REMINDERS  The audience will be in listen-only mode.  Listeners can questions to the panel via the Q&A box to the right of your screen. Select questions will be answered during the last 10 minutes of the program.  We will be providing several poll questions throughout the discussion. The questions can be answered via a pop-up box in your screen.  If you are having technical difficulties, please call customer support at

and welcome you to our webcast: “Analyzing the Pulse of a Changing Commercial Real Estate Market”

Moderator: Matt Miller editor at large The Deal LLC Introduction

Matthew Niemann managing director, global head of real estate strategic advisory practice Houlihan Lokey Inc. Expert panel

Robert O’Brien vice chairman, real estate sector Deloitte LLP

Expert panel Jeffrey Lenobel partner Schulte Roth & Zabel LLP

Expert panel Spencer Levy executive managing director CB Richard Ellis Capital Markets

The landscape of U.S. commercial real estate market dealmaking: Where are we now?

Sources: Real Capital Analytics (sales) Green Street Advisors (value)

AUDIENCE POLL QUESTION What U.S. region do you expect to experience the highest level of commercial property sales and leasing activity in 2012? A) Northeast B) Southeast C) Midwest D) Southwest E) West

Financing concerns in the current market

Commercial Real Estate Mortgage Maturities (1) Source: Foresight Analytics, SNL, Intex,Trepp, Morgan Stanley (1) Does not include construction loans. Total amounts are shown on top of each bar

Growth in Loan Modification Activity Specially Serviced CMBS Loans (% of Total CMBS Universe) Loan Modification Activity Levels (Excl. GGP) ($ in billions) Outstanding Modified Loan Balance ($ in billions) Source: Morgan Stanley; Trepp

Percentage of Modifications With Select Strategies Note: Percentages are not mutually exclusive, as modifications can include more than one type of modification strategy Source: Morgan Stanley; Trepp

Historical A/B Usage (% of Loan Modifications) Source: Intex; Barclays Capital A/B Loan Modifications Typical B Note characteristics (referred to as a “Hope Note”): Sized at 20% to 30% of the original CMBS mortgage loan No interest payments received, and typically do not accrue interest Amortization tied to potential excess cash sweep participation (often shared with borrower once permitted under A Note) Other Observations No specific template or formula – solutions are highly negotiated and situation specific Reporting of completed modifications is not always complete and often difficult to know with certainty specifics of each deal New money is typically invested between the A Note and B Note, and sometimes will earn a preferred return that comes ahead of the B Note (usually accrued) About 1/3 of A/B modifications also include maturity extensions – most often borrowers will end up with at least three years of runway before maturity Many deals require borrower/sponsor to reinvest new capital for funding reserve accounts, to cover transaction fees to servicers and other professionals, and/or to repay all or a portion of accrued and unpaid interest A/B Note modifications are attractive because they can align interests and “buy time” for the parties involved. The hope is that property values will increase over a several year horizon. Also delays the time at which lenders have to realize losses

AUDIENCE POLL QUESTION What type of property do you expect will have the greatest difficulty achieving successful/favorable debt refinancing as a result of the current structure or terms of its debt? A) Retail B) Office (hi-/low-rise) C) Heavy/light manufacturing and or warehouse storage D) Healthcare facilities E) Hotels and resorts

Current valuations: What direction is the market moving?

AUDIENCE POLL QUESTION What type of commercial property in the U.S. has rebounded (strongest relative sales prices) most positively over the past 12 months? A) Retail B) Office (hi-/low-rise) C) Heavy/light manufacturing and/or warehouse storage D) Healthcare facilities E) Hotels and resorts

Impact of distressed commercial real estate assets on dealflow

Impact of employment market on commercial real estate

Commercial real estate near-term outlook

AUDIENCE Q&A

and thank you for joining our webcast