Florida REALTORS ® Commercial Real Estate Lending Study

Florida REALTORS® Commercial Real Estate Lending Study Market Enhancement Group, Inc. July 2012

Survey Objectives • To assess the commercial real estate lending market in Florida with a special emphasis on: • Full-time employed commercial real estate professionals • The impact of credit availability • The effect of commercial real estate appraisals • Challenges confronting commercial real estate professionals Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Methodology • Telephone interview methodology. • The interviewing achieved a completion rate of 79.1% of all commercial real estate professionals who were contacted. • Respondents were “not” limited to those who belong to the Florida REALTORS®. • 300 surveys completed in May and June 2012. • Results are statistically projectable at two standard deviations (a 95% confidence level). Overall data is subject to a maximum sampling error of +/- 5.8%. • Survey respondents were selected on a random probability basis from a list provided by MEG. Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Methodology • An important consideration is that we are measuring perceptions. • Perceptions are never wrong; they can, however, be factually incorrect. • When respondents make decisions, perceptions are more important than the facts. • Most interviews were done on cellular telephones. The cellular telephone is the commercial real estate professional’s main telephone. Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Survey Respondents • Survey respondents were divided equally between full-time commercial real estate professionals as follows: • Commercial real estate brokers 50% • Commercial real estate non-brokers 50% • Survey respondents by area of specialty were: • Sales 58% • Leasing 29% • Management 13% Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Survey Respondents Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Survey Respondents: Area of Specialty Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Area of Specialty Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Key Conclusions Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Key Conclusions • 77% of survey respondents have completed one or more sales transactions in 2012, this figure was higher for non-brokers than for brokers. • Those completing one or more sales transactions in 2012 was higher for those in sales and leasing as opposed to those in management. Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Key Conclusions • When asked about major obstacles for commercial real estate this year, the average respondent mentioned 3.9 different obstacles on an “unaided” basis. • The obstacles for commercial real estate mentioned most often were: • Lack of available financing 78% • Low, inconsistent appraisals 66% • Economic Conditions 58% • Inventory 41% • Inconsistent financing standards 37% • Declining prices 36% Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Key Conclusions • 86% of commercial real estate professionals have failed to complete one or more transactions in the past one year due to a lack of financing. • The most frequently mentioned reasons for having failed to complete one or more transactions in the past one year due to a lack of financing were: • Lender backed out 69% • Low appraisal 56% • Declining prices 38% • Very stringent lending standards 15% • Internal underwriting standards 15% • 84% of commercial real estate professionals report that a lack of financing has impacted their clients’ decisions about commercial real estate. Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Key Conclusions • Two-thirds of commercial real estate professionals report that lending conditions have tightened significantly over the past year. • The groups that currently provide financing for commercial real estate deals are most likely to be: • National Banks 51% • Community/Local Banks 48% • Regional Banks 47% • Private Investors 42% • REIT’s 30% • Mortgage Brokers/Co’s 24% • Credit Unions 22% • Life Insurance Companies 21% • Owner Financing 19% • Fannie/Freddie 14% Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Key Conclusions • When asked about the amount of their last transaction,14% of survey respondents reported that it was a cash transaction. • Most transactions that were financed were in the $750K to $4.9M range. • Average loan-to-value ratios for commercial deals over the past year were concentrated in the 70% to 75% range. • Only a third of any commercial real estate transactions were supported by a SBA loan. • When survey respondents were asked about their experience with property appraisals over the past year, most had nothing positive to report and most cases cited they were low, inconsistent, and often out of touch with economic conditions. Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Detailed Findings Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Have Completed a Sale/Transaction This Year Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Major Obstacles for Commercial Real Estate This Year Multiple, unaided responses. Percentages will not total to 100%. Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Major Obstacles for Commercial Real Estate This Year Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Have Failed to Complete a Transaction This Year Due to Lack of Financing Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Why You Failed to Complete a Transaction This Year Due to Lack of Financing Multiple, unaided responses. Percentages will not total to 100%. Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Has Lack of Financing Impacted Your Clients’ Decisions Related to Commercial Real Estate? Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

How Have Lending Conditions Changed Over This Year Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Which Groups Currently Provide Financing for Commercial Deals Mean number mentioned = 3.28 Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Based on your last sales transaction, what was the amount of the loan? (Distribution of Loan categories) Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Average Loan-To-Value (LTV) Ratios for Commercial Deals over the Past Year Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Have Been Involved With Any Commercial Transaction Supported by a Small Business Administration (SBA) Loan Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Your Experience over the Past Year with Commercial Property Appraisals Multiple, unaided responses. Percentages will not total to 100%. Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Your Experience over the Past Year withCommercial Property Appraisals Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Suggestions for Practitioners Looking for Commercial Loans Multiple, unaided responses. Percentages will not total to 100%. Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Demographics and Experience Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Demographics and Experience • The typical commercial real estate professional has a decade of experience in the business. Only 28% have three or fewer years of experience. • Most commercial real estate professionals are male (62%). • The average commercial real estate professional is 45 years of age and 87% have a BS/BA degree or higher. Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Commercial Real Estate Experience Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Commercial Real Estate Experience Mean Number of Years Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Survey Respondents: Gender Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Survey Respondents: Age Category Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Survey Respondents: Generation Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Survey Respondents: Education Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Survey Respondents: Ethnic Background Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Definitions • The survey breaks some questions down by “generations.” • The generations are defined as follows: • Gen Y: born 1980 to 1999 (age 32 and younger) • Gen X: born 1965 to 1979 (age 33 to 47) • Boomers: born 1946 to 1964 (age 48 to 66) • Seniors: born pre-1946 (age >66) • Newer real estate professionals are defined as: 3 years or less in real estate experience. • Seasoned real estate professionals are defined as: >3 years in real estate experience. Market Enhancement Group, Inc. MEG-Research.com 800.549.9327

Florida REALTORS ® Commercial Real Estate Lending Study