Ben Loughry Forecast 2010

8/14/2019 Ben Loughry Forecast 2010

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Integra Realty Resources DFW1

Economic & Commercial Real Estate Outlook


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Peace is that brief,glorious moment in history

when everybody stands around,

and the smart people are reloading.


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Economic Conditionsand the

Capital Markets


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GDP Declines Appear to Have Ended

REAL GDP OVER THE PAST DECADE

10,000

10,500

11,000

11,500

12,000

12,500

13,000

13,500

14,000

Q1'0

0

Q3'0

0

Q1'0

1

Q3'0

1

Q1'0

2

Q3'0

2

Q1'0

3

Q3'0

3

Q1'0

4

Q3'0

4

Q1'05

Q3'05

Q1'0

6

Q3'0

6

Q1'07

Q3'07

Q1'0

8

Q3'0

8

Q1'0

9

Q3'0

9

Billionsin200

5Dollars


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Future of US Dollar is Uncertain

US Dollar vs. Major Currencies

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09

Chang

e

JPY/$ AUD/$ CHF/$ EUR/$ GBP/$

Japanese Yen British Pound

AustralianDollar

Swissfranc

Euro


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National Employment Losses Increased


7/60Integra Realty Resources DFW

7

Local Employment Rates

2008 2009

66,800 66,400

Fort Worth- Arlington

1%

DeclineVS.

Dallas- Plano-Irving

9% Decline



8

Consumer Confidence is Up Slightly in December

2008 2009

Seasonally adjusted

1985=100

Source: The Conference Board

Dec. 52.9

Consumer Confidence Board



9Integra Realty Resources 9



10

Biggest Worry:Home Foreclosures


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U.S. Home Prices Ended Free Fall

S&P/Case-Shiller Home Price Index20-City Composite

100

120

140

160

180

200

220

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09


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Bank Failures Reached Historic Levels

FDIC Bank Failures by Month

0

5

10

15

20

25

30

Jan-04

May

-04

Sep-04

Jan-05

May

-05

Sep-05

Jan-06

May

-06

Sep-06

Jan-07

May

-07

Sep-07

Jan-08

May

-08

Sep-08

Jan-09

May

-09

Sep-09


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Commercial Real Estate Markets


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Aggressive Use of Leverage

Has Been the Primary Catalystof the Downturn


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1stLien 80/85%

Mezzanine 10/15%True Equity 0/5/10%


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February 2009 SaleProperty Size - 906,287 SFSale Price - $355 MillionPrice/SF - $391.71 per square foot

Buyer - CBRE Investors

No Room for Error

Decrease in Value 63.0%!

February 2007 SaleProperty Size - 906,287 SFSale Price - $967.5 MillionPrice/SF - $1,067.60 per square foot

Buyer - Macklowe Properties

The Bertelsmann Building

1540 Broadway New York, NY


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Integra Realty Resources DFW 17

CMBS Market Is Yet to Return

16 26

37

74

5749

74

52

7893

169

203

230

122

$0

$75

$150

$225

$300

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Billions


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Maturities LoomApprox. $300 million Annually

COMMERCIAL MORTGAGE MATURITIES

$0

$50

$100

$150

$200

$250

$300

$350

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Billions

Banks CMBS Life Companies Other

Source: Foresight Analytics, LLC


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Cap Rates Needed for

Aggressive Buying

Property Type Top-Tier Mid-Tier Low-Tier

Apartment 8.2% 9.3% 11.0%

Industrial 9.0% 10.2% 12.2%

Office- Downtown 9.0% 10.0% 11.6%

Retail- grocery/drug center 9.1% 10.2% 11.7%


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Industrial

Top Markets By Vacancy

1. Los Angeles, CA 4.92%2. Orange County, CA 6.58%3. Seattle, WA 6.70%4. Long Island, NY 4.3%

Local MarketFort Worth, TX 10.72%

Bottom Three Markets

54. Austin, TX 18.40%55. Boston, MA 24.76%56. Louisville, KY 26.01%


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U.S. Industrial Market Pricing

Moodys/REAL Commercial Property Price Index - Industrial

1.0

1.3

1.5

1.8

2.0

Q4'00

Q2'01

Q4'01

Q2'02

Q4'02

Q2'03

Q4'03

Q2'04

Q4'04

Q2'05

Q4'05

Q2'06

Q4'06

Q2'07

Q4'07

Q2'08

Q4'08

Q2'09

Index


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Despite increases, Industrial cap rates arenot yet back to the levels of ten years ago

0

2

4

6

8

10

12

90-91

199

3

1995

1997

199

9

200

1

200

3

2005

2007

200

9

Year

Perc

entage

Manufacturing

Bulk

Office/Warehouse

R&D

10 Year Treasury(September Avg.)

10-Year Treasury(Annual Avg.)


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Biggest Rent Declines in 2009

San Jose, CA -6.7%

Seattle -6.3

San Francisco -5.9

Las Vegas -5.7

New York -5.6

Los Angeles -5.0

Orange County, CA -4.9

Oakland East Bay -4.9


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Apartment

Top Three Markets By Vacancy

1. San Francisco, CA 3.59%%2. Syracuse 3.94%

3. New York City 4.80%

Local MarketFort Worth, TX 10.42%


54. Phoenix 12.97%

55. Naples/Ft. Myers 13.37%56. Providence 14.11%


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U.S. Apartment Market Pricing

Moodys/REAL Commercial Property Price Index - Apartments

1.0

1.3

1.5

1.8

2.0

Q4'00

Q2'01

Q4'01

Q2'02

Q4'02

Q2'03

Q4'03

Q2'04

Q4'04

Q2'05

Q4'05

Q2'06

Q4'06

Q2'07

Q4'07

Q2'08

Q4'08

Q2'09

Index


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Apartment Cap Rates UpAlmost 150 bps From Lows,

But Still Below Historical Averages

0

2

4

6

8

10

12

90-91

1993

1995

1997

1999

2001

2003

2005

2007

2009

Year

Percentag

e

Urban Multi-Family

Suburban Multi-Family

10 Year Treasury(September Avg.)

10-Year Treasury(Annual Avg.)


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Office Market Cycle


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Office CBDTop Three Markets By Vacancy

1. Charlotte, NC 6.43%

2. Boise, ID 8.10%

3. Memphis, TN 8.70%

Local Market

Fort Worth, TX 10.70%*


54. San Jose, CA 23.90%

55. Detroit, MI 25.00%

56. Dayton, OH 26.00%


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Office Rents

Average effective

rent for the 4thquarter 2009:

vs. Fort Worth $24-25Source: Reis.com


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U.S. Office Market PricingMoodys/REAL Commercial Property Price Index - Office

1.0

1.3

1.5

1.8

2.0

Q4'00

Q2'01

Q4'01

Q2'02

Q4'02

Q2'03

Q4'03

Q2'04

Q4'04

Q2'05

Q4'05

Q2'06

Q4'06

Q2'07

Q4'07

Q2'08

Q4'08

Q2'09

Index


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Office Cap Rates On the Rise, ButStill Below 2003 Levels

0

2

46

8

10

12

90-91

1993

1995

1997

1999

2001

2003

2005

2007

2009

Year

Percentage

Office CBD

Office SUB

10 Year Treasury

(September Avg.)

10-Year Treasury

(Annual Avg.)


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Retail Market Cycle


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Retail

Top Three Markets By Vacancy

1. San Francisco, CA 3.08%

2. Los Angeles, CA 4.87%

3. San Jose, CA 5.03%

Local Market

Fort Worth, TX 8.61 %


54. Providence, RI 17.00%

55. Dayton, OH 17.30%

56. Detroit, MI 17.35%


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U.S. Retail Market Pricing

Moodys/REAL Commercial Property Price Index - Retail

1.0

1.3

1.5

1.8

2.0

Q4'00

Q2'01

Q4'01

Q2'02

Q4'02

Q2'03

Q4'03

Q2'04

Q4'04

Q2'05

Q4'05

Q2'06

Q4'06

Q2'07

Q4'07

Q2'08

Q4'08

Q2'09

Index


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Despite Upward Movement, Retail CapRates Not to Levels Prior to 2004

0

2

4

68

10

12

90-91

1993

1995

1997

1999

2001

2003

2005

2007

Year

Percenta

ge

Regional Mall

Community Mall

Neighborhood Strip

10 Year Treasury

(September Avg.)10-Year Treasury(Annual Avg.)


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Retail Rally


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Decent Christmas for Most Retailers

8.6%

7.4%

9.9%

4.5%

0.7%

3.8%

1.8%

9.2%

December Sales:
http://images.google.com/imgres?imgurl=http://upload.wikimedia.org/wikipedia/en/3/33/Zale_Corporation_Logo.png&imgrefurl=http://en.wikipedia.org/wiki/File:Zale_Corporation_Logo.png&usg=__Uff8r2VLYDiWdaZdCrZBOEj72Lo=&h=150&w=343&sz=8&hl=en&start=2&sig2=5APc7yc0SgzSDtTdF2ThPA&tbnid=ET0-WzrcAusWUM:&tbnh=52&tbnw=120&prev=/images%3Fq%3Dzales%2Bcorp%2Blogo%26gbv%3D2%26hl%3Den&ei=w4FHS737JYSwMr236I8Jhttp://images.google.com/imgres?imgurl=http://www.blogcdn.com/www.bloggingstocks.com/media/2008/03/jcp-jc-penney-logo.jpg&imgrefurl=http://kss.bloggingstocks.com/category/kss/page/2/&usg=__kEVvD4Ix2wckUZnE23ncCyMJT8E=&h=144&w=156&sz=7&hl=en&start=7&sig2=swSXNe2dVN-eh6ckPNDZJA&tbnid=cWC-4j5o1owmZM:&tbnh=90&tbnw=97&prev=/images%3Fq%3Djc%2Bpenny%2Blogo%26gbv%3D2%26hl%3Den&ei=sIFHS-vUHp6ONYOjxJAJhttp://images.google.com/imgres?imgurl=http://www.bilerico.com/2009/09/macys_logo.png&imgrefurl=http://www.bilerico.com/2009/09/top_10_stores_to_pick_up_gay_men.php&usg=__0kZDFUSNweFT9RW6T6PdJaG-SKg=&h=504&w=419&sz=17&hl=en&start=1&sig2=RIGkL7_lTfi2_4r3-TR_Qw&tbnid=WcMEsXnEiMutfM:&tbnh=130&tbnw=108&prev=/images%3Fq%3Dmacy%253Bs%2Blogo%26gbv%3D2%26hl%3Den&ei=m4FHS63cLYz8NbvwxY8Jhttp://images.google.com/imgres?imgurl=http://www.starchildrens.com/starweb2007/DNN/Portals/0/Neiman%2520Marcus%2520Logo.JPG&imgrefurl=http://www.starchildrens.com/SponsoranEvent/StarFashionEvent2008/tabid/78/Default.aspx&usg=__xebR2bG72pNzYcet3dG35BS-vSU=&h=139&w=362&sz=35&hl=en&start=11&sig2=fsgeqpVDuKUczXYC5p-z6g&tbnid=J7JXBeuImOMC3M:&tbnh=46&tbnw=121&prev=/images%3Fq%3Dneiman%2Bmarcus%2Blogo%26gbv%3D2%26hl%3Den&ei=i4FHS_DRC6HUNO-CtZEJhttp://images.google.com/imgres?imgurl=http://www.hakeindustries.com/images/logo_pier1.gif&imgrefurl=http://www.hakeindustries.com/clients.html&usg=__cxVQAhIKbFBO0tJ7B5XK294WbbU=&h=127&w=204&sz=6&hl=en&start=9&sig2=W7-Mf8Vhos5wkM0dNmqfMA&tbnid=c9lmRE9HO7pgYM:&tbnh=65&tbnw=105&prev=/images%3Fq%3Dpier%2B1%2Blogo%26gbv%3D2%26hl%3Den%26sa%3DX&ei=doFHS7KpH43CNdinsJAJhttp://images.google.com/imgres?imgurl=http://www.boston.com/ae/music/blog/target400.jpg&imgrefurl=http://www.boston.com/ae/music/blog/2009/03/prince_marks_th.html&usg=__0qa_hWbU4T0UEQBkVapLz_n3ROY=&h=400&w=400&sz=28&hl=en&start=3&sig2=ea83q4HkCsKj2nntbOF3MA&tbnid=vcynPRx5_1j40M:&tbnh=124&tbnw=124&prev=/images%3Fq%3Dtarget%26gbv%3D2%26hl%3Den&ei=XIFHS8ngFJTEM6aR3Y8J


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Secondary Property Types

Medical Office

Lodging

Senior Housing

Gaming

Self-Storage


41/60


Good News!


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Texas Growth Rate RemainsHighest in U.S.


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DFW Area Unemployment Rate


44/60


Integra Realty Resources 44

OIL,Black Gold


45/60


2008-2009 Fort Worth Highlights


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1. Q-Edge

- Leased 365,000 sq.ft. at the Alliance Global Logistics Hubas its new strategic assembly and distribution center.

- Bringing in 1,400 direct or indirect jobs

- Economic impact expected to be $700 million for theregion over the next decade
http://www.vetoquinol.com/eng/index.php


47/60


-Leased 31,000 sq.ft. at the CentrePort BusinessPark as its newest call center-Bringing 250 jobs with a $7 million capital

investment & $7.5 million in annual payroll

- Chose Fort Worth as New Headquarters

- Bringing 100 jobs to our community

3. DT Credit Corporation

2. Vetoquinol
http://www.vetoquinol.com/eng/index.php


48/60


4. Coaire Corporation

Selected Fort Worth to serve as its central andMidwest distribution center and leased 64,000sq.ft. at the Northern Crossing Business Park

Coaire will have over 75 jobs in 2010


49/60


New Cowboys Stadium Opens


50/60


Home Construction RisingDallas- Fort Worth annual total of

Single-family home starts:


51/60


Berkshire Hathaway acquires BNSF


52/60


Record Season For Horned Frogs


53/60


Recognition!
http://www.siteselection.com/issues/2010/jan/cover/


54/60


National Recognition

ForbesMagazine name Fort Worth/Arlington as themost cost-efficient region in which to live

The Milken Institute Best Performing Cities Indexnamed Fort Worth/Arlington area sub-market as the12th best*

Newgeographynamed us 4th best place for jobgrowth


55/60


Relocation.com recognized FW as one of the

best cites for a fresh start

Builder Magazinenames the city as the 3rd

healthiest metropolitan area for housing

The Kosmont-Rose Institute 2009 Cost ofDoing Business Survey listed FW as one of thetop 10 least expensive U.S. cites in which to live

Summary of the Commercial


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Summary of the Commercial

Real Estate Markets

Credit and liquidity concerns take center-stage

Depressed job markets have hurt all commercialreal estate sectors

Full effects not yet completely realized

Development is rare; market prices dropped belowreplacement cost in many markets

Safe havens remain, though due diligence is key Lenders shifting from pretend and extend to

equity infusion, stonewall and workout

A L k I t 2010 d B d


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A Look Into 2010 and Beyond

Cash is KingAgain

Maturities Mount

Focus on Asset Management

Look for infill opportunities

Economy deals with current problems and faces new

challenges

Upwards of 300 banks will likely fail over the next 24-36 months


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CONCLUSION

- Commercial real estate marketremains volatile; theopportunities for

advantageous acquisitionsare present

- Todays discounted prices will likely represent the

best window for investingin commercial realestate that will occur in our careers


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59

Times are tough,But there aint no place that Id rather be...


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- 59 Offices in 33 states, plus DC and Mexico

- Over 800 Consultants & Advisors

- 150+ MAIs company-wide

Integra Realty Resources

Nations Largest Valuation

& Counseling Firm

Documents

Ben Loughry Forecast 2010