The Economic and Real Estate Outlook. Kenneth T. Rosen

Similar documents
U.S. Economic, Capital Markets. and Self-Storage Market Overview

CBRE Cap Rate SURVEY. second Half A CBRE RESEARCH Publication

Self-Storage Investment Trends to Watch. April 16, 2015

CBRE Cap Rate Survey. A CBRE Publication. First Half Click to Enter

National Property Type Cycle Locations. Hotel Full-Service Hotel Ltd. Service Retail 1st Tier Regional Mall. Retail Neighborhood/Community

Houston Economic Outlook. Presented by Patrick Jankowski Vice President, Research

Singing the housing. Christopher Thornberg Principal

CRE PRICE RECOVERY CONTINUES WITH STRONG SHOWING IN NOVEMBER HEALTHY DEMAND FOR CRE BUOYS NET ABSORPTION AND PRICE GAINS

The Housing recovery is here! Should you buy a house?

The Lodging Conference 2011

CBRE Cap Rate Survey. A CBRE Publication. February Click to Enter

COMPARISON OF FIXED & VARIABLE RATES (25 YEARS) CHARTERED BANK ADMINISTERED INTEREST RATES - PRIME BUSINESS*

COMPARISON OF FIXED & VARIABLE RATES (25 YEARS) CHARTERED BANK ADMINISTERED INTEREST RATES - PRIME BUSINESS*

COMMERCIAL PROPERTY PRICE INDICES SPRING FORWARD IN MAY

CAPITALIZATION RATES BY ASSET TYPE

National Property Type Cycle Locations. Industrial R&D Flex Retail Factory Outlet. 4th Qtr Source: Mueller, 2016

HIDDEN RISKS AND OPPORTUNITIES NAREIM - DALLAS CHRIS MACKE GLOBAL RESEARCH AND CONSULTING

What Will 2015 Hold for the Seattle Economy & Residential Real Estate Market?

More Liquidity in Debt and Equity Markets to Spur Higher Investment Activity

State of the Commercial Real Estate Markets

Introduction to Commercial Real Estate: An Overview (415)

PRESS RELEASE. Home Price Gains Ease in April According to the S&P/Case-Shiller Home Price Indices

CREW, SAN ANTONIO PRESENTATION SPENCER G. LEVY, AMERICAS HEAD OF RESEARCH

Property Stocks Attractive Following Sell-Off

S&P/Case-Shiller Home Price Indices

Eurozone Economic dashboard

Subject to Change 1 As of 8/13/14

FRBSF ECONOMIC LETTER

Comprehensive Course Schedule

More than Just Curb Appeal Factors that affect the Housing Market

Economic indicators dashboard

S&P/Case-Shiller Home Price Indices

DEUTSCHE ASSET & WEALTH MANAGEMENT REAL ESTATE OUTLOOK

ASSESSING RISK OF SENIOR LIVING OVER-SUPPLY A LONG-TERM PERSPECTIVE

Multifamily Market Commentary July 2014 The Nation s Aging Multifamily Housing Stock

Home Price Increases Slow Down in February According to the S&P/Case-Shiller Home Price Indices

PRESS RELEASE. Widespread Gains in Home Prices for February According to the S&P/Case-Shiller Home Price Indices

MBA Forecast Commentary Joel Kan

IN THEOR Y, PUBLIC INVESTMENTS IN MASS TRANSIT CAN MAKE URBAN

National Economic Indicators. September 28, 2015

Zurich Staff Legal. Experienced. Collaborative. Focused on Results.

The Impact of Interest Rates on Real Estate Securities

The sustained good news in home prices over the past five months makes us optimistic for continued recovery in the housing market.

What Will Drive Growth in the Washington Area Economy Going Forward?

U.S. ECONOMIC ACTIVITY.

U.S. ECONOMIC ACTIVITY.

S&P/Case-Shiller Home Price Indices

S&P/Case-Shiller Home Price Indices

INDUSTRIAL OUTLOOK: Manufacturing, E-Commerce, Supply Chains and the Future of Industrial CRE

Austin, TX: An Economic Prospectus. Growing Pains of Austin

Zillow Negative Equity Report

S&P/Case-Shiller Home Price Indices

S&P/Case-Shiller Home Price Indices 24%

PRESS RELEASE. Home Prices Grew at Twice the Rate of Inflation in 2014 According to the S&P/Case-Shiller Home Price Indices

U.S. ECONOMIC ACTIVITY.

2015 NFL Annual Selection Meeting R P O CLUB PLAYER POS COLLEGE ROUND 2

U.S. Real Estate Strategic Outlook

UPDATE ON CURRENT MACRO ENVIRONMENT

Fixed Income 2015 Update. Kathy Jones, Senior Vice President Chief Fixed Income Strategist, Schwab Center for Financial Research

Multifamily Outlook Second Half 2015 Executive Summary

AT&T Global Network Client for Windows Product Support Matrix January 29, 2015

Monetary Policy and Mortgage Interest rates

The U.S. and Midwest Economy in 2016: Implications for Supply Chain Firms

Home Prices Closed Out a Strong 2012 According to the S&P/Case-Shiller Home Price Indices

Atlanta Lodging Outlook

The Housing Downturn in the United States 2009 First Quarter Update

S&P/Case-Shiller Home Price Indices

The Aftermath of the Housing Bubble

What Millennials Want

PRESS RELEASE. Home Prices Continue Upward Trend According to the S&P/Case-Shiller Home Price Indices

JENS HENRIK EGGERT CHRISTENSEN RESEARCH ADVISOR, FINANCIAL RESEARCH FEDERAL RESERVE BANK OF SAN FRANCISCO 101 MARKET STREET, SAN FRANCISCO, CA 94105

Relocation Policy I S I T T I M E T O L O O S E N T H E R E I N S?

California s Construction Cost Outlook

ECONOMIC SNAPSHOT. A Summary of the San Diego Regional Economy UNEMPLOYMENT

NATIONAL CREDIT UNION SHARE INSURANCE FUND

Asian Capital Investing in US Real Estate

U.S. Real Estate Outlook

Outlook for Australian Property Markets Perth

Turkish Arab Economic Forum June 29, Mehmet Şimşek. Minister of Finance

Risks and Rewards in High Yield Bonds

Know Your Benchmark: What NCREIF Data is Telling Us

U.S. Commercial Real Estate Outlook:

commercial investment 2015 hampton roads real estate market review

THE STATE OF THE ECONOMY

THE STATE OF THE ECONOMY

GasBuddy Fuel Price Outlook 2015

CREDIT UNION TRENDS REPORT

MBA COMMERCIAL REAL ESTATE / MULTIFAMILY FINANCE QUARTERLY DATABOOK

UNITED STATES OFFICE OVERVIEW & FORECAST. A Cushman & Wakefield Research Publication

The Numbers Tell the Story. Jeremy Aguero Preview Las Vegas 2015

Commercial Real Estate: Economic Cycle Analysis. By Larry Souza, MD, Charles Schwab Investment Management

S&P/Case-Shiller Home Price Indices

Rea l Es t at e Ove rv i e w & Ou t l o o k. Second Quarter 2013

International competition will change mortgage lending

Financial Planning Association of Colorado

Home Prices See Strong Gains in the First Quarter of 2013 According to the S&P/Case-Shiller Home Price Indices

Quarterly Highlights

U.S. Lodging Overview What Lies Ahead. Vail R. Brown Vice President, Global Business Development & Marketing

Discussion of Discounting in Oil and Gas Property Appraisal

Comprehensive Course Schedule

Transcription:

The Economic and Real Estate Outlook Kenneth T. Rosen

Positives Private sector job growth Strong auto sales Very low interest rates, QE3 Global Monetary Easing Improvement of for-sale housing market / Price surge Energy independence Declining oil and gasoline prices Two year budget agreement Negatives Geopolitical events: ISIS (Iraq, Syria, Saudi Arabia), Ukraine, Gaza, Pakistan, Iran, North Korea, Libya Emerging market slowdown: China, Fragile Five, and numerous other countries Interest rate normalization Credit and asset bubble? Tax increases, entitlement explosion 2

Path to Recovery: 2014 and 2015 Moderate and Choppy Recovery 65% Double Dip 20% Strong Recovery 15% 3

U.S. Employment Growth Private Sector Thousands of Jobs 400 300 200 100 0-100 -200-300 -400-500 -600-700 -800-900 00 01 02 03 04 05 Estimated job losses from peak to trough: -8,818,000 06 Recovery since February 2010: +10,034,000 Monthly Absolute Change Aug-13: +180,000 Sep-13: +153,000 Oct-13: +247,000 Nov-13: +272,000 Dec-13: +86,000 Jan-14: +166,000 Feb-14: +201,000 Mar-14: +200,000 Apr-14: +278,000 May-14: +228,000 Jun-14: +260,000 Jul-14: +213,000 Aug-14: +134,000 07 08 2014: 210,000 per month avg. 09 10 11 13 14 Latest data as of August 2014 Sources: BLS, RCG 4

Percent Job Losses in Post-WWII Recessions 1% 1948 1953 1957 1960 1969 1974 1980 1981 1990 2001 2007 0% -1% -2% -3% -4% -5% -6% Great Recession -7% 0 4 8 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 Number of Months After Peak Employment Sources: BLS, RCG 5

Unemployment and Underemployment Rates 20% Bachelor s Degree and Higher 3.2% Less Than High School 9.1% 15% Underemployment Rate Unemployment Rate 10%.0% 5% 6.1% 0% 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 13 14 Latest data as of August 2014, seasonally adjusted Source: BLS 6

Federal Reserve Assets Trillions $5.0 $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 2008 2009 2010 2011 20 2013 2014 Latest data as of September 24, 2014 Sources: Federal Reserve, RCG 7

3-Month T-Bill vs. 10-Year T-Bond Artificially low 16% 14% % 10% 8% 6% 10-Year Yield Movement since Sept. 1, 2013 3.4% 3.2% 3.0% 2.8% 2.6% 2.4% 2.2% Sep Nov Jan Mar May Jul Sep 4% 2% 0% 87 8889 10-Year 3-Month 90 9192 93 9495 96 9798 99 0001 02 0304 05 0607 08 0910 11 13 14 2.52% 0.01% Latest data as of September 25, 2014; green lines are 2014 forecast Sources: Federal Reserve, RCG 8

10-Year TIPS Real Interest Rates Artificially low 1.0% Movement since Sept. 1, 2013 5% 4% 3% 0.8% 0.6% 0.4% 0.2% 0.0% Sep Nov Jan Mar May Jul Sep 2% 1% 0.50% 0% -1% 00 01 02 03 04 05 06 07 08 09 10 11 13 14 Latest data as of September 25, 2014 Source: Federal Reserve 9

10-Year T-Bond Spread vs. German 10-Year Government Bond Basis Points 160 140 0 100 80 60 40 20 0-20 -40-60 -80 01 02 03 04 05 06 07 08 09 10 11 13 14 155 Latest data as of September 25, 2014 Sources: Federal Reserve, ECB, RCG 10

10 Year T-Bond Forecast 6% 5% 4% 3% 4.80% 3.73% 3.22% 2% 1% Forward Curve 4/25/2013 Forward Curve 9/25/2014 RCG Base 0% 2013 2014f 2015f 2016f 2017f 2018f 2013 2014f 2015f 2016f 2017f 2018f Forward Curve 4/25/2013 1.76% 2.04% 2.37% 2.67% 2.93% 3.22% Forward Curve 9/25/2014 3.03% 2.77% 3.25% 3.49% 3.63% 3.73% RCG Base 3.03% 3.30% 4.10% 4.80% 4.70% 4.80% Sources: Federal Reserve, RCG 11

U.S. Budget Deficit to GDP 5% 0% -5% -10% -15% 33 3639 42 4548 51 5457 60 6366 69 7275 78 8184 87 9093 96 9902 05 0811 14 Note: Latest data as of 2Q14; green line indicates 2014 forecast Sources: Office of Management and Budget, BEA, RCG

Consumer Confidence by Income Class Conference Board Survey Index 140 < $15,000 $15,000-$24,999 130 $25,000-$34,999 $35,000-$49,999 0 > $50,000 >$5,000 110 100 90 80 70 60 50 40 30 20 2008 2009 2010 2011 20 2013 2014 Latest data as of August 2014, seasonally adjusted Source: The Conference Board 13

Consumer and Producer Prices Contained for the moment 18% 16% 14% % 10% 8% 6% 4% 2% 0% -2% -4% CPI PPI 1.5% 1.0% 0.5% 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 14 0.0% -0.5% -1.0% A N F M A N F M A N F M A 13 14 Latest data as of August 2014 Note: Annual figures from 2005 forward are December year-over-year data Source: BLS 14

Economic Outlook for 2014 and 2015 Moderate and Choppy Recovery (65%) Economic Growth GDP Growth: Employment Unemployment Rate: Employment Growth: Jobs Created: Interest Rates and Inflation T-Bill: T-Bond: CPI: Stock Market S&P 500: Dow Jones Industrials: 20 2013 2014f 2015f 2.8% 1.9% 2.3% 2.5% 7.8% 7.0% 5.9% 5.5% 1.7% 1.8% 2.0% 1.9% 2.2 mil. 2.4 mil. 2.7 mil. 2.6 mil. 0.1% 0.1% 0.1% 1.2% 1.8% 3.0% 3.3% 4.1% 1.9% 1.2% 2.0% 2.8% 1,426 1,848 1,979 2,078 13,104 16,576 17,200 18,060 15

U.S. Employment Growth August 2014 vs. August 2013 Moderate and Choppy Recovery Growth Rate -1.9% to -5% -0.9% to 0% 0% to 0.9% 1% to 1.9% 2% to 4.9% Source: BLS, not seasonally-adjusted preliminary year-over-year growth rates 16

Change in Employment Ranked by Year-over-Year Percentage Change in Employment Data is seasonally adjusted as of August 2014 Sources: BLS, RCG Yr/Yr Growth August 2014 Absolute (000) Percent North Dakota 19.8 4.4% Houston 108.9 3.9% Austin 32.1 3.7% Orlando 37.3 3.5% Dallas 75.4 3.5% Miami 35.5 3.4% San Francisco 35.7 3.3% San Jose 31.3 3.2% Seattle 44.5 2.9% Inland Empire 34.7 2.8% San Diego 34.8 2.6% Minneapolis 43.3 2.4% Phoenix 43.4 2.4% Denver 29.3 2.3% New York 2.1 2.2% Oakland 22.7 2.2% Atlanta 52.3 2.2% Sacramento 17.4 2.0% U.S. Average (in mil.) 2.5 1.8% Los Angeles 71.6 1.7% Boston 41.1 1.6% Tampa 15.6 1.3% Orange County 18.3 1.3% Philadelphia 25.8 0.9% Chicago 39.8 0.9% Pittsburgh 9.2 0.8% Washington, D.C..1 0.4% Detroit 3.1 0.2% 17

Change in Employment Ranked by Jobs Recovered as a Percentage Change from Trough, August 2014 Jobs Recovery from Trough Absolute (000) Percent North Dakota 103.6 28.6% Austin 144.4 19.1% San Francisco 165.5 17.5% San Jose 146.4 17.1% Houston 397.4 15.9% Dallas 261.5 13.1% Orlando 6.3.9% Seattle 171.4.4% Denver 146.0.3% Miami 117.9.1% Oakland 109.4 11.5% Inland Empire 7.5 11.2% Phoenix 177.9 10.6% San Diego 3.3 10.1% Atlanta 214.0 9.5% Minneapolis 158.9 9.4% New York 475.5 9.4% Tampa 100.4 9.1% Orange County 3.5 9.1% Detroit 156.2 9.1% Los Angeles 333.5 8.6% Sacramento 64.7 7.9% Boston 187.5 7.8% U.S. Average (in mil.) 9.5 7.3% Chicago 257.5 6.1% Washington, D.C. 176.1 6.0% Pittsburgh 56.9 5.1% Philadelphia 100.3 3.7% Data is seasonally adjusted as of August 2014 Sources: BLS, RCG 18

Commercial Real Estate Capital Markets

Current Conditions Little new construction, except for apartments Moderate demand recovery Libor life support but low absolute long-term rates are available High investment demand for stabilized properties; lower demand for broken deals Real estate still cheap compared to 10-year Treasuries Broken deals and deleveraging opportunities Mortgage restructuring opportunities 20

Cap Rates by Product Type % 11% 10% 9% 8% 7% 6% 5% 4% Apartment Office Industrial Retail 3% 86 88 90 92 94 96 98 00 02 04 06 08 10 14 Latest data as of 2Q14; ACLI, adjusted Sources: ACLI, RCG 21

Cap Rate Spreads vs. 10-Year Treasury Yield Basis Points 600 500 400 300 200 100 0-100 -200-300 Apartment Office Industrial Retail 86 88 90 92 94 96 98 00 02 04 06 08 10 14 Latest data as of 2Q14; ACLI, adjusted Sources: ACLI, RCG 22

Investment Performance REITs vs. S&P 500 Index Total Return 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% 92 37% 36% 37% 33% 36% 31% 33% 28% 28% 23% 20% 21% 15% 14% 15% % 16% % 8% 10% 11% 3% 5% 1% 4% 94 96 98-17% -3% 00-9% -% 02-22% 04 06-18% 08 4% -39% 29% 29% 26% -31% 10 18% 15% 16% 9% 0% 2% 14 30% 14% 10% Latest data as of September 24, 2014 Sources: S&P, Bloomberg, RCG DJ Wilshire REIT Index S&P 500 Index 23

REIT Valuation Premium / Discount to Underlying Asset Value 40% 30% 20% 10% 0% 2.0% -10% -20% -30% -40% -50% 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 13 14 Latest data as of September 2014 Sources: Green Street Advisors, RCG 24

New Domestic Commercial Real Estate Debt Originations Billions $600 $500 $508 $400 $345 $406 $359 $393 $300 $244 $200 $181 $184 $100 $82 $119 $0 05 06 07 08 09 10 11 13 14f Sources: MBA, RCG 25

Domestic Commercial MBS Gross Amount Issued Billions $240 $228.5 $200 $160 $166.5 $198.4 $0 $80 $40 $0 $28.8 $17.2$17.5 $17.9 $14.0 $7.6 $40.4 $77.7 $58.5 $48.7 $67.3 $52.1 $77.8 $92.6 $.2 $11.6 $2.7 $32.7 $48.4 $86.1$90.0 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 13 14f Sources: Commercial Mortgage Alert, RCG 26

U.S. Investment Sales Volume Billions $600 $571.0 $500 $423.0 $400 $362.0 $360.0 $368.0 $300 $200 $100 $106.0 $130.0 $2.0 $174.0 $67.0 $147.0 $233.0 $299.0 $0 02 03 04 05 06 07 08 09 10 11 13 14 Latest data through 2Q14, annualized Source: RCA 27

Real Estate Cycle Clock - Fundamentals United States Overshooting/ Demand Shortfall Phase Decline Phase 9 Equilibrium 3 Class C Malls 3:30 Multifamily Rental / Ltd. Service Hotels 7:30 Residential Land 7:00 Growth Phase Outlet Center / Single Family / Full Service Hotels / Resorts 6:30 6 Absorption Phase Power Center 4:00 Suburban Office 4:30 Neighborhood Strip 5:00 Extended Stay 5:30 CBD Office / Industrial / Class A Malls 6:00 28

Office Construction Value of Construction Put-in-Place Billions (2009$) $0 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 14 Latest data as of 2Q14, seasonally adjusted annual rate Sources: Census, RCG 29

Office Employment Growth Annual Change Thousands of Jobs 2,000 1,500 Monthly Change in Employment (Thou.) Sep-13: +44 Dec-13: +9 Mar-14: +46 Jun-14: +96 Oct-13: +64 Jan-14: +46 Apr-14: +82 Jul-14: +49 Nov-13: +70 Feb-14: +85 May-14: +61 Aug-14: +52 1,000 500 0-500 -1,000-1,500-2,000 84 86 88 90 92 94 96 98 00 02 04 06 08 10 14 Latest data as of August 2014 Sources: BLS, RCG 30

Office Availability Rates Downtown and Suburban 30% 25% 20% 16.8% 15% 10%.7% 5% 0% Downtown Suburban 88 90 92 94 96 98 00 02 04 06 08 10 14 Latest data as of 2Q14 Sources: C&W, RCG 31

U.S. Downtown Office Rent Growth 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% 88 8990 91 9293 94 9596 97 9899 00 0102 03 0405 06 0708 09 1011 1314 Latest data as of 2Q14 Sources: C&W, Grubb & Ellis, Various Local Brokers, RCG 32

Private Market Total Return (NCREIF) Office 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% 88 6.0%4.1% 90-1.1% -8.0% -11.4% 92-3.9% 94 7.2% 3.9% 96 17.9% 19.6%.2% 13.6% 14.1% 6.2% 98 00 02 2.8%5.7% 04.0% 19.2% 19.5% 20.5% 06 08-7.3% -19.1% 10 11.7% 13.8% 9.5% 10.3% 9.9% 14 Latest data as of 2Q14, year-over-year Sources: NCREIF, RCG 33

Renter Households Proportion of Total Households 38% 36% 34% 32% 30% 84 86 88 90 92 94 96 98 00 02 04 06 08 10 14 Source: Census 34

Multifamily Rental Housing Starts Units (Thousands) 400 350 340 300 250 200 150 227 204 280 285 271 254 263 258 274 265 226 217 201 183 188 159 222 283 300295 280 275 100 91 99 50 0 94 9596 97 9899 00 0102 03 0405 06 0708 09 1011 1314f 15f 16f17f 18f Note: 2014 through 2018 data are forecasted Sources: Census, RCG 35

U.S. Rental Apartment Vacancy Rate (5+ Units) 14% % 10% 8% 6% 8.2% 4.4% 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 13 14 4% 2% 0% Census Vacancy Rate (5+ Units) MP/F Investment Grade Vacancy Rate Latest data as of 2Q14 Sources: Census, NMHC 36

Household Formation HH Formation (000s) 2,500 2,000 2007: 1.8 million 2008: 878,000 2009: 453,000 2010: 406,000 2011: 861,000 20: 1.2 million 2013: 1.4 million 1,500 1,000 500 0 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 Sources: Census, RCG 37

Young Adults Aged 18-34 Living with Parents Millions 23 22 21 20 19 18 17 16 15 1999 2001 2003 2005 2007 2009 2011 2013 Sources: Census, RCG 38

Employment Growth by Age Group Annual Change 4% 3% 2% 1% 20-34 Years 35-54 Years 0% -1% -2% -3% -4% -5% -6% 2008 2009 2010 2011 20 2013 2014 Latest data as of August 2014; not seasonally adjusted Sources: BLS, RCG 39

U.S. Rental Inflation Annual % Change % 10% 8% 6% CPI Rental Component Professionally Managed Apartments 4% 2% 0% -2% -4% -6% 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 13 14 Latest data as of 2Q14 Sources: BLS, NMHC 40

Year-over-year Change in Apartment Fundamentals, August 2014 Year-over-year Change in Year-over-year Change in Year-over-year Change in Revenue per Available Unit Occupancy Effective Rent Denver 10.1% 0.3% 9.7% Atlanta 8.8% 1.0% 7.6% San Francisco 7.1% 0.3% 6.7% Seattle 6.6% -0.1% 6.6% Las Vegas 6.4% 1.7% 4.4% Houston 5.9% 0.6% 5.2% Riverside 5.9% 0.7% 5.2% Phoenix 5.8% 0.7% 5.0% Los Angeles 5.6% 0.7% 4.8% Orlando 5.4% 0.5% 4.9% Dallas/Ft. Worth 5.1% 0.1% 5.0% Orange County 5.1% 1.0% 4.0% San Diego 5.0% 0.1% 4.9% Tampa 4.9% 0.8% 4.1% Austin 4.4% -0.1% 4.5% Chicago 3.7% 0.6% 3.1% Charlotte 3.3% -0.1% 3.4% Manhattan 3.0% 0.7% 2.2% Boston 2.7% 0.2% 2.5% Washington, D.C. 0.0% 0.0% 0.0% Sources: Axiometrics and Bank of America Merrill Lynch, Miller Samuel, RCG 41

Private Market Total Return (NCREIF) Multifamily 25% 20% 15% 10% 5% 0% -5% -10% -15% 10.3% 8.8% 5.8% -1.4% 1.7% 21.2% 14.1%.1% 11.5%.9% 13.0% 13.0% 11.7% 11.7% 8.7% 9.4% 8.8% 8.9% 14.6% 11.4% -7.3% 18.2% 15.5% 11.2% 10.4% 9.9% -20% 88 90 92 94 96 98 00 02 04 06 08-17.5% 10 14 Latest data as of 2Q14, year-over-year Sources: NCREIF, RCG 42

Retail Space Construction Value of Construction Put-in-Place Billions (2009$) $90 $80 $70 $60 $50 $40 $30 $20 $10 84 86 88 90 92 94 96 98 00 02 04 06 08 10 14 Latest data as of 2Q14, seasonally adjusted annual rate Sources: Census, RCG 43

Real Retail Sales Growth Excluding Autos Annual % Change 10% 8% 6% 1.5% Nominal Monthly % Change 1.0% 0.5% 0.0% -0.5% -1.0% A N F M A N F M A N F M A 13 14 4% 2% 0% -2% -4% -6% -8% -10% 86 88 90 92 94 96 98 00 02 04 06 08 10 14 Latest year-over-year change data as of 2Q14, monthly change is as of August 2014 Source: Census 44

Overall Comparable Store Sales vs. Luxury Store Sales Y-o-Y% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Overall Luxury 4Q: 1.3% 7.8% 1Q13: 1.7% 4.1% 2Q13: 3.0% 4.1% 3Q13: 2.4% 3.6% 4Q13: 1.0% 3.6% 1Q14: 1.0% 6.6% 2004 2005 2006 2007 2008 2009 2010 2011 20 2013 2014 Overall Comparable Stores Luxury Latest data as of 1Q14; data excludes Wal-Mart, which stopped reporting monthly sales in May 2009 Source: ICSC 45

Retail Vacancy Rate 14% % 10% 8% 6% 4% 2% 84 86 88 90 92 94 96 98 00 02 04 06 08 10 14f Green line is forecast Sources: Valuation International, Viewpoint, SNL, RCG 46

Super-Stores and Internet Sales Cannibalization Percentage of total sales by retailer type 60% 50% 40% Grocery Stores 30% Department Stores 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 13 14 20% 10% 0% Warehouse Clubs and Super-Stores Internet Sales Latest data as of June 2014 Source: Census 47

Private Market Total Return (NCREIF) Retail 25% 23.0% 20% 15% 10% 5% 20.0% 17.1% 14.9% 13.7% 13.8% 13.5%.9%.5%.9% 13.4% 13.5%.6% 11.6% 8.5% 9.5% 7.8%6.7% 6.0% 6.0% 4.8% 4.9% 4.0% 0% -5% -1.9%-2.2% -4.1% -10% -15% 88 90 92 94 96 98 00 02 04 06 08-10.9% 10 14 Latest data as of 2Q14, year-over-year Sources: NCREIF, RCG 48

Hotel Construction Value of Construction Put-in-Place Billions (2009$) $40 $35 $30 $25 $20 $15 $10 $5 $0 84 86 88 90 92 94 96 98 00 02 04 06 08 10 14 Latest data as of 2Q14, seasonally adjusted annual rate Sources: Census, RCG 49

Hotel Occupancy Rate 70% 65% 60% 65.5% 65.2% 65.7% 64.5% 63.7% 64.0% 63.2% 62.3% 62.4% 60.9% 62.0% 63.7% 63.3% 61.3% 59.8% 59.2% 59.2% 63.4% 63.1% 63.2% 60.4% 63.3% 62.3% 61.4% 59.9% 57.5% 55% 54.5% % 50% 45% 40% 88 8990 91 9293 94 9596 97 9899 00 0102 03 0405 06 0708 09 1011 1314f Latest data year-to-date as of December 2013; 2014 data are forecasted Sources: Smith Travel Research, RCG 50

RevPAR Growth Annual % Change 15% 10% 5% 0% -5% -10% -15% -20% 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 13 14 Latest data year-to-date as of August 2014 Sources: Smith Travel Research, RCG 51

Hotel Performance by Market Segment August 2014, year-over-year Segment Occupancy RevPAR Luxury UP 1.2% UP 8.8% Upper Upscale UP 2.3% UP 8.5% Upscale UP 3.5% UP 9.4% Midscale with F&B UP 3.9% UP 8.9% Midscale without F&B UP 4.9% UP 9.5% Economy UP 4.0% UP 9.4% Total U.S. Industry UP 3.8% UP 9.4% Note: Data is year-over-year as of August 2014; measured against August 2013 Source: Smith Travel Research 52

Industrial Warehouse Construction Value of Construction Put-in-Place Billions (2009$) $40 $35 $30 $25 $20 $15 $10 $5 $0 84 86 88 90 92 94 96 98 00 02 04 06 08 10 14 Latest data as of 2Q14, seasonally adjusted annual rate Sources: Census, RCG 53

U.S. TEU Growth Annual % Change 15% 10% 5% 0% -5% -10% -15% -20% 6.1% 4.8% 9.6% 9.0% 8.0% 1.2% 8.5% 8.5% 6.7%7.0% 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 0.9% 6.6% 11.0% 6.5% 8.6% 5.8% 1.3% -5.7% -17.0% 09 10 11 7.0% 2.9% 2.9% 2.3% 0.7% 13 14 Latest data is year-over-year estimate as of August 2014 Sources: AAPA, PortTracker 54

Industrial Vacancy Rate % 10% 8% 6% 4% 2% 2010: 10.3% 2011: 9.2% 20: 8.3% 2013: 7.5% 1Q14: 7.4% 2Q14: 7.2% 2014f: 6.9% 82 84 86 88 90 0% 92 94 96 98 00 02 04 06 08 10 14 Latest data as of 2Q14; Green line is forecast Sources: CBRE, C&W, RCG 55

Private Market Total Return (NCREIF) Industrial 25% 20% 15% 10% 5% 0% -5% -10% 9.9% 8.7% 2.0% -3.9%-4.5% -0.8% 15.9% 15.9% 13.6% 14.0%.3% 11.6%.1% 9.3% 8.2% 7.6% 6.7% 20.3% 17.0% 14.9% -5.8% 15.2%.7%.6% 11.2% 9.4% -15% -20% 88 90 92 94 96 98 00 02 04 06 08-17.9% 10 14 Latest data as of 2Q14, year-over-year Sources: NCREIF, RCG 56

Investment Implications Core Real Estate Buy high quality REITs on a substantial dip (10-20%) Buy Office, Medical Office, Industrial, Apartments, Senior Housing, Data Centers & Retail at 5% - 7% or above cap rates, 80% replacement costs or below Monetize mature core assets if cap rate is below 4% by sale or like-kind trade or refinance Lock in low debt costs with assumable debt Short long term treasuries Short China high-end residential real estate Short Euro 57

Investment Implications Value-Add Debt for transitional assets Buy vacancy in strategic markets Reposition assets for upgraded use Buy distressed assets from European lenders Mezzanine debt to fill capital gap Development deals Apartments Adaptive re-use Opportunistic Single family land / housing Select office and industrial development Grocery-anchored real estate development 58

Rosen Consulting www.rosenconsulting.com