BORROWER’S ADVOCATE COMMERCIAL REAL ESTATE COMPANY

1. Is it Possible to Really Restructure CMBS Debt? September 21, 2011 Hosted By: www.1stsss.com First American Title Insurance Company makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. BORROWER’S ADVOCATE COMMERCIAL REAL ESTATE COMPANY

2. Agenda • Overview of the CMBS market today • Parties roles and motivations • CMBS special servicer • CMBS restructures • The primary drivers in a restructure • Types of restructures • Note sales • Q&A Presented by Ann Hambly

3. U.S. CRE Outstanding Debt BY CAPITAL SOURCE Total $3.5 Trillion $749 Billion

4. CMBS Defaults $94.52 Billion

5. Defaults by Vintage 84%

6. Parties/Roles and Motivations Investment Banking Firm Creates Pool Special Servicer is Assigned Rating Agencies Bonds are Sold Loan Funded Bonds are rated: AAA AA A BBB BB B UR Bonds are rated: AAA AA A BBB BB B UR B piece owner becomes Controlling Class Certificate Holder “CCR” Borrower Investment Grade Lender “CCR” selects Special Servicer Non- Investment Grade “B pieces” Loan contributed to Pool Rated Master Servicer is assigned to Pool Lender may stay in as Primary Servicer

7. Current Dynamics at Play • The lowest rated bond holder is the CCR • Losses hit the lowest rated bonds • As losses occur, the CCR changes • As CCR changes, so can the special servicer AAA AA A BBB BB B UR

8. CMBS Special Servicers • Top 3 = 75% of business • Top 8 = 98 % of business

9. Servicing Standard • Servicing Standard- maximize return to all bond holders without regard to your own position and no benefit of 20/20 hindsight Pooling & Servicing Agreement

10. Primary Drivers in a Restructure • Market conditions • Maturity date of Loan • Loan size • Location of property • Property type • Will servicer get a better outcome with borrower or foreclosing • NPV calculation

11. Types of Restructures • Payment Modification • Where a modification of payment only results in positive net cash flow • A/B Note Restructure • Where recovery of the entire debt is likely before maturity of the note • Discounted Payoff • Where recovery of the debt is unlikely before maturity of the note • Loan Extension • Where loan is otherwise performing but mature

12. Note Sales • Live auction format • Borrower will not likely know auction is happening • Borrower can bid on own note • Benefit of note sales to special servicers • Motivation of note buyers

13. What It Takes To Have A Successful Restructure • Understand WHO you are negotiating with and what their drivers and motivations are • Know the “menu of options” for each special servicer • Present a well thought out, written plan in a timely manner to the special servicer • Ensure that you know the ultimate exit strategy for the asset • Have an experienced advocate on your side

14. Questions & Answers • If you would like a copy of the PowerPoint Presentation or any reference materials, please visit the Lecture Series section of the NCS website at www.firstam.com/ncs • An audio/video replay of the presentation will also be posted to our website at www.firstam.com/ncs • CLE Credits are not available in all 50 states – to find out if credits for this webinar are available in your state, please contact your local NCS account representative • To contact our presenter, Ann Hambly email:ahambly@1stsss.com Office: 817.756.7227