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					  Glenn R. Mueller, Ph.D.
                 Professor

  University of Denver
   Franklin L. Burns School of Real Estate
       & Construction Management
                      &


  Real Estate Investment Strategist
Dividend Capital Research
       glenn.mueller@du.edu
                     Dr. Glenn Mueller
Real Estate Investment Strategist – Dividend Capital Group
 Professor – University of Denver – Franklin L. Burns School of Real Estate &
  Construction Management
 Visiting Professor – Harvard University, 2002-2008 & summer executive
  education semesters
 Guest Lecturer – Wharton School, Yale, Berkeley, Ohio State, UNC, USC,
  European Business School, University of Regensburg
Previous Experience
 Legg Mason – Real Estate Investment Strategist
 PriceWaterhouseCoopers – National Director of Real Estate Research
 Alex. Brown Kleinwort Benson – Head of Real Estate Research
 Prudential Real Estate Investors – Vice President of Real Estate Research
 B.S.B.A. in finance from the University of Denver
 MBA from Babson College
 Ph.D. in Real Estate from Georgia State University
                       DU Founded 1864
                       Daniels COB ranked top 50 - WSJ



• 550 Students Earning Degrees

• Undergraduate - BSBA
• Graduate – MBA & MS
• Executive – MS
Real Estate, Construction Management, RECM,
RE & Accounting, Finance, Marketing,
Management, International Business, Law
     Why Real Estate Fits A Portfolio = Size
   U.S. Real Estate vs. Other Asset Classes - 12/06




Source: Pension & Investments, October 30, 2006 and Prudential Real Estate Investors, December 2006.
                    All Real Estate = Half - 12/06
                         U.S. Real Estate Values = $33.3 Trillion




Source: Prudential Real Estate Investors, December 2006.
Market Cycle Analysis

       Physical Cycle

Demand & Supply drive Occupancy
 Occupancy drives Rental Growth
                            Market Cycle Quadrants
            Phase 2 -                                       Phase 3 - Hypersupply
            Expansion                          Demand/Supply Equilibrium Point
Occupancy




            Long Term Vacancy Average




              Phase 1 -                                                   Phase 4 -
              Recovery                  Legg Mason Real Estate Research   Recession
                                               Time
                                                      Demand/Supply
                                                       Equilibrium
                                     High Rent
                         Rents Rise     Growth in                 Rent Growth
                            Rapidly        Tight Market             Positive But
                             Toward New                                Declining
                                Construction
                                    Levels
Occupancy




                                                Cost Feasible New
                                                 Construction Rents
            Long Term Average Occupancy
                                                                         Below
                                                                         -

                                                                          Inflation &
                                                                          Negative
                                Below
                                                                            Rent
                                 Inflation
                                   Rental
                                                     Physical                 Growth
                  Negative            Growth       Market Cycle
                     Rental
                         Growth                   Characteristics


                                               Time
                 Historic National Office Rental Growth
                                                                11.0%
                                                     10.5%      11
                                                                          6.1%
                                                           10        12
                                           6.4%       9
                                                 8        12.5% 10.0% 13       3.3%
        Long Term Average Occupancy         7
Occupancy




                                      6                                       14
                              1.7%               6.7%
                                5
                     0.3% 4                                                    15
                                      4.0%
       -3.0%            3
                                                                                     -1.0%
                                                                          1.6%
                 2          2.7%                                                    16
            1                             30 Year Cycle - Periods 1968-1997              1
                -1.5%
                                             Time
                 Historic National Industrial Rental Growth %
                                                                 8.3%
                                                       6.8%        11         4.6%
                                                            10           12
                                            5.1%        9
                                                   8        8.5%        5.9% 13 4.8%
            Long Term Avg Occupancy
                                              7
                                                  3.8%
Occupancy




                                   3.0% 6                                        14

                                    5
                       -2.1%   4
                                                                                   15
                                        4.6%
            0.8%                                                                        -0.4%
                         3
                   2         0.4%                                               0.7% 16
             1                              30 Year Cycle - Periods 1968-1997             1
                  2.8%
                                               Time
                      National Property Type Cycle Locations
Phase II - Expansion                                                                         Phase III-
                                                                                             Hypersupply
                                                  Retail - 1st-Tier Regional Malls

                                                                                          Retail - NH & Com
                                                Health Facility                           Power Center Retail


                                Hotel - Full-Service                   10        11
                                                                                        12
      Retail - Factory Outlet                                     9
      Industrial - Warehouse                           8                                        13
                                          7                 LT Average Occupancy
       Industrial -              6                                                                       14
       R&D Flex
                                              Apartment                                                       15
                      4     5                 Senior Housing                                                       16
1     2       3                               Hotel - Ltd. Service                                                           1
                                     Office - Downtown                                    Retail - 2nd Tier Regional Malls
    Office - Suburban
                                                               1st Qtr 2008

    Phase I - Recovery                            Source: Mueller, 2008              Phase IV - Recession
 Office Market Cycle Analysis
                               1st Quarter, 2008


                 Dallas FW
           Ft. Lauderdale-1
                    Hartford
                Indianapolis
                Kansas City
                Long Island
                                                          Honolulu
                Las Vegas-1
                                                          Miami
                   Memphis                                Wash DC
                Minneapolis
                   St. Louis
                                                                     Austin
                   Stamford
                                                                     Charlotte+1
          W. Palm Beach-1
                                     Los Angeles                     Denver
Albuquerque
  Baltimore                          New Orleans-1                   Houston                     10     11
  Cincinnati                         Oklahoma City                   New York
                                                                                         9                        12
  Cleveland                          Orange County
  Columbus                           Phoenix-1                               8                                         13
     Detroit                         Raleigh-Durham
 Milwaukee                           Salt Lake                 7                 San Antonio+1
    Norfolk                          San Jose         6                                                                     14
  Pittsburgh                         Tampa                                              LT Average Occupancy                     15
                                    4      5                                                                                          16
        1        2             3               Boston                                                                                      1
                                               East Bay
                                               Orlando
           Atlanta
                                               Portland
          Chicago
                                               Sacramento
      Jacksonville
                                               San Diego                                  Source: Mueller, 2008
         Nashville
                                               San Francisco
     Philadelphia
                                               Seattle
       Riverside-1
                                               NATION
    N. New Jersey
        Richmond
       Wilmington
Industrial Market Cycle Analysis
                                 1st Quarter, 2008




                                                                                                      Los Angeles
                                                                                     Orange County
                        Chicago            Ft. Lauderdale
                        Cincinnati         Houston                                   Riverside-1                Las Vegas
                        Dallas FW-1        Kansas City+1
                                                                Portland
                                                                San Francisco               10       11
                        Indianapolis       Norfolk+1
                                                                San Jose                                     12
   Atlanta              Milwaukee          Richmond                                9
 Baltimore              Minneapolis        Salt Lake
   Boston               New York           Seattle                      8                                             13
 Columbus               Orlando-1                           7               East Bay
  Hartford              Philadelphia
   Tampa                St. Louis+1              6                          New Orleans+1
                                                                            W. Palm Beach
                                                                                                                            14
                                                                                            LT Average Occupancy 15 16
                        Stamford
                                                   Jacksonville
                             4         5
 1        2         3                              Phoenix
                                                   Sacramento
                                                                                                                                 1
                     Austin-1                      San Antonio
 Cleveland           Charlotte                     San Diego
 Detroit              Denver
 Pittsburgh          Honolulu
                  Long Island
                    Memphis
                       Miami                                                           Source: Mueller, 2008
                     Nashville
               N. New Jersey
               Oklahoma City
              Raleigh-Durham
                    Wash DC
                    NATION
   Apartment Market Cycle Analysis                                                                       Austin+2
                                                                                                         Jacksonville
                                        1st Quarter, 2008                                                Las Vegas
                                                                                                         Ft. Lauderdale
                                                                                                         Miami
                                                                                                         Norfolk
                                                                                                         Sacramento
                                                                     East Bay                            Wash DC
                                                                     N. New Jersey   New Orleans+2
                                                                                                                    Orange County+1
                                                                     Portland             Salt Lake
                                                                                                                    Phoenix+1
                                                                     San Jose
                                                                                                                    Riverside+1
                                            Baltimore
                                                                     NATION
                                                                                       10         11                San Diego+1
                                               Denver                                                   12
                         Cincinnati+1     Philadelphia                        9                                                Orlando+1
                                                                                                                               Tampa+1
                            Houston
                          Long Island
                                                Seattle          8                        Chicago
                                                                                                                13             W Palm Beach+1
                                                                                          Los Angeles
                            Nashville                     7      New York
          Indianapolis
      Raleigh-Durham
                         Richmond-1
                            St. Louis
                                            6                 San Francisco                                               14
                                                 Atlanta                          LT Average Occupancy                         15
                           4       5             Boston
                                                                                                                                      16
  1         2        3                           Columbus
                                                 Dallas FW
                                                                                                                                                1
                            Charlotte-1          Honolulu
                            Cleveland            Kansas City
                            Detroit              Minneapolis
 Hartford
                            Memphis              Oklahoma City
Milwaukee
                            Pittsburgh
                            San Antonio
                            Stamford
                                                                              Source: Mueller, 2008
     Retail Market Cycle Analysis
                                  1st Quarter, 2008
                                                                                                East Bay
                                                                                            Long Island
                                                                                              New York             Baltimore
                                                                                          Orange County            Ft. Lauderdale
                                                                                              San Diego            Honolulu+1
                                                                                           San Francisco           Portland
                                                                                               Wash DC             Richmond+1
                                                                                                                   Seattle
                   Cincinnati-1
                                                                                  Oklahoma City                    St. Louis
                     Cleveland
                                                                  Boston
                     Columbus
                                                             Los Angeles                     10            11      NATION
                     Hartford-1
                                          Kansas City           San Jose                                        12
                   Milwaukee-1
                                           Pittsburgh
                                                                                    9                                                Chicago+1
                      Nashville                                                                                                      Orlando+1
               W. Palm Beach-1
                                      Raleigh-Durham                       8                                              13         Phoenix+1
 Memphis-1                                                    7                   LT Average Occupancy
New Orleans
 Riverside-1
                                                     6            N. New Jersey                                                     14
San Antonio                                                       Philadelphia                                    Miami+1
                                           5                                                                     Norfolk+1               15
                       3          4                                                                             Sacramento                    16 1
    1          2                               Dallas FW                                                          Salt Lake
                                               Denver                                                            Tampa+1                  Atlanta
            Charlotte-1                        Houston-1                                                                                  Austin
              Detroit-1                        Minneapolis                                                                                Jacksonville-3
           Indianapolis                        Stamford                                                                                   Las Vegas




                                                                                    Source: Mueller, 2008
Hotel Market Cycle Analysis                                   Atlanta
                                                              Chicago
                             1st Quarter, 2008                Denver
                                                              Ft. Lauderdale+1
                                                              Norfolk
                                                              Philadelphia-1
                                                              Phoenix-1
                                                              Portland               Austin
                                                              Raleigh-Durham         East Bay
                                                              Richmond               Honolulu+1
                                                              Riverside-1            Long Island
                                                              San Antonio            Los Angeles
                                                              Stamford
                                                              Seattle
                                                              W. Palm Beach                10        11
                                                                                                                12
                                 Cincinnati                   NATION             9            Houston
                                Hartford+1                                                    New York
                               Indianapolis                           8                       San Diego               13
                                 Pittsburgh
                                  Tampa-1
                                                          7               Charlotte           San Francisco+1

            Columbus                            6                         Jacksonville
                                                                          Miami
                                                                                                                           14
             St. Louis                   5          Boston+1              Nashville       LT Average Occupancy                  15
                               4                    Dallas                Oklahoma City                                              16   1
1           2            3                          Las Vegas             Orange County
                                Baltimore-1         Memphis               Orlando
                                Detroit                                   San Jose
                                                    Milwaukee
Cleveland                       Kansas City                               Wash DC
                                                    Minneapolis
                                New Orleans
                                                    Sacramento
                                N. New Jersey
                                                    Salt Lake-1

                                                                                              Source: Mueller, 2008
                  1970s Cycle
   •Factors Driving The First Half Cycle (5 Year)
      •Strong Demand from the 1960s that stopped
      •Recession 1974
      •Capital Flow - Mortgage REITs produced oversupply
•Factors Driving The Second Half Cycle (5 Year)
   •Baby Boom Generation Goes to Work = Demand
   •Capital Flow Shut Down = no supply = Lenders Recover
   •Markets tighten and reach peak occupancy 1979 (5% vacancy)
                      1970s Office Demand & Supply
                                                                Demand         Supply
8%
                             Oversupply Years               Baby Boomers Go To Work
6%
4%
2%
0%
            1970


                      1971


                                 1972


                                           1973


                                                  1974

                                                         1975


                                                                1976


                                                                       1977


                                                                              1978


                                                                                     1979
Source: FW Dodge, CB Commercial, BLS, Mueller
               1980s Cycle
•Factors Driving The First Half Cycle (5 Year)
   •Tight market in 1979 pushes rents and prices up
   •Tax Act of 1981 attracts taxable investors supply up
   •Inflation pushes real estate prices higher
   •Thrift Deregulation allows capital to flow
•Factors Driving The Second Half Cycle (5 Year)
   •Tax Act of 1986 slows taxable investors, but not tax free
   •Poor stock market attracts Pension & Foreign capital
   •Rising R.E. prices masks poor income returns
      1980s Office Demand & Supply                                      Demand        Supply
10%
 8%
                                                                      Oversupply Years
 6%

 4%
 2%

 0%
            1980

                      1981

                                1982

                                          1983

                                                 1984

                                                        1985

                                                               1986

                                                                        1987

                                                                               1988

                                                                                       1989
Source: FW Dodge, CB Commercial, BLS, Mueller
               1990s Cycle
•Factors Driving The First Half Cycle (5 Year)
   •Moderate but stable demand growth    (1991 recession minor)

   •Oversupply and Foreclosures shut down construction
   •Excess space absorbed - bringing markets back
•Factors Driving The Second Half Cycle (5 Year)
   •Moderate Demand growth Continues
   •Oversupply absorbed and return performance improves
   •Construction “constrained” causing rents & prices to rise
   •More efficient markets match supply to demand
                                                                                   Demand Supply
                                                                                      Matched
   3.0%                 1990s Office Demand & Supply
                        Demand            Supply
   2.5%
   2.0%                          Oversupply Absorbed
   1.5%
   1.0%
   0.5%
   0.0%
                 1990

                          1991

                                   1992

                                                1993

                                                       1994

                                                              1995

                                                                     1996

                                                                            1997

                                                                                     1998

                                                                                            1999
Source: FW Dodge, CB Commercial, BLS, Mueller
                 2000s Cycle
Demand
•Globalization - creates stable U.S. economy
•Job Growth out of Technology Change
•2.7 million population growth per year for 10 years
•Baby boomers at “highest income earning” years
   •second home market wave
•Echo boom children – college, first job, & renting
•Aging population not a major factor till 2014
•Employment growth drives commercial demand
                                        2000s Cycle
                                             Demand
                               Age 0-60: Percent of Total Population




Source: U.S. Census Bureau, November 2006.
                                                        2000s Cycle
                                                     Change in 20-29 Year Old Age Cohort
 1,500,000




 1,000,000
                                                    Baby Boom

                                                                                           Echo Boom
   500,000




         -




   (500,000)




                                                                      Gen X
 (1,000,000)




Source: National Center for Health Statistics and Mueller estimates
Government Stimulus Working?
         Top Federal Budget Deficits Since 1932
35
30
25
20
15
10
  5
  0
       1943
              1945
                     1946
                            1934
                                   1985
                                          1984
                                                 1991
                                                        1939
                                                               1076
                                                                      1935
                                                                             1993
                                                                                    2003
Source: U.S. Census Bureau, Office of Management & Budget
Any U.S. Recession Should be MILD
The Rest of the World is Growing Well
Export growth supports demand for industrial space.



                               2008 GDP % Growth




Source: World Bank estimates
                2000s Cycle
                 Supply Constraint
•Public Markets make R.E. Capital markets efficient
   •Economically driven capital - low spec construction
   •500 + Research watchdogs – Data Available
•Constrained Supply (economically driven capital)
   •construction labor harder to find
   •materials costs increasing
   •infrastructure problems constrain growth
•Feedback loop keeps demand and supply in better balance
   •greater transparency
   •Faster reaction to demand slowdown
              2000s US Office Demand & Supply
                                                                                  FORECAST
  3%
                                 Office Demand & Supply                           Demand 1.41%
                                                                                  Supply 1.44%
  2%

  1%

  0%
          2000             2002             2004             2006          2008      2010        2012
-1%

-2%
            Supply Reacted to
                                              Demand              Supply
            Demand Slow Down
-3%
Source: Property & Portfolio Research, Grubb & Ellis, Mueller 2007.
                    National Property Type Cycle Forecast
Phase II - Expansion                                                                 Phase III-
                                                                                     Hypersupply


                                              Health Facility                     Retail - 1st Tier Regional Malls
                                          Hotel - Full-Service
                                                                                           Neighborhood/Community
                                                                     10    11              Retail+1
                                        Apartment                               12         Power Center Retail
                                                                 9
                                                     8                                  13
          Office - Suburban               7
            Senior Housing       6                                                               14
                                              Hotel - Ltd. Service   LT Average Occupancy             15
                    4     5                                                                                16
1     2      3                     Office – Downtown                                                                 1
                                   Retail - Factory Outlet
                     Industrial –Warehouse                                                        Retail 2nd -Tier
                                                                                                   Regional Malls
               Industrial - R&D Flex                1st Qtr 2009
                                                    ESTIMATE
    Phase I - Recovery                           Source: Mueller, 2008      Phase IV - Recession
         Office Occupancy & Rent Cycle
                                                                                          12%
                             Office Occupancy                         Rent Growth
 92                                                                                       9%
                                                                               Forecast
                                                                                          6%

 88                                                                                       3%
                                                                        1.7%              0%

 84                                                                                       -3%

                                                                                          -6%

 80                                                                                       -9%
   81
   83
   85
   87
   89
   91
   93
   95
   97
   99
   01
   03
   05
   07
   09
   11
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
Source: Property & Portfolio Research, Grubb & Ellis, Mueller 2008.
   Office Market Cycle FORECAST
                     1st Quarter, 2009 Estimate




      Chicago
  Jacksonville
                                  Dallas FW
  Kansas City                     New Orleans                     Denver
  Las Vegas-1
     Memphis
                                  Miami-1                         New York             10      11
                                  Oklahoma City                                                           12
  Minneapolis
      Norfolk                     Orange County                               9
N. New Jersey                     Orlando-1                              8                                     13
                                  Sacramento
    Richmond
     Riverside                    Salt Lake                   7              LT Average Occupancy
     Stamford                                     6      Austin-1
                                                                                                                    14
     St. Louis                                           Honolulu                                                        15
                              4          5               Houston-1                                                            16
    1        2        3                      Boston      San Antonio                                                               1
                      Atlanta                Charlotte   San Francisco
                      Ft. Lauderdale-1       East Bay
      Baltimore                              Portland
                      Hartford
      Cincinnati      Indianapolis           San Diego
      Cleveland                              San Jose
                      Long Island                                                 Source: Mueller, 2008
      Columbus                               Seattle
      Detroit         Los Angeles
                      Nashville              Wash DC
      Milwaukee
      Philadelphia    Phoenix-1              NATION
      Pittsburgh      Raleigh-Durham
                      Tampa
                      W. Palm Beach-1
     Industrial Occ. Cycle & Rent Growth
                                                                                              93.0%
  4.0%
                                                                                              92.0%
  2.0%
                                                                                    1.2%
                                                                                              91.0%
  0.0%

-2.0%                                                                                         90.0%

-4.0%                                                                                         89.0%
        89
        91
        93
        95
        97
        99
        01
        03
        05
        07
        09
        11
      19
      19
      19
      19
      19
      19
      20
      20
      20
      20
      20
      20
                Industrial Rent Growth                                industrial Occupancy Rate

Source: Property & Portfolio Research, Grubb & Ellis, Mueller 2007.
Industrial Market Cycle FORECAST
                         1st Quarter, 2009 Estimate


                            Denver
                          Houston                                                                       Los Angeles
                       Jacksonville                                                                     New Orleans
                        Long Island
                                                                                                                      Las Vegas
                          Memphis                               San Jose
                         Milwaukee                              San Francisco                          11             Riverside
                           Norfolk                              W. Palm Beach                10                  12
   Atlanta                 Phoenix                                                 9
Baltimore        Raleigh-Durham+1
Cleveland                Richmond                                      8               Orange County
                                                                                                                            13
Columbus                Sacramento                        7
                          Salt Lake
 Hartford
Pittsburgh                Wash DC
                                                6                                                                                 14
 St. Louis
                                                                        East Bay        LT Average Occupancy                           15
                           4          5             Portland
                                                                                                                                            16
1          2         3                              San Diego                                                                                    1
                               Austin
                               Charlotte
 Detroit                       Ft. Lauderdale
           Boston
                               Honolulu
          Chicago
                               Kansas City
        Cincinnati
                               Minneapolis                                               Source: Mueller, 2008
       Dallas FW
                               New York
      Indianapolis
                               Orlando
            Miami
                               Philadelphia
       Nashville-1
                               Seattle-1
    N. New Jersey
                               NATION
    Oklahoma City
      San Antonio
         Stamford
           Tampa
   Apartment Occ. Cycle & Rent Growth
  6.0%                                                                                   95.5%
  5.0%                                                                                   95.0%
  4.0%                                                                           3.8%    94.5%
  3.0%
                                                                                         94.0%
  2.0%
                                                                                         93.5%
  1.0%
                                                                                         93.0%
  0.0%
 -1.0%                                                                                   92.5%

 -2.0%                                                                                   92.0%
           89

           91

           93

           95

           97

           99

           01

           03

           05

           07

           09

           11
         19

         19

         19

         19

         19

         19

         20

         20

         20

         20

         20

         20
            Apartment Rent Growth                                     Apartment Occupancy Rate
Source: Property & Portfolio Research, Grubb & Ellis, Mueller 2008.
  Apartment Market Cycle FORECAST
                  1st Quarter, 2009 Estimates
                                                                                                  New Orleans+1
                                                                                                      San Diego
                                                                                                      Wash DC
                                                                                                       Salt Lake        Austin
                                                                                                                        Ft. Lauderdale+1
                                                                                                                        Las Vegas+1
                                                                                            Chicago
                                                                                                                        Miami+1
                                               Baltimore                                                                Norfolk+1
                                               Boston                                                                   Orange County
                                                                      East Bay
                                               Kansas City                                                              Riverside
                                               Oklahoma City
                                                                      N. New Jersey
                                                                                         10           11
                                               Richmond                                                         12
                            Charlotte          St. Louis                      9                 San Jose+1                       Jacksonville+1
                                                                                                San Francisco                    Phoenix+2
                            Cleveland                           8                 Los Angeles                        13          Sacramento+2
                            Detroit
                            Indianapolis
                                                      7                           New York
                                             6         Atlanta
                                                                                  Portland
                                                                                                                              14
                                                       Columbus
                                                       Denver
                                                                                  LT Average Occupancy                             15
                           4        5                                                                                                      16
     1        2   3                     Cincinnati
                                                       Honolulu
                                                       Nashville
                                                                                                                           Orlando+2
                                                                                                                            Tampa+2
                                                                                                                                                  1
                                        Dallas FW-1    Minneapolis                                                   W. Palm Beach+2
                      Memphis
                                        Houston        Philadelphia
                      San Antonio
                                        Long Island    Seattle
       Hartford
                                        Pittsburgh     NATION
  Milwaukee-1
                                        Stamford
RaleighDurham                                                                         Source: Mueller, 2008
           Retail Occ. Cycle & Rent Growth
  6.0%                                                                                   92.0%

  4.0%                                                                                   90.0%

  2.0%                                                                                   88.0%
                                                                        1.4%

  0.0%                                                                                   86.0%
-2.0%                                                                                    84.0%

-4.0%                                                                                    82.0%

-6.0%                                                                                    80.0%
        89
        91
        93
        95
        97
        99
        01
        03
        05
        07
        09
        11
      19
      19
      19
      19
      19
      19
      20
      20
      20
      20
      20
      20
                       Retail Rent Growth                        Retail Occupancy Rate
Source: Property & Portfolio Research, Grubb & Ellis, Mueller 2007.
Retail Market Cycle FORECAST
                     1st Quarter, 2009 Estimates




                                                                                                East Bay
                                                                                               New York
                                                                                           Oklahoma City
                                                                                                                      Orange County
                                                                                                                      San Francisco
                                                                                                                      Wash DC
                                                                         Los Angeles
                                Dallas FW
                                                                                                10         11                              Chicago
                                Denver                                                                            12
                                Milwaukee          Pittsburgh                     9                                                        Miami
                                                                                                                                           Richmond
                                                   Stamford                            Boston
Cleveland-1
                                Minneapolis
                                W. Palm Beach
                                                                       8                                                      13           Tampa    Atlanta
                                                                                                                                                    Austin
Indianapolis                                                 7        LT Average Occupancy                                                          Orlando+1
  Las Vegas
   Nashville
                                                 6                                       Baltimore
                                                                                                                                       14           San Antonio
                                                                 Philadelphia                                   Ft. Lauderdale
                                                                                                                                                    Sacramento+1
   Riverside                                                                                                       Honolulu+1                15
                               4        5                        San Jose
                                                                                                                   Long Island                    16
  1        2          3                     Houston                                                                    Norfolk         Phoenix            1
                                            N. New Jersey                                                                             Salt Lake
                          Charlotte                                                                                   Portland
      Jacksonville                          Raleigh-Durham
                          Cincinnati                                                                                 San Diego
      New Orleans         Columbus                                                                                      Seattle
                          Detroit                                                                                     St. Louis
                          Hartford-1                                                                                 NATION
                          Kansas City
                          Memphis
                                                                                Source: Mueller, 2008
            Hotel Occ. Cycle & Rent Growth
                                                                                             70.0%
  14.0%
  10.0%                                                                                      68.0%
                                                                                6.5%
    6.0%                                                                                     66.0%
    2.0%
                                                                                             64.0%
  -2.0%
                                                                                             62.0%
  -6.0%
-10.0%                                                                                       60.0%
          89
          91
          93
          95
          97
          99
          01
          03
          05
          07
          09
          11
       19
       19
       19
       19
       19
       19
       20
       20
       20
       20
       20
       20
                     Hotel RevPar Growth                          Hotel Occupancy Rate (%)

Source: Property & Portfolio Research, Grubb & Ellis, Mueller 2007.
 Hotel Market Cycle FORECAST
                1st Quarter, 2009 Estimates
                                                                                                 East Bay
                                                                          Charlotte
                                                                          Denver                 Houston
                                                                          Jacksonville-1         Long Island
                                                                          Nashville              San Jose
                                                                          Oklahoma City          San Francisco
                                                Dallas FW                 Orange County
                                                                          Portland                          Los Angeles
                                                Hartford
                                                                                                            New York
                                                Memphis                   Richmond
                                                Minneapolis               Riverside
                                                Raleigh-Durham-2          Wash DC
                                                Stamford                  NATION
                                                                                             10          11
                                                                                                                  12
                             Baltimore-2
                                                                                  9
                             Detroit                                  8               Austin                              13
                             Kansas City                                              Chicago
                             St. Louis
                                                         7                            Honolulu       LT Average                 Occupancy
                             Tampa-1        6                Atlanta
                                                                                      Miami                                    14
New Orleans-1                                                                         Orlando
                                                             Boston
                                                                                      Philadelphia                                  15
                            4      5                         Ft. Lauderdale-1                                                            16
    1      2       3                                         Las Vegas
                                                                                      San Diego-1                                             1
                                       Cincinnati            Milwaukee
                       Cleveland       Columbus              Norfolk
                                       Indianapolis          Phoenix
                                       N. New Jersey         Sacramento
                                       Pittsburgh            Salt Lake
                                       San Antonio-1         Seattle                   Source: Mueller, 2008
                                       W. Palm Beach-1
    Market Information
        used to:

• determine competitive position
• set lease strategy
• determine improvements program
  Real Estate
Financial Cycles

 Capital Flows
 Affect Prices
        Market Cycle Capital Flow Impact
   Capital Flows to Existing Properties
Cost Feasible Rents Reached
                                          Hyper Supply




                            LT Occupancy Avg.




                           Capital Flows to New Construction
                     National Office Physical Market Cycle
                    vs. Financial Cycle = New Permit Values
               96                                                                         65,000
                    Physical                                                              60,000
                                                       Financial             No Lag       55,000
               92
                                                                                          50,000
   Occupancy




                                                                                                   Value ($Mil)
                                                                                          45,000
               88                                                                         40,000
                                                                                          35,000
                                                                                          30,000
               84
                                                                                          25,000
                                                                                          20,000
               80                                                                         15,000
                1972    1976          1980    1984    1988
                       Source: CB Commercial, Census Bureau
                                                              1992   1996   2000   2004
                                             Market Cycle               Permit
Source: BEA, CB Commercial, Mueller
                    Flow of Funds Commercial Mortgages
                          All Sectors (1976 - 2001)
25,000
                                                                                                                    False Price
20,000                                                                                                              Appreciation
                                                                                                                    Support
15,000
 ($ Mils)




10,000
                                                                                                                                                                ?
  5,000
            0
                                                                                                                                     Public Market
 -5,000                                                                                                                              Volatility
-10,000
                1970Q1
                         1972Q1
                                  1974Q1
                                           1976Q1
                                                    1978Q1
                                                             1980Q1
                                                                      1982Q1
                                                                               1984Q1
                                                                                        1986Q1
                                                                                                 1988Q1
                                                                                                          1990Q1
                                                                                                                   1992Q1
                                                                                                                            1994Q1
                                                                                                                                     1996Q1
                                                                                                                                              1998Q1
                                                                                                                                                       2000Q1
       Source: Federal Reserve
                           Property Price Movement
  11.0
                                            Historic Cap Rates
  10.5
  10.0
     9.5
     9.0
     8.5
     8.0
     7.5
     7.0
            1989

                    1990

                           1991

                                  1992

                                         1993

                                                1994

                                                       1995

                                                                1996

                                                                       1997

                                                                              1998

                                                                                     1999

                                                                                            2000

                                                                                                   2001

                                                                                                            2002

                                                                                                                   2003

                                                                                                                          2004

                                                                                                                                 2005
                   Office - CBD                               Office - suburban                           Industrial - Warehouse
                   Industrial - R&D                           Apartments

Source: Real Estate Research Corporation - Chicago
                               Property Prices Strong
13.0
                                      Historic Cap Rates
12.0

11.0

10.0

  9.0

  8.0

  7.0

  6.0
          1989
                 1990
                        1991
                               1992
                                      1993
                                             1994
                                                    1995
                                                           1996
                                                                  1997
                                                                         1998
                                                                                1999
                                                                                       2000
                                                                                              2001
                                                                                                     2002
                                                                                                            2003
                                                                                                                   2004
                                                                                                                          2005
                 Hotels                                                         Regional Mall
                 Power Center                                                   Neighborhood Comm.
Source: Real Estate Research Corporation - Chicago
                            Transaction Pricing
                              Q1 2004 Cap Rates
    9.5     9.3                 9.3
                                                                       Denver
    9.0
                                                                       US
                                      8.4      8.4
    8.5
    8.0           7.8
                                                     7.7
    7.5
                                                                 7.1
                                                                       6.9
    7.0
    6.5
    6.0
             Office            Industrial       Retail         Apartment
            36/1636 deals      25/1319 deals   33/1624 deals   37/1798 deals

Source: Real Capital Analytics, New York       www.rcanalytics.com
                            Transaction Pricing
                              Q3 2006 Cap Rates
    9.0
                                                                      Denver
    8.5
                                                                      US
    8.0
                                7.5
    7.5
                                      7.1
            6.9
    7.0
                                                     6.6
                  6.4                          6.3
    6.5
                                                                5.8
    6.0                                                               5.5
    5.8
             Office            Industrial       Retail         Apartment
            94/3512 deals      26/2871 deals   39/2703 deals   63/3922 deals

Source: Real Capital Analytics, New York       www.rcanalytics.com
                                                         Supply
       – The new supply of space was down in 2006 and 2007 and
         the forecast is for moderate supply growth – well below
         the long-term average

                                      Commercial Real Estate Supply Growth




Source: Property & Portfolio Research & Dividend Capital Research.
                         Average Cap Rates
9.00%




8.50%



8.00%




7.50%

                                                                    industrial

                                                                   strip ctr
7.00%
                                                                of f suburban



6.50%                                                               NNN retail

                                                                    garden apt

6.00%
                                                                    of f CBD


5.50%
         1 2   3   4    1 2   3   4    1 2   3   4    1 2   3   4
        '04            '05            '06            '07
                                Quarterly Transactions 2001 -2007




Source: Real Capital Analytics 2008, www.rcanalytics.com
     Globalization of Real Estate Markets
                                U.S. Still Looks Cheap
                        Office Price s                                              Office Cap Rates
                              ($/Sq. Ft.)
                               $1,081                                               6.6%




                                                                                                  5.3%
            $621                        $641    $627
                                                                         4.8%              4.8%

                                                                                                          4.3%
                       $324
          n




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Source: Real Capital Analytics, January 2008– rcanalytics.com
                         Transactions Growing
                                           US Property Acquisitions
                                   office, industrial, multifamily & retail properties $5 mil.+
                        billions
             $350
                            Privatization
             $300            Portfolio
                             One-Off
             $250


             $200


             $150


             $100


              $50


              $-
                       2001          2002        2003         2004        2005        2006        2007

Source: Real Capital Analytics, 2008
                    Debt Rates having Little Effect on Prices
                                          Mortgage Rates & Price Appreciation
                     Mtg Rates (7-10 yr fixed conduit)                           Moody's/REAL CPPI (monthly, all property types)

  6.50%                                                                                                                                             200




  6.25%                                                                                                                                             180




  6.00%                                                                                                                                             160




  5.75%                                                                                                                                             140




  5.50%                                                                                                                                             120




  5.25%                                                                                                                                             100
                      Apr 04




                                                          Apr 05




                                                                                              Apr 06




                                                                                                                                  Apr 07
                                        Oct 04




                                                                            Oct 05




                                                                                                                Oct 06
           Jan 04




                               Jul 04




                                                 Jan 05




                                                                   Jul 05




                                                                                     Jan 06




                                                                                                       Jul 06




                                                                                                                         Jan 07




                                                                                                                                           Jul 07
Source: Real Capital Analytics, 2008
                     Diversified Buyer Group
                            Composition of Equity Buyers
                                office, industrial, retail and multifamily properties $5 mil.+

             100%
                                                                                                  inst'l
                                                                                            13%
              90%        17%                  19%                    22%

                                                                                            11%   foreign
              80%         8%                   8%
                                                                      7%
              70%                                                                           10%   reit/public
                         17%                  13%                    11%
              60%
                                                                                                  user/other
              50%                              9%
                          7%                                         14%
                                               5%                                           40%   fund
                          6%
              40%                                                     3%
                          7%                  12%                     3%
              30%                                                                                 syndicator

              20%                                                                                 condo
                         32%                                         34%
                                              30%                                                 converter
              10%                                                                           22%
                                                                                                  private
               0%
                         2004                2005                   2006                   2007

Source: Real Capital Analytics, 2008
           Private Funds a Major Source of Capital
                              The Universe of Private Equity Funds
              Number of Funds                              Targeted Equity Raise
                                                                     in billions
450                                                $250

400

350                                                $200

300
                                                   $150
250

200
                                                   $100
150

100                                                 $50
 50

  0                                                  $0
       2002 2003 2004 2005 2006 2007                      2002 2003 2004 2005 2006 2007

             Source: Real Estate Alert
Source: Real Estate Alert
Billions   35
                         Foreign Acquisitions of US Property                                        Other
                    (trailing 12 months, office, industrial, apartment, retail properties)

           30
                                                                                                    Latin America


           25                                                                                       Euro


                                                                                                    Pac Rim
           20
                                                                                                    Canada

           15
                                                                                                    UK


           10                                                                                       Australia


                                                                                                    Mid East
           5

                                                                                                    German
           0
            2002    2003              2004               2005               2006             2007

Source: Real Capital Analytics, January 2008 rcanalytics.com
            2008 Physical Cycle
     Demand & Supply Affect Vacancies Rental Growth
         Demand Growth – SLOWER / LOWER 2008
               Economic growth – Positive?
          Supply Slowing - balanced absorption?
           Return to Growth Phase in 2009/2010?

             2008 Financial Cycle
       Capital Flows Affect Prices – Stock Market Fear
       Real Estate the SAFEST Investment Alternative?
R E Equity – dominated by Private Markets (diversified buyer groups)
      Yield Spread drives SOME Buyers (low interest rates?)
      Public Debt Market in Turmoil – Big Capital Source
               Confidence in R E prices in 200?
       For an electronic copy
               of the
Real Estate Market Cycle Monitor
               Go to
     dividendcapital.com

				
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