The Real Estate Lenders AssociationMarket Update

October 2010

Presentation to:

Table of Contents

I. CMBS Market Update

- Spread Environment

- Hedging Environment

- OBP-2010 Case Study

- Deal Underwriting Case Study

- Competitive Landscape

- CMBS Deal Comparison

- BofAML Real Estate Qualifications

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Spreads on generic 10yr AAA super-senior bonds have tightened approximately 345bps since October 2009, and are currently trading in the S+275 area

Synthetic CMBX 06-1 AAAs spreads have tightened approximately 140bps since October 2009 and are currently trading in the S+62 area

BofAML expects to be in the market this week with a $740.0MM multi-lender/multi-borrower conduit transaction (WFMC 2010-C1) as well as a $2.7Bn legacy large loan securitization of the Hilton Hotels Mortgage (BALL 2010-HLTN)

Significant Spread Tightening in AAA CMBS

Spread EnvironmentCMBS Market Update

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-

200

400

600

800

1,000

1,200

1,400

-

200

400

600

800

1,000

1,200

1,400

Generic 10 Year Super Senior AAAs CMBX 06-1 AAAs High Grade Corporate Index REIT Bond Index

3/24/2009PPIP and TALF for

legacy CMBS announced

11/16/2009 - 12/10/2009Flagler*, DDR and Inland

2/10/2009Fed Announces TALF

may expand to legacy CMBS

June 2010One Bryant Park*,

JPMCC 2010-C1

5/1/2009TALF expands to

include new CMBS and allow for 5

year loans

Q4 2009Market lenders

start making new loans for CMBS

August 2010GSMS 2010-C1, VNO 2010-VNO

October 2010JPMCC 2010-C2, COMM 2010-C1, WFMC 2010-C1*, BALL 2010-HLTN*

*BofAML led deal

While CMBS lenders have once again begun to lend with a securitization exit in mind, hedging loan pipelines continues to be an art:

Lending volume remains low which has increased warehousing periods, adding additional importance and difficulty to loan hedging in the current fixed income markets

CMBX and IG are instruments of choice. TRS transactions will become viable with additional new issuance CMBX is a thinly traded market dominated by fast-money investors and broker dealers. Accounts use the CMBX

to make macro bets for short term profit While the CMBX market tightens, both secondary and new issue cash CMBS markets have lagged the rally

causing spread hedging to become less effective. Since late August, as the S&P 500 rallied, CMBX tightened approximately 50bps, while Generic cash spreads

were 10bps tighter. Additionally, new issue 10yr spreads, were relatively unchanged.

No Natural Spread Hedge

Hedging EnvironmentCMBS Market Update

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____________________Source: BofAML Research and Bloomberg

CMBX Outperforming IG and Cash CMBS

50100150200250300350400450500550600

Oct

-09

Nov

-09

Dec

-09

Jan-1

0

Feb-

10

Mar

-10

Apr-

10

May

-10

Jun-1

0

Jul-10

Aug-

10

Sep-1

0

Oct

-10

AAA 06-1 Generic AAA 30% Super IG

Bank of America Merrill Lynch structured and underwrote the July 2010 $1.30 Billion financing backed by The Bank of America Tower at One Bryant Park located in New York City. Bank of America, which represents 76% of the NRA, has 18yr remaining on its lease

Groundbreaking Transaction

First securitization to combine taxable CMBS and tax-exempt Liberty Bonds secured solely by real estate

First single property CMBS transaction since 4 Times Square in December 2006

Building was appraised for $2.2Bn

Innovative structure whereby both taxable and tax-exempt loans and both issuing vehicles are governed by a single servicing agreement

Key Achievements

39-year final maturity maximizes benefit of Liberty Bond financing

Financing is designed to allow for future refinancing of AAA CMBS while leaving Liberty Bonds in-place

OBP-2010 Case StudyCMBS Market Update

One Bryant Park

Tranche Class Type Proceeds Cumulative Coupon Cumulative Loan / SF

AAA Taxable 650,000,000 650,000,000 4.6492% 4.6492% $276

AA (Component 1) Tax-exempt 206,200,000 856,200,000 5.1250% 4.7638% $364

AA (Component 2) Tax-exempt 145,400,000 1,001,600,000 5.6250% 4.8888% $425

A Tax-exempt 87,100,000 1,088,700,000 5.6250% 4.9477% $462

BBB- Tax-exempt 211,300,000 1,300,000,000 6.3750% 5.1797% $552

Total/Wtd Avg. 1,300,000,000 5.1797% $552

Capital Structure and Pricing

February 2010 October 2010 Variance

Property Type: Class A Office Class A Office

Location: Washington, DC Washington, DC

Term: 10 Years 10 Years

Amortization: 30 Years 30 Years

NOI: $3,512,046 $3,512,046

NCF: $2,939,576 $2,939,576

Cap Rate: 7.0% 6.5% (50 bps)

Debt Yield: 11.00% 9.25% (175 bps)

Spread: Swaps + 272 Swaps + 240 (32 bps)

10 Yr UST: 3.66% 2.52% (114 bps)

10 Yr Swap Spread: 0.15% 0.07% (9 bps)

10 Yr Swap Rate: 3.81% 2.58% (123 bps)

DSCR: 1.45x 1.44x

LTV: 53.2% 58.9% 5.64% pts

Loan Proceeds: $26,700,000 $31,800,000 $5,100,000

All-in Financing Rate: 6.53% 4.98%

Underwriting Standards Sizing constraints have eased as traditional lenders re-enter the market and the competition to lend intensifies.

Below is a comparison of how BofAML’s underwriting standards have changed within the last year. The market is now willing to push debt yield constraints into the 9.25% range. Spread compression of approximately 30 bps in combination with the current interest rate environment allows borrowers to lock in at historically low all-in coupons.

Lenders are once again willing to be aggressive for certain high quality properties located in key markets.

CMBS Market Update Deal Underwriting Case Study

BofAML

Citigroup

Deutsche Bank

Goldman Sachs

JP Morgan

Morgan Stanley

Wells Fargo

Apollo

Basis Capital

Cantor Fitzgerald

Colony

G2 Capital

Ladder Capital

Loancore

Starwood

Blackstone

Centerline

Crexus

Elliott

H2

LNR

Rialto

Torchlight

MetLife

NY Life

NW Mutual

Principal

Prudential

Bank of China

BofAML

Wells Fargo

WestImmo

Banks Non Banks B-Piece Buyers

CMBS Lender Market

Life Companies Balance Sheet Banks

Most Competitive Portfolio Lenders

CMBS Market Update Competitive Landscape

Competitive Landscape

Recent New Issue CMBS Transactions

CMBS Deal ComparisonCMBS Market Update

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2010-OBP JPMCC 2010-C1 Freddie Mac 2010-K7 GSMS 2010-C1 JPMCC 2010-C2

Transaction Type: CMBS - Large Loan CMBS - Conduit CMBS - Agency CMBS - Conduit CMBS - Conduit

Underwriter: BofAML and JPM JPM BofAML and DB Goldman, Sachs JPM

Date of Issuance: 6/ 25/ 10 6/ 11/ 10 6/ 10/ 10 8/ 4/ 10 10/ 7/ 10

Size:$1.3Bn

($650.0MM CMBS)$716.3MM $1.2Bn $788.5MM $1.1Bn

AAA Spread: S + 150 bpsS + 140 bps (5yr) / S + 160

(7yr) / S + 165 (10yr)S + 60 bps (5yr) / S+ 80 bps (10yr)

S + 125 bps (5yr) / S + 135 bps (10yr)

S + 130 bps (5yr) / S + 145 (7yr) / S + 150 (10yr)

Security: First-lien mortgage First-lien mortgage First-lien mortgage First-lien mortgage First-lien mortgage

Term: 10yr ARD Various Various Various Various

Amortization: Interest Only ARD Various Various Various Various

LTV: 29.5% 61.5% 70.1% 53.7% 60.0%

Wtd. Avg. Debt Yield: 20.2% 12.4% 9.3% 15.2% 12.8%

Rating Agencies: S&P / Fitch / Realpoint Fitch / Moody's Moody's Moody's / DBRS S&P / Fitch

Property Type: Office Various (Retail 70.9%) Multifamily Various (Retail 78.2%) Various (67.0% Retail)

First Half 2010 - Bookrunners of Global Real Estate Bonds

(Includes: CMBS, CDO, REIT Bond)

2009 – Bookrunners of Global Real Estate Bonds(Includes: CMBS, CDO, REIT Bonds)

BofAML was the most active CMBS Underwriter in Q2-2010 Co-Lead Manager and Joint Bookrunner on the $1.2Bn Freddie Mac 2010-K6 transaction that priced on March 24th and closed on

April 6th

Co-Lead Manager and Joint Bookrunner on the $1.2Bn Freddie Mac 2010-K7 transaction that priced on June 10th and closed on June 24th

Co-Manager on the $716.3MM JPMCC 2010-C1 transaction that priced on June 11th

Co-Lead Manager and Joint Bookrunner on a $2.3Bn 2nd lien mezzanine transaction of non-rated debt backed by Hilton Hotels Corp. that priced on June 18th. This debt was originally funded in 2007 and restructured in April 2010

Co-Lead Manager and Joint Bookrunner on a $1.3Bn investment grade (AAA to BBB-) securitization of the One Bryant Park office property that priced at the end of June

$5.4

$3.7 $3.6

$2.2$2.0 $1.9

$1.6 $1.5$1.3

$1.0

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

BofAML JPM GS DB MS BARC RBS JF CS CITI

$BN

$5.0

$4.0

$2.9 $2.8 $2.6$2.4 $2.3 $2.2

$1.5$1.3

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

BofAML JPM DB BARC MS CITI RBS CS GS JF

$BN

____________________Source: Commercial Mortgage Alert

BofAML Leading in the Real Estate Debt Market

BofAML Real Estate QualificationsCMBS Market Update

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