CAR Commercial Forum Meeting – September 2013

(Chicago Metro)

Robert Carrillo

September2013

Macro Economic Trends and Forecast

Estimate for 2013.Q2 GDP is 1.7 indicating modest but sustained growth QOQ

Quantitative Easing and Tapering is coming

QE4? Fed likely to taper back on asset purchases

Key interest rates expected to leave rates near 0 (until unempl. rate nears 6.5%). Economists split on when Fed will raise but most say 2015.

*Reporting and polling by Deepti Govind

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Jobs

Unemployment dropped to 7.3% Nationally

63.2% Participation Rate (lowest since 1978)

Economists Mixed (sustained growth at subpar pace

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Business Sentiment

Business spending shows growing confidence in the first half of the year

The first quarter spending was down 4.6 percent, with a decline driven by a 25.7 percent drop in spending on commercial structures

However, the second quarter posted a much better performance, with an annual growth rate of 4.6 percent

Spending on commercial buildings rose 6.8 percent

In line with growing demand for properties, prices rose 8 percent on a yearly basis, according to RCA’s Commercial Property Price Index. Prices rose the most for apartments (15%) and retail buildings (13%).

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Business Sentiment (cont’d)

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General Market Info

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• Chicago is the 3rd largest US city by population

• Employment lagging US and unemployment still high, 10.3 (Chicago) and 9.1 (Illinois), but positive movement being made

• Multi-family projected increase of over 225%

Risks and Opportunities

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• Foreclosure in SFR sector is still a little high

• Unemployment slow to recover

• Apartments greatest improvement,

due to increased household formations and tight

mortgage underwriting

• Multi-family permits forecasted to increase

exponentially, vacancy rates declined sharply

and now stabilizing, inventory dropping and rent

forecasted to increase. Supply and Demand coming in line.

39083

39173

39264

39356

39448

39539

39630

39722

39814

39904

39995

40087

40179

40269

40360

40452

40544

40634

40725

40817

40909

41000

41091

41183

41275

41365

0%

2%

4%

6%

8%

10%

12%

14%

10%

12%

14%

16%

18%

20%

22%

24%Chicago Commercial Real Estate

Vacancy Rates

Apartment Vacancy Rate: Q2 @ 3.6% (Left Axis)

Retail Vacancy Rate: Q2 @ 11.1% (Left Axis)

Office Vacancy Rate: Q2 @ 18.5% (Right Axis)

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Overall Snapshot

Los Angeles = Los Angeles County

New York = Manhattan, Brooklyn, Queens and The Bronx

Miami = Miami-Dade County

Chicago = Illinois component of Chicago MSA

Philadelphia = Philadelphia County

San Francisco = San Francisco County

Population data from US Census Bureau, July 2011

*estimate

# Sales Transactions <1mil

Total $ Sales Transactions <1mil

Average Sales Transactions <1mil

Largest Segment by $ Population

Los Angeles 1945 $1,054,671,274 $541,167 Multifamily 9,889,056New York 1689 $910,934,578 $539,334 Retail 7,774,443Miami 1056 $365,182,786 $345,817 Retail 424,662Chicago 1020 $376,495,828 $368,899 Retail 9,650,000*Philadelphia 609 $161,003,457 $264,374 Retail 1,536,471San Francisco 185 $112,161,450 $606,278 Multifamily 812,826

BREF Partner Value Underserviced Market

Our customer is your customer• There are over 27 million small business owners* in the U.S. and they are heavily

invested in real estate

• Ninety-five (95) percent of small business owners own their personal residence per the National Federation of Independent Business, Access to Credit Study in 2008

• Twenty-two (22) percent have taken out at least one mortgage on their personal residence to finance business activities

• Thirty-four (34) percent own the commercial property that houses their small business

• Forty-one (41) percent own investment real estate, excluding their residence and business

• The majority, fifty-eight (58) percent of those owning investment property, own more than one such property

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“In Chicago over the past 12 months 82% of CRE sales transactions were <$1million compared to 53% in LA, 62% in New York and 77% in Miami.”

Sources

NAR 2013 CRE Outlook REIS CNNMoney.com Wells Fargo Securities, LLC

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