1. Real Estate Development Industry Senior Analyst: Chris Woo Junior Analysts: Nakul Pandav, Joseph Padellaro, Steve Xiarhos, Eric Des Lauriers

2. 2  Real estate development is a multifaceted business, encompassing activities that range from the renovation and re-lease of existing buildings to the purchase of raw land and the sale of improved land or parcels to others.  Developers buy land, finance real estate deals, build or have builders build projects, create, imagine, control and orchestrate the process of development from the beginning to end. Industry Definition NYSI:TCI – 44.67 M NASDAQ:AVHI – 198.73 M NASDAQ:STRS – 75.45 M NYSE:HHC – 2.72 B NYSE:FOR– 592.69 M NYSE:CTO – 184.86 M

3. 3 Financials 11,120 B (100%) Real Estate 2,040 B (18.3%) Real Estate Management & Development 1,100 B (9.9%) Real Estate Development 370.87 B (3.3%) Small-Cap Real Estate Development 5.9 B (.053%) Real Estate Development Industry Breakdown HHC2,720 M STRS75 M AVHI198 M TCI44 M CTO184 M FOR592 M Other

4. 4 Geographic Breakdown and Market Segmentation Multi-Family Housing Construction Market Single-Family Housing construction Market Commercial Building Market Nonbuilding Construction Market

5. 5 Process Flow: Revenue Generation Process Land Real Estate Development Firms Develop Building Program & Design Obtain Necessary Public Approval & Financing Build Structure / Utilize outside Contractors Lease Manage Sell Commercial Real Estate Market Residential Real Estate Market 70% of Industry Revenue 18% of Industry Revenue Direct Sale of Land Residential Market End User: Home Construction Firms Commercial Market End User: Retail Shops & Office Lessee

6. 6 Executive Summary Industry: Real Estate Development Recommendation: Overweight Low 30-year Mortgage Rate & Decreasing Home Supply will Increase Demand for New Homes Increasing Home Builder Confidence & Housing Starts will create new business in the upcoming months Decreasing Unemployment and Increasing Disposable Income will bolster consumer spending and commercial real estate rev. Low interest rates will benefit internal financing activities and encourage investors Key Industry Drivers

7. 7 Drivers for the Residential Real Estate Market

8. 8 Lower 30-year Mortgage Rates & Home Supply Decreasing as Demand for New Homes Increases Home supply decreasing at a 2 year CAGR of 5.24% The 30-year mortgage will continue to stay low with the help of the Fed. (QE3) Until 2015 Increasing consumer sentiment in conjunction with continuingly low mortgage rates suggest that the demand for homes will rise Decreasing Supply of Existing Homes and Increased Demand are Substantially Increasing the Need for New Home Construction Home Supply CAGR: - 5.24% 30-Year Mortgage 4 Year CAGR: -10.59%

9. 9 Increasing Home Builder Confidence & Housing Starts NAHB Builder confidence index hit a four year high this October reaching 46 Residential Construction companies are the main end user in the real estate development industry Real estate development revenue and housing starts have a regression correlation of 91.6% IBIS projects housing starts will reach 1226 and Industry Rev. will reach 23,000 by 2014 Growing Demand For New Homes may Potentially Increase Industry Revenue by 9.4% YOY until 2014 *Real Estate Development Rev. & Housing Starts Projected by Ibis World Housing Starts Projected YOY Growth: 25.25%

10. 10 Historical Growth in Quantity of Homes Sold

11. 11 Historical Price and Quantity of Homes Historically from 1963-2002 (Start of Sub-Prime Crisis) home sales have increased at a 40 year CAGR of 1.39% According to the Case-Shiller Index, homes in the US have lost 15% of their price value since 2008 and have since normalized around 130 Using the Linear Trendline CAGR from 1963-2012 we can expect a minimum YOY growth of 1.21% in Homes Sold Linear Trendline CAGR: 1.21%

12. 12 Drivers for the Commercial Real Estate Market

13. 13 Low Interest Rates and a Recovering Economy Lower interest rates will allow for more affordable financing of projects and acquisition of land Increased disposable income will will help to bolster the retail portion of the commercial real estate market Decreasing unemployment represents the overall recovery of consumer spending End Commercial Real Estate Users are mainly companies in the Retail Industry Disposable Income is projected to grow 1.95% YOY until 2015, which would directly decrease retail vacancy rates 2008-2012 CAGR: -7.56% 2008-2012 CAGR:.79% 29% 8% 17% 46% Gross Rent from Office Buildings Gross Rent from Industrial Properties Other Gross Rent from Retail Buildings *Disposable Income Projected by Ibis World

14. 14 Risks Impacts of Fiscal Cliff on Real Estate Development Industry With the combination of expiring tax cuts, new taxes, and automated spending cuts, the domestic economy could decline into another projected recession (4% to 5% decrease in GDP) As a result of a decrease in GDP, disposable income, consumer sentiment, and builder confidence may decrease Potential Inflow of Shadow REOs into the Market Banks and other lenders could potentially flood the market with Shadow REOs, which would negatively impact the price of existing homes on the market The increase in supply of homes caused by the REOs could skew projections based on the decreasing supply of existing homes Dependency on Homebuilders High dependency on Homebuilders, which are largely driven by macro economic factors, long term interest rates, federal intervention, and expected rental yields High volatility in this industry especially over the last 5 years due to the recession

15. 15 Industry Overview Real Estate Development Industry Rating: POSITIVE Potential for increased demand from homebuilders due to favorable Mortgage rates and falling supply of existing homes Projected increases in housing starts indicate potential for revenue growth of the next few years Overall recovery of the economy and consumer confidence may lead to gains in the commercial market Risk of another recession if policy makers allow GDP to fall due to increased taxes

16. 16 Questions? 1) Industry Definition 2) Executive Summary 3) Industry Breakdown 4) Geographic Breakdown & Market Segmentation 5) Process Flow 6) Trend: Increased Housing Demand 7) Trend: Industry Rev. & Housing Starts 8) Trend: Historical Price and # of Homes Sold 9) Trend: Disposable Income & Unemployment 11) Why Real Estate Development? 10) Risks 14) Wells Fargo Market Housing Market Index 16) Multifamily Starts 13) Housing Formations On The Rise 15) Single-Family Starts 12) US Housing Prices / Income

17. 17 Why Real Estate Development? Strategic Development Opportunities Potential Hedging Against Negative Impacts of Strict Lending Regulations (Dodd-Frank Act) Business Segments Revenue 201120102009 Master Planned Communities $184,03851.5%$151,13151.4%$121,78346.8% Operating Assets $148,57341.6%$140,66147.8%$138,86253.3% Strategic Developments $24,8617.0%$2,5170.9%-$360-0.1% Total Segment revenues $357,472100%$294,309100%$260,285 100% Howard Hughes Corporation (HHC)

18. 18

19. 19

20. 20

21. 21

22. 22