1. 1 Overview of the US Commercial Real Estate Investment Market January 20, 2009

2. 2 Current economic environment…  Economy is contracting  Employment has declined for 11 consecutive months  Financial Markets have collapsed  Recession with a capital “R”  How’d we get here???

3. 3 Current account deficit has been growing… Source: Bureau of Economic Analysis, Cushman & Wakefield

4. 4 Federal fiscal deficit has been growing for decades… Source: Bureau of Economic Analysis, Cushman & Wakefield U.S. Federal Fiscal Deficit

5. 5 Until recently stock market has been steadily rising… Source: Dow Jones, Cushman & Wakefield Dow Jones Industrial Average

6. 6 Long-term interest rates have been falling… Source: Moody‘s Economy.com, Cushman & Wakefield

7. 7 Household savings has been declining… Source: Moody‘s Economy.com, Cushman & Wakefield

8. 8 Source: Federal Reserve Board Household debt has been growing… Aggregate Household Debt Billions of US Dollars

9. 9 ■Fed Chairman Ben Bernanke: “A global savings glut.” ■Mercantilist trade policies depress value of foreign currencies relative to the dollar -Encouraging U.S. consumerism -Discouraging U.S. savings -Depressing U.S. industrial production and exports ■Result: Huge capital transfers from emerging to mature economies -Causing run-up in asset prices What has fueled this?

10. 10 ■Massive capital transfers from emerging to mature economies ■Easy debt, excessive leverage, lax discipline by lenders and investors (e.g., example of residual values) ■Causing huge bubbles in asset prices, including residential and commercial real estate ■Over-leveraged financial institutions catastrophically vulnerable to pricing corrections ■WE ALL SAW THE BUBBLE, BUT IGNORED THE INEVITABLE IMPACT ON THE FINANCIAL SECTOR What are the results?

11. 11 Business is retrenching, shedding jobs… Source: US Bureau of Labor Statistics

12. 12 Source: U.S. Census Bureau Retail sales are falling… Year-over-year change (3-month moving average)

13. 13 The response – massive monetary and fiscal stimulus… Source: US Federal Reserve Board Credit Crunch and Recession Period: Aug-07 to ??? Cause: Residential Subprime Contagion Recession Period: Sep-01 - 02 Cause: Tech Bubble Bursts and Sept 11 Economic Slow Down Period: Jul-95 to Mar-97 Cause: S&L Crisis Credit Crunch Period: Aug-98 to Jan-99 Cause: Asian Flu

14. 14 U.S. Gross Domestic Product: 1980 – 2011 Source: Moody’s Economy.com, Bank of America, Cushman & Wakefield Capital Markets Group Forecast

15. 15 The U.S. Real Estate Market

16. 16 Q3-08 CBD VACANCY RATES Gateway CBDs holding up reasonably well…

17. 17 Q3-08 SUBURBAN VACANCY RATES Suburban markets beginning to feel the pain…

18. 18 Q3-08 SUBURBAN VACANCY RATES Change from One Year Ago Suburban vacancies increased from year ago…

19. 19 Source: Cushman & Wakefield, PropertyData, RCA Global Real Estate Investment * Preliminary 2008 Volume Global investment volumes declined substantially…

20. 20 U.S. investment sales volumes returning to normal levels? Source: Real Capital Analytics, Cushman & Wakefield Capital Markets Group * Preliminary 2008 Volume

21. 21 The market has its challenges… There is a crisis of confidence and a perception that markets haven’t “bottomed out” – stalling any material sales activity. Absence of available debt is severely reducing the pool of capable buyers. Properties with assumable financing, or with available seller financing, and reasonable remaining term (minimum three years) fare better. Foreign investors, once looking at the U.S. as a safe haven for real estate capital, face similar if not more severe credit issues.

22. 22 All Property Offerings & Closings* US, Monthly There are now more sellers than buyers able to close… Source: Real Capital Analytics, Inc. ’07‘08 Credit Crunch In 2008: $250b offered $138b closed *Excludes Privatizations

23. 23 Office properties have suffered the steepest decline… Source: Real Capital Analytics, Cushman & Wakefield Capital Markets Group * Preliminary 2008 Volume

24. 24 Property yields returning to historic norms… Source: NCREIF, Moody’s Economy.com, Real Capital Analytics, Cushman & Wakefield Capital Markets Group * *4 th Quarter Office Derived Cap Rate forecasted using RCA data.

25. 25 CMBS/conduit financing is essentially gone… Source: Mortgage Bankers Association

26. 26 Re-pricing of capital & risk translates to falling property values… Source: Cushman & Wakefield Capital Markets Group * Mezz rates include amortized up front points. Opportunistic Capital