Which Way “Real Estate”?

0% 5% 10% 15%

NAREIT (Public Real Estate)

NCREIF (Private Real Estate)

Russell 2000

S&P 500

NASDAQ

U.S. Govt. Bonds

Sources: NAREIT; NCREIF; Russell 2000; Standard & Poor’s; NASDAQ; Merrill Lynch

U.S. Real Estate Returns Have Been Stellar For a Decade…

Average Annual Return,

1997 through 2006

5%

6%

7%

8%

9%

10%

11%

Industrial

Suburban Office

Retail

CBD Office

Apartment

Source: Real Capital Analytics

O v

e ra

ll C

a p

it a

li z a

ti o

n R

a te

2001 2002 2003 2004 2005 2006

Driven By Lower Cap Rates...

-150

0

150

300

2001 2002 2003 2004 2005 2006

A b

s o

rp ti

o n

S F

( m

il li o

n s )

9%

10%

11%

12%

A v a il a b

il it

y R

a te

Absorption Availability Rate

Industrial Demand Has Been Solid…

Sources: CBRE Torto Wheaton Research; CBRE Investors

The Office Market Has Steadily Recovered…

Sources: CBRE Torto Wheaton Research; CBRE Investors

-100

-50

0

50

100

2001 2002 2003 2004 2005 2006

A b

s o

rp ti

o n

S F

( m

il li o

n s )

10%

12%

14%

16%

18%

V a

c a

n c

y R

a te

Absorption Vacancy Rate

Sales Growth Has Maintained Moderate Retail Availabilities…

0

2

4

6

8

2001 2002 2003 2004 2005 2006

R e ta

il S

a le

s

A n

n u

a l

P e

rc e

n t

C h

a n

g e

0

3

6

9

12

S h

o p

p in

g C

e n

te r

A v a il a b

il it

y R

a te

Retail Sales Growth Shopping Center Availability Rate

Sources: Moody’s Economy.com; CBRE Torto Wheaton Research

Apartment Rents Have Increased While Condo Prices Have Cooled...

-5%

0%

5%

10%

15%

20%

1999 2000 2001 2002 2003 2004 2005 2006

A n

n u

a l

C h

a n

g e

Apartment Rent

Condo Prices

Sources: REIS, Inc.; National Association of Realtors

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Existing Homes

New Homes

2001 2002 2003 2004 2005 2006

Residential Sales Are Dropping…

Sources: National Association of Realtors; U.S. Census Bureau; CBRE Investors

Y e

a r-

O v

e r-

Y e

a r

S a

le s

C h

a n

g e

S ix

M o

n th

M o

v in

g A

v e

ra g

e

2007

Real GDP Growth

United States, 2000 Prices

20062005200420032002200120001999199819971996

5

4

3

2

1

0

Percent Change, Year Ago

Source: Global Insight

20072006200520042003200220012000199919981997

6.5

6.0

5.5

5.0

4.5

4.0

3.5

4

3

2

1

0

-1

-2

Percent Percent Change, Year Ago

Unemployment Rate - L Civilian Employment - R

U.S. Employment Picture

Unemployment Rate & Employment Growth

Source: Global Insight

Real Consumer Spending

United States

0601969186

6

5

4

3

2

1

0

-1

Percent Change, Year Ago

Source: Global Insight

Consumer Confidence Index

Conference Board

20072006200520042003200220012000199919981997

160

140

120

100

80

60

40

Index 1985 = 100

Source: Global Insight

Employment Growth

California vs. United States

20072006200520042003200220012000199919981997

4

3

2

1

0

-1

-2

-3

Percent Change, Year Ago

California United States

Source: Global Insight

Interest Rates Fed Funds Rate and 10-year Government Bond

20072006200520042003200220012000199919981997

8

6

4

2

0

Percent

Fed Funds Rate 10-year Government Bond

Source: Global Insight

Yield Curve

10-year Government Bond Minus Fed Funds Rate

20072006200520042003200220012000199919981997

4

3

2

1

0

-1

-2

Percent

Source: Global Insight

Wages and Unemployment

Average Hourly Earnings and Unemployment

200720062005200420032002200120001999199819971996

6.5

6.0

5.5

5.0

4.5

4.0

3.5

4

3

2

1

0

-1

-2

-3

Percent Percent Change, Year Ago

Unemployment Rate - L Average Hourly Earnings - R

Source: Global Insight

Civilian Unemployment Rate

United States

05009590858075706560

11

10

9

8

7

6

5

4

3

Percent

Source: Global Insight

Real Estate Investment Trusts Sector

Net Acquisition of Financial Assets

20062005200420032002200120001999199819971996

400

300

200

100

0

US$ Billions

Source: Global Insight

Foreign Purchases of U.S. Securities

Net Foreign Purchases

20072006200520042003200220012000199919981997

200

150

100

50

0

US$ Billions

Source: Global Insight

Housing Affordability Index

Seasonally Adjusted

05009590858075

160

140

120

100

80

60

40

Base = 100

Source: National Assoc. of Realtors

Consumer Inflation Rate

Consumer Prices and Wages

20072006200520042003200220012000199919981997

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

Percent Change, Year Ago

Core CPI Average Hourly Earnings

Source: Global Insight

Consumer Price Index

Food and Energy

0705030199979593918987

30

20

10

0

-10

-20

-30

Percent Change, Year Ago

Food Energy

Source: Global Insight

Consumer Price Index

Housing CPI vs. Education CPI

20072006200520042003200220012000199919981997

180

160

140

120

100

80

Index 1997=100

Education CPI Housing CPI

Source: Global Insight

S&P 500 Yield

Dividend / Price Ratio

0601969186

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

Ratio

Source: Global Insight

Mortgage Rates

United States

20072006200520042003200220012000199919981997

9

8

7

6

5

4

3

Rate

30-Year Fixed

15-Year Fixed

1-Year ARM

Sources: Freddie Mac, Economy.com

1-Month LIBOR

London Interbank Offered Rate

20072006200520042003200220012000199919981997

7

6

5

4

3

2

1

0

Rate

Sources: Freddie Mac, Economy.com

Construction Put in Place

Private Residential vs. Private Nonresidential

20072006200520042003200220012000199919981997

30

20

10

0

-10

-20

-30

Percent Change, Year Ago

Residential Construction Nonresidential Construction

Sources: U.S. Census, Economy.com

Single-Family Housing Starts United States, SAAR

20072006200520042003200220012000199919981997

2.0

1.8

1.6

1.4

1.2

1.0

Millions

Sources: U.S. Census, Economy.com

Multi-Family Housing Starts United States, SAAR

20072006200520042003200220012000199919981997

500

450

400

350

300

250

200

Thousands

Sources: U.S. Census, Economy.com

Existing Single-Family Home Sales United States, SAAR

2006200520042003200220012000199919981997

6.5

6.0

5.5

5.0

4.5

4.0

3.5

Millions

Sources: NAR, Economy.com