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COLLIERS INTERNATIONAL | HOUSTON MEDICAL OFFICE | 2ND QUARTER 2010

YEAR-END 2012 | MEDICAL OFFICE

Accelerating success.

HOUSTON MEDICAL OFFICE

MARKET INDICATORS

1STHALF

2012

2ND HALF

2012

CITYWIDE NET

ABSORPTION (SF) 735K 250K

CITYWIDE SF DELIVERED 1.0M 207K

CITYWIDE AVERAGE

VACANCY 12.6% 12.5%

CLASS A

AVERAGE VACANCY 14.4% 14.6%CITYWIDE AVERAGE

RENTAL RATE $23.11 $23.17

CLASS A AVERAGE

RENTAL RATE $28.92 $29.13

COLLIERS HEALTHCARE SERVICES GROUP - Houston Texas

HEALTHCARE MARKET COMMENTARY

Houstons Medical Office Market Posts 984,525SF of Positive NetAbsorption in 2012

Houston medical office buildings recorded 249,533SF of positive net absorptio

in thesecond halfof2012,pushing year-end 2012 netabsorption to 984,525SF

By property class, Class A posted the largest amount of year-end positive ne

absorption with 771,903 SF, followedbyClass B properties posting 244,875 SF

of positive net absorption. Since mid-year, the citywide average vacancy rate

decreased 10 basis points and the average quoted rental rate increased slightl

from$23.11 to $23.17 per SF.

Houstons medical office market is expected to benefit from both short- and

long-term regional trends. Disciplined development, with only 9 new buildings

added to inventory in 12 months, will relieve the pressure in filling the existing

vacant lease space.

Overall, Houstons economy remains among the strongest in the U.S. Housto

area home sales increased by 17.4% compared to sales one year ago. The

Houston metropolitan area added 85,000 jobs between November 2011 and

November 2012, an increase of 3.2%, and is on track to add the same amoun

in2013. Unemployment fell to 5.8%from7.3%one year ago.

5%

7%

9%

11%

13%

15%17%

(200,000)

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000Absorption New Supply Vacancy

ABSORPTION, NEW SUPPLY & VACANCY RATES

Houston

UNEMPLOYMENT NOV2011 NOV2012

HOUSTON 7.3% 5.8%

TEXAS 7.2% 5.8%

U.S. 8.2% 7.4%

JOB GROWTHANNUALCHANGE

# OF JOBSADDED

HOUSTON 3.2% 85K

TEXAS 2.6% 274K

U.S. 1.4% 1.9M

JOB GROWTH & UNEMPLOYMENT(Not Seasonally Adjusted)

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MEDICAL OFFICE & HEALTHCARE MARKET COMMENTARY | YEAR-END 2012 | COLLIERS INTERNATIONAL HOUSTON TEXAS

COLLIERS INTERNATIONAL | P.

Vacancy &AvailabilityHoustons medical office occupancy

increased slightly during the second

half of 2012 with the citywide average

vacancy rate decreasing by 10 basis

points (bps) to 12.5%from12.6%.

By property class, Class B vacancyrates posted the largest decrease

during the second half of 2012, 50

bps to 11.5% from 12.0% in 2Q 2012.

Class A vacancy rates increased 20

bps to 14.6 % from 14.4%, while

Class C vacancy rates increased 30

bps to 12.1% from 12.1%mid-year.

Sublease space has not had a

significant impact on current vacancy

rates, remaining below 1.0% of total

vacant space over five years. Of the

3.4M SF of vacant space on themarket at year-end 2012, only 61,180

SF was sublease space.

Disciplined medical office

development activity has helped

prevent major upheavals in current

occupancy levels. There were only

seven (7) new buildings (152,108 SF)

added to the market during 2011 and

just nine (9) buildings (1.26M SF)

delivered in 2012. The largest project

completed within the past two yearswas the University of Texas MD

Anderson Cancer Center

Administration Building located at

7007 Bertner Avenue in the Texas

Medical Center (895,600 SF owner

occupied).

Presently, only one medical office

building is under construction, The

30,000 SF College Park Medical

Plaza located at 3117 College Park

Dr. in The Woodlands. The project is23% pre-leased and is scheduled to

deliver J une 2013.

Absorption& Demand

Houston medical office buildings

recorded 249,533 SF of positive net

absorption in the second half of 2012,

pushing year-end 2012 net absorption

to 984,525 SF.

By property class, Class A posted th

largest amount of year-end positiv

net absorption with 771,903 S

followed by Class B propertie

posting 244,875 SF of positive n

absorption. In contrast, Class

posted 32,253 SF of negative n

absorption.

Rental RatesQuoted full-service rental rates for a

medical office property classe

averaged $23.17/SF in 4Q 2012, a

increase from the $23.00/SF in mid

year. Medical office building landlord

continued to offer lease concession

including free rent and generou

tenant improvement packages t

attract and retain credit worthtenants.

By property class, on a bi-annu

basis, the average Class A rental ra

of $29.13 per SF increased fro

$28.92 per SF, Class B increased t

$22.57 from $22.43 per SF, and th

average Class C rate increased fro

$22.43 to $22.57 per squarefoot.

MEDICAL OFFICECLASS A & B VACANCY VS. RENTS

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

8%

0%

2%

4%

6%

8%

0%

Q1-10

Q2-10

Q3-10

Q4-10

Q1-11

Q2-11

Q3-11

Q4-11

Q1-12

Q2-12

Q3-12

Q4-12

Class AVacancy Class BVacancy

Class ARents Class BRents

Class A7,611,919

28.2%

Class B14,239,726

54.9%

Class C5,006,935

18.6%

Class A Class B Class C

00,000)

0

00,000

00,000

00,000

00,000

00,000

00,000

00,000

Q1-10

Q2-10

Q3-10

Q4-10

Q1-11

Q2-11

Q3-11

Q4-11

Q1-12

Q2-12

Q3-12

Q4-12

Class A Class B Class C

MEDICAL OFFICENET ABSORPTION BY CLASS

MEDICAL OFFICEEXISTING INVENTORY BY CLASS

2

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MEDICAL OFFICE & HEALTHCARE MARKET COMMENTARY | YEAR-END 2012 | COLLIERS INTERNATIONAL HOUSTON TEXAS

COLLIERS INTERNATIONAL | P.

SalesActivity

Transaction activity remained solid

during 2012, with 57 properties

changing hands. According to CoStar

Comps, Houston medical sales

transactions had a total dollar volume of$170M, averaging $223 per SF with a

7.4% capitalizationrate.

Many of the transactions were multi-

property sales, however, there were

several significant single property

transactions thatoccurred.

The 27,760 SF 8515 FanninMOB inthe

South Main/Medical Center submarket

was purchased by The Link Group, Inc.

in September 2012.

The 80,740 SF 1111 Augusta MOB in

the San Felipe/Voss submarket was

purchased by Sentinel Real Estate

Corporation for $21.4M or $265 per SF.

The property was built in 1977 and was

renovated in 2004..

The 29,313 SF, Kingsland Medical

Plaza located at 777 S Fry Rd. in the

Katy Freeway West submarket was

purchased byFinesa RealEstate Groupfor$4.3M or$147 per SF.

Investcorp J V Griffin Partners

purchased the Offices at Pin Oak Park,

a 504,700 SF, five-building portfolio

from McCord Development for $78.7M

or$156 per SF. The property is located

in the Bellaire submarket and was 90%

occupiedatthetime ofsale.

LeasingActivity

Houstons 2012 medical office leasin

activity reached 823,000 SF. B

property class, Class B product led th

market with 464,000 SF lease

followedby Class A at271,000 SF, theClass C at88,000 SF.

Although the majority of new lease

signed in the second half of the yea

were in the 1,000 - 5,000 SF rang

there were a few larger leas

transactions.

One of the larger transactions wa

Physician Endoscopy Centers leas

renewal of 14,080 SF at 3030

Gessner Rd. in the Westchassubmarket.

Additional lease transactions includ

DermSurgery Associates, PA renewe

its lease of 14,000 SF in Greenpark I

the South Main/Medical Cente

submarket; Legacy Community Heal

Center leased 3,700 SF at 830

Homestead Rd. in the Northeast Nea

submarket; Woodlands Gynocology

Aesthetics leased 3,000 SF Medic

Arts Center II in The Woodland

submarket.

Source: Costar Group; Real Capital Analytics

RBA: 27,760 SF

Built: 1994

Buyer: The Link Group, Inc.

Seller: Treeline Partners Ltd

Sale Date: Sep 2012

RBA: 80,740 SF

Built: 1977/2004

Buyer: Sentinel Real Estate Corp

Seller: Healthcare Realty Trust Inc.

Sale Date: Aug 2012

Sale Price: $21.4M

Cap Rate: 6.81%

RBA: 29,313 SF

Built: 1994

Buyer: Finesa Real Estate Group

Seller: Norvin Partners

Sale Date: Dec 2012

Sale Price: $4.3M

Kingsland Medical Plaza

777 S Fry RdKaty Freeway West Submarket

8515 Fannin Street1

South Main/Medical Center Submarket

SALES TRANSACTIONS

1111 Augusta Drive

San Felipe/Voss Submarket

1Colliers International Houston Transaction

Cordes Medical Building

2655 Cordes DriveE Fort Bend Co/Sugar Land Submarket

RBA: 8,531 SF

Built: 2005

Buyer: Scuben Cordes, LLC

Seller: Jag At Cordes LLC

Sale Date: Nov 2012

Sale Price: $2.3M

Cap Rate: 8.25%

3

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MEDICAL OFFICE & HEALTHCARE MARKET COMMENTARY | YEAR-END 2012 | COLLIERS INTERNATIONAL HOUSTON TEXAS

COLLIERS INTERNATIONAL | P.

The Texas Medical Center (TMC) the worlds largest medical center represents one of Houstons major

economic drivers and core industries with an estimated regional annual economic impact of $14 billion. TMC is

also one of Houstons largest employers with 92,500 employees, including physicians, scientists, researchers and

other advanceddegreeprofessionals in the life sciences.

The internationally-renowned, 1,300-acre TMC is the worlds largest medical complex with 52 member institutions,

including leading medical, academic and research institutions, all of which are non-profit and dedicated to the

higheststandards of research, education and patientand preventive care. Member institutions include13hospitals

and two specialized patient facilities, as well as 19 renowned academic and research institutions virtuallycovering

all health-related careers including two medical schools, four nursing schools, as well as schools of dentistry,

public health, and pharmacy and 15support services organizations. Over69,000 students including more than

7,000 international students are affiliated with TMC, includinghighschool, collegeand health profession graduate

programs. More than7.1million patients visited in 2011, including approximately16,000 international patient visits.

TMC Patient Care Institutions

The University of Texas M.D. Anderson Cancer Center

Texas Childrens Hospital

Memorial Hermann Hospital System

The Methodist Hospital

St. Lukes Episcopal Hospital

Lyndon B. J ohnson General HospitalQuentin Mease Community Hospital

Ben Taub General Hospital

The Institute for Rehabilitation and Research

The Hospice at the Texas Medical Center

Texas Heart Institute

Shriners Hospitals for Children Houston

Veterans Affairs Medical Center in Houston

In addition to the medical facilities and institutions of higherlearning, TMC is also home to more than 280 professionalbuildings. Overall, the complex covers over 18 miles ofpublic and private streets and roadways, with 45.5M SF ofexistingpatient, education, andresearchspace.

TMC has continued to grow and expand over the pastseveral decades with the majority of growth occurring in thepast ten years. The Center is located in the 110-acreUniversity of Texas Research Park, a joint effortbetween theUniversity of Texas Health Science Center, M.D. Andersonand General Electric Healthcare. In terms of future growth,TMC approved $7.1 billion in building and infrastructureinvestments between 2008 and 2012, with annual research

expenditures estimatedat$1billion.

TMC Academic and Research Institutions

Texas Childrens Hospital Neurological Research Institute

Baylor College of Medicine

The University of Texas Health Science Center at Houston

The University of Texas M.D. Anderson Cancer Center

University of Houston College of Pharmacy

Rice UniversityTexas A&M University Health Science Center

Prairie View A&M University College of Nursing

Texas Womans University Institute of Health Sciences

Texas Southern University College of Pharmacy and HealthSciences

Harris County Psychiatric Center

Houston Academy of Medicine

TEXAS MEDICAL CENTER

The University of Texas M.D. Anderson CancerCenter ranked #1 in U.S. News & World Reports

Americas Best Hospitals for cancer care.

4

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MEDICAL OFFICE & HEALTHCARE MARKET COMMENTARY | YEAR-END 2012 | COLLIERS INTERNATIONAL HOUSTON TEXAS

COLLIERS INTERNATIONAL | P.

HOUSTON AREA HOSPITAL LOCATIONS

5

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MEDICAL OFFICE & HEALTHCARE MARKET COMMENTARY | YEAR-END 2012 | COLLIERS INTERNATIONAL HOUSTON TEXAS

COLLIERS INTERNATIONAL | P

Accelerating succ

COLLIERS INTERNATIONAL | HOUSTON

1300 Post Oak Boulevard

Suite 200

Houston, Texas 77056

Main +1 713 222 2111

LISA R. BRIDGESDirector of Market Research HoustonDirect +1 713 830 2125Fax +1 713 830 2118lisa.bridges@colliers.com

6

The Colliers AdvantageEnterprising Culture

Colliers International is a leader in global real estate services,defined by our spirit of enterprise. Through a culture of service

excellence and a shared sense of initiative, we integrate theresources of real estate specialists worldwide to accelerate thesuccess of our partners.

When you choose to work with Colliers, you choose to workwith the best. In addition to being highly skilled experts in theirfield, our people are passionate about what they do. And theyknow we are invested in their success just as much as we arein our clients success.

This is evident throughout our platformfrom Colliers University, our proprietary education and professional development platform, to ourclient engagement strategy that encourages cross-functional service integration, to our culture of caring.

We connect through a shared set of values that shape a collaborative environment throughout our organization that is unsurpassed in the

industry. Thats why we attract top recruits and have one of the highest retention rates in the industry. Colliers International has also beenrecognized as one of the best places to work by top business organizations in many of our markets across the globe.

Colliers International offers a comprehensive portfolio of real estate services to occupiers, owners and investors on a local, regional, nationand international basis.