1. 1 ABA SECTION OF REAL PROPERTY, TRUST & ESTATE LAW 21 ST ANNUAL SPRING SYMPOSIA EMERGING FROM THE DARK? TRENDS AND RESPONSES TO THE CREDIT CRISIS PROGRAM CHAIR: - JOHN P. McNEARNEY, Husch Blackwell Sanders LLP SPEAKERS: - Robert S. Chase II, Sutherland Asbill & Brennan LLP - Gregory A. Cross, Venable LLP - Christopher L. Peterson, University of Utah, S.J. Quinney College of Law

2. © 2010 Venable LLP BA3/446976 “INTO THE COAL MINE”

3. © 2010 Venable LLP BA3/446976 WHERE WE ARE? U.S. MARKET AS WHOLE $3.5 trillion commercial real estate market is experiencing serious financial stress By 2014, an additional $1.4 trillion is expected to mature Property values have reportedly declined by 40% Pooled loans in excess of $200 million are extremely rare Defaults doubled in 2009 and are not expected to peak until 2011

4. © 2010 Venable LLP BA3/446976 WHERE WE ARE? CMBS MARKET CMBS loans represent approximately 20% of commercial property debt At the end of February 2010, 10% of CMBS loans were in special servicing - $76.6 billion During 2009, CMBS special servicers resolved $8.7 billion of the defaulted loans – just 11% of the loans in special servicing There were virtually no new securitizations in 2009 and uncertainty remains in 2010 Maturities significantly increase in 2011 and 2012 Credit Suisse recently estimated that it would take special servicers 5.5 years to resolve the current backlog

5. © 2010 Venable LLP BA3/446976 UNIQUE CHARACTERISTICS OF CMBS Cannot re-lend against REO Cannot effectively distribute interest rate increases Cannot extend beyond term of PSA or contractually permitted period Must sell within six years after REO Cannot advance funds for construction Generally cannot take equity as part of restructure Controlling class representatives instruct special servicers even though ultimately out of money

6. © 2010 Venable LLP BA3/446976 IMMEDIATE MARKET REACTIONS “A rolling loan gathers no loss” “Hold and hope” Short term extensions –Full cash sweep –12 months Receiverships with no intent to foreclose Consensual longer term extensions in bankruptcy – GGP

7. © 2010 Venable LLP BA3/446976 WHAT HAPPENS NEXT? INVESTORS/BORROWERS Aggressive senior investors jumping trust structures Investors shopping for maturing defaults “loan to own” Bankruptcy cram down –Low interest rates – Till –Low valuations –Bankrupt guarantors Bankruptcy sales –No credit bid Large case bankruptcy filings –Corporate Family Doctrine – GGP

8. © 2010 Venable LLP BA3/446976 WHAT HAPPENS NEXT? SPECIAL SERVICERS Delayed response time Investor litigation to preserve trust structure Foreclosures with corresponding REO build-up Loan sales Split A/B structures reflecting value realities of the market REMIC reform

9. © 2010 Venable LLP BA3/446976 SOURCE MATERIALS Maureen Milford, Next Bubble: Commercial Real Estate, The News Journal, March 14, 2010 Commercial Mortgage Alert, February 5, 2010 February 22, 2010 Credit Suisse First Bank Analysis Report on the CMBS Market