This is a presentation I prepared for a ULI LA Education Event "DEBT: Where to find it in 2010." We brought 4 institutional scale lenders together, to respond to 4 loan request scenarios. If the CMBS market grows 10x in 2010, then it will only accomodate 3% of maturities. Debt will still come from Life Cos, Banks (recourse & non-recourse), and Mezz lenders

1. DEBT
WHERE TO FIND IT IN 2010?
This event was made possible by the above sponsors

2. PANELISTS
• Bill Harvey
Senior Vice President
• Jaime Zadra
Principal
• Ronnie Gul (in place of Steve Fried)
Vice President
• Rudy Kramer
Senior Vice President

3. MARKET PRESSURE POINTS
 Funding gap
 $450 bn maturities in 2010/2011/2012
 If CMBS issuance grows 10X from 2009 issuance ($130 mn), it's only 3% of 2010 maturities 
maturity events & new debt to come from Banks, Life Companies, Agency, & Specialty
 Ample buy-side liquidity in the market today
 Abundant Institutional Capital for core assets in gateway markets
 Plenty of private capital (pricing is key) for secondary and transitional properties
 Declining fundamentals as continued job losses ripple through the office market
 Scarcity of product on the market is driving price (ahead of fundamentals)
 Quality assets get pricing premiums

4. THE UNDERWRITTEN NOI
Underwriting
 Vacancy – 10% to account for weakening fundamentals, credit quality of
tenants
 Rents – Decreases of 20%-40% depending upon the market
 T.I.’s – Increases of 50%+ from current market (Manhattan = $70 psf)
 Lease-up – Doubling lease-up time
 Reserves – $.20/.25 psf
 Residual – 50-100 bp over going in cap rate
Result
 NOI is 10-20% less than actual operating statements
 Lender LTV: 50%-65%, Borrower LTV: 40%-55%
 Buyer Cap Rate: 7%-10%, Seller Cap Rate: 9%-12%
 Result = Value Dislocation (price is hard to discover)
 Net Cash Flow v. Net Operating Income

5. HFF DEBT TRANSACTION
ACTIVITY
% of Loan Transaction
Volume
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
2007
2008
3Q 2009
SOURCE: HFF Transactional Activity by Dollar Volume

6. OVERALL HOLDERS OF
SECURED CRE DEBT
9/09 9/08
($Bil.) ($Bil.) % Chg.
Banks & Thrifts $1,722.4 $1,711.4 +0.4
CMBS CMBS 708.5 745.5 -5.0
21%
Insurers Insurers 310.1 318.0 -2.5
9% Federal Agencies 282.6 250.9 +12.6
Banks &
Agency CMBS 162.2 148.6 +9.2
Thrifts
50% Other 250.6 276.5 -9.4
Total $3,436.4 $3,450.9 -0.4
Federal
Agencies
Agency 8%
Other CMBS
7% 5%
SOURCE: Federal Reserve Board, as of Sep. 2009

7. AVERAGE LTVs FOR HFF
Office Retail
Year LTV LTV
2004 74% 75%
 Declining leverage 2005 72% 75%
 Declining property cash flow 2006 77% 74%
2007 72% 73%
2008 68% 64%
2009 60% 58%
Since Aug 1 66% 63%

8. AVAILABILITY OF DEBT
PRODUCTS
Loan Type Availability
Permanent/Term Loans
Bridge Financing
New Construction Financing
Financing for unstabilized or non-cash flowing assets ?

9. Stabilized Office (Financial District)
multi-tenant class-A
Property 566,000 net rentable SF; 28 story; largest tenants are
Description several leading law firms with lease maturity in 2017
(DLA Piper Rudnick, Howrey Simon Arnold)
Buyer/Borrower JV between a foreign fund and an experienced/capable
local operator structured as a 90/10 split; long-term hold
strategy to own a stabilized CBD at well below
replacement cost in a much-improved downtown LA
Hurdles Loan request is greater than $50 MM
Purchase Price $125,000,000
Cash Flow T12 NOI $8.8 MM
$8,944,000 NOI (87% occupancy)
Loan Request
Amount Up to $81,250,000
LTV 50-65%
Rate Fixed preferred
Amortization 30 Year
Term 10 years
Recourse Non or partial-recourse preferred

10. Stabilized Retail (Coastal Orange County)
Grocery/Drug anchored neighborhood center
Property Description 140,000 net rentable SF; built in 1977, renovated in 2005; located at a primary intersection;
Albertson’s occupies 60,000 SF (rollover in 2015) T-12 sales $425 psf; Rite-Aid occupies
20,000 SF (rollover in 2011) T-12 sales n/a; remaining tenants a good mix of national/local
tenants with an even rollover over the next 5 yrs, avg sales of $325 psf and rents of $2.56
psf NNN
Owner/Borrower Publicly traded REIT with a $27 MM securitized interest-only loan that matures in April 2010
(originated in 2005 as a 5 Year loan)
Hurdle Rollover of maturing CMBS loan
Valuation Borrower values NOI at a 7.5% cap (value = $34,700,000)
Cash Flow T-12 NOI $2.6 MM (92% occupancy)
Loan Request
Amount Up to $27,000,000
LTV 50-65%
Rate Fixed preferred or floating
Amortization 30 Year
Term 5 years
Recourse Non or partial-recourse preferred

11. Multi-housing - approaching stabilization
(downtown LA/Southpark neighborhood)
Property 157,000 net rentable SF; 20 story bldg, 160 units,
Description class-A amenities (pool, fitness, theater/game
room) on a 20,000 SF single land parcel; 240 space
parking facility (1 space per bedroom). An
apartment built to condo specs at $350 psf, for a
cost of $61,250,000
Owner/Borrower 5 member syndicate with an established apartment
operator as GP
Hurdles After concessions, rent is averaging $2.65 psf
Purchase Price $45,000,000 ($257/SF)
Cash Flow T-12 NOI $2.5 MM (80% occupancy)
Loan Request
Amount Up to $27,000,000
LTV 50-65%
Rate Fixed preferred
Amortization Interest Only or 30 Year
Term 5 or 7 years
Recourse Non or partial-recourse preferred

12. Industrial - unstablized
(Cornerstone Commerce Center – Downey, CA)
Property Description 45 newly constructed industrial condomiums, totaling 176,000 SF, situated on 8.83 acres.
One of the most desirable industrial projects in the sub-market; part of a larger 195,000 SF,
50-unit business park “Cornerstone Commerce Center” built at $140 psf; units are 14%
improved with office space
Owner/Borrower Rexford, an experienced/capable operator of industrial real estate
Hurdles Non-cash flowing asset; holdback for commissions, interest reserve, & Operating Expenses
request; partial reconveyance; 11.39% market availability rent (vacant + sub-lease
Strategy (i) Sell individual units to owner/users; (ii) sell the entire project to one investor at a market
cap rate (Yr 3 stabilized Cap Rate projected to be 10.4%, based on 30% below market
rents); (iii) sell individual leased multi-tenant buildings to smaller 1031 exchange buyers at
anticipated pricing close to owner/user values.
Purchase Price $10,000,000 ($57/SF)
Loan Request
Amount Up to $7,500,000
LTV 55-75%
Rate Fixed or floating
Amortization Interest only / 25 or 30 Year
Term 3 Years
Recourse Partial-recourse

13. QUESTIONS
Moderator John Crump (Holiday Fenoglio Fowler)
YLG Education Committee Greg Mino (Fuscoe Engineering)
Bob Eidson (Asset Plan USA)
Volunteer Alan Kwan (Rexford Industrial)