Distressed Multifamily Opportunities

Green PearlChicago Distressed Real Estate Summit

May 2010

May 2010 Confidential & Proprietary

Confidential & Proprietary Page 2

Questions

1. Are the spike in values justified ?• What kind of deals and related cap rates are in the market ?• Are you seeing a V-shaped recovery at your properties ? Is the revenue increase

driven by occupancy gains or real rent increases ?

2. Debt ?• What type of deals are out there to buy from servicers and constr. lenders ?• What are the pitfalls ?• How are buyers, sellers, or lenders reacting to terms in the market ?• Are banks or servicers going to get more aggressive in foreclosures /DPOs ?• Is buying loans getting played out or is there more room to run ?• Current lending environment and terms for Agencies, or mezz, or hard money

investors ?• What is the outlook for Fannie /Freddie ? Will they merge, shrink ?

3. Have we forgotten the impact of the debt bubble still ahead of us ?• How will the large amount of construction debts play out ?• How will the maturing CMBS products get refinanced, or flushed through ?• Who are the buyers going to be for the “non–A” grade products ?


Questions

4. Legal side• Any major changes in players, deal terms, client sentiments ?

5. Development of apartment/condos going forward• What is the time frame to start building again ?• What type of terms will investors get on equity and construction debt ?• Any new ways to look at this model ?

Looking ahead• Where does the new equity come from for acquisitions when the supply of

assets gets larger ? What type of returns would investors expect ?• What have we learned in the past 24 months ?• NOI – Buyers are all underwriting significant growth due to recovery and

lack of new construction – What are your thoughts on this assumption ?• Where do new jobs come from ?

• Wrap up


Apartment transactions

$20.4 $22.7

$30.3

$51.0

$88.8 $91.7

$99.6

$37.3

$14.1$17.3

1,1691,251

1,649

2,462

3,814 3,8713,795

2,055

975868

0

1,000

2,000

3,000

4,000

5,000

$0 B

$20 B

$40 B

$60 B

$80 B

$100 B

$120 B

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Annualized

Nu

mb

er

of

Tra

nsacti

on

s

To

tal$

Am

ou

nt

ApartmentTransactionVolume through April 2010

Garden Mid/highrise Total Price Transactions

Source: Real Capital Analytics


Source: Mortgage Bankers Association (“MBA”).The December 2009 MBA Survey covered most multifamilyloans outstanding from the investor pool except for CommercialBanks/Thrifts.

Detailed Multifamily Maturities

Note: Does not include commercial banks which have over$200 billion in apartment debt O/S

$4.3$7.5

$17.0 $18.6$14.3 $16.1 $15.8

$18.8$7.4

$10.7

$12.8 $7.1

$8.3

$16.0

$25.3 $21.1

$7.4

$4.0

$3.2

$1.6$1.6

$1.8

$1.8 $1.7

$4.5

$5.9

$7.5

$6.5

$5.1

$6.0

$7.9$5.6

$0

$10

$20

$30

$40

$50

$60

2010 2011 2012 2013 2014 2015 2016 2017

$ billions Multifamily Maturities - by Investor Types: 2010 to 2017(Does not include commercial lenders/ thrifts or savings institutions)

Fannie, Freddie, FHA and Ginnie Mae CMBS, CDO or other ABS

Credit Companies, Warehouse, and Other Life Insurance Companies

Average- $37 billion$40.5

$28.1

$50.8

$39.9

$29.3

$33.8

$47.2

$23.6


Current Apartment Mortgage Holders

Can the Agenciescontinue to deploy capitalto make up for the lack ofCMBS and LifeInsurance originations ?

$139

$158

$168

$215$210

$98

$96

$93

$65$60

$42$46

$52 $52 $50

$89

$103

$125

$114$108

$229

$244

$302

$357

$379

$0

$50

$100

$150

$200

$250

$300

$350

$400

12/31/05 12/31/06 12/31/07 12/31/08 12/31/09

Commercial Banks

Savings institutions

Life Insurance

Private mtg Conduits

Total Gov't backedentities

Increase from 2005(billions) $ %

Fannie/Freddie $140 77.5%

Gov't entities (non Fannie& Freddie) $9 4.1%

Commercial Banks $71 51.3%

Savings Institutions ($38) -39.1%

Life Companies $7 17.7%

Conduits $19 21.2%

Source: Federal Reserve


Trepp Multifamily Delinquencies

2.54

3.343.81 3.79 3.88

3.52 3.66 3.79

6.797.06

1.431.88

2.202.65

2.90

3.33 3.37

4.04 4.37

4.85 5.08

5.666.14

6.74

7.69

8.29

11.22 11.55

2.582.82

3.443.74 3.86

5.23 5.165.39

5.61

6.677.06

7.66

8.74

9.269.72 9.86

13.17 13.32

0

2

4

6

8

10

12

14

Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10

30 days 60 days 90 days Non perf Forclose/ REO 90 days+ non-perf + REO Total

Source: Trepp


Multifamily Delinquencies

2.65%3.33%

3.37%

4.04%

4.37%

4.85%5.08%

5.66%

6.14%

6.72%

7.69%

8.29%

11.22%

11.55%

0.32% 0.34% 0.36%0.50% 0.51% 0.56% 0.56% 0.62% 0.61% 0.66% 0.63% 0.69% 0.73%

0.08% 0.09% 0.10% 0.12% 0.11% 0.11% 0.10% 0.11% 0.17% 0.19% 0.19% 0.21% 0.25% 0.24%

2.96%3.15%

3.42%

3.94%

4.72% 4.98%

5.29% 5.38% 5.52%5.69%

2.13%2.44%

2.62%2.78%

2.95%3.13%

3.30%3.54%

3.72% 3.87%4.15% 4.20% 4.13%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%Trepp CMBS -multifamilyFannie- multifamily

Freddie -multifamily

Fannie- single family

Freddie- single family

Freddie-

Fannie

Trepp-

Fannie Multi

Freddie


Non-current Multifamily C&D loans

0.25% 0.28% 0.29% 0.31%0.41%

0.60% 0.66% 0.68% 0.76%

0.98%

1.20%

1.47%

1.74%

2.45%

3.13%

3.58%

4.44%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

Percentage of Multifamily- non current(90 days past due or non accrual status)

Noncurrent %

Multifamily$ o/s

(billions)

Dec-05 0.25% $188

Mar-06 0.28% $191

Jun-06 0.29% $192

Sep-06 0.31% $193

Dec-06 0.41% $193

Mar-07 0.60% $192

Jun-07 0.66% $190

Sep-07 0.68% $193

Dec-07 0.76% $202

Mar-08 0.98% $207

Jun-08 1.20% $211

Sep-08 1.47% $205

Dec-08 1.74% $206

Mar-09 2.45% $211

Jun-09 3.13% $213 $ NC

Sep-09 3.58% $216 $7.73

Dec-09 4.44% $211 $9.39

Note: In the past 6 quarters theamount of outstanding apt loans hasremained virtually the same.However, total C&D for all realestate has dropped $170 billion .

Source: Federal Reserve


Conclusion

1. Should we jump back into the pool now ?• Will NOI increases offset any increases in interest rates and cap rates ?• Has the market been too conservative over the past 24 months ?• What type of returns (IRR or COC) for apartment acquisitions ?

2. Debt• Will Fannie/Freddie continue to fuel the market ?• Is there a real risk that Fannie/Freddie will slow down, or even consolidate ?• Will CMBS come back to save B and C grade properties market ?

3. What is ahead of us ?• What keeps you up at night ?


Caldera Asset Management is a turnaround and restructuring consulting workingexclusively with multifamily assets. We offer lenders, equity investors, developers andlawyers the convenience and efficiency of one-stop shopping. We provide solutions that fittheir individual needs.

Caldera Asset Management

Caldera brings a wealth of experience that covers virtually all aspects ofapartments:

– Asset management

– Restructuring and recapitalization of portfolios as well as one-off assets

– Executive experience

• Public REITS

• Private REITS

• Pension fund advisors

• Entrepreneurial firms

– Experience in direct ownership of all classes of apartment assets (A,B and C)

– Financing

– Accounting

– Brokerage

– Portfolio acquisition / disposition

www.CalderaAssetManagement.com

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