Green Pearl Events Multifamily Investment Summit Mike Kelly Presentation

Green Pearl Real Estate ConferenceDecember 3, 2009December 3, 2009

December 3, 2009 Confidential & Proprietary

Questions -

1. Identifying the bottom?• Are we there yet?

• What are rent roll trends in different markets, quality of product

2. What kind of deals are getting done these days?• Core – Who is selling, where, urban/suburban

• Development deals- Have we seen developers sell their projects or are deals

just being extended

• REO- How much is hitting the market and clearing?

Confidential & Proprietary Page 2

• REO- How much is hitting the market and clearing?

• Do you see a Bar bell type of market in 2010/2011

3. Cap rate compression?• Is this a trend or simply a lack of supply?

• Funds needing to deploy capital (commitment period), cheap debt, what

else is driving this compression?

• When & what drives cap rates to normalize?

4. Debt – What kind of deals are getting done?

$0.6 $20.2

$22.0

$16.7 $24.5

$4.5

$4.5

$2.1 $1.4

$1.6

$2.4

$2.8

$4.5

$7.0

$8.1

$7.1

$4.8

$6.6

$7.7

$5.4

$30

$40

$50

$60

$ billionsMultifamily Loan Maturities

By Investor Type (2009 to 2017)

$30$26

$35 $34

$47

$40

$46

$53

Detailed Multifamily Maturities

$56

Average $41 Billion

On average, $41 billion multifamily loans mature annually over the next nine years.


$6.3 $7.1 $10.5

$13.3 $7.1 $8.1

$15.8

$25.5 $21.6

$4.4 $2.8 $2.2

$0.8

$0.6 $0.5

$0.4

$0.6

$1.5

$6.4 $5.3

$11.1

$20.2

$22.6 $19.0

$22.0

$8.5

$5.5

$4.5 $5.6

$0

$10

$20

2009 2010 2011 2012 2013 2014 2015 2016 2017

CMBS, CDO or other ABS Commercial Banks/Thrifts

Fannie, Freddie, FHA and Ginnie Mae Credit Companies, Warehouse, and Other

Life Insurance Companies

Source: Mortgage Bankers Association (“MBA”)

The MBA Survey covered most multifamily loans outstanding from

the investor pool except for Commercial Banks/Thrifts. Per the

MBA , bank/thrifts participation was approximately 25% of the

total multifamily exposure.

FDIC –Construction & Development Loans

8.71%

10.91%

13.45%

14.99%

8.00%

10.00%

12.00%

14.00%

Non-Current Construction

and Development Loans

(% of Total)

45.17

51.38

61.83

$72.06

73.78

40.00

50.00

60.00

70.00

Non-Current Construction

and Development Loans

(Billions $)

Report

Date

Total C&D

Loans

$Billions

Non-

Current

C&D

%

Non-Current

C&D Billions

$

1997 88.2 1.02% 0.90

1998 106.7 0.85% 0.90

1999 135.6 0.67% 0.90

2000 162.1 0.82% 1.32

2001 193.2 1.12% 2.16

PER FDIC:

*NON CURRENT LOAN RATES represent the

percentage of loans in each category that are past

due 90 days or more or that are in nonaccrual status.


Source: FDIC Quarterly Banking Profile (Sept 30, 2009)

1.02%

0.67%

1.12%

0.38%

1.86%

3.29%

4.74%

6.09%

7.32%

0.00%

2.00%

4.00%

6.00%

8.00%

Non-Current C&D %

0.90 1.322.61

1.61

4.465.82

8.02

11.48

20.72

29.96

38.21

0.00

10.00

20.00

30.00

40.00

Non-Current C&D Billions $

2001 193.2 1.12% 2.16

2002 244.9 1.07% 2.61

2003 272.2 0.73% 2.00

2004 336.8 0.48% 1.61

2005 448.7 0.38% 1.72

2006 564.9 0.79% 4.46

3/31/2007 582.1 1.00% 5.82

6/30/2007 600.1 1.34% 8.02

9/30/2007 616.4 1.86% 11.48

12/31/2007 628.9 3.29% 20.72

3/31/2008 631.8 4.74% 29.96

6/30/2008 627.2 6.09% 38.21

9/30/2008 617.1 7.32% 45.17

12/31/2008 590.2 8.71% 51.38

3/31/2009 566.9 10.91% 61.83

6/30/2009 535.8 13.45% 72.06

9/30/2009 492.22 14.99% 73.78

� There is currently $500 billion construction debt on bank books, of which $125 is for multifamily constructions.

� Deleveraging these will require an additional equity of:

� $36 billion for multifamily

� $145 billion for other asset types.

Construction Debt: Where do we go now?


asset types.

Seriously delinquent loans - Greater than 90 days + foreclosure/reo

2.77%

2.96%

3.15%

3.42%

3.68%

3.94%

4.17%

4.45%

2.62%

2.78%

2.95%

3.13%

2.65%

2.90%

3.33% 3.37%

4.04%

4.37%

4.85%

3.00%

3.50%

4.00%

4.50%

5.00%

Fannie- single family

Freddie single family

Trepp CMBS -multifamily

Fannie- multifamily

Freddie -multifamily

Freddie-Single

Fannie single

Trepp-multiFYI : Trepp %

Sept 09 – 5.08%

Oct 09 - 5.66%

Nov 09 - 6.14%


Source: Trepp

1.57%

1.72%

1.89%

2.13%

2.42%

1.10%1.22%

1.34%

1.52%

1.72%

1.98%

2.13%

2.29%

2.44%

2.62%

1.15%1.27% 1.32%

1.43%

1.88%

2.20%

2.65%

0.16% 0.16% 0.21% 0.25% 0.30% 0.27% 0.32% 0.34% 0.36%0.50% 0.51% 0.56% 0.56%

0.02% 0.01% 0.01% 0.01% 0.01% 0.03% 0.08% 0.09% 0.10% 0.12% 0.11% 0.11% 0.10%0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

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

Trepp multifamily monthly trends

Month

end Original Current Orig Current 30 days 60 days 90 days Non perf

Forclose/

REO Total

90 days,

non-perf

& REO

Aug-08 164,078,841,777 120,188,598,717 22,919 14,943 0.27 0.16 0.42 0.06 0.67 1.61 1.15

Sep-08 164,226,728,256 119,393,307,021 22,935 14,756 0.37 0.08 0.48 0.04 0.75 1.74 1.27

Oct-08 164,226,728,256 118,333,726,435 22,935 14,538 0.5 0.08 0.46 0.05 0.81 1.93 1.32

Nov-08 163,636,161,343 117,118,369,431 22,700 14,150 0.81 0.31 0.48 0.08 0.87 2.58 1.43

Dec-08 163,636,161,343 116,551,297,624 22,700 14,034 0.58 0.33 0.73 0.08 1.07 2.82 1.88

Jan-09 163,636,161,343 115,760,089,050 22,700 13,865 0.64 0.57 0.98 0.06 1.16 3.44 2.20

DelinquentNumber of loansLoan Balances


Source: Trepp

Jan-09 163,636,161,343 115,760,089,050 22,700 13,865 0.64 0.57 0.98 0.06 1.16 3.44 2.20

Feb-09 163,517,225,730 115,031,547,811 22,695 13,757 0.57 0.5 1.08 0.05 1.52 3.74 2.65

Mar-09 162,737,408,442 114,481,626,205 22,579 13,666 0.62 0.31 1.39 0.12 1.39 3.86 2.90

Apr-09 162,741,997,265 113,670,444,797 22,518 13,558 1.58 0.29 1.58 0.14 1.61 5.23 3.33

May-09 162,741,997,265 113,069,919,254 22,518 13,421 0.71 1.06 1.55 0.21 1.61 5.16 3.37

Jun-09 164,835,629,093 114,293,127,465 22,638 13,379 0.87 0.46 2 0.19 1.85 5.39 4.04

Jul-09 164,811,059,210 113,443,679,056 22,631 13,271 0.79 0.42 2.07 0.28 2.02 5.61 4.37

Aug-09 164,735,059,210 112,723,433,180 22,629 13,152 1.33 0.47 2.1 0.35 2.4 6.67 4.85

Sep-09 164,606,059,210 112,011,789,657 22,627 13,021 1.26 0.69 2.25 0.29 2.54 7.06 5.08

Oct-09 166,786,650,737 113,472,522,324 22,720 13,007 1.47 0.5 2.48 0.33 2.85 7.66 5.66

Nov-09 166,986,220,620 112,686,242,136 22,730 12,903 1.58 1.02 2.33 0.59 3.22 8.74 6.14

Current Mortgage Holders – per Fed Reserve

Mortgage

Holders

Amount as of Q2 2009 (in

billions) Percentage Share

Fannie Mae $223 24.5%

Freddie Mac $89 9.8%

Comm. Banks $212 23.4%

Conduits $112 12.3%

Savings Instit. $66 7.3%

Life Co $51 5.6%


Life Co $51 5.6%

Ginnie Mae $38 4.2%

Others $117 12.9%

Total $907 100.0%

Comments

1. Fannie, Freddie & FHA are virtually the only lender in the market in 2009.

Thus, their share of the overall market will increase significantly going

forward.

2. Can the agencies continue to deploy dollars to make up for the lack of

CMBS and Life Insurance originations/

Apartment Development Pipeline- Nov 2009

City Period 1 Period 2 Stub/overlap Period 3 Period 4 Last four years Period 5 Total

Time frame reported Oct 06-sept 07 Oct 07-sept 08 Oct 08-sept 09 Oct 09-sept 10 Oct 10 -later

1 Atlanta X 8,426 4,878 0 7,846 6,389 27,539 0 27,539Oct 06-sept 07 Oct 07-sept 08 Oct 08-sept 09 Oct 09-sept 10 Oct 10 -later

2 Dallas / Ft Worth X 7,231 10,439 14,515 16,557 48,742 1,019 49,761Oct 06-sept 07 Oct 07-sept 08 Oct 08-sept 09 Oct 09-sept 10 Oct 10 -later

3 Houston X 7,339 11,158 0 17,132 9,407 45,036 0 45,036Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 T otal July 2010 - later

4 San Antonio X 4,907 5,670 (1,538) 4,479 5,028 18,546 376 18,922Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 July 2010 - later

5 South Florida X 1,596 1,710 (200) 2,334 3,810 9,250 0 9,250Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 T otal July 2010 - later


Source: MFP

6 Charlotte X 2,017 3,502 (1,843) 3,491 4,460 11,627 276 11,903Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 T otal July 2010 - later

7 Raleigh X 2,012 3,468 (338) 3,055 3,079 11,276 0 11,276Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 T otal

8 Wash DC 4,819 6,334 (1,420) 7,308 7,802 24,843 1,371 26,214Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 T otal July 2010 - later

9 Tampa X 1,874 991 (84) 2,067 3,718 8,566 0 8,566Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 July 2010 - later

10 Denver X 859 2,537 (982) 4,372 3,950 10,736 1,572 12,308Oct 06-sept 07 Oct 07-sept 08 July 2008-june 2009 July 2009-june 2010 July 2010 - later

11 Orlando X 2,407 1,623 (224) 5,217 1,742 10,765 0 10,765Oct 06-sept 07 Oct 07-sept 08 Oct 08-sept 09 Oct 09-sept 10 Oct 10 -later

12 Austin X 4,672 3,441 11,209 4,532 23,854 0 23,854

Total 48,159 55,751 (6,629) 83,025 70,474 250,780 4,614 255,394

Multifamily Revenue and Growth Projections

3.20%

-1.10%

0.60%

2.70%

5.20%4.70%

-0.50% -3.30%

-0.50%

2.40%

1.80%1.70%

7.30% 7.50%

0.60%0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Projected Rent and NOI Growth


Source: PPR

-0.90%

-1.10% -0.50%

-3.90%-3.30%

-7.80%

-8.20%

-3.60%-2.80%

-3.70%-5.90%

-2.30%

0.60%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

Rent Growth NOI Growth

(The current decline in Rent and NOI is expected to continue until 2012)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Multifamily Current Information

Items that drive value Data Source of data Bullish Case Bearish Case

Vacancy ratesNational rate up to 7.7% (5.9%

in 3q 2008)Reis

Increase in vacancy is

slowing. Only .2% from 2q

2009.

Third quarter is typically the best

leasing quarter of the year. PPR

estimates 4q 2009 vacancy to be 9.0%

and 9.6% for 2010

Rental RatesRent rolls continue to decline.

3q 2009 rental rates (-3.3%) vs.

3q 2008

Reis

Quarterly sequential decrease

is slowing. Only -.5% from

2q 2009

Third quarter is typically the best

leasing quarter of the year.

Concessions are growing in most

markets. Once the floor has been

reached its much more difficult to

raise rents than drop them.


Development

pipelineStarts have fallen dramatically

in 2009DB, MPF

The slowdown in new

product will help the market

recover faster

Less new construction means less

construction jobs which typically are

more transient an generally renters.

JobsRecorded unemployment is

10.2%. Under employed is

approximately 16%

Fed, Bloomberg

The stimulus will create jobs

which will in turn create

renters.

The recovery will be slow and a very

small amount of new jobs will be

created. People will continue to live

at home

Interest ratesAgency rates are 210 bps +/-

over 10 year paper. 1-2 years

i/o

Dus & Freddie

Mac lenders

Solid positive arbitrage for

the first two years.

Hopefully the recovery will

take hold by the time the

interest only period ends

Rent rolls need to flatten and start

rising quickly to offset the

amortization impact in year 3. Or

deals at current cap rates will have

effective negative amortization

Other risk

The number of transactions increased 230% from 2001-2007, but then dropped over 40% from 2007-2008. During the same period, the dollar value of transactions dropped over 60%. October YTD 2009 vs. 2008 is down 64% in number of transactions while the dollar value of transactions has dropped to 70%.

Transaction Volume (2001- Q3 2009)

$99.63,814 3,871

3,795

4,000

5,000

$100 B

$120 B

Nu

mb

er

of

Tra

nsacti

on

s

To

tal $ A

mo

un

t

Apartment Transaction Volume through October 2009 Last 6 months of

transactions- 2009

Garden Mid rise Total

2007

total -

ref


Source: Real Capital Analytics November 2009

$20.4 $22.7

$30.3

$51.0

$88.8 $91.7

$37.3

$12.4

1,1691,251

1,649

2,462

2,055

798

0

1,000

2,000

3,000

$0 B

$20 B

$40 B

$60 B

$80 B

2001 2002 2003 2004 2005 2006 2007 2008 2009(Annualized)

Nu

mb

er

of

Tra

nsacti

on

s

To

tal $ A

mo

un

t

Garden Mid/highrise Total Price Transactions

May 31 37 68 298

June 80 21 101 379

July 54 15 69 319

Aug 46 12 58 304

Sept 61 17 78 412

Oct 62 15 77 562

Total 334 117 451 2274

Avg 56 20 75 379

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