The document provides commentary on the state of global real estate markets in May 2009. It notes that real estate investment trusts (REITs) bottomed in March 2009 and have rallied significantly since then. However, the recovery may be ahead of itself until the global economy and commercial mortgage-backed securities market stabilize. Direct commercial property with high quality long-term leases has become more attractive, particularly in markets like Washington D.C., but liquid markets still provide the best opportunities. Volatility can be taken advantage of through long/short hedge funds or separate accounts.

1. Real Estate Commentary
May 15, 2009

2. Theme: Public Securities Debt, Equity, capital markets are now Open. New issuance helping to de-lever.
Global REITsREIT in March and April as “value” prices March 9, brought large buyers and short
Global rallied Markets
covering (see below)
Investors should be more positive, but perhaps now, wait for a pull back to deploy into liquid
investments and Start to Buy direct property with 8-9% Cap Rates with long leases in DC, Boston,
London.
YTD 5/14/09
EPRA NAREIT Global index -5..25%
S&P 500 +0.21%
EPRA NAREIT Asia Index +2.18%
U.S. NAREIT Equity Index -14.12%
Major EPRA NAREIT Indexes YTD 5/8/09
Total Return to 5/8
Asia REIT Index +4.73%
European REIT Index +4.89% YTD
Global RE Index +.54%
U.S. Equity REIT Index -6.27 YTD

3. Driver of past Valuations in commercial real estate was cheap and plentiful Loans
Fitch is forecasting total U.S. CMBS issuances to be about $12 billion in 2009,
with most of it coming in the second half, a stark contrast to the record $230 billion issued in 2007.
Loan Market will need a fully functioning CMBS capital markets capability by 2015 to absorb maturities.
Loan Vintages:
CMBS Loan Maturities
Source: DB, Trepp

4. Corporate Restructuring are affecting occupancy.
Office Vacancy Rate %
17%
16%
15%
14%
13%
12%
2002 2003 2004 2005 2006 2007 2008 2009
Vacancies of Office buildings has not peaked as of March ‘09.
(Source: CBRE U.S. Office vacancy rates)

5. Cost of capital improving
3 Mo Libor Rate %
Under 1 % for the First time May 5, 2009
was 10% in 1989
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2002 2003 2004 2005 2006 2007 2008 2009
Lower LIBOR will certainly help fuel a recovery in corporate strength and RE financing.

6. Corporate Bonds Issued by RE Companies and REITS
reached 14% Yield Q4 ’08 now 8.5% Yield May 14, 2009
U.S. Real Estate
1450
Corporate Bond Spreads
1250 1267
1050 1042
987 1020
923
850
825
OAS
650 650
559
450 444 437
363
258 306
250
50 93 85
Mar-06 Feb-07 Dec-07 Jan-08 Mar-08 Jun-08 Jul-08 Aug-08 Sep-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09
Real Estate Corporate Bond Spreads widened in have tightened dramatically
As REITS are retiring debt and improving balance sheets. REIT Bonds +20% YTD 4/30/09
(Source: ML index 3/31/09)

7. April has proven to be one of the best Months
based on past 59 years of S&P data
January 1950 to April 2009
(Source: Dr. Robert Shiller,INetBridge Plexus

8. Good News in April:
Lodging/Resorts
Regional Malls
Simon Property Group
Retail
Prologis
Diversified
Office
FTSE NAREIT U.S.
Apartments
Self Storage
EPRA Nareit Global
EPRA Nareit Europe (USD)
Healthcare
Straits Times Index
DAX Germany
Brazil Bovespa Index
Hang Seng Index
GCC Bloomberg Index
EPRA Nareit Asia
MSCI World Index
0% 10% 20% 30% 40% 50% 60% 70%
% Total Return

9. Good News:
Capital Markets opened. $7+ Billion securities issued to improve Bal Sheets
REIT equity bottomed March 9, ’09 REIT preferred +46% from 3/9 to 5/14
FASB rule on mark to market is a big Plus for RE debt.
LIBOR improved, CMBS Total Return +16.7% 3/9/09 to 5/14/09 AAA rated
Job losses are stabilizing, peak continuing claims may have been 3/27/09
Caution:
Structured Finance Market remains a broken foundation for RE
General Growth Properties files Bankruptcy 4/16/09
Bounce could be temporary.
Sun Hung Properties (Hong Kong) +48%, Starwood REIT +110% from 3/9/09

10. Real Estate Commentary
2009 Outlook: until the global economy and CMBS market is functioning
REIT: Defense/Liquidity
56% rally in EPRA NAREIT Global Index 3/9/09 to 5/9/09 and 30% April rally in the US REIT
index may be ahead of itself, but capital Markets opened, relieving many Bankruptcy worries.
Direct Commercial Property:
High Quality and longer leased property began to be “value” March. 8% Caps are attractive.
DC is the best market to start buying. a Fund Manager that returned +47% is opening again.
Great time to consider getting back into direct RE for longer horizon. Liquid markets have
had the best opportunities for the past 6 months.
CMBS:
Yields have dropped 400+ basis points. This seems correct but with little room to continue.
Long/Short::
Until job losses subside and CMBS markets flow to RE again, Volatility can be taken advantage
in hedge funds. Also, there are opportunities now in separate accounts as a vehicle to add
Transparency and Liquidity. This could be a trend for 2009, out of HF’s and to same manager
but as a Separate acct.
We welcome Client questions and requests for further details.
- Harry Milne, Managing Director
Strategia Investors 203-722-6974