December 9, 2009

O’Connor Forecast Luncheon

DEBT PLACEMENT INVESTMENT SALES LOAN SERVICINGPRIVATE EQUITY & CORPORATE FINANCE STRUCTURED FINANCE LOAN SALES

Todd MarixSenior Managing Director

"Houston-area real estate foreclosures hit a record, but experts said the problem should taper off next year. But commercial real estate foreclosures probably will continue to increase.”

"The number of unemployed Texans swelled again in November, pushing the state's unemployment rate up 0.7 percent to 8.5 percent, federal officials said today…”

"Although losses and insolvencies at banks can reflect incompetent management, fraud or poor loan decisions, the performance of the banking system generally reflects the overall health of the economy."

State jobless rate jumps to 8.5%

FDIC Chairman says agency “hard- pressed” after nearly 200 bank failures

Dow rallies to top 2,000 mark

Foreclosures set record, but drop seen

December 24, 1987

December 28, 1987

December 4, 1987

December 2, 1987

IN THE NEWS

“The Dow Jones industrial average rose above the 2,000 mark Wednesday for the first time in months…”

Properties are trading at a increasing pace

Interest is high for the right product and the right story

Not all of the properties trading are distressed

Financing has evolved to meet the market and become more creative

Full marketing process still the best method to drive price and uncover new buyers

CONTRARY TO WHAT YOU MAY HAVE HEARD

CityTotal

TransactionsJan-Jun % of Total

Jul-Dec

% of Total

Austin 12 5 41.67% 7 58.33%

Dallas 58 28 48.28% 30 51.72%

Houston 60 22 36.67% 38 63.33%

San Antonio 15 6 40.00% 9 60.00%

2009 Increasing Transaction Volume

As of December 7, 2009Source: Real Capital Analytics

RECENTLY SOLD: GABLES AUGUSTA

YOC: 2004

Total Units: 312

Class: A

Submarket: Galleria

# Offers: 20

Cap Rate: 6.50%

Close Date: June 2009

RECENTLY SOLD: CHAMPIONS WOODS

YOC: 1983

Total Units: 186

Class: B

Submarket: FM 1960 West/Champions

# Offers: 17

Cap Rate: 8.25%

Close Date: September 2009

RECENTLY SOLD: WESTCHASE FOREST

YOC: 1999

Total Units: 400

Class: A-

Submarket: Westchase

# Offers: 27

Cap Rate: 7.60%

Close Date: October 2009

RECENTLY SOLD: TIAA PORTFOLIO

YOC: 1988-1994

Total Units: 470

Class: A and B

Submarket: Medical Center

# Offers: 10 Portfolio/50 Individual

Cap Rate: 7.50%

Close Date: December 2009

UNDER CONTRACT: LEGACY AT WESTERN OAKS

YOC: 2001

Total Units: 479

Class: A

Submarket:

Southwest Austin

# OMs: 154

# Tours: 29

# Offers: 36

Est. Close Date: December 2009

We are actively tracking 83 properties (28,000 units) that are in receivership, in

REO or posted for foreclosure

Additional 51 properties (10,000 units) that have been transferred to special

servicer

Total of 134 properties (38,000 units) in some form of REO competing for capital in

next 12-24 months

THE NEXT WAVE OF PRODUCT

Estimated Maturity Profile of Commercial Mortgages

FINANCING THE NEXT WAVE: BANK DEBT

YOC: 1982

Units: 270

Class: C

Submarket: FM 1960 W

Status: Closed

FINANCING THE NEXT WAVE: SELLER FINANCING

YOC: 1983

Units: 320

Class: C

Submarket: FM 1960 W

Status: Marketing

FINANCING THE NEXT WAVE: RESTRUCTURED / ASSUMABLE CMBS

YOC: 1970

Units: 440

Class: C

Submarket: Pasadena

Status: Closed

Commons on Edgebrook

YOC: 1982

Units: 224

Class: C

Submarket: Alief

Status: Closed

Brookstone

“Austin, Dallas, Houston, and San Antonio were included in the nation's 20 strongest metro areas by the Brookings Institute. The Washington, D.C. company’s quarterly MetroMonitor ranks the nation’s 100 largest metro areas for their economic performance based on five key indicators — employment, unemployment, output, home prices and foreclosure rates.”

"Austin took the top spot while Houston moved up 11 spaces to claim the fifth spot on this year's Milken Institute/Greenstreet Real Estate Partners Best Performing Cities Index. San Antonio, Fort Worth and Dallas ranked 11-13 respectively. Texas’ strong position in our best performing cities study demonstrates that a favorable business climate, combined with a low-cost/low-tax environment, is highly supportive of job creation."

"Four Texas markets will be among the first in the nation to recover from the recession, says a nationwide forecast by IHS Global Insight. San Antonio and Austin will lead the way, bouncing back to their pre-recession job levels sometime next year, while Houston and Dallas-Fort Worth are among eight other metropolitan areas predicted to recover by 2011."

Texas metros top 2009 best-performing cities list

Texas cities predicted to lead recovery

Report: Texas cities amongst strongest markets in the country

November 19, 2009

September 28, 2009

September 15, 2009

GOOD NEWS: YOU’RE IN TEXAS

GOOD NEWS: MULTI-HOUSING DEMAND

Historical and Projected Employment Growth

0

500

1,000

1,500

2,000

2,500

3,000

2005 2006 2007 2008 2009 2010 2011 2012 2013

Empl

oym

ent

(Tho

usan

ds)

Austin Dallas Houston San Antonio

GOOD NEWS: MULTI-HOUSING SUPPLY

New Construction Pipeline

3,037

10,516

3,4021,839

4,953

14,337

15,332

5,372

0

5,000

10,000

15,000

20,000

25,000

30,000

Austin Dallas Houston San Antonio

Tota

l Uni

ts

Leasing

Under Construction

3% of Total Supply

5% of Total Supply

4% Total Supply

5% Total Supply