December 9, 2009 O ’ Connor Forecast Luncheon DEBT PLACEMENTINVESTMENT SALES LOAN SERVICINGPRIVATE EQUITY & CORPORATE FINANCESTRUCTURED FINANCELOAN SALES Todd Marix Senior Managing Director

"Houston-area real estate foreclosures hit a record, but experts said the problem should taper off next year. But commercial real estate foreclosures probably will continue to increase.” "The number of unemployed Texans swelled again in November, pushing the state's unemployment rate up 0.7 percent to 8.5 percent, federal officials said today…” "Although losses and insolvencies at banks can reflect incompetent management, fraud or poor loan decisions, the performance of the banking system generally reflects the overall health of the economy."  State jobless rate jumps to 8.5%  FDIC Chairman says agency “hard- pressed” after nearly 200 bank failures  Dow rallies to top 2,000 mark  Foreclosures set record, but drop seen December 24, 1987 December 28, 1987 December 4, 1987 December 2, 1987 IN THE NEWS “The Dow Jones industrial average rose above the 2,000 mark Wednesday for the first time in months…”

 Properties are trading at a increasing pace  Interest is high for the right product and the right story  Not all of the properties trading are distressed  Financing has evolved to meet the market and become more creative  Full marketing process still the best method to drive price and uncover new buyers CONTRARY TO WHAT YOU MAY HAVE HEARD City Total Transactions Jan-Jun% of Total Jul- Dec % of Total Austin %758.33% Dallas % % Houston % % San Antonio %960.00% 2009 Increasing Transaction Volume As of December 7, 2009 Source: Real Capital Analytics

RECENTLY SOLD: GABLES AUGUSTA YOC: 2004 Total Units: 312 Class: A Submarket: Galleria # Offers: 20 Cap Rate: 6.50% Close Date: June 2009

RECENTLY SOLD: CHAMPIONS WOODS YOC: 1983 Total Units: 186 Class: B Submarket: FM 1960 West/Champions # Offers: 17 Cap Rate: 8.25% Close Date: September 2009

RECENTLY SOLD: WESTCHASE FOREST YOC: 1999 Total Units: 400 Class: A- Submarket: Westchase # Offers: 27 Cap Rate: 7.60% Close Date: October 2009

RECENTLY SOLD: TIAA PORTFOLIO YOC: Total Units: 470 Class: A and B Submarket: Medical Center # Offers: 10 Portfolio/50 Individual Cap Rate: 7.50% Close Date: December 2009

UNDER CONTRACT: LEGACY AT WESTERN OAKS YOC: 2001 Total Units: 479 Class: A Submarket: Southwest Austin # OMs: 154 # Tours: 29 # Offers: 36 Est. Close Date: December 2009

 We are actively tracking 83 properties (28,000 units) that are in receivership, in REO or posted for foreclosure  Additional 51 properties (10,000 units) that have been transferred to special servicer  Total of 134 properties (38,000 units) in some form of REO competing for capital in next months THE NEXT WAVE OF PRODUCT Estimated Maturity Profile of Commercial Mortgages

FINANCING THE NEXT WAVE: BANK DEBT YOC: 1982 Units: 270 Class: C Submarket: FM 1960 W Status: Closed

FINANCING THE NEXT WAVE: SELLER FINANCING YOC: 1983 Units: 320 Class: C Submarket: FM 1960 W Status: Marketing

FINANCING THE NEXT WAVE: RESTRUCTURED / ASSUMABLE CMBS YOC: 1970 Units: 440 Class: C Submarket: Pasadena Status: Closed Commons on Edgebrook YOC: 1982 Units: 224 Class: C Submarket: Alief Status: Closed Brookstone

“Austin, Dallas, Houston, and San Antonio were included in the nation's 20 strongest metro areas by the Brookings Institute. The Washington, D.C. company’s quarterly MetroMonitor ranks the nation’s 100 largest metro areas for their economic performance based on five key indicators — employment, unemployment, output, home prices and foreclosure rates.” "Austin took the top spot while Houston moved up 11 spaces to claim the fifth spot on this year's Milken Institute/Greenstreet Real Estate Partners Best Performing Cities Index. San Antonio, Fort Worth and Dallas ranked respectively. Texas’ strong position in our best performing cities study demonstrates that a favorable business climate, combined with a low- cost/low-tax environment, is highly supportive of job creation." "Four Texas markets will be among the first in the nation to recover from the recession, says a nationwide forecast by IHS Global Insight. San Antonio and Austin will lead the way, bouncing back to their pre-recession job levels sometime next year, while Houston and Dallas-Fort Worth are among eight other metropolitan areas predicted to recover by 2011."  Texas metros top 2009 best-performing cities list  Texas cities predicted to lead recovery  Report: Texas cities amongst strongest markets in the country November 19, 2009 September 28, 2009 September 15, 2009 GOOD NEWS: YOU’RE IN TEXAS

GOOD NEWS: MULTI-HOUSING DEMAND

GOOD NEWS: MULTI-HOUSING SUPPLY 4% Total Supply 5% Total Supply