Bloomberg Brief Real Estate Special

1. special edition 2013 real estate SPONSORED BY <<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<

2. Introduction Welcome to Bloomberg Brief’s special edition on real estate. Investors have flocked back to the residential and commercial property markets as the economy has showed signs of recovering. The issuance of bonds backed by commercial properties is on track to beat last year’s supply and yield premiums for bonds backed by commercial property loans have narrowed. Our special edition will help shed light on where we go next. Jefferies CMBS veteran Lisa Pendergast says she expects CMBS spreads to narrow by year end, while Fannie Mae economists Douglas Duncan and Patrick Simmons argue that a slowdown in the growth of the labor force suggests more modest prospects for the demand for new housing and construction. Emile J. Brinkmann, the chief economist of the Mortgage Bankers Association of America, probes how state regulations will affect the pace of foreclosures and delinquencies. Nicolas Retsinas of Harvard’s Joint Center for Housing has some advice for lawmakers on GSE reform: Be careful that new rules and regulations don’t raise borrowing costs. And Donald Trump offers a characteristically confident view that the recovery in real estate is for real. VIDEO INTRODUCTION Click on or Scan the QR code below with your smartphone to watch our video introduction

3. To ﬁnd out how you might help, contact Jeremy Kraut-Ordover at jkrautordover@habitat.org or visit www.habitat.org. Habitat for Humanity. We build. Habitat for Humanity believes that housing is a critical foundation for breaking the cycle of poverty. We build, renovate and repair homes throughout the United States and in more than 70 other countries around the world. Through technical support; access to resources; and affordable, no-profit loans, Habitat helps families who cannot qualify for conventional financing find hope and opportunity for brighter futures. This “hand up” philosophy can benefit families for generations to come. In the process, stronger communities emerge for everyone.

4. Real Estate By The Numbers 12.2 million Number of U.S. homeowners who owed more than their properties were worth at the end of the second quarter 2013. 15.3 million Homeowners owed more than their properties were worth at the end of the second quarter 2012. 4.50% Average rate for 30-year fixed rate residential mortgage loans in September 2013. 3.31% Average rate for 30-year fixed rate residential mortgages in November 2012. 5.35% Average rate for conventional mortgages between 1900 and 1909. 12.68% Average rate for conventional mortgages between 1980 and 1989. $88.1 billion Total amount of commercial mortgage bonds sold year to date. $117.6 billion Total CMBS sold in 2012. $253.9 billion Amount of commercial mortgage securities sold in 2007. 1,027 Number of real estate M&A deals unveiled year to date. $101.4 billion Value of real estate mergers unveiled year to date. 8 Number of acquisitions announced by Advance Residence Investment year to date, making it the most acquisitive company within real estate M&A. 9% Projected decline in total residential mortgage loans underwritten in 2013 from 2012. $619 billion Total amount of loans expected to be underwritten by lenders for residential home purchases in 2013. $973 billion Total amount of applications expected to be processed by lenders for residential home mortgage refinancings in 2013. $10.5 billion Total amount of non-agency residential mortgage debt sold year-to-date. $3.5 billion Non-agency residential mortgage debt sold in 2012. $1.2 trillion Non-agency residential mortgage debt sold in 2006. $1,528 Average profit earned on each loan underwritten by independent mortgage banks and mortgage subsidiaries of chartered banks in the second quarter of 2013. $1,772 Average profit earned on each loan underwritten by independent mortgage banks and mortgage subsidiaries of chartered banks in the first quarter of 2013. 52% Share of all home loans processed by lenders that are used to buy homes in the second quarter of 2013. 12.1% June gain in home prices from year-earlier level. Source: Bloomberg LP, Brean Capital, Freddie Mac, Mortgage Bankers Association, Zillow, “A History of Interest Rates”(John Wiley & Sons.)

5. We’ve set the foundation for long-term growth 2325 E. CAMELBACK RD., SUITE 1100, PHOENIX, AZ 85016. © 2013 COLE REAL ESTATE INVESTMENTS, INC. ALL RIGHTS RESERVED. Learn more about our team and capabilities by visiting us at www.ColeREIT.com or by calling 800-877-COLE (2653). www.ColeREIT.comVisit our new website A Market Leading Net Lease REIT At Cole, we’ve maintained leadership in the net-lease market by combining best-in-class management, an integrated investment philosophy and disciplined processes. We’ve built an attractive commercial real estate portfolio with high-credit-quality tenants and long-term net leases in retail, office and industrial properties. This proven investment approach provides stable current income over market cycles — with a foundation for long-term growth. 34 Years in Commercial Real Estate Experience #1 Acquirer of Net-Lease Properties for the Past 10 Years1 $10.6 Billion of Gross Assets Owned or Managed2 1. According to Real Capital Analytics, North America, U.S. Transactions closed or under contract. Excluding joint ventures. Status dates: 6/30/2003 to 06/30/2013 2. Data as of 07/31/13

6. The Housing outlook will brighten, but for how long? Demographic and labor market fundamentals point to brighter days ahead for housing, but participants in housing and mortgage finance should keep their umbrellas handy, say economists at Fannie Mae. Page 1 Liquidity Returns to cmbs market Commercial and multifamily real estate investors now look to life companies, pension funds, the government sponsored enterprises, private equity, and CMBS lenders to finance asset purchases and loan refinancings. Page 3 interview: Goodwin procter’s gil menna Real estate investment trust mergers might have picked up if there hadn’t been a wave of stock exchange listings by non-listed REITs seeking liquidity for their shareholders. Page 5 Data Commercial real estate foreclosures, delinquencies, REO properties and CMBS spreads. Page 6, 7, 9, 11-14 retailers stick to bricks and mortar Despite the popularity of online shopping, brick- and-mortar stores still command the lion’s share of shoppers’ dollars and serve as the cornerstone for a retailer’s strategic growth plans, says A&G’s Jonathon Graub. Page 15 higher rates and spending The issue of higher borrowing costs for home buyers has already made it into earnings conference calls, with several businesses voicing concerns about how higher rates will impact consumer spending on goods and services, says Bloomberg’s RichardYamarone. Page 16 data Real estate owned properties. Page 17-19 data Commercial real estate lenders with the most delinquent property loans. Page 22 malls and sluggish retail sales Mall REITs have enjoyed strong tenant-sales growth since the credit crisis and recession, letting them increase rents. Now they face difficult comparisons to past results and limited avenues for external expansion. Page 23-24 data IO loans in CMBS, agency collateral, CMBS issuance. Page 25-26 DatA Florida had the most single family home loans that are 90 days or more delinquent or are in the process of foreclosure in the first quarter of 2013. Page 30 A Menu for gse reform Market distortions and higher borrowing costs are just two factors that should be considered by lawmakers crafting GSE reform legislation. Page 31-32 Data Higher rates have eroded demand for home loan refinancings. In September 57 percent of all loan applications were for refinancings; in December 2012 they accounted for 84 percent of all loans processed by lenders. Page 33 delinquencies Growth in the nation’s economy has not been uniform and regulations vary with each state. These are just two factors that will determine which single family home loans will go delinquent, according to the Mortgage Bankers Association of America’s chief economist. Page 34 interview: Marinus’ najib Canaan The veteran mortgage bond market participant and co-founder of Marinus Capital looks back at how the mortgage bond world has changed after the credit crisis. Page 35 data Forty NewYork businesses with Chapter 11 peti- tions involving debt of $1 million or more identified themselves as single asset real estate, while 29 such filings were California businesses in the first half of 2013. Page 36 interview: prime lending’s steven la due Consumer sentiment has improved, driving up demand for loans to buy homes and much of the lending is being done by large well-capitalized firms as opposed to independent brokers. Page 37 mapping out home prices National home price trends could be misleading for investors, according to Clear Capital’s Dr. Alex Villacorta. Page 38-39 interview: Donald Trump Commercial and residential real estate markets are making a comeback but President Obama’s healthcare legislation threatens the U.S. recovery and has limited real estate investments, says Trump. Page 40 Contents Bloomberg Brief Real Estate Supplement Newsletter Ted Merz Executive Editor tmerz@bloomberg.net 212-617-2309 Real Estate Aleksandrs Rozens Editor arozens@bloomberg.net 212-617-5211 CMBS/CRE Product Cheryl Lopez-Collins Manager clopez12@bloomberg.net 415-617-7026 CMBS Analyst Mohit Malhotra mmalhotra11@bloomberg.net 212-617-4159 Real Estate Jennifer Prince Data Editor jprince10@bloomberg.net 212-617-4589 Art Director Lesia (Alexandra) Kuziw akuziw@bloomberg.net 212-617-5113 Newsletter Nick Ferris Business Manager nferris2@bloomberg.net 212-617-6975 Advertising Jeff Maniatty jmaniatty@bloomberg.net 203-550-2446 Reprints & Lori Husted Permissions lori.husted@theygsgroup.com 717-505-9701 To subscribe via the Bloomberg Terminal type BRIEF <go> or on the web at www.bloombergbriefs.com. To contact the editors:arozens@bloomberg.net This newsletter and its contents may not be forwarded or redistributed without the prior consent of Bloomberg.Please contact our reprints and permissions group listed above for more information. © 2013 Bloomberg LP. All rights reserved.

7. The Housing Outlook Will Brighten, But for How Long? Over the next several years, the two biggest influences on the residential real estate market – household formation and job growth – are signaling a brighter outlook for the housing market. Longer term, however, the likelihood of less immigration and the continued retirement of Baby Boomers may damp demand for housing. In the short run there are reasons to be optimistic. House- hold formation rates, which lagged during the economic slowdown, should recover along with employment rates, creating demand for new housing units. Based on the Census Bureau’s most recent population projections and our view that new household formation will pick up with continued labor market improvement, we forecast that almost 1.4 million households will form when housing markets return to “normal” in 2016. This forecast represents substantial improvement from recent household growth, which bottomed at less than half a million during the Great Recession and is still running at a sub-million annual pace. When combined with demand from few vacant units, our household growth forecast implies a need for more than 1.6 million housing starts in 2016. Although well below housing construction at the peak of the boom, this forecast represents twice the level of housing production recorded last year. Part of the reason for our optimistic outlook is that household formation rates should begin to recover as labor markets improve, unlocking “pent-up” demand for housing, particularly among young adults. During the Great Recession, unemployment among young adults shot up: The unemployment rate for people between 18 and 34 increased to 12.7 percent in 2010 from 6.5 percent in 2007. Facing stormy employment prospects, many young adults, who otherwise would have gone to work and formed independent households, took shelter in Mom and Dad’s basement or in college dormitories. Fortunately, recent data suggest some thawing of the deep freeze in youth employment. The unemployment rate among young adults has declined by about 3 percentage points from its peak. Although Fannie Mae’s Economic and Strategic Research Group doesn’t forecast unemployment rates by age, our latest Economic Outlook calls for the overall rate to decline from 7.5 percent this year to 6.0 percent in 2016, steady improvement that bodes well for the employment prospects of young adults. As labor market conditions continue to improve for young adults, the boost to household formation could be substantial. Recent estimates suggest that the release of pent-up demand alone could lead to a couple of million household formations, spread out over several years. That would create a relatively sunny housing outlook for the next several years. Patrick Simmons Doug Duncan 24 25 26 27 28 29 30 31 32 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2011 (rev) 2012 18-34Year-OldsLivingatHome(percent) Without Good Job Prospects, More Young Adults Live at Home 0 500 1,000 1,500 2,000 2,500 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total Housing Starts (000s of units) Forecast Housing Starts Are Expected to Double Between 2012 and 2016 residential real estate www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 1 continued on next page

8. Over the longer term, however, dark clouds could be forming on the demographic and labor market horizons. Specifically, as described in our recent edition of Housing Insights, we anticipate a long-term slowdown in labor force expansion that suggests more modest prospects for new housing demand and construction than we have seen historically. Underlying the workforce growth slowdown there are two other powerful trends: a decline in immigration and the continued retirement of Baby Boomers. Even using optimistic assumptions about future labor force participation rates (the proportion of the population in a given age and gender that is either employed or actively looking for work), we forecast that workforce growth, after rebounding somewhat from recessionary lows, will be slow next decade. During the first half of next decade, we project that the labor force will grow by only 0.4 percent to 0.8 percent per year, a substantial decline from the average growth rate of 1.5 percent per year experienced between 1948 and 2012. The implications for housing demand are substantial. Reviewing five decades of historical data, we find that the number of new housing units produced is closely correlated with labor force growth. The association between housing production and labor force growth is at least as strong as the correlation between housing production and growth in households, payroll employment, or population. Given the positive correlation between housing production and labor force growth, the anticipated marked slowdown in workforce expansion implies weaker housing demand and homebuilding activity than observed in the past. As a result, we expect demographic and labor market fundamentals point to brighter days ahead for housing, but that players in the housing and mortgage finance industries should keep their umbrellas handy. — Patrick Simmons is director of the strategic planning economic and strategic research group at Fannie Mae. Doug Duncan is senior vice president and chief economist of the economic and strategic research group at Fannie Mae. -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 ChangeinLaborForce(YoY%,3-yearaverage) History Historical Average Most Recent BLS Labor Force Projections ESR Base Scenario ESR Optimistic Scenario Labor Force Growth Is Expected to Remain Subdued For Years To advertise in future editions of Bloomberg Brief Real Estate or any other of our 18 titles contact us today. Contact: Jeff Maniatty +1 203 550 2446 / jmaniatty@bloomberg.net Visit bloombergbriefs.com/advertising for more information. residential real estate… www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 2 continued from previous page

9. Improved Liquidity Propels Commercial Mortgage Bond Issuance To Post-Crisis High The recovery in the commercial mortgage backed securities market is evident on a number of fronts. Most importantly, major commercial real estate property markets have seen rents and valuations approach and – at times – ex- ceed pre-crisis peaks. The better conditions in the commercial real estate (CRE) market are also tied to improved liquidity. In spite of these positive factors, the recovery remains uneven across property markets and asset classes, with weaker markets only recently garnering attention as CRE investors broaden their reach into value-added assets. Unlike the CRE downturn in the late- 1980s and early-1990s brought on by overbuilding, macro economic forces and the drying up of liquidity in the capital markets fueled the latest downturn. The recovery in the property markets is aided by plentiful capital from both U.S. and non-U.S. equity and debt markets. Commercial and multifamily real estate investors now look to life companies, pension funds, the government sponsored enterprises, private equity, and CMBS lenders to finance asset purchases and loan refinancings. Increased conduit lending has led to higher volumes of new-issue CMBS. Through August 2013, CMBS supply totals a post-crisis peak of $56.7 billion, already surpassing 2012’s full-year tally of $48.4 billion but well shy of the 2007 peak of $243 billion. After a number of fits and starts, CMBS issuance is now more consistent in terms of structure, issuing partners, and collateral. In 2010, the ten largest loans in a “conduit” pool made up over 67% of the pool and retail loans on average made up about 40% of a pool. Both metrics fell in 2012 and in 2013, making for more diverse bond pools. CMBS post-crisis underwriting is far more conservative than was the case in 2007, with rating agency stressed loan to values and debt service coverage ratios, or DSCRs, now averaging 95.3% and 1.08 times, respectively versus 111.2% and 0.91 times in 2007. Some slippage in underwriting is evident recently. Stressed loan to values, or LTVs, and DSCRs are softer versus 2010 levels and the percentage of partial IO loans has climbed to 30% versus just 6% in 2010. The majority of loans are still sized based on in-place cash flows, and loan-level disclosure is better than it has been in the history of this market. Importantly, credit-enhancement levels remain substantially higher than those of pre-crisis deals and increased in recent years in response to the modest slippage in underwriting. Proposed risk-retention rules do not provide an exemption to single-borrower/ single-asset CMBS so investors should expect large trophy assets sprinkled pari- passu in CMBS conduits. The lower leverage that character- izes these loans means that, with some tweaking, many will make the cut as ‘qualified commercial real estate’ loans under Dodd-Frank. This is positive for both investors due to the improved credit quality of the pool – all else equal – and retainers. These loans reduce the overall retention obligation by the proportionate percentage of the loan principal balance for “qualified” loans. As for relative value, macro factors may fan CMBS spread volatility in the coming months as the market awaits further data that offers clues to the pace of economic growth, potential QE tapering, the debate over the debt ceiling, events unfolding in Syria, bond outflows, and the effect of all these factors on benchmark rates. CMBS spreads likely will widen amidst the volatility and uncertainty, but yield premiums should tighten into year-end due to the sector’s attractive relative value versus competing sectors, sound underwriting of mortgage loans resold as bonds, and a slowdown in CMBS issuance. CMBS bonds up the credit stack will continue to garner focus given their heightened liquidity and almost ‘cash- surrogate’ quality. Spreads on LCF bonds – at about 103 basis points or more over swaps – are well off 2013’s tights of 72 basis points over swaps and may widen even further near term given projected heavy conduit supply this month. LCF spreads at 103 to 110 basis points over swaps should prove a very attractive entry point. For now, multifamily directed class sales of over $7 billion from Fannie Mae and Freddie Mac dominate the high- grade legacy space. The shorter average lives and improved convexity of these bonds make them better relative value plays than legacy super senior AAA securities. Look to AAA-rated mezzanine bonds and select legacy AAA-rated junior bonds for added risk-adjusted yields once markets stabilize. Finally, recently issued BBB- mezzanine classes in the 420 basis point over swaps area are attractive; more conservative investors should focus on better underwritten 2012 BBB- bonds at still attractive spreads in the 400 basis points or more area. —Lisa Pendergast is a debt strategist at Jefferies Group Inc. commercial real estate Lisa Pendergast follow the money in the municipal marketmflo <Go> www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 3

10. commercial + Multifamily

11. www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 5 Based: Boston and New York Hometown: Fishkill, New York Hobbies: Flying (private pilot), skiing, tennis, cycling, pickleball Education: Syracuse University, BA, Georgetown University, JD and MLT Books: “Crossing to Safety” and “Angle of Repose” by Wallace Stegner Restaurant: Hakkasan in New York Q:What do you expect from REIT M&A in the second half of this year? A: We’ve seen those non-exchange-traded REITs address the need for liquidity for their shareholders by making the strategic decision to list on the NYSE. If they’re list- ing, they’re not selling their company. The more listings we see in the non-exchange- traded REIT space, especially in the last half of the year, the more likely we are to see less M&A. We represented Cole Credit Property Trust II in its sale to SRC [Spirit Realty Capital Inc.] and that’s because Cole Credit Property Trust II is looking for liquidity in 2017 for its investors and Cole wanted to demonstrate to its investors that they could effect a liquidity event because others in the industry, including ARC [American Realty Capital], were putting points on the board in providing liquidity. That was a $7.1 billion merger, a significant transaction, and that’s the kind of thing I think you’ll see less of. Cole, for example, decided to list CCPT III and re- name it Cole Real Estate Investments Inc. The exception to that are a couple of non-exchange-traded REITs and a big one called Inland American [Real Estate Trust Inc.] that has an array of different assets in it. Dedicated REIT investors make their asset allocations based on what asset class they want to go into.They don’t like diversified REITs. So Inland American is not likely to list.That’s likely to get broken up. The REIT industry has a lot of players in it and you see a lot of M&A at the smaller levels too, for example we represented Mid-America [Apartment Communities Inc.] its acquisition of Colonial [Properties Trust], that was a smaller deal. Q: So we shouldn’t conclude from that transaction that we’ll see more deals in apartments? A: It was a unique transaction. Colonial is a good example of why Inland American couldn’t list. It was one of the first diversified REITs. It had apartments, it had retail, it had office, and they tried to switch their strategy to become more of a pure apartment play. But it really didn’t work. So it was a great opportunity for MAA, which is a darling on Wall Street in the apartment sector, to buy that company because Colonial couldn’t get out of its own way. It always had a depressed multiple.Why would you buy it because it’s not just a pure apartment play? They’re buying Colonial’s retail and office assets and they may have to find homes for them. Q: The public REIT landscape isn’t especially consolidated, so why is it so hard to compel M&A to happen? A: It’s an excellent question — one that we keep asking ourselves. If you look back at the history of apartment REITs, you’ll see that the sea changes, they come and they go, they get absorbed. I think that’s likely to happen, for example, in retail.Arguably, there are too many retail REITs. Brixmor [Property Group], for example, is buying assets and Brixmor’s going to be coming public now. It’s a 600-pound gorilla.When they get out it’s going to be interesting to see what happens to the retail sector. Retail is a good example of one where it would be logical. Why doesn’t that happen? It has to do with social issues. Those that sit in the executive suite of many of these REITs see themselves as buyers, first and foremost, and not sellers. If everyone sees themselves as a buyer there’s not likely to be a seller, right? Q: Is the CommonWealth REIT struggle with activist investors a bellwether for the industry in any way? A: Clearly it’s a one-off.The REIT is sponsored by the Portnoy-affiliated listed companies, the Portnoy family, it was externally advised. Most equity REITs are not externally advised.When Corvex [Management LP] and Related [Cos.] saw the opportunity to internalize management by taking a run at the public company, you saw an immedi- ate pop in the stock.There’s such a drain on the cash flow available for distribution to shareholders from the contract with the external manager. It’s almost no different than the rage that’s happening in REIT conversions, where companies can convert to a REIT platform and save significant corporate tax. I believe that the activism in the case of CommonWealth, personally, and I say this very carefully, was not surprising.And I might actually err on the side of saying that it was almost justified, and highly unusual and not likely to be repeated in the context of the mainstream REIT industry. Real estate investment trust mergers might have picked up if there hadn’t been a wave of stock exchange listings by non-listed REITs seeking liquidity for their shareholders, says Gil Menna, co-chair of the real estate, REITs and real estate capital markets group at Goodwin Procter LLP. He spoke with Will Robinson. Commercial Real Estate Exchange Listings, Management Attitudes Limit REIT M&A, Says Goodwin’s Menna Those that sit in the executive suite of many of these REITs see themselves as buyers, first and foremost.

12. commercial real estate July Commercial Mortgage Debt Foreclosure Rate at Lowest Since Oct. 2009 Foreclosures of securitized commercial real estate mortgage loans tracked by Bloomberg fell in July to a level not seen since Oct. 2009. The rate of commercial mortgage debt foreclosures involving all property types in July was 0.76 percent – the lowest since Oct. 2009 when it was at 0.72 percent. Foreclosures of commercial mortgage debt peaked in July 2011 when they hit a rate of 1.92 percent. The 30-day delinquency rate of commercial mortgage debt involving all property types, which peaked in June 2009 when it was at 1.33 percent, declined to 0.33 percent in July, according to data compiled by Bloomberg LP. That’s a low not seen since December 2008 when they were at 0.36 percent. Commercial mortgage debt delinquent 60 days was at a rate of 0.21 percent in July, down from 0.22 percent in June and May. In April it was at 0.21 percent. Sixty-day delinquency rates were as high as 0.72 percent in April 2010. Ninety-day delinquencies of commercial mortgage debt were at their highest in June 2010 when the rate was 4.06 percent. In July they were at 1.46 percent. — Aleksandrs Rozens 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 05/2007 03/2008 01/2009 11/2009 09/2010 07/2011 05/2012 03/2013 DelinquencyRate(Percent) 30 Day 60 Day 90 Day-plus Foreclosure Source: Bloomberg LPSource: CRE <GO>, REDQ <GO> MakE an IMpaCT wITh BLOOMBERG BRIEF COnTEnT Bloomberg Briefs provide dedicated licenses to reuse our content to help your business. We offer a full suite of products and services ranging from hardcopy and electronic reprints to plaques, permissions/licensing and photocopies. BRIEF To find the solution that is right for you, contact us today at: 800 290 5460 x 100, email: bloombergbriefreprints@theygsgroup.com www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 6

13. Commercial real estate Hospitality Property Foreclosures Drop Below One Percent for First Time Since Jan. 2010 0 0.5 1 1.5 2 2.5 3 3.5 4 5/1/2007 3/1/2008 1/1/2009 11/1/2009 9/1/2010 7/1/2011 5/1/2012 3/1/2013 Rate(Percent) 30 Day 60 Day 90 Day-plus Foreclosure Source: Bloomberg LP 0 0.5 1 1.5 2 2.5 3 3.5 4 5/1/07 3/1/08 1/1/09 11/1/09 9/1/10 7/1/11 5/1/12 3/1/13 Rate(Percent) 30 Day 60 Day 90 Day-plus Foreclosure Source: Bloomberg LP 0 2 4 6 8 10 12 14 16 5/1/07 1/1/08 9/1/08 5/1/09 1/1/10 9/1/10 5/1/11 1/1/12 9/1/12 5/1/13 Rate(Percent) 30 Day 60 Day 90 Day-plus Foreclosure Source: Bloomberg LP 0 1 2 3 4 5 6 7 5/1/07 3/1/08 1/1/09 11/1/09 9/1/10 7/1/11 5/1/12 3/1/13 Rate(Percent) 30 Day 60 Day 90 Day-plus Foreclosure Source: Bloomberg LP Foreclosures of mortgage debt secured by hospitality properties fell in July to their lowest rate since January 2010. The foreclosure rate of mortgages for hospitality was at 0.9 percent in July, down from 1.06 percent in June. This is the first time they have been below 1 percent since January 2010 when the figure was 0.95 percent. Foreclosure rates for other commercial real estate also fell in July. Retail property foreclosure rates were at 1.02 percent in July, down from 1.09 percent in June. In July mortgage debt secured by office properties saw foreclosure rates of 1.32 percent, down from 1.56 percent in June and a low not seen since March 2011 when they were at 1.3 percent. Foreclosures of mortgage loans backed by industrial properties were 0.83 percent, down from 0.88 percent in June. They peaked at 2.08 percent in July 2011. – Aleksandrs Rozens Retail Property Foreclosures Office Property Foreclosures Hospitality Property Foreclosures Industrial Warehouse Property Foreclosures LOOKUP YOUR FUND WITH ONE CLICK FL <GO> www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 7

14. 23 JOIN USa t P R E A’ s twentyt h i r d a n n u a l I n s t i t u t i o n a l I n v e s t o r R e a l E s t a t e C o n f e r e n c e O c t o b e r 2 8 – 3 0, 2 0 1 3 T h e F a i r m o n t C h i c a g o, C h i c a g o, I L

15. commercial real estate South Carolina Among Top States With 30-, 60- and 90-Day or More Delinquencies South Carolina and Georgia commercial properties were among the most delinquent as of Aug. 2, according to Bloomberg LP. South Carolina had 161 properties with debt 90 days or more delinquent accounting for 3.45 percent of the state’s securitized commercial mortgage debt; 12 properties were 30 days delinquent and five were 60 days delinquent. 30-Day Delinquencies 60-Day Delinquencies 90-Plus-Day Deliquencies RANK STATE % OF BAL DQs ($M) STATE TOTAL BAL ($B) NO. OF PROPS STATE % OF BAL DQs ($M) STATE TOTAL BAL ($B) NO. OF PROPS STATE % OF BAL DQs ($M) STATE TOTAL BAL ($B) NO. OF PROPS 1 West Virginia 7.64 111.94 1.46 4 Wyoming 2.95 12.92 0.44 1 South Carolina 3.45 278.85 8.08 161 2 South Dakota 1.83 13.63 0.74 2 Connecticut 1.33 135.43 10.17 2 New Mexico 3.45 99.51 2.89 21 3 Rhode Island 1.58 23.03 1.46 1 Tennessee 0.87 97.32 11.13 15 Virginia 3.22 1,036.83 32.18 122 4 Mississippi 1.20 34.14 2.83 9 Georgia 0.68 174.73 25.57 27 Michigan 3.00 476.96 15.91 44 5 New Hampshire 1.14 22.51 1.98 3 Ohio 0.64 125.12 19.60 14 Arizona 2.88 540.83 18.75 66 6 South Carolina 1.08 86.98 8.08 12 Massachusetts 0.49 99.87 20.53 5 Georgia 2.69 688.52 25.57 195 7 Tennessee 0.96 106.55 11.13 18 Texas 0.48 349.52 72.38 35 Delaware 2.69 87.83 3.27 4 8 Colorado 0.85 139.79 16.45 6 Michigan 0.43 68.00 15.91 9 Wyoming 2.68 11.74 0.44 3 9 Pennsylvania 0.69 168.77 24.30 12 South Carolina 0.39 31.26 8.08 5 Nevada 2.53 338.04 13.35 47 10 Indiana 0.68 76.00 11.18 6 Illinois 0.38 121.43 32.24 10 Nebraska 2.53 67.03 2.65 6 11 Michigan 0.49 77.72 15.91 10 Nevada 0.38 50.36 13.35 7 Wisconsin 2.52 193.76 7.68 150 12 Georgia 0.46 118.89 25.57 33 Alabama 0.37 28.02 7.60 9 Idaho 2.41 29.66 1.23 17 13 New Jersey 0.46 104.24 22.55 9 Pennsylvania 0.35 85.92 24.30 8 South Dakota 2.36 17.58 0.74 2 14 New Mexico 0.45 13.06 2.89 2 Wisconsin 0.35 26.52 7.68 8 Indiana 2.29 255.69 11.18 43 15 Arizona 0.42 79.20 18.75 14 Louisiana 0.30 21.30 7.07 2 Massachusetts 2.27 466.03 20.53 25 16 Wisconsin 0.37 28.40 7.68 20 Delaware 0.18 5.83 3.27 1 Mississippi 2.20 62.30 2.83 50 17 North Carolina 0.36 79.83 22.34 37 North Carolina 0.17 37.86 22.34 10 Ohio 2.19 429.23 19.60 48 18 Utah 0.35 19.50 5.52 1 Arkansas 0.16 5.09 3.10 3 Louisiana 2.18 154.15 7.07 20 19 Florida 0.34 178.96 51.95 41 Indiana 0.16 17.86 11.18 5 Florida 2.17 1,126.67 51.95 267 20 Virginia 0.31 99.58 32.18 14 New Jersey 0.14 31.56 22.55 3 Connecticut 2.10 213.63 10.17 23 21 Missouri 0.31 29.10 9.43 9 Arizona 0.14 25.49 18.75 3 Pennsylvania 2.10 510.04 24.30 55 22 California 0.30 358.15 119.37 27 Virginia 0.13 41.13 32.18 8 North Carolina 1.93 430.88 22.34 148 23 Kentucky 0.29 16.18 5.61 2 Florida 0.12 63.95 51.95 15 Oklahoma 1.81 83.93 4.64 16 24 Maine 0.29 3.52 1.20 2 Idaho 0.12 1.46 1.23 2 Missouri 1.59 150.39 9.43 39 25 Texas 0.26 187.09 72.38 134 Colorado 0.10 16.06 16.45 3 Alabama 1.50 113.86 7.60 165 * Ties in rank are broken by number of properties and total delinquent balance. www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 9

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17. Commercial real estate 0 200 400 600 800 1000 1200 1400 1600 1/6/06 1/6/07 1/6/08 1/6/09 1/6/10 1/6/11 1/6/12 1/6/13 SpreadsVersusSwaps(BasisPoints) Source: Commercial Real Estate Direct AAA five-year CMBS spreads hit 1,500 basis points over swaps, while U.S. Treasury 10-year notes fell to 2.60 percent on Dec. 12, 2008. Legacy AAA-rated five-year commercial mortgage bond yield premiums over swaps are wider from June when the spread was at 120 basis points, according to data compiled by Commercial Real Estate Direct – crenews.com. In July 2012 these five-year AAA CMBS spreads were at 185 basis points, compared with 150 basis points this summer.Yield premiums of these securities were as high as 1,500 basis points in December 2008. To get this data on your terminal, please type in CMB <GO> — Aleksandrs Rozens AAA Five-Year CMBS Wider From June, Narrower From Year-Ago AAA five-year CMBS spreads hit 1,500 basis points over swaps, while U.S. Treasury 10-year note yields fell to 2.60% on Dec. 12, 2008. Capital Markets / Project Leasing / Property Management / Tenant Representation / Corporate Services / Project & Development Services Discover the value of industry veterans, supported by an innovative platform, delivering solutions for today’s commercial real estate challenges. Challenging the Conventional Discover Opportunity in Commercial Real Estate www.cassidyturley.com/challenger-brand www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 11

18. Commercial real estate Twelve Properties Make Iowa Top State for Commercial Real Estate Foreclosures Twelve Iowa properties in foreclosure accounted for 3.53 percent of the state’s commercial mortgage debt as of Aug. 2, according to Bloomberg LP data. In Nevada, 3.11 percent of the commercial mortgage debt in the state was in foreclosure, while 2.46 percent of the commercial mortgage debt in New Jersey was in foreclosure, as of Aug. 2. Twenty-four Nevada properties were foreclosed on and 41 New Jersey commercial properties were being foreclosed on as of Aug. 2, according to Bloomberg LP. To access this data on your Bloomberg terminal, please type in CRE <GO> or REDQ <GO> — Aleksandrs Rozens (Percentage of state’s commercial mortgage debt in foreclosure) THE MUST-ATTEND EVENT FOR SENIOR-LEVEL WOMEN IN PRIVATE EQUITY & ALTERNATIVES Private Equity | Venture | Hedge | Real Estate | Real Asset | Infrastructure | Distressed 5th Annual Women’s Alternative Investment Summit November 7–8, 2013 The Pierre, New York City Join more than 300 of the top women in private equity and alternatives — GPs, LPs, and advisors to the industry — as we gather in November in New York City for insightful and candid discussions on fundraising, deal flow, portfolio management, liquidity, and more. PLATINUM SPONSOR: GOLD SPONSOR: SILVER SPONSORS:FOUNDER AND PRODUCER www.WomensAlternativeInvestmentSummit.com | T: + 1 781.652.0900 | info@FalkMarquesGroup.com www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 12

19. Commercial real estate Nevada Has Highest Percentage of Real Estate Owned Property in U.S. Nevada was the state with the highest percentage of real estate owned property as of Aug. 2; 7.89 percent of its securitized commercial mortgage debt was real estate owned, according to Bloomberg LP Data. Nevada had 62 properties with a real estate owned balance of $1.05 billion. Vermont had one property that was real estate owned accounting for 6.64 percent of the state’s securitized commercial mortgage debt and Georgia’s 122 properties accounted for 6.08 percent of the state’s securitized commercial real estate debt. To get this data on your terminal, please type in CRE <GO> or REDQ <GO> — Aleksandrs Rozens G L O B A L R E I T S U M M I T LISTED,NON-TRADED & PRIVATE REITS 2 0 1 3S U M M I T2 0 1 3S U M M I T OCTOBER 2nd , 2013 | Helmsley Park Lane Hotel, New York KEY TOPICS THAT WILL BE COVERED: • Navigating Today’s REIT Terrain: What Lies Ahead? • Demystifying the REIT Universe: Equity vs. Mortgage, Listed vs. Non-Traded, Up vs. Down REITs • Hot Spots & Sizzling Sectors: A Snapshot of the REIT Universe • Going Public: REIT IPOs & Conversions • Dynamic Dialog: REITs vs. Private Equity Real Estate—Which Makes the Best Investment? • New Ways to Play Non-Traded REITS • REIT Strategies: Best & Next Practices • REIT Financing & Leverage: Capital & Credit Markets Report • Plus luncheon workshop: REIT Conversions—Monetizing Your Real Estate Assets REGISTER TODAY AT www.iglobalforum.com/reit Exclusive discountcodefor subscribers:usecode REITSBBfor10% off (Percentage of state’s securitized commercial mortgage debt that is real estate owned) www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 13

20. Commercial real estate Nevada Has Highest Percentage of Real Estate Owned Hospitality Properties rank State % of Bal REO Bal (USD) Total Bal (USD) Number of Properties 1 Nevada 14.82 143,217,628 966,393,864 2 2 New Mexico 13.43 58,926,129 438,786,517 3 3 Idaho 11.03 8,737,433 79,239,792 1 4 Maryland 8.34 149,782,029 1,795,100,833 2 5 Alabama 7.07 45,718,463 646,657,281 2 6 Arizona 5.31 98,152,805 1,849,334,251 7 7 Illinois 5.18 184,291,716 3,561,032,250 11 8 Wisconsin 4.55 31,691,534 695,967,486 3 9 Tennessee 4.21 62,581,243 1,485,392,700 4 10 Texas 4.19 277,007,958 6,608,532,933 11 11 South Carolina 3.98 52,197,846 1,311,796,016 7 12 Missouri 3.93 39,482,217 1,005,861,764 2 13 Utah 3.76 17,341,467 461,566,087 2 14 Florida 3.61 314,388,402 8,705,776,590 20 15 Louisiana 3.24 24,534,974 757,992,488 3 16 Nebraska 2.71 4,799,648 177,239,006 3 17 Michigan 2.46 24,626,344 1,001,801,064 8 18 Pennsylvania 2.29 56,539,643 2,472,250,095 3 19 Georgia 2.20 47,385,077 2,154,791,752 5 20 Massachusetts 2.07 51,000,000 2,457,982,932 1 21 Kentucky 1.84 12,635,508 688,345,326 1 22 California 1.83 267,182,198 14,574,149,450 14 23 Washington 1.54 31,585,246 2,047,399,066 4 24 Mississippi 1.54 5,263,158 341,264,656 1 25 Oregon 1.53 14,550,535 952,553,115 1 Source: Bloomberg LP Two of Nevada’s commercial real estate loans backed by hospitality were real estate owned, accounting for 14 percent of all of the state’s securitized commercial mortgage debt as of Aug. 2, according to Bloomberg. Florida, with 20 real estate owned hotels, had the most hotel property loans that fell into the REO category. www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 14

21. Retailers Fend Off Online Competition by Revamping Physical Store Locations Besieged by cost- conscious shoppers, stiff competition, the proliferation of mobile payment and Internet shopping, U.S. retailers are looking to extract value from brick-and- mortar store locations. Video rental businesses, book sellers and electronic equip- ment sellers have been hard hit and businesses such as Block- buster Inc., Borders Group and Circuit City Stores Inc. have been forced to seek out bankruptcy court protection; many eventually liquidated their assets. In spite of their varied products and business models, Borders, Circuit City and Blockbuster shared one commonality: too many underperforming stores that needed to be closed well before the companies embarked on a restructuring process. Despite the popularity of online shopping, brick-and-mortar stores still command the lion’s share of shoppers’ dollars and serve as the cornerstone for a retailer’s strategic growth plans.Although it faces new challenges the retail industry offers strong growth opportunities for executives who are willing to take advantage of their own real estate and other retail properties that come up for sale when these businesses fail. The current response among retailers to changing market conditions in terms of managing their real estate could be one of the most significant periods in the retail industry’s history since the shopping center concept was developed in the 1950’s. With retail spending exhibiting little growth at a mere 0.2 percent uptick last month from July, based on Commerce Depart- ment data, retail executives are looking at how to get the most out of their brick and mortar locations along with traditional methods aimed at managing a downturn in consumer spending: merchandising, product line overhaul and better seasonal inventory management. Take, for example, the $2.9 billion, $16-per-share acquisition of Saks Inc. by Toronto’s Hudson’s Bay Company announced on July 29.The deal is predicated in large part on unlocking the inherent value of real estate owned by both businesses, which operate their respective stores under the Hudson’s Bay, Lord & Taylor and Saks Fifth Avenue brand names. As Hudson’s Bay pointed out in an an- nouncement unveiling the acquisition, the companies’ combination will create an unrivaled coast-to-coast North American real estate portfolio comprised of stores located in major shopping areas within New York, Beverly Hills, Toronto, Van- couver and Montreal, among others. Its store base will mushroom to 320 including 179 full-line department stores, 72 outlet stores and 69 home stores spread between the U.S. and Canada. The Canadian retailer said it plans to evaluate strategic alternatives to fully realize the value of the combined companies’ real estate portfolio, including the creation of a real estate investment trust. In addition to managing inventory, how retailers use their physical space has come under greater scrutiny. Some big box players are moving to use their existing store space in creative ways, such as forming joint ventures that allow another company to lease its space. Best Buy, for example, has teamed with Microsoft to allow the software giant to establish 500 stores within its own stores. Microsoft will be able to obtain retail store exposure at a fraction of the cost required to develop or open its own stand- alone locations, while Best Buy diversifies its revenue stream and take advantage of excess floor space. Others have moved to consolidate their real estate in order to trim costs amidst re-jiggering product lines and making price point adjustments on merchandise. Publicly traded Jones Group Inc., for example, has moved to prune underperforming stores from its portfolio.The NewYork-based company, which manages the Nine West and Anne Klein brands, announced in April that it would shutter 170 stores in order to save $40 million to $60 million over 15 months. Rationalizing store size, the number of units in a market, and making sure whether the stores are situated in high traffic areas such as shopping centers should be of paramount concern for retailers. Having the correct store footprint is crucial to being an efficient and successful merchant. When store comps and margins are under pressure due to the impact of economic issues the ability to find alternative uses for space, whether expanding assortments, establishing branding departments, or other means of utilizing space becomes more important than ever. Downsizing, while un- appealing as it is, or relocating a business to another location of better size must be a serious consideration. If retail real estate executives are going to be successful in the New Millennium they must look further down the road than the next quarter’s projected revenues or switch- ing the line up on seasonable fashions as apparel sellers must do.They must be willing to adjust their thinking and strategy for growth. For those unable to evolve quickly enough, there looms the unattractive prospect of having to close stores and start restructuring its business. Adapting is important but, so too, are long term planning and real estate consider- ations. Strategic decisions about managing properties should be made at least three years in advance to best position brick-and- mortar stores for the future. Significant thought and analysis must also come into play when it becomes time to engage in the lease renewal process. Often, relocating a store to the proper size is cheaper and easier than other tough decisions, such as implementing a downsizing and store closure plan. At the same time strategic market re- views held at least once a year will help ensure a retailer understands changing market conditions and adjusts to developing trends more effectively. Implement- ing efficient processes, using analytics and formulating the right strategy can determine how well retailers manage their costs. Occupancy must be kept under control for retailers to be successful and grow, which in the long run, is better for everyone. — Jonathon Graub is a principal in the commercial real estate,advisory and investment group at A&G Realty Partners, where he focuses on retail real estate. Jonathon Graub commercial real estate www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 15

22. Richard Yamarone Bloomberg Economist commercial & residential real estate To see Orange Book postings on the Bloomberg terminal type NI ORANGEBOOK <go> Boston Properties [BXP] Earnings Call, 7/31/13: “In the markets that we are in, primarily, San Francisco, and Washing- ton, and Boston, and Cambridge in the Boston area – these markets are not just the downtown areas, but markets in general, and of course, New York have all been performing relatively better than the overall national economy. In fact, these are perhaps the four best cities or among the four best cities – these four markets and the cities in general have done better than the overall economy.” Starwood Hotels [HOT] Earnings Call, 7/25/13: “We continue to see a great deal of confidence among real estate investors and developers in Mexico, for Mexican markets and that’s been the source of our pipeline for our business there. At the same time, there’s been an overall growth in the Latin American business, and when you look at markets like Brazil, for example, you see a massive growth in the middle class, very much along the lines of what we’ve seen in other parts of the world, including Asia.” Weyerhaeuser [WY] Earnings Call, 7/26/13: “In Real Estate, we expect continued improvement in our single-family homebuilding business as a result of a strengthening housing recovery, especially in Southern California, as well as a seasonally stronger third quarter compared to the second quarter. Sales have continued at a brisk pace and we expect to close over 700 homes in the third quarter compared to the 636 closed in the second quarter.” Simon Property Group [SPG] Earnings Call, 7/29/13: “There’s nothing more than buying something cheap that excites me and the team here. So we love to buy things really cheap. And if that can be done on a distressed basis, we like it as long as – ultimately we’ve got to believe in the real estate because we’re not, well, I wouldn’t say we’re traders. So at the end of the day we’ve got to have a long- term view that we like the cash flow that’s being generated from the real estate.” Wynn Resorts [WYNN] Earnings Call, 7/31/13: “The amount of money that’s been lost in Las Vegas in the last four years, in terms of abandoned projects, and marked down values from the Frontier and the Stardust property to Fontaineb- leau and Cosmopolitan and CityCenter and places like that has been astro- nomical. I don’t even like to think what that number is, but Las Vegas is perking along, because there’s tremendous choices that are available to people of every income level. The infrastructure in Las Vegas is almost impossible to duplicate. And that’s the reason why it survives California Indian gaming and all these other jurisdic- tions. It doesn’t get any easier, but Las Vegas is managing to hold its head up.” Kimco Realty [KIM] Earnings Call, 7/31/13: “Overall, our industry maintains its quarter-by-quarter recovery. Retail- ers continue to grow their expansion plans and coupled with a 35-year low in new supply, effective rents are moving up materially. Consumer spending and retail sales are also doing well, despite the sequester and the beginning of rising interest rates.” Beazer Homes [BZH] Earnings Call, 8/1/13: “But there is an elephant in the room, and that’s rising mortgage rates. Ordinarily an uptick in mortgage rates acts as a bit of an accelerant, pulling demand forward as buyers worry about getting hurt by future rate increases. And when the rates started moving in May, that’s what we anticipated. But it’s turned out a little differently, at least in our communities. While traffic levels are still up year-over- year, our sales pace particularly in June and July has been a little bit softer than we expected.” D.R. Horton [DHI] Earnings Call, 7/25/13: “I think everybody is just going to have to get accustomed to the fact that we’re in a slightly rising interest rate environment.You’re not going to see anybody for a while because people are frankly a little freaked out about, well I missed the low. And why didn’t I buy a home when the rates were an eighth of a percent lower? But those people come back and they’re ultimately – most of them going to buy.” The issue of higher borrowing costs for home buyers has already made it into earnings conference calls, with several businesses voicing concerns about how higher rates will impact consumer spending on goods and services. Other issues hanging over Corporate America include sequestration, a soft household sector and the need for a heavily promotional environment. The Bloomberg Orange Book Senti- ment Index, a measure of sentiment among the most economically U.S. companies, has been below 50 for 31 consecutive weeks – a signal of economic contraction. There is an elephant in the room and that’s rising mortgage rates. where are people buying in the municipal bond market? mFlo <go> www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 16

23. commercial real estate Arkansas Has Highest Percentage of Real Estate Owned Retail Properties rank State % of Bal REO Bal (USD) Total Bal (USD) Number of Properties 1 Arkansas 14.28 130,967,404 917,373,551 2 2 Vermont 13.62 36,437,434 267,615,103 1 3 Colorado 8.86 304,148,666 3,431,695,484 14 4 Georgia 6.14 399,010,185 6,503,181,590 33 5 South Carolina 5.98 115,801,622 1,938,258,497 8 6 Michigan 5.35 218,992,927 4,094,773,062 17 7 Nevada 4.77 244,936,543 5,137,492,753 15 8 Indiana 4.57 127,620,594 2,794,771,079 13 9 Arizona 4.47 245,074,051 5,479,113,247 20 10 Missouri 4.28 105,934,075 2,474,641,329 5 11 Maryland 4.13 199,032,904 4,821,239,212 9 12 Illinois 4.05 251,809,290 6,218,307,124 21 13 Kansas 3.87 43,283,957 1,119,717,813 3 14 Mississippi 3.87 22,330,195 577,794,448 4 15 California 3.84 1,068,224,673 27,843,126,895 53 16 New Mexico 3.32 25,009,852 753,285,866 4 17 Massachusetts 3.14 112,130,370 3,567,967,425 5 18 Tennessee 3.01 65,447,297 2,172,421,254 15 19 Louisiana 2.99 58,820,310 1,963,432,338 4 20 Florida 2.86 397,032,373 13,868,537,428 30 21 Wisconsin 2.82 58,454,750 2,069,659,906 7 22 Washington 2.46 61,522,372 2,503,647,156 6 23 North Carolina 2.36 131,507,934 5,569,210,259 14 24 Virginia 2.33 150,778,475 6,477,111,460 9 25 Utah 2.32 28,381,355 1,222,765,588 7 Source: Bloomberg LP Mortgages for two retail properties in Arkansas made up 14.28 percent of the state’s securitized commercial mortgage debt as of Aug. 2, according to Bloomberg LP. The REO balance of the two retail property loans is $131 million. California’s 53 real estate owned retail properties made up 3.8 percent of the state’s securitized commercial mortgage debt. www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 17

24. Commercial real estate Arizona Has Highest Percentage of Real Estate Owned Office Properties rank State % of Bal REO Bal (USD) Total Bal (USD) Number of Properties 1 Arizona 19.26 488,826,982 2,537,906,626 29 2 Minnesota 18.33 225,841,866 1,231,918,436 8 3 Georgia 17.83 741,346,358 4,157,608,649 31 4 Rhode Island 16.49 43,500,001 263,720,471 1 5 Nevada 15.44 227,182,798 1,470,937,608 19 6 Arkansas 14.59 38,304,669 262,620,543 2 7 Kansas 13.42 86,431,126 643,910,153 7 8 Michigan 12.16 271,998,735 2,236,676,095 31 9 Iowa 11.55 6,348,661 54,990,475 1 10 Alabama 11.43 106,655,345 933,319,566 8 11 New Jersey 9.83 516,338,548 5,254,180,878 16 12 Indiana 9.14 92,138,565 1,008,533,320 5 13 Missouri 8.39 120,500,349 1,436,694,464 10 14 Maryland 7.06 287,313,709 4,068,257,793 14 15 Florida 5.94 396,870,191 6,684,633,907 37 16 California 5.92 1,634,075,368 27,622,006,523 55 17 South Carolina 5.71 35,595,481 623,033,298 7 18 Ohio 5.43 126,541,727 2,328,637,968 7 19 Tennessee 5.40 77,880,054 1,441,502,480 5 20 Idaho 4.49 9,100,002 202,454,865 2 21 North Carolina 4.49 121,931,252 2,716,988,067 14 22 Hawaii 4.10 26,228,668 638,955,142 2 23 Pennsylvania 3.85 185,686,842 4,822,749,257 10 24 New Mexico 3.66 11,747,823 320,972,905 2 25 Colorado 3.11 79,487,222 2,555,930,742 8 Source: Bloomberg LP Arizona has mortgage debt on 29 office properties that are real estate owned, which accounts for 19.26 percent of the state’s securitized commercial mortgage debt as of Aug. 2. California’s 55 REO properties accounted for 5.92 percent of the state’s securitized commercial mortgage debt. www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 18

25. commercial real estate Rhode Island Has Highest Percentage of REO Warehouse Properties rank State % of Bal REO Bal (USD) Total Bal (USD) Number of Properties 1 Rhode Island 40.85 2,959,237 7,243,517 1 2 Tennessee 32.35 269,154,851 832,080,911 47 3 Colorado 14.27 49,060,384 343,838,720 8 4 North Carolina 13.17 95,209,844 722,813,312 10 5 Missouri 11.85 50,682,970 427,873,949 6 6 West Virginia 8.58 3,043,348 35,468,108 1 7 Iowa 8.27 12,464,479 150,734,157 1 8 Ohio 7.99 79,888,531 999,507,320 7 9 Minnesota 7.91 25,588,684 323,572,925 6 10 Georgia 7.74 73,878,262 954,798,412 10 11 Michigan 7.68 51,459,351 669,733,792 16 12 Pennsylvania 7.11 97,565,621 1,371,958,302 9 13 New Jersey 5.47 87,871,829 1,606,782,412 16 14 Florida 5.41 73,827,769 1,365,000,942 14 15 Texas 4.88 89,171,681 1,828,815,683 10 16 Arizona 4.68 25,177,573 538,332,130 5 17 Nevada 4.50 20,034,523 445,012,948 5 18 New Mexico 3.73 2,268,379 60,787,837 1 19 Illinois 3.04 30,698,937 1,011,398,795 3 20 Indiana 2.82 19,550,732 692,646,566 4 21 California 2.66 141,678,660 5,331,081,424 16 22 Louisiana 2.24 4,721,394 210,336,223 1 23 Wisconsin 2.21 12,727,489 575,284,921 5 24 Massachusetts 2.04 17,013,591 833,348,815 3 25 Virginia 1.03 8,410,001 812,706,519 1 Source: Bloomberg LP A single real estate warehouse property accounted for 40.85 percent of the state’s securitized commercial mortgage debt as of Aug. 2, according to Bloomberg LP. Real estate owned loans on 47 Tennessee warehouse properties made up 32.35 percent of the state’s commercial mortgage debt as of Aug. 2. www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 19

26. Henderson Property andTIAA-CREF Global Real Estate recently announced the formation of a new $63bn global investment management company. Here James Darkins and Mike Sales of Henderson’s Property team andTom Garbutt, Mark Wood and Phil McAndrews ofTIAA-CREF speak about joining forces to create the fourth largest real estate investment management business. What is the purpose of the new joint venture (“JV”)? Darkins:The JV will be an investment management company that will pursue core and value-add investments in all major sectors of real estate, and will focus on providing clients with increased global access to new opportunities, particularly in Europe and the growing Asia Pacific region. What was the reasoning behindTIAA-CREF and Henderson Property coming together to form this JV? Garbutt: TIAA-CREF and Henderson both recognize that meeting the needs of today’s institutional real estate investors requires the appropriate scale and expertise to successfully pursue opportunities around the globe. Darkins: The JV will provide a platform with significant global scale and a deep pool of experienced regional and sector specialists, leading to improved access to opportunities and greater capacity to innovate and deliver new investment products and solutions for our clients. Sales: It provides the optimum opportunity to drive the growth of both businesses. Henderson wants to build on its expertise in providing institutional blue-chip quality real estate investment opportunities, and grow its key franchises from a predominantly European base, while TIAA-CREF has a large pool of real estate assets, skills and capabilities, primarily in North America, which it is seeking to diversify. Wood: Internationally, a major resource that Henderson is bringing to the deal is its local ‘feet on the ground’ presence in markets where we see long-term potential and value for clients, but currently have Henderson Global Investors and TIAA-CREF to create global real estate giant limited exposure. TIAA-CREF is looking to regionally diversify its real estate portfolio and product offerings, which are currently centered in North America.We are particularly focused on the fast-growing Asia Pacific region, where Henderson has already begun to establish a strong presence and growing business. How will the new company be structured and who will be the leadership team? Wood: TIAA-CREF will hold a 60 percent interest and Henderson will hold a 40 percent interest in the new JV. The senior management team will consist of Tom Garbutt as Chairman, currently TIAA-CREF’s head of global real estate; James Darkins as CEO, currently Henderson’s head of global property; myself as COO, currently TIAA-CREF’s head of European real estate; Mike Sales as managing director for Europe, currently Henderson’s managing director and CIO of global property; and Phil McAndrews as managing director for North America, currently TIAA-CREF’s head of global real estate transactions and JVs. Sales:The company will be headquartered in London and will have approximately 225 employees across Europe, Asia Pacific and North America. International locations will include Henderson’s existing offices in Beijing, Frankfurt, Hamburg, Hong Kong, London, Luxembourg, Madrid, Milan, Paris, Singapore, Stockholm, Sydney and Vienna, as well as additional new representation in NewYork. How will the JV fit with the North American business? McAndrews: TIAA-CREF is fully acquiring Henderson’s existing North American real estate business, in a separate but related transaction to the JV.The combined North American business, under TIAA-CREF, will be fully aligned with the JV and provide domestic investment management on its behalf. Overall, there will be approximately 150 total real estate staff in the U.S. across seven locations: NewYork, Newport Beach, Charlotte, San Francisco, Boston, and, with the addition of Henderson’s U.S. team, Chicago and Hartford.Total U.S. real estate assets under management, when combining Henderson’s with TIAA-CREF’s, currently represents approximately $43.5 billion. Garbutt: While the JV will focus on opportunities in Europe and Asia Pacific, TIAA-CREF will focus on North American investments and opportunities on behalf of the JV.The teams will all work together in developing, distributing and servicing real estate investment solutions for our clients worldwide, as one seamless global organization. How do the firms’ investment philosophies compare? Darkins: Both firms emphasize a disciplined investment process centered around top-down fundamental research coupled with bottom-up local market knowledge, and both believe in global reach as an overall diversification strategy. Both businesses are managed based on a proprietary research process, disciplined portfolio construction, and focused risk management. McAndrews: We believe consistent results are built on a reliably solid investment process involving proprietary analysis of top-down research, a disciplined portfolio construction methodology, and focused risk management. Consistent Mark Wood, James Darkins,Tom Garbutt, Phil McAndrews and Mike Sales SPECIAL ADVERTISING SECTION continued on next page

27. results are also dependent on bottom-up expertise through local market presence and maintaining active long-standing relationships with local developers, property management firms and real estate brokers, as well as, of course, a rigorous underwriting process. Will there be a sustainability focus? Sales: Both firms are committed to sustainability measures. Both recognize that sustainability underpins the embedded value of assets and the long-term performance delivered. Henderson’s Responsible Property Investment (RPI) philosophy is based on continuous, measurable improvement, and the property business works to a clearly defined RPI policy designed to protect and hopefully enhance returns to investors over the long term. Current initiatives range from employing renewable energy incentives via the installation of PV panels to encouraging biodiversity through the installation of beehives at several retail and office properties. Wood:TIAA-CREF’s commitment to sustainability measures includes seeking ways to enhance the value and competitiveness of our real estate assets through portfolio-wide opportunities to realize high returns on investments in those measures. From mandating LEED certification for all new development projects to pursuing Energy Star certification for all eligible properties, TIAA-CREF’s activities to drive greater energy efficiency help our real estate assets to stand out in the market.With sustainability being as important to our clients as us, the JV will definitely have a sustainability focus imbedded in its investment philosophy. In what other ways do the firms complement each other? Darkins: TIAA-CREF’s investments have historically been concentrated in North America, while Henderson’s biggest presence has been in Europe, and more recently in Asia Pacific, which, when combined, provides a solid base on which to build and expand the JV’s global platform. Also, while both firms primarily invest in the four major property types, TIAA-CREF is more heavily weighted toward the debt sector, while Henderson’s assets mainly comprise private equity investments. In addition, about 80 percent of TIAA-CREF’s investments are in the core space with the remainder in the value-add and opportunistic spaces, while Henderson’s assets are approximately 55 percent core, 45 percent value-add.These variations will combine well to create a diversified platform on which to further build. Garbutt: Henderson was identified as a firm that aligned with our global aspirations, had a similar approach to risk and offered an excellent cultural fit. TIAA-CREF also brings a strong balance sheet to the JV with available capital to be deployed into the business. We anticipate investing $1.5bn in real estate in Europe and Asia over the next few years which will be managed by the JV.The capital will be utilised both for seed capital and for co-investment purposes and will help position the JV to take maximum advantage of the opportunities in the current market environment and boost its assets under management. McAndrews: Both companies are well respected investors and are focused on growing their core businesses and serving their clients.We are strategically aligned in our investment approach, using research to identify assets that have the potential for growth. Having greater access to capital and expertise will enhance the JV’s ability to build scale, to innovate and to deliver a number of compelling new investment opportunities to new and existing clients. Where do you see the biggest opportunities for the JV in Europe and Asia Pacific today? Sales: In Europe, the challenges faced by banks still dealing with the repercussions of the global financial crisis have created an attractive lending environment as they continue to shrink their balance sheets, most notably to commercial real estate. As a result, we believe there is an opportunity for institutional investors to enhance their investment portfolios by widening their exposure to a broad range of senior secured asset classes such as real estate debt. Wood:The new venture will offer commercial real estate debt investment opportunities to clients and will leverage the resources, track record and experience of TIAA-CREF’s U.S. real estate debt team to augment a new dedicated team in Europe. In many ways, this transaction is a specific response to the evolution of the property investment landscape; in recent years, scale and access to capital have become increasingly important factors to success in real estate asset management. We’ve seen an increasing expectation on the part of investors for the investment manager to demonstrate an alignment of interest through co-investment or seeding. Garbutt: In Europe, we see the U.K., Germany and France as strong opportunities due to their high levels of liquidity and transparency, and robust legal structures. In Asia Pacific, we believe Singapore and Australia offer similar favorable characteristics along with the added benefit of direct exposure to Asia’s growth cycle.Top-quality, well- located office and retail properties in the “gateway” cities of London, Paris, Munich, Berlin, Singapore, Sydney and Melbourne are considered to be well positioned to benefit from the ongoing global economic recovery. Darkins: In the coming year, apart from major changes yet to come for fiscal and sovereign debt situations in the U.S. and Europe, a number of key socio-political events are expected to have significant impacts on the Asia Pacific region’s capital and property markets.We believe China is a particularly attractive growth market for luxury goods retailers due to its large population, high number of densely populated large cities, growing affluence and local consumers’ appetite for luxury as well as for globally recognized brands. Any scheme that brings like-minded retailers together and provides the quality of shopping experience the discerning Chinese consumers will increasingly demand, while offering attractive prices, should perform very well. For any questions relating to the JV, please contact: Andrew Friend, Head of Investor Relations, Property - Henderson Global Investors T: +44 (0)20 7818 2439 E: andrew.friend@henderson.com For questions regardingTIAA-CREF Asset Management, please contact: Kevin Maxwell (east coast), Managing Director T: 212 916-4812 E: kmaxwell@tiaa-cref.org Deborah Ulian (west coast), Senior Director T: 415 882-3507 E: dulian@tiaa-cref.org SPECIAL ADVERTISING SECTION continued from previous page

28. commercial real estate Column Financial Commercial Property Loans Most Delinquent as of Aug. 2 Rank Loan Originator Current Balance Delinquent Balance Total number of Loans numer of Delinquent number of Bankrupt 1 Column Financial 29,366,675,496 3,233,804,152 6,415 287 16 2 Wachovia Bank NA 46,465,858,224 7,833,052,008 3,486 231 9 3 LaSalle Bank National Association 17,135,605,143 2,324,031,022 5,156 216 11 4 Lehman Brothers 23,530,325,065 2,278,242,796 3,950 158 5 5 JPMorgan Chase & Co. 51,992,587,189 3,527,980,464 4,855 157 8 6 Bank of America, NA 43,011,202,850 3,410,532,832 4,155 146 3 7 Greenwich Capital 19,679,316,023 4,030,009,384 1,866 138 5 8 Merrill Lynch & Co. Inc. 14,100,565,160 3,038,100,534 2,301 102 4 9 CRF 9,506,658,567 1,329,518,433 1,293 101 10 10 CIBC 10,948,935,231 1,247,228,870 1,805 90 7 11 Morgan Stanley Mortgage Capital Holding 18,240,019,611 1,042,089,212 1,712 89 2 12 German American Capital 25,143,967,646 1,951,012,769 1,678 86 7 13 UBS AG 22,436,757,586 2,053,776,839 2,408 83 2 14 CGM 12,225,137,579 1,277,988,375 1,057 81 2 15 PNC 11,542,619,170 778,350,868 1,768 77 5 16 Bridger Commercial Funding 2,779,294,513 439,441,887 966 72 2 17 General Electric Capital Corp. 8,601,960,168 719,135,715 2,849 69 1 18 Wells Fargo Bank, NA 34,975,724,086 684,907,343 5,399 68 3 19 Goldman Sachs 31,705,921,459 1,727,559,887 1,602 67 1 20 Washington Mutual Bank 1,725,023,265 81,645,298 2,353 66 5 21 Bear Stearns Co. Inc. 15,816,020,847 1,543,315,183 2,394 59 2 22 NCCI 5,674,999,555 587,565,507 963 43 6 22 Barclays 8,232,716,011 878,304,641 790 43 2 24 Artesia Mortgage Capital Corporation 2,861,581,774 515,409,629 937 38 1 24 Morgan Stanley 14,084,460,475 319,590,862 2,171 38 0 Among underwriters of commerical mortgage loans resold as CMBS Column Financial had the most number of delinquent mortgage loans as of Aug. 2, according to Bloomberg LP. The underwriter had 287 delinquent loans for commercial real estate properties. Com- mercial mortgages underwritten by Wachovia Bank and LaSalle Bank NA were also more likely to see delinquencies; Wachovia had 231 of 3,486 mortgages delinquent and LaSalle had 216 of 3,486 delinquent as of Aug. 2. www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 22

29. Mall owners, the best-performing U.S. property stocks for four years, have tumbled to the worst as sluggish retail sales and limited opportunities to expand drive investors to look elsewhere for earnings growth. Real estate investment trusts that own regional malls reported the smallest increase in tenant sales per square foot in three years in the second quarter, according to data compiled by Bloomberg. Nordstrom Inc. cut its revenue forecast for the year and Macy’s Inc. and Aeropostale Inc. disclosed declines in consumer purchases. Slowing sales among retailers and rising borrowing costs are sparking concern that mall landlords, including the two largest, Simon Property Group Inc. and General Growth Properties Inc., could be hurt too. Mall REITs have enjoyed strong tenant- sales growth since the credit crisis and recession, letting them increase rents. Now they face difficult comparisons to past results and limited avenues for external expansion. “REITs have had a tough year across the board, and the mall REITs have had a tougher year in general,” said Benja- min Yang, an analyst at Evercore Part- ners in San Francisco. “Fundamentals are good but they’re slowing down.” The Bloomberg mall REIT index has fallen 5.2 percent this year, the worst performing part of the industry, after posting the biggest increases from the start of 2009 through 2012. Even shares of outlet-center operator Tanger Factory Outlet Centers Inc., whose sole business is in one of the best-performing segments of the retail-property market, are down 5.2 percent this year. Growth in mall-tenant sales, which rose 4.3 percent in the second quarter from a year earlier, peaked in the three months through June 2012 and has slowed each quarter since, according to Bloomberg Industries. Simon Property and General Growth last quarter beat analysts’ estimates for funds from operations, a measure of cash flow used by the REIT industry. While results have been positive for mall REITs overall, they’ve been over- shadowed by the potential impact of higher borrowing costs on property valuations, said Keith Bokota, an analyst at Principal Global Investors, part of insurance and financial services company Principal Financial Group Inc. “When we look at the fundamentals that these companies are delivering, they’re strong,” said Bokota, whose Des Moines, Iowa-based firm owned shares of mall REITs including Simon and Taubman Centers Inc. at the end of July. “The rising interest rates have impacted the way REITs have traded recently.” The 10-year Treasury yield has climbed to 2.9 percent from 1.63 percent on May 2, its low for the year, while the Bloom- berg mall REIT index has fallen 18 percent since May 21, its high for 2013. The cost of raising money from the commercial mortgage-backed securities market has also increased. Top-ranked bonds linked to commercial mortgages are yielding 129 basis points more than Treasuries from 88 basis points on Jan. 14, according to a Bank of America Merrill Lynch index. The spread peaked at 153 basis points, or 1.53 percentage points, on July 8. Simon shares have fallen 18 percent since May 21, even as the company on July 29 reported an increase in second-quarter funds from operations and raised its FFO forecast for the year as it redevelops centers domestically and expands overseas. “Our business is strong and our cash flow is growing,” Chairman and Chief Executive Officer David Simon said. Aside from higher borrowing costs, REITs have few chances to buy high- quality malls because those properties rarely come on the market, with publicly traded landlords owning most of the best-performing centers, said Rich Moore, an analyst at RBC Capital Mar- kets in Solon, Ohio. “They’re so lucrative that no one gets rid of them,” he said. Regional-mall transactions are down 49 percent to $4.5 billion this year from the same period in 2012, according to Real Capital Analytics Inc., a commercial-property research firm in New York. “There continues to be robust demand from investors for these high-quality assets,” Bokota said. “There’s just a scarcity characteristic.” Slowing sales in the second quarter were reported by retailers including traditional mall anchor Macy’s, and apparel chains Aeropostale and Abercrombie & Fitch Co. said traffic at stores declined. Nordstrom, the Seattle-based department-store chain, last month lowered its total-sales forecast for the year to an increase of 3 percent to 4 percent, down from a previous estimate of 4 percent to 6 percent. Cincinnati-based Macy’s cut its forecast for earnings for the year ending in January as sales at stores open at least a year fell 0.8 percent in the second quarter from a year earlier. Aeropostale, a New York-based cloth- ing store that targets young people, said on Aug. 22 that second-quarter net sales fell 6 percent and comparable sales, including online sales, dropped 15 percent. Mall owners may be cushioned from the impact of their tenants’ slowing sales because occupancies are high, said Cedrik Lachance, an analyst at Green Street Advisors Inc. in Newport Beach, California. At regional malls, which typically include department stores, vacancies fell to 8.3 percent in the second quar- Mall Owners Go From First to Last as Spending Slows Commercial real estate www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 23 The malls are currently better occupied than they’e ever been.That does provide some pricing power to the landlords despite some softness emerging in retailer sales. continued on next page

30. ter from 8.9 percent a year earlier, and rents rose to $39.62 a square foot from $39.12, according to data from New York-based research firm Reis Inc. “The malls currently are better occupied than they’ve ever been,” Lachance said. “That does provide some pricing power to the landlords despite some softness emerging in retailer sales and retailer profitability.” The struggles of J.C. Penney Co. have led to questions about the health of malls. While the decline in sales has slowed under new CEO Mike Ullman, they were down 12 percent in the second quarter. That compared with a 23 percent decline a year earlier, when former CEO Ron Johnson led the company. The company owns 429 of the 1,104 department stores it operates in the U.S. and Puerto Rico, according to the company’s latest annual report. Even if J.C. Penney got into more serious trouble, the impact on mall REITs would be minimal – and “it’s highly unlikely” it will disappear, said Moore of RBC Capital Markets. “Most of the landlords would tell you they would love to get their J.C. Pen- ney box back,” Moore said, adding that the stores could be rented to another department-store chain or torn down and replaced with smaller shops, movie theaters or restaurants. “Most of these guys would say, ‘Great.’” Outlet centers, where brand-name retailers sell goods at discounted prices, are performing better than other retail property types as consumers seek more- affordable apparel and other goods, according to Craig Guttenplan, a REIT analyst at CreditSights Inc. in London. “Consumers like the bargains still,” he said. “They’re still cautious on spending.” The popularity of outlet centers has led some traditional-mall REITs, including CBL & Associates Properties Inc., Taubman and Macerich Co., to enter the business. Chudi Aguanunu, who works at Street Talk, a mobile-phone accessories kiosk in Macerich’s Shops at North Bridge on Chicago’s Michigan Avenue, goes to outlet malls or online when he wants something. The Shops at North Bridge, which caters in part to tourists, has stores including Nordstrom and Hugo Boss. “It’s got to be at a good price,” said Aguanunu, 25, a former walk-on of- fensive lineman with the University of Illinois football team. “I’m not going to spend $100 for a T-shirt.” The shares of Tanger, which operates only outlet malls, may be under pressure because of increased competition from other landlords expanding into the business, said Yang of Evercore. Greensboro, North Carolina-based Tanger owned and operated 36 outlet centers as of June 30, and held stakes in seven other properties, including three in Canada, according to a regulatory filing. “There’s clearly an abundance of new players in a sector that for the most part is much healthier than the malls,”Yang said. “During and following the recession, consumers were clearly looking for value.” Hoteliers and self-storage landlords are the top-performing REIT sectors this year. Since REIT shares peaked on May 21, lodging and storage companies have fallen less than other groups, while the performance of single-tenant, healthcare and mall REITs – which have longer leases, giving them less flexibility to raise rents – has been among the worst as other REIT types become more appealing to investors. “It’s all about choices,” Yang said. “There appear to be more-attractive, better-accelerating core growth stories, perhaps, in some of the other sectors.” With few high-quality malls for sale, landlords are focusing on sprucing up their existing properties to boost traffic and rents at their properties. “The one other growth avenue that a lot of the companies are pursuing is active redevelopment,” Bokota said. “That’s where they’re putting a lot of their cash flow and new dollars to work.” Simon, based in Indianapolis, had $212 million in mall redevelopment projects in progress in the second quarter, with a projected rate of return of 8 percent, according to a regulatory filing. The figure is Simon’s share of construction costs at properties it owns outright or has an ownership stake. Chicago-based General Growth has invested $356 million on redevelopment and expansion with an expected return of as much as 11 percent, according to a regulatory filing. General Growth said it spent $567 million repurchasing shares at an average price of $20, mostly from Bill Ackman’s Pershing Square Capital Management LP. Pershing was the second-largest investor in General Growth, holding about 68 million shares as of June 30, according to data compiled by Bloomberg. The New York-based hedge-fund firm previously sold about 7 million shares of the mall landlord in June, the data show. “This is a discount to private- market valuation for high-quality U.S. retail properties,” General Growth Chief Executive Officer Sandeep Mathrani said in the statement. Shares of Simon – which has 22 buy ratings from analysts, five hold s and no sells, according to data compiled by Bloomberg, and is the largest U.S. outlet-mall owner – have fallen 18 percent since the REIT slide began in May. That decline led Paul Adornato, an analyst at BMO Capital Markets in New York to upgrade Simon’s shares on Aug. 23 to outperform, the equivalent of a buy, based on the company’s valuation. “We like their business mix,”Adornato said in a telephone interview.“They have the greatest exposure to the outlet business.” — Brian Louis (Bloomberg News) MONITOR LIQUIDITY FOR MULTIPLE BONDS FIW <GO> www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 24 continued from previous page

31. commercial real estate IO Commercial Real Estate Loans Account for 28.32 Percent of This Year’s CMBS 0 10 20 30 40 50 60 70 80 90 100 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Partial IO IO Balloon Fully Amort Source: Bloomberg LP CMB <GO> This year, 28.32 percent of all commercial mortgage debt bundled in securities are interest only mortgages, according to Bloomberg LP. Balloon mortgages account for 28 percent of commercial property debt resold into securities and fully amortizing commercial property mortgages – just over 40 percent of all commercial mortgage debt resold as bonds in 2011 – account for 22.81 percent of all commercial property mortgages resold in securities. — Aleksandrs Rozens BLOOMBERG IS THE PREFERRED SOLUTION FOR CMBS MARKET LEADING ANALYTICS Robust loan and property performance-driven cashﬂow analysis and predictive modeling. MOST TRUSTED DATA High quality loan and property CMBS data, complemented with data from trusted CRE data providers. BREADTH AND DEPTH Breadth of Bloomberg tools for tenant and borrower company analysis, staying ahead with real-time news and pricing, and much more... LEARN MORE To learn more about commercial real estate data, news and analytics on the Bloomberg Professional® service, email our Mortgage Sales Specialist Group at mtgegroup@bloomberg.net ©2013 Bloomberg Finance L.P. All rights reserved. 53355929 0413 New York +1-212-318-2000 San Francisco +1-415-912-2960 www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 25

32. Commercial real estate Use of Agency Collateral in CMBS Grows After Credit Crisis While commercial mortgage bond transactions have come to rely more on conduit debt, this source of collateral for bonds has not returned to pre-crisis levels. At the same time, agency debt is accounting for more collateral in the post-crisis market. Year to date, agency debt in CMBS is at $38.02 billion, according to data compiled by Bloomberg LP. In 2012, $51.68 billion worth of agency debt was bundled in CMBS and $32.31 billion of conduit debt was resold in CMBS. In 2007, $157.7 billion of conduit debt was resold into CMBS and $1.4 billion of agency debt was resold into CMBS. — Aleksandrs Rozens 0 50 100 150 200 250 2005 2006 2007 2008 2009 2010 2011 2012 2013 DollarVolume(Billions) Other Japanese European Large Loans/Floaters Conduit Agency Source: Bloomberg LP 0 50 100 150 200 250 300 12/31/97 12/31/01 12/31/05 12/31/09 12/31/13 (DollarVolume(Billions) All U.S. All Non-U.S. Source: Bloomberg LP CMBS Issuance on Track to Beat 2012 Levels Year-to-date, $88.1 billion worth of commercial mortgage bonds has been issued in the U.S. and $5.8 billion worth of CMBS have been issued in Europe. In 2012 issuance of commercial mortgage backed bonds in the U.S. totaled $117.6 billion, up from $67.8 billion, according to data compiled by Bloomberg LP. The issuance of bonds backed by commercial real estate debt hit a historic high of $253.9 billion in the U.S. in 2007; in Eu- rope, the historic high was seen in 2006 when $89.1 billion worth of commercial mortgage backed bonds was sold. — Aleksandrs Rozens MONITOR LIQUIDITY FOR MULTIPLE BONDS FIW <GO> www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 26

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36. residential real estate Florida Is Busiest With Residential Home Foreclosures, Delinquencies in Q1 Florida had the most single family home loans that are 90 days or more delinquent or are in the process of foreclosure in the first three months of 2013, according to the Mortgage Bankers Association. Ac- cording to the MBA, 14.97 percent of the state’s one to four unit residences were 90 days or more delinquent or in the process of foreclosure. — Aleksandrs Rozens TAKE YOUR FREE 30 DAY TRIAL TO ANY OF OUR 19 MARKET LEADING NEWSLETTERS: > Economics(U.S., Europe and Asia editions) > Hedge Funds (U.S. and Europe Editions) > Private Equity > Bankruptcy and Restructuring > Healthcare Finance > Oil Buyer’s Guide > Structured Notes > Mergers > Municipal Market > Leveraged Finance > Financial Regulation > Clean Energy & Carbon > Technical Strategies > China Brief (Chinese language) (Percentage of a state’s one-to-four unit homes 90 days or more delinquent) www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 30

37. GSE Reform Should Factor in The Possibility of Market Distortions, Higher Mortgage Rates Given the recent flurry of activity in Washington, it looks like housing finance reform is finally getting out of the legisla- tive dugout and into the on-deck circle. Following the February release of a reform plan by the Bipartisan Policy Center’s Housing Com- mission, Sena- tors Bob Corker (R-TN) and Mark Warner (D-VA) introduced their own far-reaching proposal. Con- gressman Jeb Hensarling (R-TX) also drafted a comprehensive plan -- the Pro- tecting American Taxpayers and Home- owners (PATH) Act -- that has already been approved by the House Financial Services Committee. More recently, President Obama injected a jolt of energy into the debate by announcing his “core principles” for reform. What is striking about these proposals are their many common elements: ■■ A recognition that the overwhelming government footprint in the mortgage market is unsustainable; ■■ A desire to introduce far more risk- bearing private capital into the mortgage system to enhance consumer choice and reduce taxpayer exposure; ■■ The elimination of Fannie Mae and Fred- die Mac over a multiyear transition period; ■■ The promotion of higher levels of transparency in the mortgage market to encourage greater involvement by the private sector; and ■■ A recognition of the importance of com- munity banks and other small lenders in meeting America’s mortgage needs. Unlike the PATH Act, both the Obama plan and the Corker-Warner bill also support the idea that the government must function as the insurer of last resort in the secondary market for mortgage-backed securities to preserve widespread access to the 30-year fixed rate mortgage. Here, too, the details are similar: Under both plans, the government role is explicit, private capital must be wiped out before the government guarantee is triggered, and the government must collect actuarially fair premiums for the insurance it provides. Both plans call for a strong independent regulator to enforce rules consistent with these objectives. Final passage of comprehensive legislation is unlikely by year’s end. Since nego- tiations over the federal budget are bound to consume Congress’ attention this Fall, the most optimistic scenario is passage of a reform bill sometime in 2014. This timetable provides the opportunity for a more rigorous examination of some fundamental questions: 1. Will Private Capital Step Up? There is broad agreement that more private risk-bearing capital must enter the system, but what is the evidence that private capital will, in fact, assume more risk? After all, private-label mortgage- backed securities still account for less than one percent of the overall market. And if risk-bearing private capital is to play a more prominent role, what form will it take – a capital markets structure, private mortgage insurance, or a combination of approaches? How much additional private capital is needed to replace the $5 trillion in credit risk as- sumed by Fannie and Freddie? 2. Are We Prepared for Higher Mort- gage Rates and Tougher Underwriting Standards? If private capital bears more risk in a new system, it will insist on some com- pensation to offset this risk. This additional cost will be passed along to consumers in the form of higher mortgage rates. These rates are likely to increase once the Federal Reserve dials back on its asset purchase program. Private investors may also impose more stringent underwriting requirements for loans if expected to assume the “first loss” on securities comprised of these loans. Are American consumers prepared to accept these changes? 3. Can the Government Effectively Price Risk? The Corker-Warner bill calls for the creation of a “mortgage insurance fund” that is built up over time by charging a fee for each mortgage-backed security benefiting from the government guarantee. The goal is for the fund to accu- mulate enough reserves so it absorbs all losses in a severe market downturn before the taxpayers are ever tapped. But is the government capable of effectively pricing risk and gauging what is an “actuarially fair” fee? Alternatively, is the private sector any better at pricing risk than the government? 4. How Do We Encourage Access to Credit Without Distorting the Market? A stated aim of the reform plans is to ensure broad access to mortgage credit in all communities. But the plans also reject the “affordable housing goals” that were imposed on Fannie and Freddie on the grounds they distorted the market in harmful ways. How can we have confidence that our new housing finance system will be inclusive and fair consistent with sound risk management? In addition, how do we ensure that access to the government-guaranteed secondary market is open on equal terms to mortgage lenders of all types and sizes? 5. Is There Anything Worth Preserving from the Current System? As we transition to a new system, what parts (if any) of Fannie and Freddie should we maintain? Over the years, the two institutions have assembled talented teams and developed their own securitiza- tion platforms to which market participants have grown accustomed. The Federal Housing Finance Agency, their regulator, has now directed them to develop a single, common platform that will serve as the infrastructure of a new secondary market. Is this the right way to go? Nicolas Retsinas Robert M. Couch residential real estate www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 31 continued on next page

38. 6. What are the First Transition Steps? Even the harshest critics of Fannie and Freddie acknowledge they cannot be eliminated overnight without creating immense market turbulence. But what precisely are those first few steps in the transition to a new system? To reduce taxpayer exposure to credit risk, should Fannie and Freddie offer risk-sharing options to mortgage lenders at the “point of sale,” as some have sug- gested? Should they develop a common security in the To-Be-Announced (TBA) market, a step some consider necessary for a more efficient secondary market? A thorough examination of these issues will improve the legislation that Congress ultimately passes. If done in a transparent and bipartisan manner, the American people will benefit from a more complete understanding of what’s at stake and will have greater confidence that the judgments reached were the right ones. — Nicolas P. Retsinas and Robert M. Couch are members of the Bipartisan Policy Center’s Housing Commission. Retsinas served as FHA Commissioner in the Clinton Administration and Couch, counsel to Bradley Arant Boult Cum- mings LLP, served as Ginnie Mae President in the George W. Bush Administration. KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, are marketed. Securities products and services such as investment banking and capital raising are offered by KeyBanc Capital Markets Inc., Member NYSE/FINRA/SIPC. Securities products and services: Not FDIC Insured • No Bank Guarantee • May Lose Value. Banking products and services are offered by KeyBank National Association. All credit products subject to credit approval. Key.com is a federally registered service mark of KeyCorp. ©2013 KeyCorp. KeyBank is Member FDIC. ADL6687 Key is a proven industry leader in providing strategic real estate solutions to our public and private clients. We are uniquely equipped to meet clients’ complex business needs and enhance value by leveraging our fully integrated financial platform. Key’s comprehensive suite of real estate capital products and services includes: • Corporate credit facilities • Private placements • Syndicated finance • Acquisition, bridge, and construction loans • Equity and debt capital markets • Permanent financing • Advisory services Let us put our expertise to work for you. To learn more: Contact David Gorden, Managing Director & Group Head, KeyBanc Capital Markets, at 617.385.6220 or dgorden@key.com. Visit key.com/realestate Unlock value www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 32 continued from previous page

39. Residential real estate 1000 1500 2000 2500 3000 3500 4000 4500 5000 5500 6000 9/1/2011 1/1/2012 5/1/2012 9/1/2012 1/1/2013 5/1/2013 9/1/2013 MortgageRefinanceIndex 30-year fixed mortgage rates hit 4.57 percent, according to Freddie Mac. Source: Mortgage Bankers Association OMBAREFI <INDEX> <GO> Requests for Home Loan Refinancings Fall to Lowest Since April 2011 Requests from homeowners who want to cut borrowing costs via a home loan refi- nancing have declined as mortgage rates have risen from historic lows, according to data compiled by the Mortgage Bankers Association. The industry group’s mortgage refinance index - a measure of applications for single family home loan refinancings - fell to 1,528.5 in the week ended Sept. 6. That’s down from a historic high reading of 5,888 on Sept. 28, 2012. This measure of requests for home loan refinancings was last this low on April 15, 2011 when it was 1,872.0. The index’s all time high was on May 30, 2003, when it hit 9,977. —Aleksandrs Rozens 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 20 30 40 50 60 70 80 90 9/21/2007 1/21/2009 5/21/2010 9/21/2011 1/21/2013 30-YearMortgageRate(%) RefinancingsAsPercentageofallLoans Refis as Percentage of All Loan Applications 30-Year Mortgage Rate Source: Mortgage Bankers Association For Mortgage Lenders Focus Is Now on Supplying Credit to Buy Homes Mortgage lenders likely will focus more on loans to buy homes now that the pace of refinancings has slowed. Fifty-seven percent of all home loan applications in the Sept. 6, 2013 week were requests to refinance an existing mortgage loan, down from the previous week when they were 61.3 percent of all loan applications, according to data compiled by the Mortgage Bankers Association. Mortgage rates for 30-year fixed loans in the Sept. 6 week were at 4.57 percent; in November 2012 they were as low as 3.31 percent. A year ago, 79.7 percent of all mortgage loan applications were for refinancings and they were as high as 84 in the Dec. 7, 2012 week. — Aleksandrs Rozens 30-year fixed mortgage rates hit 4.57 percent, in the week ended 9/12/13, according to Freddie Mac. www.bloombergbriefs.com Bloomberg Brief | REAL ESTATE SPECIAL EDITION 33

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