K.C. Conway, MAI, CRE

Economist | Counselor of Real Estate

Sr. VP Credit Risk Management – SunTrust Bank

Kiernan.Conway@SunTrust.com

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Disclaimer: Upfront and Not in fine print…

Neither the Georgia Board of Realtors or SunTrust Banks, Inc. make any

representations or warranties about the accuracy or suitability of any

information in this presentation. The aforementioned do not guarantee,

warrant, or endorse the advice or services of K.C. Conway, MAI, CRE.

This presentation consists of materials prepared exclusively by K.C.

Conway, MAI, CRE, and is provided during this conference solely for

informational purposes of attendees. This presentation is not intended to

constitute legal, investment or financial advice or the rendering of

legal, consulting, or other professional services of any kind.

Page #2

Economic Update – May 7, 2015 Griffin, GA K.C. Conway, MAI, CRE – SunTrust Market Intelligence

What you don’t know about K.C. Conway An Economist & Futurist

According to Luke, Dad/K.C. Conway is a 3-part Economist/“Futurist”

• 1 Part Client Eastwood Futurist

A “Futurist has to know his limits! – Know what you don’t know

… like future price of Oil.

• 1 Part David Allen Coe Futurist

I’ll Hang Around Just as Long as You will let me – I’m paid by the hour.

• 1 Part Billy Beane (Money Ball/Oakland A’s) Futurist

Know Your Metrics – And Heart of GA has some attractive metrics!

Page #3

“A” – What is the value of “Heart of Georgia” Real Estate priced in Bitcoin?

The Economic & CRE Trends K.C. won’t Forecast “A man/economist has got to know his limitations” - Clint Eastwood

http://bitcoincharts.com/charts/

Bitcoin all-time high $1,126 Nov 30 2013

Bitcoin Q2 2014 rally: $490 in April to $655 June

Pay attention to the FED (Richard Fisher in particular from Dallas FED) and the 10-Yr Tr. Recall the 10-Yr was 3% start of 2014.

The value of

Commercial Real

Estate at these low

interest rates is

distorted!

Cap Rates up

200bps and impact

on Value – 25%

Page #4

What to expect in 2015?

Page #5

Port States in Top-10 for Job Gr in Q1 ‘15

Q1 Econ. Data is telling us 2015 will be weak!

Page #6

Port States in Top-10 for Job Gr in Q1 ‘15

5th consecutive month Private Employment Job growth has slowed, and

2nd month in which the rate of Private Job creation was <200k

1. GDP: 0.2% in Q1 down from 4.5%-5% Q2-Q3 2014 When is last year we had 3 consecutive quarters of 3.5% or higher GDP? (2004)

2. JOBS: ½ of top-10 states for Job growth in 2014 were in what U.S. Region (NE, SE+Mid-Atl, SW+Inner Mtn states (TX, AZ, CO, NV, UT) or West-coast)?

3. Currency Devaluation: Argentina debt default, Euro at 12-yr record low ($1.35 to $1.05 March 2015). It matters to GA Ports and Manufacturing

4. Energy: Prices to stay recessed for years (not months)

5. Re-make Supply Chain: Short West-coast ports? This is the BIG Opportunity for GA!

6. Industrial: Inland Ports, Intermodal, E-Commerce

7. 3D Print Manufacturing

KC’s Top – 7 Economic “Disruptors”:

Page #7

Answers

Test Your Industrial R.E. Knowledge

• Assoc. of American Railroads & best

economic data on Industrial activity.

• Intermodal Assoc. of North America.

Detail on location of all Intermodal

• Ocean Shipping Container Availability

Report – by USDA / 2 yrs. Old /

Answers the ?: Where are my

containers / 18 OSCAR markets.

• Inland Port Market fueling BMW mfg

growth; and new Intermodal link for

KCS Class 1 RR thru TX to Mexico.

Page #8

• What is AAR.org & RailTime

Indicators?

• What is IANA?

• What is OSCAR – not the

Hollywood one. Why isn’t GA one?

• What’s the big deal about

Greenville, SC & Kansas City that

GA ought to take note of?

Inland Ports

Industrial – Redefining “Core” markets: The new CORE for Ind’l to be … TX Vs. CA, K-City (intermodal),

Greenville SC (Inland Port) & Memphis + Louisville KY (Air-cargo). GA a ?

The 7- Class I RRs (Note CN (red) & KCS (brown)

AAR.org – American Assoc. of RRs

Page #9

RailTime Data is Top Ind’l Intel for Warehouses & Manufacturing Forget ISM, Empire State Mfg Index & FED Mfg Surveys – go to the source!

Page #10

Intermodal - IANA Intermodal Association of North America

Intermodal Trivia:

1. How many

Intermodal Facilities

in the US?

(>1,080)

2. What 3 states have

the most Intermodal

facilities today?

(CA, IL, TX)

Post 2015?

“All that happens on the ports, doesn’t

stay on the ports” – Rail, Intermodal!

http://www.intermodal.org/

Page #11

OSCAR – Where are the Containers? Ocean Shipping Container Availability Report

OSCAR: Ocean Shipping Container Availability ReportThe OSCAR goes to 18 US Markets with the Logistics Data

Region MSA Region MSA

West Coast: Long Beach, CA Inland: Chicago, IL

Oakland, CA Cincinnati, OH

Seattlw, WA Columbus, OH

Tacoma, WA Dallas, TX

East Coast: New York Denver, CO

Norfolk, VA Kansas City, MO

Charleston, SC Memphis, TN

Savannah, GA Minneapolis, MN

Gulf Coast: Houston, TX OSCAR Atlanta

New Orleans, LA Omissions Florida/Jacksonville

Indianapolis

Page #12

Port Rankings – GA is #4 & “Best in Logisitics” A huge opportunity for GA!

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Inland Ports Offer Cost-Effective Intermodal Options

Charleston and Savannah are using the inland ports to protect their existing business and grab market

share from their competitors. The cheaper transportation provided by the inland ports also could make

shippers, more competitive globally. The Greer, S.C., inland port has been a long time coming. The South

Carolina Ports Authority bought the 100-acre site in 1982 The Port of Charleston saw how the Port of Virginia

was working to develop its inland port in Front Royal. The Virginia Inland Port — served by Norfolk

Southern Railway has attracted 39 major shippers and more than doubled its annual container. The

dynamics for the inland port at Greer, located near the Interstate 85 corridor, are now clear, Newsome

said. Higher fuel costs and tightening truck capacity are making intermodal rail more attractive to shippers,

and upstate South Carolina has become a hotbed of various types of manufacturing. The region is

expected to be the fastest-growing part of the Southeast over the next two decades, he said.

2015 STI UPDATE: The Ultimate Inland Shipping Machine

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www.colliers.com/US/Colliers_Port_Analysis_NA_Aug-2012 www.colliers.com/us/insights

CRE.org/Publications/rei_absdetail.cfm?lid=1897&lparent_id=1892 Page #15

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Industrial Trends: Global Freightways are going to REVERSE from E-W to W-E, and N-S.

East-coast ports open up new routes

Suez Canal is a check on Panama

Canal rates post 2015

LATAM labor cost Vs China’s – shift mfg.

Energy $ - commodities will flow differently

Harbor Maint. Tax – Canada/Mexico adv.

Who has

Energy?

Who

needs

Energy?

Source: IMS – Steve Shellenberg

Page #17

So What is the Future? Intermodal, Inland-Ports, and Rail

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2007 V 2040

Truck Traffic

on Nation’s

Highways

▶Economies of scale – lower delivered cost

One gallon of diesel fuel moves one ton of freight

•Nearly 500 miles via rail

•155 miles via truck

▶Eases highway congestion

A single intermodal train can take 300 long haul

trucks off the highway

▶Rail is the “Green” alternative

Trucks emit 4X more Greenhouse

gases than rail for same load of freight

▶Trucking industry facing increased costs

/ regulation, such as:

i) Hours of service change; ii) High driver

turnover (100%); iii) Rising insurance costs;

iv) Highway congestion; and v) Quality of life

for drivers.

Source: CenterPoint & USDOT Page #18

America’s 4th Coast

28% of GDP

Who will be East-coast’s

LA & LB?

The Gulf-coast: Houston &

Mobile

70% of Population East of MS

Where is the RR, Intermodal, e-Commerce fulfillment

infrastructure in the West? Why do you think the KeyStone

Pipeline is such a big-deal?

“FREIGHTWAYS” Define the 2015-2020 Outlook & E-Coast Economy Freightways are the CORRIDORS by which our economy grows - via sea-land-air.

Page #19

CenterPoint Intermodal Center- Joliet, IL: Why not Central GA?

▶ Nation’s Largest Inland Port

▶ Connects Chicago to West and East

Coast Ports

▶ 6,000+ Acres

▶ BNSF’s 770-Acre Intermodal Terminal

▶ UPRR’s 850-Acre Intermodal Terminal

▶ 4-6 Million TEU’s Per Annum in

Future

▶ 30 Million SF of Industrial Facilities

▶ 450 Acre Equipment Management

Area

▶ Over $50 Billion of Goods Past

Through Both Facilities

▶ Foreign Trade Zone #22

▶ $3 Billion CenterPoint Investment

▶ Public-Private-Partnership

Page #20

CenterPoint Recent Aerial Photo

Page #21

CenterPoint in Winterhaven,FL The Plan … more containers than GA or SC

▶ Up to 8.8 million square feet of new buildings

▶ 50 acres dedicated to container storage or fully loaded containers

Page #22

What they figured out in Winterhaven FL: Why not in Griffin?

▶ 407,000 square feet, 36’ clear height, cross dock facility

▶ Zoning to allow yard hostlers to buildings

Page #23

So What is the Future for East-coast & GA? Intermodal, Inland-Ports, and Rail … Export/Import Corridors!

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Page #24

Page #25

2nd Lowest $

#1 Eco Impact

Most Jobs + ROI

Convergence of Industrial, Mfg & Trade.

Page #26

Source: DaVinci Institute

http://www.thefiscaltimes.com/Articles/2014/02/17/These-Shoes-Were-Made-3-D-Printing#sthash.7rJwHKQQ.dpuf

3D Shoe Printer 3D Organ Printer Generic 3D Printer

Page #27

3D Printing will Revolutionize Supply Chain & Ind’l R.E. It isn’t far-fetched or Science Fiction!

3D Food Printers: Think raw-AG supply-chain & Central GA?

Will Dominos & PaPa Johns even exist in 10 years when we can 3D-Print a pizza at home?

Page #28

3D Printing is not Science-Fiction. It has evolved from trinkets to cosmetics – and more…

For those of you that have heard me speak in 1H2014, you know my thoughts and prognostications on 3-D printing. It is not a fad and it will revolutionize how we manufacture, warehouse and shop in ways that we could never have imagined. When we start to absorb all the ways 3-D printing technology is being applied today by real-world businesses, we start to realize this technology is very real and applicable to every industry sector and far beyond plastic trinkets sold in a Dollar-Discount store. Feetz – a company in southern California – is making custom orthotics using 3-D printing technology. Another California company is manufacturing AK-47 automatic weapons using graphite. Leading medical research university after university is developing the technology further to synthetically manufacture medicines and pharmacy items and human tissue ranging from skin grafts to even organs. But this may be the “disbeliever’s” breakthrough – MINK. MINK is the genius of a Harvard Business School graduate that has figure out how to 3-D print any shade of lipstick a woman could desire from home at a cost of $300. Imagine a 3-D Lipstick printer as a bathroom accessory for about the cost of the 3-D color printer in your office. It is reality by the end of this year! 3-D printing is going to turn upside down how we manufacture, warehouse and retail. It is another accelerant to the e-commerce revolution already underway in retail. How does a drug-store look without a cosmetics section because it all can be 3-D printed from home?

Skin &

Micro-Skin Sensors

Lipstick & Cosmetics

too!

Page #29

NASA Completes the First Successful 3-D Print in Space Nov 25, 2014 Travis Hessman | IndustryWeek

HTTP://WWW.INDUSTRYWEEK.COM/TECHNOLOGY/NASA-COMPLETES-FIRST-SUCCESSFUL-3-D-PRINT-SPACE?NL=IW-

07&SFVC4ENEWS=42&CL=ARTICLE_2_B&YM_RID=CPG03000001440206&YM_MID=2143

3D Printing & the Manufacturing Technology - CLIP. 3D Print-Manufacturing – Continuous Liquid Interface Production

Page #31

http://www.ibtimes.com/pulse/3d-printed-shelby-cobra-debuts-2015-detroit-auto-show-concept-reality-just-six-weeks-1781086

3D Printing & the Automobile Industry The Oakridge National Lab in TN

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3D Printing will DISRUPT commercial Real Estate! Think about 3D and new Home Construction.

Affordable housing & rebuilding post natural disasters?

Page #34

3D Printing – From trinkets to Aviation … Who will get these 3D Mfg Plants? Why not Griffin?

Page #35

Logistics

3PL

Transportation Services

Asset and Asset-Light

Cargo Handling

Public and Port Warehousing

Temperature Controlled Logistics

Auto / Light Truck

Intermodal Containers

Helicopters

Heavy / Construction Equipment

Offshore Equipment

Inland / Coastal Marine

Transportation

Leasing Assets

Marine &

Offshore

Services

Trucking

Coastal Tug & Barge

Inland Tug & Barge

Jones Act Shipping

Helicopters

Offshore Service Vessels

Oil Field Support Assets

Less Than Truck Load Truck Load

Rail Services &

Manufacturing

Class 1 Rail

Short Line Rail

Railcar Manufacturing & Lessors

Rail Services

Conclusion: Shameless plug for SunTrust Bank STI has Dedicated Transportation & Logistics Expertise

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Representative Clients 1,100 plus municipal clients

50 dedicated Relationship Managers

Average Relationship Manager experience: 20

years

Dedicated team of Public Finance bankers with

a national distribution network through STRH

~$5B in credit commitments to municipalities

~$6B in deposits for municipalities

Dedicated Municipal and Transportation Expertise as well …

Industry and Product Solutions Work Together to Meet our Client’s Needs

Note: Financial and estate planning provided through SunTrust Investment Services

Treasury & Payment Solutions

Payables and Receivables

Online Information and Control

Fraud Prevention

Commercial Card Programs

Merchant services

International Services

Investments and Endowment Mgmt

Investment Advisory and Management

Fixed income Investments

Retirement Plans

Planned Giving Services

Reporting & Administrative Services

Investment Banking Solutions

Public Debt Issuance

Interest Rate & Currency Risk Management

Private placement of Debt

Industry Expertise including Healthcare & Energy

Financing Solutions

Tax-Exempt Loans

Revolver and Term Loans

Bridge/Capital Campaign Financing

New Markets Tax Credits

Equipment Leasing Ports and

Logistics

The Final Comment… Luke knows that the “Driving Innovation” is Intermodal!

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Think intermodal & FREIGHTWAYS, not just land-sea-air! Thank You

K.C. Conway, MAI, CRE

Economist | Counselor of Real Estate

Sr. VP Credit Risk Management - SunTrust

KCmaicre@gmail.com