This presentation discusses the state of commercial real estate markets in early 2009. It notes that fundamentals are currently well-aligned across major property types, but refinancing will be a major issue that year. It also compares the current downturn to the early 1990s recession, finding it is looking worse so far. The document outlines how lower mortgage rates are enabling refinancing but changes in capital markets are gradual. It discusses the impacts of layoffs and falling consumer confidence on the economy.

1. Happy New Year? A Presentation for CBRE Capital Markets Presented By: Jim Costello, Principal, Torto Wheaton Research January 8, 2009

2. Fundamentals Well Aligned, So Far… 32 to 34 39.3 31.1 Full Service Hotels 5 to 6 6.7 5.7 Multifamily 9 to 10 9.7 10.7 Retail 9 to 10 11.8 11.3 Industrial 13 to15 17.0 13.9 Office "Natural Rate" Previous Peak 2008Q4* Sources: TWR Outlook XL Winter 2009 *Except Multifamily and Hotels, which are 2008Q3 Availability Rate

3. Refinancing is an Issue in 2009 but Most is 10 years Away Sources: TWR Outlook XL Winter 2009

4. This Downturn is Looking Worse than the Early 1990s July 1990 Source: CBRE/TWR, BLS January 2008 This gap may get worse in early 2009 with downward revisions to the employment data.

5. Mortgage Rates Bringing Payments Down Source: Freddie Mac, Federal Reserve Demand for Mortgages includes anticipation of FED purchaces 0 1 2 3 4 5 6 7 1/3/08 2/3/08 3/3/08 4/3/08 5/3/08 6/3/08 7/3/08 8/3/08 9/3/08 10/3/08 11/3/08 12/3/08 10 Year Treasury 30 Year Conventional Mortgage

6. Leading To Re-Financing Source: Citigroup Global Markets Inc., CBRE Torto Wheaton Research Mortgage Applications

7. But Capital Markets Change is Very Gradual TED Spread has come down from highs but is only recently un-stuck from 2%...needs to get below 1% CMBX spreads (and Cash CMBS spreads and Commercial Mortgage Spreads) are still extremely elevated. Disadvantage of focus on residential is not that it won’t help with problems in commercial, but that it’s help may come too late.

8. Layoffs and Dwindling Confidence Have Led to Sharply Lower Consumer Spending… Source: BEA, TWR

9. … And Higher Personal Savings Rates Source: BEA, TWR

10. There is a Lot of Cash on the Sidelines Source: CBRE/TWR, Federal Reserve Bank

11. Monetary Policy at Bottom: No Benefit from an Upward Sloping Yield Curve Source: Federal Reserve Bank

12. Fiscal Policy now the Instrument to Boost Growth

13. Trusted Advice. Proven Performance. Thank You www.tortowheatonresearch.com Torto Wheaton Research 260 Franklin Street, Suite 400 Boston, MA 02110 Tel: 617.912.5200 Fax: 617.912.5240