The Dallas Central Business District currently has two major economic incentive programs available for downtown property owners. Each of these programs was created to further the economic stability and growth of downtown Dallas.

Downtown Improvement District. The Downtown Improvement District (DID) is a special assessment district which offers enhanced safety, maintenance, communications, events, and capital improvements projects to Downtown Dallas. The DID is funded by downtown property owners through a special assessment paid on real property.

The geographic boundaries of the DID encompass the downtown freeway loop, which is composed of Woodall Rodgers Freeway to the north, Sternmons Freeway to the west, R.L. Thornton Freeway to the south, and North Central/Julius Schepps Expressways to the east.

Recent DID projects include the Dallas Ambassadors, a friendly, street-level safety presence; a twelve-story outdoor mural on Renaissance Tower Parking Garage; a downtown beautification project; an enhanced sidewalk cleaning program and purchase of ninety trash receptacles; a free weekly street fair; a new Mobile Command Unit for the Dallas Police Department; and reconstruction of Murphy's Crossing pedestrian walkway.

City Center Tax Increment Financing District. The City Center Tax Increment Financing (TIF) District was established in 1996 to improve the infrastructure in downtown and demonstrate to the world of investors that local governments believe that downtown has a bright future. The TIF zone is essentially the central core of the CBD, with an extension to the Deep Ellum area, but excludes many of the newest, largest, and most valuable downtown office properties.

Properties not included in the zone include the Arts District, Trammell Crow Center, Chase Texas Tower, Fountain Place, the Fairmont, and the West End district. Southern and western CBD properties not included in the TIF include NationsBank Plaza, the Hyatt Regency and Union Station area, the Convention Center area, the Civic Center area south of Young Street, and the Fartners Market. The TIF includes approximately $1 billion in real estate out of a total estimated value of $2.2 billion. As stated, the TIF was established in 1996 and has an overall tax base (1995) of about $1 billion. Thereafter, the tax proceeds on the incremental increase in value of the tax base above the base level will be reinvested in public improvements to the area. The TIF, therefore, motivates property owners to increase the value of their properties since the taxes on the increased value are reinvested in improvement projects that benefit their holdings. The maximum revenue from the TIF equals $42.5 million.

DALLAS ECONOMIC OVERVIEW

Dallas is located in North Central Texas, approximately 300 miles north of the Gulf of Mexico. The city is roughly equidistant from the four largest population centers in North America: New York, Los Angeles, Chicago, and Mexico City. The Dallas area has a strong service-oriented economy. Widely recognized as one of the leading financial centers in the United States, Dallas serves as headquarters for dozens of banks and savings and loans, the I Ith District of the Federal Reserve Bank, and the 9th District of the Federal Home Loan Bank.

With more than one million residents, Dallas is currently the ninth most populous city in the United States and the second largest city in Texas. With a population of over 4.0 million in 1990, the Dallas/Fort Worth Consolidated Metropolitan Statistical Area (CMSA or Metroplex) is one of the most dynamic and growing urban areas in the United States. This area experienced an average annual compound growth rate of 2.9% from 1980 to 1990 and 1.5% from 1990 to 1995. The North Central Texas-Council of Governments anticipates that this most recent pace of growth should be sustained through 20 10.

The Civil Labor Force in the Metroplex reached 2.41 million in April 1997. Except for net job losses of 7, 100 jobs during 1987 and 1, 100 in 199 1, the Metroplex has posted net job gains throughout the past 10 years. The 1987 and 1991 losses occurred at the beginning of the two minor recessionary periods; however, job creation in the Metroplex is now very stable. In the twelve months prior to March 1998, the Metroplex created an estimated 107,600 new jobs, ranking the area among the United States' leading job growth regions. According to the United States Bureau of Labor Statistics, the unemployment rate, as of April 1998, in the Metroplex was 3. 1 %, which compares favorably with the State of Texas (4.5 %) and the United States (4.3+/-%) averages.

Although much of the Dallas area's growth in the late 1970s and early 1980s was spurred by the dramatic increase in global oil prices, the Metroplex economy consists of a more diverse economic foundation than the other more petroleum-dependent economies in Texas. The economy of the Metroplex includes a solid manufacturing base that produces automobiles, industrial equipment, computers, jet aircraft, food products, chemicals, cement products, weapon systems, and a massive service sector, which includes major telecommunications, airlines, retailing, banking, and insurance components.

Dallas/Fort Worth International Airport

Since its opening in 1974, the Dallas/Fort Worth International Airport has made increasing contributions to the Metroplex economy. Encompassing nearly 18,000 acres, DFW Airport currently consists of six runways and four terminals. The airport is master-planned for a total of nine runways, 13 terminals, and 234 passenger/aircraft gates. DFW Airport is the world's second busiest airport and a major cargo carrier. The passenger counts at DFW Airport steadily increased during the 1980s. Passenger boardings increased from 21.62 million in 1980 to approximately 48.52 million in 1990 and 54.4 million in 1995.

American Airlines, which is headquartered just south of the DFW International Airport, is the largest airline at the facility and throughout the industrialized world, with a 20%+ market share in the United States. Since 1992, American Airlines has completed a $200 million expansion program encompassing the construction of a new tram system and a 10,000-car parking facility, as well as the expansion of passenger boarding gates and the customs and immigration facility.

By the year 2010, it is projected that the DFW` International Airport will7require the capacity to accommodate over 104 million passengers and 1.2 million aircraft landings and takeoffs per year. To provide the facilities to handle the future growth, DFW officials have budgeted nearly one billion in airport improvements over the next five years. Construction underway includes 2,000-foot extensions of the airport's two largest runways and construction of a seventh runway on the east side of the airport.

A significant amount of airline passenger volume is also handled by Love Field, Dallas' other major commercial airport. Located approximately five miles north of the Dallas Central Business District, Love Field provides Dallas area residents with extremely convenient intrastate and regional service, as well as a high concentration of the area's general aviation flight operations volume. Additional air service is available at several smaller area airfields, including Addison (located approximately 5 miles northeast of the Property) and Red Bird Airports.

Located 15 miles west of DFW Airport is Alliance Airport. Noted as the first master-planned industrial airport in the world, Alliance has enhanced the stature of the Metroplex as an air cargo and transportation hub. Alliance is a 3,800-acre industrial park that is a result of the funding of Ross Perot, Jr., the FAA, and city and state governments. Initial development began with the construction of the Alliance Airport, a 418acre, non-passenger air cargo facility. The industrial park now has a 1.6 million square foot American maintenance facility, a 158-acre regional sorting hub for Federal Express and distribution centers for Food Lion, Nestle Distribution Company, Zenith Electronics Corporation and Nokia Mobile Phones. Recent developments at Alliance include the completion of a 300-acre Burlington Northern Sante Fe Railway intermodal and CTC facility and the ground breaking for a $1.3 billion microprocessor manufacturing facility for Intel.

DALLAS CITYWIDE OFFICE MARKET OVERVIEW

The Dallas office market encompasses an aggregate supply of 140 million rentable square feet. Most of this supply is situated on or near Dallas' highway network. The city's five primary office sectors, which collectively contain approximately 70% of the city's total inventory, are all located on key corridors of the Dallas freeway system.

The Dallas office market has recovered from the real estate recession the city went through during the late 1980's and early 1990's. The office market began recovering in 1992, as a result of a virtual halt in new construction of office property since 1988, major corporate relocations to the Metroplex such as J.C. Penney, GTE, Exxon, TransAmerica Insurance Group, Quaker State Oil, Nokia and Blockbuster Entertainment, and a robust Dallas economy that has been one of the nation's leaders in job growth since 1993. The Dallas office market has reached a point where substantial new construction is occurring in several of the leading submarkets. Additionally, the Dallas Central Business District (CBD) has gathered significant momentum in terms of leasing and absorption as well as investor interGst.

Evidence of the recovery is clear in recent trends in office space absorption. Beginning in 1993, the Dallas area began posting significant positive absorption following on the heels of two years (1991 and 1992) of negative absorption. In 1994, the office market absorbed just over four million square feet. Subsequently, in 1995 and 1996, Dallas absorbed 3.9 and 4.25 million square feet, respectively. In 1997, the Dallas office market absorbed over 4.7 million square feet bringing overall occupancy to 87% and suburban occupancy to 92%. In 1998, the Dallas area absorbed over 4.9 million square feet.

Class A & B space has comprised the vast majority of the absorption over the past several years. Since 1994, the absorption of Class A space has averaged about 2.5 million square feet (57% of the overall absorption). The absorption of Class B space has averaged 1.64 million square feet (38% of the overall absorption).

The following shows a perspective of Dallas' citywide absorption trends since 1994.