NASDAQ OMX Group (NDAQ)

7. Real Estate Developments

New York

In 2001, Nasdaq recorded a sublease loss reserve of $21.5 million in anticipation of relocating its headquarters location from One Liberty Plaza to 1500 Broadway. Nasdaq signed a lease commencing May 1, 2002 at 1500 Broadway. Later in 2002, Nasdaq’s management reconsidered its decision to relocate to 1500 Broadway and decided to maintain its headquarters at One Liberty Plaza. Nasdaq maintained the initial reserve

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recorded in 2001 (including interest accretion) for the sublease loss at 1500 Broadway. At December 31, 2003, the estimated loss on the sublease was approximately $20.5 million. In 2004, Nasdaq signed subleases for all of its space at 1500 Broadway. At December 31, 2004, Nasdaq updated the sublease loss estimate based on current assumptions and known sublease incomes and recorded an additional loss of $1.2 million to general and administrative expense in the Consolidated Statements of Income. The additional loss was primarily due to a change in the assumption of sublease term commencement dates. At December 31, 2004, the estimated sublease loss reserve was approximately $18.0 million. The estimated reserve was adjusted throughout the year to reflect interest accretion, rental payments made during 2004 and depreciation on leasehold improvements. The estimated loss was calculated using a 7.5% net discount rate and estimated 21-year sublease terms commencing in 2004 and 2005 at estimated market rates.

In 2001, Nasdaq also signed a lease for expansion space on one of the floors it occupied at One Liberty Plaza, which was to commence on October 1, 2004. Nasdaq’s management does not intend to occupy this space and began marketing the expansion space for sublease during the third quarter of 2004. Nasdaq is obligated under the terms of the expansion space lease to pay $33.9 million over the remaining life of the lease and recorded a sublease loss reserve of $12.8 million, which is included in general and administrative expense in the Consolidated Statements of Income. In addition, in the fourth quarter of 2004, Nasdaq’s management decided that it no longer needed the space it currently occupied on the expansion floor and recorded an additional estimated sublease loss reserve of $4.8 million for the remaining space. This charge is also included in general and administrative expense in the Consolidated Statements of Income. Nasdaq is obligated under the terms of this lease to pay $12.6 million over the remaining useful life of the lease. Both estimated losses for One Liberty Plaza were calculated using a 7.5% net discount rate and estimated 17-year sublease term commencing in January 2006 at estimated market rates.

New Jersey

As a part of Nasdaq’s strategic review, Nasdaq vacated the space Nasdaq Tools occupied at 15 Exchange Place, Jersey City, New Jersey. As of December 31, 2003 Nasdaq was obligated under the terms of this lease to pay $2.8 million over the remaining life of the lease and recorded a sublease loss reserve of $1.2 million, which was included in the elimination of non-core product lines, initiatives and severance in the Consolidated Statements of Income. At December 31, 2004, Nasdaq updated the sublease loss reserve based on current assumptions and recorded an additional loss of $0.2 million to general and administrative expense in the Consolidated Statements of Income. The estimated loss was calculated using a 7.5% net discount rate and estimated 6-year sublease term commencing in the beginning of 2005 at estimated market rates. Nasdaq is currently actively marketing the space and has signed a sublease agreement for approximately 50.0% of the space. At December 31, 2004, the sublease loss reserve was approximately $0.8 million. The estimated loss was adjusted throughout the year to reflect interest accretion and rental payments made during the 2004.

Maryland

During 2003, Nasdaq decided to vacate part of the space it occupies in Rockville, Maryland located at 9600 Blackwell and recorded a sublease loss reserve of $2.3 million, which was included in general and administrative expense in the Consolidated Statements of Income. Nasdaq’s management re-evaluated its decision to vacate the space at 9600 Blackwell and decided instead to sell the building it owns and occupies in Rockville, Maryland located at 9513 Key West Avenue. Based on Nasdaq’s management’s revised decision, Nasdaq released the sublease loss reserve recorded for 9600 Blackwell which totaled $1.9 million, net of rental payments, in September 30, 2004, which is recorded in general and administrative expense in the Consolidated Statements of Income.

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Nasdaq began actively marketing the 9513 Key West building for sale in the fourth quarter of 2004 and expects the building to be sold within a year. During the fourth quarter of 2004, Nasdaq recognized a $7.4 million loss, which is included in general and administrative expense in the Consolidated Statement of Income, on the write-down of the building’s carrying amount to fair market value less cost to sell. Fair value was determined using a quoted market price from an independent third party.

Connecticut

In 2004, Nasdaq also evaluated its real estate needs in Trumbull, Connecticut. Nasdaq currently owns and occupies a building located at 80 Merritt Boulevard and leases and occupies another building located at 35 Nutmeg Drive. Nasdaq’s management determined that based on staff reductions, all employees in Trumbull will consolidate into Nasdaq’s building at 80 Merritt Boulevard. Although Nasdaq’s lease at 35 Nutmeg Drive terminates in July 2008, Nasdaq plans on moving all employees from 35 Nutmeg Drive to 80 Merritt Boulevard by the end of 2005. As a result, Nasdaq expects to record a charge of approximately $2.5 million in the fourth quarter of 2005 when it completely vacates 35 Nutmeg Drive for its remaining lease obligation. In order to accommodate all employees in the Merritt building, two data center spaces will be converted into office space. The data centers will cease being used by the end of the first quarter of 2005, and accordingly, Nasdaq began accelerating the data centers’ fixed assets and leasehold improvements over the new estimated useful life. Nasdaq recorded $4.5 million of accelerated depreciation for the data center assets for the year ended December 31, 2004 and will record an additional $2.2 million in the first quarter of 2005.