Deutsche Bank Real Estate Presentation

The Next Move Insights from the Real Estate Industry’s Top Investors, Researchers and Investment Bankers

Tuesday, October 6, 2009 I Time Warner Center, New York City

The Next Move

7:30 – 8:15 a.m. Breakfast

8:15 – 8:30 a.m. Assessing the Situation: Current Market, Players and Outlook

Chip Packard,Head,U.S.PrivateBank—EasternRegion Jon Vaccaro,GlobalHeadofCommercialRealEstate

8:30 – 9:00 a.m. The U.S. Housing Market: At An Inflection Point? Karen Weaver, GlobalHeadofSecuritizationResearch

9:00 – 10:30 a.m. Strategically Positioning For the Next Move Moderator:Toby Cobb,SpecialAssignmenttotheOfficeoftheCEO—Americas Panelists:

Peter Linneman, Principal,LinnemanAssociates,ProfessorandFoundingChairmanof Wharton’sRealEstateDepartment

Lewis Ranieri, FounderandChairman,RanieriPartnersLLC

Mortimer Zuckerman, Chairman,BostonProperties;Publisher,NY Daily News;Chairman &Editor-In-Chief,U.S. News & World Report

10:30 – 11:00 a.m. Break

11:00 – 12:30 p.m. Capitalizing on Opportunities: Investor Solutions Across the Globe John Nacos Head,CommercialRealEstateAmericas,Asia-Pacific&Japan Head,GlobalCommercialRealEstateSpecialOpportunitiesGroup

Justin Kennedy Head,GlobalCommercialRealEstateCapitalMarkets

Jonathan Pollack CommercialRealEstateCapitalMarkets

Scott Waynebern CommercialRealEstateSpecialOpportunities

Q&AwithCommercialRealEstateProductSpecialists

12:30 – 2:00 p.m. Lunch

Insights from the Real Estate Industry’sTop Investors, Researchers and Investment Bankers

AGENDATuesday, October 6, 2009 I Time Warner Center, New York City

BIOGRAPHIES

Tobin(Toby)Cobb

TobyCobb isaManagingDirectorandonSpecialAssignment to theOfficeof theCEOofDeutscheBankAmericasfocusingontheEmergencyEconomicStabilizationActof2008,relatedgovernmentprogramsandthecreditcrisis.

Prior to this assignment, he was the Co-Head of the U.S. Commercial Real Estate Business at DeutscheBank.Previously,Mr.CobbspentfiveyearsatDLJwherehehadprimaryresponsibilityforsubordinatedebtplacement andCMBSsecuritization.Prior to that, he spent four years atCiticorpSecuritieswherehewasresponsibleforbiddingonperformingandnon-performingcommercialrealestateloanpools.Mr.CobbsitsontheBoardofDirectorsoftheCommercialMortgageSecuritiesAssociation(CMSA)whereheisacurrentVice Chair of the CMSA Policy Committee and has twice served as the Co-Chair for the CMSA industryconference.

Mr.CobbholdsaB.S.ineconomicsandfinancefromSouthernMethodistUniversityandanM.B.A.infinanceandinternationalbusinessfromNewYorkUniversity.

Peter Linneman, Ph.D.

Dr.PeterLinnemanisthePrincipalofLinnemanAssociatesandalsoservesastheAlbertSussmanProfessorofRealEstate,Finance,andPublicPolicyattheUniversityofPennsylvania.Afacultymembersince1979,heservedastheFoundingChairmanofWharton’sRealEstateDepartment,andwastheDirectorofWharton’sZell-LurieRealEstateCenter.Heisthefoundingco-editorofThe Wharton Real Estate Review.

Dr.LinnemanistheCEOofAmericanGrowthLandFunds.Hisquarterlyresearchpublication,The Linneman Letter, iswidelyreadthroughouttherealestateindustryandhisbook,Real Estate Finance and Investments: Risks and Opportunities, hasbeenadoptedatover50universities and is a reference source for real estatefinanceandinvestment.

Previously, he served as Senior Managing Director of Equity International Properties, a Vice Chairman ofAmerimarRealtyandwasChairmanoftheBoardofRockefellerCenterProperties.

Dr.Linnemanholdsbothamaster’sdegreeandadoctorateineconomicsfromtheUniversityofChicago.

BIOGRAPHIES

JohnNacos

JohnNacosisaManagingDirectorandtheGlobalHeadofDeutscheBank’sGlobalCommercialRealEstate(CRE)SpecialOpportunitiesbusiness,whichmakesprincipal investments in real estate assets around theworld.Mr.NacosalsohasregionalresponsibilityforDeutscheBank’sCREgroupintheAmericas,Asia-PacificandJapan.HejoinedDeutscheBankin2001andpreviouslyrantheEurope,MiddleEast,AfricaandIndiabusinessforCRE.

PriortojoiningDeutscheBank,heworkedatMerrillLynchfor11years,whereheestablishedandmanagedMerrillLynch’smortgagefinancing,opportunisticrealestateandMBS/ABStradingactivities inEurope.HewasalsotheCo-founderandCFOofCreditweb,oneofEurope’sleadingon-line/off-linesinglefamilymortgageintermediaries,withannualloanoriginationsinexcessof€1billion.

Mr.Nacosisa1989cum laudegraduateofHarvardCollege.

ChipPackard

ChipPackardisaManagingDirectorandHeadofthePrivateBankEasternRegionforPWM—U.S.Inhisrole,heoverseesallactivitiesintheNewYork,Boston,ChicagoandFloridamarkets.HeisalsoamemberofthePWM—U.S.ExecutiveCommittee.

SincejoiningDeutscheBankin2006,hesuccessfullyexpandedPWM’spartnershipwithGlobalBankingandGlobalMarketsandenhancedtheadvisoryandcapitalmarketsinvestmentplatformsasAmericasHead,GlobalInvestments&Sales.PriortojoiningDeutscheBank,Mr.PackardwasaManagingDirectorandGroupHeadatCreditSuissewherehewasresponsibleformanagingallinteractionsbetweenCreditSuisse’sInvestmentBankingandPrivateBankingdivisions intheAmericas.HealsosatontheExecutiveCommitteeofPrivateBankingUSAandwasamemberoftheirInvestmentCommittee.Priortothat,hehadsimilarresponsibilitiesatDonaldsonLufkin&JenretteSecuritiesCorp.

Mr.PackardearnedaB.A.cum laudefromtheUniversityofSanDiegoandaJ.D.fromPepperdineUniversity.

BIOGRAPHIES

LewisS.Ranieri

LewisRanieri is theFounderandChairmanofRanieriPartnersLLC,an investmentmanagementcompanyfocusedonopportunitiesinthefinancialservicessector.Thefirmmanages$825millionindistressedresidentialloansthroughitsSeleneMortgageOpportunityFundandservicesover$2billionincommercialrealestatethroughitsspecialservicer,HeliosAMC.

Mr.Ranieriisgenerallyconsideredtobethe“father”ofthesecuritizedmortgagemarket.In1988whileservingasViceChairmanofSalomonBrothers,hewasresponsibleforthefirm’sactivitiesinthemortgage,realestateandgovernment-guaranteedareas.Hedevelopedthecapitalmarketsasasourceoffundsforhousingandcommercialrealestate,establishedSalomon’sleadershippositioninthemortgage-backedsecuritiesarea,andledeffortstoestablishfederallegislationtobuildthemortgagemarkets.

Regardedasaninnovatorinboththemortgageandcapitalmarkets,Mr.RanierihasservedontheNationalAssociationofHomeBuildersMortgageRoundtablesince1989.Inrecognitionofhislifelongachievementsinthehousingindustry,hewasinductedintotheNationalHousingHallofFame.HealsoreceivedthelifetimeachievementawardfromtheFixedIncomeAnalystsSociety,Inc.andwasinductedintotheFIASIHallofFameforoutstandingpractitionersintheadvancementoftheanalysisoffixed-incomesecuritiesandportfolios.In2004,BusinessWeekmagazinenamedhimoneof“thegreatestinnovatorsofthepast75years,”andin2005,hereceivedtheDistinguishedIndustryServiceAwardfromtheAmericanSecuritizationForum.

Mr.RanieriservesasatrusteeforTheMetropolitanOperaAssociationandisalsoontheBoardoftheAmericanBalletTheatre.

Karen Weaver

KarenWeaverisaManagingDirectorandtheGlobalHeadofSecuritizationResearch,responsibleforDeutscheBank’s researchon securitizedfixed incomeproducts.She joinedDeutscheBank fromCreditSuisseFirstBoston(CSFB)in2000.PriortojoiningCSFB,shewasaportfoliomanageractiveintheABSandMBSmarkets.Ms.Weaver isacontributingauthor tonumerousbooksonmortgage-backedandasset-backedsecurities,andhasappearedonBloombergNews,CNBC,theABCEveningNews,NBCDatelineandNPR.Karenandher teamhaveearnedmany industryaccolades, including rankings in Institutional Investor, Global Investor, EuromoneyandCredit Magazine.Sheiswidelycreditedwithbeingoneofthefirstanalyststoforecastthehousingcrisis.

Ms.WeaverisagraduateofTempleUniversity,whereshestudiedstatisticsandeconomicsasanundergraduateandfinanceatthegraduatelevel.SheisalsoaCharteredFinancialAnalyst.

BIOGRAPHIES

MortimerB.Zuckerman

MortimerZuckermanistheChairmanandEditor-in-ChiefofU.S. News & World ReportandisthepublisheroftheNew York Daily News.HeisalsotheCo-founderandChairmanofBostonPropertiesInc.

Mr.Zuckerman isa formerAssociateProfessorofCityandRegionalPlanningat theHarvardGraduateSchoolofDesign,aformerlecturerofCityandRegionalPlanningatYaleUniversityandapastpresidentoftheBoardofTrusteesoftheDanaFarberCancerInstituteinBoston.HeisatrusteeofMemorialSloan-Kettering,amemberoftheJPMorganNationalAdvisoryBoard,theInternationalPeaceInstitute,theBankofAmericaGlobalWealth&InvestmentManagementCommittee,theCouncilonForeignRelations,theWashingtonInstituteforNearEastStudiesandtheInternationalInstituteofStrategicStudies.

Mr.ZuckermanisagraduateofMcGillUniversityinMontrealwherehereceivedanundergraduatedegreeand a degree in law. He received anM.B.A. with distinction from theWharton School, University ofPennsylvaniaandanLLMfromHarvardUniversity.HehasalsoreceivedthreehonorarydegreesandwasawardedtheCommandeurDeL’OrdredesArtsetdesLettresbythegovernmentofFrance,theLifetimeAchievementAwardfromGuildHallandtheGoldMedalfromtheAmericanInstituteofArchitecture inNewYork.

JonVaccaro

JonVaccaroisaManagingDirectorandtheGlobalHeadofCommercialRealEstateatDeutscheBank,responsibleforrealestatecapitalcommitmentsglobally.Hehasover30yearsofexperienceinrealestateinvestment,financeandcapitalmarkets.Mr.VaccaroiscreditedwithbuildingoutDeutscheBank’sRealEstatePrincipalFinancebusinessesintheUnitedStates,EuropeandAsia.Theresultingorganization,grownbothorganicallyand throughacquisitions,hasseveralhundredemployeesaround theglobedeliveringregionalsolutionswhileleveragingabroadglobalplatform.

Prior to joining Deutsche Bank, Mr. Vaccaro spent 18 years with Citicorp where he had severalassignmentsrelatingtomanaginganddevelopingsecuritizationprogramsandstructuringcapitalmarketstransactions.

BIOGRAPHIES

Justin Kennedy

JustinKennedy isaManagingDirectorandhasbeenCommercialRealEstate’sGlobalHeadofcapitalmarkets,structuringandsyndicateactivitiessince1998.Mr.Kennedyhasspentthelast22yearsintherealestatecapitalmarketsandrealestatedevelopmentbusinessesincludingfouryearsatGoldmanSachs&Co.asheadofthecommercialmortgagetradingdeskandeightyearsinrealestatedevelopment.

Mr.KennedyholdsaB.A.ineconomicsfromStanfordUniversityandanM.B.A.fromUCLA.

JonathanPollack

JonathanPollackisaManagingDirectorandhasbeenwithDeutscheBank’sCREbusinessformorethan10years.Mr.PollackwasafoundingmemberoftheEuropeanCommercialRealEstateGroup(ECREG)in2001,andoversawitsgrowthintothelargestCREplatforminEurope.Mr.PollackiscurrentlybasedinNewYorkandisgloballyresponsibleforallloancommitmentsforCRE.

Mr.PollackjoinedDeutscheBankin1999havingpreviouslyworkedforNomura.HeattendedNorthwesternUniversityandgraduatedwithaB.A.ineconomicsin1998.

ScottWaynebern

ScottWaynebernisaManagingDirectorandmanagestheInvestmentSolutionsteamwithinCRE’sSpecialOpportunitiesbusinessandisresponsibleforcommittingcapitalinavarietyofDeutscheBank-managedinvestmentvehiclesandpartnerships.

Priortohiscurrentrole,Mr.WaynebernwasHeadofDeutscheBank’sPrimaryCMBSTradingDeskwherehewas responsible forcommittingcapital,pricingand riskmanagement forDB’sU.S. loanoriginationbusinessandforthedistributionofnewissueCMBS.Mr.WaynebernbeganDeutscheBank’ssecondaryCMBStradingdeskin1996andwasoneofthefoundingmembersofDeutscheBank’sCREbusiness.

Mr.Wayneberngraduated from theWhartonSchoolat theUniversityofPennsylvania.Mr.Waynebernreceived an M.B.A. in finance with distinction from Northwestern University’s Kellogg School ofManagement.

Commercial Real Estate Cycle – The Next Move

DEFLATION

INFLATION INCREASING CAPITAL

LIQUIDITY

DECREASING CAPITAL

LQIUIDITY

CAPITAL FLIGHT

CAPITAL FORMATION

Total Value Decline 30 - 60%

PEAK

EXPANSIONCONTRACTION

Balanced Value Line

TROUGH

RECESSION

15 years

???Unknown

timing and path of cycle

1992 2007 2009

RECOVERY

~ $2 trillion of CRE

loans in US maturing

now to 2013DEFLATION

INFLATION INCREASING CAPITAL

LIQUIDITY

DECREASING CAPITAL

LQIUIDITY

CAPITAL FLIGHT

CAPITAL FORMATION

Total Value Decline 30 - 60%

PEAK

EXPANSIONCONTRACTION

Balanced Value Line

TROUGH

RECESSION

15 years

???Unknown

timing and path of cycle

1992 2007 2009

RECOVERY



now to 2013



now to 2013

The Next Move The U.S. Housing Market: At An Inflection Point?Karen Weaver, GlobalHeadofSecuritizedProductsResearch

The U.S. Housing Market: At An Inflection Point?

Global Securitization Research

October 2009

Karen Weaver, CFAGlobal Head of Securitization Research212 250 3125

All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Independent, third -party research (IR) on certain companies covered by DBSI's research is available to customers of DBSI in the United States at no cost. Customers can access IR at http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 106/05/2009

Page 2Karen Weaver, [email protected]


“Armageddon” recedes, but home prices still correcting

n New “nationwide” HPD forecast (Q2 data)– ~10% more to go, 38% peak-to-trough– We’re no longer outliers

n Greenshoots – positive surprises – Some data is misleading due to base effect, seasonality– ~43% of home sales are to first time homebuyers (tax credit(s) pulling demand

forward)– ~29% of home sales are to investors; will be future inventory

n Yet, momentum is important– HPA is highly auto-correlated– Buyers/sellers/lenders focus on comparables

Estimation risk in our HPD forecast is now—for the first time—skewed to upside

Karen Weaver, [email protected]


A glimmer of stabilization in home prices and the stock market’s buoyancy could change psychology

n Potential buyers cite two reasons they aren’t buying1. Expect prices to fall further (momentum)2. Fear of job loss (psychology)

n Consumer confidence, while up from its lows, fell again in September

n Psychology is unpredictable and can change quickly

n In markets with good affordability and low foreclosures, a change in psychology could surprise us on the upside



Monthly momentum* in the Case-Shiller SA 10-city index

* If momentum equals 1, on average, the subsequent month’s appreciation is the same as the prior month’s appreciation

Source: S&P, Deutsche Bank

-12

-9

-6

-3

0

3

6

9

12

15

Mar-87 Dec-89 Sep-92 Jun-95 Mar-98 Dec-00 Sep-03 Jun-06 Jun-09

Mon

thly

mom

entu

m o

f com

posi

te 1

0

-85

18



But we doubt that psychology and momentum can spiral upward and overcome the daunting fundamentals…

n Excess supply of 2-4 years– rising inventories, especially distressed– shadow inventory (currently only 30% of sales are optional)

n High unemployment and underemployment that few expect to subside soon

n Tight credit conditions at the extremes (subprime and jumbo)

n Unsustainably low mortgage rates

n Rent-vs-buy less attractive as rents fall

Our base case is there is still too much stress to re-start a self-fulfilling upward spiral



Rapid rise in serious delinquencies = rapid rise in foreclosures 18 months hence

Source: First American CoreLogic, LoanPerformance, Deutsche Bank

34%

9.7%

0

15

30

45%

Jan-00 Dec-01 Nov-03 Oct-05 Sep-07 Aug-09

Non

-prim

e 60

+ de

linq

(%)

0

11%

U

nem

ploy

men

t rat

e (%

)

Subprime and Alt-A US unemployment rate (sa, rhs)

34%

7.1%

9.7%

0

15

30

45%

Jan-00 Dec-01 Nov-03 Oct-05 Sep-07 Aug-09

Non

-prim

e 60

+ de

linq

(%)

0

11%

Prim

e 60

+ de

linq

(%)

and

unem

ploy

men

t rat

e (%

)

Subprime and Alt-A Prime (rhs) US unemployment rate (sa, rhs)



Shadow supply – problem mortgages still in the wings

Source: Deutsche Bank

Est’d Foreclosures

Out of 60+days

Delinquent

2.4 million

Est’d Units in

Foreclosure

2.1 million

Est’d Foreclosures

Out of Current and < 60

6.5 million

11 million+ + ˜



As long as excess supply exists, ‘over’ correction is the result

n We estimate excess supply at 3.5 million units

n If annual U.S. household formations are 800k, 3.5m units = ~4 years

Source: Deutsche Bank, US Census Bureau

~2 million ‘excess’ vacant units

2

3

4

5

6

7

Q1'65 Q1'76 Q1'87 Q1'98 Q1'09

0.62 excess vacancies per 100 people

~1.5 million ‘negative household formations’PLUS

2.72.6

2.9

3.2

3.5

Q1'65 Q1'76 Q1'87 Q1'98 Q1'09

Avg no. of people per housing unit

Assume density reverts to 20-yr avg



U.S. home price declines have been staggering

S&P/Case-Shiller Home Price Index peak -to-current (% decline)

Case-Shiller data as of 7/09Source: S&P, Deutsche Bank

30

48

11 1315

19 20 2022 24

30 31

40 40 40 4145

4853 55

0%

15%

30%

45%

60%

20-C

ity In

dex

Dal

las

Den

ver

Cha

rlotte

Cle

vela

nd

Bos

ton

Atla

nta

New

Yor

k

Por

tland

Sea

ttle

Chi

cago

Was

hing

ton

Min

neap

olis

San

Die

go

Tam

pa

Los

Ang

eles

San

Fra

ncis

co

Det

roit

Mia

mi

Pho

enix

Las

Veg

as

Hom

e pr

ice

decl

ine

sinc

e pe

ak

(Cas

e-S

hille

r)



DB’s home price outlook

n Keyed off of affordability– the share of median income in that MSA needed to buy – the median home in that MSA– at current local mortgage rates

n Mean-reverting MSA by MSA– there are consistent regional differences in the share of income people devote to

housing

n Augmenting our analysis with four factors in each MSA– distressed inventory– unemployment, both the level and rate of change– home price momentum



HPD forecasts have converged

Source: Economy.com, S&P, Fitch, Calculated Risk

10% to go

38%40% 40% 39% 39%

36% 36%

27%

0

10

20

30

40

50

Deutsche Bank

Chase Nouriel Roubini

Economy.com

S&P Barclays Fitch NAR

Nat

ionw

ide

hom

e pr

ice

peak

-to-

trou

gh d

eclin

e (n

omin

al)



Deutsche Bank's outlook for bellwether MSAs and our 100-MSA weighted average

Decline neededto restore Distressed Home price DB home price outlook

affordability inventory Unemployment score momentum Q2’09-to- Peak-to-MSA(a) (as of Q2’09) (b) score Level Change score trough trough

Los Angeles, CA (2)% 7 9 2 4 (5)% (45)%

New York, NY (28) 7 6 10 9 (39) (54)

Miami, FL (21) 10 8 10 5 (23) (58)

Phoenix, AZ — 9 3 5 7 (11) (58)

Las Vegas, NV — 10 9 10 10 (16) (63)

Boston, MA (6) 6 3 7 2 (9) (28)

Chicago, IL (2) 8 7 8 5 (5) (31)

Nationwide (10.5)% (38)%

(a) MSA = ‘ Metropolitan Statistical Area’(b) Price decline to restore affordability to its historical peak in a given MSASource: US Department of Labor, National Association of Realtors, First American CoreLogic, LoanPerformance, Deutsche Bank



14 million 15 million

11 million

18 million

~21 million

Est'd current DB

(Q1'09)

Est'd current Economy.com

(Q1'09)

Est'd current CoreLogic(Q4'08)

Economy.com projection

DB projection (~Q1'11)

Housing morphs from piggy bank to albatross

Source: Economy.com, CoreLogic, Deutsche Bank

Appx 42% of mortgagors

Homeowners with mortgage balances > property value



Summing up

n Housing prices remain vulnerable based on fundamentals

n Positive momentum is worth noting and probably limits downside

n U.S. gov’t support has been massive– FHA lending, homebuyer credit, MBS purchases, mods/moratoriums

n Another 10% to go, possibly less, probably not more



Appendix 1

Important DisclosuresAdditional Information Available upon Request

Regulatory Disclosures1. Important Additional Conflict Disclosures

Aside from within this report, important conflict disclosures ca n also be found at https://gm.db.com/equities under the “Disclosures Lookup” and “Legal” tabs. Investors are strongly encouraged to review this information bef ore investing.

2. Short-Term Trade Ideas

Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank’s existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com.

3. Country-Specific Disclosures

Australia: This research, and any access to it, is intended only for “wholesale clients” within the meaning of the Australian Corporations Act.

EU countries: Disclosures relating to our obligations under MiF iD can be found at http://globalmarkets.db.com/riskdisclosures.

Japan: Disclosures under the Financial Instruments and Exchange Law: Company name – Deutsche Securities Inc. Registration number – Registered as a financial instruments dealer by the Head of the Kanto Local Fina nce Bureau (Kinsho) No. 117. Member of associations: JSDA, The Financial Futures Association of Japan. Commissions and risks involved in stock transactions – for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations.

New Zealand: This research is not intended for, and should not be given to, “members of the public” within the meaning of the New Zealand Securities Market Act 1988.

Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation.



The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report.

Karen Weaver

Analyst Certifications

Global DisclaimerThe information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively “Deutsche Bank”). The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Deutsche Bank makes no representation as to the accuracy or completeness of such information.Deutsche Bank may (1) engage in securities transactions in a man ner inconsistent with this research report, (2) with respect to securities covered by this report, sell to or buy from customers on a principal basis, and (3) consider this report in deciding to trade on a proprietary basis. Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Prices and availability of financial instruments are subject to change without notice. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy.The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Stock transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency other than an investor’s currency, a change in exchange rates may adversely affect the investment. Past performance is not necessarily indicative of fut ure results.Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor's home jurisdiction. In the U.S. this report is approved and/or distributed by Deutsche Bank Securities Inc., a member of the NYSE, the NASD, NFA and SIPC. In Germany this report is approved and/or communicated by Deutsche Bank AG Frankfurt authorized by the BaFin. In the United Kingdom this report is approved and/or communicated by Deutsche Bank AG London, a member of the London Stock Exchange and regulated by the Financial Services Authority for the conduct of investment business in the UK and authorized by the BaFin. This report is distributed in Hong Kong by Deutsche Bank AG, Hong Kong Branch, in Korea by Deutsche Securities Korea Co. This report is distributed in Singapore by Deutsche Bank AG, Singapor e Branch, and recipients in Singapore of this report are to cont act Deutsche Bank AG, Singapore Branch in respect of any matters arising from, or in connection with, this report. Where this report is issued or promulgated in Singapore to a person who is not an accredited investor, expert investor or institutional investor (as defined in the applicable Singapore laws and regulations), Deutsche Bank AG, Singapore Branch accepts legal responsibility to such person for the contents of this report. In Japan this report is approved and/or distributed by Deutsche Securities Inc. The information contained in this report does not constitute the provision of investment advice. In Australia, retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision abo ut whether to acquire the product. Deutsche Bank AG Johannesburg is incorporated in the Federal Republic of Germany (Branch Register Number in South Africa: 1998/003298/10). Additional information relative to securities, other financial products or issuers discussed in this report is available upon request. This report may not be reproduced, distributed or published by any person for any purpose without Deutsche Bank's prior written consent. Please cite source when quoting.Copyright © 2009 Deutsche Bank AG

Capitalizing on Opportunities

October 2009

Page 2

Commercial Real Estate Overview

Overview of Real Estate at Deutsche Bank

Commercial real estate is one of the

critical business lines of Deutsche

Bank

* REGAL – Real Estate Gaming and Leisure

Corporate and Investment Real Estate Banking (CIB)

Deutsche Bank AG

Global Banking

Real Estate Advisor

n Full range of advisory and M&A servicesn Cover public and private companies, REITs and REOCs, as

well as select financial buyers and institutional investorsn Business and client activities managed globallyn Integrated with corporate finance client coveragen Initiate, finance, execute large complex transactions

Real Estate, Gaming & Lodging (REGAL )

n Dedicated REGAL equity teamn IPO and secondary market offering originationn Researchn Equity Derivatesn Cash equities

Equity Capital Markets

n Dedicated REGAL team for HY and IGn Bond and financing productsn New issue origination

Debt Capital Markets

Commercial Real Estate Group (CREG)

Commercial Real Estate Group

n CMBSn Securitized Loansn Credit tenant lease financingn Warehouse lines

n GSE Multifamily financingn FHA-related financingsn FI Advisoryn Restructuring Advisory

n Distressed Purchasesn Distressed Financingn Portfolio Purchases

CREG SpecialSituations

n New Issuancen Secondary Tradingn Syndicationn Credit Linked transactions

CMBS Capital Markets

Page 4

CRE’s Geographic Presence

Headquartered in New York City with 18 principal offices

around the world and approximately 400 professionals

With over 20 years of relevant

experience, CRE’s experienced and dedicated senior

management and personnel ensure

clients benefit from CRE and DB’s

global platform

Commercial real estate team

Deutsche Bank CIB office

CRE’s Broad, Highly Integrated Business Model has Transformed Since the Market Dislocation

Large Loan

(>100mm)CMBS

Large Loan

(>100mm)CMBS

Small Loan (<100mm)

CMBS

Small Loan (<100mm)

CMBS

Product Model Pre-2008

Product Model 2009+

GSE market open

GSE market open

Whse Lines ok under revised terms

Whse Lines ok under revised terms

CDO market dead

CDO market dead

High growth area

•Single Asset• NPL Portfolios• Constrained

Lending

High growth area

•Single Asset• NPL Portfolios• Constrained

Lending

Synd. Market partially open

Synd. Market partially open

Secondary Trading – Growth areaSecondary Trading – Growth area

Growth area –

strategic and

transformation into

profit center

Growth area –

strategic and

transformation into

profit center

Capital Markets -The core intellectual capital of the franchiseCapital Markets -The core intellectual capital of the franchise

CAPITAL MARKETSCAPITAL MARKETSADVISORYADVISORY

No Large Loans

No Large Loans

Open / Growth

Stalled

Closed

Advisory

Multi-Family(DBBM)

Multi-Family(DBBM)

WhseLinesWhseLinesCDOCDO

SpecialSituationsSpecial

Situations

Corp RE Loans

Corp RE Loans

Secondary Trading: Cash, Agency and DerivativesSecondary Trading: Cash, Agency and Derivatives

Servicing & Asset

Surveillance

Servicing & Asset

Surveillance

Capital Markets Pricing and DistributionCapital Markets Pricing and Distribution

Loan Origination and BankingLoan Origination and Banking

TALF & Pfandbr

iefopen

TALF & Pfandbr

iefopen

DISTRESSEDDISTRESSED

New high growth

product area

New high growth

product area

Page 6

Recent Awardsn Global awards

– Best Bank Overall– Best Bank for Equity Related Issues– Best Bank for Debt Capital Markets

n Regional awards– Best Bank Overall in Western Europe– Best Bank Overall in Emerging Europe– Best Bank for Equity Related Issues in Western

Europe– Best Bank for Debt Capital Markets in Western Europe– Best Bank for M&A Advisory in Western Europe

n Country awards– Best Bank Overall in Germany– Best Bank for Equity Related Issues in Germany– Best Bank for Debt Capital Markets in Germany– Best Investment Manager in Germany– Best Bank Overall in Russia– Best Investment Manager in Russia

n 'Best Debut Covered Bond'

PresentersMaximus Advisors

n Peter Muoio, Ph.D. Senior Principal

Deutsche Bank

n Richard ParkusHead of CMBS Research

n Justin KennedyGlobal Head, Commercial Real Estate Capital Markets

n Scott WaynebernCommercial Real Estate Special Opportunities

n Jonathan PollackCommercial Real Estate Capital Markets

Page 8

CRE Exposure in the Banking System

Macroeconomic Backdrop

Economy Has Stabilized, Financial Market Confidence Returning, Pressures Holding Back Recovery

n The “shock and awe” stage is over; most financial market and economic indicators have ceased their free-fall

n However, there is little impetus to growth at the present as most sectors of the economy remain under intense pressure and government policies are working at cross-purposes to each other

n Consumer: job declines, high unemployment, wage pressures, wealth loss, less access to credit

n Businesses: stabilized but low profitability, regulatory and fis cal uncertaintyn Exports: global weakness persists despite improvement in some large developing

countries like China and Braziln Government: stimulus is having an impact but other initiatives – climate change,

health care, deficit reduction, regulation – are increasing consumer and business uncertainty and raising specter of much higher taxes ahead, counteracting stimulus policies

n Real estate fundamentals will continue to deteriorate and values continue to decline as vacancies and rents in coming quarters reflect the impact of damage already inflicted and still to come from the weak economy

Page 10

Regional Impact of Recession

Most Major US Metro Areas Are Still Shedding Jobsn Weakness is still pervasive across most economies.

n Manufacturing-intense metro areas remain under significant pressure, as do those with outsized exposure to housing

n Outside of NY, markets where financial services are a core component continue to sustain significant losses.

Employment Still Declining Across Most Major Markets

US Office Fundamentals Set to Worsen Further

Slowing Office Job Losses Do Not Imply Easing of Negative Absorption

0 90 807060 50403

40

20

0

-20

-40

-60

-80

4 0

2 0

0

-20

-40

-60

-80

M SF

Thr oug h2q09

Of fise Employment Ch ange, MSF equiva len tOf f ice A bsor ption

Page 12


Office Segment Still in the Vicious Supply-Demand Cycle

090 8070 6050403

30

20

10

0

-10

-20

-30

30

20

10

0

-10

-20

-30

MSF

Through2q 09

A bsor ptio nCompletions


US Office Vacancies Will Hit 19% in 2010 and then Recover Slowly

131 21 11009080 70 60504030 20 10099989 79 69594939 29 190

1 50

1 00

50

0

-50

-1 00

-1 50

24

20

16

12

8

4

0

MSF Perce nt

Maximus AdvisorsF orecast

A bso rp tio nComp le tio nsV aca nc y Rate (r ight sca le)

Page 14


Office Rent Outlook Poor

131 211100 908070 605040 302010 099

2 6

2 4

2 2

2 0

1 8

1 6

1 4

1 2

1 0

2 6

2 4

2 2

2 0

1 8

1 6

1 4

1 2

1 0

$ /sf

20.720.32 0.020.6

22.4

2 4.624.6

22 .2

2 0.419.820.0

2 1.1

22.7

24 .5

2 1.8

M axim us A dvisorsF or ec as t

US Retail Fundamentals Look to Weaken This Year and NextRetail Sales Freefall Has Stopped but Spending at 2004 Levels and Listless

090807060504

130

125

120

115

110

Retail Sal es ex Auto s, $1982 B i ll ion

Through7/09

090807060504

130

125

120

115

110

Retail Sal es ex Auto s, $1982 B i ll ion

Through7/09

Page 16

US Retail Fundamentals Look to Weaken This Year and NextHigher Savings Rate Could Have Long-Term Impact on Retail

08060402009896949 290888684828078767 47270

16

14

12

10

8

6

4

2

0

16

14

12

10

8

6

4

2

0

US Savi ngs Rate, %

T hr ou g h7 /0 9

US Retail Fundamentals Look to Weaken This Year and NextAbsorption Continues Decline While Vacancies Rise

0 9080 70605

15

10

5

0

-5

-10

1 0.0

9 .5

9 .0

8 .5

8 .0

7 .5

7 .0

6 .5

M S F P ercent V ac ant

Th ro ug h2q 09

A bsorpt ion (lef t)Competions ( lef t)V acancy Rate ( right)

Page 18

US Retail Fundamentals Look to Weaken This Year and NextNeighborhood/Strip Rents Are Sharply Lower

0 90 807060 5

6

4

2

0

-2

-4

-6

6

4

2

0

-2

-4

-6

Ann ua li ze d Qu arte rl y % C ha nge

T hr oug h2q 09

US Retail Fundamentals Look to Weaken This Year and NextUS Retail Vacancies Will Hit a New Record

131 21 11 00 90 8070605040302010099989796959493929190

60

40

20

0

-20

-40

1 8

1 5

1 2

9

6

3

0

M i l li on Squ are Feet Pe rc ent

Ma xi m us Ad vi sorsForec ast

A b sor ptio n (lef t)Completions ( le ft)V a can cy Rate (r ight)

Page 20

US Retail Fundamentals Look to Weaken This Year and NextRetail Rents Will Post Significant Declines

1 31 21 11 009080706050 40 30 20 100

6

4

2

0

-2

-4

-6

6

4

2

0

-2

-4

-6

%Ch ang e Ye ar A go

M ax im u s A dvi sorsF orecast

Apartment Fundamentals: More Pain, Faster Gain

Negative Apartment Absorption Reflects Impact of Recession

Page 22


20-34 Age Group Growing Rapidly but Impact Currently Masked by Recession

15141312111009080706050403020100

6 8

6 6

6 4

6 2

6 0

5 8

6 8

6 6

6 4

6 2

6 0

5 8

Millio n Peo ple (20 -34 A g e Gro up)


US Apartment Vacancies Look to Reach New Highs

13121110090 80 70 60 50403020100999897969 59 49 39 29190

2 50

2 00

1 50

1 00

50

0

-50

1 0

8

6

4

2

0

Thou san d Units Pe rc ent

M axi m us Adv isorsF oreca stA bso rp tion ( left)

Comp le tion s (lef t)V aca ncy Ra te ( rig ht)

Page 24


Rents Heading Down this Year and Next then Recovering in 2011-12

1312111 00 90807060504030 20 100999897969 59 49 3929190

1 0

8

6

4

2

0

-2

-4

10

8

6

4

2

0

-2

-4

Eff ec tive Rents, % Chan ge

M a xi m us A dvi sorsFo re cast

Implications for NOI, Cap Rates and Valuations

n This suggests an aggregate NOI decline across the three segmentsof about 16.3%

Fundamentals Deterioration and Deteriorated Credit Markets Push Valuations Down

Page 26

Loan Performance Deteriorating Precipitously

n Speed of deterioration in loan performance remains at unprecedented levels

n Total delinquency rate (fixed rate CMBS) reached 5.5% in September, nearly 3-times its March level

n Delinquency rates will continue to rise over next 12-24 months, spurred by billions of dollars of pro forma loans that never stabilized and resetting partial IO loans

n With 2,158 delinquent fixed rate loans ($27.9 billion) special servicers may soon be under pressure

n We project total losses will reach 9-12% for the CMBS universe ($65-$85 billion), and 17-21% for the 2007 vintage

Where We Were at the End of Q1 2009…

n Our view as of Q1 2009: Aggregate delinquency rate will be in excess of 3.5% by end of 2009, and 5-6% by late 2010

0 . 0 0

0 . 5 0

1 . 0 0

1 . 5 0

2 . 0 0

2 . 5 0

3 . 0 0

3 . 5 0

4 . 0 0

J a n - 9 9 J a n - 0 0 J a n - 0 1 J a n - 0 2 J a n - 0 3 J a n - 0 4 J a n - 0 5 J a n - 0 6 J a n - 0 7 Jan-08 J a n - 0 9

Del

inqu

ency

Rat

e (%

)

0

1

2

3

4

5

6

Tot

al D

elin

quen

cy R

ate

(%)

3 0 - D a y 6 0 - D a y 9 0 + d a y D e l i n q u e n t M a t u r e d L o a n s To ta l (R t . Ax i s )

Page 28

Where We are Five Months Later…

n Total delinquency rate, currently 5.5%, increasing at a dramatic pace: 170% since March ’09 and 600% since October 2008

n Pace of deterioration exceeds that of 1990s: Total increase nearly 500bp in last 12 months

n We expect aggregate delinquency rate to reach 6.5-7.5% by end of 2009

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

J a n - 9 9 J a n - 0 0 J a n - 0 1 J a n - 0 2 J a n - 0 3 J a n - 0 4 J a n - 0 5 J a n - 0 6 J a n - 0 7 J a n - 0 8 J a n - 0 9

Del

inqu

ency

Rat

e (%

)

0

1

2

3

4

5

6

Tot

al D

elin

quen

cy R

ate

(%)

3 0 - D a y 6 0 - D a y 9 0 + d a y D e l i n q u e n t M a t u r e d L o a n s T o t a l ( R t . A x i s )

Even Highly Seasoned Vintages Showing very Significant Deterioration

n Maturity defaults removed from the data, leaving only term-delinquencies

n 2002-2004 vintages still exhibiting reasonable performance

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Jan-01 J a n - 0 2 J a n - 0 3 Jan-04 J a n - 0 5 Jan-06 Jan-07 J a n - 0 8 Jan-09

Tot

al D

elin

quen

cy R

ate

(%)

1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8

Page 30

$15 billion of Large Pro Forma Fixed Rate Loans had Not Stabilized as of 2007

n Less than 8% currently delinquent

n Pro forma loans are now highly unlikely to stabilize

n A very large percentage of these loans will default over the next 6 to 12 months, as their interest reserves are become depleted

Source: Intex, Trepp

Property Sector Balance ($ Bil) % DelinquentMultifamily 5.83 4.46%

Office 4.79 6.86%Retail 2.17 12.89%

Mixed Use 1.10 11.11%Hotel 0.65 4.06%

Industrial 0.47 11.74%Total 15.02

Partial IO Loans Exhibiting Significantly Greater Performance Deterioration Post Reset

n Delinquency rate for reset partial IO loans roughly twice that of other loans

n Nearly $100 billion of partial IOs resetting through mid 2012

n Average increase in debt service of 20-25%

Source: Intex, Trepp

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Jan-0

7

Mar-07

May-07

Jul-0

7

Sep-07

Nov-07

Jan-0

8

Mar-08

May-08

Jul-0

8

Sep-08

Nov-08

Jan-0

9

Mar-09

May-09

Tot

al D

elin

quen

cy R

ate

(%)

N o n - R e s e t I O s R e s e t I O s

Page 32

Massive Refinancing Risk for Loans that Survive to Maturityn CRE prices likely to decline 30-40% due to dramatic tightening in

underwriting and financing terms, and another 10-15% in response to contracting cash flows (recession)

n Simultaneously, allowable leverage has declined from 80-85LTV to 60-65LTV

n The combination is highly problematic, especially for 2005-2007 vintage loans

n Simple example: An 80 LTV loan on a $100MM property where property price drops 40%

Massive Refinancing Risk for Loans that Survive to Maturity (continued)n In excess of 65% of loans ($400 billion in CMBS) may not qualify to

refinance

n Over $2 trillion in commercial mortgages (excluding construction loans) maturing between now and 2013 in CMBS, banks and life company portfolios

n These problems are not the result of dislocated financing markets, rather they reflect the simple fact the majority of loans do not qualify for a loan large enough to retire the existing debt

n Improvements in rents and vacancy rates are also extremely unlikely to be sufficient to materially affect the scope of the problems

DB Term and Maturity Default Related Loss Estimates

n Very high forecasted total losses for the 2005-2008 vintages; much lower for the pre-2005 vintages

n Losses split fairly evenly between term and maturity default related

Source: Deutsche Bank, Intex

Existing

Originat ion Defau l t L o s s Sever i t y Defau l t Loss Sever i t y L o s s Defau l t L o s sV i n t a g e (%)* ( % ) * ( % ) * ( % ) * ( % ) * (%)* ( % ) * (%)* ( % ) *

2 0 0 0 2 . 6 1.4 5 2 . 3 4.3 0.9 21.9 1.6 6 . 9 3.9

2 0 0 1 2 . 5 1.2 4 8 . 7 8.5 1.9 21.9 1.1 1 1 . 1 4.22 0 0 2 3 . 1 1.4 4 6 . 0 1 2 . 9 2.2 17.2 0.5 1 6 . 0 4.2

2 0 0 3 4 . 0 1.9 4 7 . 4 1 4 . 1 2.2 15.5 0.2 1 8 . 2 4.32 0 0 4 6 . 5 2.9 4 4 . 8 2 0 . 6 3.0 14.7 0.1 2 7 . 1 6.0

2 0 0 5 8 . 7 4.2 4 8 . 6 3 2 . 5 5.5 16.9 0.1 4 1 . 2 9.82 0 0 6 1 4 . 7 7.4 5 0 . 3 3 1 . 0 5.5 17.9 0.0 4 5 . 6 1 2 . 92 0 0 7 2 1 . 7 1 2 . 1 5 5 . 8 3 8 . 4 9.2 23.9 0.0 6 0 . 0 2 1 . 3

2 0 0 8 1 7 . 7 8.5 4 7 . 9 1 9 . 8 5.7 28.7 0.0 3 7 . 5 1 4 . 2

2 0 0 0 - 2 0 0 8 1 2 . 2 6 . 3 5 2 . 2 2 7 . 7 5 . 5 1 9 . 7 0 . 2 3 9 . 8 1 2 . 0

2 0 0 5 - 2 0 0 8 1 5 . 8 8 . 3 5 2 . 9 3 4 . 0 6 . 9 2 0 . 3 0 . 0 4 9 . 7 1 5 . 3

* P e r c e n t c a l c u l a t e d w i t h r e s p e c t t o o r i g i n a l b a l a n c e

Projected Term P r o j e c t e d M a t u r i t y Pro jec ted Tota l

Commercial Mortgage Maturities

$0

$50

$100

$150

$200

$250

$300

$350

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Banks CMBS Life Cos Other

Sources: Federal Reserve, Foresight Analytics

In this cycle, CMBS lending becomes a factor unlike prior cycles

Page 36

“Shadow Banking” Funded the Bubblen “Shadow Banking” created unregulated credit supply that, for many asset classes, was greater

than that from normal bank sources

n Rapidly rising liquidity on increasingly aggressive terms, allowed by the run-away late stage securitization market, fed the growing bubble of asset prices

n In late 2006, the bubble mentality “group-think” started to crack. The broad market began to realize that asset prices, led by single family homes, would not always go up and simultaneously that the subprime lending process had created a massive pool of toxic assets

n The lending process is crippled, absent large scale intervention by the government. There is no visible path toward new paradigm.

n Current dearth of debt financing feeds a vicious circle for asset prices


0%

100%

200%

300%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Structured Products Nominal GDP

ConstrainedCredit

Higher Costof Capital

Poor CreditPerception

Lower AssetPrices

CheapLiquidity

Higher AssetPrices

Better CreditPerformance

Better Costof Funds

Vicious CircleVirtuous Circle

0%

100%

200%

300%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Structured Products Nominal GDP

ConstrainedCredit

Higher Costof Capital

Poor CreditPerception

Lower AssetPrices

CheapLiquidity

Higher AssetPrices

Better CreditPerformance

Better Costof Funds

Vicious CircleVirtuous Circle

The Value of Debt Informs the Value of Equityn Numerical example of a simple commercial real estate investment starkly demonstrates that new

debt parameters radically change required equity investment and return profile

n To maintain reasonable equity return profile, asset prices fall 44% - 50%.


Date February 2007 Sept 2009 Sept 2009 Sept 2009 Sept 2009 Sept 2009 Sept 2009Net Operating Income (NOI) 5.00 5.00 5.00 5.00 5.00 5.00 4.25

Cap Rate 5.0% 5.0% 5.0% 5.0% 8.9% 9.4% 8.4%Purchase Price ($) 100 MM 100 MM 100 MM 100 MM 56 MM 53 MM 50 MM

Loan to Cost 85% 38% 38% 62% 63% 72% 70%Equity ($) 15 MM 62 MM 62 MM 38 MM 21 MM 15 MM 15 MMLoan Amount ($) 85 MM 38 MM 38 MM 62 MM 35 MM 39 MM 35 MM

Amortization IO 30yr 30yr 30yr 30yr 30yr 30yr10yr UST 4.69% 3.22% 3.22% 0.00% 3.22% 3.22% 3.22%Swap Spread +50 +17 +17 +17 +17 +17 +17Credit Spread +55 +461 +500 +500 +361 +461 +461

5.74% 8.00% 8.39% 5.17% 7.00% 8.00% 8.00%

Debt Service 4.9 MM 3.4 MM 3.5 MM 4.1 MM 2.8 MM 3.4 MM 3.1 MMDebt Yield (NOI/Loan Amt) 5.9% 13.2% 13.2% 8.1% 14.2% 13.0% 12.1%DSCR 1.02x 1.48x 1.43x 1.22x 1.76x 1.46x 1.36x

NOI Growth Rate 3% 0.00% 9.11% 0.00% 0.00% 0.00% 2.00%Yr 10 NOI 6.5 5.0 11.0 5.0 5.0 5.0 5.1 Terminal Cap Rate 5.0% 5.0% 5.0% 5.0% 7.5% 7.5% 7.5%Yr 10 Value 130 100 219 100 67 67 68IRR 15% 2.6% 15.0% 2.4% 13.0% 15.0% 15.0%

Page 38

CRE, Construction and Land Exposures Present a Looming Threat to US Depository Capital Adequacy

ALL US DEPOSITORIES* BY ASSETS - ASSET COMPOSITION COMPARISON ($mm)Current Loan Portfolio 3/31/09

Dollar Amt % of AssetsTotal Assets ($mm) 13,850,906

Total Loans 7,708,262 55.7%

Residential RE Loans % of LoansResi 1-4 Family 2,700,362 35.0%

Commercial RE Loans % of LoansComm RE & Farm ($mm) 1,018,251 13.2%Constr & Land Dev ($mm) 532,444 6.9%Multifamily ($mm) 150,090 1.9%Foreign R/E ($mm) 77,923 1.0%Total CRE Loans 1,778,708 23.1%

Total RE Loans 4,479,070 58.1%

Other LoansC&I ($mm) 1,416,459 18.4%Consumer ($mm) 999,300 13.0%Other Loans ($mm) 694,691 9.0%Total Leases ($mm) 118,742 1.5%Total Non RE Loans 3,229,192 41.9%

* Excludes bank holding companies & non-depository and specialty banks (e.g. - GS, MS, AXP, STT, etc)Source: SNL Financial

All BanksDollar Amt % of Assets

7,245,229 52.3%

3,295,819 45.5%

% of Loans1,325,827 40.2%

% of Loans181,234 5.5%

93,835 2.8%58,549 1.8%66,591 2.0%

400,208 12.1%

1,726,036 52.4%

678,310 20.6%638,988 19.4%211,285 6.4%

41,202 1.3%1,569,784 47.6%

Top 4


Dollar Amt % of Assets Dollar Amt % of Assets5,935,590 42.9% 1,309,639 9.5%

2,423,007 40.8% 872,812 66.6%

% of Loans % of Loans947,368 39.1% 378,459 43.4%

% of Loans % of Loans92,097 3.8% 89,137 10.2%53,876 2.2% 39,959 4.6%49,637 2.0% 8,912 1.0%62,472 2.6% 4,119 0.5%

258,081 10.7% 142,127 16.3%

1,205,450 49.8% 520,586 59.6%

493,353 20.4% 184,957 21.2%521,285 21.5% 117,703 13.5%177,836 7.3% 33,449 3.8%25,085 1.0% 16,117 1.8%

1,217,558 50.2% 352,226 40.4%

JPM, Citi, BOA WF



Total Loans 7,708,262 55.7%






All BanksDollar Amt % of Assets Dollar Amt % of Assets

5,935,590 42.9% 1,309,639 9.5%

2,423,007 40.8% 872,812 66.6%

% of Loans % of Loans947,368 39.1% 378,459 43.4%

% of Loans % of Loans92,097 3.8% 89,137 10.2%53,876 2.2% 39,959 4.6%49,637 2.0% 8,912 1.0%62,472 2.6% 4,119 0.5%

258,081 10.7% 142,127 16.3%

1,205,450 49.8% 520,586 59.6%

493,353 20.4% 184,957 21.2%521,285 21.5% 117,703 13.5%177,836 7.3% 33,449 3.8%25,085 1.0% 16,117 1.8%

1,217,558 50.2% 352,226 40.4%

JPM, Citi, BOA WF



Total Loans 7,708,262 55.7%






All Banks

Page 40


Dollar Amt % of Assets Dollar Amt % of Assets5,935,590 42.9% 1,309,639 9.5%

2,423,007 40.8% 872,812 66.6%

% of Loans % of Loans947,368 39.1% 378,459 43.4%

% of Loans % of Loans92,097 3.8% 89,137 10.2%53,876 2.2% 39,959 4.6%49,637 2.0% 8,912 1.0%62,472 2.6% 4,119 0.5%

258,081 10.7% 142,127 16.3%

1,205,450 49.8% 520,586 59.6%

493,353 20.4% 184,957 21.2%521,285 21.5% 117,703 13.5%177,836 7.3% 33,449 3.8%25,085 1.0% 16,117 1.8%

1,217,558 50.2% 352,226 40.4%

JPM, Citi, BOA WFDollar Amt % of Assets

291,093 2.1%

178,817 61.4%

% of Loans61,208 34.2%

% of Loans23,266 13.0%12,111 6.8%3,071 1.7%

29 0.0%38,478 21.5%

99,686 55.7%

53,164 29.7%13,790 7.7%5,958 3.3%6,220 3.5%

79,132 44.3%

PNC



Total Loans 7,708,262 55.7%






All Banks




Total Loans 7,708,262 55.7%






All Banks Top 4% of Assets

52.3%

45.5%

% of Loans40.2%

% of Loans5.5%2.8%1.8%2.0%12.1%

52.4%

20.6%19.4%6.4%1.3%47.6%

5 - 30% of Assets

25.1%

50.2%

% of Loans33.1%

% of Loans14.3%7.9%2.1%0.4%24.7%

57.8%

21.4%12.5%4.8%3.5%42.2%

>30% of Assets

22.6%

85.3%

% of Loans29.8%

% of Loans22.0%11.3%2.0%0.2%

35.5%

65.4%

13.7%5.3%

15.0%0.6%

34.6%

Page 42

Now What? Value in a Volatile Real Estate Market

Is this the Bottom?

Source: Bloomberg, WSJ and Barron’s (Dow Jones, Inc)

TARP: October 2008 TALF: May 2009 Barron’s: May 2009

Page 44

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9/30/1996 9/30/1997 9/30/1998 9/30/1999 9/30/2000 9/30/2001 9/30/2002 9/30/2003 9/30/2004 9/30/2005 9/30/2006 9/30/2007 9/30/2008 9/30/2009

Swap

Spr

ead

(bps

)

-

200

400

600

800

1,000

1,200

1,400

1,600

9/30/1996 9/30/1997 9/30/1998 9/30/1999 9/30/2000 9/30/2001 9/30/2002 9/30/2003 9/30/2004 9/30/2005 9/30/2006 9/30/2007 9/30/2008 9/30/2009

Swap

Spr

ead

(bps

)

Modern CMBS Market: Spread History 1996–2009Asian

Currency Crisis

Q4 1997

Russia/LTCM

Q3 1998

9/11Q3 2001

Capital Markets Crisis Q1-2007 – ?

Sources: Bloomberg, Morgan Stanley, Bank of America

10 yr AAA Spreads

10 yr BBB Spreads

25

50

75

100

125

150

175

200

225

NAREIT US Real Estate Index

Source: NAREIT

2009

-65%

+243%

-54%

-38%

+185%

-72%

-118%

----------

Peak to Tro

ugh :146 Months

----------

-----

--------46 Months

------

---------

84 Months ------

-------

--- 26 Months

---

------------------25 M

onths -----------------------

--------

--------

-----

83 M

onths

----

--------

-------

+68%

Page 46

-

200

400

600

800

1,000

1,200

1,400

What Happened to US Commercial Real Estate Companies?

CarrAmericamerger announced

NAREIT index peaks EOP merger announced

Moody’s changes CMBS UW standards

§Bear Stearns announces 2 hedge funds lose over 90%

§Blackstone divests 61mm out of 100mm SF for $28bn, creating approximately $22bn of office CMBS debt for the market to absorb

Lehman files bankruptcy BofA to acquire Merrill

§Bear Stearns collapses

TALF eligible issuance for ABS commences

GGP Files Bankruptcy

Simon raises equity

Source: Bloomberg, Deutsche Bank

TALF expanded for

CMBS

1st CMBS TALF

subscription date

TALF extended until 2010

TARP Enacted

REIT Comparison – Retail

Source: Bloomberg

0%

50%

100%

150%

200%

Retail REITS

SIMON PROPERTY

MACERICH

DEVELOPERS DIVERSIFIED

GENERAL GROWTH

75%

125%

175%

225%

275%

325%

375%

425%

475%

525%

575%

625%

675%

725%

775%

Retail REITS – Previous 5 Years Retail REITS – Previous 2 Qtrs

Page 48

REIT Comparison – Office

Source: Bloomberg

0%

50%

100%

150%

200%

250%

300%

Office REITS

BOSTON PROPERTIES

VORNADO

BROOKFIELD

SL GREEN

100%

150%

200%

250%

300%

350%

400%

450%

Office REITS – Previous 5 Years Office REITS – Previous 2 Qtrs

REIT Comparison – Multifamily

Source: Bloomberg

100%

125%

150%

175%

200%

225%

250%

275%

0%

25%

50%

75%

100%

125%

150%

175%

200%

225%Multifamily REITS

EQUITY RESIDENTIAL

AIMCO

POST PROPERTIES

AVALONBAY

Multifamily REITS – Previous 5 Years Multifamily REITS – Previous 2 Qtrs

Page 50

REIT Credit Spreads by Sector (2004 – 2009)


+0

+200

+400

+600

+800

+1,000

+1,200

+1,400

+1,600

+1,800

+0

+200

+400

+600

+800

+1,000

+1,200

+1,400

+1,600

+1,800

+2,000

Spr

ead

to T

reas

ury

(bps

)

Office

Retail IndustrialMultifamily

Healthcare

Previous 5 Years (March ‘04 – Sep ’09) Previous 2 Qrts

Market Cap Rates vs. REIT Implied Cap Rates

Property Type Market Implied ?Office 10.1% 7.6% 2.5%

Retail 10.2% 8.0% 2.2%

Apartment 8.1% 6.8% 1.3%

Industrial 8.9% 7.7% 1.2%

Avg 9.3% 7.5% 1.8%

Source: Maximus Advisors, Green Street Advisors, Deutsche Bank

Page 52

CMBX.AAA.4 Price History (Jan ‘08 – Mar ‘09)

Source: Markit Group Limited

55

60

65

70

75

80

85

90

95

100

CMBX

Pric

e

CMBX.AAA.4

CMBX vs. S&P 500 (Jan ‘08 – Mar ‘09)

Correlation = 90%

Source: Bloomberg, Markit Group Limited

55

60

65

70

75

80

85

90

95

100

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

CMBX

Pric

e

S&P

Pric

e

S&P 500

CMBX.AAA.4

Page 54

CMBX vs S&P 500 vs Financials (Jan ‘08 – Mar ‘09)

(CMBX v s S&P) Correlation = 90%

(S&P v s Financials) Correlation = 98%(CMBX v s Financials) Correlation = 89%


25%

35%

45%

55%

65%

75%

85%

95%

105%

% C

hang

e

S&P 500CMBX.AAA.4

DJ U.S. Financials

CMBX vs S&P 500 vs Financials vs Commodities (Jan ’08 – Mar ‘09)


(CMBX v s Financials) Correlation = 98%(CMBX v s DB Commodities) Correlation = 88%

25%

45%

65%

85%

105%

125%

145%%

Cha

nge

S&P 500CMBX.AAA.4DB Commodities IndexDJ U.S. Financials

Page 56

CMBX.AAA.4 Price History (March ‘09 – Oct ‘09)

Source: Markit Group Limited

65

67

69

71

73

75

77

79

81

83

85

CMBX

Pric

e

CMBX.AAA.4+22% from 3/30/2009+43% from trough

CMBX vs. S&P 500 (March ‘09 – Oct ‘09)

Correlation = 84%


65

67

69

71

73

75

77

79

81

83

85

750

800

850

900

950

1,000

1,050

1,100

CMBX

Pric

e

S&P

Pric

eS&P 500

CMBX.AAA.4

+30% from 3/30/2009+52% from trough

Page 58

CMBX vs S&P 500 vs Financials (March ‘09 – Oct ‘09)


(S&P v s Financials) Correlation = 98%(CMBX v s Financials) Correlation = 82%


95%

105%

115%

125%

135%

145%

155%

165%

175%

% C

hang

e

S&P 500CMBX.AAA.4DJ U.S. Financials

+62% from 3/30/2009+111% from trough

CMBX vs S&P 500 vs Financials vs Commodities(March ‘09 – Oct ‘09)



95%

105%

115%

125%

135%

145%

155%

165%

175%

% C

hang

e

S&P 500CMBX.AAA.4

DB Commodities Index

DJ U.S. Financials

+10% from 3/30/2009+20% from trough

Page 60

CMBX vs S&P 500 vs Financials vs Commodities (Jan ‘08 – Oct ‘09)




25%

45%

65%

85%

105%

125%

145%

% C

hang

e

S&P 500

CMBX.AAA.4DB Commodities Index

DJ U.S. Financials

Matryoshka-zation of Equity Risk

Underlying Asset Loan Securitization CDO CDO2 CDO3/SIVs/ABCP/Banks

Pro

per

ty V

alu

e

RealEstateAsset

1st Mortgage Debt

Equity

BBB

Not Rated

Non-Investment

GradeCMBS

InvestmentGradeCMBS

AAA

BBB

Properties Loans CMBS

Paym

ent Priority

AAA

CDO

Mezz Debt

Mezz Debt

Equity

BBB

Not Rated

AAA

BBB

AAA

Equity

Pro

per

ty V

alu

e

RealEstateAsset

1st Mortgage Debt

Equity

BBB

Not Rated

Non-Investment

GradeCMBS

InvestmentGradeCMBS

AAA

BBB


Paym

ent Priority

AAA

CDO

Mezz Debt

Mezz Debt

Equity

BBB

Not Rated

AAA

BBB

AAA

Equity

RealEstateAsset

1st Mortgage Debt

Equity

BBB

Not Rated

BBB

Not Rated

Non-Investment

GradeCMBS

InvestmentGradeCMBS

AAA

BBB

AAA

BBB


Paym

ent Priority

AAA

CDO

Mezz Debt

Mezz Debt

Equity

BBB

Not Rated

BBB

Not Rated

AAA

BBB

AAA

BBB

AAA

Equity

Page 62

U.S. CMBS Issuance

Source: Deutsche Bank Securities, Commercial Mortgage Alert

$74

$ 5 7$47

$67$ 5 2

$ 7 8$93

$169

$ 2 0 3

$ 2 3 0

$ 1 2

0

5 0

100

150

200

250

1998 1999 2 0 0 0 2001 2 0 0 2 2 0 0 3 2004 2005 2006 2007 2 0 0 8

($ in

bill

ions

)

Current Debt Yields: 16% 15% 14% 14% 14% 12% 11% 10% 9% 9%

Debt Yield Definition: Property Cash Flow/Property Debt Amount (i.e. Discount rate at which the lender would own the property)

16%

2009

NA

Rating Agency Credit Metrics

Source: Moody ’s Investor Service

Moody's LTV vs Appraised LTV

60%

70%

80%

90%

100%

110%

120%

Moody's LTV Appraised LTV

2003 2004 2005 2006 2007 Q2 2008

LTV GAP

10%

15%

20%

25%

30%

35%

40%

45%

50%

LTV GAP

2003 2004 2005 2006 2007 Q2 2008

Page 64

Largest loan in CMBS universe…

Sources: Deutsche Bank, New York Post, Standard & Poor’s


STUY TOWN BLUESTISHMAN CA$H CRUNCH

§Exemplifies Strong value/Weak cash flow/Big interest reserve transaction

2.1% cap rate (purchase = $5.4B) 1.8% cap rate (total cost = $6.3B)0.40x DSCR (based on 2006 NCF)


Page 66






Largest borrower in CMBS universe…







Move by General Growth Rattles Malls' Investors“General Growth is the single largest CMBS borrower in the U.S. “

Page 68








Largest unsold loan in CMBS universe…








Largest unsold loan in CMBS universe…Blackstone explores Hilton restructuringHilton earned the dubious distinction of ending the jumbo LBO wave of 2007…In October 2007, Bear Stearns, Goldman Sachs, Morgan Stanley and Bank of America were among the banks that underwrote the [$21B of CMBS and mezzanine notes] that paid for Hilton’s acquisition. The banks failed to syndicate the deal at the time but offloaded some of the debt in the ensuing years.

Page 70

AAA CMBX Prices

74.0

76.0

78.0

80.0

82.0

84.0

86.0

88.0

90.0

92.0

94.0

CMBX.AAA.1 CMBX.AAA.2 CMBX.AAA.3 CMBX.AAA.4

CMBX Prices

Yield = 4.6%

Yield = 5.1%

Yield = 6.1%

Yield = 6.6%

Source: Markit Group Limited, Deutsche Bank

CMBS Exposure: Fixed Rate vs Floating Rate Collateral

OriginalProperty

Value = 100%

100

90

80

70

60

50

40

30

20

10

0

-Property-

-Fixed Rate Whole Loan-

Current Property Valuation

“Super Senior AAA”

= 0-49%

“AAA” = 49-61%

“AA” + lower-rated

bonds = 61-80%

-Floating Rate Whole Loan -

“Super Senior AAA”

= 0-27%

“AAA” = 49-61%

“B-Note” to “ Mezz” = 45-80%

“AAA” = 27-36%

“AA to BBB-” = 36-45%

Loan to

Value

Outside of CMBS Trust

Page 72

Historic Dislocation of CMBS Market = Opportunity

+0

+500

+1,000

+1,500

+2,000

+2,500

Spre

ad o

ver S

wap

s (b

ps)

U.S. Super-Senior Fixed Rate AAA CMBS

U.S. Floating Rate AAA CMBS (DB Duration Adjusted)

U.S. Fixed Rate WAC IOs

U.S. Investment Grade Corporate Bonds

Significant Widening of CRE Credit

Commercial real estate products – approximate pricing comps

Q1 2007 Q1 2008January 22,

2009 September 30, 2009

FIXED – CMBS

Super Senior AAA S+23 S+170 S+ S+200-600 ($80- 95 )

BBB- S+83 S+1605 S+2500-5000 ($17-26)

FLOATING – CMBS

AAA L+10 L+275 L+ L+400-1000 ($70-90)

BBB- L+190 L+850 L+ L+1500- 2000 ($35- 60)

REIT Bond Spread

BXP (Baa2/BBB+) S+35 S+271 S+999 S+275

SPG (A3/A-) S+18 S+291 S+877 S+250

AVB (Baa1/BBB+) S+21 S+331 S+888 S+215

CMBS -Style Mezzanine Loans

Sr. Mezzanine – 65% – 70% LTV L+175 L+300 L+1200 L+1200*

Mid Mezzanine –70% – 75% LTV L+250 L+350 L+1500*/NANote: Spreads are best estimate of current market pricing indic ations as of 9/30/2009. Source: Deutsche Bank Securities.

S+8400 ($5- $8)

900 ($75)

9000 ($6-$10)

1075 ($65)

L+1500/NA

* LTV on new values

Page 74

ConclusionsMispricing of equity risk; debt returns for equity risk§ Desire for higher return leads to reach for yields in every part of capital markets§ Low yielding assets over-levered to achieve higher returns§ Complexity of market overwhelms some participants

§ Over-reliance on rating agencies for credit analysis (now too conservative?)§ WE ARE SEEING THE RETURN OF ALL 4 FAULTS OF THE PREVIOUS CYCLE

Market inter -connectedness

§ Global pool of capital – limited new investment ideas

Securitization was/is vital to movement of capital and the global economy§ Securitization and leverage have greatly benefited the markets § Misapplication of these tools has driven this market crisis§ Remains part of the solution

Next Moves§ Massive, highly correlated trades likely over§ Good old-fashioned fundamental credit analysis and timing of investment to drive returns

Generic Asset Capitalization

Structure

1st Mortgage/1st Lien (60% LTV)

Mezzanine Debt(90% LTV)

Equity



Equity



Equity



Equity (10%LTV)

1st Mortgagne/1 st Lien(60% LTV)



Equity



Equity



Equity



Equity (10%LTV)

1st Mortgage/1 st Lien(60% LTV)



Equity



Equity



Equity



Equity (10%LTV)

1st Mortgagne/1 st Lien(60% LTV)



Equity



Equity



Equity



Equity (100%LTV)

1st Mortgage/1 st Lien(60% LTV)

Principal Debt Opportunities

Page 76

He Who Bought Real Estate in 2007 is Lost

2009 New DealValue: $65MM

2007 DealValue: $100MM

$80MM

$39MM

$20MM

$26MM

$20MM

$20MM

Equ

ity: 2

0%D

ebt:

80%

2007

Val

ue

= $1

00M

M

2009 Value = $65M

M

New

Equ

ity: 4

0%

Deb

t Writ

ten

Off

Old

Equ

ity

Deb

t: 60

%

Not

e S

ale

Val

ue

$60MM

2009 Distressed DealValue: $60MM

New Loan Origination

n Just now returning to our core business

n Focus on fundamentals

n Up to 70% LTV (new world valuation)

n Swaps + 300 to 600

n All major property types

n We will issue CMBS in 2010

Page 78

Single Asset Distressed

Hold to maturity balance sheet for 12% and higher returns

n Secondary market mortgage note acquisitions

n New loan to buyer of distressed asset– Post foreclosure– Unsold condo units

n DPO financing for good operators

n DIP financing for developments

n Bridge to lease-up or repositioning

n Direct participation or financing of other purchasers

Portfolio Distressed

n CRE-focused Financial Institution coverage

n FDIC loan auctions

n FDIC bank sales– Partnership on unwanted assets with acquiring bank

n Direct participation or financing of other purchasers

Page 80

DB Berkshire Mortgage – GSE Opportunity

n Maintained high activity level throughout the crisis

n $4.9bn volume in 2008, ~$4bn YTD 2009

n Fully integrated origination, underwriting, servicing and asset management

n Platform has many applications today– Basic GSE multifamily lending– Post-construction bridge financing to GSE take-out– Purchasing multifamily loan portfolios from financial institutions

Disclaimer

The information herein is believed to be reliable and has been obtained from sources believed to be reliable, but we make no representation or warranty, express or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of such information. In addition we have no obligation to update, modify or amend this communication or to otherwise notify a recipient in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. We therefore strongly suggest that recipients seek their own independent advice in relation to any investment, financial, legal, tax, accounting, or regulatory issues discussed herein. Analyses and opinions contained herein may be based on assumptions that if altered can change the analyses or opinions expressed. Nothing contained herein shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency rate or other market or economic measure. Furthermore, past performance is not necessarily indicative of future results.

This communication is provided for information purposes only. It is not an offer to sell, or a solicitation of an offer to buy any security, nor to enter into any agreement or contract with Deutsche Bank AG or any affiliates. Any offering or potential transaction that may be related to the subject matter of this communication will be made pursuant to separate and distinct documentation and in such case the information contained herein will be superseded in its entirety by such documentation in final form.

Because this communication is a summary only it may not contain all material terms, and therefore this communication in and of itself should not form the basis for any investment decision. Financial instruments that may be discussed herein may not be suitable fo r all investors, and potential investors must make an independent assessment of the appropriateness of any transaction in light of the ir own objectives and circumstances, including the possible risks and benefits of entering into such a transaction. By accepting receipt of this communication the recipient will be deemed to represent that they possess, either individually or through their advisers, suffic ient investment expertise to understand the risks involved in any purchase or sale of any financial instrument discussed herein. If a financial instrument is denominated in a currency other than an investor’s currency, a change in exchange rates may adversely affect the price or value of, or the income derived from, the financial, and any investor in that financial instrument effectively assumes currency risk. Prices and availability of any financial instruments described in this communication are subject to change without notice.

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