Coldwell Banker Commercial Offices

Seattle

Fargo

Minneapolis
Boise Green Bay Boston
Rapid City
New
D t it
Detroit York
Chicag Philadelphia
Reno Salt Lake City o Pittsburgh Baltimore
Indianapolis Washington D.C.
Denver Cincinnat
San Francisco Kansas City i
Virginia
St. Louis
B h
Beach
Las
Vegas Charlotte
Los Santa Fe
Oklahoma City Memphis
Angeles
Phoeni Atlanta
x

Dallas

New
Houston Orleans
San
Antonio
Miami
Office
Pat Eberlin
CREATIVITY
Non-Farm Payroll Jobs
60 000
60,000
58,000 56,700
56 000
56,000 56,500
55,100
54,000 54,200

52 400
52,400
52 000
52,000
50,000
49,200
48 000
48,000 Non-Farm Payroll Jobs

46,000 46,000

44 000
44,000
42,000
40 000
40,000
 Office Survey Breakdown

10.03%
1,200,000

1,000,000
3.91%
800,000
Net Usaable SF

Vacant SF
600,000
, Net Usable SF
Net Usable SF

400,000 5.27%
7 70%
7.70%
200,000

0
Post Falls Hayden Rathdrum Coeur d'Alene

Source: Fall 2008 Office Survey

Auble, Jolicoeur & Gentry/Coldwell Banker Commercial
Class A Space
• Quality of Construction
• Exceptional finish, amenities and location
• M d
Modern ttechnology
h l
• Rents $18-$24/sq. ft. NNN Annual
Class B Space
• Lesser quality interior finishes and amenities
• More affordable space for tenants
• Rents $12-18/sq. ft. NNN Annual
Class C Space
• Functionally out-dated
• Lacking ADA, Parking, Technology, Location
• Rents $6-$12/sq.
$ $ ft. NNN Annual
Speculative Office Construction
• New office construction down for two reasons
• 1) The negative absorption of existing projects
• 2) Financing
New Projects Starting & Finishing in 09
• Mountain West Bank Operations Center
2 story; 28,000 SF
New Projects Starting & Finishing in 09
• The Plaza on Sherman
SEC Sherman & 7th: 6 story; 70,000 SF
New Projects Starting & Finishing in 09
• Global Credit Union
320 E Neider: 2 story; 27,400 SF
New Projects Starting & Finishing in 09
• Kootenai Cancer Center of Post Falls
2 story; 23,609 SF
Creative Minds at Work
1) Value Add Projects
Creative Minds at Work
2) Offer Affordability
• Rent concessions
• Rent
R t abatement
b t t
• Tenant improvement funds
3) Keep an open mind to retain current tenants
• Growing trend of 2009 – Current tenants asking for
decreased rent
• Maintain value of investment by offering free rent
opposed to decreased rent
• Deferring
D f i th the reduced
d d rentt amountt tto the
th back
b k end
d off th
the
lease term
• Request most recent P&Ls to verify financial distress
Creative Minds at Work
4) Flexible Build-Out
• Modular Walls with High-End Finishes
• Ability
Abilit tto E
Expand/Contract
d/C t t C Costt Eff
Effectively
ti l
• Quick Assembly/Minimal Impact
• Classified as Furniture (Faster Depreciation)
• Pros vs. Cons
2009 Kootenai County Office Forecast
- Keep open dialogue with current tenants
- Rising unemployment = Increased Vacancies
- Offer Affordability
- Limited amount of new construction will aid in
office absorption
- CREATIVITY
Retail
Dani Kramer, CCIM
 Local Unemployment Statistics
Kootenai County vs. State of Idaho Unemployment Rate
8.0
7.0
6.0
mploymeent Ratee

5.0
4.0 Kootenai County 
Unemployment
3.0
State of Idaho 
2.0 p y
Unemployment
Unem

1.0
0.0

Year Source: Idaho Commerce & Labor

 Pre-2008 Market Conditions

Class A Buildings Class B Buildings Class C Buildings

•Prime locations •Slightly older buildings •Functionally obsolescent
•Newer buildings •Good locations •Older neighborhoods
•$16 - $24 per SF NNN •$11 - $15 per SF NNN •$6 - $10 per SF NNN

•All rates quoted annually

•NNN = Tenant’s ppro-rata share of common area maintenance,,
property taxes, insurance, and other operating expenses
 Local Retail – Landlord’s Struggle

Landlords start with

asking rental rates

Solid Tenant =
Negotiation on terms
and rent with Tenant
Current Retail Market – Riverstone Master Plan

Retail
eta Leasing
eas g Rates
ates
$22 - $24 per SF NNN
Current Retail Market – Riverstone Aerial

Pl
Planned
d Site
Sit for
f Peak
P k
 Current Retail Market - Vacancies

Neider
N i & 95
Ironwood Square $15 per SF NNN
$12.00 per SF NNN
Sportsman Plaza I & II
$15 per SF NNN $23 - $25 per SF NNN
 Current Retail Market

Neider
N i & 95
Ironwood Square $15 per SF NNN
$12.00 per SF NNN

Sportsman’ss Warehouse
Sportsman
Current Retail Market – New Retail CdA
NEC of Best & 4th Street
$ -$
•$18 $24 per
p SF NNN

Mountain
ou ta View
V ew Plaza
a a
•NWC of Hwy 95 & Neider
•$9 - $15 per SF NNN
 Current Retail Market – New Retail Hayden
Rustlers Roost
NWC of Hwy 95 &
•NWC
Hayden Ave Planned

2.5 acres sold to a

national medical user

Discount Tire
 2008 Vacancy Report – Kootenai Retail
Vacancy
5.83%
Rates
12.48%
2,500,000
Net Ussable SF
F

2,000,000

1,500,000
, ,
Vacant SF
Net Usable SF

1,000,000 6.03%

10.66%
500,000

0
Post Falls Retail Hayden Retail Rathdrum Retail Coeur d'Alene Retail

Source: Auble, Jolicoeur & Gentry/Coldwell Banker Commercial

 2008 Vacancy Report – Kootenai Retail

Parkwood Business Properties

• 2008 Retail Vacancy – 1.3%
2008 Vacancy Report – Kootenai Retail
General Growth Properties Inc. (GGP)
Current Retail Market – Post Falls
 Current Retail Market – Post Falls
Coeur d’Alene, ID
I-90 Pleasantview Rd. Interchange
(46,000+ CPD 2006)
EXPO Retail/Commercial/Industrial/Multi-Family
R t il/C i l/I d t i l/M lti F il

Future Beck Rd. Interchange

Sysco 2010 Estimated Completion

Planned Wal-Mart Superstore

Pl
Planned
d Lowe’s
L ’

Idaho-Washington Border

Stateline I-90 Interchange

 Current Retail Market – Post Falls

Mullan Avenue

Highway 41
Highland Crossing

Planned

River City Center

 Looking Forward to 2009 - Retail Market
• Landlords and Tenants need to keep an open dialogue
• Expect stable/increased vacancies
• Downward
D d pressure on rents
t
• Increased pressure on rent concessions
 Looking Forward to 2009 - Retail Market
“With Adversity Comes Opportunity”
• Landlord Opportunities
• Purchase distressed properties
• Purchase retail projects at favorable cap rates
• Acquire tenants looking to downsize or relocate to a better
location

• Tenant Opportunities
pp
• Lock-in a lower lease rate for several years at a better
location
• Renegotiate
R ti t upcoming
i option
ti extensions
t i
Development Land
Doug Rall, CPA
Topics
• Review
R i off residential
id i l andd commerciali lb
building
ildi permitsi
issued for 2008 verses 2007
• Review of residential platted lots added from 2000
thru 2008
• Review of out of state drivers’ license surrender report
p
from 2002 thru 2008
• Review of closed commercial land escrows reported
b th
by the MLS ffor 2008 verses 2007
2007.
• Forecast for 2009-2010.
Kootenai County Building Permits
Number of Permits
2007 2008 2007/2008 Change

Residential 1,848 1,294 -28.25%

Commercial 336 273 -18.75%
18 75%
Total 2,184 1,567 -29.98%

Permit Volume
2007 2008 2007/2008 Change

Residential $305,338,467 $182,706,174 -40.16%

Commercial $212 724 424
$212,724,424 $118 070 569
$118,070,569 -44 5%
-44.5%
Total $518,062,891 $300,776,174 -41.94%

S
Source: Construction
C t ti M Monitor
it
Total Residential Lots Platted
3000
2617
2462
2500

2000 1938
1593
1510
1500 1362
1179
1152 Total Residential Lots Platted
l d l l d
989
1000

500

0
Drivers License Surrenders
2000
1800
1600
1400
Arizona
California
1200
Colorado
1000
M t
Montana
800
Nevada
600
O
Oregon
400
Washington
200
0
2002 2003 2004 2005 2006 2007 2008
License Surrenders/Lots Platted
6000
5219 5309

5000 4779
4708
4289 4429
4073
4000

3000
2617 Total Lots Platted
2462
Drivers License Surrenders
1938
2000 1593
1510
1179 1362
989 1152
1000

0
Commercial Land Sale

# Land Sales Range Gross Sales

2007 24 0.13 – 56.8 Acres $13,868,701

2008 16 0 26 – 4.4
0.26 4 4 Acres $3 841 650
$3,841,650
Source: Coeur d’Alene MLS
Forecast
• Building permits are expected to remain at or slightly
below 2008 levels.
• O t off state
Out t t migration
i ti to t Idaho
Id h isi expected
t d to
t remaini
level or show a slight decrease
• Commercial land sales will continue to be slow
• Prices of land will continue to decline

“When building values decline, the value of raw land

declines and when building values increase, so
does the value
al e of raw
ra land
land.””
Multi Family
Multi-Family
Glenn Sather
Topics
• Statistics
• Observations
• Forecast & Recommendations
2008 Statistics
• Sales Volume and Values
40,000,000
35 MM
35,000,000
30,000,000
25,000,000
20,000,000 16 MM Multi‐Family 
15,000,000 11 MM Sales Volume
10,000,000
5,000,000
0
2006 2007 2008
2008 Statistics
150%+ - Supply of “For Sale” Stock
2008 Statistics

New Construction Permits
100,000,000 91 MM

80 000 000
80,000,000

60,000,000 51 MM
New Construction 
N C t ti
40,000,000
Permits
20,000,000 12 MM

0
2006 2007 2008
2008 Statistics
• Capital Markets & Apartments
• 2-4
2 4 Units
• 5 Units +
• Vacancy Data
• Rents
R t
Observations
• The Condo Card
• Shadow Stock
• Apartments
p & the “Financial Storm”
Forecast & Recommendations
• Opportunities in 2009
• Supply Problem
• Rents
• Tenant Retention
Investments
Wayne Burton
What Type of Investments?
This Segment
g will FOCUS on
Income-Producing Investments.
What Will Be Covered?
• Capitalization (Cap) Rates.
• C h on C
Cash Cash h (R
(Return
t on Y
Your MMoney).
)
• 2008 Financing and its Effects
Effects.
• 2008 At a Glance.
• What About 2009?
• Is the Herd turning?
Capitalization Rates
• Considered a Common Method to
determine Value.

• Predicated on a Cash Purchase prior to

Debt Service.
• Higher Cap Rate = Lower Property Value
• Cap Rate has Direct Effect on Property Value
Net Operating Income (NOI) of $100,000
9% Cap Rate = Property Value of $1,111,111
6.5% Cap Rate = Property Value of $1,538,461
• What
Wh t Determines
D t i Cap
C R Rates?
t ?
 Factors That Help Set
Property Cap Rates
• Market
• Desirability and Availability
• Property Type
• Location and Condition
Example
p Of 12% Plus Cap
p
 New NNN Lease
S ld att 8.82%
Sold 8 82% C
Cap R
Rate
t
 22 unit Apartment
Sold At 10.5%
10 5% Cap Rate
Self Storage has been in
Escrow at
9.0% Capp Rate
Example of 7% and less Cap
 CASH ON CASH
• A Method to Value Your Return on
g g
Investment when leveraging.

EXAMPLE: O
EXAMPLE On a 9% CCap R
Rate
t P
Purchase,
h with
ith a:
• Loan Rate @ 7.5%,, Cash on Cash is: 7.44%
• Loan Rate @ 6.5%, Cash on Cash is: 9.12%
• Cap Rates and NOI does not take into
account Financing.

• Interest Rates

• The Availability and Cost of Capital

Capital.
 2008 FINANCING & EFFECTS
• Commercial Direct Lenders were in the 7-8%
Range

• Banks wanted more Owner Equity - 30% and

higher

• Debt Service Ratio (DSR) was higher

• What is DSR?
• What were the Banks doing?
• Relationship-Banking
g
• Much Tighter
g Underwriting
g
• Cash
Cas aand
dOOwner
e Financing
a c g
became King
 2008 At a Glance
• Fewer Buyers
• Cost of Capital
• Loan Requirements
Tightened
• Cap Rate Trended up
• Buyers looking for Value - 8.5%
plus Cap Rates
• Loan Requirements Constricted
Sales
 What About 2009?
• Interest Rates Have Come Down -
6.10% to 7.10%
• Some Lending Institutions Are
Lending ONLY for Owner-Occupied
Owner Occupied
• Strong Pressure on Interest Rates to
Rise
• Cap Rates Will Continue to Rise
• Possible Increase in Capital
p Gains Tax
• Product Makes a Difference Example.

Thi is
This i a Market
M k t like
lik NONE WWe
Have Seen in Years!
 Forecast for 2009
Where Is the Herd Going?
g
A
Activity and IInquires are U
Up

I
Interest Rates
R Are
A D Down

Value
l isi the Best it
i has been in
i Years
Y

The Herd Has Stopped

SOME HAVE TURNED
• Owner-Occupied

• SBA

• USDA
• How about “Sale Lease Back”?

• Banks are Back to Basics.

• Out-of-Town Investors.
Investors
SOME ARE THINKING ABOUT IT.
• Buyers will be tentative.
• Gaps in the market
• What Gets The Deal Done?
• Is this a STRONG Buyer?
• Is the Project Financeable?
• I Owner-Carry
Is O C available?
il bl ?
• Is the Cap Rate based on Actual
Numbers?
• What about Replacement Cost?
 WHAT WILL THE DEAL
LOOK LIKE?
It will be more difficult to
get the Deal to Escrow
“The Altar” and even
harder to gget them to sayy
“I Do”

2009 will have its

Challenges but it is also
a Great
G t Time
Ti tto LEAD
the Herd,
NOT TO FOLLOW IT!
FROM OUR PROFESSIONALS TO YOU:

Based on Replacement Cost, Cap / Loan

Rates and Availabilityy
NOW IS POSSIBLY THE BEST TIME
IN YEARS TO BUY!
THANK YOU FOR
COMING
R Davidson
Rick D

President & COO

Coldwell Banker Commercial
 Agenda

• Overview of International Commercial

Real Estate markets
• Di
Discussion
i off Major
M j Product
P d Types:
T
Office, Industrial, Retail, Multi-family
• Market Direction
Widening of the Financial Crisis
Seized by: British Government

Acquired by:

Acquired by:

Collapsed

Filed for Bankruptcy

Placed into Federal Conservatorship

Widening of the Financial Crisis
Acquired by:

Taken Over by:

Infused dollars from:

Federal
Government

Sold Assets to:

Became Bank Holding Companies

 Unemployment and Job Loss
Unemployment
M 09’ 8
Mar 8.5%
5%

Job Loss

Education Level
Global Markets
Real GDP Growth Rates: 2008-
2008-2011

Source: Economist Intelligence Unit, ING Economics, ING Real Estate Research & Strategy as of 14 November 2008.

Note: Countries and regions are ranked, left to right, by the difference between their forecast GDP growth rate of 2009 and their average long-
term GDP growth rate (Geometric average 1998-2011). Historical data is from EIU. Forecasts are from ING Economics
 AsiaPac
Leasing Markets will see a turn
Vacancy Rates
Rents

In Markets including:
g
Hong Kong
Singapore
Shanghai
Tokyo
New Delhi
Mumbai
 EURO ZONE
UK will be the worse performing
Projected negative growth of 1.7%
1 7%

leasing Markets
Vacancy Rates
Rents

In Markets including:
London
Madrid
Milan
Paris
Warsaw
 Canada
Economic Growth is projected below LT

Market Fundamentals
Vacancy Rates
Rents (softening)

Office Vacancy:
6 7%
6.7%
 Latin America

Expected
p Positive Economic Growth:
Brazil
Mexico
Argentina
Chile
Venezuela
 US
4thh Year of decline in Housing Sector

Declining Consumer Spending

Declining Access to Capital

Illiquidity of Credit Markets

 The Great Deleveraging

Capital Values are falling as investors

reappraise their appetite for risk

As commercial real estate

fundamentals decline – there will be a
direct impact on real estate values
CMBS Issuances
I 1990
1990--2008

Decline 75% in 2008 over same period in 2007

 Office

Jan 09 – fewer than

$1B Closed

Listings
Li i O
Outpaced
d
Closed Transactions
41
4:1

Cap Rate 7.5%

(45 bps increase since Sep 08)
Distressed Office Assets
297 Properties

$11.5B in Value

Notable Markets:
Austin
Los Angeles
Detroit
Cleveland
Kansas City
Offi Buyer
Office B C
Composition
iti
 Office

Vacancy (14%)

Rents (5-6%)

Absorption
 Industrial

Jan 09 – fewer than

$400m Closed

Close to $2B iin newly

Cl l
listed properties

Cap
p Rate 8.4%
(80 bps increase since Sep 08)
Distressed Industrial Assets

170 Properties
p

$1.3B in Value

Notable Markets:
Austin
Columbus
I d t i l Buyer
Industrial B C
Composition
iti
Industrial

Vacancy (8.8%)

Rents (1.7% Warehouse)

(3.6% R&D)
(1.1 Manufacturing)

Absorption
 Retail

Jan 09 –$876m Closed

Close to $2B in newly

li d properties
listed i

Cap Rate 7.3%

(20 bps increase since Sep 08)
Distressed Retail Assets

$6 7B iin V
$6.7B Value
l

Notable Markets:
Las Vegas
Indianapolis
San Jose
Retail Buyer Composition
 Retail
Vacancy (8.9%)
(8 9%)

Rents (1.1%)

Absorption
 Multi--Family
Multi

Jan 09 – fewer than

$600m Closed

Listings
Li i O
Outpaced
d
Closed Transactions
51
5:1

Cap Rate 6.4%

(50 bps increase since Sep 08)
Distressed Multi-
Multi-Familyy Assets
906 Properties

$9 2B in Value
$9.2B

Notable Markets:
Miami
Las Vegas
P l Beach
Palm B h
Multi--Family Buyer Composition
Multi
Multi-
M lti-Family
Multi F il

Vacancy (6.6%)
(6 6%)

Rents

Absorption
 Market Outlook
• Rents will fall; Concessions will grow

• Retail product is and will suffer the most;

• Office product will continue to be weak with

f th growth
further th iin unemployment
l t

• Industrial will be impacted less but still

impacted
p

• MF will perform better than the rest from an

operational standpoint
 Opportunities
pp
• For Tenants – take advantage
g of the
market and lock in for longer terms

• For landlords – keeping tenants is key

• Smaller sales transactions with private

investors

• REO transactions
 Opportunities
pp
• NPL portfolios and other distressed debt
purchases
h

• Student
S d h
housing
i will
ill continue
i to perform
f

• Health care will continue to have demand

• Other Federal Government related business

• “Keep some powder dry”

Big Brothers Big Sisters
2007 Climb for Kids’
Kids Sake
2008 Climb for Kids’
Kids Sake
2009 Climb for Kids’
Kids Sake

Events.org/cbcclimb