1. Real Estate Equity Markets (Public & Private) (Public & Private) Lambda Alpha – July 13, 2010

2. PrivatePublic Equity Net commercial real estate BUYERS during peak (Archstone, EOP, Hilton) Significant legacy issues Distress investment models and high target returns Uncertain quality of capital commitments Shift to current yield to reduce risk, illiquidity, and feed pension liabilities Net commercial real estate SELLERS during peak (Archstone, EOP, Hilton) Substantial REIT stock issuance to de-lever balance sheets in past year P/E investors raising new equity capital in public markets via REITs for coming opportunities (Starwood, Colony, Apollo) Registered Private REITS are booming Current yield focus Debt Massive restructuring activities “Amend to extend” preferable Equity investors continue to buy debt at a steep discount Conservative coverage, valuation, pricing, and proceeds Financing new buyers of REO deals to facilitate closing CMBS delinquencies are rising 3%+ are 60+ days delinquent versus 1% a year ago, and 5% expected by year end TALF form CMBS extension to June 2010 expected to facilitate new issuance in public debt markets Restructuring nightmare: “Tranche Warfare” Private vs. Public Debt and Equity Markets Source: Concept from Moss Adams

3. Real Estate Private Equity Raised Since 2003 Source: National Real Estate Investor for data through Q3 2007 and IREI for data from Q4 2007 to Q4 2009

4. Real Estate Sector NAV Premium / Discount By Industry Source: Wells Fargo Securities, Real Estate Capital Markets Update, 7/9/10

5. REIT vs. Private Market Valuations Over Time Source: Green Street Advisors, as of 10-1-09 (via Eastdil Secured)

6. Implied Nominal Cap Rates by Sector Source: Green Street Advisors (via Eastdil Secured) as of 7/9/10.

7. Private vs. Public Debt and Equity Markets  Public Real Estate Equity Market Major recovery in REIT stocks in past year Public market has opened up, BUT activity access limited to best REITs / sponsorships Public market has recovered in anticipation of a recovery in the property markets  Public Real Estate Debt Market Public debt market open for select REITs; spreads have tightened CMBS market still closed; need rating agency reform $1.4 trillion of CRE loans maturing over next five years (may be over-stated with extensions); it will be challenging to function without CMBS market;  Private Real Estate Equity Market There may be an inadequate supply of equity capital to offset equity demand due to de- leveraging Private market re-pricing not over yet: cap rates are too low given the anticipated drop in NOI, BUT risk spreads narrowing worldwide Ability to raise commingled private equity funds limited in the near-term (the largest provider of risk capital); expect net reduction of fund sponsors; will impact real estate operators  Private Real Estate Debt Market Limited amount of non-recourse financing available Capacity being utilized for REITs and for loan extensions Cost of debt not fully reflected in private market valuations