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Whither the Capital Markets?

Whither the Capital Markets?. Up, Down & All Around. Over several years debt issuance rose. Volumes Peak. Record Low Spreads. Q1 / 02. Q1 / 03. Q1 / 04. Q1 / 05. Q1 / 06. Q1 / 07. . . . & spreads narrowed. REITs were on tear. 33.7% total return.

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Whither the Capital Markets?

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  1. Whither the Capital Markets? Up, Down & All Around

  2. Over several years debt issuance rose . . . Volumes Peak Record Low Spreads Q1 / 02 Q1 / 03 Q1 / 04 Q1 / 05 Q1 / 06 Q1 / 07 . . . & spreads narrowed

  3. REITs were on tear . . . 33.7% total return S&P/TSX REIT Index Peaks Feb ’07 - 22.7% 12 mo. return . . . and able to do accretive acquisitions

  4. Capital drove investment sales up . . . . . . and cap rates down

  5. Mega institutions & private equity joined the party . . . EQUITY OFFICE PROPERTIES 580 Office Properties Location: Across U.S. Size: 108.6 Million SF Price: US$39 Billion Purchaser: Blackstone & Others DUNDEE REIT Mixed-Use Portfolio Location: Eastern Canada Size: 16.5 Million SF Price: C$2.3 Billion Purchaser: GE Capital Realty . . . and did some mega deals!

  6. In commercial real estate cracks first appeared . . . Feb ’07 Peak S&P/TSX Capped REIT Index - (24.2%) 12 mo. return . . .in the REIT markets, which turned negative

  7. Record High Spreads Volumes Plummet! Q2 / 07 Q3 / 07 Q4 / 07 Q1 / 08 Debt markets threw in the towel . . . . . .with record low volume & high spreads

  8. While the Fed & BoC issue liquidity . . . 4.0% US CPI – Negative Real Interest Rates . . . to “prime the pump” or start more fires?

  9. In a changing market how do you . . . • Access equity capital? • Determine your cost-of-capital? • Generate the best risk-adjusted returns? . . . not just survive, but thrive?!

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