GE Real Estate

1. GEReal Estate UCONN Presentation October, 2008 Skip WellsManaging Director

2. Agenda GE Overview Real Estate Fundamentals Credit Crisis Questions

3. GE Overview

4. GE Jeffrey R. Immelt Chairman of the Board & CEO GE THE FOUR BUSINESSES OF GE KEY STATISTICS Capital Energy Infrastructure Technology Infrastructure NBC Universal • 300,000+ employees worldwide • Operating in more than 100 countries • Manufacturing facilities in more than 32 countries Q2’08 FINANCIAL HIGHLIGHTS • Total Assets: $847 billion • Gross Revenue: $47 billion • Net Earnings: $5 billion 4

5. GECapital Michael A. Neal Vice Chairman, GE President & CEO, GE Capital BUSINESS UNITS BUSINESS UNITS KEY STATISTICS Aviation Financial Services • 73,000+ employees worldwide • Operating in more than 50 countries • Backed by GE’s AAA rating • Commercial Finance • Capital Solutions • Corporate Financial Services • Healthcare Financial Services • Real Estate Q2’08 FINANCIAL HIGHLIGHTS Energy Financial Services • Total Assets: $696 billion • Net Earnings from discontinued Ops: $2.8 billion • Net Income: $2.4 billion GE Money Treasury 5

6. GEReal Estate Ron Pressman President & CEO GE Real Estate BUSINESS UNITS BUSINESS UNITS KEY STATISTICS North America Lending • 2,000+ employees worldwide • Operating in 31 countries • 480+ million sq ft of global real estate Americas’ Equity GE Real Estate International Q2’08 FINANCIAL HIGHLIGHTS • Total Assets: $90.6 billion • Total Volume: $9.3 billion • Net Income: $483 million Global InvestmentManagement 6 6

7. GEReal Estate PORTFOLIO Product Geography Asset Class Other AsiaPacific 4% Nordic 2% Hotel 6% U.S. 47% Equity 44% Office 40% Mexico 6% Retail 10% Other Europe 8% France 6% Other 15% Japan 9% Debt 56% Industrial 14% UK 9% Multifamily 15% Canada 10%

8. Real Estate Fundamentals

9. Key concepts/definitions Commercial Real Estate: Investment Tranches: Borrower Cash Equity • Income-producing properties, primarily leased to 3rd-party tenants • Examples: Office, retail, multi-family, industrial, self-storage, hotel • Asset value less the total amount of Leverage. • Financing that is subordinate/junior to Mortgage Debt. Secured by a pledge of the property owner’s partnership interests in the asset. MezzanineDebt(70-90%LTV) 1st MortgageDebt(40-75% LTV) • Real estate financing secured by a recorded mortgage lien. • Mortgage Debt is the most senior level of financing on a property. Capital Stack

10. Lender Execution Strategies • Hold Loan on Balance Sheet- 100% of loan retained by originating lender. - Strategy employed by Life Co’s, Banks & Finance Companies. • Syndicate the Loan to Other Lenders- Sell a portion or all of the loan to other balance sheet lenders. - Strategies include pari-passu and senior/sub sales. - Primarily employed by Banks & Finance Companies. • Securitize the Loan in a CMBS Pool- Loan is combined with a group of other similar loans in a pool. - Lender sells rated securities in the pool to a wide range of investors. - Lender makes an “arb” – difference between avg. interest rate on the loans and the average rate paid out to investors. - Strategy used by Wall Street firms.

11. Real Estate Metrics Cap Rate: Rate of return used to derive the capital value of an income stream. Property value = NOI / Cap Rate. Loan-to-Value (LTV): Ratio of Leverage to the total value of an asset. Cash-on-Cash (CoC): NOI / loan amount on the property. Debt Coverage Ratio (DSCR): NOI / debt service (interest & amortization) on the loan.

12. Leverage $100MM asset purchase price; $7MM NOI $15MMEquity $35MMEquity $20MM8% MezzDebt Leverage Increases Buying Power & Returns … And Risk $100MMEquity 1.3xDSCR $65MMMortgageDebt @6.00% $65MMMortgageDebt @6.00% 1.8xDSCR Equity Yield: 7.0% 8.9% 10.0% Equity Return on $110MM Sale: 10.0% 28.6% 66.7%

13. Deal Process AssetManagement Approval &Closing Marketing Sourcing Underwriting • Advertisements in newspapers, magazines, trade publications. • Meetings with new and existing clients to communicate strategy & product offerings. • Hosting dinners, golf outings, sporting events and group trips to build personal relationships with customers. • Networking at industry conferences, outings. • Receipt of a financing package from customers or brokers. • Analysis of property financials, asset quality, market conditions and execution strategy. • Negotiate loan pricing, proceeds and structure while in competition with other lenders for the business. • Execute a term sheet / loan application with the client. • Detailed analysis of property rent roll and expenses. • Property site inspection and identification of rent and sale comps. • Engineering and environmental due diligence completed by expert 3rd-party consultants. • Complete a credit request to obtain internal approval for the deal. • Presentation of credit request & analysis to committee for approval. • Preparation and negotiation of legal documentation. • Execution of legal documents and wiring of money. • Host a closing dinner with the client. • Monitoring of loan performance, focused on CoC, DSCR, and LTV. • Execute future funding draws, loan extensions, asset releases, and cash flow sweeps. • Seek approval for and close any modifications to the loan terms. • Complete foreclosures of assets where borrower is in default.

14. Credit in Crisis

15. Unrated Bonds BB Bonds AAA Bonds BBB Bonds A Bonds AA Bonds Housing Bubble Starts the Problem Rating Agencies Regional/ National Banks Investors Investment Bank Homeowners Mortgages Issues: • Sub-prime credit • Over supply • Teaser rates • Limited underwriting • High leverage • Low interest rates from Fed (Greenspan) • Originate to sell model – short term sale vs. long term investment • Pricing driven by demand for bonds • Ratings driven by pooling effect • Ignored credit quality and real estate fundamentals • Investors increase allocation to real estate given strong recent track record • Relied on rating agencies for due diligence

16. Wall Street meltdown …making lenders less willing to take risks Long term corporate borrowing costs rise & borrowing costs rise for banks • Rates on long-term bonds shot up • Even top-rated companies had to pay more interest to raise capital for long-term needs • Banks more fearful to lend • Libor (interbank lending rate) shot up • Impacts rates on mortgages, small-business loans, credit cards, student loans • Banks less willing to lend • More difficult for consumers & businesses to get credit in already tight market • Consumers pulling back 3 Month LIBOR Consumer credit ($B) AAA Corporate Bond Yield 2008

17. Investors spooked Failing firms set off worry about other firms… … and investors seek safer bets • Banks more fearful to lend • Libor (interbank lending rate) shot up • Impacts rates on mortgages, small-business loans, credit cards, student loans • 9/15/08: Lehman declares bankruptcy • 9/16/08: AIG bailed out by the government • Cost of insuring financial firms against default skyrockets (credit default swaps) Yield on 3-Month Treasury Bill As demand increases for short-term Treasury notes, the return on the investment declines.

18. Confidence returns with rescue plan…but plummets as credit markets remain weak Dow Jones Industrial Average Sept 18 Dow : +410 Sept 17 Dow : (449) Sept 29 Dow : (778)

19. Liquidity dries up A rush out of money markets… … makes it harder for companies to borrow • Large companies usually sell commercial paper to money market funds to cover day-to-day operations • Companies couldn’t borrow due to turmoil, freezing their ability to do business • Traditionally viewed as ultra-safe investment • One long-standing money market mutual fund lost money due to Lehman exposure • Many investors reduced money market fund holdings Weekly Change in Commercial Paper Outstanding ($B) Week Ending Oct 1: (95)Billion

20. Commercial Real Estate Sample Transaction

21. Macklowe EOP • Blackstone acquires assets as part of its $38.5B LBO of Equity Office Properties (EOP) in Feb ‘07 • Macklowe properties purchases 7 Class A Manhattan office properties from Blackstone for $7.OB in Feb ‘07 • Deutsche Bank provided $5.7B of property level financing for 1 year, and a Fortress/Deutsche JV provided a $1.2B equity bridge. Macklowe invested $50MM of equity • Financing split into 3 separate collateral pools, with senior mortgages securitized and mezz debt tranched & syndicated • Borrower short-term strategy: sell 1 or 2 assets in strong market to reduce the basis in the portfolio, and to bring in permanent equity partners and reduce the debt load. Long-term strategy is to roll rents to market and significantly improve portfolio cash flow.

22. Capital Structure…$50MM Owner’s equity to secure $7.0B deal $50MM Macklowe Equity, $1,155psf $1.2B Equity Bridge Loan, $1,147psf Fortress Investment (70%) and Deutsche Bank (30%) Secured by equity pledges in all assets owned by Macklowe, plus a $1B personal guarantee from Harry Macklowe $65MM Mezz 5 Tranche78% LTC, 3.6% CoC, $852psf $68MM Mezz 5 Tranche80% LTC, 3.0% CoC, $944psf $159MM Mezz 4 Tranche80% LTC, 3.1% CoC $238MM Mezz 2 Tranche75% LTC, 3.3% CoC $200MM Mezz 4 Tranche77% LTC, 3.2% CoC, $906psf $64MM Mezz 4 Tranche73% LTC, 3.8% CoC, $798psf $308MM Mezz 2 Tranche69% LTC, 3.6% CoC $200MM Mezz 3 Tranche68% LTC, 3.6% CoC, $793psf $128MM Mezz 3 Tranche68% LTC, 4.1% CoC, $745psf $793MM Mezz 1 Tranche61% LTC, 4.0% CoC, $760psf $65MM Mezz 2 Tranche58% LTC, 4.2% CoC, $679psf $36MM Mezz 2 Tranche59% LTC, 4.8% CoC, $638psf $650MM Mezz 1 Tranche55% LTC, 5.5% CoC, $643psf $550MM Mezz 1 Tranche56% LTC, 5.4% CoC, $608psf $1.6B First Mortgage41% LTC, 6.1% CoC, $510psfSecuritized $485MM Existing 1st Mortgage23% LTC, 10.4% CoC, $274psfSecuritized $180MM Existing 1st Mortgage14% LTC, 20.3% CoC, $150psfSecuritized POOL #14 Properties, 3.2MM sf, 93% Occupied POOL #22 Properties, 1.2MM sf, 98% Occupied POOL #31 Property, 1.8MM sf, 99% Occupied

23. Questions?

24. The Good Old Days when DJ>10000 and “Par” did not mean buying bad loans in a Bailout