1601 Forum Place, Ste. 200 West Palm Beach, FL Ph: Yamato Road, Ste. 102 Boca Raton, FL Ph:

1601 Forum Place, Ste. 200 West Palm Beach, FL Ph: Yamato Road, Ste. 102 Boca Raton, FL Ph: SOUTH FLORIDA September 13, 2011 Presented by: Neil E. Merin, SIOR, CCIM Chairman SHORT SALES & FORECLOSURES PRESSURE DROP

Section 1 Flooding The Market

SOUTH FLORIDA PROPERTY SALES Source: CoStar Supply Demand Pricing Income

SOUTH FLORIDA SALES VOLUME & AVG. PRICE PER SF – ALL COMMERCIAL Source: CoStar

SOUTH FLORIDA SALE TRANSACTIONS – ALL PROPERTY TYPES Source: CoStar

SOUTH FLORIDA SALES LAST 12 MONTHS Source: CoStar 1,120 Transactions $3,200,000 - Average Sales Transactions 31,800,000 - Square Feet Sold 5,325 - Acres of Land Sold $119 - Average Price Per Square Foot $57,000 - Average Price Per Hotel Room $96,000 - Average Price Per Multi Family Unit $3,400,000,000 - of Commercial Transactions

SOUTH FLORIDA SALES PENDING AND FOR SALE Source: CoStar 3,798 Properties 43,391,000 – Square Feet Of Commercial 1,863 - Hotel Rooms 9,765 – Acres Of Land 5,568 – Multi Family Units $7,730,000,000 - Of Total Value

SOUTH FLORIDA NUMBER OF SALES BY PROPERTY TYPE Source: CoStar

FLOODING THE MARKET INCREASING NUMBER OF FORECLOSURE SALES DRAWING MORE CAPITAL, COMPETITION AND INTEREST. VALUES ARE RISING OFF BOTTOM LEVELS COST BASIS OF OWNERSHIP IS FALLING FOR NEW OWNERS.

Section 2 Clearing The Pipeline

SOUTH FLORIDA TOTAL AMOUNT IN SPECIAL SERVICING BY PROPERTY TYPE December August% Change Retail Office Industrial Multi Family Other Hotel $300,333, %$563,274,836 $295,195,000$446,613, % $39,265,000$43,569, % $86,900,000$182,676, % $237,565,000 $332,680, % $83,800,000 $892,925, % Total $1,043,058,000 $2,461,740, %

SOUTH FLORIDA CMBS LOANS DELIQUENT VS FORECLOSURES/REO $3,000,000, $2,500,000, $2,000,000, $1,500,000, $1,000,000, $500,000, $0.00 $1,043,058,000 $2,461,740,293 0 $838,911,665 Dec Foreclosure/REO Dec. 2009Aug Foreclosure/REO

SOUTH FLORIDA TOP FIFTEEN CMBS FORECLOSURES/REO Property NameCityProperty TypeLoan Amount City PlaceWest Palm BeachMixed Use$150,000,000 The Shore ClubMiami BeachHotel$107,588,733 Rivergate PlazaMiamiOffice$58,500,000 Palm Beach MallWest Palm BeachRetail$49,199,148 Sawyer PortfolioSunriseMulti Family$43,000,000 PGA Plaza Shopping CenterPalm Beach GardensRetail$33,450,000 The Sagamore HotelMiami BeachHotel$31,500,000 Shoppes of Wellington GreenWellingtonRetail$30,750,000 PGA Design CenterPalm Beach GardensRetail$30,000,000 Wellington ReserveWellingtonOffice$28,800,000 Bank of AmericaBoca RatonOffice$24,151,217 Horizon & Mellon Office BuildingWest Palm BeachOffice$22,400, North Pine Island RoadSunriseMulti Family$19,690,395 Southpark CentrePinecrestMixed Use$17,272,160 Flamingo Market PlacePembroke PinesRetail$14,314,570 Total $660,616,223

NON CURRENT LOAN BY TYPE FDIC INSURED INSTITUTIONS Development Commercial & Industrial Retail & Office Multi Family 9/10 6/11

COMMERCIAL REAL ESTATE HURTING SMALL BANKS The bulk of the rising delinquencies is falling squarely on the shoulders of small and regional banks. Small to regional banks – defined as banks holding less than $100 billion in assets – have $784 billion in commercial real estate loans on their books. Thats about 71% of the total market. Source: Independent Community Bankers Association of America

RECENT HEADLINES BANKS SELLING LOANS Anglo Irish Reportedly Taps Winners in Commercial Real Estate Loan Sale $9.5 Billion of commercial real estate loans on 250 properties sold to Lone Star Funds, Wells Fargo, and JP Morgan $800 Million CRE Loan Sale Completed This week Mission Capital Adivisors had over $800 million is CRE loans on sale, giving bidders the opportunity to acquire performing, sub- and non-performing assets secured by a variety of collateral types, including multifamily, office, student housing, condominiums, marina, industrial, residential and commercial land, medical office, bank stocks, among others, throughout the U.S. Many of the loans have recent appraisals. "The sale is an ideal opportunity for equity buyers looking to enter the market by purchasing one or several of the individual loans," said Stephen Emery, managing director of sales and trading at Mission Capital. HFF Completes $238 Million Loan Portfolio Sale on Behalf of a Major Financial Institution

RECENT HEADLINES BANKS SELLING LOANS RBS Seeks Sale of Property-Loan Portfolio, Sunday Times Says 2.6 billion dollars of loans to be sold to Blackstone Group at 50% discount Barclays Bank agrees $586m Commercial Real Estate loan portfolio sale Regions Bank completes $500,000,000 sale of non-preforming notes

BANKS SELLING LOANS

CLEARING THE PIPELINE SPECIAL SERVICERS MOVING RAPIDLY FROM WORKOUTS TO FORECLOSURES. BANKS AND SAVINGS INSTITUTIONS ARE SELLING NOTES AND REAL PROPERTY TO CLEAR NON- PREFORMING LOANS. NOTE BUYERS ARE SEEKING UNDERLYING PROPERTIES AT SIGNIFICANT DISCOUNTS.

Section 3 Pressure Drop

SOUTH FLORIDA VACANCY & RENTAL RATES – ALL PROPERTIES Source: CoStar

BROWARD & PALM BEACH COUNTY SALE TRANSACTIONS - OFFICE Source: CoStar

BROWARD & PALM BEACH COUNTY SALES VOLUME – OFFICE BUILDING Source: CoStar

BROWARD& PALM BEACH COUNTY SALES BY BUILDING CLASS – OFFICE BUILDINGS Source: CoStar

BROWARD & PALM BEACH COUNTY AVERAGE PRICE PER OFFICE BUILDING SF Source: CoStar

BROWARD & PALM BEACH COUNTY VACANCY & RENTAL RATES - OFFICE Source: CoStar

BROWARD &PALM BEACH OFFICE FORECAST REPORT Source: CoStar

BROWARD & PALM BEACH COUNTY VACANCY & RENTAL RATES - RETAIL Source: CoStar

BROWARD & PALM BEACH COUNTY AVERAGE PRICE PER BUILDING SF – RETAIL SALES Source: CoStar

BROWARD & PALM BEACH RETAIL VACANCY RATES Source: CoStar

PRESSURE DROP COST BASIS FOR COMPETING PROPERTIES DROPPING. INCOME IS NOT RISING, AS NEW OWNERS CAN AFFORD LOWER RENTAL RATES. VACANCY NOT EXPECTED TO IMPROVE IN NEAR TERM (3 YEARS), AND RENTS WILL STAY LOW OR GO LOWER.

WORKOUTS ARE THE PAST, ITS FORECLOSURE TIME We are at the very beginning of a massive amount of CRE foreclosures. Sales at dramatically lower prices than previous purchase prices will create lower basis for new owners. Despite flat line income growth, prices on CRE will continue to rise modestly, as buyers lower yield horizons and compete for product. New owners will be able to compete with low rents, forcing current owners to lower rates. Rents will be flat to falling over next 3 years, landlords will lack pricing power. More available for sale product will attract more buyers and capital.

1601 Forum Place, Ste. 200 West Palm Beach, FL Ph: Yamato Road, Ste. 102 Boca Raton, FL Ph: Neil E. Merin, SIOR, CCIM Chairman