State of Capital Raising

1. State of Capital Raising Anthony Frammartino, Principal The Townsend Group

2. State of Capital Raising • Anecdotes from capital raisers in the industry • “Most capital placement agents will raise well less than half what they raised in 2007” • “Less than 1/3 of the funds currently in the market will ultimately close” • “I am “0” for 08”

3. State of Capital Raising • What do you currently face as capital raisers? • Almost 700 competing investment opportunities as of the end of October 2008 Townsend Open Fund Database Source: The Townsend Group

4. State of Capital Raising How did we get here? Significant increase in new fund offerings year over year [1] From 224 in 2007 to 312 in 2008, a 40% increase High Return fund offerings increased the most from 194 to 275, a 42% increase New Fund Offerings, by Geography New Fund Offerings, by Sector Source: The Townsend Group [1] Comparison over first three quarters of each year

5. State of Capital Raising Are managers still raising capital? Yes – but generally at lower levels in 2008 compared to 2007[1] Funds closed from 92 to 79, a 14% decrease 49 of the 79 closed funds in 2008, or 62%, closing at or below target raises Fund Closings, by Sector Fund Closings, by Geography Source: The Townsend Group [1] Comparison over first three quarters of each year

6. State of Capital Raising Observations on largest active fund raisings [1] 70% of these funds are expected to close in 2009, many began raising in early 2007 2 of 27 funds are at targeted raise levels considering hard and soft commitments Yet only 36% of total commitments are hard to date Observations on open end commingled fund universe 28 funds representing $104 billion in NAV[2] $5.3 billion currently resides in redemption queues, or 5% of total NAVs[3] Estimated return of capital projected at 1 to 2 years [1] Fund set includes 27 funds, each with target capital raises exceeding $1.5B [2] Open end commingled fund data as of end of 2Q08 [3] Redemption queue data as of 11/3/2008 Source: The Townsend Group

7. State of Capital Raising But isn’t this a great time to invest? Opportunities appear attractive to be certain Developed market distress today especially REIT recaps Private Fund recaps New debt opportunities Returns in excess of 15% net of all fees Emerging market opportunities likely later New Debt Fund Offerings

8. State of Capital Raising Could be a great time to buy a house if you didn’t have a house to sell first Global equity market returns decreased sharply over the past twelve months MSCI World Index Total Returns[1] [1] Source Morningstar Data as of 11.4.08

9. Real estate values and returns have been resilient to date[1] Denominator effect of loss in equity values Median investor had 7% of portfolio in RE as of 9/30/2007 Median investor had 11% of portfolio in RE as of 9/30/2008 Not only do investors not have new money for additional investments but must further rebalance from real estate to meet policy requirements State of Capital Raising [1] NCREIF and The Townsend Group

10. And capital distributions are down dramatically while past commitments are still calling new capital U.S. real estate transaction activity decreased by 56% year-over-year Capital distributions from existing fund investments down almost 75% from prior years average State of Capital Raising Capital Distributions U.S. Real Estate Transaction Activity Source: Real Capital Analytics Source: The Townsend Group

11. State of Capital Raising In summary: Available options to investors at unprecedented levels, still Total closings and capital raised are down, while Opportunities seem very attractive if not compelling, but Investors simply lack capital/will to invest