Market outlook

Trends in the real estate private

equity industry
Ernst & Young is pleased to present our 2010
real estate private equity Market Outlook.
If the story of world nancial market cycles was captured in a novel, the
chapter on 2009 would recount the spiraling descent to the brink of the
abyss where the very survival of the lead characters was in question.
In March 2009, the world economy had descended to the brink of that
abyss. There was a full scale freeze of credit and widespread asset
deation as market participants traded intrinsic value, long-term return
and immediate dilution for liquidity. The Dow Jones Industrial Average
1
bottomed at 6,547 and the spreads on AAA rated commercial
mortgage-backed securities (CMBS) exceeded 1,000 basis points over
2 transparency with investors will pay solid dividends.
U.S. Treasuries. The US had multiple consecutive quarters of gross
domestic product (GDP) contraction, and the fear vs. greed investment
dynamic was fully tilted toward risk aversion and safety. With massive
government intervention around the globe to create liquidity and
stimulate trade, the rst green shoots of hope for economic recovery
emerged and started to grow late in the second quarter. By the
end of 2009, most industrialized countries around the world had
posted positive GDP growth, albeit without signicant impact on
unemployment levels and job creation.
The real estate private equity industry was not spared during this great
recession, as rapidly declining property values, a dearth of nancing
options and escalating demands from concerned investors tested the
ingenuity and resiliency of fund managers.
Over the course of 2009, real estate fund managers were reintroduced
to the lessons that have been commonly repeated during rapid market
contractions throughout history.
1. Markets correct – they do not go up or stay down forever. While
nancial markets build slowly over time, their corrections are often
rapid, violent episodes that wreak havoc on the overexposed and
unprepared.
2. Leverage is a tool; neither good nor bad. It amplies the return
to equity of market swings in both directions. Leverage can be
amazingly positive during upswings and truly devastating during a
downturn.
3. Financing long-term assets with short-term debt is a market timing
gamble and not a sustainable strategy.
4. Absolute return strategies, by denition, require greater risk-
taking during up markets. As capitalization (cap) rates compress,
achieving a xed target yield will require greater risk of loss due
to elevated structural complexity, greater leasing uncertainty,
geopolitical complication, construction risk and greater leverage,
among others.
5. Investment success in one phase of a market cycle leads to greater
expectations in the next phase of a market cycle, whether rational
or not. These expectations, together with natural competition,
often lead to ‘style drift’, where managers expand into new
investment arenas or opportunities outside of their original core
1 Dow Jones Factiva, 9 March 2009
2 Commercial Mortgage Securities Association, http://www.cmsaglobal.org/, accessed 2 March 2010
competency in search of yield. It is often in these new investment
arenas that managers are least equipped to handle the rapid
shifting of a down market.
6. Unrealized gains do not count for much in the grand scheme of
things. Knowing when to take money off the table (realize gains)
can be a tremendous differentiator.
7. Strong investor relations matter. It may seem like an unnecessary
overhead when investors are making 25% returns, but when the
world turns upside down, strong communication, openness and
8. Natural selection applies to all living things, including investment
managers. Faced with environmental distress and economic
scarcity, competition will escalate. Only the strong, intelligent and
resourceful will overcome these market difculties and position
themselves to prot from the next phase of the market cycle.
Outlook for 2010 and beyond
We polled more than 100 real estate professionals in the US, UK,
Japan, China and India to gauge the sentiment of the industry and
develop an outlook for 2010. The results of our survey and an analysis
of the ndings are provided in the pages of this report. Our key
takeaways:
• Market fundamentals are expected to soften as job growth lags
behind the broad recovery.
• The capital markets will continue to open slowly and the availability
of debt and equity capital will increase throughout the year.
• Valuations of private real estate will continue to slide for a time, but
pockets of well-positioned, low-risk, prime assets in gateway cities
such as London, Washington, D.C. and New York will rally ahead of
the broader market as a result of increased investor demand.
• Although the “extend and pretend” strategy for underwater
mortgage maturities will likely continue, banks and other lenders
will increasingly feel pressure to nally resolve their troubled loans
through sale or foreclosure.
• Bid-ask spreads will start to narrow, the number of opportunities to
acquire real estate at distressed prices will increase and transaction
velocity will start to accelerate by the end of 2010.
• Emerging growth markets such as China and India have bounced
back from the global economic crisis much quicker than the western
industrialized economies. A more bullish outlook for near-term
growth exists within those markets, but fears persist that a new
asset bubble may be forming.
In the US, 2010 appears to be a “set-up” year for the next chapter
of opportunity. The real estate market bottom is still in front of us,
but nearing in most geographies and asset classes, and institutional
investors are still slowly evolving their focus from principal safety to
increased yield. The sentiment for opportunistic investing in 2011
seems brighter and is being projected by many as the start of a great
vintage of asset acquisitions.
Setting up for increased investment opportunity in 2011 will
require fund managers to use 2010 to get their house in order.
Table of Contents
Important considerations include:
Real estate fundamentals
• Maximizing the value of legacy portfolios – With capital still
The softening continues ....................... 2
scarce, fund managers must be brutal in prioritizing which
legacy investments have realistic return potential and which Real estate capital markets
do not. For priority assets, a return to basics and a focus on
The return of public equity.................... 3
creating value at the property level through the aggressive
re-leasing of space and rationalization of costs is key. Debt capital — slow progress ................. 3

• Nurturing and sustaining investor relations – The signicant

Valuations
variance in the performance of fund managers on the basic
The difculty continues ........................ 4
elements of good investor relations is well-documented by
the institutional investment community. Closely managing Expectations for 2010 —
and cultivating investor relations is an investment in the mixed at best ....................................... 5
future. Without ready access to capital, the turning of the
market and the return of broad investment opportunity will Distress is in the eyes of the beholder
be nothing but a footnote in history. Troubled loan strategy —
• Managing retention of key employees – With fund promote a banking conundrum........................... 5
distributions underwater, and perhaps beyond recovery, Bank strategy — looking forward ........... 6
fund managers need to rethink their strategy for retaining
their key employees, or risk losing them to the open market. Transaction velocity
Nothing will be more attractive to an ambitious investment Still anemic .......................................... 7
professional at the end of 2010 than a new fund with no
legacy issues to work out, committed capital to draw and a
fresh promote to provide incentive.
Global perspectives
United Kingdom ................................... 8
As with most down markets, we don’t expect that all fund Euro Zone ............................................ 9
managers will successfully navigate through this dark period
China ................................................. 10
in history. Best-in-class fund managers will have prepared
themselves for a downturn and managed to de-lever Japan ................................................ 10
appropriately. They will prioritize legacy investments and India .................................................. 11
work them back to protability, while avoiding the traps
associated with the sunk costs of lost causes. They will ensure Developing this report ................... 12
their interests are properly aligned with investors and key
executives, and will attract fresh capital to invest in a new Contacts .......................................... 13
vintage of assets.

We would like to thank the fund sponsors that participated in

our survey and contributed to this report. We wish all fund
managers success in this challenging environment.

Gary Koster
Global Leader,
Real Estate Fund Services

Market Outlook Trends in the Real Estate Private Equity Industry 1

Real estate Figure 1
At the end of 2010, unemployment in
fundamentals the US will be:
Global comparison

The softening continues About the

Higher Lower
22% same
The US economy had annualized GDP growth of
US 22% 24% 54%
2.2% and 5.9%3 in the third and fourth quarters
of 2009, respectively, marking the end of one US 54% UK 43% 14% 43%
of the deepest recessions in US history. Though 24% Japan 50% 10% 40%
there are many factors contributing to the India 18% 64% 18%
recovery, the consensus view is that government China 0% 50% 50%
intervention through direct scal spending and
stimulative monetary policy helped the US to Higher Lower About the same
avoid a much deeper economic contraction.
Unfortunately, the economic recovery has Figure 2
At the end of 2010, national
not translated into meaningful job growth for occupancy levels will be:
the US, with a reported unemployment rate Global comparison
of 10% at 31 December 2009.4 The cycle of About the
Higher Lower
unemployment in the US has momentum that same
18%
will take time to reverse. Published forecasts US 18% 40% 42%
reect US unemployment as fairly at and slowly 42% UK 43% 14% 43%
US
starting to reverse in the second half of 2010 Japan 40% 20% 40%
40%
as fears subside, excess capacity is absorbed,
India 64% 0% 36%
productivity gains are maximized and employers
China 50% 17% 33%
come to believe in the broad economic recovery.
As noted in gure 1, only 24% of the US real Higher Lower About the same
estate fund managers in our survey expect that
unemployment will be lower at the end of 2010
than it is today. The majority of respondents Figure 3
At the end of 2010, national rent
(54%) anticipate that unemployment will levels will be:
essentially be at for the period, with as many Global comparison
5%
jobs being lost as created. A jobless recovery About the
Higher Lower
is a source of legitimate concern for real estate same

owners and operators, as occupancy levels 33% US 5% 62% 33%

for rental properties are directly correlated to US UK 65% 5% 30%
employment levels and job growth. 62% Japan 10% 50% 40%

US occupancy levels broadly trended downward India 27% 9% 64%

throughout 2009 in most asset classes, and China 33% 17% 50%
they are anticipated to continue their decline, as
occupancy trends in the US generally lag behind Higher Lower About the same
trends in employment. With little expectation of
job growth in 2010, it’s not surprising that 82% Figure 4
of survey respondents expect that average US At the end of 2010, debt and equity
occupancy levels will be lower or at at the end capital availability will:
Global comparison
of 2010 as compared to the beginning of the 2%
year (gure 2). 11% Remain the
Increase Decrease
same

US 87% 2% 11%
US UK 51% 3% 46%
87%
3 U.S. Bureau of Economic Analysis, www.bea.gov/, accessed 2 March Japan 70% 0% 30%
2010 and Moody’s Economy.com, http://www.economy.com/default.
India 64% 18% 18%
asp, accessed 2 March 2010

4 Moody’s Economy.com, www.economy.com/default.asp, accessed 2

China 33% 0% 67%
March 2010 Increase Decrease Remain
the same

2 Market Outlook Trends in the Real Estate Private Equity Industry

Regardless of property type, soft occupancy
levels throughout 2010 are expected to
elevate the competition for tenants as leases
expire. Tenants have alternatives in this soft
US rental market and they are capitalizing
on the opportunity to either upgrade to
better located/equipped premises without
impacting their overall cost, or they are
negotiating to reduce overall occupancy costs
in their current location. More than 60% of
our survey respondents expected that US
rent levels will be lower at the end of 2010
vs. 2009 (gure 3) with the majority of the
remaining respondents indicating that rents
will be at.
The impact of both lower occupancy and
lower effective rents will put a sizeable dent
in the net operating income of US property
owners. Where the signicant focus of the
past several years in the real estate industry
has been on the cost and availability of
capital and the multiplier effect of leverage,
market participants appear to be coming
back to a more balanced view, with equal
priority given to managing the basics of
real estate fundamentals. This “back to
basics” focus on fundamentals will center
on managing the tenant experience, driving
down property vacancies, shoring up, or at
least slowing down, the erosion of rental
rates and rationalizing operating costs. The
ability to differentially manage these basic
fundamentals of the real estate business will
likely provide a competitive advantage for
fund managers in 2010.
Real estate capital
markets
The return of public equity
Active and liquid capital markets are
essential to the effective operation of
businesses large and small. The extension
of credit to nance everything from the
payroll of the local hardware store to the
letters of credit supporting a multinational
import business is the grease in the machine
that allows the various interconnected parts
to keep moving efciently.
In spite of the “back to basics” trend that
has shifted attention back to real estate
fundamentals, the cost and availability
of capital, as well as the strategy for its
deployment, will always be a critical issue for
real estate fund managers. Though massive
US government policy intervention helped
avert what might have been the country’s
second great depression, it also helped to
create the largest US budget decit since
World War II. Intervention from the Federal
Reserve, the Treasury and the Federal
Housing Administration, among others, has
come at a cost of signicantly increased
US debt levels, the benets of which will be
debated by politicians for years. Difcult to
argue, however, is the return of condence in
the US capital markets.
The rebound of the public equity markets
in the US during 2009 was dramatic. After
tumbling to a bottom of 6,547 in March of
2009, the Dow Jones Industrial Average
rapidly ascended, and has maintained a
relatively steady position above 10,000
5
since early November 2009. The price of
publicly-traded US real estate investment
trust (REIT) shares followed a path somewhat
more extreme than the Dow Jones Industrial
Average. The Dow Jones Equity All REIT
Index lost three quarters of its value from
February 2007 to March 2009, but since
hitting its bottom last spring, it has doubled
6
in value. As the market for new equity
securities opened up, the REIT community
was quick to access capital to de-lever balance
sheets, create a cushion for further nancial
shocks and perhaps build a war chest for
future investment opportunity. In 2009,
public REITs raised US$22.25 billion of equity
and US$10.8 billion of debt capital from
7
the public markets. This capital came at a
healthy price, as it was signicantly dilutive
to existing shareholders. However, as one
market participant stated at a 2009 industry
conference, “When insolvency is brought into
question, liquidity trumps dilution every time.”
The private institutional capital market is
taking longer to sort itself out. Pensions,
endowments, trusts and other institutional
investors were greatly impacted by the
5 Dow Jones Factiva, 9 March 2009
6 Anton Troianovski, “REITs: Better But Not All Clear”, The Wall
Street Journal, 1 February 2010
7 Jason Lail, “2009 REIT Common Equity Offerings”, SNL
Financial, 21 January 2010, and Chris Henderson and Jenny
Traille, “2009 US REIT Debt Offerings”, SNL Financial, 11
January 2010
Market Outlook Trends in the Real Estate Private Equity Industry
dislocation experienced after the market
turned in 2007. Even though equities have
rebounded signicantly from their lows, many
institutional portfolios are still out of balance
with their target allocations.
Institutional investors are working hard to
rebalance their portfolios. This requires
getting a handle on their exposure to
alternative investments such as real estate
private equity. Many such investors have
been locked into capital commitments at a
time when reducing exposure to alternative
investment classes was called for under
portfolio allocation theory. With private real
estate investments showing six consecutive
quarters of negative returns through 31
8
December 2009, many institutional investors
have adopted a mentality with regard to new
real estate investment that is both cautious
and highly selective. As a result, competition
among fund managers for new capital
allocations is erce. The time and effort that
is required to effectively raise a new fund
has increased dramatically, and reports of
fund managers closing their new funds with
commitments materially below their capital
raise targets are commonplace.
Debt capital: slow progress
The nance markets, completely frozen in
the spring of 2009, continue to thaw slowly.
Traditional lending institutions are still largely
overexposed to the real estate sector, and
as such, the appetite for signicant new
investment is muted. However, progress is
being made, especially at the lower risk end of
the lending spectrum. First mortgage loans of
up to US$100 million at advance rates of up
to 60% of current property values are broadly
becoming available for stabilized properties in
strong rental markets. The availability of debt
capital falls off precipitously for rst mortgage
loans for non-stabilized properties or projects
under development. Looking forward, 87%
of survey respondents believe that the
availability of debt and equity capital in the US
will increase by the end of 2010 (gure 4).
By 31 December 2009, interest rate
spreads over the benchmark risk-free rate
had narrowed more than 600 basis points
8 “NCREIF Property Index Returns”, National Council of Real
Estate Investment Fiduciaries, www.ncreif.com/property-index-
returns.aspx, and “NCREIF Fund Index Open-Ended Diversified
Core 7 Returns”, National Association of Real Estate Investment
Fiduciaries, www.ncreif,com/fund-index-odce-returns.aspx
3
 increases and capital supply decreases, the
At the end of 2010, institutional Figure 5
cost of debt capital, if available at all in some
capital sources will: markets, increases dramatically. Competition
Global comparison
to place more opportunistic capital and capture
35% Continue to maximize Slowly seek yield yield is expected to eventually moderate this
principal safety through increased risk
dynamic and narrow spreads. So far in 2010,
65% US 35% 65% however, there seems to be little appetite for
US
UK 62% 38% such risk.
Japan 30% 70%
India 45% 55%
China 33% 67%
Valuations
Continue to maximize principal safety
Slowly seek yield through increased risk
The difculty continues
The changing cost of capital and the shifting
landscape of real estate fundamentals converge
Figure 6
By the end of 2010, interest rate in the analysis of asset pricing. The valuation of
spreads will: real estate in an environment which continues
Global comparison to have historically low trading volumes is
Remain the
difcult, to say the least. However, just as the
Narrow Widen
same frozen capital markets are thawing themselves
36%
US 36% 14% 50% out, the trading market is slowly starting to
US 50%
open as well.
UK 26% 15% 59%
Japan 20% 0% 80% If there was a common view from market
14%
India 55% 27% 18% participants about the frothy days of the peak
China 33% 33% 34% market of 2006 and 2007, it was that risk was
Narrow Widen Remain
mispriced. The cap rate compression of the day
the same was universal. It was perhaps most bewildering
at the riskier end of the spectrum, where
At the end of 2010, benchmark Figure 7 the difference between the cap rates on well
interest rates will be: located, well tenanted, Class A buildings and the
1%
Global comparison cap rates of Class C buildings in tertiary markets
was uncomfortably narrow.
Signicantly Slightly About the
higher higher same
45% In looking through some of the signicant
US 1% 54% 45% trades in the later part of 2009, it appears that
US
UK 0% 54% 46% risk is now priced very dearly. Most 2009 real
54%
Japan 0% 0% 100% estate trades in the US seem to conrm a peak
India 0% 82% 18%
to trough valuation decline of 25% to 40%. For
certain properties, such as 1999 K Street, an
China 17% 83% 0%
ofce building in Washington, D.C. which traded
Significantly Slightly About the
higher higher same in August 2009 at a reported price of US$835
10
per square foot, pricing has held up better in
from the spring of 2009 when they were market dislocation and the uncertainty the down market. Considering the attributes
9
at historic peaks. The market is re- that lies ahead that more than a third of of the property, it is reasonable to infer that
pricing risk as fears of a further nancial US respondents believe that institutional the differential in pricing is directly correlated
meltdown subside, competition takes hold investors will continue to maximize principal to risk. The 1999 K Street property is newly
and investors start to search again for safety through the end of 2010. As shown constructed, well located in the Washington,
yield. This trend is expected to continue in gure 6, 36% of US respondents predict D.C. submarket, and the property is leased to a
throughout 2010. As shown in gure 5, that interest rate spreads will continue to major law rm through 2024. Stable, low-risk
65% of US survey respondents expect that narrow through the end of 2010, with 50% properties in gateway cities are being selectively
institutional capital sources will slowly seek predicting that spreads will hold steady bid back up by patient capital sources. This
greater yield in the US through increased throughout the year. observation is not limited to the US, and may be
risk. It is a testament to the depth of the even more pronounced in central London. Well
A two-tiered market is developing for debt
capital, with risk levels as the primary 10 “Real Capital Analytics Property Report - 1999 K Street NW”, Real
9 “Commercial Mortgage Securities Association Compendium
of Statistics,” Commercial Mortgage Securities Association, determinant of capital supply. As risk Capital Analytics
23 February 2010

4 Market Outlook Trends in the Real Estate Private Equity Industry

tenanted, well located Class A ofce buildings
At the end of 2010, changing real Figure 8
in central London are trading at levels above
current valuations. At a recent European real estate fundamentals will:
Global comparison
estate industry conference, a London-based
panelist indicated that he had observed 150 Put
18% Put upward Have no
downward
basis points of cap rate compression in central pressure on impact on
pressure on
real estate real estate
London in the last six months. The prime ofce real estate
15% values values
US values
market in central London is widely viewed as 67%
US 67% 15% 18%
one of the lowest risk real estate markets in
the world. With property values at historical UK 62% 18% 20%

lows and the currency fairly weak, demand for Japan 60% 30% 10%
these assets is very high, outstripping supply Put downward pressure on real estate values India 27% 73% 0%
and leading to a trading market that some say Put upward pressure on real estate values China 50% 33% 17%
seems frothy.
Have no impact on real estate values

Expectations for 2010:

mixed at best At the end of 2010, the changing cost Figure 9
Polled on US real estate pricing expectations for of capital will:
2010, 67% of our survey respondents indicated Global comparison
that changing real estate fundamentals will put
Put Have no
Put upward
downward pressure on privately-held real estate downward
impact on
28% pressure on
pressure on
values (gure 8). This view is consistent with real estate real estate
real estate
44% US values values
the broad expectations for eroding real estate values
fundamentals and declining net operating US 44% 28% 28%
28%
income in the US throughout the year as a UK 19% 50% 31%
result of declining occupancy and rent levels in
Japan 50% 20% 30%
most US markets and property types.
Put downward pressure on real estate values India 46% 18% 36%
Interestingly, as shown in gure 9, when real China 33% 33% 34%
Put upward pressure on real estate values
estate professionals were polled on the impact
of the changing cost of capital on US real estate Have no impact on real estate values
values in 2010, the greatest percentage of
respondents indicated that the changing cost
of capital will put downward pressure on real Distress is in the Troubled loan strategy – a
estate values. This response would seem to banking conundrum
infer that the cost of capital will increase in eyes of the beholder In the spring of 2009, at a real estate funds
the US during 2010, giving rise to cap rate A classic strategy for real estate private breakfast at Ernst & Young’s ofces in New
expansion. This inference is inconsistent with equity rms involves deploying capital York, approximately 50 participants were
the earlier consensus view that the cost of to acquire distressed real estate assets asked if they felt that US banks would be
capital in the US would largely decrease or in illiquid markets when the demand for insolvent if evaluated on a true mark to
remain unchanged. This could be an indication such assets is at a cyclical low. Over the market basis. The overwhelming majority
of the “stickiness” and momentum of cap rate last two years, billions of dollars of capital of participants in the room raised their hand
trends which, for private real estate valuation, have been raised to take advantage of in a resounding afrmative. Although a
tend to lag behind the day-to-day changes what may be the greatest down cycle in scary portent for the US economy and the
in the cost of capital. Approximately 28% a generation. In spite of the prolonged fate of its banking system, as a distressed
of respondents in the US indicated that the economic recession, precipitous decline investor, this was a clear indication of the
changing cost of capital would put upward in asset values and the dearth of available massive opportunity to come, at least by
pressure on real estate values. However, for nancing alternatives, opportunistic historical standards. In the real estate
this response there were several supplemental investors generally characterize the last two debacle of the late 1980s, the US savings
comments to clarify that this upward pressure years as disappointing. Simply stated, there and loan industry, having heavily nanced
would not be sufcient to offset the downward hasn’t been enough distress to go around. the real estate boom of the mid-80s, was
pressure on values asserted as a result of Although there are many contributing turned upside down when real estate values
declining real estate fundamentals. factors, the leading cause of this lack of crashed. One institution after another
distressed trading seems to be the inaction was deemed insolvent as a result of their
of banks and other lenders with respect to real estate exposure. The US Government
troubled loans.

Market Outlook Trends in the Real Estate Private Equity Industry 5

established the Resolution Trust Corporation
which was empowered to take over these
failed institutions and liquidate the toxic
real estate assets on a best-efforts basis. It
created a classic opportunity for distressed
investors who had investment capital, a long
view of real estate cycles and the courage
of their conviction. History now marks the
brilliant foresight of these contrarian fund
managers and the outsized returns they
ultimately produced for investors.
The decision-making process of banks
and other lenders today, along with the
intervention of the US Government, has
made this economic crisis a completely
different ballgame, and we are still only in
the middle innings.
The real estate values underlying the loans
made by banks and other lenders have fallen
signicantly in the last two years, and in many
cases, are lower than the face values of the
loans, hence the phrase “upside down”. The
decline in residential values in the US led the
way, but it was soon followed by a decline in
commercial values. Banks and other lenders
adopted a “bunker mentality” as a result of
the slide in real estate values, and stopped
underwriting new debt.
The US Government, recognizing the
possibility of massive bank failure and the
domino effect this would have on the broader
economy, embarked on a slate of support and
stimulus programs to prop up the banking
community and re-open US credit markets.
Among these programs:
1. Direct infusions of capital to banks through
the Troubled Asset Relief Program;
2. The extension of credit from the Federal
Reserve discount window to investment
banks;
3. The reduction of the federal funds rate to
near zero;
4. The mandate to the US Financial
Accounting Standards Board to revise its
denition of fair value to clarify that it is
not a distressed trading value
These programs and initiatives had a
signicant impact on the banking community’s
strategy for handling troubled loans.
The properties collateralizing many of
the maturing loans held by banks are still
6 Market Outlook Trends in the Real Estate Private Equity Industry
generating sufcient cash to cover debt
service charges. The fair market value of
these loans may be signicantly lower than
their current face value; however, performing
loans are not generally marked to market
by lenders. As such, any unrealized loss
on performing loans is unrecognized by
the bank and therefore does not erode the
bank’s capital balance. Both foreclosure on a
property and a sale of defaulted loans would
result in a bank having to recognize a loss
for nancial reporting purposes, eroding a
bank’s capital base. Given these potential
consequences, the predominant strategy
employed by banks and other lenders has
been to extend the maturity of loans as
they come due, notwithstanding the fact
that they are under-collateralized. Loan
modication or extension is ideal for existing
real estate owners as it preserves the owner’s
participation in a potential recovery of real
estate prices, while continuing to allow the
owner to manage the property and collect
fees. Given the alternatives, it’s not hard to
see why the owners’ “delay and pray” and the
banks’ “extend and pretend” strategies are
being deployed for maturing loans today.
The real estate fund community is deeply
divided about these circumstances. To the
extent fund managers are long real estate
investments now worth less than the related
debt obligations, they are delighted with the
forbearance of the banking community and
the optionality that an extended maturity
date provides. To the extent that fund
managers are long uninvested capital in
search of opportunity, these loan extensions
are a disaster, because they mitigate the
level of distress in the property sale market.
Signicantly fewer properties are trading
because the issue of signicant valuation
decline is not being forced by lenders. The
“wait and see” scenario is a nightmare for
distressed buyers, who can’t nd enough deal
ow at current valuations. The “knock on”
effect is that bid-ask spreads are very wide and
the market seems to be caught in a signicant
and prolonged period of pricing discovery.
Bank strategy: looking
forward
Given its signicance to the opportunistic
investing landscape, the question being hotly
debated is whether the lending community’s
incentive to extend the terms of maturing
underwater loans will persist through 2010.
While the “extend and pretend” strategy is
expected to continue, 70% of our survey
respondents in the US believe that banks
will increasingly trade their troubled loans at
reduced valuations or take action to foreclose
on the real estate collateral in 2010 (gure
10). One critical factor often raised in the
debate is the impact that the coming wave of
debt maturities will have on banks in general
and on the “extend and pretend” strategy
in particular. According to a February 2010
report by a US Congressional Oversight Panel,
there will be approximately US$1.4 trillion of
maturing real estate debt or debt securities
over the four-year period through 2014.11
As shown in gure 11, two thirds of the US
real estate professionals surveyed believe
that this coming wave of debt maturities
will put pressure on the banks to be more
aggressive in resolving troubled loan issues.
Declining operating income resulting from
softening fundamentals and the prospect of
increases in interest rates would also erode
debt service coverage ratios, making it more
difcult to extend troubled loan maturities
for a prolonged period. Further, pressure
is building from regulators to encourage
banks to be more aggressive in dealing with
maturities of troubled loans.
Much of the US media focus on the banking
industry has been around the top 20 nancial
institutions which were too big to fail. There
are more than 8,000 banks in the US, most
with sizeable exposure to real estate. As
shown in the chart in gure 12, 51% of the
commercial real estate debt at 31 December,
2009 is concentrated in the 107 largest
banks and 47% is spread broadly over the
5,060 US banks with total assets between
US$100 million and US$10 billion. The
Federal Deposit Insurance Corporation (FDIC)
has been less than aggressive about enforcing
the hundreds of cease and desist orders that
are outstanding on many of these banks.
Since the beginning of 2008, there has been
a slow but steady stream of bank failures in
the US, approximately 175 in total, with 45
reported in the fourth quarter of 2009.12 The
number of institutions on the FDIC’s problem
list rose to 702 at the end of 2009 from 252
11 “CRE Losses and Risk to Financial Stability”, Congressional
Oversight Panel Report, 10 February 2010
12 “Quarterly Banking Profile”, www.fdic.gov, accessed 9 March
2010, and Jon Hilsenrath, “Battle Inside Fed Rages Over Bank
Regulation”, The Wall Street Journal, 8 March 2010
 Figure 10 at the end of 2008. The total assets of these
At the end of 2010, the dominant problem institutions were US$402.8 billion at
strategy for banks and other lenders with 31 December 2009, up 153% from the end
respect to troubled loan portfolios will be: of 2008 and at the highest level since June
Global comparison* 1993.13 As the economy picks up momentum
and the systemic risk to the market of bank
Continue to Increasingly Increasingly
30% trade their
failures subsides, it would not be surprising to
“extend and take action
US 47% pretend” no to foreclose loans at see the pace of these bank takeovers continue
problems on real reduced to accelerate.
exist estate valuations
23%
US 30% 23% 47%
UK 52% 30% 18% Transaction velocity
Continue to “extend and
pretend” no problems exist Japan 70% 10% 20%
Increasingly take action to India 64% 18% 18%
Still anemic
foreclose on real estate To the lament of real estate fund managers,
*Information not available for China transaction velocity for opportunistic
Increasingly trade their loans
at reduced valuations investments has been severely restrained. The
reported sales of global real estate investments
in 2009 were 69.2% lower than that in 2007.14
Figure 11 Bid-ask spreads continue to be very wide. As
At the end of 2010, the coming wave
of commercial debt maturities will: noted in gure 13, the majority of US real
4% estate professionals surveyed cite multiple
Global comparison* contributing factors to the current pricing gap,
Put pressure
including: (1) banks’ “delay and pray” strategy,
29% on banks’ Further Have no
(2) the desire to defer accounting losses, (3)
US to be more the banks impact on
aggressive interest existing government policy intervention holding down
67%
resolving in “extend troubled loan interest rates, masking the true cost of capital
loan portfolio and pretend” strategies
issues and (4) a general lack of available nancing.
US 67% 29% 4%
With the transaction market as weak as it is,
Put pressure on banks to be more aggressive there have been widespread reports of fund
in resolving loan portfolio issues UK 70% 30% 0%
managers reaching the end of their contractual
Further the banks’ interest in Japan 60% 40% 0%
“extend and pretend” investment period and releasing undrawn
India 55% 36% 9% capital commitments back to investors.
Have no impact on existing troubled
loan strategies *Information not available for China
Looking forward, the view of real estate
professionals on transaction velocity for
2010 is optimistic. By the end of 2010, 76%
Figure 12 of respondents in the US expect that bid-ask
spreads will narrow (gure 14). Additionally,
Commercial Real Estate Loan Portfolios US Banks and Thrifts in the US, 89% of real estate fund professionals
Billions polled expect that the number of opportunities
Construction and to acquire real estate at distressed prices will
Number of Commercial Multi-Family
Size of Total Assets development Totals increase or increase signicantly by the end of
banks mortgages mortgages
loans 2010 (gure 15).
>US$10BB 107 $526.8 $135.5 $237.8 $900.1 During signicant real estate downturns,
US$1B to US$10B 565 271.7 41.7 107.6 421.0 the transformation of real estate lenders to
US$100M to $US1B 4,495 272.2 32.3 99.9 404.4 unintended owners has historically increased
the opportunity for distressed investing.
US$0 to US$100M 2,845 20.7 1.9 6.1 28.7
According to FDIC reports, bank real estate
8,012 $1,091.4 $211.4 $451.4 $1,754.2 owned balances have increased 55% in 2009.
Source: Quarterly Banking Proles as of 31 December 2009 Time will tell if history will repeat itself on this
point, or if we will have a prolonged period

13 “Quarterly Banking Profile”, www.fdic.gov, accessed

9 March 2010

14 “Global Capital Trends”, Real Capital Analytics, February 2010

Market Outlook Trends in the Real Estate Private Equity Industry 7

 with limited actual trading as lenders nurse
Figure 13
At the end of 2010, bid-ask spreads their balance sheets back to health. What real
are historically wide today because of: estate fund managers are rooting for remains a
mixed bag. Conicting hopes by fund managers
for either deeper distress or quick economic
29% recovery are driven by their relative levels of
Global comparison*
current real estate investment exposure and the
US 54% Delay Government Availability amount of fresh capital they have available to
and Accounting intervention of All
5% take advantage of new opportunities. Only one
pray and policy nancing
thing seems certain; real estate fund managers
US 29% 5% 7% 5% 54%
7% are unlikely to have it both ways.
5% Japan 20% 0% 0% 0% 80%
India 17% 25% 0% 17% 41%
Delay and pray Government
intervention *Information not available for China or UK Global perspectives
and policy
Availability of Accounting
The world economy in 2010 is highly
financing interconnected. Any arguments to the contrary
All were sorely tested in the face of the widespread
economic downturn experienced around the
world during the last 18 months. The timing
Figure 14 of the downturn, as well as the severity and
By the end of 2010, bid-ask duration, varied signicantly by region, however.
spreads will: Differences in domestic consumption, global
trade, commercial and consumer debt levels,
Global comparison*
24% scal and monetary policy, unemployment levels,
Gap out, demographic patterns and currency uctuations,
Narrow, Remain
further
0% increasing among others, affected the severity and duration
US slowing about the
transaction
transaction same of the downturn experienced in each region.
76% velocity
velocity

US 76% 0% 24% The impact of the downturn on international real

Japan 70% 0% 30%
estate markets was also widespread, but like the
variations in the broader economies, regional
India 82% 9% 9%
Narrow, increasing real estate markets have similarly ebbed and
transaction velocity China 33% 0% 67%
owed at different rates. As part of our research
Gap out, further slowing *Information not available for UK
transaction velocity on global real estate markets, we interviewed
Remain about the same
real estate market leaders from Ernst & Young
to get a sense of local market trends. We also
polled 37 real estate investment professionals
in the United Kingdom (UK) and conducted a
Figure 15 smaller “sounding” of real estate investment
At the end of 2010, the number of
opportunities to acquire real estate at professionals in India (11), Japan (10) and China
distressed prices will: (6) to help gauge sentiment for the real estate
4% investing landscape in 2010.
7%
Global comparison The following is a summary of our observations
and ndings.
13% Remain
Increase
Increase Decrease the
signicantly
US same United Kingdom
76% US 76% 13% 4% 7% With a relatively large percentage of GDP
UK 76% 0% 9% 15% supported by the nancial services sector, the
Japan 60% 0% 0% 40%
UK was one of the rst of the major developed
countries to follow the US into recession. With
Increase India 46% 0% 18% 36%
signicant exposure to real estate markets,
Increase significantly China 17% 17% 16% 50%
many view the UK as having faced up to its
Decrease asset deation problem faster than most
Remain the same countries with a peak to trough valuation
decline of nearly 50% in most markets. This

8 Market Outlook Trends in the Real Estate Private Equity Industry

rapid valuation decline turned loan to value
ratios upside down, freezing the real estate
lending community in a manner very similar
to the US.
The UK emerged from its recession in the
fourth quarter of 2009 with GDP growth
of 0.3%. With the benets of inventory
restocking largely behind them, concerns
persist about the possibility of a double dip
recession as scal stimulus is withdrawn and
monetary policy is reexamined in advance of
the general election.
Bolstering the outlook for continued growth
was the Nationwide Building Society’s report
for February indicating that British consumer
condence had hit its highest level in the last
two years.15 Also cited was an expectation
of a strengthening labor market over the
next six months. In the UK, 43% of survey
respondents expected unemployment to
increase, with an equal share of respondents
expecting unemployment to be at
throughout 2010 (gure 1). In stark contrast
to the US, 86% of respondents expected
occupancy levels to be at or higher in
2010, with almost two thirds of respondents
projecting that rent levels will be higher in
2010 than 2009 (gures 2 and 3). Although
somewhat questionable in the context of
the broader UK markets, this expectation
certainly seems plausible for prime ofce
property in central London where demand
is very high and would-be investors bemoan
the lack of supply. According to Matt
Maltz, Head of Real Estate Fund Services
at Ernst & Young in the UK, “Weak sterling
exchange rates combined with retrenchment
15 Nationwide Consumer Confidence Index, www.nationwide.co.uk,
3 March 2010
by investors away from risky emerging
markets to stable developed markets have
signicantly increased demand beyond the
supply of sellers. The consequent increase in
real estate prices in the London prime ofce
niche is difcult to correlate with economic
fundamentals showing the UK barely limping
out of recession.” Continued Maltz, “More
prime London assets may be brought to
market as property owners that bought
during the market bottom see the frothy
demand as an opportunity to sell.”
With respect to the outlook on valuations for
the broader market, respondents in the UK
had a similar view to those in the US, with the
majority indicating that changing real estate
fundamentals will put downward pressure
on real estate valuations, while the changing
cost of capital will put upward pressure on real
estate valuations in 2010 (gures 8 and 9).
Notwithstanding these conicting inuences,
the broad expectation is for continued
valuation declines through 2010 in most
geographies and property types.
The majority of UK respondents expect the
lending community to continue their “extend
and pretend” strategy for maturing loans, but
acknowledge that the coming wave of debt
maturities will increasingly put pressure on
lenders to more aggressively resolve their
troubled loan portfolios (gures 10 and 11).
Overall, there is optimism in the opportunistic
investor community in the UK as more than
three quarters of respondents believe that the
number of opportunities to acquire real estate
at distressed prices will increase in 2010
when compared to 2009 (gure 15).
Market Outlook Trends in the Real Estate Private Equity Industry
Euro Zone
The European Union was conceived as a
single interconnected nancial market with
a common currency and united oversight.
The efcacy of the European Union is
being put to the test as a result of the great
recession. The disparity in nancial strength
and resilience to market shocks of the 16
member countries is bearing itself out as
countries such as Germany and France move
slowly but condently in the direction of
steady growth while Portugal, Italy, Ireland,
Greece and Spain continue to struggle with
scal imbalances and other recessionary
pressures. Greece and Spain, which were still
in recession in the fourth quarter of 2009,16
are widely viewed as the most vulnerable
economies in the Euro Zone and most likely
to stall its economic recovery. With sovereign
debts at risk of default and budget gaps
widening, there is signicant pressure to
reduce spending. However, removal of scal
stimulus is expected to exacerbate problems
with escalating unemployment and declining
domestic consumption. Fears persist that
the nancial struggles of the more vulnerable
countries in the European Union, could, if not
carefully managed, tip the Euro Zone back
into recession.
“Real estate is greatly impacted by the broad
economic downdraft,” says Ad Buisman,
the Head of Real Estate for Ernst & Young in
the Netherlands. “Unemployment is driving
vacancy levels up, which in turn is putting
pressure on rental rates in every property
type. The collective view on real estate
16 Natasha Brereton, Paul Hannon, and Terence Roth, “UK Sees
Stalled Euro-Zone Recovery”, The Wall Street Journal, 24
February 2010
9
valuation trends varies across the Euro Zone,
but the composite expectation is that values
will continue to decline until real estate
fundamentals rm up”
Says Hartmut Fründ, Managing Partner of
Real Estate for Ernst & Young in Frankfurt,
“Pension funds and open ended funds in
Germany have recognized the opportunity
presented by the widespread decline of asset
values and have started initiatives to acquire
trophy assets in prime markets around
the world such as London, New York and
Washington, D.C. The opportunity to acquire
prime assets in gateway cities,
below replacement cost, rarely presents
itself and may represent a generational
investment opportunity.”
Buisman continued, “Real estate opportunities
vary greatly by country, and further by
market. Real estate has always been a local
business that is broadly impacted by global
capital ows. The interesting thing about the
rst half of 2010 is that investors seem to be
chasing the same assets, prime real estate
with credit tenants located in gateway cities.
It’s ironic that we are observing cap rate
compression for this niche of the market.”
China
China was one of the few economies to avoid
a prolonged downturn. Although the country
did not experience a recession, the economic
growth rate was lower than the Chinese
government’s 8% target. In an attempt to
maintain the target growth rate during the
global downturn, the Chinese government
was quick to employ signicant scal stimulus
measures to minimize the impact of the fall off
of western demand for Chinese products.
The valuation trend line for real estate in
China had the same basic shape as the US.
Property valuations peaked in November
2007 when the MSCI China Property
Index topped at nearly 1,600, followed by
a steady decline to just below 300 on 29
October 2008, a peak to trough decline of
more than 80%. Since hitting bottom, the
MSCI China Property Index has increased
almost 200%17,raising fears of a second
asset bubble. Arguments supporting the
stability of asset prices include outstanding
17 ThomsonReuters Datastream, online.thomsonreuters.com/
datastream, 8 January 2010, and BofAML Equity Research,
www.ml.com, 8 January 2010
10
GDP growth of approximately 8.7% in 2009,
urban population growth, rising median
income levels and lowering unemployment.
The Chinese government is taking steps to
stabilize prices and lessen the chance of a
second real estate bubble. Policy tightening
is expected to include interest rate hikes,
reserve ratio increases (to induce a broad
credit pullback) and tax increases such as
a 5.5% business tax on asset appreciation
and annual property taxes. All real estate
professionals sounded in China expected
benchmark interest rates to rise during 2010.
Says Howard Altshuler, Real Estate Leader
for Ernst & Young in China, “The Chinese
government considers real estate to be one
As a result, conventional theory suggests
of the ‘pillars’ of the economy and is reluctant
long-term investing in Chinese real estate
to see a second downturn in real estate
will provide for strong returns, especially for
values. Furthermore, the government sees
investors in up and coming second and third
the availability and affordability of housing to
tier cities.”
be a key attribute in maintaining its agenda
of social harmony. As a result, market Japan
participants should expect to see continued
Japan’s economy grew at a 4.6%18 annualized
policy intervention to maintain a stable
pace in the fourth quarter of 2009 as demand
real estate environment, which will include
for its manufactured goods resumed and the
increasing accessibility to housing for lower to
impact of continuing government stimulus
middle class families.”
measures were realized. The government
The real estate professionals sounded in policy intervention has come at a cost, as
China were split on the expectations for Standard & Poor’s downgraded the outlook
unemployment levels (gure 1), with 50% for the AA credit rating on Japan’s mounting
indicating unemployment will trend downward debt balance from stable to negative19.
and 50% indicating it will stay steady Equally concerning however, is the impact
throughout 2010. Consistent with these that a hasty stimulus withdrawal by the new
ndings, 83% of respondents in China viewed Democratic Party of Japan would have on
both occupancy and rent levels (gures 2 and domestic consumption, further elevating
3) as holding steady or trending higher. Given the importance of Japanese exports in an
the government’s stated objective to stabilize uncertain world. In spite of these difcult
real estate prices, it’s not surprising that the challenges, the consensus view is that Japan
real estate professionals sounded on the is on a path to slow but sustainable recovery.
direction of real estate valuations were split,
The economic growth, which is projected
with those seeing rising prices as a result of
to be lower in the rst half of 2010, is not
the changing cost of capital just about equal
expected to result in employment gains, as
to the number of respondents anticipating
90% of the real estate professionals surveyed
falling valuations in 2010 (gure 9).
project unemployment levels to be higher or
According to Altshuler, “The real estate at throughout the year (gure 1). Similarly,
market has the potential to be unstable for 90% of respondents indicated that rental rates
the short-term, due to the effects of the will fall or at best stay at through the year
global recession, changing regulations and (gure 3). According to Tom Brown, Co-
the unprecedented level of real estate lending Leader of Ernst & Young’s real estate practice
over the past few years. That being said, in Japan, “There is little expectation that
China continues on its path of urbanization,
with more than 300 million people expected 18 “Asian Shares Slip, Japan GDP Fails to Excite”, The Wall Street
Journal, 15 February 2010
to move from outlying areas of the country
19 Douglas McIntyre, “S&P Issues a Warning on Japan’s Credit
to urban centers over the next 20 years. Rating”, dailyfinance.com, 26 January 2010
Market Outlook Trends in the Real Estate Private Equity Industry
the real estate recovery will be quick or that
investment returns will be as high as those
achieved in the last nancial crisis in Japan.”
Investors are slowly turning a corner in Japan.
70% of survey respondents expect that
institutional capital sources will slowly
seek yield in 2010 through increased
investment risk, while 30% of respondents
project that the predominant investment
strategy will continue to maximize principal
safety (gure 5).
On the outlook for real estate valuations,
the majority of survey respondents are
projecting that the changing real estate
fundamentals and cost of capital will result in
downward pressures through the balance of
2010 (gures 8 and 9). Says Brown, “Flat or
negative operating conditions are expected in
the near future and that will inevitably create
some downward trends in real estate values.”
With respect to the lending community’s
strategy for underwater real estate loans,
“extend and pretend” appears universal, as
70% of real estate professionals surveyed
expect it will be the dominant strategy in
2010. (gure 10) Says Brown, “There is
a long history of deferring the impact of
unrealized losses on bank and other company
earnings. Other countries are just borrowing
a page from Japan’s corporate handbook.”
Real estate transaction velocity has been
anemic throughout Japan, but expectations
for an increase in transaction volumes
were noted. Seven out of ten real estate
professionals surveyed expected bid-ask
spreads to narrow during 2010 (gure 14).
India
Widely viewed as an emerging markets
powerhouse, India, like China, felt the effects
of the global economic downturn differently
than most of the developed industrialized
countries of the world. Having averaged
GDP growth of 8.9% between 2003 and
2007,20 the pace of India’s rapid growth
was slowed in 2008 and 2009 to 7.4% and
6.4%, respectively. Aggressive scal stimulus
and monetary easing were employed in an
attempt to maintain the economy’s historic
growth trajectory. Resultant budget decits
increased the country’s debt to GDP ratio but
not to levels anywhere near many developed
western economies.
Rental rates in India broadly declined by
10%-40% in 2009 depending on the Indian
sub-market and property type. In the face of
signicantly lower demand, competition for
tenants increased dramatically.
Survey results reect optimism about the
impact the growing economy will have on
real estate fundamentals. The majority
(64%) of survey respondents expect
lower unemployment and higher national
occupancy levels by the end of 2010, and
rental rates are expected to hold steady
throughout the year. (gures 1, 2 and 3)
Says Ganesh Raj, Leader of Real Estate in
India, “As a result of the worldwide economic
crisis, developers deferred new projects,
avoiding massive supply imbalances. As the
economy continues to recover during 2010,
we expect occupancy levels to improve in the
ofce and retail sectors. Additionally, the
20 Economist Intelligence Unit, www.eiu.com and EDC Economics,
www.edc.ca, accessed 11 March 2010
Market Outlook Trends in the Real Estate Private Equity Industry
reduction in residential prices, coupled with
lower nancing rates, are starting to revive
residential demand throughout India.”
On valuations, 73% of survey respondents
expect strengthening fundamentals to put
upward pressure on real estate pricing in
2010. According to Raj, “There is no surprise
with this response as with the economy rmly
on a path to recovery, investors are starting
to shed their risk aversion with the pursuit
of returns gaining precedence over safety.
Real estate fundamentals are starting to
improve and more capital is owing into the
sector. These dynamics will naturally lead to
increasing values over time.”
Overall, optimism about distressed investing
was more tempered in India than in the
developed countries surveyed, with only 46%
of respondents indicating that they anticipate
increased opportunities for distressed
investing by the end of 2010 vs. 2009.
(gure 15) Says Raj, “With strengthening
fundamentals and valuations climbing,
distressed opportunities become more
difcult to nd.” The banks in India were not
saddled with as high a level of troubled loan
portfolios as their western counterparts,
leading to lower levels of distress. Liquidity
is still tight among leveraged real estate
developers which may lead to an elevated
level of property sale activity in 2010.
11
 Developing this report
Ernst & Young’s 2010 Market outlook:
Trends in the real estate private equity
industry marks the sixth report in our series
providing a summary of the trends and
developments in the real estate private
equity fund sector. It is based upon data
collected and analyzed by Ernst & Young
professionals dedicated to the real estate
private equity fund industry.
As in the past, the central part of our
research is a survey of real estate private
equity fund sponsors focusing on the
value-added and opportunistic end of the
investment spectrum.
Our survey included 14 central questions
pertaining to the state of the real estate
investment fund market. We received
responses from 120 fund professionals
throughout the US, Europe and Asia. We
also conducted interviews with sponsors and
other market participants to supplement
the survey ndings and our general
observations of the market.
The survey data in the report was
based upon responses received through
15 February 2010.
12 Market Outlook Trends in the Real Estate Private Equity Industry
Ernst & Young has maintained the strict
condentiality of all survey respondents
and interview participants. Under no
circumstances will the identity of the
respondents or those interviewed be
made public. In preparing this report,
Ernst & Young relied on the data and
information supplied by the survey
respondents. We did not attempt to verify
the information provided in the survey
or interview process, and we do not take
responsibility for the accuracy or reliability
of the data.
About
Ernst & Young’s
Real Estate Fund
Services group
Ernst & Young has invested in the people,
processes, tools and methodologies required
to help meet the challenges faced by real
estate private equity funds. Our Real Estate
Private Equity Fund Services group is an
international team of senior real estate
professionals experienced in providing
multidisciplinary services to funds.
For more information about any of the
topics discussed in this report, please
contact one of the Real Estate Private Equity
professionals listed here.
Contacts
Global Leader, Real United States Asia-Pacic Europe
Estate Fund Services Michael Frankel Howard Altshuler Olga Arkhangelskaya
Miami Shanghai Moscow
Gary Koster +1 305 415 1610 +86 21 2228 2908 +7 495 755 9854
New York michael.frankel@ey.com howard.altshuler@cn.ey.com olga.arkhangelskaya@ru.ey.com
+1 212 773 0525
gary.koster@ey.com Robert Langer Thomas Brown Ad Buisman
Chicago Tokyo Amsterdam
+1 312 879 2300 +81 3 3503 2093 +31 55 529 1428
Global Real Estate thomas.brown@ey.com ad.buisman@nl.ey.com
robert.langer@ey.com
Leader Christopher Lawton Hartmut Fründ
John French
Howard Roth Los Angeles Sydney Frankfurt
New York +1 949 437 0275 + 61 2 9248 5165 +49 61 96996 26351
+1 212 773 4910 john.french@ey.com chris.lawton@au.ey.com hartmut.fruend@de.ey.com
howard.roth@ey.com
Michel Kapulica Ganesh Raj Karl Hamberger
San Francisco Gurgaon Munich
Global Real Estate +1 415 894 8605 +91 124 464 4000 +49 89 14331 13662
michel.kapulica@ey.com ganesh.raj@in.ey.com karl.hamberger@de.ey.com
Markets Leader
Michael Straneva Soo Hock Teoh Matt Maltz
Richard Sinkuler
Phoenix Kuala Lumpur London
Chicago
+1 602 322 3610 +60 37 495 8717 +44 20 7951 1886
+1 312 879 6516
michael.straneva@ey.com soo-hock.teoh@my.ey.com mmaltz@uk.ey.com
richard.sinkuler@ey.com
Michael Hornsby
Luxembourg
+352 42 124 8310
michael.hornsby@lu.ey.com

Market Outlook Trends in the Real Estate Private Equity Industry 13

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