STATE OF THE CAPITAL MARKETS

2015 NCREIF CONFERENCE STATE OF THE CAPITAL MARKETS

AGENDA Current Trends in Treasuries Current Borrowing Rates CMBS Lending Status Recent Originations Capital Flows Summary/Conclusions

CURRENT TRENDS IN TREASURIES Through the end of 2015, will Treasury Yields increase, decrease, or stay the same?

HISTORIC 10-YEAR TREASURY 4 2015 NCREIF CONFERENCE CBRE

10-YEAR U.S. TREASURY Since Q4 14 2.50% 2.30% 2.10% 1.90% 1.70% 1.50% 10-Year UST Daily Close 10-Year UST as of 1/2/15 Average 10-Year UST from 10/1/14 to 3/3/15 5 2015 NCREIF CONFERENCE CBRE

10-YEAR TREASURY YIELDS Actual and Q4 Philly Fed Forecasts 6 2015 NCREIF CONFERENCE CBRE

TOP INVESTMENT BANK ESTIMATES 10-Year Treasury 3.75% 3.50% 3.25% 3.00% 2.75% 2.50% 2.25% 2.00% 1.75% 1Q '15 2Q '15 3Q '15 4Q '15 1Q '16 2Q'16 Current 10-Year Yield Allianz BBVA BMO Capital Cantor Fitzgerald CIBC Coamerica Commerzbank Freddie Mac Goldman Sachs Heartland Financial HSH Nordbank ING MBA Moodys Capital Morgan Stanley NAHB Nomura Standard Chartered Wells Fargo Average Source: Bloomberg News Monthly Survey February 2015 7 2015 NCREIF CONFERENCE CBRE

CAPITAL MARKETS 10-YEAR UST FORECAST Median 3.50% 3.03% 3.00% 2.65% 2.80% 2.85% 2.78% 2.90% 2.50% 2.20% 2.40% 2.20% 2.40% 2.60% 2.00% 2.00% 1.50% 1Q '15 2Q '15 3Q '15 4Q '15 1Q '16 2Q'16 Current Median Previous Months' Median Source: Bloomberg News Monthly Survey February 2015 8 2015 NCREIF CONFERENCE CBRE

CURRENT BORROWING METRICS Through the end of 2015, will all-in commercial interest rates increase, decrease, or stay the same?

CURRENT INDICATIVE RATES Base Index Rate as of 3/3/2015 45% - 60% LTV 61% - 75% LTV Treasuries Swaps Spread (BPS) Target Rate Range Spread (BPS) Target Rate Range I. 5 YEAR TERM Life Company 1.60% 125-175 2.85% - 3.35% 150-220 3.10% - 3.80% CMBS 1.77% 200-250 3.77% - 4.27% 220-275 3.97% - 4.52% GSE 1.60% 140-160 3.00% - 3.20% 190-210 3.50% - 3.70% II. 7 YEAR TERM Life Company 1.92% 120-170 3.12% - 3.62% 160-220 3.52% - 4.12% CMBS 2.01% No bid Inefficient and thin market No bid Inefficient and thin market GSE 1.92% 140-160 3.32% - 3.52% 180-200 3.72% - 3.92% III. 10 YEAR TERM Life Company 2.10% 120-160 3.30% - 3.70% 150-200 3.60% - 4.10% CMBS 2.23% 150-185 3.73% - 4.08% 180-220 4.03% - 4.43% GSE 2.10% 140-160 3.50% - 3.70% 170-190 3.80% - 4.00% IV. BANKS 5 Year Fixed Rate 2.85% - 3.35% 3.10% - 3.80% 7 & 10 Year Fixed Rate 3.25% - 4.10% available for high quality and bank customers Floating Rate V. MEZZ LENDERS Pricing range: LIBOR + 140-275 bps Average Pricing: L + 175-225 bps Debt Yield: 8.5%-9.5% for 50-65% LTV Term: 3-5+ years with extensions Loan to Value: Up to 80%-85% Interest Rate: 6% - 12% 10 2015 NCREIF CONFERENCE CBRE

COUPON RATE ANALYSIS CBRE Debt Originations (includes both Agency and non-agency loans) 50% Q4 2014 Percent of Total Distribution 40% 30% 20% 10% 0% 50% 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 < 10 mil >= 10 Mil Q3 2014 Percent of Total Distribution 40% 30% 20% 10% Q2 2014 Percentage of Total Distribution 0% 50% 40% 30% 20% 10% 0% 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 < 10 mil >= 10 Mil 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 < 10 mil >= 10 mil Source: CBRE Research 11 2015 NCREIF CONFERENCE CBRE

AVERAGE LTV - CBRE DEBT ORIGINATIONS Well Below 2007 Peak Average LTV % 80 75 70 65 60 This is the average LTV for deals with fixed rate permanent debt. 55 50 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Commercial Multifamily-Related Source: CBRE Research 12 2015 NCREIF CONFERENCE CBRE

LOAN METRICS - CBRE DEBT ORIGINATIONS Debt Service Coverage Ratio Loan Constant 1.60 7.0% 1.55 1.50 1.45 1.52 6.5% 6.0% 6.4% 1.40 5.5% 1.35 1.30 1.25 5.0% 4.5% 1.20 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 4.0% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Percentage of Loans with Interest-Only Terms Average Debt Yield and Cap Rate 70% 60% 13% 11% 10% 10.3% 50% 9% 40% 8% 30% 20% 52% 7% 6% 6.6% 10% 5% 0% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 4% Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Partial Interest-Only Full Interest-Only Debt Yield Cap Rate Source: CBRE Research 13 2015 NCREIF CONFERENCE CBRE

CMBS LENDING STATUS Compared to 2014, will CMBS do more or less in terms of loan volume in 2015?

COMMERCIAL & MULTIFAMILY ORIGINATIONS ($ billions) Source: Mortgage Bankers Association 15 2015 NCREIF CONFERENCE CBRE

COMMERCIAL & MULTIFAMILY ORIGINATIONS ($ billions) $120 $100 $80 CMBS Volume $86 $94 $110 $60 $40 $20 $0 2013 2014 2015 Forecast Note: 2015 Forecast shown totaling $110 billion is the low-end forecast. High-end forecast is $125 billion. Source: Mortgage Bankers Association 16 2015 NCREIF CONFERENCE CBRE

WHO'S LENDING ON COMMERCIAL PROPERTIES? 40% 35% 30% Q4 2013 Q4 2014 25% 20% 15% 10% 5% 0% Banks Life Companies CMBS Other Source: CBRE DSF Other: REITs, Funds, Credit Companies, SBA, etc. 17 2015 NCREIF CONFERENCE CBRE

WHO S LENDING ON MULTIFAMILY PROPERTIES? 70% 60% Q4 2013 Q4 2014 50% 40% 30% 20% 10% 0% Agency Banks Life Company Conduit Other Source: CBRE DSF 18 2015 NCREIF CONFERENCE CBRE

RECENT ORIGINATIONS

APOLLO WORLD HEADQUARTERS $91,500,000, 5 year term, full term I/O, 50.0% LTV, Fixed Rate of 3.66% 20 2015 NCREIF CONFERENCE CBRE

CAMELBACK SQUARE $26,568,000, 3 year term, full term I/O, 65.0% LTV, Floating Rate of 2.45% 21 2015 NCREIF CONFERENCE CBRE

RANCHO TEMECULA TOWN CENTER $28,000,000, 12 year term, full term I/O, 46.7% LTV, Fixed Rate of 4.18% 22 2015 NCREIF CONFERENCE CBRE

CAPITAL FLOWS Through the end of 2015, will capital flows into the U.S. increase, decrease, or stay the same?

FOREIGN CAPITAL INFLOWS Top 10 Sources over the Last 3 Years Top 10 Sources in 2014 Total foreign direct investment in U.S. real estate totaled $41 billion in 2014. 24 2015 NCREIF CONFERENCE CBRE

FOREIGN CAPITAL INFLOWS Top 10 Sources over the Last 3 Years The direct effects of a stronger U.S. dollar on commercial real estate fundamentals are likely to be overall positive. A possible downside is that the rising dollar might diminish capital flows from countries experiencing the double whammy of both falling oil prices and depreciating currencies. However, domestic capital is still abundant. Industrial and bread-and-butter retail (as opposed to luxury) assets will benefit the most as consumers, flush with the oil dividend, take advantage of the cheaper prices of goods. According to Real Capital Analytics, the total volume of U.S. properties sold over the last three years is approximately $1.1 trillion, and foreign investors accounted for only 10.9% of that total. This represents 39 countries and no country, except for Canada, accounts for as much as 10% of all foreign investments into U.S. commercial real estate. Capital flows into the U.S. are deep and diverse. The fact that the U.S. is the only growth story in town will mean that overseas investment interest will remain high. 25 2015 NCREIF CONFERENCE CBRE

SUMMARY/CONCLUSIONS

2015 OUTLOOK Underlying fundamentals continue to improve Market sentiment remains positive Return of financial market volatility Attention to slowing economic growth outside the U.S. 27 2015 NCREIF CONFERENCE CBRE

LENDERS IN 2015 LIFE COMPANIES CMBS BANKS GSE (FREDDIE & FANNIE) Life Company volume in 2015 expected to equal or exceed 2014 volume by 5% to 10% Large loans and portfolio loans are in demand More conservative, but great execution Forwards returning and some offering higher yielding mezzanine debt The cost of locking a forward rate is free for the first 3 months, then 2 to 4 bps per month for up to 9 additional months Many have instituted rate floors that start around 3.5% for a 10-yr term Increasing willingness to do deals in secondary markets CMBS increased dramatically in 2014 ($94B, up from $86B in 2013) Average prediction for 2015 production is $110-125 B. Off to a strong start in 2015 With approximately 35 CMBS lenders, competition is fierce Higher LTV s and more aggressive underwriting returning to the market. Compete on I/O & proceeds Majority of deals are 10-year terms, but 5- and 7-year terms are available Full-term I/O loans are available at 65% LTV Actively using the balance sheet again, local banks filling a void Attractive rates, particularly LIBOR-based floaters that can be swapped Most active in 3-7 year terms, competitive in local markets Can be very competitive with conduits, life companies and GSE s Basel III capital requirements may cause some banks to become more conservative in 2015 As year goes one, may see banks increase pricing to offset new risk retention rules 2014 volume of $56B up slightly from 2013 Great execution in primary through tertiary markets Market share increased in Q3 and Q4 2014 as new head of regulator FHFA has encouraged new products (affordable, small balance loans and manufactured housing) and excluded them from production volume limits. 2015 volume expectation of well over $60B indicates an increase of approximately 10% over 2014 volume Dominant lenders for the apartment segment Both Fannie and Freddie are tweaking their ARM products, will be rolling out more competitive interest rate cap structures 28 2015 NCREIF CONFERENCE CBRE

COMMERCIAL MORTGAGE DEBT MARKET Strong Liquidity and Low Rates There is tremendous liquidity in the commercial mortgage markets leading to continued strong competition amongst lenders. Continued attractive interest rates both short- and long-term. There will be a gradual easing of underwriting standards as the competitive landscape increases. This will include higher LTVs, more interest-only components and increased lending activity in secondary markets. The industry seems very comfortable that there is sufficient debt capital to fund the 2015 deals, including the wall of maturities. Given the competition, it is difficult to predict which lender will win a given deal. Most deals should be widely marketed into the debt capital markets in order to capture the best available loan structure and economics. It remains a borrower s market for 2015. 29 2015 NCREIF CONFERENCE CBRE

QUESTIONS?