Discover Leadership / Discover Excellence / Discover Success

Joe StettiniusPresident | Cassidy Turley

Highlights – Industrial

WRIT Washington DC Portfolio

Client: WRITSF: 3.1 millionPrice: $350 million

Discover The State of Real Estate / 2012

Highlights – Multifamily

JLL CBRE Cushman &

2011 DC Multifamily Development Finance Market Share

HFF30%

JLL8% 0% Wakefield

0%

Cassidy Turley62%62%


2011 Recognition


Kevin ThorpeChief Economist | Cassidy Turley

World GDP Grows by 2.5% in 2012Russia China

GDP, 2012, Year-over-year % change

2.5

Canada

1 7

UK Japan

3.6

Russia

7 5

India9.1

China

1.7

-0.3

Eurozone2.0

7.5

3.8

Brazil


Source: Cassidy/Turley Research

U.S. Bank Exposure to the Euro-Zone% of Tier 1 Capital

90

76 7%

Exposure to entireEuro-zone

60

70

80 76.7%

Private

30

40

50

BanksExposure to

Peripheral Countries

0

10

20

Portugal, Ireland, Italy, Greece, Spain All Claims(Entire Eurozone)

Public

16.8%


Source: Capital Economic, BIS

Portugal, Ireland, Italy, Greece, Spain All Claims(Entire Eurozone)

Still DeleveragingHouse Debt-to-GDP

100%

60%

80% Historical Average

0%

20%

40%

0%


Source: Federal Reserve Board

2011 F t 2012 F t

NABE’s Consensus ForecastAnnual Forecast Made November 2011

2011 Forecast 2012 Forecast

Median FiveLowest

Five Highest Median Five

LowestFive

Highest

Real GDP, % change, Q4/Q4 1.7 1.2 2.0 2.4 0.9 3.8

CPI % change Q4/Q4 3 4 1 3 3 9 2 0 0 7 3 9

“While we still expect that economic activity and labor market conditions will improve gradually over time the pace of progress isCPI, % change, Q4/Q4 3.4 1.3 3.9 2.0 0.7 3.9

Personal Consumption Expenditures Price Index less food energy, % chg, Q4/Q4 1.9 1.4 2.3 1.8 0.9 2.8

Civilian Unemployment Rate, % annual average 9.0 9.0 9.1 8.9 8.1 9.5

gradually over time, the pace of progress is likely to be frustratingly slow.”

-Chairman Bernanke

"If the economy is growing only 1.5 percent to average

Federal Funds Target, % year-end 0.125 0.103 0.126 0.125 0.103 0.341

10-Yr Treasury Note Yield, % year-end 2.73 2.15 3.53 2.70 2.18 4.03

Foreign Exchange Rate, US$ per Euro, December Average 1.37 1.22 1.43 1.37 1.11 1.47

2 percent and you get a fiscal drag of 1.3 percent — that's the difference between a growth recession and effectively zero growth.”

-Nouriel Roubini, NYU

g

Housing Starts, millions of units 0.60 0.57 0.74 0.66 0.60 0.96

Home Prices, FHFA, % change, Q4/Q4 -2.5 -6.2 1.8 0.9 -3.6 4.8

Oil Prices, $ per barrel, December Average 92.0 78.7 97.0 94.8 79.6 110.6

"The economy is struggling to avoid recession…There are a number of things coming together with regards to fiscal policy that makes early next year look very iffy .”

-Mark Zandi, Moody’s Analytics


S&P 500 Index, December 31 1294.4 1178.0 1391.2 1380.0 1202.6 1604.8

Reasons for OptimismHH Debt is Affordable Debt

15

Historical Average: 12.113

14

11

12

10


Source: Federal Reserve Board HH Debt-Service Ratio

Couldn’t Catch a Break in 2011

Di t i

Consumer Confidence Index

Gas prices spike $4

Disaster inJapan

Debt ceilingdebate begins

US GDP nearly

S&PDowngrade

ycontracts in Q1

European Debt Crisis Worsens


Source: Cassidy/Turley, The Conference BoardCCI

Reasons for OptimismCorporate Profits, $Tril

• Corporate profits up$2.0

• Job growth hits 200K

• Auto sales rebounding$1.2

$1.6

• Confidence is rebounding

• Exports strong$0.4

$0.8

• ISM Index back up$0.0


Source: Federal Reserve BoardCorporate Profits

What to Watch: Italian Bonds10-Yr Sovereign Debt Yields, %


Source: Moody’sGermany Portugal Italy Ireland Greece Spain UK

What To Watch: CopperCopper Prices


Source: DOW Jones, AIG, NSA Future Price Index: Dow Jones AIG - Copper(NSA)

DC MetroDC Metro


The Budget Control Act of 2011Total of $4 trillion needed for long-run sustainability, 2012-2021

Specified spending cuts ($0.7 tril.)

Interest savings ($0 4 tril )Interest savings ($0.4 tril.)

Supercommittee/trigger ($1.3 tril.)

To be determined ($1.6 tril.)


Source: CBO, Moody’s

Specific Spending “Cuts”

$ Billions$ Billions



Too Many Questions

?Tax revenue?

Entitlement reform?

Cuts in DC or elsewhere?



DC Metro Becoming More RelevantDC Metro Share of U.S. GDP

3.4%

2.8%

3.0%

3.2%

2.2%

2.4%

2.6%

2.0%


Source: BEA

People Drive DemandDC Metro Population, 000’s

POPULATION GROWTH


Source: Census Bureau, Moody’s

Short Term: SluggishDC Metro Job Growth: Year-Over-Year, 000’s

150

50

100

Historical Average: 35,000

17.4

-50

0

-100


Source: BLS, Cassidy/Turley ResearchTotal Nonfarm Forecast

Not Terrible Relative to the CountryOffice Sector: Net Absorption 2011

1.2 MSF



But It Feels Terrible

7

Office Sector: Net Absorption

4

5

6

illio

ns)

MD

VADC

2

3

4

quar

e Fe

et (m

0

1

2

Sq


2010 2011Source: Cassidy/Turley Research

Short-Term: SluggishNet Effective Rents: 2012 Forecast

Key Trends:The District

Key Trends:

• Tenant’s market returns

Downtown Submarkets

Emerging Submarkets

Northern VA

• Federal Gov’t contracts

• Private sector sluggish

Inside the Beltway

Outside the Beltway

Suburban MD

-1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0%

• Depleted deal activityMontgomery County

Prince Georges County



Long-Term: What’s the Concern? Job Growth Since 2000, 000’s


Source: BLS

Forecast Comparison: 2011-2014DC Metro Annual Job Growth


Source: Bureau of Labor Statistics, George Mason University, Moody’s, Cassidy TurleyCassidy Turley George Mason University Moody’s Average

Supply Remains ConstrainedOffice Deliveries DC-VA-MD

MDVADC

20 Yr Average: 7.3M SF 12’- 13’ Avg:0 e age 3 S 12 13 Avg: 2.7M SF


Source: Cassidy Turley

Apartment Demand SurgingDC Metro, Net Absorption

MD DCNoVA

29 500 units of29,500 units of future demand


Source: Cassidy Turley, Reis

A l F

DC Metro Forecast TableActual Forecast

2009 2010 2011 2012 2013

D.C. Region EconomyReal GMP (%) 0.0 3.3 2.1 2.7 3.0

Employment Annual (000s) -36.5 11.1 18.9 17.4 33.1

Unemployment Rate (%) 6.2 6.0 6.0 5.8 5.7

Population (000s) 4,308.5 4, 401.1 4,460.9 4,516.1 4,569.1

Personal Income Growth (%) 1.0 2.6 3.8 5.2 6.1

Existing Home Price ($000s) 308.6 325.3 327.0 335.1 344.5

Housing Permits (000s) 10.6 10.2 13.6 18.6 25.6

2 8 68 8U.S. Consumer Confidence 45.2 54.5 58 68 85

U.S. CPI Inflation (%) -0.3 1.6 3.2 2.2 3.0

U.S. 10-Yr Treasuries (%) 3.3 3.2 2.8 2.7 3.2

Fed Funds Rate 0.2 0.2 0.1 0.1 0.1

D.C. Region Office Sector(%) 13 9 13 0 13 1 12 8 12 3Vacancy (%) 13.9 13.0 13.1 12.8 12.3

Net Absorption -2.3 5.7 1.2 2.8 3.5

Asking Rents $35.70 $34.90 $35.45 $37.09 $37.86

New Space Deliveries 9.9 4.6 1.3 2.7 2.6

Investment SalesS l V l ($billi ) $2 3 $4 3 $7 2 $5 4 $6 8


Sales Volume ($billions) $2.3 $4.3 $7.2 $5.4 $6.8

Year-ago %chg -32% 87% 67% -25% 26%

Bill CollinsExecutive Managing Director | Cassidy Turley

2011 Office Investment Sales MarketShare by Transactions – Washington Region

Grubb &CBRE,

8%Other,

7%

Transwestern,7%

Grubb & Ellis, 3%

JLL, 4% 44%

Eastdil

HFF, 13%


Eastdil, 14%

2011 Construction Equity/Debt Finance Market

Share by Transactions – Washington RegionWalker & Dunlop,

Cushman & Wakefield,

HFF,23%

JLL, 5%

Dunlop,0% CBRE,

0%

Wakefield, 0%

73%73%


Office Investment SalesOffice Investment Sales


Office – Washington Metro Area

Office 2009 2010 2011

Total Volume $2.3 Billion $4.0 Billion $7.2 Billion

# of Transactions 32 52 73

Average of Price/SF $301 $345 $400Average of Price/SF $301 $345 $400

Average Cap Rate 7.5% 6.75% 6.84%

DC 6.75% 6.0% 6.01%

Inside the Beltway 7.5% 6.75% 6.04%

Outside the Beltway +8.0% 7.0% 7.43%


Office Investment SalesWashington, DC Metro Area

$14.1$14

$16

$10.2

$12.5

$8

$10

$12

$14

ons

Historical Average = $5 4 B $7 2

$1 1$2.0

$2.8

$4.9

$2.7$3.7 $4.0 $3.9

$6.4$7.3

$3.4$2.3

$4.3 $5.4

$2

$4

$6

$8

$ B

illi Historical Average = $5.4 B $7.2

$1.1

$0

$2

Suburban MD Northern Virginia DC


Suburban MD2011 Total $507K

Northern Virginia2011 Total $3.1B

DC2011 $3.6B

Buildings on the MarketWashington, DC Metro Area

90

100Office Listings

60

70

80

90

Historical Average = 55

20

30

40

50

0

10


Source: Cassidy Turley

Office PricesDC Metro

$370

$411 $400$400

$450

$201$223

$240$264

$315$341

$370

$301

$345

$250

$300

$350

$400

quar

e Fo

ot

$127 $127 $140$165 $169

$187 $201

$

$100

$150

$200

Pric

e Pe

r Sq

$0

$50


Office PricesDistrict of Columbia

$544$503

$600

$267 $277$323

$363

$423$461 $451

$403

$491 $503

$300

$400

$500

quar

e Fo

ot

$186 $190 $190 $209 $210$245

$267 $277

$100

$200

$300

Pric

e Pe

r Sq

$0


Office PricesNorthern VA

$356 $345$3 0

$400

$191$221 $229

$282$299

$316

$231 $236

$

$200

$250

$300

$350

quar

e Fo

ot

$114 $116 $129

$165 $167 $171 $165$ 9

$50

$100

$150

$200

Pric

e Pe

r Sq

$0

$50


Office PricesSuburban MD

$251

$283 $275$300

$$147

$165$142

$182

$239$227

$251

$185$171

$150

$200

$250

quar

e Fo

ot

$82 $76$102

$122 $131$113

$142

$50

$100

$150

Pric

e Pe

r Sq

$0


Primary Markets Dominate SalesOffice Sales Volume, Year-to-Date, November 2011

$600

$9 000

$10,000

$300

$400

$500

$5 000

$6,000

$7,000

$8,000

$9,000

PU(mill

ions

)

2011 District = $503/SF

$100

$200

$300

$2,000

$3,000

$4,000

$5,000 PP

$ Vo

lum

e (

$0 $0

$1,000


*As of December 31,2011Source: Cassidy Turley, Real Capital Analytics

$ Volume Avg PPU

Office Cap RatesWashington, DC Metro Area, all classes

9 0%

10.0%

9 0%

10.0%

6.0%

7.6%

6.9%

5 0%

6.0%

7.0%

8.0%

9.0%

5 0%

6.0%

7.0%

8.0%

9.0%

7.6%6.9%6.0%

2.0%2.0%

3.0%

4.0%

5.0%

2.0%

3.0%

4.0%

5.0%

2.0%

0.0%

1.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

DC MD VA 10 Yr Treasury

0.0%

1.0%


yDC MD VA -10 Yr Treasury

Source: Moody’s Economy.com, Cassidy Turley

Office Cap RatesDistrict of Columbia

10.0%10.0%

6.2%7.0%

8.0%

9.0%

6.2%7.0%

8.0%

9.0%

6.0%

3 0%

4.0%

5.0%

6.0% 6.0%

4.0%

5.0%

6.0%

2.0%

3.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Class A Class B/C 10 Yr Treasury

2.0%

3.0%

2.0%


Class A Class B/C 10 Yr TreasuryClass A Class B/C -10 Yr Treasury

Percent of Class A Office SalesDC Metro, % of Office Sales Volume Class A

95%

85%

90%

75%

80%

65%

70%


Office Capital FlowsDC Metro United States

35%

19%

22%

46% 47% 36% Institutional

Cross-Border

12%

20%22%

17%

12%

12%

17%

16%

Public Listed/REITs

Private

Users/Other

8%

14%16%

32% 38%

5%

17%

12%

25%

12%

23%

12%

12%

5% 7%


2008 2009 2010 2011 (YTD) 2011 (YTD)Source: Real Capital Analytics

Multifamily Investment SalesMultifamily Investment Sales


Multifamily

Office 2009 2010 2011

$1 2 $3 6 $4 0Total Volume $1.2Billion

$3.6 Billion

$4.0Billion

# of Transactions 29 51 84

Average of Price/SF $141 232 $180 793 $182 116Average of Price/SF $141,232 $180,793 $182,116

Average Cap Rate 6.9% 6.4% 6.0%

Class A 6.0% 4.5-5.5% 4.5%

Class B 7.0% 6.0-6.5% 6.0%

Class C 8.0% 7.0% 6.5%


Sales Volume

$600

$3 5

$4.0

Multifamily Sales Volume, Year-to-Date, November 2011$600

$300

$400

$500

$2 0

$2.5

$3.0

$3.5

(bill

ions

)

$300

$400

$500

usan

ds)

$100

$200

$300

$0 5

$1.0

$1.5

$2.0

$ Vo

lum

e

$100

$200

$300

PPU

(tho

$0 $-

$0.5

$0


$ Volume Avg PPUSource: Real Capital Analytics

Sales VolumeMultifamily Sales Volume, Year-to-Date, November 2011

9 0%

10.0%9 0%

10.0%

5.6%6.1%6.0%

5 0%

6.0%

7.0%

8.0%

9.0%

6.1%6.0%

5 0%

6.0%

7.0%

8.0%

9.0%

2.0%2.0%

3.0%

4.0%

5.0% 5.6%

2.0%2.0%

3.0%

4.0%

5.0%

0.0%

1.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

DC MD VA 10 Yr Treasury

0.0%

1.0%


Source: Moody’s Economy.com, Real Capital Analytics

yDC MD VA -10 Yr Treasury

Multifamily Capital Flows

11%

DC Metro United States

30%11%

11%42% 51% 32% Institutional

Cross-Border

31%20%

31%7%

6%

14%

Public Listed/REITs

Private

Users/Other

37% 53%

5%

31%

25% 17%

22%45%


5%2008 2009 2010 2011 (YTD) 2011 (YTD)

Source: Real Capital AnalyticsRounded figures may not add up to 100%

Forecast 2012: DebtForecast 2012: Debt


U.S. Real Estate Capital$3.9 trillion

Public PublicDebt

Private Equity

EquityDebt

Private Debt


Debt

Debt Capital$2.8 trillion Commercial

Mortage Securities

Government Credit

AgenciesMortgage

REITsREIT

Unsecured Debt

Pension Funds

Public

Life Insurance Companies Public Debt

Untraded FundsPrivate Debt

Banks, S&Ls, Mutal Savings


gBanks

CMBS Mortgage Maturities

$130 $130 $150

$100

$ $

$90

$120

atur

ing

fDol

lars

)

$28

$58 $50

$57

$20 $10

$20 $25 $30

$60

Loan

s M

a(B

illio

ns o

f

$10

$0


Source: Trepp, LLC. Note: For the public conduit universe, including multifamily-directed, non-multifamily-directed, and full deceased loans, as of September 2011

U.S. CMBS Issuance

$250

$150

$200

al fDol

lars

)

$50

$100Tota

(Bill

ions

of

$0


Source: Commercial Mortgage Alert. *Issuance projected through December 31, 2011

Forecast 2012• Debt

• Interest Rates

• Inflation

E• Economy

• Euroburb

• New Development

• Future of Office Space


p

Discover Leadership / Discover Excellence / Discover Success

Discover Leadership / Discover Excellence / Discover Success

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