GENERAL NOTES ·

BUYERS CRITERIA price plus hold, & carry=make offer=should be 80% of today’s value in 3- 5 years · OR cost to buy, carry, and resell—should leave 20% · Next 2-3 years difficult · Refinance issue...Solve the problem-

Banks and Govt. Must take 20% write down…Works in all cycles · Recognize loss-will solve the Problem. Lower rates will not fix like write downs will

· Demand Drivers-first to rebound-jobs-weather-where people want to live · Operational efficiencies-bet better-drive to bottom line · Hottest deals have Discount to replacement with demand · M family, lots, hospitality, residential ·

 Upbeat discussions-feel ice is thawing-smart $ smells the bottom · 1/2 of SFR REO yet to come · Commercial next shoe to drop—lot of empty retail to come · Regional malls hard hit · High end–or weak retailers get hit the most, i.e. Pottery Barn Saks, etc—non essential retailers hit · Some $ chasing cash flow of apartments · Finished lots-in good locations strong play

· Condo hotels dead · Resort markets/second luxury homes—lots of inventory–new is dead · Due diligence is key · Speed wins at first cut—need to have quick-fast team · Local troops critical–get industry experts · Broken condos-have appeal-but must work thru hair-need to cash flow · Chinese drywall in past 3 years-huge concern if taking over a failed project

· Failure to meet obligations of note yet Banks willingness to take back—don’t want it · Friendly investor or will they fight · Banks give internal business to own customers first · Mark to market–once you write down 1 property in portfolio-all properties at that level- same with new appraisals-banks don’t want them · UK down 43% in correction · $1.2 Trillion due to reset….30% will default-$2-2.5 Trillion · Legacy issues-HOA, warranty, debt, etc. get legal

· Best product is well located—near jobs · Overhang of supply-shadow markets-causing inventory supply · This is a demand driven downturn caused by lack of confidence-jobs credit-eliminating demandadded to increase in short sale supply · Expect resale inventory buy off to be completed with a year. · Real estate is local—weak markets—but good submarkets within · Builder concessions 1 keep base price plus concessions-upgrades ·

Lower base and concessions · Slash base and bigger concessions · Expect resale to go down maybe 10% still—new homes 5% · Homebuilders already adjusted for extra supply · “Honest Pricing” is new reality · Banks can’t write down correctly or they are insolven

·CARIBBEAN MARKETS · Current status: 57 projects 5 star and above either stalled or discontinued ·

 In some locations /countries the national market within the country was protected from the international slow down. There is some 3-4 star activities….but there is a lack of long term financing. · Shadow market of inventory competes with developer inventory

. · DEMOGRAPHICS ARE EVERYTHING. CANADA< UK< · Baby boomers are split in half: older half and the younger half. The younger half being squeezed by economy erosion of their ability to buy and kids and parents (sandwich) needing assistance. · Segment by lifestyle and price range · Big trend wellness and wholeness

· Medical clusters to attract retirement centers off shore · Relationships with universities and non profits. · Affordable housing development opportunities- big in Latin America and South America · Biggest items-security-Air lift-health care-banking- cost. CUBA · Expected to be open for business 2010-2011 · Expect FLOOD of business—forbidden fruit

· Cuba lacks infrastructure-3-4 star hotels · Fractionals will be key · 900,000 current visitors from Canada alone · Already doing business in Cuba 15 years. Govt. is your partner · Other destinations are worried about demand for Cuba product affecting theirs · Already doing fractional business in Cuba Looking

BUYING A BANK—investing in a bank—see presentation on rules—Crown knows of several opportunities · Need good bankers to help run these-stabilize them need CFO,CLO,CEO,CCO ·

 Buying a bank- investing groups have 2 ways to go: participate in an FDIC assisted transaction or buy a bank without government help · Opportunistic groups who have the ability to roll up their sleeves and evaluate the opportunity and the asset quality, the stability of the existing deposits, and what the existing competition is for the target bank among other things could make bank deals happen.

 · Each bank, like a development project, no matter the size will need a process on grading the opportunity as well as an objective, defensible methodology for doing just that when stratifying the loan portfolios. · PWC (Price Waterhouse Coopers) a once in a lifetime opportunity in the US market–for buying a bank. Reason: · Occurring at historically low valuations ·

The majority of acquisitions currently taking place in the banking industry are distressed or government assisted transaction · Under these circumstances, deal must close quickly, minimizing the time available to perform due diligence · Established players are large-largest 4 financial institutions control 36% of all US Banking assets. This will limit further acquisition along with new regulatory constraints.

· CHALLENGE-CONDENSED DEAL TIME FRAMES-7-14 DAYS FROM INFO PACKAGE · Major task-completing due diligence, completing purchase accounting · Obtaining data necessary to value assets & report losses · Integrating new fair value accounting processes by next quarter end

· Valuing assets not new for banks- however time frame requires banks to significantly enhance their tool kits and acquisition of personnel who understand marketing of assets and control of the sales process for disposition of assets to raise capital once bank acquired.

Book value may be meaningless. · HOW WE GOT HERE (Banking situation) · Over the past ten years community banks’ net interest margins have been squeezed by DeNovo banks pushing local deposit rates and securitization driving down asset values.

BANKING NOTES · 800+ banks on watch list in 2010 first ½ only—WAVE is coming · 8000+ banks=$$ 13 trillion—a lot to reset soon · FDIC grades on quality and liquidity, stability, reserves 800+ currently on list · $ 56 B in write offs last year ·

FDIC is out of $$$--so they really can’t absorb loss- make good on bank guarantees—so Private Equity is king · Values across board down min 35% plus · Asset quality is really pass/ fail A/B or F · A assets banks keep—C and D assets have too much hair and too much time to make them worthwhile. · From high values in 07 now a 50% decline in prices

· New product is competing against its own 2 year old product · Need to move the needle on pricing · See clearing in inventory thru sales burn—but slow going next 3-5 years on anything new · 05-07 loans interest only–exotic loans

now coming due—when interest only term is done in 5 years---can’t reset—BIG PROBLEM won’t appraise · REGULATIORS DO NOT WANT BACK THE BANKS · Usually sell best stuff to other banks to raise cash · Usually best time is quarter or year’s end · A product bank to Bank D product to FDIC ·

 Chairman and Lenders take it personally—i.e. they loaned on the shit—what were they thinking · Sell to existing customers first—i.e. restructure current customer and board room deals—then bank to bank then dump · Great pressure to create liquidity or FDIC puts on Cease order C and D ·

Banks don’t want deed—will short sale instead · Hire dispassionate parties who have knowledge and best interests and fiduciary · Cost to carry min 1.5% month · Banks need to be dispassionate--analysis not original lender who is CYA

COMMERCIAL AND RESIDENTIAL MARKET OVERVIEW…. · “Make your money on the day you buy and save your tail on the exit” · Starwood buying the TOUSA portfolio and selling off. · The big builders are taking options on lots. DR, Toll, Centex etc. · Lot % to home value was at 20-25%; going to 30-40%

depending on the location. · Sales of land as % of finished home price—rural much less than in fill · 7-10% finished lot 4-7% entitled, 0-3% raw land · No demand for raw land · Everyone wants discount to replacement · Some may be overpaying for lots/ products-purchase price + expenses to carry. Basis may grow · Cash flow is important · Inflation should not be relied upon to bail you out. · Go with people who know how to operate the asset. Bankers understand the banking part but not the marketing of the asset part.

 FINANCING · Traditional lending off 85-90% · Want speed and surety of closing · Closing within 3-4 weeks · Bridge for 1 year to recapitalize is strong play · Fees 1-3 points and 10-12% · Banks and traditional are best play—lowest cost of capital · Hard $$ last resort—5 and 15—now call is preferred capital · Mezz is dead—now is all equity at 30-40% ·

 Want skin in game, $, local expertise · White knight structure: equity for 15% unleveraged return–priority first, then profit share ,then hit waterfall splits. · No happy endings for mezz $$.... it is all gone · 35% Equity is the new mezz. · When resets come due—rewrite with recourse, guarantees cost to complete. · Never get full recovery from defaults · Guarantees limited value but are leverage ·

 PRICING ASSETS · All depends on class, use, geography and demand. · Numbers skewed by deal size and FDIC give a ways · Infill first- then suburban then rural · Big discounts for secondary markets · How fast will the market rebound—come back ·

 NO INCOME has NO VALUE i.e. land · Price Cash flow at 10% cap on NPN · Not much volume to get actual on—range really depends on fundamentals of each asset · NPN 50-70% · Performing 55-80% · Raw land 15-20% · Entitled land 25-30% example $180 M for $30.5 M · Finished 30-40% example $80k lots know $30k

HENRY CISNEROS: KEYNOTE Administration has a 5 point recover plan: These may have brought us back from the brink. 1. Financial stimulus; 2. Rescue of banks TARP; 3. Stabilization of the housing market/ foreclosure mitigation; 4. Financial regulatory system; 5. Global dimension and cooperation of other nations.

OVERVIEW · Demographics-US is growing 306 M people today; 430M by 2050; Aging population…US will have issues- training and growth · Global economy-more emphasis on shipping and cargo/airports/ports will be winners · Demand drivers….Population, boomers-eco boomers and global economy-aging population · Infrastructure $$ will grow—new global information based economy running on 1950-1960 roads ·

 Must address old infrastructure—roads, ports, airports, bridges · Ports are economy drivers…..25% of GDP in port cities · Top Gateway cities with ports to Grow... San F, DC, Miami, Houston, LA, Seattle, NYC, Boston etc. · Invest in top 100 metros….65% population but over 75% of GDP expected to grow 80% · 2nd ties cities-San Antonio, Austin, Denver, Orlando, Raleigh, Charlotte, Portland, Jacksonville · Medical and medical related-will be strong—aging population

· Growth and demand will be driven by Jobs, Employment-growth-wages-Income · Tax credit will spur demand—then go flat—just like car rebates · Infrastructure and energy related companies will grow · Issues of growth and training on new economy · Investors are using a cash model not leveraged model · If you are in the shoes of the institutional managers-before it was keep your powder dry- now liquid capital can take advantage of opportunities. ·

 2/3 of deals need nontraditional financing · Goals: Buy, manage, hold and wait for fundamentals to improve · Caution: How to increase value, stabilize and market these assets will be key to profitability.

TOP DEMOGRAPHIC PROJECTIONS BY US CENSUS. http://buffalo.bizjournals.com/buffalo/blog/the_score/2010/03/buffalo_clings_to_50th_on_population_list.html

by Mark Heschmeyer

Private commercial real estate investors believe it will take another year and half before the investment market begins to strengthen, according to a poll conducted by Lee & Associates-Investment Services Group in Los Angeles (Lee-ISG).

Of those polled, nearly 82% said that prices for commercial real estate had not yet begun to stabilize and about half project that it will be at least 18 months before the market begins to gain traction. Only 23% of those polled thought that the market would start to turn around in less than one year.

 Indeed, the poll also found that 62% of all the assets purchases in the fourth quarter were made with lender financing. Another 26.4% of respondents said they purchased assets on an all-cash basis. When asked what they think will turn the market around, 55% of those polled said available financing followed by better pricing. A majority of investors polled - 72% - said that sellers had become only "slightly" more realistic in their pricing.

 "The consensus seems to be that sellers would like to sell on last year's pricing while buyers believe values are declining further," Larson said. "It is unclear if the bottom has occurred as we are just seeing lending institutions getting back non-performing assets."

The dismal performance of U.S. hotels since their peak of 2008 has Fitch Ratings predicting that defaults should double from current levels by 2012. Hotel defaults will be most pronounced in 2011 and 2012 when the largest concentration of loan maturities occur.

Hotel revenue has declined almost 20% since 2008, the largest decline among the major CMBS property types, according to Fitch. Cash flows are not expected to increase until 2011. In addition, capitalization rates have increased, according to Fitch. As a result, hotel property values have fallen as much as 50% from their peak in 2007.

The magnitude of income and value declines in 2009 were a result of reduced travel in the corporate and leisure sector, capital constrained borrowers, and a frozen financing market for property trades. Since hotels do not have long-term contractual leases, and rates can be re-set on a daily basis, they have been especially hard hit by the economic downturn. Also, given lower free cash flow from the properties, capital investments have been postponed, affecting future hotel operating performance.

Of the $42 billion Fitch rated hotel loans originated during 2006-2007, 45% were floating rate. As a result of a record low London Interbank Offering Rate (LIBOR), borrowers in many cases have been able to keep their loans current, despite lower operating cash flows. However, of the floating rate hotel loans originated during 2006-2007, 78% mature in 2011 and 2012.

 Many of these loans will have difficulty refinancing given their lower values and operating cash flows and higher debt yields required by the lenders. Therefore, mainly due to upcoming maturity concerns, Fitch Ratings projects that delinquencies will increase from 16.6% as of February 2010 to 25-30% in 2012. co star

After years of price growth spurred by a population boom between 2002 and 2006, some areas of Florida lost as much as half their value in 2008.

The survey sought to determine average rural land values as of May 2009. Results show that the value of farmland in North Florida dropped between 3 percent and 17 percent since 2008, while values in South Florida dropped between 10 percent and 31 percent.

Read more: Survey: Florida rural land values down - Jacksonville Business Journal: