ALLIANCE FOR DOWNTOWN NEW YORK

Q3 2011

COMMERCIAL OFFICE MARKET

TOP LEASES SIGNED Q3 2011Source: CoStar, Alliance for Downtown New York

LOWER MANHATTAN LEASING ACTIVITY (sf)Source: CBRE

0

2 Million

4 Million

6 Million

8 Million

10 Million

20032004

20052006

20072008

20092010

2011

Q3 YTD Year End

Leasing ActivityStrong leasing continued in Lower Manhattan during Q3 2011. Nearly 1.6 million sf transacted during Q3 2011 for a total 4.8 million sf year-to-date—a 104% increase over 2010, and already outpacing year-end totals for the past three years. The second and third quarters this year also showed the strongest quarterly leasing activity since Q3 2006.

Several notable deals drove this robust leasing. Oppenheimer and Co. took 270,000 sf, the first transaction at 85 Broad Street since Goldman Sachs vacated the space for its new headquarters in Battery Park City. Oppenheimer plans to consolidate its operations and relocate employees from Midtown.

MSCI Barra, a financial services firm, also signed 125,000 sf, taking the last available space at 7 World Trade. ARUP, an international design and engineering firm, signed nearly 100,000 sf at 77 Water Street and will relocate from Midtown.

1

Tenant Name Building Address SF Leased Transaction Type Industry

Oppenheimer and Co. Inc 85 Broad Street 269,105 Consolidation with Relocation FIRE

MSCI Barra, Inc. 7 World Trade Center 125,000 Direct FIRE

ARUP 77 Water Street 97,412 Direct, Relocation Creative Services

Centerline Capital Group 100 Church Street 57,945 Direct, Relocation FIRE

International Business Times 7 Hanover Square 46,176 Direct Creative Services

New York City Health and Hospitals Corporation

160 Water Street 43,000 Expansion Government

Juvenile Diabetes Research Foundation International

26 Broadway 42,291 Renewal Healthcare

Freedom Specialty Insurance Co. 7 World Trade Center 32,000 Expansion FIRE

Huron Consulting 40 Wall Street 29,000 Direct, Relocation Professional Services

Portware, LLC 233 Broadway 28,098 Renewal Technology

LOWER MANHATTAN REAL ESTATE MARKET OVERVIEW

OVERALL AVERAGE ASKING RENTSSource: Cushman & Wakefield

TOTAL VACANCY

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32009 2010 2011

Lower Manhattan Midtown

SUBLET VACANCYSource: Cushman & Wakefield

0%

2%

4%

6%

8%10%

12%

14%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32009 2010 2011

Lower Manhattan Midtown

VacancyLower Manhattan’s overall vacancy rate was 9.9% in Q3 2011, the third lowest of among business districts nationwide. Vacancy was stable over last quarter and down one percentage point over last year. Sublease vacancy remained very low at just 1%.

Midtown’s vacancy rate was 10% in Q3 2011, up slightly from 9.8% last quarter but down a percentage point from last year. Sublease vacancy was 1.7%.

RentsDespite strong leasing activity and year-over-year drops in vacancy, rents remained flat in Lower Manhattan and Midtown. Lower Manhattan’s overall asking rent was $39.10 per square foot, and Class A rents were $43.19 per square foot.

Meanwhile, Lower Manhattan maintained its competitive advantage in pricing, with overall asking rents showing about a $25 discount compared to Midtown where overall asking rents were $64.07 per square foot and Class A rents were $69.75 per square foot.

SalesThree sales transacted during Q3 2011.1 SouFun Holdings purchased 72 Wall Street from Young Woo & Associates for $180 per square foot. Young Woo paid about $100 per square foot when it bought that building packaged with 70 Pine Street in 2009. Young Woo sold 70 Pine Street to Metro Loft Management during Q2 2011.

Robert Quaco, as part of an investment group, purchased 264 Water Street, an eight-story residential loft building with plans to upgrade apartments and hold the asset long term. The building sold for $374.38 per square foot.

UDR bought 95 Wall Street from the Moinian Group, which converted the building from commercial office use and reopened it as a 507-unit residential rental building in 2008 with high end interior design by Philippe Starck. The building was 93% occupied at the time of sale and sold for $715.03 per square foot.

1 Source: Massey Knakal2009 2010 2011

Lower Manhattan Midtown

$20

$30

$40

$50

$60

$70$80

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2

LOWER MANHATTAN REAL ESTATE MARKET OVERVIEW

OTHER REAL ESTATE NEWS

WORLD TRADE CENTER SITE MAP

NATIONAL 9/11 MEMORIAL AND MUSEUMWorld Trade Center Memorial and Other Rebuilding ProgressThe National September 11 Memorial was dedicated on September 11, 2011 and opened to the public on September 12, 2011. A temporary visitor entrance was opened at the intersection of Albany and Greenwich streets and will serve as the main entry during the ongoing construction on surrounding World Trade Center projects. The 9/11 Memorial Museum will open in September 2012.

Meanwhile, construction at the World Trade Center site continued during Q3 2011, with 1 World Trade surpassing 86 stories and becoming the tallest commercial building in Lower Manhattan. Two World Trade remains on-track to be built to street level by late summer 2012. Steel at 4 World Trade is above 56 floors, concrete is being poured above the 46th floor, and the facade is now above the 22nd floor. Additionally, Mayor Bloomberg announced a board is being formed to oversee construction of the 1,000-seat performing arts venue at the World Trade Center site, which will be anchored by the Joyce Theater.

Fulton Street Transit CenterThe Fulton Street subway station at 135 William Street opened in July. Southbound N/R Service returned to the Cortlandt Street Station in September, which closed in 2005 for repairs. Northbound service was restored in in 2009. The N/R entrance will be connected underground when the Transit Center is completed in 2014.

East River EsplanadeThe first section of the East River Waterfront Esplanade, stretching along the East River from Wall Street to Maiden Lane, opened in July. This phase features plantings, elevated seating, chaise lounges, game tables, planter walls, waterside benches, a dog park, and a purple girder underneath FDR Drive which is illuminated at night.

The New York City Economic Development Corporation expects phase two, which extends from Broad Street to Wall Street, to be completed at the end of 2012. Phase three includes the waterfront from the Manhattan Bridge up to and including Pier 35, and is scheduled to be completed by June 2013.

New Commercial CondominiumCassidy Turley completed the repositioning of four floors at 40 Broad Street as commercial condominiums, totaling 67,544 square feet. The 33-story building also houses the Setai condominiums, a spa, and restaurant SHO Sean Hergatt.

3

LOWER MANHATTAN REAL ESTATE MARKET OVERVIEW

RESIDENTIAL MARKET

RESIDENTIAL SALES (Avg. PSF)Source: Citi-Habitats

0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3

2010 2011

Studio 1 BR 2 BR 3 BR

$0$200$400$600$800

$1,000$1,200$1,400

Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Lower Manhattan Manhattan-Wide Average

LOWER MANHATTAN RENTSSource: Citi-Habitats

Development and InventoryTwo new buildings, 300 North End Avenue and 40 Gold Street, opened during Q3 2011. These added 249 condos to Lower Manhattan’s residential market for a total of 28,499 units in 314 buildings south of Chambers Street.

Additionally, the first units at Forest City Ratner’s New York by Gehry were occupied during the third quarter. Though this building is not scheduled for completion until 2012, 500 of the 903 rental units have been leased and over 30% of units are already occupied. The building also houses an elementary school, PS 397, which welcomed its first students in September.

Rental MarketLower Manhattan residential vacancy remained low, at just 1.06% in Q3 2011, while Manhattan-wide vacancy was 0.93%.

The rental market remained tight this quarter—the second half of the peak season in the residential market. Rental rates were on par with last quarter but showed a considerable jump over last year. Two- and three-bedroom units experienced the most dramatic increases, jumping 14% and 12% respectively. This increase may be the result of units at 8 Spruce Street entering the market, where two- and three-bedroom units are priced above the Lower Manhattan average.

Manhattan-wide, rents trended similarly showing stability over last quarter and a 7 to 8% increase year-over-year.

Additionally, several Lower Manhattan condominium buildings have begun renting unsold units. At 25 Broad Street, a condo conversion project that has been dormant for several years, 104 of 305 total units were leased during Q3 2011.

Sales MarketQuarterly comparisons of recorded closings show a stable sales market over the past year in Lower Manhattan. Price per square foot averaged $984 in Q3 2011, up 4% over Q2 2011, and up 1% year-over-year. Lower Manhattan remains a more affordable option at $984 per square foot, compared to the Manhattan-wide average of $1,233 psf.

RESIDENTIAL VACANCYSource: Citi-Habitats

Q1 Q2 Q4 Q1 Q2 Q32010 2011

Q3

Lower Manhattan Manhattan

0.0%

0.5%

1.0%

1.5%

2.0%

4

LOWER MANHATTAN REAL ESTATE MARKET OVERVIEW

HOTEL OCCUPANCY RATES AVERAGE DAILY ROOM RATES

50%

60%

70%

80%

90%

100%

Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011Lower Manhattan New York City

$50

$100

$150

$200

$250

$300

$350

Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Lower Manhattan New York City

Source: Alliance for Downtown New York, NYC & Company

Development and InventoryLower Manhattan has 4,092 rooms in 18 hotels and the hotel inventory continues to expand.

The 463-room Embassy Suites, now closed for renovations is scheduled to reopen as the Conrad Hilton by the end of the 2011. Another 789 rooms in five hotels are under construction. These additions include: a 95-room hotel on John Street scheduled for completion later this year, a 21-story hotel at 53 Ann Street, a Hampton Inn at 32 Pearl Street, a Holiday Inn at 99 Washington Street, and a 264-room Sheraton Hotel at 217 Pearl Street. This new supply will bring Lower Manhattan’s inventory to 23 hotels with 4,881 rooms.

HOTEL MARKET

Occupancy and Room RatesPricing increased this quarter to an ADR of $308, ahead of the city-wide ADR of $245. Lower Manhattan ADR showed an 8% increase over Q2 2011, and a 6% increase over last year. The Q3 2011 city-wide ADR of $245 was also a 6% increase over Q2 2011, but was unchanged year-over-year.

Lower Manhattan ended Q3 2011 with an 81% average occupancy rate-- a 5% decrease over last quarter and a 5% decrease over last year. Within the quarter, ADR improved in September—a positive sign heading into the peak season for tourism. City-wide, the average occupancy rate was 86% in Q3 2011, stable over last quarter and 3% lower than last year.

RETAIL MARKETTwenty-eight new restaurants, stores, and storefront services opened this quarter for a total 70 new establishments to date in 2011. Highlights include:•A 23,310-square-foot Duane Reade opened at 40

Wall Street, the chain’s largest store featuring a doctor, sushi bar, make-up boutique, and juice bar

•Financier Patisserie at the corner of Fulton and Nassau streets, the patisserie’s fourth location in Lower Manhattan and the 12 location citywide

•Lower Manhattan’s fifth Pret A Manger opened at 100 Church Street

•Beekman Beer Garden Beach Club opened at the South Street Seaport

•Growler Bites & Brews, a pub for dogs and dog-lovers, opened at 15 South William Street

Ground-floor retail rent on Lower Broadway averaged $131 per square foot, consistent with ground-floor retail rents on Lower Broadway last quarter.2

Several notable leases were signed during Q3 2011, including Kortako, a Korean-taco restaurant from the owners of BonChon Chicken, at 80 Nassau; and Le Bunny Bleu, a high-end shoe store, at 61 Broadway

2 Source of rent information: CB Richard Ellis

5