MODULE 12

Public, Private, & Investment Performance

Are Equity REIT’s Stock or Real Estate?

How Do Historical Returns of Indirect Vehicles for Real Estate Investment, Public and Private, Stack up Against One Another?

Do REIT’s Perform Like Small-Cap Stocks?

Will Future Performance of REIT’s Differ From the Past?

Comparing Ownership of Real Estate Alternatives

Direct vs. Indirect Ownership of Real Estate

Characteristics of Ownership Direct Indirect Interest Liability Transfer Rights ControlCharacteristics of Ownership Liquidity Performance Measure Term Investor Scale Economics of Scale Agent Relations

Private vs. Public Ownership

O pe n -e nd C lo sed -e nd R E IT

P riva te

E q u ity R E IT

P u b lic

Characteristics of OwnershipInterestLiability

Transfer RightsControl

Characteristics of Investment Vehicle

LiquidityTerm

Agent RelationsSource of Appreciation

Other Issues of Public Entities

Liquidity and Value Management and Investment

Decisions Operating Entity vs. Assets

Information: Public vs. Private Ownership of Real Estate

Type of Information Private Market Public MarketValue Periodic Appraisals Public Trading

Performance Individual Property Proprietary Public Domain Compensation Analysis Consultant Services Public Analysts

Asset Profiles Investment Annual Report, 10K Prospectus

Transactions Acquisitions Proprietary “News” Release Debt Proprietary “News” Release

Capital Raising Equity Proprietary “News” Release Debt Proprietary “News” Release

Insider Trades NA Market Tracking

Services

Financial Audits “Standard Practice” “Required Annual Report”

REIT Pricing Models

NAV Dividend-Multiple DCF Pure DCF REIT Scoring Model with Add-

ons

CAP Rates and Interest Rates: How Should they Relate?

REIT Yields and Market Interest Rates: What’s the Relationship?

Net Asset Values: Easily Accessible?

Appraisal Accuracy Costs

Multiple Comparisons Method

FFO x Multiple for FFO FAD x Multiple for FAD

Multiple Comparisons “Adjustments”

High Expected Growth Rates Low Level of Capital Expenditures Solid Market Fundamentals Focus/Expertise in Property Type or Locale Low Debt, High EBITDA Coverage Ratios High Debt Quality Low Dividend Pay-out (% of FFO or FAD) Quality Management Long, Stable History

Implicit Capitalization Rate Method

Calculate REIT’s Implicit CAP RateEquity Market Capitalization 600plus Outstanding Debt 300less Construction in Progress 100less Non-Real Estate Assets 100Implied Real Estate Value 700Aggregate Annualized Property Level NOI 55Implied CAP Rate 7.9%

Asset Valuation Method

NOI 55Market Cap Rates 9.0%Value of Property(Asset Value) 611Third Party Property Management Fees & Other Income 5Management Fee Multiple 5xValue of Management Fee and Other Income 25Development in Progress 50Expected Initial Return 10.0%Expected Initial $ 5Market CAP Rate 9.0%Value of Development Under Construction 56

Current REIT Valuations

Property Value 611Third Party Management Fees and Other Income 25New Development Value 56Gross Company Value 692Debt Outstanding (300)Net Company Value 392Shares Outstanding 10Value Per Share $39.20

Other Factors to Consider in Valuation

Management Asset quality Capital Structure Board of Directors

Track Record: Strong Returns and Portfolio Growth

Scale Returns

Composition of REIT Total Returns

Dividend Yield 8% Average “Same Store” NOI Increase 3-5% Investment of Retained Earnings 1% Acquisitions/Development ? Efficiency Gains ? Restructuring Gains ?

Total Return 12-14%

DCF Model: Issues and Problems

Accurate Inclusion of Risk/Rewards Valuation Effects of Level and Current

Development Options

Proper Inclusion of Debt Structural Features of Corporation

Scoring Models

Use DCF and/or NAV to Aid Analysis

Use Key Qualitative/Quantitative Variables

Green Street Advisors Model

A Two Step Model

1. Corporate NAV

2. Adjust for Special

Circumstances of REIT

REIT Value Vis-à-Vis NAV

Liquidity Value-Added Option Potential Efficient Operations Diversification Franchise Value

Green Street Advisors, Inc.Example of Scoring Model (Page 9, and

Appendix A)

Variable Selection Franchise Value Inside Ownership Focus Potential Conflicts Overhead Expenses Balance Sheet Activity

DEBT...A Four Letter Word?

Scenario with 35%

DebtEBITDA $ 60

Debt $263 (35%)

Cost of Debt Service 8.0%

Equity $487 (65%)

Cost of Equity 12.0%

Total Capitalization 750 (100%)

Weighted Cost of

Capital 10.6%

Coverage Ratio 2.9:1

Scenario with 45%

Debt $ 60

$338 (45%)

8.0%

$412 (55%)

12.0%

750 (100%)

10.2%

2.2:1

How Do REIT’s Grow? Internal

- Revenue

- Costs External

- Acquisition

- Merger Financial Engineering

- Capitalization Factor

- Leverage