EDR Annual Client Summit Conditions in the Commercial Real Estate Debt Markets

May 8, 2013

2

Sources of Commercial Real Estate Debt

• CMBS (Securitization)

• Commercial Banks• Government• Private Equity• Life Insurance

Companies• REITs• Private Debt Funds

─ Growing─ Active─ Stabilizing─ Active─ Stabilizing─ Emerging─ Emerging

3

CMBS Primary Market Activity

2011• $30.2 billion

– (28 deals)• $13.7 billion in

Freddie Mac– (12 deals)

• $350 million in FDIC – (1 deal)

2012• $45.8billion

– (57 deals)• $21.2 billion in

Freddie Mac– (17 deals)

• $449 million in FDIC – (1 deal)

Source: Trepp, LLC

4

Loan Performance

5

Reduced Bank CRE ConcentrationsBy Bank Size

Sources: Call Reports, FDIC, Trepp LLC

Number of Banks/Thrifts with CRE Concentration*

* CRE Loans (excluding Owner-Occupied Mortgages).

6

U.S. CMBS Collateral PerformanceThe Worst Is Over

Source: Trepp, LLC

7Source: Trepp, LLC

U.S. CMBS Collateral PerformanceRemaining Delinquencies Are More Serious

8

Delinquencies > 90 Days

Note: CMBS Delinquencies include Foreclosure, REO, Non Performing Balloon Loans

Source: Trepp-CREFC Portfolio Lender Survey, Trepp BankNavigator

Total Realized Net Losses

9Source: Trepp-CREFC Portfolio Lender Survey, Trepp BankNavigator

10

U.S. CMBS Delinquency Rates: Significance of Regional Variation

12.41%

10.77%

9.17%13.59%

6.36%

12.94%

6.29%

8.08%11.37%

Source: Trepp, LLC

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Property Performance

Office - CBD

Office -Sub

Apartment

RetailIndustrial

75

95

115

135

155

175

195

215

235

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Source: Moody’s/RCA

National Commercial Property Price Index

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

BillionsIndividual PortFolio

-100%

0%

100%

200%

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Year-Over-Year % Change

US Quarterly Volume By Property Type

Source: RCA

Apartment

Office

Retail

Industrial

Hotel

YOY Change (bps)2012 Avg Cap Rate2012 Volume ($bil) YOY Change in Volume

$85

$78

$53

$37

$20

47%

19%

20%

4%

-2%

6.1%

7.1%

7.3%

7.7%

7.8%

(23)

(28)

(25)

(8)

(1)

US Quarterly Volume By Property Type

Source: RCA

Office - CBD

Off ice - Sub

Apartment

Retail

Industrial

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Average Cap Rates by Sector

Source: RCA

16

Into the Future

17

Commercial Real Estate Debt MaturitiesAnnual Maturities by Lender Type

050

100150200250300350400

2013 2014 2015 2016 2017Banks CMBS Life Cos Other

Source: Federal Reserve, Trepp LLC

$ Billions

18

Additional Opportunities in Maturing CMBS Loans

Source: Trepp, LLC

19

Additional Opportunities in Maturing CMBS Loans

Source: Trepp, LLC

20

The Box Score

21

In Summary

• Past the worst• Recovery is not overly robust-but is

happening• Clearly not affecting all markets equally

22