Capital  Markets  Overview  

CAPITAL MARKETS OVERVIEW

DEBT PLACEMENT INVESTMENT SALES PRIVATE EQUITY & CORPORATE FINANCE STRUCTURED FINANCE NOTE SALES & NOTE SALE ADVISORY LOAN SERVICING

Special “thank you” to Mark Gibson, Colby Mueck and HFF.

Much of the analytical data compiled by HFF and provided by noted sources.

Capital  Markets  Overview  

DISCLAIMER  Forward-­‐Looking  Statements  

Certain  statements  in  this  presenta-on  are  “forward-­‐looking  statements”  within  the  meaning  of  the  federal  securi-es  laws.  Statements  about  our  beliefs  and  expecta-ons  and  statements  containing  the  words  “may,”  “could,”  “would,”  “should,”  “believe,”  “expect,”  “an-cipate,”  “plan,”  “es-mate,”  “target,”  “project,”  “intend”  and  similar  expressions  cons-tute  forward-­‐looking  statements.  These  forward-­‐looking  statements  involve  known  and  unknown  risks,  uncertain-es  and  other  factors  that  may  cause  results  and  performance  in  future  periods  to  be  materially  different  from  any  future  results  or  performance  suggested  in  forward-­‐looking  statements  in  this  presenta-on.  Investors,  poten-al  investors  and  other  readers  are  urged  to  consider  these  factors  carefully  in  evalua-ng  the  forward-­‐looking  statements  and  are  cau-oned  not  to  place  undue  reliance  on  such  forward-­‐looking  statements.  Any  forward-­‐looking  statements  speak  only  as  of  the  date  of  this  presenta-on  and,  except  to  the  extent  required  by  applicable  securi-es  laws,  HFF  (the  Company)  expressly  disclaims  any  obliga-on  to  update  or  revise  any  of  them  to  reflect  actual  results,  any  changes  in  expecta-ons  or  any  change  in  events.  If  the  Company  does  update  one  or  more  forward-­‐looking  statements,  no  inference  should  be  drawn  that  it  will  make  addi-onal  updates  with  respect  to  those  or  other  forward-­‐looking  statements.    

   

Industry  and  Market  Data      

In  this  presenta-on,  we  rely  on  and  refer  to  informa-on  and  sta-s-cs  regarding  economic  condi-ons,  trends,  and  our  market  in  the  sectors  of  that  market  in  which  we  compete.  In  par-cular,  we  have  obtained  general  industry  informa-on  and  sta-s-cs  from  certain  third-­‐party  sources.  We  believe  that  these  sources  of  informa-on  and  es-mates  are  reliable  and  accurate,  but  we  have  not  independently  verified  them.      

Capital  Markets  Overview  

$89  $106  

$131  

$213  

$364  

$427  

$574  

$175  

$68  

$146  

$234  

$297  

$361  

$418  

0%  

1%  

2%  

3%  

4%  

5%  

6%  

$0  

$100  

$200  

$300  

$400  

$500  

$600  

2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014  

Billion

s  

Total   10yr  UST  

Source:  Real  Capital  Analy-cs  

U.S.  Real  Estate  Investment  AcOvity  Property  Sales  ($B)  

Down  88%  From  Peak  

2010  Up  117%  vs.  2009    

2012    Up  29%  vs.  

2011  

2003  –  2007  10Y  T  averaged  4.40%  

1998  –  2012  10Y  T  averaged  4.22%  

2013  Up  19%  vs.  2012  

2011    Up  59%  vs.  

2010  

10yr  UST  Decade   Avg.   Med.  

1962  -­‐  1969   4.85%   4.61%  1970  -­‐  1979   7.50%   7.50%  1980  -­‐  1989   10.58%   10.84%  1990  -­‐  1999   6.65%   6.50%  2000  -­‐  2009   4.44%   4.43%  2010  -­‐  2014   2.57%   2.76%  

     5.00%                              4.59%                              4.00%                              4.26%                            4.28%                              4.79%                            4.63%                              3.64%                            3.24%                              3.20%                            2  .76%                            1.79%                              2.34%                            2.52%  Annual  Average  10yr  UST  

2014  Up  16%  vs.  2013  

Capital  Markets  Overview  

 $-­‐    

 $50    

 $100    

 $150    

 $200    

 $250    

2005  

2006  

2007  

2008  

2009  

2010  

2011  

2012  

2013  

2014  

Billion

s  

2005  

2006  

2007  

2008  

2009  

2010  

2011  

2012  

2013  

2014  

2005  

2006  

2007  

2008  

2009  

2010  

2011  

2012  

2013  

2014  

2005  

2006  

2007  

2008  

2009  

2010  

2011  

2012  

2013  

2014  

MulO-­‐Housing  Touching  Previous  Peak  Volume  Historical  TransacOon  Volume  By  Property  Type  

Source:  Real  Capital  Analy-cs  

Apartment            Industrial                                    Office            Retail  

Capital  Markets  Overview  

$0  

$10,000  

$20,000  

$30,000  

$40,000  

$50,000  

$60,000  

NYC

 Metro  

LA  M

etro  

San  Francisco  

DC  M

etro  

Chicago  

Boston

 

Dallas  

South  Florida  

Atlanta  

Houston  

Seac

le  

Denver  

San  Jose  

Phoe

nix  

No  NJ  

San  Diego  

Aus-n  

East  Bay  

Philade

lphia  

Inland

 Empire  

Tampa  

Charloce  

Minne

apolis  

Orla

ndo  

Raleigh/Du

rham

 

Portland

 

Bal-more  

Las  V

egas  

Nashville  

San  An

tonio  

Tran

sacOon

 Volum

e  ($MM)  

Office   Industrial   Retail   Apartment   Hotel   Land  

Source:  Real  Capital  Analy-cs  

TransacOon  Volume  Heavily  Weighted  To  Top  Twenty  Markets  But  Investment  Becoming  More  Broad-­‐Based  YTD  Nov  2014  US  CRE  TransacOon  Volumes  

Top  10  Markets  $182.6  Billion  

65.9%  of  Top  30  Markets  

Markets  11  to  20  $61.9  Billion  

22.3%  of  Top  30  Markets  

Markets  21  to  30  $32.7  Billion  

11.8%  of  Top  30  Markets  

“STEM”  Markets  

Capital  Markets  Overview  Major  Markets  Have  Recovered  Peak  Pricing  

Major  Markets  Are  11.0%  Above  Previous  Peak  –  Non-­‐Major  Markets  Are  -­‐9.7%  Off  Peak  –  NaOonal  0.2%  Off  Peak  Major  Markets  Have  Increased  81.1%  Since  Bocom,  Approximately  1.4x  56.9%  Gain  By  Non-­‐Major  Markets  

Source:  Moody’s  Analy-cs/Real  Capital  Analy-cs  Major  Markets  include  Boston,  Chicago,  Los  Angeles,  New  York,  San  Francisco  and  Washington,  D.C.  This  index  measures  prices  changes  in  US  commercial  real  estate,  based  on  the  completed  sales  of  the  same  commercial  proper-es  over  -me,  known  as  the  “repeat-­‐sales  methodology.”    

80  

100  

120  

140  

160  

180  

200  

220  

2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014  

Na-onal   Major  Markets   Non-­‐Major  Markets  

Capital  Markets  Overview  Property  Prices  &  Employment  Growth  

A  Strong  CorrelaOon  

Source:  NCREIF,  Bureau  of  Labor  Sta-s-cs,  Bloomberg  

-­‐5%  

-­‐4%  

-­‐3%  

-­‐2%  

-­‐1%  

0%  

1%  

2%  

3%  

4%  

5%  

-­‐20%  

-­‐15%  

-­‐10%  

-­‐5%  

0%  

5%  

10%  

15%  

20%  

25%  

79   80   81   82   83   84   85   86   87   88   89   90   91   92   93   94   95   96   97   98   99   00   01   02   03   04   05   06   07   08   09   10   11   12   13   14  

YoY  Change  (%)  Yo

Y  Ch

ange  (%

)  

CRE  Prices   Total  Employment  

Capital  Markets  Overview  What  About  Interest  Rates?  

Property  Sales  Volume  Has  Increased  In  Prior  Periods  Of  Expanding  Interest  Rates  If  Interest  Rates  Improve  Because  Of  Expansive  Economy  

Source:  Real  Capital  Analy-cs,  Goldman  Sachs  

Capital  Markets  Overview  10yr  UST  Yield  Through  YE  2014  

3.65%?  

Source:  JPMorgan  Investment  Management,  HFF  Research,  Bloomberg  

Actual:  2.53%   Actual:  2.49%  

Actual:  2.17%  

Capital  Markets  Overview  

Source:  Cornell  University,  Hodes  Weill,  October  2014  

All  CRE  Investors  Underweight  &  Increasing  AllocaOons  InsOtuOons  Are  Currently  ~90  BPS  Under-­‐Invested  &  Increasing  AllocaOons  By  ~20  BPS  In  2015  

2014  Actual  %  Invested  vs.  2014  &  2015  Target  AllocaOons  

8.49%  

9.38%  

9.62%  

7%  

8%  

9%  

10%  

2013   2014   2015f  2014  Actual   2014  Target   2015  Target  

Capital  Markets  Overview  

$25  

$26   $37   $55   $70   $83  

$85   $94  

$80   $93  

$79   $1

14  

$32   $44   $5

0  

$64  

$91  

$139  

$129  

$119  

$160  

$213  

$256  

$283  

$58  $71  

$86  

$119  

$161  

$223  $214   $214  

$240  

$307  

$335  

$397  

$0  

$50  

$100  

$150  

$200  

$250  

$300  

$350  

$400  

$450  

2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   2013  

Dry  Powder   Invested   Total  

9.2%  Increase  

27.8%  Increase  

12.3%  Increase  

Closed-­‐End  Fund  AUM  Now  Exceeds  $390  Billion  Dry  Powder  Available  Exceeds  $114  Billion  

18.4%  Increase  

78.4%  Increase  

Source:  Preqin,  latest  informa-on  available  

$Billions  

Capital  Markets  Overview  

$167.5  

$213.6  

$0  

$25  

$50  

$75  

$100  

$125  

$150  

$175  

$200  

$225  

2000   2001   2002   2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   2014  

Billion

s  Open-­‐End  Core  Fund  AUM  Now  Exceeds  $200  Billion  

27%+  Increase  Over  2008  Peak  AUM  

27.5%  Increase  

Source:  NCREIF,  ODCE  Fund  

3Q14  14%  

Increase  Vs.  3Q13