Dear David and Members of the Board of Directors of NW Natural:

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1 Via Federal Express Northwest Natural Gas Company (dba NW Natural) One Pacific Square 220 NW Second Avenue, 13th Floor Portland, OR Attention: David H. Anderson Directors of NW Natural Re: NW Natural s home at One Pacific Square Dear David and Members of the Board of Directors of NW Natural: As someone with deep admiration for NW Natural ( NWN ) and strong business ties to your company as a shareholder, ratepayer and current landlord I am writing to shed light on a real estate decision that is deeply flawed, maximizes business risk to NWN, shifts significant unwarranted costs onto ratepayers and reflects negatively on NW Natural s hard-earned reputation as a responsible corporate citizen. As you are aware, Menlo Equities was recently informed of NWN s plan to move out of One Pacific Square at the end of the current lease term 2020 and relocate in a new, custom-built, headquarters office building in a "more desirable neighborhood. No one likes to learn that a tenant is planning to leave, but as we take a clear-eyed look at the factors in the NWN decision, it s hard not to take issue with the process and conclude that NWN is making a significant business miscalculation, given the current economic climate. Let s look first at the enormous benefits Menlo Equities has built into its proposal to ensure that One Pacific Square can continue to accommodate all of NWN s needs, both near-term and long-term: A fully designed and entitled Class A lobby expansion and renovation; LEED Gold building certification; An extremely generous improvement allowance and future contraction capabilities; and, A fully scoped and designed state-of-the-art seismic retrofit that will result in the building meeting and exceeding the critical facility (e.g. hospital) standards. 490 South California Avenue, Fourth Floor Palo Alto, CA Phone: (650)

2 Letter to David H. Anderson and Directors of NW Natural Let s now look at the unwarranted and unprecedented premiums NWN or its ratepayers will incur with a fiscally irresponsible move to a new, customized, build-to-suit headquarters: The lease transaction NWN is pursuing will be at one of the highest office rental rates ever paid in the history of Portland and NWN s projected occupancy costs in the proposed build-to-suit will be $50 to $55 million higher than at One Pacific Square over the same contemplated term; NWN s annual rent per square foot at a new, customized build-to-suit building will be higher than the cost of any other corporate headquarters of a major public utility in the western U.S. as shown on Exhibit A, while CBRE Research shows that occupancy costs for office tenants in Portland should be lower than in every one of these other metropolitan areas (see Exhibit B). NWN is also pursuing a HQ that is markedly fancier than all of the other utilities listed. The strategy to move into a customized build to suit building has significant development risk. Since 2007, approximately half of all significant build-to-suit leases/buildings in Portland s urban core have encountered entitlement, financing or construction delays after a lease was signed. If NWN encounters a delay and has to exercise a medium-term renewal option to avoid being homeless, it could add on yet another $30 to $35 million of additional cost. Finally, let s consider the flawed process that has led to this flawed outcome: A biased proposal solicitation process aimed at moving: in October 2016, along with several other possible locations, we were asked to provide NW Natural with best and final lease terms on which an apples-to-apples decision would be based. As requested, we submitted a term sheet along with 2-3 other competing new development projects. We later learned from the real estate community that NW Natural was shopping the economics contained in our term sheet (through its brokers, Cushman Wakefield) and asking the developers of two prospective new buildings to further sharpen their pencils while not asking us to do the same. This suggests the committee was focused on trying to shrink the economic disparities between a renewal and its preferred fancy new offices route rather than pursue the best outcome for the company, including ratepayers. We submitted an unsolicited revised offer on March 5, Regretfully, it s my understanding these revised, and very favorable to NWN, economic terms were never shared with the board. Lack of candor in assessing comparative seismic performance in search of rationalization of a costly move: I personally met with Lea Anne Doolittle (Senior Vice President - Chief Administration Office and co-chair of the real estate committee), Wayne Pipes (Senior Manager - Facilities, Security & Emergency Management and a real estate committee member) and Steve Walti (Manager Risk & Land and a real estate committee member) on February 14, 2017 to discuss the renewal. During that meeting, I asked if they had any outstanding questions or concerns about the seismic retrofit solution and they replied, no. This question was a follow up to a call my colleague, Michael Johnston, and I had with Wayne and the team of structural engineers working on the project

3 Letter to David H. Anderson and Directors of NW Natural (including KPFF acting as advisor to NW Natural) to review the retrofit solution on January 17, On this call too, there were no questions or concerns regarding the retrofit and by all accounts Wayne and the real estate decision-making group were pleased with the design and explicitly acknowledged that it met all of standards NWN is seeking. However, on March 8, 2017, when Wayne phoned Michael to inform him of NW Natural s intent to move, one of the primary reasons he cited was concern regarding the seismic retrofit and related elements. Some of the most talented structural engineers in the country (including KPFF - NWN s own advising engineering firm) have spent the last 18 months refining the seismic/structural design to meet and exceed every element of the standard that NWN is looking for, and numerous opportunities were given to the committee to express and resolve any questions about the design. However, the committee did neither and now appears to be trying to use this item to rationalize a large additional expenditure. A disturbing, inherent, hidden bias against Old Town/China Town neighborhood: The other primary reason for the move communicated to us was a dislike of the Old Town neighborhood by NWN and its employees. This is disappointing and upsetting for a variety of reasons. It puts NWN at odds with city revitalization policies and flies in the face of emerging marketplace dynamics that are creating a renaissance in a rediscovered, historic gem of a neighborhood. NWN has been a pillar of the Old Town Community for more than three decades occupying or owning four city blocks in the neighborhood. As I m sure you re aware, the Portland City Council and the Portland Development Commission adopted the Old Town/Chinatown Action Plan in 2014, and these efforts have resulted in numerous new developments, brought in many new businesses, and spurred the beginnings of a neighborhood renaissance. The neighborhood is at a major inflection point and NWN s abandonment of the neighborhood would be a huge setback to these efforts. It was also communicated to us that there is a belief at NWN that a move out of Old Town will provide intangible benefits to the company like the ability to better attract and retain talent. I would hope that a company like NWN would embrace and support the social and economic diversity of Old Town not see it as a hindrance or blight on the company s reputation. I want to point out that AirBNB, a company widely respected as one of the most innovative and skilled businesses at attracting and retaining next generation talent, recently opened a major Portland outpost two blocks from One Pacific Square in Old Town. Similarly, the University of Oregon Business School decided Old Town was the ideal location for its MBA program, opening directly across the street. Both of these examples show that, contrary to the image promoted by NWN s real estate committee, Old Town isn t a hindrance but rather an asset to talent recruitment and retention, and staying would so much better reflect the values of NWN, one of Portland s historic, standard bearing companies. As a company that prides itself on its corporate responsibility, I m surprised this is factoring in this way in NWN s decision making process. I would be remiss if I didn t acknowledge that I have a financial interest in NWN staying in One Pacific Square. However, the real estate committee and your brokers have done an exceptional job pushing our economics to a point far below market and our original internal pro forma.

4 Letter to David H. Anderson and Directors of NW Natural It s tempting to just turn away and say, well, just like any other business say the technology, financial services or legal sectors NWN is entitled to make this real estate decision using a biased and self-interested rationale but we all know NWN occupies a unique position in a business category where regulation and reputation demand adhering to a higher standard, and that intelligence, prudence and public interest trump the more narrow, inward-looking criteria of corporate prestige. As corporate leaders and strategic advisors with a fiduciary responsibility, I hope you will step back, reconsider the mistaken decision and direction being pursued, and do what is best for your ratepayers, investors and the Portland community at large. Regards, Rick Holmstrom Vice Chairman

5 EXHIBIT A MAJOR WEST COAST UTILITIES PROVIDERS HQ LOCATIONS Property Utility Location Building Age Current Rent (NNN) Pacific Gas & Electric San Francisco 1971 Owned San Diego Gas & Electric San Diego 1986 $19.42 NNN Southern California Edison Rosemead (east of Los Angeles) Early 1970 s Owned Southern California Gas Company Downtown Los Angeles 1991 $22.33 NNN Portland General Electric Portland 1978 Controlled via extremely longterm four-block master lease signed 30+ years ago Puget Sound Energy Bellevue 2002, 2005 $30.39 NNN

6 Pacific Power Portland 1981 Partial Owned/ Partially Leased (+/- $16.00 NNN 1 ) NW Natural Gas Building Finalists Oregon Square Portland /-$32.00 NNN 250 Taylor Portland /-$32.00 NNN 1 Converted from FSG using $11/SF/year for operating expenses.

7 EXHIBIT B ESTIMATED YEARLY COSTS BY MARKET: RENT OBLIGATION FOR A TYPICAL FIRM TYPICAL FIRM ESTIMATE: 500 EMPLOYEES, 75,000 SQ. FT. Market Rent Cost (Avg. Rent x 75,000 SF) New York, NY $5,651,250 San Francisco Bay Area, CA $4,469,304 Washington, D.C. $2,737,500 Boston, MA $2,704,500 Los Angeles, CA $2,698,500 Austin, TX $2,448,750 San Diego, CA $2,416,500 Seattle, WA $2,303,983 Orange County, CA $2,214,000 Chicago, IL $2,180,250 Houston, TX $2,118,000 Philadelphia, PA $1,970,250 Minneapolis, MN $1,960,500 Newark, NJ $1,952,250 Long Island, NY $1,938,000 Denver, CO $1,882,500 Portland, OR $1,880,250 Raleigh Durham, NC $1,796,250 Charlotte, NC $1,730,250 Dallas/Ft. Worth, TX $1,716,750 Atlanta, GA $1,683,750 Baltimore, MD $1,681,500 Sacramento, CA $1,584,000 Richmond, VA $1,500,930 Hartford, CT $1,497,750 Average $2,268,699 Source: CBRE Research, 2016 Scoring Tech Talent.