DEBTWHERE TO FIND IT IN 2010?

This event was made possible by the above sponsors

PANELISTS

• Bill HarveySenior Vice President

• Jaime Zadra Principal

• Ronnie Gul (in place of Steve Fried)Vice President

• Rudy KramerSenior Vice President

MARKET PRESSURE POINTS

Funding gap $450 bn maturities in 2010/2011/2012 If CMBS issuance grows 10X from 2009 issuance ($130 mn), it's only 3% of 2010 maturities maturity events & new debt to come from Banks, Life Companies, Agency, & Specialty

Ample buy-side liquidity in the market today Abundant Institutional Capital for core assets in gateway markets Plenty of private capital (pricing is key) for secondary and transitional properties

Declining fundamentals as continued job losses ripple through the office market

Scarcity of product on the market is driving price (ahead of fundamentals)

Quality assets get pricing premiums

THE UNDERWRITTEN NOI

Underwriting Vacancy – 10% to account for weakening fundamentals, credit quality of tenants Rents – Decreases of 20%-40% depending upon the market T.I.’s – Increases of 50%+ from current market (Manhattan = $70 psf) Lease-up – Doubling lease-up time Reserves – $.20/.25 psf Residual – 50-100 bp over going in cap rate

Result NOI is 10-20% less than actual operating statements Lender LTV: 50%-65%, Borrower LTV: 40%-55% Buyer Cap Rate: 7%-10%, Seller Cap Rate: 9%-12% Result = Value Dislocation (price is hard to discover) Net Cash Flow v. Net Operating Income

HFF DEBT TRANSACTION ACTIVITY

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

2007

2008

3Q 2009

SOURCE: HFF Transactional Activity by Dollar Volume

% of Loan Transaction

Volume

OVERALL HOLDERS OF SECURED CRE DEBT

SOURCE: Federal Reserve Board, as of Sep. 2009

9/09 9/08

($Bil.) ($Bil.) % Chg.

Banks & Thrifts $1,722.4 $1,711.4 +0.4

CMBS 708.5 745.5 -5.0

Insurers 310.1 318.0 -2.5

Federal Agencies 282.6 250.9 +12.6

Agency CMBS 162.2 148.6 +9.2

Other 250.6 276.5 -9.4

Total $3,436.4 $3,450.9 -0.4

Banks & Thrifts50%

CMBS21%

Insurers9%

Federal Agencies

8%Agency CMBS

5%Other7%

AVERAGE LTVs FOR HFF

Declining leverage

Declining property cash flow

Office Retail

Year LTV LTV

2004 74% 75%

2005 72% 75%

2006 77% 74%

2007 72% 73%

2008 68% 64%

2009 60% 58%

Since Aug 1 66% 63%

AVAILABILITY OF DEBT PRODUCTS

Loan Type Availability

Permanent/Term Loans

Bridge Financing

New Construction Financing

Financing for unstabilized or non-cash flowing assets ?

Stabilized Office (Financial District)

multi-tenant class-A

Property

Description

566,000 net rentable SF; 28 story; largest tenants are

several leading law firms with lease maturity in 2017

(DLA Piper Rudnick, Howrey Simon Arnold)

Buyer/Borrower JV between a foreign fund and an experienced/capable

local operator structured as a 90/10 split; long-term hold

strategy to own a stabilized CBD at well below

replacement cost in a much-improved downtown LA

Hurdles Loan request is greater than $50 MM

Purchase Price $125,000,000

Cash Flow T12 NOI $8.8 MM

$8,944,000 NOI (87% occupancy)

Loan Request

Amount Up to $81,250,000

LTV 50-65%

Rate Fixed preferred

Amortization 30 Year

Term 10 years

Recourse Non or partial-recourse preferred

Stabilized Retail (Coastal Orange County)

Grocery/Drug anchored neighborhood center

Property Description 140,000 net rentable SF; built in 1977, renovated in 2005; located at a primary intersection;

Albertson’s occupies 60,000 SF (rollover in 2015) T-12 sales $425 psf; Rite-Aid occupies

20,000 SF (rollover in 2011) T-12 sales n/a; remaining tenants a good mix of national/local

tenants with an even rollover over the next 5 yrs, avg sales of $325 psf and rents of $2.56

psf NNN

Owner/Borrower Publicly traded REIT with a $27 MM securitized interest-only loan that matures in April 2010

(originated in 2005 as a 5 Year loan)

Hurdle Rollover of maturing CMBS loan

Valuation Borrower values NOI at a 7.5% cap (value = $34,700,000)

Cash Flow T-12 NOI $2.6 MM (92% occupancy)

Loan Request

Amount Up to $27,000,000

LTV 50-65%

Rate Fixed preferred or floating

Amortization 30 Year

Term 5 years

Recourse Non or partial-recourse preferred

Multi-housing - approaching stabilization(downtown LA/Southpark neighborhood)

Property

Description

157,000 net rentable SF; 20 story bldg, 160 units,

class-A amenities (pool, fitness, theater/game

room) on a 20,000 SF single land parcel; 240 space

parking facility (1 space per bedroom). An

apartment built to condo specs at $350 psf, for a

cost of $61,250,000

Owner/Borrower 5 member syndicate with an established apartment

operator as GP

Hurdles After concessions, rent is averaging $2.65 psf

Purchase Price $45,000,000 ($257/SF)

Cash Flow T-12 NOI $2.5 MM (80% occupancy)

Loan Request

Amount Up to $27,000,000

LTV 50-65%

Rate Fixed preferred

Amortization Interest Only or 30 Year

Term 5 or 7 years

Recourse Non or partial-recourse preferred

Industrial - unstablized(Cornerstone Commerce Center – Downey, CA)

Property Description 45 newly constructed industrial condomiums, totaling 176,000 SF, situated on 8.83 acres.

One of the most desirable industrial projects in the sub-market; part of a larger 195,000 SF,

50-unit business park “Cornerstone Commerce Center” built at $140 psf; units are 14%

improved with office space

Owner/Borrower Rexford, an experienced/capable operator of industrial real estate

Hurdles Non-cash flowing asset; holdback for commissions, interest reserve, & Operating Expenses

request; partial reconveyance; 11.39% market availability rent (vacant + sub-lease

Strategy (i) Sell individual units to owner/users; (ii) sell the entire project to one investor at a market

cap rate (Yr 3 stabilized Cap Rate projected to be 10.4%, based on 30% below market

rents); (iii) sell individual leased multi-tenant buildings to smaller 1031 exchange buyers at

anticipated pricing close to owner/user values.

Purchase Price $10,000,000 ($57/SF)

Loan Request

Amount Up to $7,500,000

LTV 55-75%

Rate Fixed or floating

Amortization Interest only / 25 or 30 Year

Term 3 Years

Recourse Partial-recourse

QUESTIONS

Moderator John Crump (Holiday Fenoglio Fowler)

YLG Education Committee Greg Mino (Fuscoe Engineering)

Bob Eidson (Asset Plan USA)

Volunteer Alan Kwan (Rexford Industrial)