VALUATION COMMITTEE NCREIF WINTER CONFERENCE TUESDAY, MARCH 4TH

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VALUATION COMMITTEE NCREIF WINTER
CONFERENCETUESDAY, MARCH 4TH

• SECURITIZED DEBT -
• BEFORE AND AFTER THE SUB-PRIME FALLOUT
• A PANEL DISCUSSION

?SCOTT HOLLAND PARTNER, KEYSTONE COMMERICIAL
CAPITAL?JOHN C. SMECK III PRINCIPAL/MANAGING
MEMBER, JOHNSON CAPITAL
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Founded in 1987, Johnson Capital is one of the
nations largest and most prominent real estate
investment banking and commercial mortgage
brokerage firms.

• Product Offerings
• Commercial Mortgage Banking
• Equity Placement
• Capital Advisory Services
• Loan Servicing
• Freddie Mac Origination
• FHA Origination
• Mortgage Loan Brokerage

Johnson Capital Production 2007 3,535,113,620
1.1 Billion
948 Million
723 Million
700 Million
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JOHNSON CAPITAL OFFICES
San Francisco Los Angeles Orange County San
Diego
Las Vegas Salt Lake City Phoenix Denver

Dallas Kansas City Little Rock Washingt
on D.C.
New York City Norwalk Boca Raton Cabo S
an Lucas, Mexico

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• Boutique mortgage banking firm started in 2007
• Located in Phoenix with a satellite office in
  Boston
  
• 7 loan originators
• 20 correspondent life insurance company lenders
• 1B loan servicing portfolio

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Changes inLife Company Lending
January 2007 January 2008
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Alternative InvestmentsSpreads Over Treasury
Yields
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Alternative InvestmentsSpreads Over Treasury
Yields
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Alternative InvestmentsReal Estate Bonds vs.
Corporate Bonds
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Changes in Life Company LendingPre-January 2007
thru Post-January 2008

• Spreads Rose
• From 100 bps to 250 bps
• Variance between lenders increased from 20 bps
  to 120 bps
  
• Treasury Yields Fell
• Down 100 bps
• 10-Year Treasury 4.76 in January 2007
• 10-Year Treasury 3.74 in January 2008
• Real Cost to Borrower 50 bps
• Ability to Leverage
• If life companies are the only game in town,
  available leverage to the market decreases
  15-20
  
• More equity required
• If equity fills gaps and equity yield demands
  remain steady, prices must come down
  
• Supply Demand Issues
• CMBS estimated to issue 50MM this year which is
  150-200MM less than 2007 or 50 less capital
  in the market
  
• Results in life company lenders being overwhelmed
  and able to cherry-pick deals
  

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Market Outlook
Depending on how active the investment market is
in 2008 (i.e. sales transactions), and if/when
the CMBS lenders return to the market in 2008,
there could be a virtual capital vacuum created
during the last half of this year!
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Retail Refinance Phoenix, AZ 650,000 square
foot, shadow anchored, community retail center

• U/W at Application
• Date 10/13/2006
• Loan Amount a) 54 MM
• b) 52 MM
• Spread 114 bps over 10-yr UST
• Rate Lock 5.9495
• DSCR 1.0x minimum, based on a 30 year
  amortization
  
• LTV 80 maximum
• Years of I/O a) 5 years
• b) 10 years

• Final Terms
• Date 10/9/2007
• Loan Amount 50.8 MM
• Spread 129 bps over 10-yr UST
• Coupon Rate 6.096 (blended rate)
• DSCR 1.0x minimum, based on a 30 year
  amortization
  
• LTV 80 maximum
• Years of I/O 5 years, followed by a 30 year
  amortization

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CMBS Loan Underwriting-Then and
NowAssumptions Current NOI 1,325,000 Current
NCF 1,265,000
Spring 2007
February 2008

• Rate 7.30
• Spread 340bps over 10Yr UST
• 10 YR UST 3.90
• Years of I/O None
• Min DSCR 1.15x-1.20x 30 Yr Amort.
• Max LTV 80
• Value derived from MAI Appraisal using current
  income and a Market Cap Rate
  
• LOAN AMOUNT 13,360,000
• (DSC Constrained)

• Rate 5.65
• Spread 105bps over 10Yr UST
• 10 YR UST 4.60
• Years of I/O 10 (Full Term)
• Min DSCR 1.15x I/O Basis
• Max LTV 80
• Value derived from MAI Appraisal using pro-forma
  income and a Market Cap Rate
  
• LOAN AMOUNT 17,000,000

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Portfolio Loan Underwriting-Then and
NowAssumptions Current NOI 1,325,000 Current
NCF 1,265,000
Spring 2007
February 2008

• Rate 6.50
• Spread 260bps over 10Yr UST
• 10 YR UST 3.90
• Years of I/O None
• Min DSCR 1.20x 30 Yr Amortization
• Max LTV 75
• Value derived from MAI Appraisal using current
  income AND an Internal Cap Rate (7.25) and
  Replacement Cost Analysis
  
• LOAN AMOUNT 13,700,000
• (LTV Constrained)

• Rate 6.00
• Spread 140bps over 10Yr UST
• 10 YR UST 4.60
• Years of I/O 3 Years
• Min DSCR 1.20x 30 Yr Amortization
• Max LTV 75
• Value derived from MAI Appraisal using current
  income and a Market Cap Rate
  
• LOAN AMOUNT 14,800,000