Jeff Glenn CB Richard Ellis Thursday March 19, MARKET FORECAST: Capital Markets

CB Richard Ellis | Page 2 What’s going on…?

CB Richard Ellis | Page 3 Raleigh – Durham Historical Transaction Volume Source: CB Richard Ellis

CB Richard Ellis | Page 4 Raleigh – Durham Product Allocation (Millions) Source: CB Richard Ellis

CB Richard Ellis | Page 5 Raleigh – Durham 2008 Quarterly Sales (Millions) Source: CB Richard Ellis

CB Richard Ellis | Page 6 Raleigh – Durham 2008 Top 10 Sales Transactions Source: CB Richard Ellis

CB Richard Ellis | Page 7 Raleigh – Durham Apartment Transaction Volume Source: CB Richard Ellis

CB Richard Ellis | Page 8 Raleigh – Durham Apartment Buyer Distribution (Millions) Source: CB Richard Ellis

CB Richard Ellis | Page 9 Raleigh – Durham Office Transaction Volume Source: CB Richard Ellis

CB Richard Ellis | Page 10 Raleigh – Durham Office Buyer Distribution Source: CB Richard Ellis

CB Richard Ellis | Page 11 Raleigh – Durham Retail Transaction Volume Source: CB Richard Ellis

CB Richard Ellis | Page 12 Raleigh – Durham Retail Buyer Distribution (Millions) Source: CB Richard Ellis

CB Richard Ellis | Page 13 Raleigh – Durham Warehouse/Flex Transaction Volume Source: CB Richard Ellis

CB Richard Ellis | Page 14 Raleigh – Durham Warehouse/Flex Buyer Distribution (Millions) Source: CB Richard Ellis

CB Richard Ellis | Page 15 Raleigh – Durham Total Buyer Distribution Source: CB Richard Ellis

CB Richard Ellis | Page 16 Raleigh – Durham Total Seller Distribution Source: CB Richard Ellis

CB Richard Ellis | Page 17 While Underwriting Standards Relaxed… Source: JP Morgan, ING 2Q 2008

CB Richard Ellis | Page 18 Allowing Subordination Levels to Fall CMBS Deal Subordination Levels

CB Richard Ellis | Page 19 Spreads Widen to Historic Levels Bps Spread over Swaps Lenders are rational and have choices. So long as their choices (buying paper in the secondary market) are more attractive than origination, they will not originate. Source: Markit, Morgan Stanley

CB Richard Ellis | Page 20 Spreads Widened…Why? Source: Mortgage Bankers Association 2008

CB Richard Ellis | Page 21 Estimated Quarterly Mortgage Originations Source: Mortgage Bankers Association

CB Richard Ellis | Page 22 Source: RealPoint 2008 Maturing CMBS Mortgages

CB Richard Ellis | Page 23 $3.4 Trillion Debt Outstanding Source: CBRE Torto Wheaton Research 2008 U.S.- How Much Are We Talking About?

CB Richard Ellis | Page 24 Rates Help Out!

CB Richard Ellis | Page : What’s In & What’s Out CHANGING MARKET DYNAMICS INOUT On-Book LendingCMBS Conservative LeverageHigh Octane Capital Stack Equity In-DealCash Out Financing Risk Based PricingInefficient Pricing of Capital Correspondent & Relationship LendingLoan Brokerage High Touch Loan ServicerSecuritized/Impersonal Servicer Amortization- 30 Year ScheduleAmortization- Interest Only Reserves Funded in CashNo Funded Escrow 450+/- Spreads100+/- Spreads

CB Richard Ellis | Page 26 New Capital Stack Market Is De-Leveraging Equity, 2% Pref. Equity, 8% Mezzanine, 10% B-Note, 15% A-Note, 65% A-Note, 45% B-Note, 15% Mezzanine, 15% Equity, 25%

CB Richard Ellis | Page 27 Why Are Values Going Down?

CB Richard Ellis | Page 28 With Buyers Re-Trenching Source: CB Richard Ellis Raleigh – Durham

CB Richard Ellis | Page 29 How High Will Cap Rates Go? Source: TWR Investment Outlook, Winter 2009 Forecast

CB Richard Ellis | Page 30 What To Do  Focus on Your Tenants  Right-Size Expense Base  Underwrite to Positive Leverage  “Partner” with Your Lender  Keep the Faith