3/25/ :32 AM U.S. Commercial Real Estate Debt Market Overview Borrowers still face challenges as a large portion of the ’05 –’07 vintage loans is scheduled to mature between 2010 and 2012 ($185 billion of the total $600 billion) Between 2005 and 2007, underwriting standards were characterized by aggressive loan-to-values, inflated appraisals and borrowing costs significantly below current levels Assets with high acquisition LTVs could have little to no residual equity value and softening fundamentals make underwriting loans more difficult Private debt markets (i.e. insurance companies) are insufficient to fill the CMBS void and even the best credits could face a frozen and expensive lending environment CMBS Maturities ($bn) Upcoming CRE Maturities ($bn) 2009 2010 2011 2012 2013 2014 2015 2016 2017 $700 O t h e r G S E ' s & F d R l a M g P oo I n u c C o m p i mm rc B k , v x $600 $500 $400 $300 $200 $100 $0 ~$900 billion of ~$3.5 trillion ~$185 billion of ~$600 billion ___________________________ Sources: Barclays Capital, Commercial Mortgage Alert, Green Street Advisors. 1

5 3/25/ :32 AM Private Markets

6 Prehistoric Ancestor – “Lucy”
3/25/ :32 AM Prehistoric Ancestor – “Lucy” 2

7 Capital Availability in Private Markets
3/25/ :32 AM Capital Availability in Private Markets Private Markets Two primary types of lenders exist in the private markets Loans tend to be slow, difficult and usually experience a long time until closing Significantly more depth under $100 million Life companies must compete aggressively for a limited number of loans 3

8 Securitization Markets
3/25/ :32 AM Securitization Markets

9 3/25/ :32 AM A Colonial American 4

10 3/25/ :32 AM REMIC Relief Securitization Markets The Federal Government is taking action to help address concerns regarding the securitized loan market in an effort to enable loan workouts rather than foreclosures Current conditions in the commercial real estate industry include the inability to refinance mortgages and the rapid deterioration of loan performance and underlying fundamentals Prior to the latest action, REMIC rules prohibited significant modifications of mortgage loans unless the loan was either in default or “default was reasonably foreseeable” Discouraged borrowers and servicers from proactively addressing problems and restructuring loans before defaults occurred Loan modifications were permitted only within a very narrow time frame With new guidance issued, modifications of commercial mortgage loans are permitted if the servicer reasonably believes that there is a “significant risk of default” Increased flexibility to renegotiate loans in order to avoid default and continue to make capital investments to preserve the value of the properties Additionally, REMIC regulations were amended to allow a wider range of loan modifications including modifications and substitutions of collateral, modifications and additions of guarantees and revisions of recourse status Subject only to the restriction that the loan continue to be principally secured by real estate 5

11 3/25/ :32 AM TALF Financing Securitization Markets In mid-June, newly-issued CMBS became eligible collateral under TALF; however, no deals have priced to date Barclays Capital has been the top-ranked bookrunner of ABS and TALF-financed ABS deals in 2009 Barclays has signed over 150 Customer Agreements with buy-side investors, giving us the deepest distribution platform The ABS pipeline continues to build up There are currently 4+ single-borrower transactions in front of the Federal Reserve. 2 of the 4 are expected to come to market in November 3 mall deals (Vornado and DDR with 2 pools) 1 hotel deal Very difficult to make the proceeds work for office transactions Other Fed Initiatives: Extended TALF to June 2010 for new-issue CMBS Is the problem systemic? Blind mortgage REIT pools (i.e., Starwood Capital, Apollo and Colony) will further accelerate reopening of commercial mortgage market 6

12 Unsecured Debt Markets
3/25/ :32 AM Unsecured Debt Markets

13 3/25/ :32 AM Astronaut in Space 7

14 Strong Tone in U.S. Credit Market in 2009
3/25/ :32 AM Strong Tone in U.S. Credit Market in 2009 Unsecured Debt Markets High Grade Credit has come back from its worst year on record to post significant gains in 2009 with spreads tightening and new issues performing well Credit Indices Have Tightened Dramatically While Rates Have Held steady +236 +195 +128 Measures of Volatility Have Also Declined Technical Factors Continue to Support the Rally U.S. Mutual Fund Flows ___________________________ Source: Barclays Capital. 8

15 Unsecured REIT Credit Market Synopsis
3/25/ :32 AM Unsecured REIT Credit Market Synopsis Unsecured Debt Markets Over the past few months, REITs ability to demonstrate access to multiple sources of financing in a capital starved environment has had a meaningful impact on valuations Convergence in REIT Credit Spread Performance Recent REIT New Issues and Performance Yield (%) 491bps 275bps Coupon 2009 REIT Unsecured Issuance Industry Rundown As evidenced from the recent unsecured issuances, access to capital continues to improve From a valuation standpoint, as REITs have made progress on this end, liquidity is likely to lose its significance as the single largest credit differentiator for companies in the sector For the better positioned credits from a liquidity perspective, investors should start to pay closer attention to the following parameters: Credit metrics Portfolio quality and diversification Earnings quality Management quality and its share-holder orientation Exposure to joint venture refinancings Exposure to development risk ___________________________ Source: Barclays Capital. 9

16 3/25/ :32 AM Mortgage REITs

17 3/25/ :32 AM Under Construction 10

18 Commercial Mortgage REIT Overview
3/25/ :32 AM Commercial Mortgage REIT Overview Mortgage REITs Since early June, 12 “blind pool” mortgage REITs have filed with the SEC, looking to raise approximately $5.0 billion of proceeds to take advantage of distressed debt levels Four companies have recently priced offerings while two companies are actively marketing their offerings Recent Mortgage REIT Filings ___________________________ Crexus will charge 0.5%, 1%, and 1.5% of stockholders' equity for the first 12 months, the next 6 months, and after the first 18 months, respectively. Tranwestern will charge no base management fee before Thereafter, for first 12 months: 1.5% of stockholders' equity invested in target / non-core assets and 1% of equity not invested in target / non-core assets. 1.5% of equity thereafter. 11

19 Commercial Mortgage REIT Comps
3/25/ :32 AM Commercial Mortgage REIT Comps Mortgage REITs Comparable business plans range from primarily loan originations to securities acquisitions and everything in between Loan Origination (1) Long Term Business Plans Opportunistic Loan Acquisition (1) (1) (1) (1) (1) Securities Acquisition Established Platform Developing Platform ___________________________ Mortgage REIT business plan(s) will include large allocations of residential mortgage loan and RMBS purchases. 12

20 What Structure Will Work Today?
3/25/ :32 AM What Structure Will Work Today? Mortgage REITs Recently priced deals call for a number of changes to the “blind pool” mortgage REIT business model Clearly Defined Business Strategy Companies need to distinguish themselves from others Create a barrier to entry Modified “Blind Pool” Partially identified pool of assets Refined Fee Structure Elimination of the incentive management fee Sponsor must incur all fees relating to the transaction 13

21 3/25/ :32 AM Mezzanine Market

22 In Search of Opportunities
3/25/ :32 AM In Search of Opportunities 14

23 Capital Returning to Mezzanine Market
3/25/ :32 AM Capital Returning to Mezzanine Market Mezzanine Market The mezzanine market is expected to rebound as companies have raised capital to take advantage of opportunities in commercial real estate loans There has been a significant amount of money raised, which will be used to acquire and originate mortgage and mezzanine loans Targeted yield: 12-18% Mezzanine debt yield is even behind first mortgages yields of 6% Upcoming transactions may reflect tighter pricing Targeted LTV: 60-70% 15

24 3/25/ :32 AM Subscription Lines

25 A Leprechaun With A Pot of Gold
3/25/ :32 AM A Leprechaun With A Pot of Gold 16

26 3/25/ :32 AM Subscription Lines Subscription Lines 17

27 Implications for Private Equity Funds
3/25/ :32 AM Implications for Private Equity Funds

28 3/25/ :32 AM An Evolution 18

29 Implications “Pretend and Extend” TALF Go Public
3/25/ :32 AM Implications Implications for Private Equity Funds There are currently three viable options to address upcoming debt maturities “Pretend and Extend” TALF Go Public 19

30 Equity Market Backdrop Has Improved
3/25/ :32 AM Equity Market Backdrop Has Improved Implications for Private Equity Funds Improved technicals are propelling the equity market Market Volatility Has Declined Mutual Fund Flows Have Turned Positive Net New Cash Flow (bn) Risk Appetite Has Increased Equity Offerings Are Outperforming the Broader Market 2009YTD follow-on equity transactions have outperformed the S&P 500 by 10% HY Index: +48.2% S&P 600: +17.1% S&P 500: +15.6% ___________________________ Source: Bloomberg, Dealogic and FactSet. Market data as of 9/25/2009. 20

31 2009YTD Aftermarket Returns
3/25/ :32 AM IPO Market Conditions Implications for Private Equity Funds With the broader equity new issuance surge in 2Q09, IPO activity has increased in recent months LTM IPO Issuance Annual IPO Pricings 2009YTD Aftermarket Returns Monthly IPO Filings ___________________________ Source: FactSet and Dealogic as of 9/25/2009. Note: Issuance volume reflects base deal size. Excludes deals less than $25 million, closed-end funds and SPACs. 21

32 IPO Activity Following the 1989 Real Estate Bubble
3/25/ :32 AM IPO Activity Following the 1989 Real Estate Bubble Implications for Private Equity Funds In the last major real estate recession, REIT valuations hit bottom much faster than private market values creating an opportunity for well capitalized firms to take advantage of higher valuations available in the public market Although the share price drop that began in August ’89 was severe, it took the public market less than 18 months to reflect the full extent of issues in the real estate market, while it took five years before the private market found its floor Private capital largely exited the real estate world after years of declining asset values and high profile bankruptcies The lack of private capital opened the door for public offerings to fill the void, which led to a flood of REIT IPOs and secondary offerings for real estate companies with relatively strong balance sheets Value of $100 Invested in REITs vs. Private Real Estate at the peak of the '89 bubble ___________________________ Source: Green Street Advisors. 22

33 Public vs Private Cap Rates
3/25/ :32 AM Public vs Private Cap Rates Current Themes in Real Estate Investment Banking Public company implied cap rates are trading tighter than their private counterparts Attractive public valuation, relative to private valuation, will be primary driver in any IPO wave Most CEOs choosing to float their companies are motivated by the following factors Need to raise equity Desire to use the public markets as a capital source Simplify their business models Demonstrate value in underappreciated stock prices Implied Cap Rates (1) The analysis below illustrates the disparity between public and private valuation ___________________________ Barclays and Green Street research. Implied cap rate implied based on FFO/AFFO multiple valuation for active Barclays Transactions. Excludes certain companies with ongoing liquidity concerns. Sector average based on property type. As of 10/2/2009. 23

34 3/25/ :32 AM Disclaimer This document has been prepared by Barclays Capital, the investment banking division of Barclays Bank PLC ("Barclays"), for information purposes only. This document is an indicative summary of the terms and conditions of the securities/transaction described herein and may be amended, superseded or replaced by subsequent summaries. The final terms and conditions of the securities/transaction will be set out in full in the applicable offering document(s) or binding transaction document(s). This document shall not constitute an underwriting commitment, an offer of financing, an offer to sell, or the solicitation of an offer to buy any securities described herein, which shall be subject to Barclays’ internal approvals. No transaction or services related thereto is contemplated without Barclays‘ subsequent formal agreement. Barclays is acting solely as principal and not as advisor or fiduciary. Accordingly you must independently determine, with your own advisors, the appropriateness for you of the securities/transaction before investing or transacting. Barclays accepts no liability whatsoever for any consequential losses arising from the use of this document or reliance on the information contained herein. Barclays does not guarantee the accuracy or completeness of information which is contained in this document and which is stated to have been obtained from or is based upon trade and statistical services or other third party sources. Any data on past performance, modeling or back-testing contained herein is no indication as to future performance. No representation is made as to the reasonableness of the assumptions made within or the accuracy or completeness of any modeling or back-testing. All opinions and estimates are given as of the date hereof and are subject to change. The value of any investment may fluctuate as a result of market changes. The information in this document is not intended to predict actual results and no assurances are given with respect thereto. Barclays, its affiliates and the individuals associated therewith may (in various capacities) have positions or deal in transactions or securities (or related derivatives) identical or similar to those described herein. IRS Circular 230 Disclosure: Barclays Capital and its affiliates do not provide tax advice. Please note that (i) any discussion of U.S. tax matters contained in this communication (including any attachments) cannot be used by you for the purpose of avoiding tax penalties; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor. BARCLAYS CAPITAL INC., THE UNITED STATES AFFILIATE OF BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK PLC, ACCEPTS RESPONSIBILITY FOR THE DISTRIBUTION OF THIS DOCUMENT IN THE UNITED STATES. ANY TRANSACTIONS BY U.S. PERSONS IN ANY SECURITY DISCUSSED HEREIN MUST ONLY BE CARRIED OUT THROUGH BARCLAYS CAPITAL INC., 200 PARK AVENUE, NEW YORK, NY NO ACTION HAS BEEN MADE OR WILL BE TAKEN THAT WOULD PERMIT A PUBLIC OFFERING OF THE SECURITIES DESCRIBED HEREIN IN ANY JURISDICTION IN WHICH ACTION FOR THAT PURPOSE IS REQUIRED. NO OFFERS, SALES, RESALES OR DELIVERY OF THE SECURITIES DESCRIBED HEREIN OR DISTRIBUTION OF ANY OFFERING MATERIAL RELATING TO SUCH SECURITIES MAY BE MADE IN OR FROM ANY JURISDICTION EXCEPT IN CIRCUMSTANCES WHICH WILL RESULT IN COMPLIANCE WITH ANY APPLICABLE LAWS AND REGULATIONS AND WHICH WILL NOT IMPOSE ANY OBLIGATION ON BARCLAYS OR ANY OF ITS AFFILIATES. THIS DOCUMENT DOES NOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ISSUES RELATED TO AN INVESTMENT IN THE SECURITIES/TRANSACTION. PRIOR TO TRANSACTING, POTENTIAL INVESTORS SHOULD ENSURE THAT THEY FULLY UNDERSTAND THE TERMS OF THE SECURITIES/TRANSACTION AND ANY APPLICABLE RISKS. Barclays Bank PLC is registered in England No Registered Office: 1 Churchill Place, London E14 5HP. Copyright Barclays Bank PLC, 2009 (all rights reserved). This document is confidential, and no part of it may be reproduced, distributed or transmitted without the prior written permission of Barclays. 24 Compensating Balance Structured Collateral Finance Strategy ASF 2006 Retail Auto ABS Sector Review Joseph Astorina, Associate Director – Barclays Capital Susan Sheffield, Senior Vice President – AmeriCredit Corp. 1 CMBS OUTLOOK: 2013 AND BEYOND 18th Annual Fisher Center Real Estate Conference Session 5: Real Estate Finance.
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