Q1 CRE Chartbook: Property Prices

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1 Economics Group Special Commentary Property Prices Growing Fastest Outside the Gateway Markets The U.S. economy grew faster than expected in the first quarter, with real GDP rising at a 2.2 percent annual rate. Moreover, the quarter ended on a strong note and growth appears to have ramped up considerably in Q2. Nonfarm employment has risen by an average of 207,000 jobs per month so far this year, up from an average of 184,000 jobs per month last year, while the unemployment rate has fallen to 3.8 percent. Wages and salaries are still rising only modestly compared with other periods when labor market measures were this tight. Inflation has also moved back to the Fed s 2 percent target range and may actually run a little above that range. We expect the Fed to continue to gradually nudge short-term interest rates higher. A common concern among real estate investors is the potential adverse impact rising interest rates may have on property values. Cap rates have risen for two consecutive quarters and appear to be moving up alongside the 10-year Treasury yield. According to Real Capital Analytics, cap rates rose 25 basis points in Q1, the largest quarterly increase since Despite the increase, cap rates remain below their prior cycle lows. Rising interest rates also come amidst an increasingly solid economic backdrop that is driving demand for commercial real estate. We anticipate the rise in cap rates should be minimal and largely offset by rising occupancy and higher rents. Property prices are currently at all-time highs. The Commercial Property Price Index has risen 8.5 percent over the past year and is 23 percent higher than its pre-recession peak. Prices increased across all property types, but especially for apartments and industrial buildings. Since the end of 2017, price appreciation in major gateway markets has moderated somewhat, while secondary markets have seen prices rise more rapidly. This comes as no surprise, as many secondary markets are attracting a great deal of investor interest given their stronger population and employment growth, particularly relative to major gateway markets. Figure 1 Figure 2 1 CRE Cap Rates By Property Type, Percent Commercial Property Price Index Year-Over-Year Percent Change Major Markets (All Property): 7. Non-Major Markets (All Property): 8. Mark Vitner, Senior Economist mark.vitner@wellsfargo.com (704) Charlie Dougherty, Economist charles.dougherty@wellsfargo.com (704) Hank Carmichael, Economic Analyst john.h.carmichael@wellsfargo.com (704) Ariana Vaisey, Economic Analyst ariana.b.vaisey@wellsfargo.com (704) Many secondary markets are attracting a great deal of investor interest given their stronger population and employment growth Apartment: 5. Retail: 6. Industrial: 6. Office: 6. Hotel: Source: Real Capital Analytics and This report is available on wellsfargo.com/economics and on Bloomberg WFRE.

2 3-Month Annualized Percent Change Commercial property prices have steadily risen over the past 10 months, with secondary markets accounting for much of the recent rise. Property Values Rising in Secondary Markets Investors are increasingly taking notice and stepping away from the pricier but more liquid major global gateways in favor of more rapidly growing markets. Some of these secondary markets, most notably Dallas and Atlanta, have become major global gateways in their own right during the past few decades. Other smaller markets have grown to become mid-majors, as their populations now easily surpass one million residents and quite often by a multiple of that. Total transaction volumes increased 5 percent to over $115 billion in the first quarter of 2018, with much of the deal volume occurring in large markets not generally considered to be global gateways. Transaction volume increased 3 percent in secondary markets while volume was flat on a year-over-year basis in the nation s six major global gateways. Investors heightened interest in markets outside of major U.S. global gateway markets is behind the growing divergence in price appreciation between major and non-major markets. Commercial property prices have steadily risen over the past 10 months through March, with secondary markets accounting for much of the recent rise. After gaining momentum throughout 2017, price increases in major markets decelerated somewhat in Q1, to a 7.6 percent year-over-year rise in March from 8.7 percent in December. By contrast, some of the strongest price gains thus far in 2018 have been outside the major six markets. Properties in Raleigh, Atlanta, and Sacramento, which rank among the nation s fastest growing metropolitan economies, have registered property price growth exceeding the 8.5 percent gains posted nationally. As investors continue to seek out higher yielding assets, we expect price growth in non-major markets to continue to outpace major markets. Price appreciation should moderate further in most major markets, particularly in,, and San Francisco. Among the largest markets, price appreciation in Washington, D.C. has remained strongest. The Washington, D.C. area is finally moving past the slowdown that emanated from sequestration back in 2013, which weighed on demand for commercial space and gave some investors pause. The recently enacted budget deal, combined with stronger private sector growth, has boosted the demand for commercial space and rekindled investor interest. Property prices in New York City also continue to rise, but mostly for properties outside of Manhattan. Apartment and Industrial Properties Lead the Way Apartment prices continue to rise the fastest among all property types. Prices increased 11.7 percent year-over-year in March and April, and price increases have been accelerating since May Apartment pricing remained strong in both major and secondary markets, except for Manhattan. High Manhattan rents have spurred migration to the more affordable Brooklyn and Queens areas. Overall apartment demand has held up better than expected this year, helped by affordability hurdles to homeownership and lack of home inventory across a growing proportion of the country. The strength in leasing is bolstering some of the bullish long-term forecast for apartments. Figure 3 Figure 4 St. Louis Richmond U.S. Employment Growth by MSA 3-Month Moving Averages, April 2018 Percent of Total Employees Less than to More than Washington, D.C. Baltimore San Diego Miami Philadelphia Las Vegas Tampa San Francisco Dallas San Jose Atlanta Minneapolis New York Detroit Decelerating Expanding Raleigh/Durham Dallas Atlanta DC Sacramento New York City Metro Denver Philadelphia Las Vegas Minneapolis Fort Myers San Francisco Tampa San Diego Nashville Orlando Miami Jacksonville Portland New York City- Manhattan Baltimore Property Prices by Metro Year-Over-Year Percent Change, March Source: U.S. Department of Labor, Real Capital Analytics and 2

3 Growth in international trade and e-commerce continues to drive the resurgent industrial sector. Industrial property prices rose 10.5 percent year-over-year in March, with prices accelerating in non-major markets and moderating in major markets. While price appreciation in major markets has outpaced that of non-major markets for the past year and a half, property values in non-major markets are gaining traction. Deal volume has also picked up for industrial properties, growing 34 percent year-over-year in the first quarter. Industrial markets surrounding many of the nation s ports and transportation hubs are seeing particularly rapid development. Part of the growth reflects the shifting of cargoes from the West Coast, as several ports along the Eastern Seaboard have been expanded to accommodate increased traffic following the widening of the Panama Canal. Rapid population growth in the Southeast and an influx of foreign direct investment are driving growth around the ports of Savannah and Charleston and also spurring growth elsewhere, as inland ports have been constructed to service motor vehicle assembly plants and other industries located inland. In addition, retailers continue to build out massive distribution facilities near major ports to streamline supply chains. Office building prices have been moderating across the board. Both suburban and central business district office price appreciation in major markets have declined since H While this same trend was apparent in many other markets, prices in secondary and tertiary markets firmed up early this year. We are seeing a growing preference from large employers to relocate or expand in parts of the country where housing tends to be more affordable and commutes are less intense. Retail property prices have also moderated significantly, rising just 1.3 percent year-over-year in Q1 from the cycle high of 13.1 percent in early The challenges facing retailers are well documented, as major chains struggle with online competitors. While traditional department storeanchored shopping malls will likely contract further, vacancy rates have not sky-rocketed and the outlook for consumer spending remains generally favorable given the recent run of strong job growth and lower marginal tax rates. Well-located properties in densely populated areas with higher incomes should continue to do well. Prices for properties in both major and non-major markets have continued to increase, with larger markets registering slightly faster growth. Many properties are being repurposed, however, which helps the overall numbers. Hotel price appreciation is still largely concentrated in major markets. Nationwide, hotel properties saw prices rise just 1.4 percent year-over-year in the first quarter. Hotels in major markets, however, continued to see outsized gains. Major market hotels sold at prices 14.4 percent above their year-ago level during Q1. While that was slightly off from the 16.8 percent gain posted in Q4, major market hotels have been on a run for the past two years. By contrast, hotel property prices in secondary and tertiary markets have lost a great deal of momentum, with prices posting a slight decline in Q after rising 8.1 percent year-over-year in the first quarter of Figure 5 Figure 6 1 Prices by Property Type Year-Over-Year Percent Change, March Commercial Property Price Index Year-Over-Year Percent Change 3 Growth in international trade and e-commerce continues to drive the resurgent industrial sector. 1 1 Major Nonmajor Apartment Office Industrial Retail Hotel - Apartment: Retail: 0. Industrial: 10. Office - CBD: 0. Office - Suburban: Source: CoStar Realty Information, Inc., Real Capital Analytics and 3

4 CRE Property Pricing & Fundamentals 1 All-property cap rates are rising, as the 10-year treasury yield edges higher. Cap rates still remain relatively low, however, and solid economic growth should help boost rents and mitigate the effects of rising interest rates. Transaction volume grew 5 percent to $115B in Q1, the first year-over-year increase since Q Deal volume was highest for apartments, industrial properties and hotels. Retail and office transactions declined for the quarter. Property prices continue to increase and are now 23 percent above their prior peak. Prices for apartment and industrial space rose 11 percent in Q1, while retail and CBD office prices moderated. Suburban office prices rose slightly. CRE Asking Rents Year-Over-Year Percent Change Cap Rates vs. 10-Year Treasury Yield Percent, Yield Apartment: 5. Retail: 6. Industrial: 6. Office: 6. Hotel: Year Yield: $200 $180 $160 CRE Transaction Volume Billions of Dollars Volume: $114.3B $180 $160 $ $140 $120 $100 $80 $60 $120 $100 $80 $ $40 $ $20 $20-1 Apartment Rent Growth Yr/Yr: 2. Office Rent Growth Yr/Yr: 1. Retail Rent Growth Yr/Yr: 1. Industrial Rent Growth Yr/Yr: Commercial Property Price Index Index, 100=2006 Apartment: Retail: 99.5 Industrial: Office - CBD: Office - Suburban: $120 $100 $80 Origin of Capital Into the United States For Commercial Real Estate, Billions of Dollars Canada: $15.1B Asia: $18.4B Middle East: $2.9B Europe: $13.4B Rest of World: $1.8B $120 $100 $80 $60 $ $40 $ $20 $ Source: CoStar Realty Information, Inc., Real Capital Analytics and 4

5 Credit Availability & Lending 6 Demand for CRE Loans Net Percent of Banks Reporting Stronger Demand Fewer banks reported rising demand for CRE loans in Q1, according to the Fed s Senior Loan Officer Opinion Survey. On net, banks have been reporting weaker demand for CRE loans since Q The total value of real estate loans still increased in 2017, but the growth rate has moderated for the past two years. CRE lending data is not yet available for Q1, but we expect the data to indicate a similar slowdown. Banks remained cautious on underwriting in Q1. On net, lending standards were more stringent for construction and land development and multifamily loans, but eased for nonresidential. Weaker demand and tighter standards point to slowing activity in the CRE credit market. CRE Lending All Commercial Banks, Construction and Land Development: 7. Income producing: 6. Multifamily Residential Real Estate: Construction & Land Development: Nonfarm Nonresidential: -7. Multifamily Residential: Banks Tightening Standards for CRE Loans Net Percent of Banks Nonfarm Nonresidential: Multifamily Residential: 5. Construction & Land Development: Commercial & Multifamily Mortgages Outstanding Percent of Total, Q $12 $10 Loans & Leases Decomposition Billions of Dollars, Gross Loans and Leases, All Commercial Banks Farm Loans: $77.4M Total Other Loans & Leases: $1.2B Loans to Individuals: $1.5B Commercial & Industrial: $1.9B All Real Estate: $4.3B $12 $10 Agency, GSE and MBS, 1 Banks and Thrifts, 4 Other, 1 $8 $8 $6 $4 $6 $4 Life Insurance, 1 CMBS, CDO and other ABS, 1 $2 $ Source: FDIC, FRB, Mortgage Bankers Association and 5

6 Quarterly Annualized Percent Change Apartment Apartment Effective Rent Growth Percent Change Apartment demand remained strong in Q1, with absorption exceeding completions for only the second time in the past two years. Affordability concerns are preventing many renters from transitioning to homeownership, keeping them in apartments. Stronger job growth is also helping pull in new tenants, many of which were living with parents or other relatives. The apartment vacancy rate fell 4 bps in Q1 but remains near a cycle high at 6.4 percent. Higher apartment vacancies are largely due to a surge in new supply, particularly of high-end units. Apartment net completions rose every year from 2011 to 2017 and reached a peak in Q Comparatively less supply has come on the market in the past two quarters but a great deal of projects remain in the pipeline. Effective rents rose 1.4 percent in Q1, following a slight dip in the prior quarter. Rent growth remains significantly below the highs seen at the end of Renewed demand amid slowing new supply should keep rents growing this year. Effective rent rose year-over-year in all of the top 25 markets in Q1. The largest rent increases were generally in rapidly growing, but relatively affordable, secondary markets in the West and South, including Las Vegas,, Tampa and the Inland Empire. and appear to defy gravity, with rents rising despite an onslaught of new supply. The disparity is due to a surge in completions of higher-priced units. Apartment Effective Rent Growth: Q Yr/Yr vs. Q/Q Annualized, Bubble Size Reflects Stock Recovering Baltimore Philadephia Atlanta Dallas-Fort Minneapolis Austin Worth Detroit San Antonio Washington D.C. Portland Denver San Francisco San Diego East Bay Tampa Columbus Expanding Las Vegas Inland Empire New York Orange County Quarter-Over-Quarter: 1. (Right Axis) Year-Over-Year: 2. (Left Axis) Apartment Supply & Demand Percent, Thousands of Units Apartment Net Completions: 49.9K (Right Axis) Apartment Net Absorption: 54.3K (Right Axis) Apartment Vacancy Rate: 6. (Left Axis) Apartment Vacancy Rates By Type, Percent All: 6. 1 & 2 Star: 5. 3 Star: 5. 4 & 5 Star: Source: CoStar Realty Information, Inc. and

7 Quarterly Annualized Percent Change Office 1 The office market remained in balance in Q1, as supply and demand grew at about the same pace. Demand for office space has moderated somewhat since 2015, however, reflecting some moderation in employment growth. Employers added just 48,000 office workers per month in 2016 and 2017, down from average of 61,000 office workers per month in Employers also remain incredibly focused on efficiency. The average square feet per worker fell from nearly 250 sf three years ago to 240 sf in Q1. As labor markets continue to tighten, it will become harder for firms to fill open positions, which may limit office demand even further. The office vacancy rate remained stable at 10.3 percent for a fourth consecutive quarter to start After peaking at 13.3 percent in 2010, the vacancy rate took seven years to fall back to its previous cycle low, where it now stands. Vacancies for higher-end properties, however, continue to trend higher, possibly reflecting a shift toward quirkier office properties just outside traditional central business districts. Asking rents rose just 0.4 percent in Q1, the smallest quarterly gain in seven years. Major markets such as New York, Washington, D.C. and San Francisco all saw rents decline in Q1, accounting for much of the weakness. By contrast, many secondary markets continue to out-perform the nation, with,, Minneapolis, Atlanta and Tampa all seeing rents rise solidly both in Q1 and over the past year. Office Asking Rent Growth: Q Yr/Yr vs. Q/Q Annualized, Bubble Size Reflects Stock Recovering Expanding Office Asking Rent Growth Percent Change Quarter-Over-Quarter: 0. (Right Axis) Year-Over-Year: 1. (Left Axis) Office Supply & Demand Percent, Millions of Square Feet Office Net Absorption: 13.7M (Right Axis) -30 Office Net Completions: 16.2M (Right Axis) Office Vacancy Rate: 10. (Left Axis) Office Vacancy Rates By Type, Percent Denver Dallas-Fort Worth Philadelphia San Jose Kansas City Minneapolis Atlanta Tampa Orange County New York Pittsburgh San Diego Saint Louis Detroit San Francisco Northern New Jersey Washington D.C. Contracting Baltimore - Decelerating All: & 2 Star: 6. 3 Star: & 5 Star: Source: CoStar Realty Information, Inc. and

8 Quarterly Annualized Percent Change Retail The market for retail space became more balanced in Q1, as weaker overall demand matched the low level of supply coming to market. Net absorption fell to its lowest level since Q3-2012, while completions are at their lowest level since Q Vacancy rates held steady at 4.6 percent. Rent growth continued to moderate in Q1 across all retail property types, but remained 1.8 percent higher than a year ago. The continued rapid growth in online retailing has taken its toll on older, less well-located retail formats. Despite the carnage at many older retail formats, retail vacancy rates have not surged and rent growth remains modestly positive. Welllocated mixed-use and town center properties are largely thriving. Well-located grocery-store anchored properties also remain in high demand, particularly those located near rapidly growing high-end residential communities. Asking rents in the largest retail markets have slowed and are lagging other markets. Rent growth in New York continued to decline in Q1 following years of above-average growth. Asking rents in also moderated, reflecting fewer new high-end developments. Denver is seeing some of the fastest rent growth. The region s strong employment and income growth has lifted asking rents nearly 7 percent over the year. Orlando is another bright spot. Job growth has been remarkably strong there for the past few years, with some of the largest gains occurring outside the region s tourist corridor. Retail Asking Rent Growth: Q Yr/Yr vs. Q/Q Annualized, Bubble Size Reflects Stock Recovering Baltimore Long Island Pittsburgh Atlanta Philadelphia Dallas-Fort Worth Orlando Inland Empire Expanding Denver San Diego Detroit Tampa - Cleveland Minneapolis Washington - New York Orange County - Contracting Saint Louis Decelerating Retail Asking Rent Growth Percent Change Quarter-Over-Quarter: 0. (Right Axis) Year-Over-Year: 1. (Left Axis) Retail Supply & Demand Percent, Millions of Square Feet Retail Net Absorption: 13.4M (Right Axis) Retail Net Completions: 13.0M (Right Axis) Retail Vacancy Rate: 4. (Left Axis) Source: CoStar Realty Information, Inc. and Retail Asking Rent Growth By Type, Year-Over-Year Percent Change All: 1. - Mall: 2. - Power: 2. Neighborhood: 2. Strip:

9 Quarterly Annualized Percent Change Industrial 1 1 Growing international trade volumes and the rapid expansion of e-commerce and data storage continue to propel the industrial sector. Net absorption pulled back in Q1 to the lowest level since 2012, but this follows a very strong Q Industrial users also may be having difficulty finding space, as new supply has only recently caught up to demand for warehouses and distribution facilities. Industrial vacancies remained steady at 5.0 percent for the quarter. Asking rent growth moderated slightly, but remained at a pace over three-times the average seen in the prior cycle. California metros have some of the strongest industrial rent gains. The East Bay is showing double-digit gains, with vacancies near 17-year lows. Rent gains in and the Inland Empire also rank among the fastest in the nation. Growing cargo volume at the ports of Savannah and Charleston has spurred capital investment and enabled major manufacturers such as Caterpillar, Honda, BMW, and Michelin to expand their export platforms in the Southeast. Additional capacity should help attract a wide array of industrial users going forward. Stronger global growth has benefited the industrial sector as rising trade volumes have boosted development in and around many of the nation s ports. Ongoing negotiations with many of America s largest trading partners represent a downside risk. We expect an agreement to be reached before tariffs actually take effect. Industrial Asking Rent Growth: Q Yr/Yr vs. Q/Q Annualized, Bubble Size Reflects Stock 1 Recovering Dallas-Fort Worth Orange County Cleveland Philadelphia Minneapolis Milwaukee Saint Louis Indianapolis Memphis Washington D.C. Kansas City Atlanta New York Inland Empire Detroit Cincinnati Columbus East Bay Contracting Decelerating Expanding - Industrial Asking Rent Growth Percent Change Quarter-Over-Quarter: 1. (Right Axis) Year-Over-Year: 6. (Left Axis) Industrial Supply & Demand Percent, Millions of Square Feet Industrial Net Absorption: 37.9M (Right Axis) Industrial Net Completions: 40.4M (Right Axis) Industrial Vacancy Rate: 5. (Left Axis) Industrial Vacancy Rates & Rent Growth By Type, Sorted by Stock Size, Percent, Q Vacancy Asking Rent Growth Yr/Yr Source: CoStar Realty Information, Inc. and All Logistics Specialized Flex

10 Hotel 8 Lodging Construction Spending Year-Over-Year Percent Change 8 Hotel occupancy is at an exceptionally high level, and continues to rise. The non-seasonally adjusted occupancy rate, at 61.6 percent, is the highest Q1 rate since the series began in Easter came early this year and likely pulled travel into March, boosting Q1 occupancy. Strong economic growth should keep occupancy high for some time to come. Hotel demand tends to track GDP growth, which we see averaging around 3 percent in 2018 and Revenue per available room (RevPAR) rose 3.5 percent year-over-year in Q1, after growing 4.2 percent in Q4. RevPAR growth, however, appears to be strengthening after a soft patch through much of 2016 and 2017, benefitting from strong demand and high occupancy rates. The hotel industry is not immune to the challenges of an increasingly tight supply of qualified workers. The ratio of job openings to employment for the leisure and hospitality industry currently matches the previous high recorded in January The strongest RevPAR growth in Q1 occurred in Minneapolis, Miami, Philadelphia and Orlando. All of these metros saw RevPAR rise more than 10 percent year-over-year. By contrast, RevPAR shrank over the year in New Orleans, St. Louis,, San Francisco, Detroit and Washington DC. The largest year-over-year drop by far was Washington, D.C. Comparisons are difficult in that market, however, given the high demand in Q linked to the presidential inauguration Lodging Spending: RevPAR vs. Average Daily Rate RevPAR: 3. Room Rate: RevPAR Growth by Chain Scale Yr/Yr Percent Change of a 3-Month Moving Avg Hotel Occupancy Rate Seasonlly Adjusted, Percent Average Occupancy ( ): 62. Occupancy: Economy & Midscale: 4. Upscale & Luxury: Source: STR, U.S. Department of Commerce and 10

11 Economics Group Diane Schumaker-Krieg Global Head of Research, Economics & Strategy (704) (212) John E. Silvia, Ph.D. Chief Economist (704) Mark Vitner Senior Economist (704) Jay H. Bryson, Ph.D. Global Economist (704) Sam Bullard Senior Economist (704) Nick Bennenbroek Currency Strategist (212) Eugenio J. Alemán, Ph.D. Senior Economist (704) Azhar Iqbal Econometrician (704) Tim Quinlan Senior Economist (704) Eric Viloria, CFA Currency Strategist (212) Sarah House Senior Economist (704) Michael A. Brown Economist (704) Charlie Dougherty Economist (704) Jamie Feik Economist (704) Erik Nelson Currency Strategist (212) Michael Pugliese Economist (212) Harry Pershing Economic Analyst (704) Hank Carmichael Economic Analyst (704) Ariana Vaisey Economic Analyst (704) Abigail Kinnaman Economic Analyst (704) Shannon Seery Economic Analyst (704) Donna LaFleur Executive Assistant (704) Dawne Howes Administrative Assistant (704) Economics Group publications are produced by, LLC, a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Securities Investor Protection Corp., LLC, distributes these publications directly and through subsidiaries including, but not limited to, Wells Fargo & Company, Wells Fargo Bank N.A., Wells Fargo Clearing Services, LLC, International Limited, Asia Limited and (Japan) Co. Limited., LLC. is registered with the Commodities Futures Trading Commission as a futures commission merchant and is a member in good standing of the National Futures Association. Wells Fargo Bank, N.A. is registered with the Commodities Futures Trading Commission as a swap dealer and is a member in good standing of the National Futures Association., LLC. and Wells Fargo Bank, N.A. are generally engaged in the trading of futures and derivative products, any of which may be discussed within this publication., LLC does not compensate its research analysts based on specific investment banking transactions., LLC s research analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm which includes, but is not limited to investment banking revenue. The information and opinions herein are for general information use only., LLC does not guarantee their accuracy or completeness, nor does, LLC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice., LLC is a separate legal entity and distinct from affiliated banks and is a wholly owned subsidiary of Wells Fargo & Company 2018, LLC. Important Information for Non-U.S. Recipients For recipients in the EEA, this report is distributed by International Limited ("WFSIL"). WFSIL is a U.K. incorporated investment firm authorized and regulated by the Financial Conduct Authority. The content of this report has been approved by WFSIL a regulated person under the Act. For purposes of the U.K. Financial Conduct Authority s rules, this report constitutes impartial investment research. WFSIL does not deal with retail clients as defined in the Markets in Financial Instruments Directive The FCA rules made under the Financial Services and Markets Act 2000 for the protection of retail clients will therefore not apply, nor will the Financial Services Compensation Scheme be available. This report is not intended for, and should not be relied upon by, retail clients. This document and any other materials accompanying this document (collectively, the "Materials") are provided for general informational purposes only. SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE