The State of the Commercial Real Estate Industry: Mid-Year 2010 Retail Review & Outlook

The State of the Commercial Real Estate Industry: Mid-Year 2010 Retail Review & Outlook Copyright 2010 CoStar Realty Information, Inc. No reproduction or distribution without permission. The following information includes projections and analyses that are based on various assumptions by CoStar concerning future events and circumstances, as well as historical and current data maintained in CoStar s database, obtained from public sources or provided by proprietary sources. Actual results may vary materially from the projections presented. The information in this presentation speaks only as of the date(s) referenced and is provided as is. CoStar expressly disclaims any guarantees, representations or warranties of any kind, including those of merchantability and fitness for a particular purpose. You should not construe any of the information herein as investment, tax, accounting or legal advice. 2 Bethesda Metro Center Bethesda, MD USA 20814 (800) 204-5960 www.costar.com NASDAQ: CSGP

Today The Economy Housing Market The Property Leasing Market The Capital Market Impact The Property Sales Market

The Economy

Expected Slowdown in GDP Growth 8% Annualized GDP Growth 6% 4% 2% 0% 2% 4% 6% 8% 1995 q4 1996 q4 1997 q4 1998 q4 1999 q4 2000 q4 2001 q4 2002 q4 2003 q4 2004 q4 2005 q4 2006 q4 2007 q4 2008 q4 2009 q4 2010 q4 2011 q4 2012 q4 2013 q4 Source: BLS, Economy.com

Strong Impetus for New Hires 145 140 135 Millions 130 125 120 115 110 105 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: BLS, Economy.com

Employment Growth by Metro 14% 2011-14 Job Growth Weak Near Term, Strong Long Term Strong Near Term, Strong Long Term 12% 10% 8% 6% 4% Weak Near Term, Weak Long Term Las Vegas Detroit Atlanta Phoenix Denver San Francisco Inland Empire Houston Fort Lauderdale Miami Los Angeles Memphis Sacramento San Jose Washington - NoVA - Indianapolis MD Philadelphia Cleveland Cincinnati Boston Oklahoma City Tampa Palm Beach County San Diego San Antonio Orlando Nashville Portland Chicago New York Austin Dallas - Fort Worth Raleigh Seattle Orange County Minneapolis Long Island Charlotte Strong Near Term, Weak Long Term -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% Sources: Moody's Economy.com, BLS 2010 Job Growth South East MidWest West

Private Wage Growth Positive 800 Annual Change in Personal Income 600 400 200 0 (200) (400) 2005 2006 2007 2008 2009 2010 YTD Source: Bureau of Economic Analysis; All else Wages: Private industries Wages: Government Other Government Unemployment Benefits and Transfers page 7

Consumer Has Done Fair Share in Driving Rebound 15.0% Annual Growth in Retail Sales, Ex Auto Per Capita Retail Sales, Ex Auto (SAAR) 16,000 14,000 10.0% 12,000 5.0% 10,000 8,000 0.0% 6,000 (5.0%) 4,000 2,000 (10.0%) 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 - Annual Change in Retail Sales, Ex Auto Sources: BEA; Census Bureau; Moody's Economy.com Retail Sales Per Capita 6/30/10

Recent Retail Sales Better than Headlines 2% Monthly Change in Retail Sales, Ex Auto 1% 0% (1%) (2%) Source: Census Bureau Apr - 09 Jun - 09 Auḡ09 Oct - 09 Dec - 09 Feb - 10 Apr - 10 Jun - 10 Retail Sales, Ex Auto Monthly % Change Retail Sales, Ex Auto and Gas Monthly % Change 6/30/10 page 9

Components of Growth Contribution To Year-Over-Year Retail Sales 10% 8% 6% 4% 2% 0% (2%) (4%) (6%) (8%) (10%) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD General Merchandise Healthcare and Personal Care Furniture, Electronics, And Appliances Nonstore Retailers Source: U.S. Census Bureau; PPR Clothing, Sporting Goods, and Miscellaneous Food and Beverage Building Materials and Supplies Gas Stations page 10 6/30/10

Borrowing Shunned by Both Sides 25,000 Consumer Debt Outstanding Per Household ($) 20,000 15,000 10,000 5,000 0 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 Sources: PPR; Federal Reserve; Census Bureau May 2010

Housing

Residential Sales by Type $2,000,000 Regular Sales REO Sales Foreclosure Sales $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 1999-Q2 2000-Q3 2001-Q4 2003-Q1 2004-Q2 2005-Q3 2006-Q4 2008-Q1 2009-Q2 Source: Collateral Analytics

New Annualized Housing Starts By Month Since 1959 3,060 2,560 2,060 1,560 1,506 1,060 560 60 1962-06 1966-06 1970-06 1974-06 1978-06 1982-06 1986-06 1990-06 1994-06 1998-06 2002-06 2006-06 2010-06 Source: U.S. Census

Housing Price Trends Vary By Market But Most Have Flattened Out $1,200 Chicago San Francisco Las Vegas Los Angeles Orlando Phoenix $1,000 $800 Price/SF $600 $400 $200 $0 2000-Q2 2002-Q2 2004-Q2 2006-Q2 2008-Q2 2010-Q2 Source: Collateral Analytics

MBA Housing Purchase and Refinancing Data By Quarter 1,400 Purchases Refinancings 1,200 1,000 Number of Refinancings 800 600 400 200 Source: MBA 0 2000 - Q1 2001 - Q1 2002 - Q1 2003 - Q1 2004 - Q1 2005 - Q1 2006 - Q1 2007 - Q1 2008 - Q1 2009 - Q1 2010 - Q1

Leasing Fundamentals

Sales Growth Pushes Forward June 2010 1 Year -Over-Year Change in Same Store Sales -1 (35%) (25%) (15%) (5%) 5% 15% Specialty Apparel and Goods General Merchandise June 2009 1 Year -Over -Year Change in Same Store Sales -1 (35%) (30%) (25%) (20%) (15%) (10%) (5%) 0% 5% 10% 15% Specialty Apparel and Goods General Merchandise Source: The Bank of Tokyo -Mitsubishi UFJ, Ltd.

Historical Retail Net Absorption 70 64.5 60 50 43.3 43.5 40 37.0 32.7 Millions of Sq Ft 30 20 10 20.1 19.7 15.5 27.0 20.4 27.6 14.1 6.1 11.2 3.1 12.8 0 (10) (9.2) (20) (18.2) (30) 2006 1q 2006 2006 3q 2006 4q 2007 1q 2007 2007 3q 2007 4q 2008 1q 2008 2008 3q 2008 4q 2009 1q 2009 2009 3q 2009 4q 2010 1q 2010 Source: CoStar Group

2009 Net Absorption 20 Largest Markets Houston Dallas/Ft Worth Westchester/So Connecticut Long Island (New York) Denver Boston Philadelphia Northern New Jersey Minneapolis Detroit Washington Seattle/Puget Sound Chicago Cleveland Tampa/St Petersburg Atlanta Inland Empire (California) Los Angeles San Francisco Bay Area Phoenix (2.4) (2.5) (2.5) (2.8) (3.0) (0.5) (0.6) (0.9) (0.9) (1.1) (1.2) (1.6) 0.1 0.1 0.5 0.5 1.5 2.4 2.3 3.4 Millions of SF Source: CoStar Group (4.0) (3.0) (2.0) (1.0) 0.0 1.0 2.0 3.0 4.0

2010 Net Absorption - 20 Largest Markets Houston 1,998 Long Island (New York) 1,668 Northern New Jersey Boston 1,296 1,166 Denver South Florida Washington Westchester/So Connecticut Los Angeles Philadelphia Minneapolis 882 858 760 732 643 541 404 Inland Empire (California) San Francisco Bay Area Atlanta Detroit 248 208 180 177 Seattle/Puget Sound 63 Dallas/Ft Worth Tampa/St Petersburg Phoenix Chicago (425) (512) (556) (687) Thousands Thousands of SF (1,000) (500) 0 500 1,000 1,500 2,000 2,500 Source: CoStar Group

Map of Net Absorption by Market Source: CoStar Group

Services Dominate Consumption 8,000 Goods Nondurable goods Services Durable goods Consumer Expenditures ($ Billions) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Source: Bureau of Economic Analysis

Tenants Selling Services Leasing Retail Space in 2010 Subway Verizon Wireless Dollar Tree Edward Jones Metro PCS Goodwill Little Caesars Pizza Five Guys Burgers & Fries State Farm Insurance Boost Mobile Sprint Cricket Wireless Liberty Tax Service Allstate Insurance Herbalife Planet Fitness Game Stop Great Clips Anytime Fitness T-Mobile Advanced Auto Parts Family Dollar AT&T Wireless Dollar General Sally Beauty Supply Source: CoStar Group 27 27 25 25 24 24 23 22 22 21 21 20 20 19 19 18 16 16 32 31 35 47 57 55 0 10 20 30 40 50 60 70 65 Number of Leases

Retail Deliveries by Year 2.5% 3% Excess 1% Excess 4% Excess 1% Excess 1% Excess 2.0% Percent Increase 1.5% 1.0% 1.5% 0.5% 0.0% 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Source: CoStar Group

Under Construction As % Of Inventory 20 Largest Markets Westchester/So Connecticut Washington Northern New Jersey Philadelphia Long Island (New York) Los Angeles Dallas/Ft Worth Chicago Denver Minneapolis Atlanta San Francisco Bay Area Tampa/St Petersburg Detroit Phoenix Boston Seattle/Puget Sound Inland Empire (California) South Florida Houston 0.4% 0.4% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0% 0.5% 0.6% 0.6% 0.8% 1.2% Historical U.S. Average Source: CoStar Group 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6%

Tight Lending Will Keep a Check on Speculative Development 100% Net % of Domestic Respondents Tightening Standards for CRE Loans 80% 60% 40% 20% 0% 20% 40% 90 92 94 96 98 00 02 04 06 08 Source: PPR; Federal Reserve

Not Much More Coming 5,000 Expected Shopping Center Completions (000s SF) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 Big -Box/Power Center Grocery -Anchored Center Other Shopping Center Regional Mall Source: PPR As of 10Q2

Retail SF Per Capita Markets With Over 2.5 Million People Minneapolis-St. Paul-Bloomington, MN-WI Atlanta-Sandy Springs-Marietta, GA Miami-Fort Lauderdale-Miami Beach, FL Denver-Aurora, CO Dallas-Fort Worth-Arlington, TX San Francisco-Oakland-Fremont, CA Tampa-St. Petersburg-Clearwater, FL Houston-Baytown-Sugar Land, TX St. Louis, MO-IL U.S. Average Seattle-Tacoma-Bellevue, WA Chicago-Naperville-Joliet, IL-IN-WI Phoenix-Mesa-Scottsdale, AZ San Diego-Carlsbad-San Marcos, CA Baltimore-Towson, MD Detroit-Warren-Livonia, MI Riverside-San Bernardino-Ontario, CA Washington-Arlington-Alexandria, DC-VA-MD-WV Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Boston-Cambridge-Quincy, MA-NH Los Angeles-Long Beach-Santa Ana, CA New York-Newark-Edison, NY-NJ-PA 34 59 58 57 55 54 53 53 52 50 50 50 49 48 47 46 45 45 44 44 43 40 SF Per Capita Source: CoStar Group; U.S. Census 0 10 20 30 40 50 60 70

Retail Total Available % vs. Vacant % 11.0% Vacancy Rate Availability Rate 10.0% 9.9% 10.0% 9.0% 8.0% 7.6% 7.0% 7.5% 6.0% 5.0% 2006 1q 2006 3q 2007 1q 2007 3q 2008 1q 2008 3q 2009 1q 2009 3q 2010 1q Source: CoStar Group

Vacancy Rates By Shopping Center Type 14% 12% 10% 8% 6% 4% 2% 0% Super Regional Mall Outlet Center Power Center Regional Mall Lifestyle Center Community Center Neighborhood Center Theme/Festival Center Strip Center Peak Trough Current Source: CoStar Group

Quarter-Over-Quarter Change in Vacancy Rates 20 Largest Markets Houston Boston Northern New Jersey South Florida Minneapolis Inland Empire (California) Denver Los Angeles Detroit Westchester/So Connecticut Atlanta Long Island (New York) Seattle/Puget Sound Philadelphia Phoenix San Francisco Bay Area Tampa/St Petersburg Chicago Dallas/Ft Worth Washington 0.3% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.2% 0.2% Source: CoStar Group 0.4% 0.3% 0.2% 0.1% 0.0% 0.1% 0.2% 0.3%

Quarterly Change in Quoted Retail Rents 1.5% 1.0% 0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 2007 4q 2008 2008 4q 2009 2009 4q 2010 Source: CoStar Group

U.S. Retail Vacancy Forecast 70 60 50 Absorption Deliveries Vacancy Rate Forecast 8.0% 7.5% 7.0% Millions of Square Feet 40 30 20 10 6.5% 6.0% 5.5% Vacancy Rate 0 5.0% (10) 4.5% (20) 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: CoStar Group 4.0%

Capital Markets

Change in CRE Debt Outstanding by Holder 350 Life Insurers and Pension Funds Depository Institutions CMBS 300 250 200 150 100 50 0 (50) (100) (150) 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010Q1 YTD Source: CoStar Group

Quarterly CMBS Issuances $80 $70 Billions of Dollars in CMBS Issuances $60 $50 $40 $30 $20 $10 Source: CMSA $0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

REIT Capital Offerings $60 IPOs Secondary Equity Unsecured Debt Secured Debt $50 Capital Raised in Billions $40 $30 $20 $10 $0 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 YTD Source: NAREIT

% of Assets Held By 20 Largest Banks 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Securities Derivatives CRE & Construction Loans Residential RE Loans C&I Loans Consumer Loans

Property Sales Market

U.S. Retail Days on Market vs. Selling Price as a Percent of Asking Price 350 Days on Market Percent of Ask 94% 92% 300 90% Days on Market 250 200 150 88% 86% 84% 82% Percent of Asking Price 100 80% 2006 2006 4q 2007 2007 4q 2008 2008 4q 2009 2009 4q 2010 Source: CoStar Group

Number of Retail Sales Withdrawn From Market 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Source: CoStar Group 2005 2006 2007 2008 2009 2010

Quarterly Sales Volume $12 $10 $8 Billions $6 $4 $2 $0 Source: CoStar Group 1996 4q 1998 1999 4q 2001 2002 4q 2004 2005 4q 2007 2008 4q 2010

Year-Over-Year Change in Sales Volume 20 Largest Markets Houston Tampa/St Petersburg South Florida Long Island (New York) Boston Detroit Los Angeles Philadelphia Denver Phoenix Inland Empire (California) San Francisco Bay Area Washington Dallas/Ft Worth Westchester/So Connecticut Chicago Minneapolis Atlanta Seattle/Puget Sound Northern New Jersey 3% 8% 15% 19% 20% 32% 61% 80% 72% 58% 40% 32% 21% 19% 6% 3% 2% 164% 161% 405% 100% 0% 100% 200% 300% 400% 500% Source: CoStar Group

Retail Distressed Sales Non Distressed Sales Transactions Distressed as a Percentage of Total Transactions Distressed Sales Transactions 5,000 25.0% 4,500 4,000 20.0% 3,500 3,000 15.0% 2,500 2,000 10.0% 1,500 1,000 5.0% 500 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0.0% Source: CoStar Group

Distress by Property Type 50% Office Industrial Retail Multifamily Hospitality 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1998 1999 4q 2001 2002 4q 2004 2005 4q 2007 2008 4q 2010 Source: CoStar Group

Distressed Retail Sales as a % of Stock Source: CoStar Group Source: CoStar Group Net Absorption Retail Distressed Sales

Retail Cap Rates 12 (%) 11 10 9 8.3 8 7.6 7 6.4 6 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: CoStar Group

Cap Rate Spread High But Leveling Off 600 Basis Points 500 400 300 Mean + One Std Dev Mean + Two Std Dev 200 100 0 1995 3q 1996 3q 1997 3q 1998 3q 1999 3q 2000 3q 2001 3q 2002 3q 2003 3q 2004 3q 2005 3q 2006 3q 2007 3q 2008 3q 2009 3q Source: NCREIF

CoStar Repeat Sale Indices 325 Retail Office Industrial Multifamily 275 225 175 125 75 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Source: CoStar Group 1998 = 100

Dispersion in Sales Prices: Shopping Centers 0.1 Standard Deviations: 500 0.25 0.5 0.75 1 2 10 Note: Mean and standard deviations are weighted by square footage. Includes Community Center, Neighborhood Center, Strip Center, Power Center, Super Regional Mall, Theme/Festival Center, Regional Mall, Outlet Center, Lifestyle Center, Airport Retail 450 400 Price/SF 350 300 250 200 150 100 50 0 1/98 Source: CoStar Group 4/99 7/00 10/01 1/03 4/04 7/05 10/06 2/08 5/09 8/10 1998 = 100

2010 Average Sales Prices/SF 20 Largest Markets Long Island (New York) Los Angeles San Francisco Bay Area South Florida Washington Chicago Westchester/So Connecticut Seattle/Puget Sound $163 $158 $156 $190 $206 $229 $227 $272 Minneapolis Tampa/St Petersburg Dallas/Ft Worth Northern New Jersey Denver Phoenix Boston Philadelphia $154 $144 $138 $131 $130 $125 $121 $117 Inland Empire (California) Atlanta Houston Detroit $67 $116 $112 $105 Source: CoStar Group $0 $50 $100 $150 $200 $250 $300

Net Purchases of Investment Grade Shopping Centers $2,000 Net Purchases Bought Sold $1,460 $1,348 $1,500 $906 $1,000 Millions of Dollars $500 $0 ($500) ($461) ($461) ($14) $68 $13 ($54) $177 $101 ($76) $359 ($1,000) ($1,500) ($989) ($2,000) ($1,368) Institutional ($1,473) Private Private Equity User REIT/Public Source: CoStar Group

Retail REIT Buying in 2010 (Price/SF Paid) Cole Real Estate Investments $227 $991 Inland Real Estate Acquisitions, Inc. $141 $811 Simon Property Group, Inc. $571 $303 Retail Opportunity Investments Corp. $123 $250 Equity One Inc $264 $188 Kimco Realty Corporation $117 $138 One Liberty Properties Inc. $156 $124 Source: CoStar Group Millions $0 $200 $400 $600 $800 $1,000 $1,200

Top Retail Sales in Second Quarter 2010 33 Properties in CA, FL Date: 4/21/2010 Seller: Kimco Buyer: Canada Pension Plan Inv Board Price: $370,000,000 Price/SF: $179 The Galleria (Houston) Date: 6/14/2010 Seller: Walton Street Capital Buyer: Simon Property Group Price: $260,000,000 Price/SF: $571 12 Properties in 4 States Date: 6/11/2010 Seller: Buyer: Entertainment Properties Trust Price: $124,000,000 192 movie screens Source: CoStar Group 21 Properties in 6 States Date: 5/25/2010 Seller: Kerasotes Showplace Theatres Buyer: AMC Entertainment Price: $275,000,000 Price/SF: $380

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