Retail Real Estate Market Overview By Walter Bialas Vice President of Research Madison Marquette

Recession Rumored at the End of 2007 is Now Official Re-benchmarked data show 1.9M jobs lost in 2008 Last 3 months — 1.2M jobs lost November jobs declined 533,000 Broad pull back across most industries

Re-benchmarked data show 1.9M jobs lost in 2008

Last 3 months — 1.2M jobs lost

November jobs declined 533,000

Broad pull back across most industries

Unemployment Rising Rapidly Unemployment now at 6.7% Highest rate in 15 years (since October 1993) Consensus is that rate will hit 8.0% in coming months Continued job erosion has economists re-vamping forecasts Rate could rise to over 9.0%

Unemployment now at 6.7%

Highest rate in 15 years (since October 1993)

Consensus is that rate will hit 8.0% in coming months

Continued job erosion has economists re-vamping forecasts

Rate could rise to over 9.0%

Economic Uncertainty Has Driven Consumer Confidence to Historic Lows October saw confidence at lowest level ever Slight re-bound in November is not material Conference Board sees a “recovery” at sustained levels above 80 Recovery not likely until last half of 2009

October saw confidence at lowest level ever

Slight re-bound in November is not material

Conference Board sees a “recovery” at sustained levels above 80

Recovery not likely until last half of 2009

Retail Spending Outlook Impacted Close relationship between home prices and retail sales historically Past price appreciation fueled the “feel good” spending boom Consumer retrenchment is both economic and psychological Consumer turnaround not expected until home prices stabilize

Close relationship between home prices and retail sales historically

Past price appreciation fueled the “feel good” spending boom

Consumer retrenchment is both economic and psychological

Consumer turnaround not expected until home prices stabilize

Shopping Center Sales Decline After Extended Run-Up Recent consumer spending cutbacks not seen in tech-bust recession Consumer loss of confidence fueling frugality Data does not reflect inflation Trading down is now common Retailer over-expansion now evident in sectors

Recent consumer spending cutbacks not seen in tech-bust recession

Consumer loss of confidence fueling frugality

Data does not reflect inflation

Trading down is now common

Retailer over-expansion now evident in sectors

Department Stores Continue to Struggle to Find Customers Sector decline still underway After some stability between 2003 and 2006, sales declines are steady Competitive pressures continue to mount from discounters and other sectors

Sector decline still underway

After some stability between 2003 and 2006, sales declines are steady

Competitive pressures continue to mount from discounters and other sectors

Discounters and Supercenters Enjoying Sustained Sales Growth Sector has consistently gained market share Organic growth has fueled significant gains Current economy favors the sector as consumers trade down

Sector has consistently gained market share

Organic growth has fueled significant gains

Current economy favors the sector as consumers trade down

Apparel Sector Slowing with Economy Consumer focusing on needs versus wants

Consumer focusing on needs versus wants

Big Ticket Items Particularly Hurt Sales declines tied to housing bust Needs versus wants dictate purchases

Sales declines tied to housing bust

Needs versus wants dictate purchases

Retailers Consolidate and Restructure to Find Solid Base Closings in 2008 top 5,600 Level not seen since the consolidation wave of the 1990s Tenants cutting back expansion plans First half of 2009 will see an acceleration in closings and filings

Closings in 2008 top 5,600

Level not seen since the consolidation wave of the 1990s

Tenants cutting back expansion plans

First half of 2009 will see an acceleration in closings and filings

Some of the More Notable 2008 Announcements No significant tenant concentrations in portfolio Limited impact of closures to Madison Marquette portfolio ANNOUNCED STORE CLOSINGS SELECT RETAILERS AS OF DECEMBER 2008 Retailer Stores Closing Status Ann Taylor 117 Re-Structuring Banana Republic 25 Re-Structuring Circuit City 155 Chapter 11 Club Libby Lu 78 Re-Structuring Disney Stores 98 Chapter 11 Fashion Bug / Lane Bryant / Catherine's 146 Re-Structuring Foot Locker 60 Re-Structuring Friedman's Jewelers 377 Chapter 11 Linen's n Things 371 Chapter 11 Mervyn's 149 Chapter 7 Pacific Sunwear 154 Re-Structuring Sharper Image 96 Chapter 11 Starbucks 600 Re-Structuring Steve & Barry's 276 Chapter 7 Talbots Kids / Talbots Mens 78 Re-Structuring Tweeter 94 Chapter 11 White Hall Jewelers 355 Chapter 11 Wilson's Leather 103 Chapter 11 Zales Jewelers 105 Re-Structuring TOTAL 3,437 --—

No significant tenant concentrations in portfolio

Limited impact of closures to Madison Marquette portfolio

Retail Projects Under Construction Beginning to Slow Difficult to find project financing Net absorption lagging deliveries Tenants cutting back expansion plans Tenants driving deals that are not economical

Difficult to find project financing

Net absorption lagging deliveries

Tenants cutting back expansion plans

Tenants driving deals that are not economical

Retail Vacancy Rising as Tenants Retrench 3Q vacancy 6.6% nationally Not all announcements closed As additional retailers reposition during 2009, vacancy likely to top 7.2% Firmer line between good and marginal locations Lack of development pipeline should begin to reduce vacancy in late 2009

3Q vacancy 6.6% nationally

Not all announcements closed

As additional retailers reposition during 2009, vacancy likely to top 7.2%

Firmer line between good and marginal locations

Lack of development pipeline should begin to reduce vacancy in late 2009

Transaction Volume Back to 2001-2002 Levels The hot deal market in 2004–2006 over-heated in 2007 High flow of capital drove underwriting standards to win deals Risk not adequately modeled Shift in pricing has investors waiting for stability Gap between sellers and buyers beginning to shrink

The hot deal market in 2004–2006 over-heated in 2007

High flow of capital drove underwriting standards to win deals

Risk not adequately modeled

Shift in pricing has investors waiting for stability

Gap between sellers and buyers beginning to shrink

Cap Rates Beginning to Readjust to New Economy As of October cap rates for strip centers averaged 7.24% Reflects an increase of 43 bps in the last 12 months Historically, the spread between 10-year treasuries and cap rates has been 450 to 500 bps As of October, the spread has risen from a low of under 200 bps to 343 bps Outlook is for this spread to return to 500 bps before stabilizing around 350 bps

As of October cap rates for strip centers averaged 7.24%

Reflects an increase of 43 bps in the last 12 months

Historically, the spread between 10-year treasuries and cap rates has been 450 to 500 bps

As of October, the spread has risen from a low of under 200 bps to 343 bps

Outlook is for this spread to return to 500 bps before stabilizing around 350 bps

Market Over Correction September and October saw dramatic declines in REIT values REITs overall were trading at 85% of their NAV: Shopping centers declined to 79% and regional malls were at 71% Since 2000 this ratio was in the range of 100% to 105%

September and October saw dramatic declines in REIT values

REITs overall were trading at 85% of their NAV: Shopping centers declined to 79% and regional malls were at 71%

Since 2000 this ratio was in the range of 100% to 105%

REIT Dividend Yields Out of Sync REIT dividend yield is now 8.18% This reflects an increase of 350 bps since the pre-bubble economy The spread between REIT yield and 10-year treasuries has grown to over 450 bps Historic spreads have been consistently in the range of 50–100 bps Even during post-tech bust, this spread only ran 300–350 bps

REIT dividend yield is now 8.18%

This reflects an increase of 350 bps since the pre-bubble economy

The spread between REIT yield and 10-year treasuries has grown to over 450 bps

Historic spreads have been consistently in the range of 50–100 bps

Even during post-tech bust, this spread only ran 300–350 bps

Recent Retail REIT Performance Stock prices down 50-plus percent Some impacted by high debt loads and no ability to refinance in frozen credit markets Some impacted by active development pipelines All impacted by perceived market risks to portfolios from tenant retrenchment PERFORMANCE SUMMARY SELECT RETAIL REITS AS OF DECEMBER 3, 2008 (Millions) Stock Price (Per Share) Current Equity Cap Enterprise Value Total Debt (YE 2007) Implied Cap Rate 1/ REIT Ticker 4-Dec-07 Current Price Decline General Growth Properties GGP $45.84 $1.33 97% $490 $24,840 $24,350 10.5% Macrerich MAC $76.29 $11.32 85% $862 $6,625 $5,763 9.5% Simon Property Group SPG $94.44 $46.36 51% $10,469 $27,688 $17,219 8.0% Taubman Centers TCO $52.51 $21.57 59% $1,144 $3,845 $2,701 8.0% Acadia Realty Trust AKR $25.28 $13.13 48% $433 $951 $518 8.0% Federal Realty Trust FRT $81.37 $52.32 36% $3,085 $4,723 $1,638 8.5% Pennsylvania REIT PEI $32.53 $3.96 88% $156 $2,431 $2,274 10.6% Regency Centers REG $65.52 $31.40 52% $2,198 $4,206 $2,008 10.5% 1/ Implied cap rate based on Wall Street analyst reports from the end of October to early November.

Stock prices down 50-plus percent

Some impacted by high debt loads and no ability to refinance in frozen credit markets

Some impacted by active development pipelines

All impacted by perceived market risks to portfolios from tenant retrenchment