UConn MBA Presentation November 20, 2004

1. Debt Capital Markets Overview George H. Lee Senior Vice-President, GECC Capital Markets Group, Inc. UConn MBA Presentation November 20, 2004

2. Real Estate Market Overview The year 2004 can be characterized as one in transition for the commercial real estate markets, as fundamentals in all sectors have turned the corner and are in various stages of recovery. We continue to look for property returns to decline over the next 12-18 months, particularly in the office and industrial sectors, as property cash flows lag and valuations come under pressure from assumed rate hikes. By 2006, we expect improving property fundamentals to replace declining cap rates as the primary driver of value increases. * The apartment market is in recovery, although it is in the early stages and sporadic. We will reach the bottom this year in terms of occupancy, and indeed many markets have already turned the corner. * The retail sector continues to exhibit the best fundamentals in commercial real estate. Vacancy levels remain low, revenue continues to steadily increase, job growth has returned and record levels of capital are flowing into the sector. * The U.S. office market has bottomed and begun to improve, however, the fundamentals remain extremely soft and the journey to solid ground looks to be long. * The outlook for the hotel sector has been consistently brighter over the past few quarters, and in Q2 2004, pent-up demand allowed the sector to post strong RevPAR gains. * Stronger-than-expected demand in Q2 2004 resulted in the first quarterly decrease in the industrial space availability rate since Q3 2000. Demand should continue to be positive but will likely slow, as leading economic indicators such as industrial production and business inventories are positive but slowing. Source: Kathleen Mixon – Wachovia Securities.

3. CMBS Market Overview • The commercial mortgage-backed securities market has experienced rapid growth since the mid 1990s • Market originally developed out of RTC “bad” real estate loan workouts • Now a major driver of US fixed-rate commercial and multi-family mortgage lending • The core fixed rate conduit and fusion sectors of the CMBS market in the US are showing strong performance this year: • Conduit loans themselves are generally “bread & butter” loans (average of $6-7 million in size) on commercial & multi-family properties • Anticipate that 2004 will be a record year for Originations. • Historically low interest rate environment stimulating demand for long term fixed rate loans • However, declining commercial real estate markets and fewer sales/purchases of properties has a negative effect

4. CMBS Market Composition Global total issuance may now exceed $122 billion! International: The UK, Europe, Japan, Asia and Canada how now become major CMBS sources.

5. US Issuance Dominated by Structured Large Loans • A/B Note Use Has Taken off • Mezzanine loan and IO are also playing a substantial role • Only 4 Shadow-Rated Loans have DSCR <1 • With no problems to date, investors are accepting these structured loans. • But…. Sources: Intex, Rating Agency Presales, and Citigroup.

6. GE Prices Better than Generic AAA 10yr CMBS – Generic vs. GE GECCMC 2004-3 GECCMC 2004-2 GECCMC 2004-1

7. Who Does What Who Does What In A Securitization Loan Sellers Institutions that team up together to originate loans and aggregate them to make the CMBS pool Issuer Entity that aggregates all the loans from individual loan sellers in to a transaction and issues the certificates (bonds). GE is a loan seller and an issuer. Underwriters Investment banks that sell the bonds (may also be the issuer and/or a loan seller) Trustee Holds the aggregated loans in trust for the benefit of certificate holders – pays P&I to the certificate holders Master Servicer Collects P&I from the loans, issues reports on performance Special Servicer Manages defaulted loans and ensures maximum possible recovery of P&I from defaulted loans for certificate holders Rating Agencies Provide credit ratings for each tranche of the transaction based on credit quality, pool diversity and structural features.

8. Securitization Steps Securitization Steps • Identify and Optimize the Pool • Send out a tape and large asset summaries to the 3 rating agencies and potential B-Piece buyers • Choose agencies and a B-Piece buyer • Work with the agencies and B-Piece buyers while they underwrite the collateral • Negotiate agency rating levels and B-Piece buyer kick-outs/price adjustments • Finalize the pool • Print the “red herring” (preliminary prospectus) and term sheets – set the bond structure • Market the bonds-rating agency presales/term sheets • Close the deal

9. Identify & Optimize the Pool Pool Optimization • Pool should be optimized from a B-Piece, Rating Agency and Investor Perspective; • Multi-Family favored by the Rating Agencies, and a combined multi/manufactured housing total of > 30% allows Government Agencies (e.g. Freddie Mac) to buy bonds • Aim for a good spread of the major use types – avoid “operating businesses” such as health care and assisted living (agencies and B-piece buyers prefer real estate risk to operating risk) • Theaters are not popular! • Hotels still a difficult sell post 9/11 – particularly luxury full-service in fly-to destinations-diversified pools more favorable Fitch 2002 CMBS Conduit Loan Default Study

10. No Matter whom you ask: Delinquencies Remain Low. • New Default and Delinquency Studies Released in 2004: • 1) Fitch CMBS: • By year-end 2003, cumulative CMBS loan defaults totaled 3.95% of the dollar Balance of all CMBS. • Consistent with previous findings, the cumulative amount of CMBS losses remains remarkably small – only 0.38% of CMBS Collateral has been lost over the past 11 years. • 2) Moody’s CMBS: • Most of the core asset classes in CMBS follow the "hill" shaped seasoning pattern common with life company loans, that is delinquency rates increase through years 6 or 7 of a loans life and then taper off. • Retail, and non core asset classes such as hotel and health care, show continued linear increases in delinquency rate through maturity • Initial loan leverage is a strong guide to performance during the early years of loan term but is less predictive in later years • Smaller markets tend to under perform larger markets even holding leverage constant. The asset class composition across markets by size is fairly consistent, other than the 10 largest markets having a disproportionate share of office • S&P CMBS: • - Evidence suggests that with the third quarter's favorable results, an inflection point in the CMBS credit cycle may have been reached. • 3) “Snyderman/Esaki” Life Co.: • - We extended our series of US commercial mortgage default studies to track the performance of life insurance company loans from 1972 through 2002. -The average lifetime cumulative default rate for origination cohorts with at least 10 years of seasoning was 19.6%. -About 55% of the defaulted loans were liquidated. -1986 remained the worst origination year with nearly 32% of the total balance eventually defaulting. -The average lifetime loss severity on liquidated loans was 33%. -Most investment grade CMBS are well protected against the worst real estate downturn of the last 30 years. -With continued reductions in subordination levels, a greater proportion of recently rated BBB classes would be vulnerable to a downturn of the magnitude of the late 1980s and early 1990s

11. B-Piece Buyers • The B-Piece buyer in a CMBS transaction will normally buy all bonds from unrated up through to BB+ • B-Piece deal negotiated right at the start of the transaction – the B-Piece buyer will take up to 7-8 weeks to complete due diligence • All other bonds normally sold in a 1-2 week time-frame after the B-Piece buyer has agreed the pool and the agencies have finalized rating levels • The “universe” of potential B-Piece buyers is normally 5 to 7 institutions, of which perhaps only 2 or 3 may bid on any given deal • Most B-Piece bidders are specialist investors/funds that look solely at CMBS B-Pieces, some are public companies • B-Piece buyers often also act as special servicer on deals so that they can control the liquidation of non-performing assets. Even if they are not the special servicer they always exercise control rights in terms of who is special servicer • B-Piece bids will contain bids as to yields on bonds, and will usually also contain “stips” as to minimum levels of subordination for certain classes, irrespective of the subordination levels the rating agencies provide • The B-Piece buyer underwrites all loans (this can be in excess of 130/140 loans in a standard CMBS conduit deal), and will exercise their right at the end of their underwriting to “kick out” loans that they do not like.

12. Rating Agency Overview Types Of CMBS Transactions • Property Specific • Single borrower, single asset or single borrower, multiple assets • SPE borrows funds generated by sale of securities backed by mortgage lien on borrower’s real property • Form of credit support: Overcollateralization • Property value exceeds Debt Amount (Loan-to-value, LTV<100%) • Property cash flow exceeds Debt Burden Debt Service Ratio (DSC) >1.0x) • Servicer provides liquidity in form of advancing.

13. Rating Agency Overview Types Of CMBS Transactions • Pool Transactions • Multiple borrowers and multiple assets. • Various types but most popular include conduit, large loan and fusion. • Portfolio of mortgage loans sold and deposited into a trust either by originator or SPE depositor. • Trust issues securities backed by mortgages • In exchange for transfer of loans, originator or depositor receives proceeds from the sale of securities • Form of credit support: Subordination • Securities get paid sequentially from highest rated to lowest rated • All losses on pool go reverse sequential, from lowest rated to highest rated. • Servicer provides liquidity in the form of advancing.

14. Rating Agency Overview Types Of CMBS Transactions • Credit Lease transactions • SPE borrower leases real estate asset to single, rated tenant • Lease is triple net, bondable lease • No borrower monetary obligations • No right to terminate lease or abate rent • Residual value insurance if not fully amortizing. • Rating of securities=rating of tenant • Rating dependency-change in tenant rating results in change in rating of securities • Servicer provides liquidity in the form of advancing.

15. Rating Agency Overview Overview Of Rating Process • Preliminary Credit Support levels • Engagement • Due Diligence • Site visits • Evaluation of property manager/borrower • Evaluation of cash flows/derivation of asset value • Review of third party reports • Review of mortgage loan documents • Review of securitization documents and legal opinions • Final Rating Committee • Asset and loan review • Determination of final credit support levels • Presale report/investor inquiries • Surveillance

16. Rating Agency Overview Determination Of Final Credit Support Levels • Pool Transactions • Property level underwriting results input into rating agency default model • Model calculates credit support at each category based on default thresholds and loss severity estimates at each rating level. • Subordination= foreclosure frequency X loss severity • Foreclosure frequency=% of loans defaulting (failing to meet threshold) • Loss severity= Amount that would be recovered upon liquidation vs. amount owed on loan • Adjustments made for non-economic factors such as environmental issues, seismic risk, non-compliant loan terms, bad borrowers etc.

17. Bond Structuring Bond Structuring AAAs and AAs normally public – most of the actual $ amount; public bonds = more secondary liquidity I/O normally private – allows buyers to get more information Bonds bought by the B-Piece buyer Highest bond % rate will = lowest loan interest rate, so some bonds sold at an initial discount to par to give investors required yield

18. Banc of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2004-5 $1.38BB NEW ISSUE CMBS Lead-Mgrs: Banc of America Securities LLC / Deutsche Bank Securities Co-Managers: Citigroup/JPMorgan/Goldman, Sachs & Co. ($15mm A2s/$15mm A3s ret.) Rating Agencies: Moody's/S&P Approx Rating Credit Principal Class Size ($mm) (M/S) Support WAL Win (mo) A1 57.600 Aaa/AAA 20.000% 2.89 1-56 A2 251.176 Aaa/AAA 20.000% 4.77 56-60 A3 307.618 Aaa/AAA 20.000% 6.77 80-84 A-AB 46.487 Aaa/AAA 20.000% 6.99 56-110 A4 198.649 Aaa/AAA 20.000% 9.64 110-118 A-1A 241.609 Aaa/AAA 20.000% 6.34 1-118 AJ 91.353 Aaa/AAA 13.375% 9.80 118-119 Collateral: 111 Loans / 121 Properties -Loan Sellers: Bank of America, N.A./General Electric Capital Corporation/German American Capital Corporation New Structuring Wrinkle: Super Senior ClassBACM 04-5 Banc of America Commercial Mortgage Inc., Commercial Mortgage Pass-Through Certificates, Series 2004-5 $1.38BB NEW ISSUE CMBS Lead-Mgrs: Banc of America Securities LLC / Deutsche Bank Securities Co-Managers: Citigroup/JPMorgan/Goldman, Sachs & Co. ($15mm A2s/$15mm A3 ret.) Rating Agencies: Moody's/S&P Approx Rating Credit Principal Class Size ($mm) (M/S) Support WAL Win (mo) A1 57.600 Aaa/AAA 20.000% 2.89 1-56 A2 251.176 Aaa/AAA 20.000% 4.77 56-60 A3 307.618 Aaa/AAA 20.000% 6.77 80-84 A-AB 46.487 Aaa/AAA 20.000% 6.99 56-110 A4 198.649 Aaa/AAA 20.000% 9.64 110-118 A-1A 241.609 Aaa/AAA 20.000% 6.34 1-118 AJ 91.353 Aaa/AAA 13.375% 9.80 118-119 Loan Sellers: Bank of America, N.A./General Electric Capital Corporation/German American Capital Corporation

19. New Structuring Wrinkle: Super Senior ClassBACM 04-5 (1) Super Senior "AAA" => classes A1 thru A4, AAB's and A1A's have been credit enhanced to 20% by adding subordinate "AAA" class AJ. (2) Class AAB is a scheduled amortization bond. It's locked out until class A1 is expected to pay off (in months 55) and stops in mos 110 (before class A4 starts paying). This was done for two reasons: i) it creates a very stable AB bond w/essentially no extension risk and little prepay risk, and ii) it also creates very tight windows on classes A2 and A3 (only 5mos on each). (3) Heavy exposure to 5yr & 7yr balloons. Such a structure might be appealing to some investors looking for triple-A bonds that are even more insulated against loss or downgrade than typical CMBS triple-A bonds. The hope is that those investors will pay up for the added security. If they do, it's probable that other issuers will adopt the structure, which has become popular among floating-rate deals.

20. Selling The Bonds Selling The Bonds Term Sheets and “The Red” used to sell the bonds. Term sheet is 25/30 page description of the pool. The red, or prospectus/prospectus supplement is 150/200 pages Lead Manager/Bookrunner runs the process of selling the bonds Co-managers normally responsible for selling a set $ amount of certain bonds – often only a small % of the AAAs

21. Selling The Bonds Selling The Bonds Deutsche and BofA are both loan sellers and underwriters 30% + Multi/Manufactured Housing For Freddie Mac eligibility

22. Selling The Bonds Fixed Rate CMBS Spreads Spread over 10Yr. UST (bps) Standard Deviation = 13.79 Source: Salomon Smith Barney Weekly CMBS Market Color Selling The Bonds Source; Bear Stearns CMBS Illustrated, Oct 22, 2002

23. Selling The Bonds Selling The Bonds (Publics) GE Commercial Mortgage Corporation Commercial Mortgage Pass-Through Certificates Series 2004-C3 Bookrunners: Deutsche Bank/Bank of America Securities Co-managers: Citigroup, JP Morgan, Merrill Lynch (Reten: $15MM A2 & $15MM A4) ~Top Ten Loans = 32% of total unpaid balance ~At current UST curve AAA classes are expected to have fixed coupons Structure: PUBLICALLY OFFERED SECURITIES CL Size($MM) S&P/Mdys C/E A/L PRIN WIN Px Guid A1 89.3 AAA/Aaa 14.000% 3.00 1-56 s+33 A2 240.7 AAA/Aaa 14.000% 4.90 56-73 s+32 A3 221.3 AAA/Aaa 14.000% 7.00 73-106 s+35 A4 301.3 AAA/Aaa 14.000% 9.72 106-120 s+34 B 32.7 AA/Aa2 11.625% 9.95 120-120 s+41 C 15.5 AA-/Aa3 10.500% 9.95 120-120 s+46 D 27.6 A/A2 8.500% 9.95 120-120 s+55 E 15.5 A-/A3 7.375% 9.95 120-120 s+66 Rating Agencies: Moody's / Standard & Poors Collateral: - Loan sellers- GECC(GE):44.6%, GACC (DB):35.4%, Bank of America: 20.0% - 127 Loans / 176 Properties - Multi 29.6% (consists of Multi 18.7% & MHC 10.9%), Office 27.0%, Retail 23.6% - CA 13.8%, NY 13.1%, FL 11.5%, TX 7.6%, MO 4.8% - DSCR 1.55x, Current LTV 70.2%, Balloon LTV 60.0%

24. Selling The Bonds Selling The Bonds (Privates) GE Commercial Mortgage Corporation Commercial Mortgage Pass-Through Certificates Series 2004-C3 Bookrunners: Deutsche Bank/Bank of America Securities Co-managers: Citigroup, JP Morgan, Merrill Lynch (Reten: $15MM A2 & $15MM A4) ~Top Ten Loans = 32% of total unpaid balance Structure: PRIVATELY OFFERED SECURITIES CL Size($MM) S&P/Mdys C/E A/L PRIN WIN Px Guid F 15.5 BBB+/Baa1 6.250% 9.95 120-120 s+75-80 G 12.1 BBB/Baa2 5.375% 9.95 120-120 s+85-90 H 18.9 BBB-/Baa3 4.000% 9.95 120-120 s+120-125 X1 1,378Ntl AAA/Aaa 14.000% (Aprx. Proc: $12MM) T+370-380 X2 1,378Ntl AAA/Aaa 14.000% (Aprx. Proc: $18MM) T+45 A1A 332.4 AAA/Aaa 14.000% NA Rating Agencies: Moody's / Standard & Poors Collateral: - Loan sellers- GECC(GE):44.6%, GACC (DB):35.4%, Bank of America: 20.0% - 127 Loans / 176 Properties - Multi 29.6% (consists of Multi 18.7% & MHC 10.9%), Office 27.0%, Retail 23.6% - CA 13.8%, NY 13.1%, FL 11.5%, TX 7.6%, MO 4.8% - DSCR 1.55x, Current LTV 70.2%, Balloon LTV 60.0% Pricing - Expected Friday July 16th Settlement - Expected July 23th *All values are subject to change and confirmation

25. Selling The Bonds IO Structures • I/O Had traditionally been one class taking all of the excess spread • Recent innovation has been introduction of PAC and support IO • PAC is a protected “core” strip of excess spread that retracts over time • Support is a wider based strip taken off more classes than the PAC • Combination of protected PAC and wider support gives better blended pricing than single IO class

26. Discussion Topic: Does Brand Matter? Paying top dollar for bonds from CMBS transactions backed by lenders that historically originate high-quality loans might be shortsighted. So says a paper released last week by the CMBS research unit at Wachovia Securities. Overall, CMBS mortgage default and loss rates have been manageable. And because of the way CMBS transactions are structured, those losses have seldom been felt by investors in investment-grade tranches. "It's silly to pay up for brands," said Brian P. Lancaster, managing director of Wachovia and head of its structured products research unit. The report he authored conceded that investors might consider originator performance in choosing which deals to buy and how much to pay. But that may be short-sighted. Average triple-B bonds in the period Wachovia examined carry subordination levels of 12.1 percent - "12 times as great as the worst performing originator," according to the Wachovia report. "Of course, as one goes even higher up into the capital structure, such as triple-A tranches, many newer investors' entry point into the CMBS market, subordination levels can range from 12 to 20 times as great as the 'worst' originator's loss level," it added. In other words, regardless of how you slice and dice originator default and loss data, CMBS are structured well enough to insulate most investors against loss.

27. Closing The Deal Key Documents Red Preliminary offering document – Prospectus and Prospectus Supplement. Filed with the SEC. Normally 150/200 pages. Main source of disclosure for buyers of public bonds Black Final version of the Red. Issued just prior (approx. 5 days) to closing of the deal. Term Sheet Condensed version of the Red/Black. Filed with the SEC. Main “marketing material” for public bond buyers. PSA Pooling & Servicing Agreement – dictates how the loans are serviced, and how the bond holders are paid MLPAs Mortgage Loan Purchase Agreements – govern the sale of loans by the loan sellers to the issuer. Include representations by the loan sellers about the loans (e.g. no previous defaults, compliance with zoning etc.). Breach of these reps can result in loan sellers having to buy the loan back