1

ROBERT A. STANGER & CO., INC.PRESENTATION TO APPRAISAL INSTITUTE

BY

WAYNE SOUZA

NON-LISTED REIT INDUSTRY

MARKET UPDATE

2

Market Update:

Summary of Major Events & Trends

• Regulatory-- DOL Fiduciary Rule – Phased Implementation / Uncertainty

-- NASAA REIT Guideline Amendment Delayed

-- 1st Anniversary of FINRA Account Statement/Valuation Rule

• Broker Dealer -- Re-Evaluation of IBD Business Model /Product Offerings

-- Temporary Paralysis

-- Movement toward a “Standard” Distribution Cost

• Competitive Environment-- Few New Sponsor Entrants to NL REIT Market

-- Pressure on DM & Advisory Fees

3

Market Update:

Summary of Major Events & Trends(continued)

• Industry Investment Performance

• Preserving AUM During Uncertain Times-- Slowdown of Liquidity Events

-- NL REIT Mergers

-- Contemplation of Conversions to NAV REIT Structure

• Product Line Expansions

-- Interval Funds / Private Placements / 1031s

• 2017 Fundraising

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FINRA Account Statement

Reporting Rules • Value Must Be Reported on Account Statement

(unless deemed unreliable)

• Member Firm Can Only Participate in Offerings Where

Issuer Agrees to Disclose Valuations Conforming to Rule

(including methodology, scope, date, basis for value)

• Two Presumptively Reliable Methods

• Net Investment

• Appraised Value

• Enhanced Disclosure Re: Distributions > “Earnings”

• Accelerated Timing of First Valuation

• Became Effective April 2016

• Led to Reduction of Front-End Fees & Multi-Share Class

Products

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Account Statement

Valuation Methodologies• Net Investment

• “Amount Available For Investment” from Estimated Use of

Proceeds In Prospectus

• Aggregate $ registered less % deduction for Sales Commissions,

Dealer Manager Fees and O&O (based on max offering,

unless reason to believe unreliable)

• May use until 150 days after 2nd Anniversary of Escrow Break

• Appraised Value

• May disclose at any time, but must disclose no later than limitation

date for Net Investment use

• Based on valuations of program assets and liabilities (“NAV”)

• Performed at least annually

• By or with material assistance/confirmation of 3rd party expert

• Methodology must conform to standard industry practice

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Account Statement Rules

Other Provisions• Enhanced Disclosure Regarding Excess Distributions

• Prior to disclosure of Appraised Valuation, account statement must

include, if applicable, this required disclosure:

“IMPORTANT – Part of your distribution includes a return of

capital. Any distribution that represents a return of capital reduces

the estimated per share value shown on your account statement.”

• Must be prominent and proximate to disclosure of distributions and

per share estimated value.

• Acceleration of Appraised Valuations

• No later than 150 days after 2nd anniversary of escrow

• Previously was 18 months after closing of offering period.

• Implemented

• April 11, 2016

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Valuations Trends

Among Public Non-Listed REITs

• Valuations Being Conducted Prior to

Extensions / Follow-On Offerings

• Gradual Migration Toward Quarterly

Valuations Beginning

• Valuations Compliant with IPA Practice

Guideline 2013-01: Valuations of Publicly

Registered Non-Listed REITs

• Disclosures of Methodology, Compliance and

Expert Engaged

8

Pressure on Distribution and

Advisory Fees

• 10 NL REITs Limiting Distribution Costs Below 10%

-- Range – 7.25% to 9.0%

-- Sponsors Absorbing Portion of Distribution Costs

• Five NL REITs Cutting Advisory Fees

-- Acquisition Fee Elimination

-- Subordination of Incentive with Greater Share of Upside

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NL REIT Investment Performance at Monetization(1)

2002 – Q1 2017 (Dollars in Millions)

Range Average Aggregate

Capital Invested (2)

$4 - $5,150 $1,434 $70,246

Total Return (1)

26.0% - 216.8% 127.3% 120.2%

XIRR (1)

(62.9%) - 48.5% 6.7% 7.7%

Aggregate Value Creation

$14.2 billion

Individual Programs

(1) Based on “Mid-Point” investor.

(2) Excludes net DRIP proceeds after redemptions.

Note: Performance is for 49 NL REITs providing liquidity events during May 2002 through March 31, 2017.

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Quarterly Liquidity Events

2013 thru March 2017

2013 - Q1 $2,235.0 2015 - Q1 $3,872.1 2017 - Q1 $0.0

2013 - Q2 8949.40 2015 - Q2 5024.6

2013 - Q3 1946.80 2015 - Q3 909.7

2013 - Q4 3196.80 2015 - Q4 3066.5

2014 - Q1 4543.70 2016 - Q1 329.9

2014 - Q2 4443.60 2016 - Q2 0.0

2014 - Q3 2096.00 2016 - Q3 953.2

2014 - Q4 4917.30 2016 - Q4 216.6

Total $46,701.2

Qtrly Avg $2,747.1

Monetizations

ROBERT A. STANGER & CO., INC.

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Public Non-Listed REIT

Equity Under Management

2009 – Q1 2017

$48.6 $52.1

$60.4 $61.3 $63.8

$66.5 $63.7

$66.5 $68.0

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

2009 2010 2011 2012 2013 2014 2015 2016 Q1 2017

($ billions)

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(1) Publicly registered as of March 31, 2017 and March 31, 2016.

(2) Does not include securities registered under dividend reinvestment plans.

Public DPP &NL REIT Offerings

($ in millions)

No. of Public

Offerings (1)

2017 2016

REAL ESTATE

Equity - LPs/LLCs 0 -$ -$ NC

- Non-Traded REITs 30 46,875.0$ 55,500.0$ -15.5%

Mortgage - LPs/LLCs 1 150.0$ 150.0$ NC

- Non-Traded REITs 2 3,500.0$ 2,800.0$ 25.0%

Total Real Estate 33 50,525.0$ 58,450.0$ -13.6%

OIL & GAS 3 3,350.0$ 3,000.0$ 11.7%

EQUIPMENT LEASING 2 400.0$ 150.0$ 166.7%

BUSINESS DEVELOPMENT COMPANIES 15 21,383.8$ 24,807.3$ -13.8%

TOTAL MARKET 53 75,658.8$ 86,407.3$ -12.4%

Amount Registered (2)

% Change

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NL REIT Fundraising

Q1 2015-2017

$3,280

$1,403 $1,556

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

Q1 2015 Q1 2016 Q1 2017

($ millions)

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Public Non-Listed REIT Fundraising

2010 – 2017e

$8,102 $8,348

$10,332

$19,620

$15,647

$10,046

$4,492

$0

$5,000

$10,000

$15,000

$20,000

$25,000

2010 2011 2012 2013 2014 2015 2016 2017e

$4,700 e

Source: The Stanger Market Pulse

($ millions)

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Q1 2017 Capital Flows to Public REITs

($ millions)

Non-Traded REITs $1,556 13%

Traded REIT IPOs $1,874 15%

Traded REIT Secondary Offerings $8,875 72%

Source: Robert A. Stanger & Co., SEC filings, NAREIT

ROBERT A. STANGER & CO., INC.

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2.56 2.98 3.16

6.50 6.50

8.60

5.65

2.05

3.46

4.74

8.76

6.91

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Stanger Market Clearing Index

Public Non-Listed REITs

ROBERT A. STANGER & CO., INC.

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NL REIT Fundraising

Q1 2017

$362

$116 $174

$22

$17

$20

$225

$208

$414

$0

$250

$500

$750

January February March

Blackstone Other NAV REITs Traditional NL REITs

($ millions)

ROBERT A. STANGER & CO., INC.

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Public NAV REIT Fundraising

2011 – YTD March 2017

$10 $49

$241 $272

$522

$876

$710 (1)

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2011 2012 2013 2014 2015 2016 2017 YTD

Source: The Stanger Market Pulse(1) Includes $279 million of Blackstone 2016 fundraising recognized at time of escrow break in January 2017.

($ millions)

ROBERT A. STANGER & CO., INC.

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CONFIDENTIAL MATERIALS - DRAFT

Effective NL-REITs & NL-BDCs

By Share Class

# Programs

Full-Load

Share Only

Low/No Load

Share Only

Multi-Share

Classes

Q1 2014 39 2 6

Q1 2015 43 1 6

Q1 2016 16 9 19

Q1 2017 7 10 25

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Non-Listed REIT Share Class

Fundraising Trend

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500C Share T Share R&W Shares

($ millions)

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Non-Listed REIT Fundraising

Full Commission Vs. No/Low Load/Trail Shares

Full Commission Product $15,213 97.2% $8,979 89.4% $1,823 40.6% $337 21.7%

No/Low Load/Trail Product

NAV 272 1.7% 522 5.2% 876 19.5% 710 45.6%

Deferred/Low/No Load 162 1.0% 545 5.4% 1,794 39.9% 510 32.7%

Total $434 2.8% $1,067 10.6% $2,669 59.4% $1,219 78.3%

2014 2015 2016 thru Mar

2017

Source: The Stanger Market Pulse.(1) Adjusted for removal of Blackstone 2016 sales which closed with breaking of escrow in January 2017.

2017 Annualized Run Rate

NAV $1,724 mm (1)

Full Commission $1,348 mm

Deferred/Low/No Load $2,040 mm

Total NL REITs $5,112 mm

($ millions)

ROBERT A. STANGER & CO., INC.

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Public Non-Listed BDC Fundraising2010 – 2017 YTD Annualized

$94

$369

$1,011e

$1,497

$2,836

$4,845

$5,493

$3,905

$1,428

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2009 2010 2011 2012 2013 2014 2015 2016 2017e

Source: The Stanger Market Pulse

($ millions)

ROBERT A. STANGER & CO., INC.

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NL BDC Fundraising

Q1 2015 - 2017

$1,141

$475

$253

$0

$200

$400

$600

$800

$1,000

$1,200

Q1 2015 Q1 2016 Q1 2017

($ millions)

ROBERT A. STANGER & CO., INC.

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2.44 2.71 3.26

2.11

3.31

6.12

14.94

17.91

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

YE 2010 YE 2011 YE 2012 YE 2013 YE 2014 YE 2015 YE 2016 Q1 2017

Stanger Market Clearing Index

Public Non-Listed BDCs