Annual Conference

1. Annual Conference Haberdashers Hall, London 21st May 2014 Please be aware that these training notes contain general information relating to issues affecting LPA Receivership law and practice only and do not constitute legal advice. For any specific issues you are recommended to consult a solicitor or other appropriate professional adviser.

2. NARA Developments Paul Batho NARA Chief Executive Please be aware that these training notes contain general information relating to issues affecting LPA Receivership law and practice only and do not constitute legal advice. For any specific issues you are recommended to consult a solicitor or other appropriate professional adviser.

3. Recovery and Evolution Recovery • Impact on NARA and the work of receivers • Bad news? Evolution • …of the role of property receivers • …of NARA

4. The Recovery Since May 2013 • Recovery of the market • Confidence returns • Investors, lenders, occupiers active • A genuine recovery? • Economic basis, interest rates • A new market or the next boom/bust?

5. The Recovery – implications for recovery specialists • Receivership appointments – slowing demand reported • A recovery-based mini-boom? • Impact of rising interest rates? • A new market • New lending • New approaches • Timing?

6. NARA – 2013/4 developments • Growing RPR membership (23 in 2014) • New Council structure • Improved web site • Financial position • Exams, regulation and the JRC • Membership numbers

8. NARA – Evolution The number of appointments will decline but……..

9. NARA – Evolution Policies for 2014/5 • Promote and supporting receivers • To lenders • To opportunity funds • To government and other institutions • Work with Association of Property Lenders • A receiver’s skills – relevance to the new lending market • Continuing relevance of RPR members • Encouraging Associate and Affiliate membership

10. NARA - Future NARA • Membership expertise in property and finance • Focussed Council structure • Well funded The skills and ingredients to serve a changing market

11. Thank you

12. Spinning Planet Property Peter Bill Evening Standard Columnist www.planet-property.net Please be aware that these training notes contain general information relating to issues affecting LPA Receivership law and practice only and do not constitute legal advice. For any specific issues you are recommended to consult a solicitor or other appropriate professional adviser.

13. “A cracking good read” - David Sleath, Segro chief executive“Sycophantically arse-licking” - Mr. Waterstone, anonymous bastard WWW.PLANET-PROPERTY.NET

14. LESSONS FROM BOOK-LEARNING • Beware of linked equity & debt deals • Beware of tall dark strangers • Beware of bright young things

15. WHERE ARE WE NOW? Starting from June 2007 • Capital growth stands at two-thirds of peak values • Rental values are stuck at 91% of June 2007 figures Starting from June 2009 • Capital growth is up 20% • Rents remain four percent below pit levels

16. BANG Dear God, just let there be one more property boom. I promise I won’t piss it all away this time Harvey Soning, property veteran

17. BOOM Bull markets are born on pessimism, grow on scepticism, mature on optimism, and die on euphoria Sir John Templeton

18. MONEY, MONEY, MONEY A billion here, a billion there, and pretty soon you’re talking about real money Everett Dirksen

19. HOW MUCH MONEY COSTSFINANCE COST FOR PURCHASING PRIME OFFICE PROPERTY

20. THE FIRST SIGN OF THE JITTERSLOAN TO VALUE RATIOS FOR PRIME OFFICE PROPERTY

21. PLANET PROPERTY Inside every working anarchy, there’s an old boy network Mitchell Kapor

22. DEVELOPERS’S WORLD People who enjoy meetings should not be in charge of anything Thomas Sowell

23. WHEN DEBT MATCHED NET ASSETSLand Securities, British Land and HammersonCombined assets and debt

24. BIG THINKERS You have to think anyway, so why not think big? Donald Trump

25. AGENTS The propensity to truck, barter and exchange one thing for another is common to all men, and to be found in no other race of animals - Adam Smith

26. AUCTIONS Large groups of people are smarter than a few experts - James Surowiecki, author of “The Wisdom of Crowds”

27. AFTERMATH Experience is the one thing you can’t get for nothing - Oscar Wilde

28. HERE WE GO AGAIN? “The reality is that a new generation comes along very quickly with lots of ideas. Then we get back into the same cycle once again.” Ian Coull, former chief executive, Segro BUT WHEN, HOW, WHERE...

29. Thank you

30. Recovery & Evolution John Muldoon, MRICS Hatfield Philips International Please be aware that these training notes contain general information relating to issues affecting LPA Receivership law and practice only and do not constitute legal advice. For any specific issues you are recommended to consult a solicitor or other appropriate professional adviser.

31. Recovery and Evolution • Loan servicing and CMBS • The Role of the Special Servicer • Evolving Real Estate Debt Market • The “Light Touch” Approach to RE Workouts • Non-Performing Loans Sales – A New Client Base?

32. Hatfield Philips – Loan Servicing & CMBS • Hatfield Philips International (“HPI”) is Europe’s longest serving commercial real estate loan Servicer, having managed over €61 billion of assets since its inception • With a staff of over 120 based in London and Frankfurt, HPI has active workout exposure in 16 European jurisdictions and has worked out over €5 billion of distressed debt • HPI is owned by Starwood Property Trust, which is the largest mortgage REIT in the U.S. with a market capitalization of $4.8 billion (NYSE: STWD) • Active servicing portfolio consists of 3,000 properties (286 loans) totalling AUM of €19 billion • HPI is the largest Special Servicer in Europe • HPI Active Servicing Portfolio • Moody’s EMEA Servicing Report January 2014 / *Securitised loan balance is in €MM as per transfer date • Data as of 31 December 2013

33. The Role of the Special Servicer • Evaluating the options to maximise returns Option 1 LOAN CORRECTION Primary Servicer Option 2 LOAN MODIFICATION Modify Loan New Sponsor Apply Funds through Waterfall Market Property w/Financing Option 3 LOAN SALE DPO Sale of Stabilised Property Option 3a Borrower Led Sale Asset Management Quick Sales Share Pledge Option 4 ENFORCE Take Control Fixed and Floating Charges

34. Evolving Real Estate Debt Market • The peak years for European CMBS issuance were 2006 & 2007 which saw €60bn and €45bn originated respectively. Post the collapse of Lehman's in 2008 origination virtually ceased. (Source: Commercial Mortgage Alert – May 2011) • Estimates for 2014 CMBS Issuance vary but point towards a range between €7bn -15bn of new originations in 2014 (Source: James Wallace, Costar, 12th December 2013) • New sources of finance have emerged to fill the void left by the reduced CMBS issuance and the continuing absence of many bank/balance sheet lenders: • Private Equity • Debt Funds • Listed Debt Vehicles • Insurance Companies • Mezzanine Lenders • Corporate Bonds • Despite the slow recovery of the CMBS Market and many banks still focusing on deleveraging their books, liquidity is returning and there is increasing Real Estate debt available. • To illustrate this, HPI have boarded 177 loans totalling €4.1 billion for six new clients within the last 18 months

35. The “Light Touch” Approach to RE Workouts • Collegiate approach verses One Stop Shop instruction • A continual and active line of communication between Special Servicer and Fixed Charge Receiver/Administrator • Multi-disciplinary teams from different practices and service providers • Asset Management placed at the centre of workout process • Robust Business Plans – regularly reviewed • Hold, Asset Manage then sell verses sell now - Capex requirements/Capex availability? • Market driven exit strategies

36. Non-Performing Loans Sales – A New Client Base? • Since 2011, HPI have underwritten NPL Projects with a UPB of circa €34.1bn • Cushman & Wakefield research suggests that European loan sales will exceed the €40bn mark in 2014 – a 32% increase on the 2013 level. (source: C & W, 05.02.2014) • Active PE buyers include Apollo, Blackstone, Cerberus, Colony Capital, Deutsche Bank, Kennedy Wilson, Lone Star, Marathon and Oaktree....and there are new entrants still looking to join upcoming bid processes. • PE buyers typically adopt a hands on approach and understand the loan and real estate metrics. • Cost of capital and NPV analysis drive their workout strategies – speed of execution is key. • PE NPL buyers have more flexibility than the vendor banks - Strategies range from DPO’s, Enforcement to Loan to Own

37. In Summary • The markets for debt and workout services are evolving as the economic recovery gains pace: • Liquidity has returned to real estate markets from new sources • There are potentially new clients for workout specialists • A dynamic client base will require advisors to adopt greater degrees of flexibility

38. Thank you

39. David Marks Co-Managing Partner, Brockton Capital LLP and President, British Property Federation Please be aware that these training notes contain general information relating to issues affecting LPA Receivership law and practice only and do not constitute legal advice. For any specific issues you are recommended to consult a solicitor or other appropriate professional adviser.

40. Table of contents 1. Market Conditions: 2005 – 2008 2. Market Conditions: 2009 – 2014 3. What happens when the ‘sardine cans’ are opened up? (Sam Zell’s dictum) 4. UK Outstanding Property Debt, 2014

41. Market Conditions: 2005 – 2008 The leverage in the system was akin to cocaine; Lehman bought it to an abrupt end.

42. 2. Market Conditions: 2009 – 2014 QE, six years of ZIRP, Help to Buy, is akin to heroin. But policy makers don’t want an abrupt end, more a gradual come down via tapering, signaling and gradual rate rises.

43. 3. What happens when the ‘sardine cans’ are opened up? (Sam Zell’s dictum) • After 12 months of ‘inadvertent ownership’, nothing much changes. • After 7 - 8 years, leases are expiring, M + E is shot, obsolescence has kicked in and the capex has been deferred. • And deferred again. And the sardines begin to stink.

44. 4. UK Outstanding Property Debt, 2014 The banks: perhaps halfway through their bad books? • DTZ estimate there is around £541 billion of UK commercial real estate in total invested stock, resulting in around 60% LTV leverage overall. (“Overall” is key. Some investors are all equity. Some are 100%+ LTV.) • The UK CRE debt market is (still) highly concentrated. • The four elephants in the room (still) comprise(1): Total (2013) UK Property Debt(1) • The size of each circle represents its portion ofthe total UK CRE loans outstanding (2013) RBS loan book c.£30bn Corporate property AND covered bonds c.£39bn NAMA c.£7bn Lbg loan book c.£27bn Total uk Property Debt2013 c.£325bn(1) • The legacy problems are being resolved—the equivalent figure was c.£172 billion last year, a reduction of c.42% through a combination of repayment, amortisation, loan sales, asset sales, and write-downs. But what is left and what is the clearing price for these remaining assets that have not yet been worked out? TOTAL UK CMBS OUTSTANDING c.£35bn (1) Source: Brockton Capital estimates using multiple sources inc. DTZ ‘Money Into Property’, De Montfort University research, Savills Debt Market Research, and company annual reports (2) RBS Annual Results, 2013 (3) The UK Loan Book for LBG is for financial year ending 2013 (4) NAMA Annual Report 2012 (5) De-Montfort University Commercial Property Lending Market Report: Mid-Year 2013

45. Thank you

46. A Developer’s Perspective Daniel Van Gelder Co-founder Exemplar Chairman, the Westminster Property Association

47. A few key messages • not enough construction activity to satisfy demand • offices still under attack from residential • occupier demand increases • construction costs going up • market risk abounds, but likely to sustain