Distressed Multifamily Opportunities: Who Will Be the First to Jump In, and Who Will Follow? by Mike Kelly, President, Caldera Asset Management. Presented at GreenPearl Events' Distressed Real Estate Summit Chicago on May 13, 2010.

1. Green Pearl
Chicago Distressed Real Estate Summit
May 2010
May 2010 Confidential & Proprietary

2. Questions
1. Are the spike in values justified ?
• What kind of deals and related cap rates are in the market ?
• Are you seeing a V-shaped recovery at your properties ? Is the revenue increase
driven by occupancy gains or real rent increases ?
2. Debt ?
• What type of deals are out there to buy from servicers and constr. lenders ?
• What are the pitfalls ?
• How are buyers, sellers, or lenders reacting to terms in the market ?
• Are banks or servicers going to get more aggressive in foreclosures /DPOs ?
• Is buying loans getting played out or is there more room to run ?
• Current lending environment and terms for Agencies, or mezz, or hard money
investors ?
• What is the outlook for Fannie /Freddie ? Will they merge, shrink ?
3. Have we forgotten the impact of the debt bubble still ahead of us ?
• How will the large amount of construction debts play out ?
• How will the maturing CMBS products get refinanced, or flushed through ?
• Who are the buyers going to be for the “non–A” grade products ?
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3. Questions
4. Legal side
• Any major changes in players, deal terms, client sentiments ?
5. Development of apartment/condos going forward
• What is the time frame to start building again ?
• What type of terms will investors get on equity and construction debt ?
• Any new ways to look at this model ?
Looking ahead
• Where does the new equity come from for acquisitions when the supply of
assets gets larger ? What type of returns would investors expect ?
• What have we learned in the past 24 months ?
• NOI – Buyers are all underwriting significant growth due to recovery and
lack of new construction – What are your thoughts on this assumption ?
• Where do new jobs come from ?
• Wrap up
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4. Apartment transactions
Apartment Transaction Volume through April 2010
$120 B 5,000
3,795
3,814 3,871
Number of Transactions
$100 B
$99.6 4,000
Total $ Amount
$88.8 $91.7
$80 B
2,462 3,000
$60 B
$51.0 2,055
1,649
2,000
$40 B 1,251 $37.3
1,169 $30.3 975
$22.7 868
$20.4 1,000
$20 B $14.1
$17.3
$0 B 0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Annualized
Garden Mid/highrise Total Price Transactions
Source: Real Capital Analytics
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5. Detailed Multifamily Maturities
$ billions Multifamily Maturities - by Investor Types: 2010 to 2017
(Does not include commercial lenders/ thrifts or savings institutions)
$60
$50.8
$47.2
$50
$39.9 $7.9
$40.5
Average- $37 billion $33.8 $1.8
$5.6
$40 $1.7
$7.5 $6.0
$28.1 $29.3 $1.8
$23.6 $3.2
$30 $6.5 $21.1
$25.3
$1.6 $5.1
$5.9 $16.0
$12.8 $7.1 $1.6
$4.5 $4.0
$20 $8.3
$7.4
$10.7
$10 $17.0 $18.6 $18.8
$7.4 $14.3 $16.1 $15.8
$7.5
$4.3
$0
2010 2011 2012 2013 2014 2015 2016 2017
Fannie, Freddie, FHA and Ginnie Mae CMBS, CDO or other ABS
Credit Companies, Warehouse, and Other Life Insurance Companies
Source: Mortgage Bankers Association (“MBA”).
Note: Does not include commercial banks which have over The December 2009 MBA Survey covered most multifamily
$200 billion in apartment debt O/S loans outstanding from the investor pool except for Commercial
Banks/Thrifts.
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6. Current Apartment Mortgage Holders
$400
Commercial Banks Can the Agencies
$379
Savings institutions continue to deploy capital
$357
$350
Life Insurance
to make up for the lack of
Private mtg Cond uits
CMBS and Life
$300 $302 Insurance originations ?
Total Gov't backed
entities
$250
$244
$229
$215
$210 Increase from 2005
$200 (billions) $ %
$168 Fannie/Freddie $140 77.5%
$158
Gov't entities (non Fannie
$150 $139 & Freddie) $9 4.1%
$125
$114
$108
$103 Commercial Banks $71 51.3%
$98
$100 $93
$89
$96 Savings Institutions ($38) -39.1%
$65
$60
Life Companies $7 17.7%
$50
$52 $52 $50
$46
$42 Conduits $19 21.2%
$0
12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 Source: Federal Reserve
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7. Trepp Multifamily Delinquencies
30 days 60 days 90 days Non perf Forclose/ REO 90 days+ non-perf + REO Total
14 13.32
13.17
12 11.22 11.55
9.72 9.86
10
9.26
8.74
8.29
8 7.66 7.69
7.06 7.06
6.67 6.74 6.79
6.14
5.66
6 5.61
5.23 5.39
5.16 5.08
4.85
4.04 4.37
3.74 3.86 3.79
4 3.52 3.66
3.44
3.33 3.37
2.82 3.81 3.79 3.88
2.58 2.90
2.65 3.34
2.20
2 1.88 2.54
1.43
0
Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10
Source: Trepp
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8. Multifamily Delinquencies
12.00% 11.55%
Trepp CMBS - Trepp- 11.22%
multifamily
Fannie- multifamily
10.00% Freddie -multifamily
Fannie- single family
8.29%
8.00% Freddie- single family 7.69%
6.72%
6.14%
Fannie
6.00% 5.66% 5.69%
5.52%
5.29% 5.38%
5.08%
4.85% 4.72% 4.98%
4.37%
4.04%
3.94% Freddie-
4.00%
3.42% 3.37% 4.15% 4.20% 4.13%
3.15% 3.87%
2.96% 3.72%
3.33% 3.54%
2.65% 3.30%
3.13%
2.95%
2.78%
2.62%
2.00% 2.44%
2.13%
Fannie Multi
0.66% 0.63% 0.69% 0.73%
0.50% 0.51% 0.56% 0.56% 0.62% 0.61%
0.32% 0.34% 0.36% 0.25% 0.24%
0.08% 0.09% 0.10% 0.12% 0.11% 0.11% 0.10% 0.11% 0.17% 0.19% 0.19% 0.21%
0.00% Freddie
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9. Non-current Multifamily C&D loans
Percentage of Multifamily- non current
(90 days past due or non accrual status) Multifamily
Non $ o/s
current % (billions)
5.00% Dec-05 0.25% $188
4.44% Mar-06 0.28% $191
4.50% $192
Jun-06 0.29%
Sep-06 0.31% $193
4.00%
3.58% Dec-06 0.41% $193
3.50% Mar-07 0.60% $192
3.13%
Jun-07 0.66% $190
3.00% Sep-07 0.68% $193
2.45% Dec-07 0.76% $202
2.50%
Mar-08 0.98% $207
2.00% 1.74% Jun-08 1.20% $211
1.47% Sep-08 1.47% $205
1.50% 1.20% Dec-08 1.74% $206
0.98% Mar-09 2.45% $211
1.00% 0.68% 0.76%
0.60% 0.66% Jun-09 3.13% $213 $ NC
0.41%
0.50% 0.25% 0.28% 0.29% 0.31% Sep-09 3.58% $216 $7.73
Dec-09 4.44% $211 $9.39
0.00%
Note: In the past 6 quarters the
amount of outstanding apt loans has
remained virtually the same.
Source: Federal Reserve However, total C&D for all real
estate has dropped $170 billion .
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10. Conclusion
1. Should we jump back into the pool now ?
• Will NOI increases offset any increases in interest rates and cap rates ?
• Has the market been too conservative over the past 24 months ?
• What type of returns (IRR or COC) for apartment acquisitions ?
2. Debt
• Will Fannie/Freddie continue to fuel the market ?
• Is there a real risk that Fannie/Freddie will slow down, or even consolidate ?
• Will CMBS come back to save B and C grade properties market ?
3. What is ahead of us ?
• What keeps you up at night ?
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11. Caldera Asset Management
Caldera Asset Management is a turnaround and restructuring consulting working
exclusively with multifamily assets. We offer lenders, equity investors, developers and
lawyers the convenience and efficiency of one-stop shopping. We provide solutions that fit
their individual needs.
 Caldera brings a wealth of experience that covers virtually all aspects of
apartments:
– Asset management
– Restructuring and recapitalization of portfolios as well as one-off assets
– Executive experience
• Public REITS
• Private REITS
• Pension fund advisors
• Entrepreneurial firms
– Experience in direct ownership of all classes of apartment assets (A,B and C)
– Financing
– Accounting
– Brokerage
– Portfolio acquisition / disposition
www.CalderaAssetManagement.com
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