Transactions Underwriting

1
Transactions Underwriting

• Jim Street
• Vice President
• Prudential Real Estate Investors, Transactions

Will Yowell Exec. Vice President CB Richard
Ellis, Transactions
2
Global Assets Under Management
Geographic Distribution as of June 30, 2006
Non-US Assets
US Assets
South Korea 6.6
Mexico 7.5
Portugal 3.5
East 45.9
West 27.0
HongKong 10.4
Poland 1.4
Malaysia 2.1
Japan 9.7
France 14.7
Other EuropeanCountries 4.2
Mid-West 7.7
UK 3.9
Other AsianCountries 3.5
Spain 2.6
South 19.4
Singapore 19.0
Netherlands 4.8
Italy 3.3
Germany 4.6
23 B (73)
8.6 B (27)
Total net assets under management as of June 30,
2005 equal 22.3 billion.
Note Other Asian Countries include China,,
Indonesia, the Philippines and Thailand. Other
European Countries include Sweden, Switzerland,
Luxembourg, Finland, and the Czech Republic.
3
US Properties
4
Acquisition Authorizations -Type
(Millions)
5
Dispositions By Type
(Millions)
6
Current Transaction Trends

• Is it still a sellers market?
• Mostly, yes yields flat to down for most Class A
  product types in supply-constrained markets.
• Investor demand in commodity markets is diluted
  by product availability, but yields still low by
  historic standards.
• Biggest current underwriting challenge is
  property insurance.

7
Santa Monica, Apartment Portfolio

• 430 units in 9 Properties
• Properties built between 2001 and 2004
• Portfolio Acquired in April 2005

8
Landmark Apartments, Ontario, CA

• 469 units
• Built in 2006 (est. Oct. 06 completion)
• Scheduled to close in December 2006

9
Underwriting ComparisonExisting Apartment
Acquisitions
Santa Monica Apartment Portfolio
Landmark (Pending) Ontario, CA
Apr 05 93 95 N/A 4.9 5.8 4
annually 7.1 6.5 414,657 405,526
Dec - 06 50 95 9.5 months 2.9 4.9 7,7,7,5.5
,3 7.6 6.0 233,533 255,475

• Purchased
• Leased at closing
• Stabilized occupancy
• Months to stabilize
• In-Place NOI Return
• Stabilized NOI Return
• Rent Growth
• 10 Yr IRR
• Yr 10 Exit Cap Rate
• Cost / Unit
• Replacement Cost/Unit

10
5900 Wilshire, Los Angeles, CA

• 444, 664 rentable square feet
• Hollywood / Wilshire submarket of Los Angeles
• Built in 1971, renovated in 1993
• Acquired in October 2005

11
Glendale Plaza, Glendale, CA

• 532, 815 rentable square feet
• Tri-Cities submarket of Los Angeles
• Built in 1999
• Acquired in September 2006

12
Underwriting ComparisonExisting Office
Acquisition
5900 Wilshire, LA
Glendale Plaza, LA MSA

• Purchased
• Built
• Investment Type
• Leased at Closing
• Stabilized Occupancy
• Months to Stabilize
• In-Place NOI return
• NOI Return (Yr 3)
• Rent Growth
• Rental Probability
• Downtime
• Cap ex. (psf)
• 10 Yr IRR
• Yr 10 Exit Cap Rate
• Cost PSF
• Cost after lease-up/PSF
• Replacement Cost/PSF

Oct 05 1971 / renov 1993 Value - Add 74 95 27
months 4.4 8.6 3 annually 65 6
months 0.25 10.1 8.25 253 277 355
Sep - 06 1999 Core 97 95 N/A 5.7 6.2 7.0,7.0
,7.0,5,5,3 75 6 months 0.20 8.3 6.75 404
N/A 475
13
Underwriting ComparisonRetail Acquisitions
Publix, Naples, FL
West Coast Retail Portfolio

• Total Cost
• Rentable Square Feet
• Purchased
• Built
• Investment Type
• Leased At Closing
• Stabilized Occupancy
• In-Place NOI Return
• Rent Growth
• Renewal Probability
• Downtime
• Cap ex. (psf)
• 10 Yr IRR
• Yr 10 Exit Cap Rate
• Cost PSF
• Replacement Cost/PSF

15.3 million 72,197 Oct, 2006 (est.) 2003 Core 10
0 5 vacancy shop space 6.25 3 75 6 mos in
line, 9 mos anchors 0.15 8.99 6.75 212 266
2.9 billion 12.1 M sf in 76 Prop Oct. 2006
(est.) Avg 16.2 yrs Core 98 3 vacancy shop
space 5.90 4 75 6 12 months 0.10 -
0.25 8.00 6.78 238 253-281
14
Crescent VI, Denver, CO

• 134,091 rentable square feet
• Tech Center submarket of Denver
• Built in 1998
• Sold in December 2005

15
Office Plaza One, Denver, CO

• 138,009 rentable square feet
• Tech Center submarket of Denver
• Built in 1997
• Closed in August 2006

16
Underwriting ComparisonOffice Dispositions
Crescent VI
Office Plaza One

• Number Offers Received
• Sold
• Built
• Investment Type
• Leased At Closing
• Stabilized Occupancy
• Months To Stabilize
• Rent Growth
• TI Costs (New/Renew)
• In-Place NOI Return
• NOI Return (Yr 3)
• 10 Yr IRR
• Cost PSF
• Replacement Cost/PSF

10 Dec - 05 1998 Value-Add 87 93 6
months 9,7.5,8,8,6,3 17.50 /
10 5.54 5.80 6.34 158 240
4 Sep - 06 1997 Value-Add 87 93 6
months 7.2,5.4,4.2,4.9,3 20 /
10 7.10 7.32 7.24 139 250
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Underwriting Insurance Costs

• Florida and California
• Overall insurance costs for 2006 are doubled for
  2007.
• After 2007, costs are stair-stepped down to reach
  130 of 2006 costs by 2010.
• For rest of U.S.
• Overall insurance costs for 2006 are increased by
  avg. of 115 for 2007, then increased at
  inflation thereafter.

18
Transaction Volume - All Product Types

• By Total Consideration

Transactions 5mm and greater Source Real
Capital Analytics
19
Volume Comparison / 6 Months - 05 to 06

• By Total Consideration

1st half 2005 sales figures for Eastdil and
Secured Capital were combined even though they
operated as separate entities during this time
period
Source Real Capital Analytics
20
Whos Selling Office?
21
National Office Bidding Profile
22
National Class A Office Cap Rates
Q2 2006 Mean Cap 6.93 IRR 9.93
23
Closing Timeline
24
On What Basis Trailing Four Quarters
25
Investment Market Overview

• Significant Capital Appetite Continues into Q4
  2006
• Pension Funds and Advisors Lead Charge
• TIC Sponsor Appetite Slows
• Low Interest Rates Spurring Product to Market
• Increased Product Availability into 2007
• Public to Private Trend Continues
• Commodity Real Estate Pricing Softens
• Significant Capital for Value Add Offerings
• Overall Bid Volumes Lower

26
Underwriting Metrics

• Rent Growth Rates
• Residual (Exit) Cap Rates
• Concessions
• Operating Expenses
• Taxes
• Insurance
• Tenant Improvements

27
Underwriting Metrics

• Cap Rates
• IRRs Cash Leveraged
• Price Per SF
• Debt

28
Bank of America PlazaAtlanta Midtown/CBD

• Delivered 1992
• Size 1,250,000 SF
• Floors 55
• Occupancy 99.8
• Tenants
• Bank of America
• Troutman Sanders
• Ernst Young
• Paul Hastings
• Hunton Williams
• Boston Consulting
• Tallest Building in US outside of Chicago and New
  York at 1,023 feet

29
Bank of America Plaza Atlanta

• Sale Date September 2006
• Occupancy 99.8
• Sale Price 436,000,000
• Price / SF 348.80
• Replacement Cost / SF 375.00
• In Place NOI Return 6.99
• Rent Growth 5 yrs 1-4, 3 thereafter
• 10 year IRR 7.95
• Residual Cap Rate 7.00
• Leveraged IRR 9.7

30
Bank of America Plaza Atlanta

• Number of Signed CAs 75
• Number of Tours 12
• Number of Initial Bids 10
• Marketing Timeframe 5 weeks
• Due Diligence Period 4 weeks
• Closing Period 8 weeks
• Seller B of A Cousins Props (JV)
• Buyer Bentley Forbes

31
Pinnacle Atlanta - Buckhead

• Delivered 1998
• Size 426,978 SF
• Floors 22
• Occupancy 98
• Tenants Merrill Lynch
• AT Kearney
• UBS
• Smith Barney
• Morgan Stanley

32
Pinnacle Atlanta

• Sale Date August 2004
• Occupancy 98
• Sale Price 145,000,000
• Price / SF 343.00
• Replacement Cost / SF 325.00
• In Place NOI Return 7.00
• Rent Growth 3 yr 1, 8 yr 2, 3 thereafter
• 10 year IRR 7.50
• Residual Cap Rate 8.25
• Leveraged IRR 9.60
• Exit Cap at 7.0 410 psf

33
Pinnacle Atlanta

• Number of Signed CAs 90
• Number of Tours 20
• Number of Initial Bids 15
• Marketing Timeframe 6 weeks
• Due Diligence Period 30 days
• Closing Period 5 days
• Seller Cousins Properties
• Buyer TIAA-CREF

34
171 17th Street Atlantic Station Atlanta
-Midtown

• Delivered April 2004
• Sale Date November 2005
• Size 509,237 SF
• Occupancy 94.0 (Master to 100)
• Cap Rate 5.9
• Cash IRR 6.7
• Price 170,500,000
• Price / SF 335.00
• Tenants Wachovia
• Arnold Golden Gregory
• Burr Forman
• Carter

35
One Two Securities Centre Buckhead

• Delivered 1982 - 1985
• Sale Date April 2006
• Size 526,705 SF
• Occupancy 93.7
• Cap Rate 6.6
• Cash IRR 9.3
• Price 103,000,000
• Price / SF 195.56
• Tenants Fidelity Bank
• Clear Channel
• Cigna
• Quikcrete
• InfiCorp

36
South Tryon Square - Charlotte

• Delivered 1999
• Sale Date August 2006
• Size 236,697 SF
• Occupancy 95
• Cap Rate 6.79
• Cash IRR 8.38
• Price 68,500,000
• Price / SF 289.40
• Tenants Wachovia
• Greer Walker
• Nexsen Pruet
• VISA
• IMG Worldwide
• PNC Business Credit

37
Transactions Underwriting

• Jim Street
• Vice President
• Prudential Real Estate Investors, Transactions

Will Yowell Exec. Vice President CB Richard
Ellis, Transactions