular office markets. As such there have been several recent notable completions in the area: Skanska’s 3009 Post Oak Blvd., BBVA Compass Plaza at 2200 Post Oak Blvd., along with Frost Bank’s new office in BLVD Place.

There are also two large scale projects currently planned in the area: Australian energy company BHP Billiton will break ground in 3Q 2013 on a new 30-story, 560,000 SF global headquarters at 1500 Post Oak Blvd., next to its current operations center at Four Oaks Place. Completion is expected in October 2016. Energy company Apache Corporation is planning to move its headquarters to a to-be-built 33-story, 750,000 SF office building within BLVD Place.

Executive Summary


RESIDENTIALThe Galleria/Uptown District features some of the most iconic and luxurious residential developments. From the nearby stately single-family residences to soaring condo towers, and everything in between, the Galleria area truly has a strong residential component. With property values beginning to rebound from the recent recessionary lows, many, developers are starting to consider new residential product in the Galleria area. Due to the lack of existing supply, new product, and the influx of new residents, the Galleria submarket has seen for sale prices increase as well as increases in rental product rental and occupancy rates. Class A multi-family properties are boasting a rental rate of $1.65 PSF/Month and occupancy of 87.2%. This occupancy number is slightly misstated due to new product still reaching stabilization. Ultimately, the Galleria/Uptown area remains one of the most popular areas for upscale living. Due to its close proximity to many corporate employers and the heavily forested surroundings of Memorial Park, it is no surprise that the area is also one of the most densely developed areas in all of Houston.

HOTEL

The Galleria District’s hotel market is unquestionably the most prestigious and successful hospitality area in the city, with consistently high occupancy rates. The area contains four of Houston’s top hotels, as rated by the American Automobile Association, and accounts for the most full-service accommodations in the Houston area. The Galleria District contains 33 hotels with 8,200 rooms, the second highest number of hotel rooms in the city (11% of the total) and dominates in generating hotel revenue representing approximately 25% of the city’s total and approximately 65% higher than the next closest submarket. Many of the top hospitality firms in the world have chosen to operate hotels in this prime location and have experienced high-degrees of success. The impressive performance of hotels in the Galleria District can be attributed to many factors including Houston’s healthy growth of business and recreational travel, the development of the Galleria District into one of the most dynamic office, retail, and residential environments in the United States, its central location within the Houston area and the high quality of hospitality facilities.

Executive Summary


GALLERIA/UPTOWN DISTRICTCentrally located and spanning approximately 500 acres, the Galleria/Uptown District is approximately ten miles west of downtown Houston. Anchored by Post Oak Boulevard, alongside Memorial Park, and flanked by the world-famous Galleria, the District is home to 25 million square feet of commercial office space, 5 million square feet of retail space, 8,200 hotel rooms, more than 100 restaurants, and a booming residential market. More than 200,000 international business professionals, fashionistas, city dwellers and tourists from around the globe converge in this area daily. Defined by its unique blending of prestigious business and residential addresses with the best shopping, dining, and entertainment, the Galleria/Uptown District is one of the world’s leading urban districts and hosts more than 24 million visitors annually.

• One of the largest business districts in the nation, ranked 15th overall in the US in terms of office space

• Home to approximately 2,000 companies with 80,000 employees, ranging from small- to large-sized commercial businesses, representing a variety of diverse industries including prominent energy, financial, real estate and professional services companies

• With 2.4 million square feet and more than 400 stores and restaurants, the Galleria is ranked as the largest mall in Texas. The Galleria is anchored by two Macy’s, Neiman Marcus, Nordstrom, and Saks Fifth Avenue and averages approximately $900 in sales per square foot.

• The Galleria/Uptown District is the most sought-after tourist destination in the city, and the Galleria, itself, is the number one shopping and tourist attraction in Houston and the southwest.

• The Uptown Houston Tax Increment Reinvestment Zone #16 (TIRZ) and the Uptown Development Authority work in tandem to encourage new development and grow Uptown Houston’s tax base.

• Uptown’s TIRZ is implementing a plan to mitigate traffic congestion. This plan includes an overall budget of $235 million for local mobility improvements during its 30-year life.


MEMORIAL PARKThe Galleria/Uptown District is connected by a hike and bike trail to Memorial Park, one of the largest urban parks in the nation at approximately 1,500 acres (nearly double the acreage of Central Park in New York City) with an estimated value of $1 billion and one of Houston’s best natural assets. Memorial Park includes the 600 acre Memorial Park Golf Course, the 155 acre Houston Arboretum and Nature Center, a three-mile, lighted, crushed granite jogging and exercise trail, six miles of multi-use trails through the woods, five softball fields, a rugby and soccer field, two sand volleyball courts, a tennis center, a swimming center, innumerable picnic tables, grills, and picnic pavilions. Memorial Park is truly a Houstonian icon and consistently attracts joggers, golfers, and nature enthusiasts alike.


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SAGE PLAZASAGE PLAZA


FOUR OAKS PLACEFOUR OAKS PLACE

FOUR LEAF TOWERSFOUR LEAF TOWERS

ST. MICHAEL’S CHURCHST. MICHAEL’S CHURCH

UPTOWN PARK

UPTOWN PARK

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RIVER OAKSRESIDENTIAL NEIGHBORHOOD

RIVER OAKSRESIDENTIAL NEIGHBORHOOD


aerial photograph


North American Oil Production

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12 million barrels per dayU.S. Canada

Projected

THE IMPLICATIONS OF ROBUSTSUPPLY GROWTH IN NORTH AMERICA ARE PROFOUND. They include the potential for a radical re-industrialization

of the U.S., based on energy intensive industry and a surge in employment growth not only around enhanced

drilling and industrial growth but in a host of other industrial and services sectors.

- Citigroup Global Markets Inc., March 2012

HOUSTON – HEADQUARTERS OF THE GLOBAL ENERGY RENAISSANCE

Houston’s history with energy dates to 1901 when oil was struck in neighboring Beaumont, Texas, creating the original

“Texas Oil Boom” and pushing the U.S., and specifically Houston, to the forefront of petroleum exploration, development

and technology. 111 years later, Houston is firmly established as the energy capital of the world with approximately

50% of the local economy tied to the petroleum, natural gas, and chemical industries. To keep production in line with

forecasts of increasing global demand, firms avoided layoffs during the recession and are now exceeding their pre-

recession levels of employment. Also, a new wave of “unconventional”

energy developments has oil and gas employment surging as domestic

production increases. From the largest corporation to the smallest

independents, expansions are in full-force across the entire spectrum

of the energy industry. As the energy industry’s home, Houston has

benefited from growth in all of the following sectors:

Upstream – This term describes the exploration and production (E&P) segment of the energy industry, which

basically encompasses drilling for resources and bringing them to market. There are three primary segments which

are classified as unconventional energy, and all three are driving employment growth in upstream investment both

domestically and globally:

• Deepwater Drilling – The Gulf of Mexico is fully recovered and Shell was issued the first new drilling permit

after the moratorium was lifted.

• Canadian Oil Sands – Possibly the world’s largest oil reserve, this field is still in early stages of development

but will contribute greatly to the Houston area refineries as improvements in transportation infrastructure

continue.

• Shale Hydrofracturing – The proliferation of horizontal drilling techniques combined with “fracking” is dramatically

increasing production of oil and gas across the U.S.

Midstream – With large new unconventional supplies coming online, there is an

increased need for transportation and storage infrastructure, which is provided

by the “Midstream” energy segment. There are market bottlenecks that have

emerged with new production, and pipeline companies and other midstream

service providers are scrambling to fulfill the increased demand accordingly.

• Although the Keystone XL pipeline has garnered the most attention,

there are dozens of new pipelines under construction which encompass

thousands of miles and represent tens of thousands of jobs in the

construction and steelmaking industries. As an example, the Marcellus

Shale in the Northeast U.S. had 18 pipelines under construction as of

March 2012.

• New trucks, railways and trains to transport crude are also in high demand

as pipelines are built. As an example, EOG Resources recently constructed

a new rail line to transport crude from the South Texas Eagle Ford Shale

to refineries in Houston.

• Trucks and rail still have constraints as well, so there is also demand for new storage facilities with proximity

to major shales and offshore platforms as transportation bottlenecks are addressed.

Downstream – Historically the prices of oil and gas have been highly correlated, but an unprecedented decoupling

of the two has occurred as gas supplies have outpaced short-term demand. Low cost natural gas is rejuvenating

U.S. manufacturing and is restoring global competitiveness in multiple industries while new sources of demand for

gas are emerging.

• Known as “coal switching”, power plants are converting from coal-fired to natural gas turbine electricity production,

which is lowering electrical costs for manufacturers and consumers and decreasing the environmental impact

of production.

• The fledgling availability of CNG vehicles, buses and truck fleets is poised for growth, with the Detroit three all

introducing CNG light trucks in their 2013 line ups and UPS and Fedex announcing CNG fleets.

• Low cost natural gas inputs have been a boon for steel, plastics, fertilizers, organic compounds and chemicals

manufacturers.

• Many of the same industries benefiting from less expensive inputs are also experiencing increased demand.

Steel, plastics, and chemicals are all required to drill and transport oil and gas, which creates a positive feedback

loop for the industry and bodes well for Houston employment.

houston economic overview


HOUSTON ECONOMIC OVERVIEW

Currently ranked as the fastest growing economy

in North America by the Brookings Institution,

Houston has consistently been a national leader

in employment and population growth, and, most

recently, named as one of the most affordable,

diverse and cultural cities to live in.

Thriving on expansive and modern infrastructure

facilities, affordable living and business costs, a

young and well-educated workforce, and vital

energy and healthcare industries, Houston

weathered the global recession and economic

volatility better than most of the nation’s largest

employment bases. In fact, the region has the

distinction of being one of only two of America’s

top 20 metros to regain all the jobs lost in the

past recession.

The region entered into 2013 with impressive

momentum. The Greater Houston Partnership

forecasted 87,600 new jobs to be created in

2012 and the city greatly surpassed that number,

adding 118,200 jobs across a wide array of

sectors between January 2012 and January

2013. With a solid economic base built on

industries with healthy long-term fundamentals,

Houston will continue to be among the country’s

pre-eminent growth markets. According to a

March 2013 study by Axiometrics Inc., Houston

is leading the nation in annual job growth and

effective rent growth.

Houston stands as a prime example of a regional economy achieving strength through diversification. In 1986, 80%

of the local economy was tied to the petroleum, natural gas, and chemical industries. Twenty-five years later, and

after concerted efforts to capitalize on other areas of strength, that number has been reduced to approximately

48%. Houston is home to the largest medical center in the world and its companies are leaders in such dynamic

high-tech sectors as biomedical technology, electronics, computers, software, aerospace, integrated power and

plastics manufacturing. The city has become a logistics powerhouse and a key hub in international trade

The Port of Houston, one of the few American port facilities to have both import and export traffic, is responsible

for one in eight jobs in the metro region. Containerized goods, raw materials, and agricultural products come into

the port from all over the world, while U.S. manufactured products and agricultural items depart from Houston to

major overseas markets. Likewise, the vast Houston airport system, which includes three major facilities, is also a

national leader in air cargo served by some of the world’s largest air transport companies. Ranking second in the

“America’s energy boom has been kind to Houston, the country’s fastest-growing job

market. As new discoveries of underground shale rich with pockets of natural gas create

fertile fields of exploration and harvest for many of the world’s largest energy companies,

Houston is reaping a windfall of investment. In 2012, Texas’ largest city added a bevy of

new jobs as it led the nation corporate facility projects, earning Houston the title of Top

Metropolitan Area in the U.S… It’s a familiar ranking for Houston, which also won the

honor for 2011.”

- Site Selection Magazine, March 2013

First in facility expansion: In 2012, Houston earned the top spot for facility expansions for the second straight year. This area saw

325 new or expanded corporate facilities in 2012, ahead of second-place Chicago, which had 311 projects. Nearly $60 billion in energy

projects have either been announced, planned or are under way.



nation behind only New York, Houston is home to twenty-five Fortune 500 headquarters. Of the world’s 100 largest

non-U.S.-based corporations, over half have non-retail operations in Houston. Growth in non-energy sectors is

expected to continue over the long-term, driving further diversification of Houston’s economic base and helping the

city achieve a consistently healthy growth rate.

EMPLOYMENT

In February 2013, and according to the Texas Workforce Commission, Houston ranked first in annual job gain, having

added 118,700 new jobs since February 2012.

Most recently, and according to the Texas Workforce Commission, Houston added 118,200 new jobs over the 12

months ending January 2013, equating to a 4.5% year-over-year increase. Effectively, Houston’s employment base

is witnessing consistent expansion – and the region is expected to remain a top performer relative to other MSA’s

nationwide. According to Moody’s Analytics, Houston is forecast to rank first in the nation in job growth between

2011 and 2016, creating 423,500 new jobs.

Job growth is expected to be kindled by continued expansion in both traditional and alternative energy sectors, as

well as profound personnel needs in industries such as healthcare, education, trade, transportation, and professional

and business services.

ENERGY SECTOR

As the domestic and international center for

virtually every segment of the petroleum and

natural gas industries, Houston is known as the

“Energy Capital of the World.” Forty of the nation’s

top 145 publicly-traded oil and gas exploration and

production firms, including 15 of the top 25, are

headquartered in Houston; 11 of the remaining

14 have subsidiaries, major divisions or other

significant operations in Houston. The nine

refineries in the Houston region produce 2.33 million barrels of crude oil annually, or 50% of the state’s total production

and 13.8% of national capacity. Fifteen of the nation’s top 20 natural gas transmission companies have corporate or

divisional headquarters in Houston, controlling 79.5% of US capacity. In total, the Houston MSA has more than 3,700

energy-related establishments, including more than 500 exploration and production firms, more than 150 pipeline

transportation establishments, and hundreds of manufacturers and wholesalers of energy-sector products.

Notably, Houston’s energy focus also includes a concentration on emerging alternative sources. The city is home

to both the Institute for Energy Research (IER) and the Advanced Energy Consortium, groups which are focused on

expanding research and development of alternative and renewable forms of energy. Beyond Houston’s natural ties to

the oil and gas industry, the city has become an established alternative energy research center with concentrations

in wind, solar, biofuel, geothermal, and smart-grid technologies. All told, approximately 48.5% of the region’s economic

base – those sectors of the local economy that export goods and services outside the region – is related to all forms

of energy development and production.

MEDICAL / LIFE SCIENCES / BIOTECHNOLOGY

Houston offers a strong foundation of academic

institutions, research centers, hospitals, and clinics

that have served as a significant driver of economic

growth. Mirroring patterns shown in the U.S. economy,

Houston’s health & educational services sector has

provided the most consistent expansion of any

employment category over the past decade. This trend

continued through August 2012 with the sector adding

14,900 jobs over the preceding 12 months, equating to an

impressive 4.6% growth rate. The primary focus of this

growth is within the internationally-renowned, 1,300+

acre Texas Medical Center – the world’s largest medical

complex with 15 hospitals and over 100 professional

office buildings. The medical, academic, and research

institutions of the Texas Medical Center collectively

represent Houston’s largest employer with more than

92,500 total jobs, including the 25,200 professionals that

have tenure of more than one decade, but not including

the more than 10,000 support personnel who work in

adjacent professional buildings.

More than 7.1 million patients visited in 2011, including over 18,000 international patients. The Texas Medical Center’s

52 member institutions, all of which are non-profit, are dedicated to the highest standards of research, education

and patient and preventive care. In addition to the 14 hospitals, there are two specialty institutions, 21 academic

institutions (including four nursing schools), and dentistry, public health, and pharmacy schools where over 34,000

students attend regular classes. 71,500 persons are currently enrolled in educational or professional retraining at Texas

Medical Center institutions. The Houston region has greatly benefited over the past decade with the development

of satellite campuses of these institutions in suburban growth areas, such as The Woodlands, West Houston, and

Fort Bend County, providing the region with state-of-the-art, advanced medical care.

MAJOR ENERGY PLAYERS IN HOUSTON

Anadarko Petroleum, Apache, BHP Billiton, BP America, Chevron, CITGO, ConocoPhillips, ExxonMobil, Kinder Morgan, Shell Oil, Vlaergo Energy, Baker Hughes, Cameron International, FMC Technologies, GE Oil and Gas, Halliburton, National

Oilwell Varco Schlumberger, Weatherford International

More heart surgeries are performed at Houston’s Texas Medical Center than anywhere else in the world.



Houston Economic Overview

HOUSTON AIRPORT SYSTEM

The Houston Airport System is the fourth largest airport

system in the United States and sixth largest in the

world. In the twelve months ending December 2011,

approximately 50 million passengers and over 750,000

tons of cargo passed through Houston’s three airports:

George Bush Intercontinental Airport/Houston on the

north side, William P. Hobby Airport on the south side,

and Ellington Field near NASA’s Johnson Space Center.

These facilities constitute one of the world’s most

accessible airport systems, and along with Houston’s

central location in the United States, provide an ideal distribution hub for domestic and international markets. Bush

Intercontinental Airport (IAH), the city’s primary airport, is now the eighth largest international passenger gateway

in the U.S. More than 700 domestic and international flights via 20 different carriers originate from the airport daily.

The airport also serves as the largest hub for United Airlines following the recent merger of Continental Airlines

and United Airlines.

Several significant expansion projects have elevated IAH to one of the world’s busiest international cargo gateways,

and the 120-acre, one-million-square-foot facility has the capacity to handle perishables, oilfield equipment, computers,

auto parts and other vital shipments safely and efficiently. Recent upgrades to IAH’s cargo facility were part of the

Houston Airport System’s $3.1 billion capital improvement project that also included terminal expansions, parking

improvements, apron extensions, and a variety of field improvements. Additionally, in early 2012, United reaffirmed its

commitment to both Houston and IAH via a public-private partnership with the Houston Airport System to overhaul

Terminal B with a five-phase, $1 billion renovation project. The first phase of the renovation is expected to cost $161

million, $92 million of which will be funded by United, and is projected to open in late 2013. Hobby Airport (HOU), located

just a few miles southeast of Downtown Houston, is the city’s oldest commercial airport and has historically served

as an important domestic aviation hub for the region. Hobby has multiple low cost carrier operations, although it is

dominated by Southwest Airlines. Southwest has 130 daily flights departing Hobby to 33 cities daily, using 17 gates

at the airport. The airline plans to maintain Houston as

a focus city and is looking to serve new markets from

Hobby. In fact, on May 30, 2012, Houston City Council

approved a deal to have Southwest Airlines build a $100

million international facility at William P. Hobby Airport

and begin operating flights to Mexico and the Caribbean

starting in 2015. At that time, Houston will be served by

two major international airport facilities.

PORT OF HOUSTON / INTERNATIONAL TRADE

The engine that drives Houston’s thriving international trade and commerce is the Port of Houston. Situated along

the Houston Ship Channel, this 25-mile-long complex is the world’s tenth largest port and the nation’s leading port in

terms of US foreign tonnage and second in overall tonnage. More than 7,000 vessels and 150,000 barges call at the

Port of Houston’s 150 public and private terminals, moving 42 million short tons of cargo annually. Increased trade

with Asia and South America, as well as the rapid growth in the energy sector, led the Port of Houston Authority

to develop a $1.7 billion capital improvement plan that will expand the port’s facilities, infrastructure, security and

overall environment.

Highlights of this plan include the Bayport Container Terminal, where the first two phases have been delivered (the

third is now under construction), as well as the Bayport Cruise Terminal. Texas benefits tremendously from the Port of

Houston as the facility has an annual statewide economic impact of more than $117 billion – nearly $4 billion of which

is solely tax revenue. The facility also currently accounts for more than 785,000 jobs in the state and approximately

$39.3 billion in annual personal income. The importance of the Port of Houston to the regional economic base is only

anticipated to grow in coming years. Continued infrastructure expansion of port facilities, particularly the widening

and deepening the Houston Ship Channel, will allow greater volumes of goods to reach the facility for distribution

throughout the United States.

POPULATION GROWTH

According to Rice University’s Kinder Institute for Urban Research, Houston was the nation’s fastest growing

metropolitan area for the decade ending 2010, adding more than 1.2 million new citizens during this period. The influx

of new Houstonians pushed the MSA’s population over an estimated 6.29 million residents by the end of 2012, more

residents than the entirety of several states. During this period, Harris County gained more than 50% of the MSA’s

total increase, making it the second fastest growing county in the nation. According to Texas State Data Center

forecasts, the MSA’s population is going to continue growing at a steady pace over the next several years, reaching

7.1 million residents by 2020 and nearly 9.5 million residents by 2035.

The U.S. Census Bureau estimates that 58.5% of the Houston region’s growth over the last year came from natural

increase, (i.e., the resident births minus resident deaths), 21.9% came from international in-migration, (i.e., people

moving here from overseas), and 19.6% came from domestic in-migration (i.e. people moving here from elsewhere

in the U.S.). The Census accounts for the fact that people move out of the region as well, thus producing an estimate

of net change due to migration. With all variables factored, total growth in the Houston area over the most recent

year was estimated at 110,068.

The metro region’s high natural growth rate is particularly impressive, as even if no one moved to Houston for the

remainder of the decade, the region would add another 600,000 residents by 2020. Moreover, if the in-migration

rate continues, 450,000 transplants will call Houston home by the next census. In summary, the metropolitan area’s

rate of growth looks to continue over the long-term, with approximately one million residents added to the current

population base by 2020.

IAH’s 784,0000-sq-ft Terminal E and Federal Inspection Services (FIS) has 84 primary inspection booths that

can process over 4,500 passengers per hour.

The Port of Houston has a local market reach to over 7 million people within 1 day’s drive time and a regional market reach

to over 28 million people for next day delivery service.


Houston Economic Overview

ECONOMIC OUTLOOK

Following on the momentum that developed in 2011, 2012 proved to be a year of continued national-leading economic

expansion. The factors that drove job growth over the last year – high energy prices, advances in exploration and

medical technology, strong demand for Houston’s exports, a weak U.S. dollar, and immigration of residents from

other places (both domestically and internationally) – will continue to drive the economy. Employment now exceeds

pre-recession peaks in several key sectors – oil and gas extraction, food and beverage stores, utilities, trucking,

computer systems design, healthcare, education services, food services, leisure and hospitality, and other (personal)

services. However, in several other sectors – construction, finance, real estate – employment remains where it stood

a decade ago. Of those three, construction and real estate show signs of significant improvement over the next year.

Overall, the Greater Houston Partnership forecasts 87,600 new jobs for the 10-county Houston metro area during

the year. Further, Moody’s Analytics projects another 423,500 jobs to be created over the next five years, as well as

population growth of 614,200 during that same period.

ENERGY CONTINUES TO DRIVE REAL ESTATENot only is energy-related employment one of the driving forces behind the Houston market, but the amount of energy expended by interviewees expressing their enthusiasm for the city’s real estate outlook is overwhelming. “You can buy now at a higher cap rate and benefit from growth over the hold period”; “We love the demand coming from the service industry in the energy renaissance”; and “Houston is a winner.”

-PWC and the Emerging Land Institute, “2013 Emerging Trends in Real Estate”

Forbes magazine rated Houston No. 1 on its list of Coolest Cities to Live in 2012, based on the economic drivers of energy,

technology, and aerospace; urban sprawl; business-friendly policies; multi-cultural and eclectic streetscape; and cost of living.


In Houston, one distinct area has truly achieved the 24/7, “live, work, play”

environment that urban planners, developers, and investors seek. Known

as the Uptown District, this area offers an expansive, diverse and energetic

urban environment, weaving together a vital business district, acclaimed retail

stores, luxury hotels, modern condominium and apartment towers, prestigious

residential neighborhoods and lush parks. Because of the concentration of

services and amenities, the Uptown District is recognized as the primary

destination center of the Houston area, attracting both residents from within

the region and visitors from around the nation and the world.

ACCESS & COMPOSITION

The Uptown District benefits from unparalleled accessibility being located

along the western frontage of the West Loop (IH 610). In fact, the Uptown

District’s proximity to this 15-lane highway, one of Houston’s most heavily

trafficked, is a major cause for its success. The area also features exceptional

access being bordered by both the Southwest Freeway (US 59) and Westpark

Tollway to the south and by the Katy Freeway (IH 10) to the north. Major east-

west roadways that bisect the area include Westheimer Road, Richmond

Avenue and San Felipe Street. The major north-south roads include Post

Oak Boulevard, Sage Road, South Rice Avenue, and Yorktown Street. This

extensive transportation network provides convenient access to and from

the Houston MSA’s other major business centers.

The Uptown District features relative proximity to two of Houston’s largest

and most important employment centers and economic drivers, being eight

miles due west of the Houston CBD and five miles northwest of the Texas

Medical Center. The city’s two major airports are each within a thirty-minute

drive; Houston George Bush Intercontinental Airport is located 23 miles to

the northeast and William P. Hobby Airport is only 20 miles to the southeast.

Land use within the Uptown District manifests the area’s diverse and

balance mix of uses, with office, retail, lodging, residential and recreational

development each featured extensively. The area hosts approximately 200,000

office workers and shoppers daily and more than 24 million visitors from all

over the world on an annual basis. It is both the unique mix and also the

large scale of these developments that distinguishes the Uptown District

from other areas of Houston.

OFFICE MARKET

The Uptown District is second only to the Central Business District in terms of

its concentration of office space in the Houston MSA, totaling approximately

31.7 million square feet in 171 buildings. In fact, the Uptown District is one

of the largest business centers outside a historic core in the United States.

The District constitutes the nation’s seventeenth largest office submarket

and is comparable in size to the CBDs of Baltimore, Denver, and Pittsburgh.

The Uptown District is the corporate or regional headquarters location for

numerous national and international companies, including AON, Apache

Corporation, BHP Billiton, Bechtel, Cameron International, Christus Health,

Southern Union, GDF Suez Energy North America, Duke Energy, Hines,

Marathon Oil, Schlumberger, Stewart Information Services, Weatherford

International, Landry’s Restaurants, and the Williams Company. The Uptown

District is also home to many of the major commercial real estate firms in

the city. Approximately 2,000 companies call Uptown Houston home, drawn

to the area’s rich amenities, convenient access, and proximity to Houston’s

most sought-after residential neighborhoods.

RETAIL MARKET

Surrounded by some of the city’s most prestigious subdivisions and home to

more than 300 luxury retailers from across the world, the Uptown District is

to Houston what Beverly Hills is to Los Angeles. Established and legitimized

by the development of Gerald Hines’ renowned Galleria in the 1970s, one of

the most significant and influential mixed-use developments in the nation,

the retail portion of the project now constitutes the seventh-largest mall in

the United States.

The Galleria/Uptown retail market comprises approximately 5.4 million

square feet of retail space spread amongst 63 properties. The area’s high

desirability is evidenced by the market’s 97% occupancy level and average

asking rental rates of more than $30.00 per square foot triple net. Both

domestic and international retailers, ranging from huge department stores to

Galleria/Uptown Market Overview


specialty boutiques, are attracted to the surrounding neighborhoods’ desirable

demographic profile. The average per capita income within a three-mile

radius is $47,000 and an average combined household income of more than

$100,000. These income levels are very comparable to the areas surrounding

such renowned shopping locations as South Coast Plaza in Orange County,

Buckhead in Atlanta, and Highland Park in Dallas. The Uptown District’s

immediate population has ample spending power, providing a proven and

powerful base for retail demand.

HOTEL MARKET

The Uptown District’s hotel market is unquestionably the most prestigious and

successful hospitality area in the city. The area contains four of Houston’s

top hotels, as rated by the American Automobile Association, and accounts

for the most full-service accommodations in the Houston area. The sector

contains 33 hotels with 8,200 rooms, the second highest number of hotel

rooms in the city (11% of the total) and dominates in generating hotel revenue

– representing approximately 25% of the city’s total and approximately

65% higher than the next closest sector. Many of the top hospitality firms

of the world have chosen to operate hotels in this prime area — and have

experienced high-degrees of success. The impressive performance of hotels

in the Uptown District can be attributed to many factors including Houston’s

healthy growth of business and recreational travel, the development of the

Uptown District into one of the most dynamic office, retail, and residential

environments in the United States, its central location within the Houston

area and the high quality of hospitality facilities.

RESIDENTIAL MARKET

Rounding out the diversity of the Uptown District is the residential sector.

The area features some of the most striking contrasts in housing available

anywhere. Soaring condominium towers, comfortable mid-rise and garden

style apartments, upscale townhomes, and stately single-family residences

make up the housing stock in and immediately surrounding the Uptown District.

Living in close proximity is very desirable not only because of the availability

of employment, but also because of its heavily forested neighborhoods and

easy access to Memorial Park, Houston’s largest public park.

According to Claritas, Inc., the Uptown District area has a large local

population base to serve. Within a five-mile radius of the intersection of

Westheimer Road and Post Oak Boulevard (the epicenter of the Uptown

District), Claritas estimated a 2010 population of 483,225 and projects a

population increase to 522,945 by 2015. This five-mile radius includes some

of the wealthiest neighborhoods in the nation. Claritas estimates show

average family household incomes in 2010 of $108,008 within a three-mile

radius of this same intersection. Approximately 32% of households within

a three-mile radius reported incomes of more than $100,000. Nearly 15% of

households within a three-mile radius reported income in excess of $250,000.

Neighborhoods surrounding the Uptown District reflect the prominence and

appeal of the area. To the east, across Loop 610, are River Oaks and Afton

Oaks, two neighborhoods with some of the city’s most magnificent homes

and wealthiest families. To the immediate north and west are Tanglewood,

Briargrove and an area known locally as the Memorial Villages. Homes within

each of these neighborhoods boast average sales prices from $600,000 to

over $2 million.

In addition to the prestigious single family neighborhoods surrounding the

Uptown District, the area itself contains numerous high profile multi-housing

projects. Six major high-rise condominium and rental projects have been

completed over the past few years. These projects include 7 Riverway,

1200 Post Oak, The Mark, The Mercer, Villa d’Este, Montebello, Dominion at

Post Oak, the Cosmopolitan and the Titan Condominiums tower. In addition

to high-rise development, several luxury mid-rise projects have also been

recently completed. In the last few years Alexan Post Oak, Lofts on Post

Oak, Montierra, Empire, Manhattan and Metropolis have all been completed.

Due to strong multi-family market fundamentals and consistent demand,

new high-rise and mid-rise projects within the Uptown District have been

announced in 2012 -- with many of these projects scheduled to enter into

inventory in 2013 and 2014.



INFRASTRUCTURE EXPANSION/AREA ENHANCEMENTS

Understanding that they need to maintain the Uptown District’s competitive

position in a changing global economic and social environment, the

submarket’s property owners and business leaders have taken the initiative in

making physical improvements to the area. Their commitment to reinvestment

will assure the area’s continued role as an international business center.

Much of the Uptown District lies within Harris County Improvement District

#1, the creation of which was a major step in enhancing the economic vitality

of the area. Private sector interests worked together to establish the District

in 1987. Through special legislation, the Texas Legislature empowered the

district to conduct a broad range of functions related to the improvement

of the area. Property owners may assess themselves on an ad valorem or

benefit basis for needed improvements and programs. The District may issue

bonds supported by ad valorem taxes and or assessments. Its purpose is

not to reduce public sector responsibilities but to leverage public additional

funds with coordinated private resources to improve services and facilities.

The District has distinguished itself by providing highly praised facilities

and improvements.

Focused on providing a healthy and reliable infrastructure system, Uptown

Houston has realized enhanced mobility is a vital component to the success

of the area. Several improvement projects have fundamentally changed the

face of Uptown and were the first critical step to making ambitious plans

become reality.

Recent regional infrastructure projects that have been completed include

improvements to the US 59 Southwest Freeway, IH-10 Katy Freeway, the

Grand Parkway, and the Fort Bend Parkway. The reconstruction of the West

Loop and the new Westpark Tollway have had a significant positive impact

on Uptown Houston. The West Loop with new entrances and exits provides

commuters with “hot links” that give direct access into and out of Uptown.

The Westpark Tollway provides west and southwest Houston communities

a quick and convenient gateway into Uptown.

The Uptown Houston District and its Tax Increment Financing District have

now embarked on a $235 million local street improvement program. Its

focus is to:

•Improve existing streets;

•Create a secondary street network;

•Improve intersections, and;

•Create a pedestrian network.

Complemented by the addition of open, green spaces and lively, active

streetscapes, these improvements not only ease congestion and increase

traffic flow, but enliven the district and create an unparalleled sense of place.

For example, Post Oak Boulevard, the primary north-south boulevard through

the Uptown District, is currently being transformed. Plans will accommodate

the new BLVD Place mixed-use development that incorporates pedestrian

and street activity, as well as a transit corridor (featuring light rail) that links

Uptown to regional transit systems and will offer improved intra-district transit

options. Plans also call for a significant pedestrian improvement program,

currently underway, which widens sidewalks and adds pedestrian lighting

and landscaping to all streets in Uptown.

One major mobility improvement project includes San Felipe. Widened to six

lanes, traffic flows much smoother on this major thoroughfare. It has also

been transformed into an oak-lined parkway with pedestrian walkways and

additional green spaces. Other neighborhood arteries feeding into major

thoroughfares are being integrated into the mixed-use environment. Finally,

a network of secondary streets, like the new Post Oak Lane and Skylark in

BLVD Place, were created to ease congestion, create value, and to provide

more active streetscapes.

CONCLUSION

Houston’s Uptown District is an urban community defined by its unique

blending of prestigious business and residential addresses with the best

in retail amenities. Since the development of the Galleria in the 1970s, this

area has truly grown into a new, twenty-first century downtown for Houston.

During this time, the Uptown District has seen more development of every

property type than any other portion of the metropolitan region, from soaring

office and apartment towers to vast retail and hotel complexes. It is an active,

thriving area which has only gotten better with time — and with more exciting

commercial and infrastructure projects on the horizon — the Uptown District

area promises to remain Houston’s preeminent mixed-use district.



INVESTMENT SALES TEAM

CRAIG LAFOLLETTE

Senior Managing Director

Phone (713) 852-3556

[email protected]

DAVIS ADAMS

Managing Director

Phone (713) 852-3558

[email protected]

MARK BRAMLETT

Real Estate Analyst

Phone (713) 852-3469

[email protected]

WILL CRAWLEY

Real Estate Analyst

Phone (713) 852-3547

[email protected]

HFF

9 Greenway Plaza

Suite 700

Houston Texas 77046

Phone (713) 852-3500

Fax (713) 852-3490

www.hfflp.com

© 2013 HFF (Holliday Fenoglio Fowler, L.P.) and HFFS (HFF Securities L.P.) are owned by HFF, Inc. (NYSE: HF). HFF operates out of 21 offices nationwide and is a leading provider of commercial real estate and capital markets services to the U.S. commercial real estate industry. HFF together with its affiliate HFFS offer clients a fully integrated national capital markets platform including debt placement, investment sales, equity placement, advisory services, loan sales and commercial loan servicing. For more information please visit www.hfflp.com or follow HFF on Twitter at www.twitter.com/hff.

HFF has been engaged by the owner of the property [properties] to market it [them] for sale. Information concerning the property [properties] described herein has been obtained from sources other than HFF and we make no representations or warranties, express or implied, as to the accuracy or completeness of such information. Any and all references to age, square footage, income, expenses and any other property specific information are approximate. Any opinions, assumptions, or estimates contained herein are projections only and used for illustrative purposes and may be based on assumptions or due diligence criteria different from that used by a buyer. Buyers should conduct their own independent investigation and rely on those results. The information contained herein is subject to change.

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