october 2009 james m. murphy cmb, cri chairman q10 capital

October 2009James M. Murphy CMB, CRI

Chairman Q10 Capital

How Did We Get Here?

So Where Are We?

What About The Capital Markets?

Where Are We going?

"Democracy is the worst form of government, except for all the other forms."

System Wide Failure

How Did This Start?

What Started This?

• Government Policy– Everyone should own a home!– HUD Sets Affordable Housing Goals– Federal Reserve Lowers Rates

• Fannie and Freddie Balloon Balance Sheets– $3.2 Trillion in debt – sold everywhere in the world

• OFHEO Undermanned and Under Funded– Campaign contributions buy elected officials

• Rating Agencies Fail to Do Their Jobs• Lenders and Wall Street Create New Products• Borrowers Take the Deal

So Where Are We Today?

"Nobody Knows the trouble I've seen. Grandpa can't pay the mortgage.”

Quote of the Year…

Employment Change in Thousands Top Ten and Bottom Ten States 2009

Importance of Education to Employment

If it’s about jobs, where are we in demand for basic property types?

Office

Retail

Industrial

Apartments

Completions and Absorptions by Property Type

Change In Asking Rents By Property Type Quarter to Quarter

Commercial Property Cap Rates

Office Market

Industrial Market

Retail Market

Retail Market

What About The Capital Markets?

Loan Portfolio ComparisonJune 30, 2009

CMBS Issuance

Originations by Investor Group

Total Debt Outstanding by Investor Group

Where Are We Going?

Non-Bank Maturities of Debt By Year

Commercial Banks and Thrift Maturities

Life Company Commercial Mortgage Maturities

Commercial Real Estate Compared To Other Assets

Yields for Comparative Asset Classes

National Office Market

12 Reasons for Optimism

1. A broad rally in stocks, confirmed and continuing into this week and led by the beaten-down financials.

2. A surprising surge in housing starts to a seasonally adjusted annual rate of 583,000 units.

3. A jump in retail sales led by autos, cash for clunkers

4. A return to profitability at several major banks, including Citigroup, Bank of America and JPMorgan.

5. A doubling in the obscure but important Baltic Dry Index, a key indicator of global trade flows.

6. An upwardly sloping yield curve, which Fed research suggests all but ensures a rebound by year-end.

7. A Housing Affordability Index that has hit an all-time high.

8. A two-month improvement in wholesale used-car prices, measured by the Manheim Index.

9. A rise in Monster's Employment Index in February, suggesting a turn in the job market may be around the corner.

10. A sharp increase in the money supply, as measured by M2 and M1. Weekly M2 growth has averaged 10.1% year-over-year since the start of 2009, while M1 has grown at a 14.6% rate.

11. A rally in the Index of Leading Indicators.

12. Data show nearly $14 trillion in liquidity on the sidelines of the markets, ready to boost consumer spending, credit growth or further stock market gains.

• “Never give in-• never, never, never,

never, in nothing great or small, large or petty,

• Never give in• except to convictions of

honour and good sense”