On June 18, 2015, EDR Insight’s Dianne Crocker moderated a panel at the MBA of NY’s inaugural Real Estate Strategic Lending Summit in Manhattan. Crocker’s panel, titled RECOVERING FROM THE RECOVERY: The New State of Commercial Real Estate Lending, kicked off the day’s events. Panelists included four well-respected heavy hitters from the world of commercial real estate analysis, presenting the latest and greatest intel on the state of the overall market and the forces impacting today’s lending environment, CMBS and the wall of maturities hitting over the next few years, lender composition, NYC pricing and the market forecast. Speakers included: Ken McCarthy, Senior Managing Director at Cushman & Wakefield; Tom Fink, Senior Vice President and Managing Director of EDR’s sister company Trepp; Bob White, founder and president of Real Capital Analytics Inc., a data and analytics company tracking the capital markets for commercial real estate globally; and Ryan Severino, senior economist and director of research in the research and economics department at Reis.

1. RECOVERING FROM THE
RECOVERY:
The New State of Commercial Real
Estate Lending
• Moderator: Dianne Crocker EDR Insight
• Panelists:
– Ken McCarthy, Cushman & Wakefield
– Thomas Fink, Trepp
– Bob White, Real Capital Analytics
– Ryan Severino, REIS

2. THE BIG PICTURE
Kenneth McCarthy
Chief Economist
Senior Managing Director
Cushman & Wakefield

3. THE MILLENNIAL WAVE
U.S. Population by Age
Millennials:
90.8 Million
Boomers:
79.1 Million
Source: U.S. Census Bureau

4. MILLENIALS ARE NOW THE LARGEST
COMPONENT OF THE LABOR FORCE
0
10
20
30
40
50
60
70
MillionsofWorkers
Millennials:
53.1 m
workers
Boomers:
49.3 m
workers
Generation X:
49.5 m
workers

5. 648.8
85
NYC HAS BEEN THE FOCAL POINT OF JOB
GROWTH IN THE METRO AREA
OVER THE PAST DECADE
OF 733,800 JOBS ADDED IN METRO AREA,
648,800 ARE IN THE CITY;
ONLY 85,000 IN THE SUBURBS
0
100
200
300
400
500
600
700
2004-2015
THOUSANDSOFPERSONS
TOTAL JOB GROWTH | JAN 2004 – APR 2005
NYC vs. Suburbs

6. NYC MONTHLY EMPLOYMENT
+463,500
12.5
years
+489,500
8.75
years
+502,900
5.3
years
and
counting…
3,100
3,300
3,500
3,700
3,900
4,100
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Source: U.S. Bureau of Labor Statistics

7. CBD VACANCY vs. % UNDER CONSTRUCTION
3.8%
7.0%
7.5%
9.4%
9.5%
9.7%
10.4%
10.5%
11.5%
11.5%
11.7%
11.9%
11.9%
12.6%
12.7%
13.1%
15.3%
15.4%
15.5%
17.4%
18.1%
18.1%
18.2%
20.8%
[VALUE]
0%
5%
10%
15%
20%
25%
Vacancy % of Inventory Under Construction
Source: Cushman & Wakefield Research
24.0%

8. U.S. CONSTRUCTION COMPLETIONS
AS A % OF TOTAL INVENTORY
1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
1.0%
Source: Cushman & Wakefield Research
1986 1990 1994 1998 2002 2006 2010 2014 2015

9. MANHATTAN OFFICE USING
EMPLOYMENT VS. VACANCY
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
1,000
1,050
1,100
1,150
1,200
1,250
1,300
1Q90 2Q91 3Q92 4Q93 1Q95 2Q96 3Q97 4Q98 1Q00 2Q01 3Q02 4Q03 1Q05 2Q06 3Q07 4Q08 1Q10 2Q11 3Q12 4Q13 1Q15
ThousandsofPersons
Office Using Employment Vacancy Rate

10. The World of CMBS
Thomas Fink, CRE
Senior Vice President
& Managing Director
TREPP

11. Sources of Commercial Real Estate Debt
• CMBS (Securitization)
• Life Insurance Companies
• Commercial Banks
• Government
• Private Equity
• REITs and Debt Funds
─ Active
─ Active
─ Active
─ Active
─ Active
─ Active

12. CMBS 2.0 Primary Market Activity
2012
• $45.8 billion in
Conduit,
SASB, & Large
Loans
• 57 deals
• $21.2 billion in
Freddie Mac
• 17 deals
2013
• $83.1 billion in
Conduit,
SASB, & Large
Loans
• 102 deals
• $28.0 billion in
Freddie Mac
• 19 deals
2014
• $93.1 billion in
Conduit,
SASB, & Large
Loans
• 120 deals
• $21.3 billion in
Freddie Mac
• 17 deals
2015 - YTD
• $42.40 billion
in Conduit,
SASB, & Large
Loans
• 55 Deals
• $11.14 billion
in Freddie Mac
• 9 deals

13. National CMBS Activity

14. NYC MSA CMBS Activity

15. Additional Opportunities
in Maturing CMBS Loans

16. U.S. CMBS Delinquency Rates:
Significance of Regional Variation
3.51%
Pacific
8.15%
Mountain
2.96%
Southwest
Central
6.64%
Northeast
Central
5.77%
Northwest
Central
8.52%
Southeast
Central
7.35%
South
Atlantic
6.15% Middle
Atlantic
4.34%

17. Middle Atlantic States:
CMBS Delinquency Breakdown
5.71%
8.07%6.81%
NY
PA
NJ

18. NYC MSA CMBS in Special Servicing

19. Commercial Real Estate Debt Maturities
Annual Maturities by Lender Type

20. The Latest on Lending and
the NYC Market
Robert M. White, Jr.,
CRE, FRICS
Founder & President
Real Capital Analytics

21. Competition Among Lenders Growing
Source: Real Capital Analytics

22. Competition Among Lenders Growing
Source: Real Capital Analytics

23. Are Manhattan Prices Already Bubbly?
US (Moody’s/RCA CPPI)
Manhattan
NYC Boroughs
NYC Suburbs
-
50
100
150
200
250
300
350
400
450
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14

24. Fundamentals Justify Prices
100
200
300
400
500
600
700
800
900
1,000
1,100
75
125
175
225
275
325
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
NCREIFNOI/RCACAPS
PriceIndex
NYC Property Prices NOI vs Cap

25. Employment Growth Justifies Prices
8,000
8,200
8,400
8,600
8,800
9,000
75
125
175
225
275
325
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Employment(millions)
PriceIndex
NYC Property Prices NYC Employment

26. NYC Prices Compare Well Globally
$610
$716
$750
$788
$1,070
$1,402
$1,773
Beijing
Manhattan
Tokyo
Paris
Singapore
Central London
Hong Kong
2014 Office Avg $/sf

27. NYC Yields Compare Well…

34. Q&A
• Moderator: Dianne Crocker EDR Insight
• Panelists:
– Ken McCarthy, Cushman & Wakefield
– Thomas Fink, Trepp
– Bob White, Real Capital Analytics
– Ryan Severino, REIS