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					CBRE Overview of the Local Investment Market 9.25.08




                                                                                                                                           CBRE Overview of the Local Investment Market 9.25.08
                                                                                                                                                                                                                                  Overview of the
                                                                                           Capital Markets                                                                                                                    Local Investment Market

                                                                                                                                                                                                                                      Whitney E. Peyton, CCIM
                                                                                                                                                                                                                              Senior Managing Director, CB Richard Ellis




                                                                                         2008: What’s In & What’s Out                                                                                                                Things Could Be Worse…
                                                                                                                                                                                                  ƒ The Great Depression
                                                                                    In                               Out
                                                          60-65% Leverage                            90-95% Leverage
                                                          Balance Sheets                             CDO’s
                                                          Balance Sheet Loans                        Conduit Loans
                                                          Skin in the Game                           “Option Equity”
                                                          Trailing – 12 Cash Flow                    Pro Forma Cash Flow
                                                          Rising Cap Rates                           Cap Rate Compression
                                                          Good Loan = Paid Back Loan                 Good Loan = Sold Loan
                                                          Credit Analysis                            Deal Flow
                                                          Credit Guy                                 Golf & Cigar Guy
                                                          Equity in the Deal                         Cash Out Financing
                                                          Sponsor Equity                             Syndicated Equity



                                                       CB Richard Ellis | Page 5                                                                                                                  CB Richard Ellis | Page 2




                                                                                   Less Credit Available For Borrowers                                                                                                                                             Outline
                                                                                                                 July – 08
                                                                                                                  Jul-08

                                                                                                                                                                                                    ƒ Capital Markets
                                                                                                                                                                                                    ƒ Office
                                                                                                                                                                                                    ƒ Industrial
                                                                                                                                                                                                    ƒ Retail
                                                                                                                                                                                                    ƒ Multi-Housing
                                                                                                                                                                                                    ƒ The Future



                                                                                         4,820,000                9,500,000   $4,680,000




                                                       CB Richard Ellis | Page 6                                                                                                                  CB Richard Ellis | Page 3
                                                                                                            Office Investment

                                                         ƒ New Market Listings




                                                                                                                                  CBRE Overview of the Local Investment Market 9.25.08
                                                           • Marquette Plaza
                                                           • Southdale Office Centre
                                                               • France Place

                                                         ƒ Still Shopping
                                                               • 225 South Sixth                                                                                                                                              Office
                                                         ƒ Off Market
                                                           • Dain Rauscher Plaza
                                                           • 510 Marquette Building



                                                       CB Richard Ellis | Page 10




                                                                                                           Recent Office Sales                                                                                                                       Office

                                                                                                                                                                                           ƒ Fundamentals remain relatively flat
                                                                          Property         Seller              Price     $/SF
                                                                                                                                                                                           ƒ Vacancy rates up slightly overall

                                                                          Rand Tower   Hempel Properties       $10.2M     $52
                                                                                                                                                                                           ƒ Asking rents up
                                                                                                                                                                                           ƒ Absorption and construction both down
                                                                 Renaissance Square      RPD Catalyst          $9.875M   $58.80                                                            ƒ Absorption:
                                                                                                                                                                                                 • YTD – 145,637 SF
                                                                                                                                                                                                 • 2007 – 368,560 SF




                                                       CB Richard Ellis | Page 11                                                                                                        CB Richard Ellis | Page 8




                                                                                                                                                                                                                                        Office Leasing
                                                                                                                                                                                         ƒ 8400 Normandale Tower
                                                                                                                                                                                              • More than 2/3 of the 280,000 SF Res Cap sublease
CBRE Overview of the Local Investment Market 9.25.08




                                                                                                                                                                                                space is gone
                                                                                                                                                                                              • Prime Therapeutics, an Eagan based medical firm,
                                                                                                                                                                                                absorbed 150,000 SF

                                                                                                                                                                                         ƒ Minneapolis CBD / Fair Isaac Corp.
                                                                                                Industrial                                                                                    • Subleasing 30th & 31st floors of AT&T Tower
                                                                                                                                                                                              • With direct leasing of 29th floor, this is largest
                                                                                                                                                                                                sublease of contiguous high-rise space

                                                                                                                                                                                         ƒ New Sublease
                                                                                                                                                                                           • Res Cap will put 100,000 SF at Meridian Crossing
                                                                                                                                                                                             on market

                                                                                                                                                                                         CB Richard Ellis | Page 9
                                                                Retail Leasing                                                                                                                          Industrial Leasing
                                                                                                                                               ƒ Vacancy rates down slightly overall
  ƒ Vacancies up                                                                                                                               ƒ Asking rents are static
                                                                                                                                               ƒ More concessions available to tenants
  ƒ Limited retailer activity
                                                                                                                                               ƒ Few speculative developments are currently under
                                                                                                                                                 construction
  ƒ Absorption down                                                                                                                            ƒ Minimal construction
                                                                                                                                                     • 1701 West 94th, Bloomington – 65,000 SF spec
                                                                                                                                                     • Rogers Industrial Park, Cobalt – 57,000 SF spec
  ƒ Rental rates slightly down                                                                                                                       • First Park Lakeville Distribution Ctr., Uponor – 285,000 SF
                                                                                                                                                       build-to-suit

  ƒ Construction costs up                                                                                                                      ƒ Absorption
                                                                                                                                                     • YTD – 681,876 SF
                                                                                                                                                     • 2007 – 273,256 SF
CB Richard Ellis | Page 16                                                                                                                   CB Richard Ellis | Page 13




                                                                Retail Leasing                                                                                                              Recent Industrial Sales

  ƒ Developers are postponing projects and/or will only
    start with most of space pre-leased                                                                                                                          Property              Buyer               Price      $/SF


  ƒ Minimum amount of new development on the horizon                                                                                                       Principal Portfolio   Dougherty Commercial
                                                                                                                                                                                   Properties, LLC &                   $88
                                                                                                                                                             Eden Prairie &                                $39.5M
                                                                                                                                                                                   Birchmont Capital                450,000 SF
  ƒ Retailers have felt significant impact of economic                                                                                                        Bloomington              Advisors

    slowdown in 2008
                                                                                                                                                     Minneapolis 12 Building                                          $66.23
                                                                                                                                                                                 CORE Realty Holdings      $35.8M
        • Several store closures, both locally & nationwide                                                                                            Industrial Portfolio                                         540,190 SF

        • “A” space end caps are over subscribed
                                                                                                                                                       City West & Tech Park
                                                                                                                                                                                   Arthur Goldner &                   $85.22
                                                                                                                                                             Portfolio                                     $31.8M
                                                                                                                                                                                      Associates                    373,148 SF
                                                                                                                                                            Eden Prairie




CB Richard Ellis | Page 17                                                                                                                   CB Richard Ellis | Page 14




                                                         Recent Retail Sales
                                                                                      CBRE Overview of the Local Investment Market 9.25.08




        Property / Date                   Buyer                 Price      $/SF


           Victor Marketplace
                                                                           $170
                  Hugo            St. Croix Real Estate, Inc.   $11.8M
                                                                         69,433 SF
             January, 2008



         Savage Town Center
                                    Wanguard Advisors           $14M
                                                                           $161                                                                                                                 Retail
             May, 2008                                                   87,181 SF



    1500 4th St. & 310-316 15th
             Ave. SE                  Arthur Goldner &                     $85.22
                                                                $31.8M
           Dinky Town                    Associates                      373,148 SF
        September, 2008




CB Richard Ellis | Page 18
                                                                                             Recent Multi-Housing Sales




                                                                                                                                             CBRE Overview of the Local Investment Market 9.25.08
                                                               Property / Date                  Buyer                   Price    $/Units



                                                          Cosmopolitan Apartments                                                 $92,371
                                                                                           Olympic Investors            $24M
                                                              January, 2008                                                      255 Units




                                                                International Village   Intercontinental RE Corp.
                                                                                                                        $30.1M
                                                                                                                                  $85,269                                                                                             Multi-Housing
                                                                    August, 2008                – Boston                         353 Units




                                                            Uptown City Apartments                                               $184,570
                                                                                         INVESCO Real Estate            $30.1M
                                                                 August, 2008                                                    163 Units




                                                       CB Richard Ellis | Page 22




                                                                                                                                                                                                                                         Multi-Housing Investment

                                                                                                                                                                                                      ƒ Overall, the multi-housing market is out-performing
CBRE Overview of the Local Investment Market 9.25.08




                                                                                                                                                                                                        other investment sectors due to:

                                                                                                                                                                                                            • Availability of debt from Fannie Mae and Freddie Mac

                                                                                                                                                                                                            • Lack of new construction

                                                                                                                                                                                                            • Continued rent growth
                                                                                                   The Future
                                                                                                                                                                                                            • Shift from home ownership to rental percentage
                                                                                                                                                                                                                    ¾ 2008 – 73%
                                                                                                                                                                                                                    ¾ 2003 – 78%
                                                                                                                    ?


                                                                                                                                                                                                    CB Richard Ellis | Page 20




                                                                                                                                 Capital                                                                                                 Multi-Housing Investment

                                                         ƒ Some loans available (60-65% of value)                                                                                                     ƒ New construction slated to be delivered throughout 2009
                                                                                                                                                                                                        • Focused primarily in urban locations
                                                                                                                                                                                                        • Emphasis on Uptown and City Lakes area
                                                         ƒ Debt funds fill new Mezzanine space (65 –                                                                                                  ƒ Vacancy has fallen market-wide
                                                           75% of value)                                                                                                                                    • 2008 – under 4%
                                                               • 11-12%                                                                                                                                     • 2007 – 5%

                                                                                                                                                                                                      ƒ Average rents
                                                         ƒ Loan quotes with rate blank                                                                                                                      • Up over past year by 3.5% ($876 - $908)
                                                                                                                                                                                                            • Compared to national average of 2.3%
                                                                                                                                                                                                            • Majority of submarkets had increase in average rent




                                                       CB Richard Ellis | Page 24                                                                                                                   CB Richard Ellis | Page 21
                                              Seller Expectations                                                                                                   Cap Rates

  ƒ Longer sale process                                                      ƒ Cap rates will increase on all but the best


  ƒ More process to close                                                    ƒ Spread between seller & buyer expectations
                                                                               will be sloppy for a while
  ƒ Fewer buyers in a wider range of value




CB Richard Ellis | Page 28                                                 CB Richard Ellis | Page 25




                             2008: Fundamentals Still Look Steady                                                                               The Bid/Ask Spread
                                                                                130
                                             Property Type Vacancy Rates
                                                                                120



                                                                                110



                                                                                100



                                                                                  90



                                                                                  80
                                                                                             2006 Q1    2006 Q2       2006 Q3   2006 Q4   2007 Q1   2007 Q2   2007 Q3   2007 Q4   2008 Q1

                                                                                                                 Transaction Based Index                Bid             Ask



                                                                                 The bid has steadily declined from quarter to quarter,
                                                                                 while the sellers’ prices (“ask”) have held steady.

Source: CBRE/Torto Wheaton Research                                        Source: CBRE Torto Wheaton Research 2008

CB Richard Ellis | Page 29                                                 CB Richard Ellis | Page 26




                                               Delinquency Rates                                                                                Buyer Expectations

                                                                             ƒ Cash will be King                                                                PAY LESS
                                                                                                                                                              PAY LESS

                                                                             ƒ More equity required


                                                                             ƒ Greater lender holdbacks




Source: MBA 2008


CB Richard Ellis | Page 30                                                 CB Richard Ellis | Page 27
                                                                                                                               Cap Rate Outlook
                                                                     NCREIF Cap Rate: Office, Industrial, Retail, Multifamily
                                                                            Sum of Markets (Weighted by Stock)

                   11

                   10

                    9




  C a p R a te %
                    8

                    7

                    6

                    5

                    4

                    3




                        1999

                               1999

                                         2000

                                                2000

                                                       2001

                                                              2001

                                                                       2002

                                                                              2002

                                                                                     2003

                                                                                            2003

                                                                                                   2004

                                                                                                          2004

                                                                                                                 2005

                                                                                                                        2005

                                                                                                                               2006

                                                                                                                                      2006

                                                                                                                                             2007

                                                                                                                                                      2007

                                                                                                                                                             2008

                                                                                                                                                                    2008

                                                                                                                                                                           2009

                                                                                                                                                                                  2009

                                                                                                                                                                                         2010
                                      Office Historical Cap Rate                            Office Cap Forecast                                     Industrial Historical Cap Rate
                                      Industrial Cap Forecast                               Retail Historical Cap Rate                              Retail Cap Forecast
                                      Multifamily Historical Cap Rate                       Multifamily Cap Forecast




Source: TWR Investment Database, Winter 2008

CB Richard Ellis | Page 31




                                                Thank you for your time &
                                                                      attention today.

                                                Whitney Peyton contact info:
                                                                        whitney.peyton@cbre.com
                                                                            CB Richard Ellis
                                                                       4400 West 78th St., Suite 200
                                                                         Minneapolis, MN 55435
                                                                         (952) 924-4633 (Direct)
                                                                          (952) 831-8023 (Fax)



CB Richard Ellis | Page 32

				
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