D&BUSRealEstateIndustryTrendReport March2009

D&B US Real Estate Industry Trend ReportMarch 2009

© 2009 Dun & Bradstreet

Amessage from Sean Cunningham, Senior Vice President—Global Analytics

Given the current challenging economic times, some thingsare certain: competition is intense, business is transacting ata faster pace than ever before, and every decision counts morethan ever.

At Dun & Bradstreet, our history and our expertise is turninginformation into business insight so that our customers makefact-based, confident decisions on those issues critical totheir success.

We hope you find this Real Estate Industry report insightful—and helpful to your business.The information and our insights in this report are from the same database that is used by ourcustomers and partners every day.

I want to knowwhat you think about this report. Please E-mail me with any questions or comments [email protected].

Sincerely,

Sean T. Cunningham

Real Estate Industry • 2

D&B’s Mission:

To be the most trusted source of

commercial insight so our customers

can Decide with Confidence.

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Report HighlightsIn this report, D&B focuses on failure trends within the Real Estate Industry using powerful proprietarymetrics that reveal critical information and insight on relevant sectors and regions in the United States.Our analytical tools include recent payment trends and behaviors such as delinquency and charge-offs,business failure metrics and public record filings (e.g. bankruptcy) recorded in our global trade database.

� D&B’s database currently holds information on 1million businesses in this industry, which is comprisedof a few different sectors but largely dominated by Real Estate Agents andManagers.

� The Real Estate Industry experienced a substantial increase in its risk profile from December 2007 toDecember 2008. Impact of the economic recession was felt most acutely first in the residentialReal Estate market. By now, it has propagated to commercial real estate.

� Focusing on businesses withmore than 2 employees, the 2008 failure rate for the Real Estate Industryis 0.59%. The comparable U.S. business benchmark is 0.4%. Therefore, the Real Estate Industry failurerate is 48% higher than the U.S. benchmark.

� Focusing on the same set of businesses, the 2007 failure rate for Real Estate was at 0.41%. The 2008failure rate of 0.59% represents a 44% increase over the year before.

� Risk indicators other than failure rate point to an equally dark scenario for this industry:

� The percentage of Businesses with “Payments 90+ Days Past Due”has increased by 9% between 2007and 2008.

� The Commercial Credit Score (CCS) has seen a dramatic rise (15%) in the number of higher-riskbusinesses.

� The number of Satisfactory Payment Experiences has also shown a decline, decreasing 4% from 2007to 2008.

� Independent of the sample used, any failure rate comparison is likely to under-estimate the extent ofhardship in this industry. It is easy to stop conducting business without leaving debt, or without filingfor bankruptcy. Number of real estate agents that have stopped working, or are working reduced hours,but have not officially, legally closed their doors is likely to be very large. Those would be the hiddenfailures not captured in this report.


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1. IntroductionThe effects of the sub-primemortgage crisis continue in the U.S.—and around the globe. States like Florida,California and Nevada that were at the epicenter of the housing crisis are no longer driving up the nation’sdelinquency rate. Instead, the foreclosure crisis is now being fueled by a spike in defaults in states such asNew York, Louisiana, Georgia and Texas, where the economies are rapidly deteriorating. According to theMortgage Bankers Association, a record 5.4 million American homeowners with amortgage of any kind, ornearly 12 percent, were at least onemonth late or in foreclosure at the end of last year. That is up from 10percent at the end of the third quarter, and up from 8 percent at the end of 2007 (AP 3/06/09). And, pricescontinue to fall. Data through December 2008, from the leadingmeasure of U.S. home prices, show that theprices of existing single-family homes continue to set record declines: an 18.2% decline in the 4th quarter of2008 versus the 4th quarter of 2007—the largest in the indices’ 21-year history.

And the crisis has spread to the commercial real estate sector. Commercial values have fallen 16.0%from their peak in October 2007, and further declines are expected over the next 12 to 24months—withdelinquencies rising as macroeconomic pressures take a toll on property cash flows. Office vacancy ratesare heading toward record levels, according to one estimate, and banks are exposed—with $1.72 trillion incommercial real estate loans outstanding as of February 18. Problems are cropping up in shopping centersas well. Large regional malls had a 7.1 percent vacancy rate in the fourth quarter of 2008—the highest levelsince 2000.

By April, the federal government expects to have a plan to refinance office towers and shopping centers indanger of defaulting. The scale is likely to be massive. Last week Federal Reserve Chairman Ben Bernankehinted at providing another $1 trillion in credit. Dennis Lockhart, president of the Federal Reserve Bank ofAtlanta, said he was concerned that U.S. banks remain “pretty heavily exposed” to commercial real estate.“It is the one domestic factor that keeps me up at night,” he said (Sources: AP 3/06/09; S&P/Case-ShillerRelease 2/24/09; Forbes.com 2/23/09; Christian Science Monitor 3/09/09).

It is no wonder that bankruptcy and foreclosure statistics have become top-of-mind for businesses andconsumers alike during this time of global economic uncertainty. However, while bankruptcy data makesfor interesting headlines, it does not provide the information and insight businesses need to make smartdecisions to manage their customers, select their suppliers and protect them from unnecessary risk.

Bankruptcy statistics measure the number of legal filings during a fixed period. Yet, business failures arenot isolated events; for every business that files for bankruptcy, there is an entire network of suppliers andcustomers that have already felt a tangible impact due to missed deadlines, late payments—and otherevents that pre-dated the legal filing. Amore dynamic view of business failure is required—one thatprovides insight early enough for businesses to take action andminimize the risk of being negativelyimpacted by financially unstable customers and suppliers. That means moving beyond summarystatistics on bankruptcy filings that are quite simply the final act in a series of unfortunate—andmeasurable events.

D&B’s proprietary global trade database holds the historical payment information that can be used topredict financial instability of customers and suppliers and their likelihood of business failure before theyimpact your business. Our database archives years of a business’monthly payment history capturing everyreported severe delinquency and charge-off. For example, lagging trade payments can serve as animportant “red flag” of current and future financial stress—a leading indicator for assessing the health ofan economic sector and a specific business partner as well.


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In this report, D&B focuses on failure trends within the Real Estate Industry using proprietary metricsincluding recent payment trends and behaviors (delinquencies and charge-offs) recorded in its trade data-base—revealing information and insight far richer than bankruptcy filing numbers alone.

Analytics and insights in this Real Estate Industry report include:

� Failure statistics in the Real Estate Industry including benchmarks against the overall US businesspopulation;

� Failure rates in the Real Estate Industry segmented across sub-industries (SIC) and geographies,including the top 10 lowest and highest failure rates by state;

� D&B proprietary metrics for the Real Estate Industry, highlighting trends from the last two years(2007 and 2008); and,

� Best practices leveraging D&B’s global database and product solutions.


2. Industry Overview—D&B Database SummaryThe Real Estate Industry defined in this report includes businesses operating in the following StandardIndustrial Classification (SIC) codes:

Currently, the D&B database holds information on onemillion businesses in the Real Estate Industry withmany different segments ranging from Real Estate Operators & Lessors to Managers and Developers, eachwith a unique Standard Industrial Classification (SIC) Code.

The Real Estate Industry has a significantly higher percentage of small businesses compared to the rest ofthe industries. 85% of Real Estate companies have 1 to 4 employees, and 71% have 1 to 2 employees.The capital requirement for this industry is relatively low. Anyone can become a Real Estate Agent withoutraising much capital, therefore the capital requirement is minimal for many segments of this industry.These hidden failures are very hard to capture.

In an effort to capture the true incidence of failure, this report utilizes 2 different samples:

1. All businesses with more than 2 employees (approximately 256,000 businesses) are used toanalyze failures, and

2. All credit active businesses (approximately 50,000 businesses) are used to analyze trade payment.A business is ‘credit active’when it has received one or more credit inquiries on their business andhas at least one commercial payment experience reported to D&B during the analysis period.This means that the business is an ‘active’ customer or supplier for another business. This part ofthe analysis focused on payment history, and predictive standard scores powered by the D&B tradedatabase within the real estate industry.


SIC Code Industry Classification Segments (Example)

SIC 651 Real Estate Operators and Lessors

a) Nonresidential building operators (6512)b) Apartment building operators (6513)c) Mobile home site operators (6515)d) Railroad property lessors (6517)

SIC 653 Real Estate Agents andManagers a) Real estate agents andmanagers (6531)

SIC 654 Title Abstract Offices a) Title abstract offices (6541)

SIC 655 Land Subdividers and Developersa) Subdividers and developers,(not elsewhere classified) (6552)

b) Cemetery subdividers and developers (6553)

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3. Characteristics and Trends of Business Failures3.1 Failure rates within the Real Estate Industry, as compared with the overall US business

population

Our first series of analyses of the Real Estate Industry examined failure rates across 4-digit SIC categories:“Failure” is defined as going out of business leaving debt and is estimated using D&B’s proprietary tradedatabase. It includes behaviors such as a combination of slow trade payments, negative payments (default)and bankruptcy filings. This part of the analysis includes businesses withmore than 2 employees.

We observed that there are differences in failure rates across segments within the Real Estate Industryin 2008.

� Real Estate Agents (SIC 6531) dominate the industry with close to half of the businesses belonging to thisindustry segment. This segment has a failure rate of 0.77% and there are likely to be other hiddenfailures in this category.

� Subdividers and Developers (SIC 6552) exhibit the highest failure rate at 1.08%; almost double the industryaverage. Since capital requirements are high for this category of business, they aremore likely to filebankruptcy as they go out of business.

� Nonresidential Building Operators (SIC 6512) show lower failure rates compared to the rest of the indus-try. It is common knowledge that this recession affected residential real estate first. Given the severity ofthis recession, it is only amatter of time that nonresidential Real Estate catches up.

� Several industry segments—Dwelling Operators Except Apartments (SIC 6514), Mobile Home Site Opera-tors (SIC 6515), Railroad Property Lessors (SIC 6517), & Cemetery Subdividers and Developers (SIC 6553)—have samples too small to draw statistically significant conclusions.


Figure 1: 2008 Real Estate Industry Failure Rate by 4-digit SIC

-0.2%

0.1%

0.4%

0.6%

0.9%

1.2%

6553655265416531651965176515651465136512

0.40%

0.28%0.24%

0.00%

0.61%

0.37%

1.08%

0.13%

Industry Segment Failure Rate

Real Estate Failure Rate (greater than 2 empl.)American Business Average (greater than 2 empl.)

0.77%

0.28%0.40%

0.59%

Failu

reRa

te SIC Code Key6512 Nonresidential Building Operators6513 Apartment Building Operators6514 Dwelling Operators, Except Apts6515 Mobile Home Site Operators6517 Railroad Property Lessors6519 Real Property Lessors, NEC6531 Real Estate Agents & Managers6541 Title Abstract Offices6552 Subdividers and Developers, NEC6553 Cemetery Subdividers & Developers

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3.2 Real Estate Industry Failure Rates across Geographies

In this analysis, we calculated failure rates by US Census regions and by the Top 10 States. The same failuredefinition and analysis files were used.

� Examining the failure rate data by US Census geographic region reveals that the US East South Centralregion (ESCL), which includes Mississippi, Tennessee, Alabama, and Kentucky, had the highest failurerate in 2008. This region's high failure rate is driven byMississippi and Alabama.

� The South Atlantic region (SATL),which includesWest Virginia, Virginia, North and South Carolina,Georgia, and Florida, has the second-highest failure rate at 0.69%.

� TheMid Atlantic region (MIDA)which includes New York and Pennsylvania had the lowest failure rateof all regions at 0.40%.


0.0%

0.5%

1.0%

WSCLWNCLSATLPACFNENGMNTNMIDAESCLENCL

Regional Failure Rate

Real Estate Failure Rate (greater than 2 empl.)American Business Average (greater than 2 empl.)

0.61%

0.74%

0.40%

0.66%

0.56%

0.62%0.69%

0.46%0.50%

0.59%

0.40%

Figure 2: 2008 Real Estate Industry Failure Rate by US Census Region

US Census Region KeyENCL East North CentralESCL East South CentralMIDA Mid AtlanticMNTN MountainNENG New EnglandPACF PacificSATL South AtlanticWNCL West North CentralWSCL West South Central

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3.2.1 Failure Rates Among States

Further analysis reveals even greater differences among Real Estate businesses at the State level.

� The Southern states of Mississippi, Alabama and Louisiana started to see a spike in Real Estate failurerates after Hurricane Katrina in 2005. In Louisiana, the Real Estate failure rate stabilized in 2008, but inMississippi and Alabama, it continued to increase in the last year.

� For the second year in a the row, Mississippi had the highest failure rate at 1.16%

� The state with the biggest growth in Real Estate failure rate is Nevada, where the failure rate grew 133%in 2008. This state has the highest foreclosure rate in the country.

� California and Florida were the first states to experience the Real Estate bust after many years of boom.Therefore, the Real Estate failure rate increased by 70% in 2008 in California and 60% in Florida.

� The Real Estate failure rate in Michigan increased by 63% in 2008.

� Rural states, like North and South Dakota, Kansas and Kentucky, have not yet been affected by the RealEstate crisis.


State 2008 Failure Rate

Oregon 0.25%

Virginia 0.25%

Wyoming 0.22%

Kansas 0.20%

South Dakota 0.19%

Kentucky 0.18%

Alaska 0.00%

Delaware 0.00%

Hawaii 0.00%

North Dakota 0.00%

Real Estate Industry Average 0.59%

Table 2: States with Lowest Failure Rates

State 2008 Failure Rate

Mississippi 1.16%

Nevada 1.09%

Alabama 1.03%

Georgia 0.98%

Maine 0.89%

Tennessee 0.89%

Michigan 0.86%

North Carolina 0.75%

California 0.75%

Wisconsin 0.74%

Real Estate Industry Average 0.59%

Table 1: States with Highest Failure Rates

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4. Leveraging D&B’s Payment Database to Highlight and Predict Future Trends withinthe Real Estate Industry

The ability to gain insight into a customer’s and supplier’s business risk profile—their future paymenthabits and long-term financial stability—is critical information for your company’s long-term financialstability. D&B’s global database and predictive scores are the building blocks for accurate, consistent—and insightful decisions on whether to extend credit, continue working with a supplier, taking on newcustomers—or themany other daily decisions that impact your company’s financial risk.

For example, historical payment information can help your organization in assessing potential risk of yourcurrent customer portfolio—and can help you take action now vs. waiting to hear that one of your keypartners or customers has filed for bankruptcy.

As an example, we analyzed approximately 50,000 “credit active” Real Estate businesses in the D&B data-base. A business is “credit active”when it has received one or more credit inquiries on their business andhave at least one commercial payment experience reported to D&B during the analysis period. This meansthat the business is an “active” customer or supplier for another business. The analysis focused on failurerates, payment history and predictive standard scores powered by the D&B trade database within the RealEstate Industry between December 2007 and 2008.

It is critical to look at past and current behavior in order to predict future performance—and the risk ofbusiness failure. D&B uses multiple trade-basedmetrics based on proprietary analytical models:

� Trade-basedMetrics: D&B collects andmonitors trade payment information to create several points ofmeasurement over time which includes:

� Number of Satisfactory Payment Experiences—Past, PresentThe percent of reported payment experiences paidwithin terms in the past 12months, includinganticipated and discounted.

� Businesses with Payments 90+ Days Past Due—Past, PresentThe percent of businesses with reported payment experiences 90 days or more beyond termsin the past 12 months.

� Commercial Credit Score (CCS)—FutureA statistical score that predicts the likelihood of severe delinquency (90+ days past due or worse) inthe next 12months. Scores range from 101 (highest risk) to 670 (lowest risk).


Figure 3: Illustration of where data points may fall on a time continuum, depending on type of data element

2007 2008 2009

History: PastPast payment behaviors

Observation Point: PresentPayment behavior now.

Credit Scores now.

PerformanceWindow: FutureWhat the score predicts

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Business Insights to Help Your Business4.1 US Real Estate Industry’s Performance

The risk for businesses in the Real Estate Industry increased substantially between 2007 and 2008, asevidenced by the change in key payment attributes:

� The Observed Failure Rate of ‘credit active’ Real Estate Industry businesses has gone up significantly—up by 79%, from 0.28% in December 2007 to 0.50% in December 2008.

� As you can see from Table 3, eachmeasure of business health has deteriorated from 2007 to 2008. TheReal Estate Industry showedmore past due payments and is predicted to incur moredelinquent payments in the future:

� The percentage of Businesses with “Payments 90+ Days Past Due” has increased by 9%, from 24.8% inDecember 2007 to 27.1% in December 2008. Typically, companies with payments that are 90 or moredays past due have a significantly higher risk for business failure.

� The Commercial Credit Score (CCS) indicator has seen a dramatic rise (15%) in the number of higher-risk businesses. It went up from 10.35% in December 2007 to 11.90% in December 2008. Since the CCSis a predictive score designed to show the likelihood of late payments in the next 12months, it is animportant indicator to monitor.

� The number of Satisfactory Payment Experiences has also shown a decline, decreasing 4% from 2007to 2008. Overall, businesses that pay within the agreed-upon time have a lower risk for businessfailure. The number of businesses that exhibited satisfactory payment behavior in the Real EstateIndustry (18.96%) was less than the US Business Benchmark of 23.11%.


Figure 4: Comparison of Commercial Credit Score

% 2008 Real Estate Businesses

% 2007 Real Estate Businesses

Commercial Credit Score Risk ClassLower Risk Higher Risk

0%

10%

20%

30%

40%

30.7% 31.4%29.8%

2.8%

7.5%9.0%

2.9%

27.6%26.8%

31.5%

Risk ClassPercentileScore

191–100

542–670

271–90

501–541

331–70

393–500

411–30

366–392

51–10

101–365

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PaymentAttribute Name

D&B PaymentAttribute Definition

Real EstateIndustry

Performance(December 2007)

Real EstateIndustry

Performance(December 2008)

Real EstateIndustry % ChangeFrom December 2007to December 2008

ObservedFailure Rate

The percentage ofbusinesses that have

ceased operations withdebts outstanding or havesought protection fromcreditors in the past

12 months.

0.28% 0.50% +79%

CommercialCredit Score

A statistical score thatpredicts the likelihood ofsevere delinquency (90+days past due or worse) inthe next 12months. Scoresrange from 101 (highestrisk) to 670 (lowest risk).

Lower Risk = 58.30%(Scores 501-670)

Medium Risk = 31.35%(Scores 393-500)

Higher Risk = 10.35%(Scores 101-392)

Lower Risk = 58.32%(Scores 501-670)

Medium Risk = 29.78%(Scores 393-500)

Higher Risk = 11.90%(Scores 101-392)

Lower Risk —

Medium Risk -5%

Higher Risk +15%

Number ofSatisfactoryPayment

Experiences

The percent of reportedpayment experiences

paidwithin terms in thepast 12months, includinganticipated and discounted.

19.75% 18.96% -4%

Businesses withPayments 90+Days Past Due

The percentage ofbusinesses with reportedpayment experiences 90

days or more beyond termsin the past 12 months.

24.84% 27.11% +9%

Table 3: 2007–2008 Real Estate Industry Performance

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Best PracticesD&B has over 168 years of experience partnering with customers to develop best practices: providing thecommercial insight they need to make critical business decisions—with confidence.

With real-time, 24x7, online access to hundreds of millions of pieces of information on companies in over200 countries—information transformed through our proprietary analytical models into predictiveindicators—our customers have integrated our best practices into their daily decisions.

The information and insight in this Real Estate Industry report, such as future payment habits,overall financial stability and comparison to industry norms, are from the same D&B global database ourcustomers use every day to manage andmonitor their customer and supplier portfolios.

Our business insight solutions include:

� D&B’s US Industry Trend Reports: providing amuch-needed frame of reference on payment and bank-ruptcy trends as well as specific industry segment performance data. This type of information can beused to help identify deteriorating markets as well as those that are growing

� DNBi: Providing themost complete and up-to-date information available, including comprehensivemonitoring and portfolio analyses in an interactive, customizable Web application

� Business Information and Comprehensive Reports: Offering an in-depth view of a company’s financialposition, including scores to predict future payment habits and financial stability

� Alert Services: Communicating changes in accounts for a range of keymetrics

� Severe Risk Services: Detecting early warning signs to identify andmanage problems for both largeand small business accounts

Our customers use our business insight solutions for risk reduction best practices in their businesses.Examples of best practice actions that can be taken using D&B’s US Industry Trend Reports include:

� Evaluate risk and exposure within a portfolio and specifically within industry segments of the portfolio

� Establish—and adjust risk thresholds by segment or region; by industry segment or sub-set withinan industry segment

� Customize collections strategies (more or less aggressive) based upon the insight provided regardinganticipated delinquency or loss—again, by segment or region

� Review credit limits dynamically with additional data points and predictive indicators

� Modify Bad Debt Reserves using industry profiles and trend data

Industry insight is critical—but having insight on your portfolio of current and prospective customers andsuppliers is what will minimize your risk andmaximize your ability to protect your business in today’seconomy. Whether you need information and predictive indicators on 1 or 1,000 business partners,D&B has what you need when you need it.


Whether you are already a D&B customer – or looking for additional information on how D&B’s globaldatabase and product solutions can help you increase the speed, accuracy and consistency of yourdecision-making, contact us at [email protected] or 800-234-3867.

We’ll let you know how you can get additional industry reports—and answer any questions you mayhave about D&B. You can also visit us 24x7 at www.dnb.com.

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About this report

What’s Our I.Q.? Information Quality—

It’s what makes D&B your partner in Business Insight.Quality information is your key to business insight—the insight you need to make good business decisions.Quality at D&Bmeans accurate, complete, timely and consistent information, regardless of where and withwhom you choose to do business.

Every hour of every business day in our U.S. database alone:

• 241 businesses will have a suit, lien or judgment filed against them;

• 78 business telephone numbers will change or be disconnected;

• 61 new businesses will open their doors; and

• 3 businesses will file for bankruptcy.

How does change and uncertainty impact your business? Quality insight and information is what you needto grow and protect your business from risk—especially in today’s economic environment.

You can Decide with Confidence with DUNSRight™DUNSRight™ is our proprietary information quality process that we’ve continued to improve over our 168year history. DUNSRight™means collecting, aggregating, editing, and verifying data from thousands ofsources daily using over 2,000 separate automated checks to make certain our data becomes information—and our information drives insight for your business.

Our expertise in turning enormous streams of data into high quality business information is what sets usapart from our competitors. It’s what makes our Predictive Indicators an integral part of our customers’credit, risk, sales &marketing, supply management, compliance and other critical business decisions.

Our global database has information on over 146million businesses in over 200 countries with nearly700million payment and bank experiences. We update over 1.5 million records each and every day toensure you have themost timely, accurate and complete information with which to minimize your riskandmaximize your business growth opportunities.


Editor’s Note: The Insight and information in this Real Estate Industry Report is from the D&B GlobalDatabase—the same source our customers use every day to make better decisions to grow and protect theirbusinesses in an increasingly volatile global economic environment.

D&B is the #1 user of its database, updating, mining and analyzing hundreds of millions of data points everyday so that we can develop and provide the most useful information and predictive indicators—the insightour customers use to gain their competitive edge.

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About Dun & Bradstreet® (D&B)Dun& Bradstreet (NYSE:DNB) is the world's leading source of commercial information and insight onbusinesses, enabling companies to Decide with Confidence® for 168 years. D&B’s global commercialdatabase contains more than 140million business records. The database is enhanced by D&B’s proprietaryDUNSRight® Quality Process, which provides our customers with quality business information. This qualityinformation is the foundation of our global solutions that customers rely on to make critical businessdecisions.

D&B provides solution sets that meet a diverse set of customer needs globally. Customers use D&B RiskManagement Solutions™ tomitigate credit and supplier risk, increase cash flow and drive increasedprofitability; D&B Sales &Marketing Solutions™ to increase revenue from new and existing customers;and D&B Internet Solutions™ to convert prospects into clients faster by enabling business professionalsto research companies, executives and industries. For more information, please visit www.dnb.com, or call800.234.3867.

About First Research—a Division of D&BFirst Research was founded in 1998 by a sales professional in the financial industry who recognized a directcorrelation between the amount of time he spent preparing for and learning about a client’s business andindustry conditions and the success of the sales call.

Today, First Research is the leading industry intelligence company that helps sales professionals performfaster and smarter, open doors and close more deals. First Research synthesizes hundreds of sources ofinformation into an easy to digest format to better understand prospects’ or clients’ business issues.Customers include leading companies in banking, technology, telecommunications, business process out-sourcing and professional services. Used bymore than 50,000 sales professionals, First Research is head-quartered in Austin, TX. For more information, please visit www.firstresearch.com, or call 866-788-9389.


Decide with Confidencewith D&B. Information qualityis what sets us apart and makes us an integral part ofour customers’ success. Our information quality drivesour insight—and our commitment to quality has madeus one of America’s Most Admired Companies fouryears in a row—and the #1 in Financial Data Services.

Real Estate Industry—Appendix A

2008 Failure Rates by 4-digit SIC (greater than 2 employees)

4-Digit SIC SIC Description Failure Rate (%)

6512 Non Residential Building Operators 0.40%

6513 Apartment Building Operators 0.28%

6514 Dwelling Operators, Except Apartments 0.28%

6515 Mobile Home Site Operators 0.24%

6517 Railroad Property Lessors 0.00%

6519 Real Property Lessors, NEC 0.61%

6531 Real Estate Agents andManagers 0.77%

6541 Title Abstract Offices 0.37%

6552 Subdividers and Developers, NEC 1.08%

6553 Cemetery Subdividers and Developers 0.13%

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2008 Real Estate Industry Failure Rates by State (greater than 2 employees)

Real Estate Industry—Appendix B

State Failure Rate (%)Alaska 0.00%Alabama 1.03%Arkansas 0.43%Arizona 0.67%California 0.75%Colorado 0.62%

Connecticut 0.46%District of Columbia 0.73%

Delaware 0.00%Florida 0.73%Georgia 0.98%Hawaii 0.00%Iowa 0.29%Idaho 0.70%Illinois 0.54%Indiana 0.40%Kansas 0.20%Kentucky 0.18%Louisiana 0.60%

Massachusetts 0.62%Maryland 0.45%Maine 0.89%

Michigan 0.86%Minnesota 0.55%Missouri 0.61%

Mississippi 1.16%Montana 0.63%

North Carolina 0.75%North Dakota 0.00%Nebraska 0.61%

NewHampshire 0.55%New Jersey 0.43%NewMexico 0.33%

Nevada 1.09%New York 0.43%

Ohio 0.52%Oklahoma 0.44%Oregon 0.25%

Pennsylvania 0.31%Rhode Island 0.26%South Carolina 0.52%South Dakota 0.19%Tennessee 0.89%

Texas 0.50%Utah 0.55%

Virginia 0.25%Vermont 0.41%

Washington 0.32%Wisconsin 0.74%

West Virginia 0.63%Wyoming 0.22%

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Real Estate Industry—Appendix C

D&B Glossary� Businesses with Payments 90+ Days Past Due—The percentage of businesses with one or more reported

payment experiences 90 days or more beyond terms in the past 12 months.

� Credit Active Businesses—D&B designates a business as “credit active”when it has received one ormore credit inquiries on the business, and they have at least one commercial payment experience re-ported to D&B during the analysis period. This means that the business is being evaluated for creditby another business.

� Commercial Credit Score (CCS)—The D&B U.S. Commercial Credit Score predicts the likelihood that acompany will pay its bills in a severely delinquent manner (90+ days past term), or obtain legal relieffrom creditors, or cease operations without paying all creditors in full over the next 12months, basedon the information in D&B’s files. A severely delinquent firm is defined as a business with at least 25%of its dollars slow and at least 10% of its dollars 90 days or more past due.

� D&B Trade Program—The use of trade payment experiences to predict future payment habits is oneof the cornerstones of D&B’s business. The trade program is a computerized collection of accountsreceivable files from various companies and banks.

� Number of Satisfactory Payment Experiences—The percent of reported payment experiencespaidwithin terms in the past 12months, including anticipated and discounted

� Observed Failure Rate—The percentage of businesses that have ceased operations with debtsoutstanding or have sought protection from creditors in the past 12 months.

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D&BUSRealEstateIndustryTrendReport March2009

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