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January 16 - January 20, 2012

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WEEKLY MARKET RECAP

Week @ A Glance
MACRO ECONOMIC & REAL ESTATE NEwS Half of the nation’s largest financial institutions have missed on a key earnings metric, and half have exceeded.

Macro Economic & Real Estate News
K.C. Conway, MAI, CRE, CIVAS Market Analytics

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ECONOMIC SCOREbOARD 2-5 This past week was dominated by earnings and economic data releases pertaining to housing, manufacturing and inflation. ThE bULLS, bEARS & bEwILDERED 6 The market is still tepid about hiring, capital investment and expansion. UpCOMINg ECONOMIC CALENDAR KEY ECONOMIC FINANCE RATES & DISCUSSION ITEM

6-7 7-9

Given the plethora of bewildering data the first three weeks of 2012, it’s time for a Test Your Knowledge quiz. The point of these periodic quizzes is to bring emerging trends into focus. Thus far in 2012, we’ve received contradictory news in bank earnings, retail sales, housing, autos and inflation. Half of the nation’s largest financial institutions have missed on a key earnings metric, and half have exceeded (American Express, Bank of America, BB&T, Goldman Sachs, SunTrust and Wells Fargo). Retailers are performing at opposite ends of the spectrum. Family Dollar, for example, is firing on all cylinders with plans to add 450 to 500 new stores in 2012. Concurrently, Food Lion is closing 113 stores that will impact 24 outstanding CMBS transactions (Source: TREPP). On the housing front, existing sales are up, but prices continue to decline. With respect to the auto industry, U.S. sales continue to rise (up 11% for Ford, 13% for GM and 26% for Chrysler), but

the average age of the U.S. auto inventory continues to rise having just hit an all-time high of 10.8 years for combined passenger cars and light trucks - and 11.1 years for passenger cars (Source: Polk). Further, with respect to inflation, the December PPI and CPI data suggest it is flat or declining, but Thursday’s sale of 10-Year Treasury Inflation Protected Securities (TIPS) suggested otherwise. The yield was negative for the first time ever (-0.46%). Why? The answer is two-fold: • Investors fear the Fed’s policies will lead to more inflation further down the road and these inflation protected securities may be hard to obtain in the future. • It’s a safe-haven play. It’s all about the return of capital rather than the return on capital. The answers to the aforementioned questions are discussed herein and presented at the end of this section. The genesis for this week’s Test Your Knowledge quiz came to me while traveling in western Michigan. During my visit to Grand Rapids and Holland, Michigan, I realized how much better the secondary markets were performing since the onset of the 2008 recession. In preparation for presentations made in Grand Rapids and Holland, I realized how important it is for all in our industry (appraisers, bankers, brokers, investors, etc.) to take time here at the beginning of 2012 to refresh our understanding of market and property conditions. Industries, such as the auto industry, are no longer four-letter words in our economy. GM has just reclaimed its top ranking from Toyota as the global leader in auto sales. Manufacturing has been, and remains, the driver out of this financial and housing led recession. The Midwest economy is growing again. The number one county for job growth in the U.S. is Ottawa County in western Michigan (+4.7% June 2010 to June 2011 – latest BLS county level employment data). According to United Van Lines 2011 moving data, the Midwest is

TEST yOur KnOWLEDGE
Q1: What U.S. county has the #1 job growth rate (BLS: Jun-2010 to Jun-2011 latest data)? Q2: What U.S. MSA has the lowest unemployment rate? Q3: What industry has 2 companies ranked among the top 10 US employers again? Q4: Four of the top 5 US employers are in what industry? Q5: Approximately how many U.S. banks were closed during the Great Depression? Q6: Approximately how many U.S. banks have failed since 2008? Q7: What months in 2012 will the Federal Reserve NOT hold an FOMC meeting? Q8: What did the US Treasury auction last week at a negative yield for the 1st time? Q9: According to United Van Lines, what was the 2011 top destination for “Move-Ins?” Q10: For the first time since 1977, what US region did NOT rank #1 for “Move-Outs?”

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no longer the number one region for “move-outs.” It has been displaced by the Northeast. U.S. auto manufacturers have climbed back into the top-10 ranking for the largest private employers (GM #8 behind IBM and Ford #10 behind General Electric). Retail is now the industry sector that holds more risk for job loss and contraction than the automobile or larger manufacturing sectors. Four of the nation’s top 5 employers are all retailers (Walmart, McDonald’s, Sears and Home Depot – followed by Target at #6).

For those banks, life companies and investors looking for growth markets in the U.S., take a look at the secondary markets, such as western Michigan, Charleston, SC, Colorado Springs, CO, Savannah, GA, Cheyenne, WY, etc. You may be surprised at what you find. Answer Key: Q1: Ottawa, MI; Q2: Minneapolis; Q3: auto; Q4: retail; Q5: 23,674; Q6: 524; Q7: no F-MAN in Feb, May, Aug & Nov; Q8: 10-Yr TIP (-0.46%); Q9: D.C.; Q10: Midwest The most noteworthy banking misses for Q4 2011 are those by Capital One (-43%), M&T (-28%) and PNC (-18%). Sears has mushroomed into a much larger concern for those in retail as the CIT Group and other business lenders have announced they are halting loans to Sears’ suppliers. In the grocery store space, Food Lion has announced it will close 113 underperforming stores. That’s the Bearish news impacting the scoreboard. On the Bullish side, refreshed data on countylevel employment, auto sales, existing home sales, home foreclosures, inflation, commercial property values and increasing construction activity were behind the optimism in the market. This Bullish optimism, though, is tempered by nearly as much bewilderment regarding metrics like Weekly Jobless Claims and negative-yielding, 10-Year TIPS. all in all, this week’s scoreboard shows the advantage went to the Bewildered due to a tie 7:7 score with the Bulls. The degree of skepticism in the market over earnings and economic data is holding economic growth back. When market participants doubt the integrity of government data or don’t anticipate past earnings performance to be sustainable due to economic headwinds, capital investment, hiring and expansion are all deferred. The market is clearly still searching for clarity. The seesaw of the Republican primaries is also beginning to weigh on the market.

THE 2012 SCOrE BOarD
WEEK EnDInG Week End: January 20 Prior WMR (Jan. 13) Dec. ‘11 4-Wk Avg. CY 2012 YTD Avg. CY 2011 Avg.
note: a Tie bulls/bears Score Results in bewildered

BuLLS 7 5 5 6.3 « 3.9

BEarS 4 5 4 5 4.3 «

BEWILDErED 7« 3« 5« 5 3.9

ThE dEgREE of SKEPTiciSm in ThE maRKET ovER EaRningS and Economic daTa iS holding Economic gRowTh bacK.

THIS paST WEEK WaS DOmInaTED By EarnInGS anD ECOnOmIC DaTa rELEaSES pErTaInInG TO HOuSInG, manuFaCTurInG anD InFLaTIOn. According to data compiled by Thomas Reuters, of the 72 (14%) S&p 500 companies who have reported Q4 earnings thus far, 60% have beat estimates, 14% were in-line, and 26% were below estimates. With respect to earnings by banks and retailers, the ratio is less favorable at 50/50. Additionally, the earnings misses have been by those generally regarded as the healthier financial institutions with improving credit conditions, lower CRE loan concentrations and less legacy residential mortgage issues. Standout Statistics There was no shortage of candidates for standout statistics. Stellar auto sales, GM retaking its mantle back from Toyota as the global leader for auto sales, a new record for the average age of U.S. passenger vehicles, negative or flat readings for producer and consumer inflation, and 10-Year TIPS trading at a negative yield (-0.46%) all stood out. The leading Bullish standout statistics were: County Level Employment: According to the BLS’ most recent report on County Employment & Wages covering the period June 2010 to June 2011, employment increased in 215 of the 322 largest U.S. counties.

The Score Board

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Ottawa, MI, posted the largest increase, with a gain of 4.7% over the year, compared with national job growth of 0.9%. Within Ottawa, the largest employment increase occurred in manufacturing, which gained 2,514 jobs over the year (9.0%). San Joaquin, CA, experienced the largest over-theyear decrease in employment among the largest counties in the U.S. with a loss of 4.0%. Earnings: Heading into the week of January 23rd, approximately 60% of the 72 S&P 500 companies that have reported Q4 2011 earnings beat consensus estimates. Important to our industry is that some bell-weather real estate banks also beat estimates despite lingering mortgage, credit loss, or put-back constraints from legacy acquisitions. Those financial institutions included Wells Fargo, SunTrust, and BB&T. auto Sales: All three U.S. based auto manufacturers reported double-digit sales increases for Q4 2011 (Ford +11%; GM +13%; Chrysler: +26%), and GM regained its lead from Toyota as the global sales leader. aging u.S. auto Fleet: An aging U.S. auto fleet is a leading indicator that the upward trajectory in U.S. auto sales beyond 13 million annual units has momentum. The average age for U.S. passenger vehicles (cars and light trucks) just reached an all-time high of 10.8 years. As Americans are confronted with replacing worn out vehicles with more fuel efficient models, the prognosis for the U.S. auto industry and jobs is good.

properties in 2011. RealtyTrac reports that 1.45% of U.S. housing units (one in 69) had at least one foreclosure filing during the year, down from 2.23% in 2010, 2.21% in 2009, and 1.84% in 2008. Nevada had the nation’s highest state foreclosure rate for the fifth consecutive year, with more than 6% of the state’s housing units (one in 16) having at least one foreclosure filing. California still leads in the absolute number of foreclosure filings.

accoRding To nEw daTa fRom REalTYTRac, 2011 homE foREcloSuRES dEclinEd 34% ovER cY 2010’S filingS.

Increasing Existing Home Sales: The National Association of Realtors reported on Friday existing home sales increased 5% to an annual rate of 4.61 million units, with all four of the nation’s regions recording gains.

Declining Home Foreclosures: According to new data from RealtyTrac, 2011 home foreclosures declined 34% over CY 2010’s filings. Approximately 2.7 million foreclosure filings - including default notices, scheduled auctions and bank repossessions - were reported on 1.8 million U.S. www.Colliers.com/ValuationAdvisory

December marked the third straight month of gains, but a glut of unsold properties is weighing down on prices and stringent lending practices by banks are likely to make progress painfully slow. The median sales price fell 2.5% to $164,500 in December from a year ago. For 2011 as a whole, prices dropped 3.9% to an average of $166,100, the lowest since 2002. Further downward pressure on prices could come in the months ahead as banks finish working their legal issues regarding the foreclosure process and push more homes into the market. Increasing Commercial property Values: Last week, CoStar provided an update to its CoStar Commercial Repeat Sales Index (CCRSI) for the period of November 2011. CoStar’s CCRSI increased by 0.6% in November 2011 based on 738 repeat sales. Although the CCRSI is now 1.8% above the same period last year, it is 31.8% below its peak in August 2007. Page | 3

January 16 - January 20, 2012

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the onset of the housing and financial crisis, it appears that not even the grocery store space has stabilized. Just three weeks into 2012, Payless Shoes, Famous Footwear, Sears and Food Lion have 650 store closings slated for 2012.
Source: ICSC and About.com No. of 2011 No. of 2011 Store Store Retailer Retailer Closings Closings 633 Borders 16 45 Big Lots 405 Blockbuster 17 45 Family Dollar 200 GameStop 18 43 Select Comfort 189 GAP 19 43 Sonic Drive-In 160 f.y.e 20 35 Denny's 117 Anchor Blue 21 32 A&P Grocer 117 Footlocker 22 30 Ultimate Electronics 100 Talbot's 23 28 Dominos 71 A.J. Wright 24 25 Superfresh (A&P) 69 MetroPark 25 20 Lowe's 63 Friendly's 26 19 Sears 60 Rite Aid 27 15 Stride-Rite 52 Destination Maternity 28 12 Basset Home Furn. 50 Abercrombie & Fitch 29 11 Sony Style 50 Hot Topic 30 10 Staples Total for Retailers closing 10+ stores: 2,749

Retailers with Most Store Closings CY 2011

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

The increase in commercial property values for the November 2011 period is believed to be attributable to a drop in the number of distressed sales in Q4 2011. That decline is not likely to hold in 2012 and 2013 as the volume of maturing CRE debt exceeds $350 billion in each year (peak for the 2007-2017 period). The leading Bearish standout statistics were: Earnings: Bell-weather companies, such as JP Morgan, Capital One, PNC Bank, General Electric and Google have missed earnings and/or revenue expectations for the Q4 2011 period in just the few couple weeks of this earnings season. The market is searching for clarity and direction in corporate earnings absent clarity from key economic measures, such as employment or GDP. Instead, the market is finding more questions than answers. The first three Mondays of February will be the dates to watch with respect to earnings as more than 200 public companies report earnings on each of these three Mondays. retail Store Closings: In addition to the store closings announced in December by Payless Shoes and Famous Footwear, and Sears’ January announcement to close 120 stores, this past week Food Lion disclosed that it will close 113 underperforming stores. Four years after www.Colliers.com/ValuationAdvisory

maturing CrE Debt & CrE Losses: This past week the market provided us with two additional glimpses into the challenges of maturing CRE debt and the likelihood that losses will continue to exceed 50% of original loan balances. The first glimpse came from the revelation that the Atlanta landmark Bank of America tower at the corner of Peachtree and North Avenue will go to foreclosure auction on February 7th – ironically during the 2012 Mortgage Bankers Association’s (MBA) Commercial Real Estate Finance conference to be hosted in Atlanta. The 55-story Bank of America Plaza is in default on a $363 million debt. Opened in 1992, the Bank of America Plaza is notable as the tallest American building located outside of New York and Chicago. It is located on the dividing boundary (North Avenue) between Atlanta’s downtown and midtown office submarkets, and benefits from access to the MARTA passenger rail system and proximity to the Georgia Tech and Emory Crawford-Long medical campuses. The current property owner, BentleyForbes, purchased the property in 2006 for $436 million from CSC Associates, a partnership of Cousins Properties Inc., and Bank of America Corp. Given the property’s size, uncertainty of its tenancy and the anticipated capital required for items like releasing commissions and tenant improvements, this foreclosure sale will be a bell-weather liquidation for other large maturing CMBS loans in 2012 and 2013. The loss severity is expected to be north of 50%. The other glimpse came from the announced closing of 113 grocery stores by Food Lion. These closings impact 24 CMBS transactions and highlight the importance of knowing your exposure to anchor tenants – especially in retail real estate. Page | 4

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Surprisingly, bank and many life company lenders still struggle to risk-rate their tenant concentrations. The just completed Federal Reserve bank stress tests failed in this area. Because bank IT systems vary in the degree of rent roll and tenant data captured, anchor tenant risk is still a risk-hole in bank Allowance for Loan and Lease Losses (ALLL) estimates.

Ironically, the less regulated CMBS arena captures this - and much more - data so that the Food Lion type store closings can be immediately understood across all existing CMBS issuance. Within hours of the Food Lion announcement, TREPP had identified the impacted 24 CMBS transactions and prepared an impact analysis for bond investors. Now that is stress testing to my regulatory colleagues.

STATISTIC(S), QUOTE(S) & hEADLINE(S) FOR ThE wEEK
The Statistic(s) of the Week: This week’s statistic of the week is the top-10 U.S. counties for job growth, led by Ottawa County in western Michigan at +4.7%. The Quote of the Week: “many investors see commercial real estate as tarred with the same brush as the residential market, but the dynamics of the two sectors are quite different.” -Joel Beam, co-author of a recently released white paper issued by San Francisco-based Forward Management LLC titled: “inflection Point: The Start of a new cycle in Real Estate?” The findings in this white paper suggest commercial real estate markets have already entered an up cycle and are poised for “slow, steady improvement” over the next five to seven years. The “Inflection Point” paper was featured in a January 12th edition of MortgageOrb titled: “white Paper Predicts improving commercial R.E. markets.” The authors go on to conclude a point elevated to WMR readers throughout 2011 - that the recovery in our residential and commercial property markets will be led by the education center markets – or as Joel Beam and his colleagues state in their paper: The top-10 counties for job growth between June 2010 and June 2011 (latest period reported on by the BLS) highlight: • With the exception of Texas, the top job producing counties are no longer located in those that have been regarded as the job producing states in the South, such as Arizona, Florida, Georgia, and Nevada. They are located in manufacturing and agricultural states such as Michigan, Indiana and Colorado. • An economic comeback story in Michigan and other Great Lake states is underway. The recovery is rooted in the states’ skilled manufacturing and the rebound in the U.S. auto industry. It’s worth nothing that Michigan has 3 of the 10 top ranked counties in job growth. • The importance of revisiting perceptions of secondary markets – A lot has changed in the past 5 years. www.Colliers.com/ValuationAdvisory “The recovery is expected to play out unevenly across U.S. and international markets.” Knowledge-based gateway cities and technology corridors are already recovering as job growth fuels demand across commercial property sectors. As vacancies drop and rents rise in those areas, demand will likely spill over into suburban job centers and secondary markets. The dimension that I would add to the education-center/knowledge-based gateway cities hypothesis is that of proximity to skilled manufacturing, U.S. ports, and agricultural centers. The latest BLS county-level employment data reinforces that it is not enough to have centers of higher learning to capture employment. Rather, it is the combination of proximity to intermodal infrastructure and skilled manufacturing or agricultural production that distinguishes one education center from another. Page | 5

SuRPRiSinglY, banK and manY lifE comPanY lEndERS STill STRugglE To RiSK-RaTE ThEiR TEnanT concEnTRaTionS.

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The Headline(s) of the week: Sales tax act is simply a matter of fairness -Tim West of the Chicago SunTimes speaking with U.S. Senator Richard Durbin (IL) – Jan 17, 2012 Just before the Thanksgiving holiday shopping season this past November, U.S. Senate Bill 1832 was introduced (aka the Marketplace Fairness Act) as the latest attempt to get internet and catalogue retailers to collect state sales taxes. This proposed legislation (preliminarily set to come up for Senate debate in the spring of this year) would give states the ability to close the online sales-tax loophole for online and out-of-state retailers. “This loophole subsidizes out-of-state businesses at the expense of local businesses. It also costs the states hundreds of millions of dollars in lost revenues at a time when states are under financial duress,” remarked Senator Durbin in the interview. The legislation finally addresses a states’ rights issue:

preserving the right of states to collect – or to decide not to collect – taxes that are already owed under state law. Subsequently, this bill has gained sponsorship and support. Some online retailers and states (Amazon and Tennessee) have already reached separate agreements to collect state sales taxes. This item has not previously been elevated in the WMR due to the plethora of other economic and real estate information and concern that it might be premature. It was prudent to see if this proposed legislation could gain any traction in a “do-nothing” Congress during an election year. However, it now appears this Senate Bill has sufficient bipartisan support to advance. This legislation could be a real game-changer for physical “bricks and sticks” retailers who continue to see sales erode to the online world. At least one competitive disadvantage appears headed for a remedy.

alThough ThE PREPondERancE of 2012 Economic daTa iS bulliSh and PoinTS To gRowTh, ThE maRKET iS STill TEPid abouT hiRing, caPiTal invESTmEnT and ExPanSion.

The Bulls, The Bears & The Bewildering
Although the preponderance of 2012 economic data is Bullish and points to growth, the market is still tepid about hiring, capital investment and expansion. Market participants are behaving in a one-step-forward, two-steps back manner. It’s almost as if the metric du jour advances optimism one-step forward in the morning to then be reversed in the afternoon by an earnings surprise, data revision or new wrinkle in the economic fabric. Is this market behavior not eerily similar to that of the second-half of 2011? The seesaw nature exhibited by employment data (Weekly Jobless Claims down 24,000 one week and then up a similar amount the next week), GDP revisions, and retail sales has industry sitting on the sidelines in search of clarity. Looming backstage behind the curtain is a wall of maturing CRE debt which peaks in 2012 and 2013 at approximately $350 billion per year. The audience knows the plot, but not the timing in which the curtain will really be drawn back to reveal the ending to this debt drama. CMBS resolutions are pointing to much higher loss severities than the 40% to 50% indicated in 2010 and 2011. Recent liquidations reported on by TREPP point to loss severities in the range of 70%, even for market hungry multifamily properties. What all this means is that the Bewildered will likely be the leading score in Q1 2012. The uncertainty in the Republican primaries is also beginning to weigh on the markets. A lack of leadership in Washington, D.C. among our elected leaders is the most detrimental factor holding back the U.S. economy. Just as Europe’s inability

to resolve its debt crisis and thread the austerity needle through the eye of fiscal responsibility has inhibited investment and economic growth, that same inaction in the U.S. is holding back economic progress. That’s the Bewildering and Bearish news. The Bullish news consists of items previously mentioned in 2H 2011 Weekly Market Recap reports that are now taking root. Agriculture, energy, and manufacturing are buoying the U.S. economy. Nowhere is this story more evident than in the followng three metrics profiled in these first three WMRs for 2012: aG-Land prices continue to rise: In the January 5th WMR the USDA’s 2011 “AG-Land Values Summary” report was highlighted. The WMR noted: AG-land values are up another 6.8%, 9.4% and 1.9% for farm, crop and pasture land, respectively. The u.S. becomes a net exporter of energy for the first time in 62 years: U.S. coal and liquefied petroleum gas are behind our energy boom and exports. States like North Carolina and North Dakota are benefiting from this growth in energy in addition to Texas, Wyoming, and Colorado. michigan has three of the top-10 counties for job growth in 2011: Except for Texas, the counties with the highest rates of job growth are located in manufacturing and agricultural states, like Indiana, Michigan and Colorado. Returning intellectualproperty-manufacturing from Asia is seeking out markets with a combination of skilled labor, Page | 6

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intermodal infrastructure and manufacturing facilities. For the first time since United Van Lines began keeping “move-in” and “move-out” statistics, the manufacturing Midwest did not rank number one in “move-outs” in 2011. Midwest states like Michigan are experiencing a rebirth in manufacturing.

2012 FOmC meeting Schedule: • January 24-25 • February – no meeting • March 13 • April 24-25 • May – no meeting • June 19-20 • July 31 • August – no meeting • September 12 • October 23-24 • November – no meeting • December 11 Note: FED releases results at 2:15pm EST following each meeting and then the Chairman holds a news conference which it commenced in 2011. 2012 Bank Stress Tests: • According to the Federal Reserve’s Summary Instructions and Guidance for the Comprehensive Capital Analysis and Review (official reference to the bank stress tests) issued November 22, 2011, the FED responses are due back to the banks by March 15th 2012. • Analysis of the results submitted to the FED is now underway. Q4 2011 Corporate Earnings: The top five dates for earnings releases in Q1 2012 are: • Friday January 13th thru Tuesday January 17th – Bank bell-weathers, such as JP Morgan, Wells Fargo and Citi, report earnings. • Monday February 6th: 257 companies release earnings • Monday February 20th: 250 companies release earnings • Monday February 27th: 209 companies release earnings • Monday February 13th: 201 companies release earnings • Monday January 30th: 189 Companies release earnings 2012 national Election Events: • Republican National Convention: August 27-31 (Tampa, FL) • Democratic National Convention: September 3-6 (Charlotte NC)

ECoNoMIC CAlENdAR
banKS and RETailERS conTinuE To bE ThE induSTRY SEgmEnTS cREaTing ThE moST anxiETY in ThE maRKET .
While the focus continues to be primarily on corporate earnings results building toward the critical first three Mondays in February, Europe and the Federal Reserve get thrown back into the fray next week with the onset of the World Economic Forum held in Davos-Klosters, Switzerland - and a two-day FOMC meeting January 24th-25th. On the economic front, the market-moving metric to look for is the advance Q4 2011 reading on GDP to be released Friday January 27th. This advance estimate will provide the market with its first peek at Q4 2011 GDP. Remember, though, this GDP announcement will be an advance estimate for Q4 2011, and the BEA’s advance estimates have been heavily revised downward in subsequent second and third estimates in the recent past. Don’t overreact to a great number, and be anxious over a disappointing number (below 2.0%) as it will likely be revised downward in the February 29th and March 29th revisions. Banks and retailers continue to be the industry segments creating the most anxiety in the market – especially after the announcements thus far by banks like JP Morgan, Capital One, Citi and PNC – as well as retailers such as Best Buy, Sears and Food Lion. One final item to keep an eye on is the finale to CMBS loans unable to refinance maturing debt. The loss severities are creeping up into the 60% and 70% ranges. The pending foreclosure auction of the landmark Bank of America office tower in Atlanta during the February 5th-8th MBA annual Commercial Real Estate Finance conference should be one to watch. Key Future Dates To Watch Two of these key dates appear on the calendar next week. They include the first 2012 FOMC meeting on Tuesday and Wednesday January 24th-25th, and the BEA’s advance estimate of Q4 2011 GDP on Friday January 27th.

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The Week of January 23rd to 27th: monday: More earnings from Apple, AMD, AT&T, AutoNation, Boeing, Coach, DR Horton & Legg Mason Tuesday: Start of the FED’s first FOMC meeting (a 2-day meeting concluding with announcement on interest rates at 2:15pm EST)

dISCuSSIoN ITEM
This week’s discussion item relates to market perceptions and how often they get refreshed. Prior to reading this week’s WMR, how many in our industry knew: • The top ranked U.S. county for job growth was Ottawa, Michigan? • Three of the top-10 ranked U.S. counties for job growth were located in Michigan? • Traditional growth states, such as AZ, CA, FL and GA, have no counties among the top-10 ranked U.S. counties for job growth? • Minneapolis is the MSA with the lowest unemployment rate at 5.1%? • For the first time since United Van Lines began keeping statistics in 1977 regarding “move-ins” and “move-outs” for U.S. states, the Midwest region is no longer ranked number one for the latter. • Retail companies now comprise 5 of the 6 largest private U.S. employers and pose a greater risk for employment loss than automobile or manufacturing sectors?

RETail comPaniES now comPRiSE 5 of ThE 6 laRgEST PRivaTE u.S. EmPloYERS and PoSE a gREaTER RiSK foR EmPloYmEnT loSS.

Wednesday: Start of World Economic Forum in Davos, Switzerland FHFA Home Prices & Pending Home Sales. Thursday: Weekly Jobless Claims (look at state level detail) New Home Sales Durable Goods Leading Economic Indicators (LEI) Survey – the Chicago Fed National Activity Index is a better and more reliable indicator. It is based on 85 actual economic measures whereby the LEI is a survey among economists regarding expectations. Friday: BEA’s advance estimate of GDP for Q4 2011. Remember that this estimate will be revised at the end of February and again the end of March before we really know what 2011 GDP was.

“ThE KEY TaKE-awaY fRom ThiS wEEK’S wmR Should bE ThaT iT iS TimE To RE-ExaminE ouR PERcEPTionS of maRKETS. SEcondaRY mSa, aS wEll aS ag and manufacTuRing baSEd EconomiES wiTh lESS ExPoSuRE To maTuRing cmbS REal ESTaTE dEbT maY PoSE SomE of ThE bEST REal ESTaTE invESTmEnT oPPoRTuniTiES in 2012. whEn iS ThE laST TimE You RE-ExaminEd ThE SEcondaRY maRKETS? fEEl fREE To conTacT mE oR YouR local colliERS PRofESSional foR SomE fRESh inSighTS.” -Kc

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KEY ECoNoMIC FINANCE RATES
GrOSS DOmESTIC prODuCT

United States
Q3 2011 Prior Qtr. CY 2010 +1.8% (Revised 20bps) +1.3% (Updated 9/29) +2.9% +0.1% (Most Recent) 0.4% -3.6%

hong Kong
Q3 2011 Prior Qtr Low (Past Decade) Historic Avg.

High (Past Decade) +6.3% Q3 2003
Q1 2009

+1.0% 1990-2011 +0.5% (Most Recent) +0.3% +2.1% Q2 2010 -3.7% Q1 2009 +0.3% 1991-2011

germany
Q3 2011 Prior Qtr. Recent High Recent Low Historic Avg.

CHICaGO FED naTIOnaL aCTIVITy InDEX (CFnaI) Current Period Year Ago Prior Month Sep 2011 Aug 2011 July 2011 June 2011 -0.37% Nov 2011 -0.18% Nov 2010 -0.11% Oct 2011 -0.24% -0.38% +0.20% -0.43%

naTIOnaL rESTauranT pErFOrmanCE InDEX Current Period Prior Period Trend Key Note U-3 (Official) U-6 (Total) Initial (1/14) Initial (Prior) 4-Wk Average 2-yr (1/4) 10-yr (1/4) 100.6 Nov 2011 100.0 Oct 2011 Volatile < 100 = contraction 8.5% Jan. 2012 16.6% Next On 2/3 352,000 402,000 379,250 +0.26% +2.05%

u.S. unEmpLOymEnT

JOBLESS CLaImS

TrEaSury raTES

CmBS DELInQuEnCy raTES
prOp. TypES Industrial Lodging Multifamily Office Retail DEC 11 nOV 11 OCT 11 3 mO. 6 mO. 1 yr.

12.03
12.20 15.57 8.97 7.85

12.20 12.28 16.18 8.76 7.52

11.59 14.12 16.73 8.95 7.61

11.38 11.68 8.97
13.30 16.96 8.29 7.62 13.87 14.31 16.48 16.48 7.35 7.82 6.93 7.86

KC Conway, MAI, CRE
EMD, Market Analytics Colliers International 1349 West Peachtree St. Suite 1100 Atlanta, GA 30309 Dir 1 760.444.8041 KC.Conway@colliers.com

The opinions and/or views expressed herein are those of the individual author and do not necessarily reflect the opinions and/or views of colliers international. www.Colliers.com/ValuationAdvisory

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COLLIERS INTERNATIONAL VALUATION & ADVISORY SERVICES

SENIOR VALUATION MANAGEMENT
Ken R. Harrison President & CEo | Valuation 760.444.8023 Phone Ken.Harrison@colliers.com Patrick T. Craig, MAI, MRICS Regional Managing director Northeast Region (New York) 212.716.3821 Phone Patrick.Craig@colliers.com E. Jason Lund, MAI, MRICS Regional Managing director Southwest Region (los Angeles) 949.751.2701 Phone Jason.lund@colliers.com Jerry P. Gisclair, MAI, MRICS Regional Managing director Southern Region (Tampa) 813.871.8531 Phone Jerry.Gisclair@colliers.com Jeff L. Grose, MAI, MRICS Regional Managing director Northwest Region (Portland) 503.542.5411 Phone Jeff.Grose@colliers.com

U.S. Regions and Locations Colliers International Valuation & Advisory Services
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ATLANTA 1349 W. Peachtree Street, Suite 1100 Atlanta, GA 30009 678.392.3674 Phone Jerry p. gisclair, MAI, MRICS Regional Managing Director Jerry.Gisclair@colliers.com BOSTON 160 Federal Street Boston, MA 02110 617.330.8101 Phone Robert Laporte, MAI, CRE Managing Director Robert.LaPorte@colliers.com BUFFALO 49 Buffalo Street Hamburg, NY 14075 716.312.7790 Phone James Murrett, MAI, SRA Appraisal Standards & Audit Services Jim.Murrett@colliers.com CENTRAL FLORIDA (TAMPA) 4350 W. Cypress Street, Suite 300 Tampa, FL 33607 813.871.8531 Phone Jerry p. gisclair, MAI, MRICS Regional Managing Director Jerry.Gisclair@colliers.com CHICAGO 2 N. LaSalle Street, Suite 800 Chicago, IL 60602 312.602.6157 Phone Jeremy R. walling, MAI, MRICS Managing Director Jeremy.Walling@colliers.com COLUMBUS / CLEVELAND 870 High Street, Suite 11 Columbus, OH 43085 614.540.2950 Phone bruce Nell, MAI, MRICS, MICp Executive Managing Director Bruce.Nell@colliers.com

DALLAS 4144 N. Central Expw., Suite 760 Dallas, TX 75204 214.217.9333 Phone Jerry gisclair, MAI, MRICS Regional Managing Director Jerry.Gisclair@colliers.com DENVER 7355 E. Orchard Avenue, Suite 350 Greenwood Village, CO 80111 303.779.5500 Phone Jonathan Fletcher, MAI Managing Director Jon.Fletcher@colliers.com HAWAIIAN ISLANDS 140 Liliuokalani Avenue, Suite 106 Honolulu, HI 96815 808.926.9595 Phone bobby hastings, MAI, MRICS Managing Director Bobby.Hastings@colliers.com HOUSTON 1300 Post Oak Blvd, Suite 200 Houston, TX 77056 713.222.2111 Phone Michael Miggins Valuation Services Director Michael.Miggins@colliers.com KANSAS CITY 4520 Main Street, Suite 1000 Kansas City, MO 64111 816.531.5303 Phone Ken wilson MAI, MRICS Managing Director Ken.Wilson@colliers.com LOS ANGELES / ORANGE COUNTY 20411 SW Birch Street, Suite 310 Newport Beach, CA 92660 949.474.0707 Phone E. Jason Lund, MAI, MRICS Regional Managing Director Jason.Lund@colliers.com

MIAMI 95 Merrick Way, Suite 380 Coral Gables, FL 33134 305.447.7828 Phone Sandy Londono, MAI Managing Director Sandy.Londono@colliers.com NEW YORK 136 Madison Avenue, 5th Floor New York, NY 10016 212.716.3821 Phone patrick T. Craig, MAI, MRICS Regional Managing Director Patrick.Craig@colliers.com PHOENIX 2390 E. Camelback Road, Suite 100 Phoenix, AZ 85016 602.222.5165 Phone philip Steffen, MAI Managing Director Philip.Steffen@colliers.com PITTSBURGH 603 Stanwix Street, Suite 125 Pittsburgh, PA 15222 412.439.0709 Phone Timothy holzhauer, JD, MAI, SR/wA Managing Director Timothy.Holzhauer@colliers.com PORTLAND / VANCOUVER 110 SW Yamhill Street, Suite 200 Portland, OR 97204 503.226.0983 Phone Jeff L. grose, MAI, MRICS Regional Managing Director Jeff.Grose@colliers.com SACRAMENTO 1508 Eureka Road, Suite 250 Roseville, CA 95661 916.724.5500 Phone Jeffrey Shouse Executive Managing Director Jeffrey.Shouse@colliers.com

SALT LAKE CITY 920 W. Heritage Park, Suite 200-C Layton, UT 84041 916.765.7992 Phone R. Todd Larsen, MAI Managing Director Todd.Larsen@colliers.com SAN DIEGO 750 B Street, Suite 3250 San Diego, CA 92101 619.814.4700 Phone Rob Detling, MAI Managing Director Rob.Detling@colliers.com SAN FRANCISCO 50 California, 19th Floor San Francisco, California 94111 415.788.3100 Phone E. Jason Lund, MAI, MRICS Regional Managing Director Jason.Lund@colliers.com SEATTLE 1325 4th Avenue, Suite 1900 Seattle, WA 98101 206.343.7477 Phone Reid Erickson, MAI Executive Managing Director Reid.Erickson@colliers.com SOUTH FLORIDA (BOCA RATON) 1489 W. Palmetto Park Road, Suite 305 Boca Raton, FL 33486 561.922.5380 Phone Ed Carlson, MAI, MRICS Managing Director Ed.Carlson@colliers.com WASHINGTON D.C. 1700 K Street, NW, Suite 200 Washington, DC 20006 202.534.3000 Phone Steven M. halbert, JD, MAI, MRICS Valuation Services Director Steve.Halbert@colliers.com

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