2012 11 Nov 28 - KC Conways ECONOFOCUS CU Presentation for Nov 28

7/30/2019 2012 11 Nov 28 - KC Conways ECONOFOCUS CU Presentation for Nov 28

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EconoFocus Market Update

Where is the Economy and CRE?November 28, 2012

K.C. Conway, MAI, CRE EMD of Market [email protected]


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Todays Faculty:

About the Instructor:


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Is the economy headed for a slide back into recession?If you just landed on Earth with no knowledge of Fiscal Cliff, and I told you

That over 1/3rd of US housing markets were improving and that the number of

improved housing markets in 2012 was up 25% over YE 2011; and

That bank failures were down over 45% from 2011 and that the newlyappointed head of the FDIC just declared US banks as healthy and was closingall but one regional center to handle bank failures; and

That CMBS delinquencies had fallen back below 10% again and were down

65 basis points to 9.69% since peaking in July; and

That over 50 US MSAs now have a total housing occupancy rate above 90%(and another 50 with a total housing above 80%); and

That auto sales were at a post 2007 peak of over 14 million units; and

That multifamily rents were up 25% over the past 24 months; and

That E-Commerce retail sales are up 24% over Cyber Monday 2011; and

That unemployment was back below 8% from a peak of 10% in 2009

How would you perceive the economy in this new place called Earth?


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4

Test Your Knowledge with KCs R.E.A.T (R.E. Aptitude Test)Since you didnt just land on Earth, lets increase the REAT difficulty with 10 ?s.

REMAT - REAL ESTATE MASTERS APTITUDE TEST

Fiscal Cliff 1 Fiscal Cliff ANumber of Improving Housing MSAs to make the latest NAHB IMI

index - a post 2008 housing crisis peak (TX with most, then FL)

Q1 - C

Housing 2 125 B Decline in Bank Failures 2012 YTD Vs CY 2011 (250 peak in 2009)Q2 - A

H.Hold

Formation3 Metro Magnets Index C

Area generally bounded by Grant Memorial, Jefferson Memorial,

Constitution and Independence Avenues - 34 days to go.Q3 - D

Bank Failures 4 -45% (50 Vs 92) D

New Pitney Bowes household formation forecast index identifying

US MSAs to see most HH growth next 5 years (Houston, Atlanta,

DC, Dallas, Phoenix are top 5 ranked for HH growth)

Q4 - B

CMBS 5 9.69% & 14.26% E

Number of crane moves per hour for North America's most efficient

port - Charleston, SC. Noteworthy re port automation trend. 10 is the

likely # of Post-Panamax ready ports the US will have by 2015

Q5 - F

Ports 6 43 / 10 FCMBS Oct DQT rate for all CRE property types Vs MF property

CMBS DQT rate. Overall rate is down 65bps from July peak

Q6 - E

Large MSA

total housing

occupancy

7

MN, LA, Boston, SF,

Denver, DC, Seattle, Phily,

Dallas, San Diego, NY

GThe large household MSAs (>1.0 million Housing Units) with the

highest housing unit occupancy rates (all above 90%).

Q7 - G

MF/Apts 8 40% / 25% H

Most important new Leading Eco Indicator introduced by the USDA

in July 2012 that will likely define the primary logisitics markets in the

1st Post-Panamax decade (2015-2025). Only 18 MSAs in total.

Q8 - I

Ind'l - A new

LEI to monitor9 OSCAR I

Average aggregate increase in costs for new MF construction since

2007 & total increase in MF rents Q2 2009-Q 2012Q9 - H

GDP - UShistory Vs

China

10 17.2% / -10.4% J All time peak and trough in US GDP (1950/1958). Think about Chinaand Europe GDP today in historical context - & US at 1.3%.

Q10 - J


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GDP: Historical and Global Perspectives are ImportantIts not enough to know your countrys key economic metrics!

Source: TradingEconomics.com


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Fallreveals the TrueColorsA change of the seasons reveals all is not evergreen in the economy.

Fall

WinterSpring

Summer

UnemploymentBanks & CMBS

U-3 Vs U-6

LaborParticipation Rate

Fiscal Cliff?

2nd U.S. Debt Downgrade; $16Vs. $101 Trillion; Bernanke

retires in 2013;

2nd U.S. Debt Downgrade; &

ILA East/Gulf-coast port strike

Where is the new growth?NAHB IMI,

ON Numbers Eco Index,Pitney Bowes Magnet

Markets Index.,OSCAR & Post-Panamax

readiness.

The SPF formula

for next Summers UV Rays(Uncertainty & Volatility) post

Fiscal Cliff & more Europe


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Fall:Lets start with EmploymentLook at ADP (private hiring), Challenger (layoffs) & BLS side-by-side

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The two GOV Employment Metrics to Monitor?U-6 Total Unemployment Rate & Labor Participation Rate

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Focus onU-6 (14.6%)

U-6 also explains whyLabor Participation

rate is so low!

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A tip When U-3 Unempl.starts to rise several

months in a row, we will bein a real recovery - why?


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Fall: Bank FailuresBanking Industry is now healthy FDIC to close East-coast TSO in FL

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9

Key Notes about Bank Failures and History of Failures since Great Depression: 23,674 Number of bank failures during the Great Depression 2,369 S&L Crisis1986-1994 (10% the number of bank failures during the GD) 25 2008 Bank Failures as the Financial Crisis commenced Fall 2008 250 2009 Bank Failures 157 2010 Bank Failures 92 2011 Bank Failures

574 Jan 2008 - Mid-Nov 2012 Bank Failures (24% the number as S&L Crisis)

2012 YTD Bank Failures - 50 thru Mid-Nov compared to 88 for same period 2011; and half bank failures (25) located in East-Coast TSO being closed - Hummm?

1 Hometown Community Bank Bras elt on GA Cert usBank, Nat ional Ass ociation 16-Nov-12 27 Alabama Trust Bank, Sylacauga AL Southern States Bank 18-May-12

2 Citizens First National Bank Princet on IL Heartland Bank and Trust Company 2-Nov-12 28 Security Bank, National North Lauderdale FL Banesco USA 4-May-12

3 Heritage Bank of Florida Lutz FL Centennial Bank 2-Nov-12 29 Palm Desert National Palm Desert CA Pacific Premier Bank 27-Apr-12

4 NOVA Bank Berwyn PA No Acquirer 26-Oct-12 30 Plantation Federal Bank Pawleys Island SC First Federal Bank 27-Apr-12

5 Excel Bank Sedalia MO Simmons First National Bank 19-Oct-12 31 Inter Savings Bank, fsb Maple Grove MN Great Southern Bank 27-Apr-12

6 First East Side Savings Bank Tamarac FL Stearns Bank N.A. 19-Oct-12 32 HarVest Bank of Gaithersburg MD Sonabank 27-Apr-12

7 GulfSouth Private Bank Destin FL SmartBank 19-Oct-12 33 Bank of the Eastern Cambridge MD No Acquirer 27-Apr-12

8 First United Bank Crete IL Old Plank Trail Community Bank, NA 28-Sep-12 34 Fort Lee Federal Savings Fort Lee NJ Alma Bank 20-Apr-12

9 Truman Bank St. Louis MO Simmons First National Bank 14-Sep-12 35 Fidelity Bank Dearborn MI The Huntington National Bank 30-Mar-12

10 First Commercial Bank Bloomingt on MN Republic Bank & Trust Company 7-Sep-12 36 Premier Bank Wilmette IL International Bank of Chicago 23-Mar-12

11 Waukegan Savings Bank Waukegan IL First Midwest Bank 3-Aug-12 37 Covenant Bank & Trust Rock Spring GA Stearns Bank, N.A. 23-Mar-12

12 Jasper Banking Company Jasper GA Stearns Bank N.A. 27-Jul-12 38 New City Bank Chicago IL No Acquirer 9-Mar-1213 Second Federal Savings and Chicago IL Hinsdale Bank & Trust Company 20-Jul-12 39 Global Commerce Bank Doraville GA Metro City Bank 2-Mar-12

14 Heartland Bank Leawood KS Metcalf Bank 20-Jul-12 40 Home Savings of Little Falls MN No Acquirer 24-Feb-12

15 First Cherokee State Bank Woodstock GA Community & Southern Bank 20-Jul-12 41 Central Bank of Georgia Ellaville GA Ameris Bank 24-Feb-12

16 Georgia Trust Bank Buford GA Community & Southern Bank 20-Jul-12 42 SCB Bank Shelbyville IN First Merchants Bank, NA 10-Feb-12

17 The Royal Palm Bank of Florida Naples FL First National Bank of t he Gulf Coas t 20-Jul-12 43 Charter National Bank Hoffman Estates IL Barrington Bank & Trus t Company, NA 10-Feb-12

18 Glasgow Savings Bank Glasgow MO Regional Missouri Bank 13-Jul-12 44 BankEast Knoxville TN U.S.Bank National Association 27-Jan-12

19 Montgomery Bank & Trust Ailey GA Ameris Bank 6-Jul-12 45 Patriot Bank Minnesota Forest Lake MN First Resource Bank 27-Jan-12

20 The Farmers Bank of Lynchburg Lynchburg TN Clayton Bank and Trust 15-Jun-12 46 Tennessee Commerce Franklin TN Republic Bank & Trust Company 27-Jan-12

21 Security Exchange Bank Marietta GA Fidelity Bank 15-Jun-12 47 First Guaranty Bank and Jacksonville FL CenterState Bank of Florida, N.A. 27-Jan-12

22 Putnam State Bank Palatka FL Harbor Community Bank 15-Jun-12 48 American Eagle Savings Boothwyn PA Capital Bank, N.A. 20-Jan-12

23 Waccamaw Bank Whiteville NC First Community Bank 8-Jun-12 49 The First State Bank Stockbridge GA Hamilton State Bank 20-Jan-12

24 Farmers' and Traders' State Shabbona IL First State Bank 8-Jun-12 50 Central Florida State Belleview FL CenterState Bank of Florida, N.A. 20-Jan-12

25 Carolina Federal Savings Bank Charleston SC Bank of North Carolina 8-Jun-12

26 First Capital Bank Kingfisher OK F & M Bank 8-Jun-12 Note: Bank Failures since Jan 2008: CY 2008 = 25; CY 2009=250; CY 2010=157; CY 2011 = 92; YTD 2012=50

Closing DateBank Name City State Acquiring InstitutionBank Name City State Acquiring Institution Closing Date


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Fall: Banks Pronouncement of Obamas 1st new Appt?Banking Industry is now healthy Close East-coast TSO in FL

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Press Release

FDIC Announces Closure of East Coast Temporary Satellite Office

FOR IMMEDIATE RELEASE

November 14, 2012

Media Contact:

Greg Hernandez (202) 898-6984

Email: [email protected]

The Federal Deposit Insurance Corporation (FDIC) today announced that its East CoastTemporary Satellite Office (ECTSO), located at 8800 Baymeadows Way West, Jacksonville,Florida, will close on April 5, 2014.

The FDIC Board of Directors approved the establishment of the ECTSO in May 2009 to managereceiverships and liquidate assets from failed financial institutions primarily located in theSoutheastern region of the United States. Based on a review of ongoing workload and inrecognition of the signs of the improving health of the banking industry, the FDIC hasdetermined that its Dallas Regional Office will be able to absorb the remaining work of the

ECTSO by the second quarter of 2014.

The ECTSO currently has a staff of 420 and manages 138 failed bank receiverships. The ECTSOOffice is the only remaining temporary satellite office of the three created by the FDIC in 2009and 2010 to manage the increased workload from the elevated number of bank failures. TheFDIC closed its Irvine, California, West Coast Temporary Satellite Office on January 13, 2012,and its Schaumburg, Illinois, Midwest Temporary Satellite Office on September 28, 2012.


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Fall: Are banks healthy?Hummm Industry says no, but regulators say yes puzzling?

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Fall: Looming FHA risk begs the question: Are banks healthy?Perspectives by Generation

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FHA's Fiscal Woes MountBy Kate Berry November 14, 2012

The Federal Housing Administration is facing its own fiscal cliff amid dwindling capital reserves, raising thepossibility that the agency may have to tap Treasury for funding for the first time in its 78-year history.

This week, FHA will release its annual independent actuarial report that is expected to show that its capitalreserve ratio - which measures reserves held in excess to cover projected losses - will fall into negative territoryfor the first time, according to people briefed on the report's findings.By law, the FHA must maintain a 2%buffer.

The report is expected to trigger a contentious battle in Washington on how to shore up the agency's finances,

which have been depleted by high levels of defaults on FHA-insured loans. Already some lawmakers are callingfor higher down payments and mandatory premium increases on FHA loans, though such proposals are likely toanger housing advocates because they would shut out large swaths of low- and moderate-income borrowers.http://www.americanbanker.com/issues/177_40/fha-finances-obama-hud-shaun-donovan-1047041-1.html

FHA also could announce changes of its own on top of insurance premium increases it made in April.

Meanwhile, bankers and mortgage lenders could be facing more buyback requests from the FHA as the agencyscrambles for new sources of revenue. The FHA was able to avert a financial crisis earlier this year only bynegotiating a $1 billion settlement with Bank of America (BAC) to compensate the agency for past losses as part

of the national mortgage settlement.

"As reserves go down, enforcement increases," says Phillip Schulman, a partner at K&L Gates.FHA would not comment before the actuarial report is issued, but it painted a far rosier picture of its financialhealth this summer when officials with the Department of Housing and Urban Development, which overseesFHA, were pushing for Carol Galante to be confirmed to head the agency. HUD expected to end fiscal 2012 with$3 billion in reserves, down from nearly $5 billion last year, but still in positive territory. Either way, its capitalreserve ratio is expected to below the congressionally mandated 2% level for the fourth consecutive year.

Schulman says that FHA's fiscal woes should be making lenders nervous. "There's no question that thestakes have been raised for FHA participants," he says. "They would be wise to put their compliancedivisions on the same par with production offices given the potential liability."


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FHA in Trouble Housing Recovery could Stumble

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FHA Annual Report Reveals a Cornucopia of Problems

American Banker: By Clifford Rossi - NOV 19, 2012

Thanksgiving is usually a time reserved for positive reflection on what has transpired over the last year. In the

case of the Federal Housing Administration, the latest actuary report has little to cheer and more to beapprehensive about in the next few years.

The estimates indicate that the economic value of the Mutual Mortgage Insurance Fund dropped below zero to negative

$13.5 billion, calling into question whether the FHA would need to take a draw from the U.S. Treasury to infuse the fund.

This day of reckoning had been anticipated for some time.

One question that emerges is whether FHA can effectively manage through this difficult time. Another is whether the

actuary model used to assess the MMI fund is fraught with model risk that calls into question the reliability of the

estimates.

The withdrawal of private capital from the mortgage market during the financial crisis was offset by government action to

leverage the FHA, along with the government-sponsored enterprises Fannie Mae and Freddie Mac, to provide a

countercyclical role in supporting housing finance to avoid an entire collapse of mortgage markets. At the height of the

boom, FHA accounted for less than 4% of the mortgage market. Today it accounts for nearly 16%. Maintaining

stability in the market was essential. However, the actuary results underscore real concerns about the FHA that should

serve as a wake-up call to policymakers. While some efforts to upgrade the agency's ability to manage risk on a $1

trillion-plus portfoliohave been made over the last few years, the FHA remains woefully under-resourced to handle the

ongoing complexity of managing its actual and potential exposures. The Government Accountability Office recognizedthese deficiencies in a report it published in 2011.

The actuary report also reveals that FHA relies on a statistically-based automated underwriting scorecard, known as

TOTAL, for approving all of its loans. Before and during the crisis, these models were oftentimes overused and, as has

been proven, did not hold up well in accurately assessing risk when economic times changed. Old-fashioned

underwriting can never be replaced by statistical models and yet we find the agency relying on them more than

the GSEs or private lenders do.

Clifford V. Rossi is the Executive-in-Residence and Tyser Teaching Fellow at the Robert H. Smith School of Business atthe University of Maryland.


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Fall:CMBS DelinquencyIts not as green as you think The math in DQT is deceiving

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CMBS Maturing debt by Property Type

Least (Indl) Vs. Most (Office & Retail) amount of maturing CMBS debt $.

Industrial CMBS Debt Slice

Office CMBS Debt Slice


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Winter: The Fiscal Cliff Americas Fiscal SituationPerspectives by Generation

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Winter:The price for a civilized societyIRS Bldg inscription: Taxes are what we pay for a civilized society

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Winter: The Fiscal Cliff Our True National DebtAmericans owe $99.141 trillion or $322,843 per m-w-c

Total U.S. Debt - All Sources (Federal, State, Municipal and Consumer)

Debt Category U.S. TotalPer Capita$ Amount

Mid-2011 Incurred U.S Debt $14,300,000,000,000 $46,567

GAO Committed/Unfunded Debt 64,000,000,000,000 $208,410

Subtotal: 78,300,000,000,000 $254,977

All 50 States Incurred Debt 1,004,000,000,000 $3,269

All 50 States Unfunded Pension Debt 3,137,000,000,000 $10,215

Subtotal: 4,141,000,000,000 $13,485

Total Outstanding Municipal Bond Debt 3,000,000,000,000 $9,769

Total Consumer Debt (auto and credit cards) 2,400,000,000,000 $7,815

Total Home Mortgage Debt (Souce: BEA) 10,300,000,000,000 $33,541

Subtotal: 12,700,000,000,000 $41,356

Student Loan Debt (Occupy Wall Street) 1,000,000,000,000 $3,256

Total U.S. Debt (Gov, Municipal, Consumer) $99,141,000,000,000 $322,843

Stockton, CA

Occupy Wall St

Update:Exceeds

$16 trillion

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Update:Exceeds

$101 trillion$330k per

m-w-c


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Winter: Black Swanevents ahead between Mid-Nov & Q1 2013What is ahead? 1H2013 likely to be bumpy; 2H2013 could be the Spring Surprise.

r

We know:

Europe and Fiscal Cliff,but are you aware of

2nd Debt Downgrade, ILA East-coast port strike, & Muni BKs

Spring: Housing & NAHBs Impro ed MSA Inde


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Spring: Housing & NAHBs Improved MSA Index.Nov was a new Peak

-

5

10

15

20

25

3035

40

45

50

55

60

65

70

75

80

85

90

95

100

105

110

115

120

125

130

135

Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12

NAHB/First American Improving Markets Index (IMI)

Peak of 101MSAs in Spring

2012

Dipped back to80 MSAs

Summer 2012

A new Peak of 125MSAs Fall 2012

S i NAHB I d MSA I d It b d b d


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Spring: NAHBs Improved MSA Index Its broad based.

S i NAHB I d MSA I d R t il R E li ti


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Spring: NAHBs Improved MSA Index Retail R.E. application

The Top 5 States with the most numberof Improved Markets are:

#1 TX with 15 (increase of 3)#2 FL with 12 (increase of 5)#3 MI with 7 (increase of 2)#4 MO with 5 (new to top 5)#5 CA with 5 (increase of 3 MSAs)

Note: The FL market additions; and Inclusion of more CA markets.

Btw Q1 & Q2 the list of MSAs declinedfrom 101 markets to 80. Btw Q2 & Q3 the

NAHB increased from 80 to 125!

* Mfg is driving the Midwest* TX dominates with job growth* CA has been a Q3 surprise.

The NAHB IMI is one of the best

forward-looking housing indicators!

NAHB/First American Improving Markets Index (IMI) drops from 101 to 80

Boise in theTop 25 of 80 MSAs with Improving Housing Conditions

Pe rmits Grow th Price s Grow th Employme nt Growth

Trough From Trough From Trough From

Rank MSA Date Trough Date Trough Date Trough

4 P hoe ni x, AZ 03/31/09 4. 0% 06/30/11 3. 8% 09/30/10 4.0%

5 Hanford, CA* 08/31/11 30.7% 07/31/11 5.9% 12/31/10 4.0%

6 B oul der, CO 11/30/09 8. 7% 01/31/11 3. 4% 03/31/10 5.3%

7 Grand Junction, CO* 06/30/11 6.2% 07/31/11 0.7% 01/31/10 3.4%

9 Cape Coral , FL 03/31/09 4.2% 02/28/11 4.6% 01/31/10 4.1%

10 De ltona, FL 04/30/09 0. 7% 03/31/11 4. 9% 12/31/10 0.3%

11 North Port , FL 05/31/09 3.8% 03/31/11 0.9% 12/31/10 2.0%

12 Orl ando, FL 05/31/09 3. 1% 04/30/11 3. 9% 12/31/09 2.6%

13 Pensacola, FL 05/31/09 1.0% 06/30/11 0.9% 12/31/09 1.1%

14 Punta Gorda, FL 01/31/09 1.7% 02/28/11 0.3% 06/30/09 2.5%

15 Tampa, FL 02/28/09 1. 6% 0 3/31/11 2. 8% 01/31/10 3.6%

16 Rome , GA 07/31/11 10.8% 04/30/11 5. 6% 08/31/11 1.4%

19 Boise City, ID 03/31/09 3.1% 05/31/11 3.0% 06/30/10 3.6%

30 Bay City, MI* 08/31/10 4.8% 02/28/11 5.7% 07/31/09 2.8%

31 De troi t, MI 04/30/09 8. 4% 02/28/11 1. 7% 06/30/09 4.8%

32 Grand Rapids, MI 04/30/09 2.2% 02/28/11 1.7% 07/31/09 7.0%33 Monroe, MI* 03/31/09 0.9% 02/28/11 2.5% 10/31/09 1.9%

34 Sagi naw, MI 02/28/11 3. 6% 04/30/11 5. 1% 07/31/09 5.3%

35 Columbia, MO 11/30/08 2.1% 01/31/11 0.9% 08/31/09 7.1%

36 Jefferson City, MO 09/30/10 2.9% 03/31/11 1.2% 03/31/11 2.5%

37 Jopl in, MO 12/31/10 6. 0% 02/28/11 11.7% 01/31/10 5.5%

38 Kansas City, MO 03/31/09 3.1% 02/28/11 1.5% 03/31/10 2.8%

39 St. Joseph, MO 02/28/10 6.5% 03/31/11 4.0% 01/31/10 9.0%

41 Burl ington, NC 01/31/11 0.7% 12/31/10 3.1% 01/31/10 3.9%

42 Goldsboro, NC 01/31/09 1.3% 04/30/11 2.1% 09/30/10 3.8%

43 Greenvil le , NC 08/31/10 3.1% 02/28/11 2.3% 08/31/11 1.5%

44 Hi ckory, NC* 10/31/11 2. 9% 03/31/11 2. 9% 02/28/10 1.7%

60 Clarksvil le , TN* 05/31/08 1.9% 02/28/11 1.6% 03/31/09 5.5%61 Jackson, TN* 02/28/11 3.5% 05/31/11 0.3% 08/31/09 5.1%

62 Knoxvi lle, TN* 10/31/11 3.0% 02/28/11 1.3% 08/31/09 5.7%

63 Austin, TX* 07/31/11 2.3% 01/31/11 3.4% 09/30/09 7.5%

64 Brownsville, TX 03/31/09 1.3% 05/31/11 1.1% 03/31/09 3.8%

65 Dallas, TX* 03/31/09 1.1% 02/28/11 0.3% 12/31/09 4.7%

66 Laredo, TX 12/31/08 1.5% 04/30/10 8.5% 09/30/09 10.4%

67 McAllen, TX 01/31/09 0.2% 11/30/10 3.7% 12/31/07 6.6%

68 Midland, TX 04/30/09 4.1% 01/31/10 10.4% 08/31/09 15.8%

69 Odessa, TX 02/28/09 24.2% 10/31/10 7.4% 08/31/09 24.0%

70 San Angelo, TX 12/31/10 2.6% 04/30/11 4.8% 06/30/09 5.7%

71 San Antonio, TX* 04/30/11 1.9% 12/31/10 1.8% 09/30/09 4.1%

72 Texarkana, TX* 08/31/11 10.0% 01/31/10 1.1% 10/31/09 5.0%73 Victoria, TX 09/30/10 5.3% 02/28/11 6.7% 11/30/09 4.8%

74 Wichita Falls, TX* 08/31/10 1.9% 12/31/10 0.1% 10/31/09 0.0%

pr ng: Housing story continues with Census Housing Occupancy %


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MSA

Total

Housing

Units (2011)

Occupied

Housing

%

Occupied

Rank

(High-Low)

Vacant

Housing

%

Vacant

NAHB

IMI

ICEE or

OSCAR

San Jose-Sunnyvale-Santa Clara, CA 650,655 622,532 95.7% 1 28,123 4.3% ICEE

Lancaster, PA 204,740 193,231 94.4% 2 11,509 5.6%

Minneapolis-St. Paul-Bloomington, MN-WI 1,359,185 1,281,260 94.3% 3 77,925 5.7% OSCAR

Oxnard-Thousand Oaks-Ventura, CA 282,521 265,492 94.0% 4 17,029 6.0%

Portland-Vancouver-Hillsboro, OR-WA 930,446 872,423 93.8% 5 58,023 6.2%

El Paso, TX 274,827 257,285 93.6% 6 17,542 6.4% ICEE

Madison, WI 254,190 237,667 93.5% 7 16,523 6.5% ICEE

Los Angeles-Long Beach-Santa Ana, CA 4,500,396 4,194,650 93.2% 8 305,746 6.8% ICEE/OSCAR

Boston-Cambridge-Quincy, MA-NH 1,891,039 1,761,868 93.2% 9 129,171 6.8% ICEE

San Francisco-Oakland-Fremont, CA 1,747,155 1,622,840 92.9% 10 124,315 7.1% ICEE/OSCAR

Denver-Aurora-Broomfield, CO 1,084,397 1,007,022 92.9% 11 77,375 7.1% X ICEE/OSCAR

Washington-Arlington-Alexandria, DC-VA-MD-WV 2,230,987 2,071,390 92.9% 12 159,597 7.2% ICEE

Seattle-Tacoma-Bellevue, WA 1,471,126 1,364,274 92.7% 13 106,852 7.3% ICEE/OSCAR

Colorado Springs, CO 267,308 247,254 92.5% 14 20,054 7.5% ICEE

Spokane, WA 203,173 187,360 92.2% 15 15,813 7.8%

Des Moines-West Des Moines, IA 241,711 222,738 92.2% 16 18,973 7.9% X

Springfield, MA 288,784 265,490 91.9% 17 23,294 8.1%

Boise City-Nampa, ID 247,228 227,276 91.9% 18 19,952 8.1% X

Austin-Round Rock-San Marcos, TX 723,297 663,866 91.8% 19 59,431 8.2% X ICEE

Albuquerque, NM 376,276 345,157 91.7% 20 31,119 8.3%

Milwaukee-Waukesha-West Allis, WI 671,857 615,107 91.6% 21 56,750 8.5%

Rochester, NY 457,585 418,779 91.5% 22 38,806 8.5%Honolulu, HI 337,528 308,495 91.4% 23 29,033 8.6% X

Bridgeport-Stamford-Norwalk, CT 362,760 331,530 91.4% 24 31,230 8.6%

Omaha-Council Bluffs, NE-IA 366,213 334,671 91.4% 25 31,542 8.6% X

Hartford-West Hartford-East Hartford, CT 508,999 464,933 91.3% 26 44,066 8.7%

Stockton, CA 234,820 213,749 91.0% 27 21,071 9.0%

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 2,439,915 2,220,655 91.0% 28 219,260 9.0% ICEE

Knoxville, TN 317,135 288,165 90.9% 29 28,970 9.1% X

Dallas-Fort Worth-Arlington, TX 2,532,937 2,300,151 90.8% 30 232,786 9.2% X ICEE/OSCAR

Note #1: 22 of top 51 are ICEE, OSCAR or both profile MSAs

Note #2: 15 MSAs are on NAHB IMI list (only 6 are not an ICEE or OSCAR marketNote #3: 28 of top 51 MSAs in terms of Housing Occupancy are NAHB IMI, ICEE, OSCAR

pr ng: Housing story continues with Census Housing Occupancy %The Housing Recovery has real legs Will Fiscal Cliff set housing back?

TotalHousing Occupied % Rank Vacant % NAHB ICEE or


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MSA

Housing

Units (2011)

Occupied

Housing

%

Occupied

Rank

(High-Low)

Vacant

Housing

%

Vacant

NAHB

IMI

ICEE or

OSCAR

San Jose-Sunnyvale-Santa Clara, CA 650,655 622,532 95.7% 1 28,123 4.3% ICEE

Lancaster, PA 204,740 193,231 94.4% 2 11,509 5.6%

Minneapolis-St. Paul-Bloomington, MN-WI 1,359,185 1,281,260 94.3% 3 77,925 5.7% OSCAR

Oxnard-Thousand Oaks-Ventura, CA 282,521 265,492 94.0% 4 17,029 6.0%

Portland-Vancouver-Hillsboro, OR-WA 930,446 872,423 93.8% 5 58,023 6.2%

El Paso, TX 274,827 257,285 93.6% 6 17,542 6.4% ICEE

Madison, WI 254,190 237,667 93.5% 7 16,523 6.5% ICEE

Los Angeles-Long Beach-Santa Ana, CA 4,500,396 4,194,650 93.2% 8 305,746 6.8% ICEE/OSCAR

Boston-Cambridge-Quincy, MA-NH 1,891,039 1,761,868 93.2% 9 129,171 6.8% ICEE

San Francisco-Oakland-Fremont, CA 1,747,155 1,622,840 92.9% 10 124,315 7.1% ICEE/OSCAR

Denver-Aurora-Broomfield, CO 1,084,397 1,007,022 92.9% 11 77,375 7.1% X ICEE/OSCAR

Washington-Arlington-Alexandria, DC-VA-MD-WV 2,230,987 2,071,390 92.9% 12 159,597 7.2% ICEE

Seattle-Tacoma-Bellevue, WA 1,471,126 1,364,274 92.7% 13 106,852 7.3% ICEE/OSCAR

Colorado Springs, CO 267,308 247,254 92.5% 14 20,054 7.5% ICEE

Spokane, WA 203,173 187,360 92.2% 15 15,813 7.8%

Des Moines-West Des Moines, IA 241,711 222,738 92.2% 16 18,973 7.9% X

Springfield, MA 288,784 265,490 91.9% 17 23,294 8.1%

Boise City-Nampa, ID 247,228 227,276 91.9% 18 19,952 8.1% X

Austin-Round Rock-San Marcos, TX 723,297 663,866 91.8% 19 59,431 8.2% X ICEE

Albuquerque, NM 376,276 345,157 91.7% 20 31,119 8.3%

Milwaukee-Waukesha-West Allis, WI 671,857 615,107 91.6% 21 56,750 8.5%

Rochester, NY 457,585 418,779 91.5% 22 38,806 8.5%

Honolulu, HI 337,528 308,495 91.4% 23 29,033 8.6% X

Bridgeport-Stamford-Norwalk, CT 362,760 331,530 91.4% 24 31,230 8.6%

Omaha-Council Bluffs, NE-IA 366,213 334,671 91.4% 25 31,542 8.6% X

Hartford-West Hartford-East Hartford, CT 508,999 464,933 91.3% 26 44,066 8.7%

Stockton, CA 234,820 213,749 91.0% 27 21,071 9.0%

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 2,439,915 2,220,655 91.0% 28 219,260 9.0% ICEE

Knoxville, TN 317,135 288,165 90.9% 29 28,970 9.1% X

Dallas-Fort Worth-Arlington, TX 2,532,937 2,300,151 90.8% 30 232,786 9.2% X ICEE/OSCAR

Harrisburg-Carlisle, PA 242,867 220,530 90.8% 31 22,337 9.2% ICEE

San Diego-Carlsbad-San Marcos, CA 1,168,705 1,061,056 90.8% 32 107,649 9.2% X

Allentown-Bethlehem-Easton, PA-NJ 343,948 312,237 90.8% 33 31,711 9.2%

Nashville-Davidson--Murfreesboro--Franklin, TN 676,139 613,496 90.7% 34 62,643 9.3%

Poughkeepsie-Newburgh-Middletown, NY 257,006 232,906 90.6% 35 24,100 9.4%

Charlotte-Gastonia-Rock Hill, NC-SC 742,559 671,191 90.4% 36 71,368 9.6% X

Worcester, MA 328,606 296,948 90.4% 37 31,658 9.6%

Salt Lake City, UT 416,355 375,903 90.3% 38 40,452 9.7%Grand Rapids-Wyoming, MI 324,114 292,195 90.2% 39 31,919 9.9% X ICEE

Buffalo-Niagara Falls, NY 518,757 467,535 90.1% 40 51,222 9.9%

Raleigh-Cary, NC 472,047 425,406 90.1% 41 46,641 9.9% X ICEE

New York-Northern New Jersey-Long Island, NY-NJ-PA 7,537,642 6,789,943 90.1% 42 747,699 9.9% ICEE/OSCAR

San Antonio-New Braunfels, TX 847,625 763,204 90.0% 43 84,421 10.0% X ICEE

Fresno, CA 318,099 286,255 90.0% 44 31,844 10.0%

Durham-Chapel Hill, NC 225,885 203,088 89.9% 45 22,797 10.1% ICEE

Lexington-Fayette, KY 211,281 189,941 89.9% 46 21,340 10.1%

New Haven-Milford, CT 363,243 326,523 89.9% 47 36,720 10.1%

Baltimore-Towson, MD 1,138,113 1 ,022,508 89.8% 48 115,605 10. 2% ICEE/OSCAR

Columbus, OH 796,946 715,770 89.8% 49 81,176 10.2% X ICEE/OSCAR

Wichita, KS 264,485 237,408 89.8% 50 27,077 10.2%

Kansas City, MO-KS 885,237 794,197 89.7% 51 91,040 10.3% X OSCARNote #1: 22 of top 51 are ICEE, OSCAR or both profile MSAs

Note #2: 15 MSAs are on NAHB IMI list (only 6 are not an ICEE or OSCAR market

Note #3: 28 of top 51 MSAs in terms of Housing Occupancy are NAHB IMI, ICEE, OSCAR

Spring: Recovering Markets ONEI November Rankings


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Spring: Recovering Markets ONEI November RankingsA relatively new forward-looking index to monitor for CRE recovery

ONEI is a new 2012 LEI by Americas Biz Journals ranking top 102 US Metros:i) OK City #1; ii) Boston top E/W coastal MSA; iii) consistent with NAHB IMI markets too.

Spring: Recovering Markets ONEI November Rankings


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Spring: Recovering Markets ONEI November RankingsLenders/Investors need help defining recovery

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ON NUMBERS ECONOMIC INDEX - NOVEMBER 2012

Rank MetroOverall

ScoreRank Metro

Overall

ScoreRank Metro

Overall

ScoreRank Metro

Overall

Score1 Oklahoma City 90.572 26 Scranton-Wilkes-Barre, PA 59.532 51 Toledo, OH 51.04 75 Youngstown, OH 38.639

2 Austin 90.349 27 Boise, Idaho 59.531 52 Richmond 50.818 76 Hartford 38.591

3 Tulsa 82.007 28 Nashville 59.358 53 Portland, OR 50.546 77 Orlando 37.204

4 Houston 80.869 29 Minneapolis-St. Paul 59.136 54 Madison, WI 49.58 78 Worcester, MA 37.155

5 Omaha 80.819 30 San Francis co-Oakland 58.541 55 Indianapolis, IN 49.036 79 Fresno, CA 37.056

6 Columbus 77.824 31 New Orleans 58.541 56 Poughkeepsie, NY 47.601 80 Los Angeles, CA 35.15

7 Denver 74.705 32 Portland, Maine 58.343 57 Kansas City 47.18 81 Albuquerque, NM 34.357

8 Pittsburgh 74.631 33 Rochester, N.Y. 58.097 58 Bridgeport-Stamford , CT 46.932 82 Atlanta 33.467

9 Boston 72.007 34 Chattanooga, Tenn. 57.699 59 Charlotte 46.685 83 Tucson 33.119

10 San Antonio 71.612 35 Phoenix 57.303 60 Greenville, S.C. 46.585 84 Dayton, OH 32.872

11 Durham, N.C. 71.512 36 Buffalo 56.71 61 McAllen-Edinburg, TX 46.462 85 Greensboro, NC 32.52612 Little Rock, Ark. 71.338 37 St. Louis 55.966 62 New York City 46.067 86 New Haven, CT 31.437

13 Provo, Utah 71.314 38 Knoxville, Tenn. 55.349 63 Sacramento 45.248 87 Modesto, CA 31.263

14 Louisville 71.289 39 Lancaster, Pa. 55.076 64 Baltimore 45.199 88 Lakeland, FL 31.016

15 Des Moines, IA 70.175 40 Harrisburg, Pa. 54.977 65 Milwaukee 44.951 89 Miami-Ft Lauderdale 30.966

16 Salt Lake City 66.908 41 Raleigh 54.532 66 Philadelphia 42.798 90 Stockton, CA 30.67

17 Dallas -Ft Worth 66.686 42 Baton Rouge, La. 54.407 67 Syracuse, N.Y. 42.377 91 Cape Coral-Ft Myers 30.446

18 San Jose 65.894 43 Seattle 54.334 68 Bakersfield, Calif. 41.289 92 Chicago 30.397

19 Wichita, Kans. 64.828 44 Columbia, S.C. 54.234 69 Springfield, Mass. 40.199 93 Jacksonville, FL 28.887

20 Charles ton, S.C. 64.309 45 Grand Rapids, Mich. 54.185 70 Memphis 39.506 94 Providence, RI 28.615

21 Ogden, Utah 64.135 46 San Diego 53.714 71 Augusta, Ga. 39.431 95 VA Beach-Norfolk 28.565

22 Cincinnati 63.071 47 Birmingham 51.337 72 Jackson, Miss. 39.406 96 Palm Bay-Melbourne, FL 27.08

23 Honolulu 62.6 48 El Paso, Texas 51.29 73 Allentown-Bethlehem, PA 38.963 97 Bradenton-Saras ota FL 26.659

24 Washington 62.18 49 Cleveland 51.214 74 Detroit 38.937 98 Oxnard-Thous and Oaks 24.629

25 Akron, Ohio 60.694 50 Albany, N.Y. 51.091 75 Youngstown, Ohio 38.639 99 Colorado Springs, CO 22.723

100 Rivers ide-San Bernard ino 21.164

101 Las Vegas, NV 20.471

102 Tampa-St. Petersburg, FLONEI:

On Numbers Economic Indexby Am City Bus. Journals

Spring: Pitney Bowes new Metro Magnets Index


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Spring: Pitney Bowes new Metro Magnets IndexIndustry, not government, will ID growth opportunities first!

Spring: Pitney Bowes new Metro Magnets Index


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28

Spring: Pitney Bowes new Metro Magnets IndexLook at who some of these MAGNETS for H.Hold growth are!

ICEE MSA

Post-PanamaxPorts theme.

Part of Airbus storyin Mobile AL

Spring: Manufacturing - Rail Time Indicators


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Spring: Manufacturing - Rail Time IndicatorsForget ISM, Empire State Mfg Index & FED Mfg Surveys go to the source!

Retailers are remaking their

Supply-Chain with newer 30-36 clear buildings. New BldgsVs 40% of existing inventorythat is Functionally Obsolete.

Spring: The award for best new R E indicator goes to OSCAR


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Spring: The award for best new R.E. indicator goes to OSCAROcean Shipping Container Availability Report - A new LEI to monitor

OSCAR: Ocean Shipping Container Availability Report

The OSCAR goes to 18 US Markets with the Logistics Data

Region MSA Region MSA

West Coast: Long Beach, CA Inland: Chicago, ILOakland, CA Cincinnati, OH

Seattlw, WA Columbus, OH

Tacoma, WA Dallas, TX

East Coast: New York Denver, CO

Norfolk, VA Kansas City, MO

Charleston, SC Memphis, TN

Savannah, GA Minneapolis, MN

Gulf Coast: Houston, TX OSCAR Atlanta

New Orleans, LA Omissions Florida/Jacksonville

Indianapolis

Key Note: 4 W-coast ports; 4 E-coast ports; 2 Gulf-coast ports; and 8 Inlanddistribution markets that exclude: i) all of FL; ii) Atlanta; & iii) Phoenix. An

OSCAR designated MSA will Impact value of Industrial R.E. post 2014.

Spring: It may be time to start tilling the LAND again


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Spring: It may be time to start tilling the LAND againSome Residential Lot shortages & Industrial in PPMX Port Markets

Moving Along CRE Chess


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Moving Along CRE ChessThe Chess moves to consider - How does CRE do in 2013?

r

If my Dad had all

the right CREchess movesfigured out for

2013, he wouldnthave me moving allthese pieces to test

out his theories!

S Wh t li h d? P t T P ti MF


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Summer: What lies ahead? Property Type Perspectives - MFConstruction Activity & Costs Vs Vacancy & Cap Rates.

Is new construction overheating? 2012-2013 New Supply under construction - thatcould all deliver in 2012, - approximates 2007 activity. Demand is there, but can rentgrowth continue at pace of last 24 months to cover 40% increase in costs?

Are higher costs being rationalized by Cap Rate compression and unrealisticrent growth? The cost per unit of new construction has increased 40%.

Multifamily CRE


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Multifamily CRE5 States account for 43% of New Supply to-be-delivered 2H2012- 2013

Three other states have >5,000 units underway: FL, NC and TN have had anuptick in new construction worth monitoring adding 5,000+ units by end of 2013.

Cap Rate and pro forma assumptions regarding rent growth and expenseratios warrant scrutiny. Are 8%-12% rent growth rates sustainable? And, are


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Office Space Trends

Source: Colliers Atlanta

35

Note:The old X growth in officeemployment means X square

feet of office absorption is outthe window.The open space architecture ismoving the space per employeeratio from 1:300 to 1:250 to1:200. That means a 20%growth in office employment =

no new absorption.

ICEE Vs FIRE Markets?


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ICEE Vs. FIRE Markets?With respect to Office R.E., ICEE is hot & FIRE is not.

ICEE has 2Xthe Absorption

O


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Top Office Market Picks

37

Rank

(Absorp)

Office

Market

Investmen

t Profile

Demand

Driver

1H2012

Vacancy

1H2012

Net

Absorption

Rank

(Absorp) Office Market

Investmen

t Profile

Demand

Driver

1H2012

Vacancy

1H2012

Net

Absorption

1 Houston Core ICEE 14.50 2,444,573 11 Miami Core FIRE 15.50 774,686

2 OK City Non-Core ICEE 10.50 1,730,066 12 San Fran Core ICEE 11.50 759,4573 Boston Core ICEE 17.50 1,567,493 13 Baltimore Non-Core FIRE 13.75 658,087

4 Atlanta Core FIRE 17.50 1,342,776 14 Orange Co, CA Non-Core FIRE 17.75 608,400

5 Piladelphia Core ICEE 14.00 1,266,608 15 Minneapolis Non-Core FIRE 14.00 579,164

6 Denver Non-Core ICEE 13.50 1,153,444 16 LA Core FIRE 18.00 480,100

7 Chicago Core FIRE 15.50 1,133,819 17 Charlotte Non-Core FIRE 12.75 448,139

8 Seattle Core ICEE 12.75 1,133,302 18 Orlando Non-Core FIRE 14.25 394,197

9 Dallas Core ICEE 16.75 875,267 19 Raleigh Non-Core ICEE 11.50 345,000

10 New York Core FIRE 11.00 816,418 20 Silicon Valley Core ICEE 15.50 157,849

Notes: * 12 of the 20 selections (60%) are investment-grade "Core" markets.

* Half of the markets are driven by traditional Finance, Insurance & Real Estate (FIRE) employment. The other half are MSAs fueled by ICEE.

* These 20 markets have an average office vacancy rate of 14.5%, or 25bps below the national average of 14.75%.

* These 20 markets accounted for 95% of the net office absorption in North America during 1H2012 (18.7msf of the 19.2msf NoAmerican total).

* These 20 markets account for 70% of total U.S. office building transaction Q1-Q3 2012 ($32.5 billion of $47.0 billion - Source: RCA and Colliers).

KCs Top 20 Office Markets in 2013: ICEE theme continues

These 20 MSAs=95% of 1H2012 net office absorption. These 20 MSAs account for70% of YTD 2012 office

building transactions.

Warehouse CRE


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Warehouse CREStill Smooth Sailing into 2013 Retailers remaking Supply Chain

Absence of NewConstruction

Less Distressedthan other CREproperty types

US Trade toEmergingMarkets

Port Readiness :Post-Panamaxcontainerships

Absence of CapRateCompression

T W h M k t Pi k


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Top Warehouse Market Picks:OSCAR & P-Pmnx Ready Port Themes

39

KCs Top 20 Warehouse Markets in 2013: Port Markets matter with Panama Expansion nearing completion - 2015

OSCAR: All but 6 are OSCAR markets Where retailers are remaking their supply-chain. Note the omissions: LA, Inland Empire and Chicago. Why?

Rank

(Absorp)

Industrial

Market

Market

Profile

Demand

Driver

2013

Key Note

1H2012

Vacancy

1H2012

Net

Absorption

Rank

(Absorp)

Industrial

Market

Market

Profile

Demand

Driver

2013

Key Note

1H2012

Vacancy

1H2012

Net

Absorption

1 Dallas-Ft. Worth Inland Distr. OSCAR #9 Export MSA 9.8% 4.6msf 11 Baltimore Port P-Panamax P-Pnmx Ready 10.0% .6msf

2 Atlanta, GA Inland Distr. Intermodal Class 1 RRs 12.9% 3.3msf 12 Tampa Port Bulk Cargo Adding TEU 10.0% .1msf

3 Houston Port OSCAR #2 Export MSA 5.1% 3.1msf 13 Savannah Port OSCAR #3 TEU port 14.0% .1msf 4 Columbus, OH Inland Distr. OSCAR Air Cargo Port 10.0% 2.7msf 14 Jacksonville Port P-Panamax Disney expansion 10.0% .1msf

5 Cleveland, OH Port Great Lakes More than Auto 8.5% 2.1msf 15 Oakland Port OSCAR 8.9% .1msf

6 Seattle Port OSCAR #1 Grain Exporter 6.6% 1.9msf 16 Memphis Inland Distr. OSCAR Alt to CHI/Nike 13.0% .1msf

7 Miami Port OSCAR Post Panamax 7.0% 1.4msf 17 San Francisco Port OSCAR High Repl Cost 8.9% 0 msf

8 Kansas City Inland Distr. OSCAR 7.2% 1.0msf 18 Charleston SC Port OSCAR Most efficient port 11.7% 0 msf

9 Denver Inland Distr. OSCAR 8.1% 1.0msf 19 New Orleans Port OSCAR Top REFER port


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40www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012

www.colliers.com/us/insights

Panama Canal Locks Expansion Project?
http://www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012http://www.colliers.com/us/insightshttp://www.colliers.com/us/insightshttp://www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012http://www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012http://www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012


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Panama Canal Locks Expansion Project?What is involved in the locks expansion project?

Existing Locks Up to 5,000 TEU vessels 2015 Locks Up to 12,500 TEU vessels

Completion has been delayed 6+ months from end of 2014 to Mid-2015.

12,500TEU

5,000 TEU3,000 TEU

2.5Xincrease

ILA Strike Update Looks like a go for Jan 1


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ILA Strike Update Looks like a go for Jan 1

Conclusion


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ConclusionIs the CRE in our clients portfolio performing in concert with

what is happening on the field? Are we sending clients the RIGHT signals?

r


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Thank YouK.C. Conway, MAI, CREExec. Managing Director, R.E. Analytics

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2012 11 Nov 28 - KC Conways ECONOFOCUS CU Presentation for Nov 28

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