This document summarizes a conference on the US real estate market. It discusses macroeconomic conditions and trends in the US economy, capital markets, the real estate market, and the future outlook. Several speakers presented on topics like GDP growth, unemployment, housing sales, debt levels, and the job market. The document also analyzes investment trends in apartment markets and the multifamily sector. It notes improving conditions for higher-quality assets but continued challenges for smaller, lower-quality properties. Overall, the future outlook is positive but short-term growth remains uncertain due to issues like high debt, conservative business spending, and political uncertainty.

1. All Rights Reserved
ANNUAL DS CONFERENCE- US REAL ESTATE
Alon Solomon- C.E.O
Asaf Arieli-Business Development Manager

2. Just saw recruiting billboard (by AOL) on 101 for the first time in years. Great sign that 2011 will be prosperous for many.
January 1 at 1:56am via Twitter · Like · Comment · @paglo on Twitter
Are things getting better?

3. Real Estate Market in the US
• Macro economics conditions
• Capital Markets
• Real estate Market conditions
• What the does the future holds for the US economy?
• What should you invest in?
• Global Paragon

4. The Good, the Bad and the Ugly
The Good
• U.S. GDP back to 2007 levels
• S&P 500 is up for straight two years
• Retail Sales excluding auto & gas up $12.6B from pre-recession levels
• Bush Tax cuts are extended
• The Private Sector added 1.3M jobs in 2010
• Corporate Profits up $48B from previous peak in 3Q 2006
• ISM manufacturing index is up 17% from pre-recession levels
The Bad
• Unemployment Rate at 9.4% or double 2007 levels
• Consumer Confidence remains 42% below pre-recession levels
• Net Exports down 10% from pre-recession levels
• Single-Family home sales 35% below 2005 peak
• Single-Family home prices down 23% from the 2006 peak
The Ugly
• Household Debt remains elevated at 91% GDP
• Public Debt, at 92% of GDP, is the highest level since WW2
• Creation of Government job vs. Free market jobs
• Political Uncertainty: New health care costs, new taxes, what will Obama do next?
Sources: BLS, BEA, ISM, U.S. Census Bureau

5. U.S. Macro Economics Data and trends

6. Sources: Marcus & Millichap Research Services,, U.S. Census Bureau
U.S. Retail sales have recovered from dramatic drop

7. Sources: BLS
Private sector job growth, one calendar year following end of recession

8. U.S. employment change by sector 2010
Sources: Marcus & Millichap Research Services, BLS

9. Increase in Government jobs and benefits
Sources: The Economist, George Washington University, White house office if information and regulatory affairs

10. Capital spending by corporate America is key to recovery – profit trend positive
Sources: BEA

11. Companies still hesitant to add long-term jobs
Sources: BLS

12. Single-Family Housing and condo market yet to enter sustainable recovery
Sources: National association of RELATORS

13. Threat of Deflation dominating current FED agenda
Sources: U.S. Census Bureau, BLS, Federal Reserve Board

14. An Economy in transition U.S. GDP growth past, present and future
Sources: BEA, Economy.com

15. Sources: BLS
Employment growth is Expected to gain momentum in 2011 and 2012

16. Sources: REIS, BLS
Quarterly Job growth vs. Apartment units absorbed

17. Sources: BLS
20-34 year olds share of job losses/gains

18. Apartment metro forecast vacancy ranking 2011
Sources: Reis

19. US Federal Debt as Percent of GDP- near WWII levels

26. Capital Markets overview and outlook

27. Sources: Reis
Core Inflation vs. 10-Year Treasury

28. Can Mortgage Rates be as high as the 80s level?
Sources: FreddieMac

29. Mortgage Crisis Overview- Secondary Market- Competition
Home Buyer
Mortgage Bank
Home Valuation
Income Check
Home Buyer
Israel Market US Market
Repayments
Mortgage Loans
Repayments
Mortgage Loans
Brokers
Appraisers
Key
Safeguards
Bank Checks
Independent Checks
Cash Flow
Mortgage
Bank A
Mortgage
Bank B
Mortgage
Bank C
Mortgage
Bank D
Mortgage
Bank E

30. Home Buyer
Mortgage Bank
Home Valuation
Income Check
Mortgage Bond
Market
Mortgage Bank
Home Buyer
Israel Market US Market
Repayments
Mortgage Loans
Repayments
Mortgage Loans
Acquisition of
Mortgage Pool
Mortgage Pool
Cash Flow
Brokers
Appraisers
Rating
Agencies
Key
Safeguards
Bank Checks
Independent Checks
Cash Flow
Mortgage Crisis Overview- Secondary Market- Securitization

31. Home Buyer
Mortgage Bank
Home Valuation
Income Check
Mortgage Bond
Market
Mortgage Bank
Home Buyer
Israel Market US Market
Repayments
Mortgage Loans
Repayments
Mortgage Loans
Acquisition of
Mortgage Pool
Mortgage Pool
Cash Flow
Brokers
Appraisers
Rating
Agencies
Key
Safeguards
Bank Checks
Independent Checks
Cash Flow
Mortgage Crisis Overview- Secondary Market- Securitization what went wrong?

32. • 2/28 loans
• Below 620 Credit Score
• NINJA loans
• Financial Engineering
The rise of the sub-prime mortgage market

33. The sub-prime aftermath

34. Multi-family mortgage debt outstanding
Sources: Marcus & Millichap Research Services, MBA

35. Sources: MBA
U.S. Commercial Mortgage delinquency rates by lender type

36. Total Multi-family mortgage debt outstanding: $847B
Sources: MBA

37. Sources: Commercial Mortgage Alert
U.S. Commercial mortgage backed securities (CMBS) Issuance

38. What will be in the future....?
Hard to tell
....
We can only guess and estimate

39. ‫דיעה‬‫אחת‬:
‫פרופ‬'‫פסיג‬ ‫דוד‬,‫טכנולוגי‬ ‫בחיזוי‬ ‫המתמחה‬ ‫עתידן‬,
‫וחינוכי‬ ‫חברתי‬-"‫צעירה‬ ‫מעצמה‬ ‫היא‬ ‫אמריקה‬"
•‫ארה‬"‫הבינלאומית‬ ‫בזירה‬ ‫מאוד‬ ‫חשוב‬ ‫תפקיד‬ ‫משחקת‬ ‫ב‬.
•‫למעצמות‬-‫חיים‬ ‫תוחלת‬ ‫יש‬ ‫על‬-‫שנה‬ ‫אלף‬ ‫עד‬ ‫אפילו‬ ‫נע‬ ‫זה‬ ‫קדומים‬ ‫בימים‬,
‫בכ‬ ‫מדובר‬ ‫המודרנית‬ ‫בתקופה‬-300‫שנה‬
•.‫ארה‬"‫השנייה‬ ‫העולם‬ ‫מלחמת‬ ‫אחרי‬ ‫רק‬ ‫על‬ ‫למעצמת‬ ‫הפכה‬ ‫ב‬,‫עדיין‬ ‫היא‬
‫צעירה‬ ‫מאוד‬.‫קורסת‬ ‫שהיא‬ ‫שחושב‬ ‫מי‬-‫המפה‬ ‫את‬ ‫נכון‬ ‫קורא‬ ‫לא‬,‫נכון‬ ‫קורא‬ ‫לא‬
‫שלה‬ ‫היתרונות‬ ‫את‬.‫להבין‬ ‫צריך‬,‫כך‬ ‫כל‬ ‫עם‬ ‫על‬ ‫מעצמת‬ ‫היתה‬ ‫לא‬ ‫פעם‬ ‫אף‬
‫לארה‬ ‫שיש‬ ‫כמו‬ ‫יתרונות‬ ‫הרבה‬"‫ב‬.
‫סין‬ ‫לגבי‬,‫כמו‬ ‫גיאוגרפית‬ ‫התפשטות‬ ‫במגמת‬ ‫כרגע‬ ‫נמצאת‬ ‫לא‬ ‫היא‬ ‫כל‬ ‫קודם‬
‫רוסיה‬,‫כלכלית‬ ‫התחזקות‬ ‫במגמת‬ ‫אלא‬.‫לכך‬ ‫מעבר‬ ‫אבל‬,‫גדולות‬ ‫בעיות‬ ‫לה‬ ‫יש‬.
‫שלה‬ ‫והחסרונות‬ ‫היתרונות‬ ‫את‬ ‫כשמנתחים‬-‫מבחינה‬ ‫נכון‬ ‫לא‬ ‫כך‬ ‫כל‬ ‫בנויה‬ ‫היא‬
‫ופוליטית‬ ‫כלכלית‬,‫שיהיה‬ ‫עד‬ ‫זמן‬ ‫של‬ ‫עניין‬ ‫רק‬ ‫שזה‬ ‫טוענים‬ ‫המומחים‬ ‫שמרבית‬
‫מאוד‬ ‫גדול‬ ‫משבר‬ ‫שם‬,‫ה‬ ‫המאה‬ ‫של‬ ‫השני‬ ‫בעשור‬ ‫יקרה‬ ‫שזה‬ ‫מעריכים‬ ‫ואנו‬-21.

40. Apartment Investment Trends

41. Market has firmed up for class “A” and “B+” larger assets in better markets
• Market is efficient and organizes
• Substantial amounts of equity raised: what are the other alternatives?
• CAP rates decreasing
• Increase of Real prices
Market Divergence between quality of assets

42. Market Divergence between quality of assets
Class “C” and smaller assets
• Market inefficient and disorganized
• Agency loans not focused on smaller assets
• Collection issues challenge cash flows
• Continued pressure from distressed assets
• Investment opportunities to experienced investors

43. Multifamily Starts – lowest levels
Sources: US census, Sequoia Research

44. Apartment Investment Trends – Transaction Volume by Price Category
Sources: CoStar Group Inc., Real Capital Analytics

45. Apartment Investment Trends – Dollar Volume by Price Category
Sources: CoStar Group Inc., Real Capital Analytics

46. National Apartment Transactions
Sources: CoStar Group Inc., Real Capital Analytics

47. Sources: CoStar Group Inc.
Estimated Distresses U.S. Apartment Investment Trends – Dollar Volume

48. National Apartment Price / Cap Rate Trends
Sources:, CoStar Group Inc.

49. Apartment Cap Rate Trends – Average Cap Rates vs. 10-Year Treasury
Sources: CoStar Group Inc. NREI, Real Capital Analytics

50. U.S Apartment Buyer Composition
Sources: Marcus & Millichap Research Services, Real Capital Analytics

51. Why the Long-Term outlook for the U.S. apartments is extremely favorable
1. Population growth: constant immigration, Echo boomers
2. Sharp decrease in new supply
3. Affordability: rent vs. own
4. Employment growth
5. Weak dollar

52. Short term growth – Uncertainty
Job growth is hampered by psychology and uncertainty
• Corporations are sitting on cash
• Productivity is at all time highs
• Temporary employment is up 25%
• Small businesses are concerned about health care costs and tax
increases
• Record deficits and national debt
• Extremely hard to qualify for any loan, both private and business loans
• Conservatism is slowing the rate of recovery

53. What type of investors will eliminate uncertainty?
•Cash Flow producing assets
•Experienced local investors
•Close to the market
•Cost Savings capabilities