2011 Jan Wells Fargo CMBS Outlook

Current CMBS Outlook
Marielle Jan de Beur Head of Structured Products Research CMBS and Real Estate Research marielle.jandebeur@wachovia.com (212) 214-8047
Chris van Heerden, CFA chris.vanheerden@wachovia.com (704) 715-8321 Lad Duncan lad.duncan@wachovia.com (704) 715-7423 Landon Frerich landon.frerich@wachovia.com (704) 715-8376
January 24, 2011
Please see the disclosure appendix of this publication for certification and disclosure information
Overview
2011 Opportunities and Risks Regulation: From Rulemaking to Implementation Commercial Real Estate Debt Landscape CMBS Defaults and Losses Modifications and Appraisal Reductions IO Loans Rolling to Amortization Underwater Performing Loans Commercial Real Estate Valuations Property Market Outlook CMBS Relative Value
2 6 12 21 32 37 40 43 48 67
Wells Fargo Securities, LLC
2011 Opportunities and Risks
2011 Opportunities and RisksRecommendations
At the top of the capital stack, we favor DUS paper. Compared with new issue CMBS AAAs, there is a 10 bps20 bps in spread concession for DUSa compelling price, in our view, for an added government guaranty and drastically lower historic spread volatility for DUS. At a 4.1% nominal yield and 50 bps inside investment-grade corporates, 2007 dupers are looking rich to corporates. CMBS bonds merit a yield premium to reflect uncertainty in the timing of cash flows as well as the liquidity concession versus corporates. Legacy CMBS paper will likely trade more like a credit product than the rates product it represented in the pasthigher beta is here to stay. That may not be bad news so long as the recovery remains on track. We see new issue AA to BBB CMBS tranches as cheap to comparable investment-grade credit risk. New issue BBBs trade around 300 bps-330 bps over swaps. For credit-challenged bonds such as cuspy AJs, we believe the market is offering good exit prices for bad risk in many cases. The machinations of new NAIC risk rankings taking effect and the high likelihood of more AJs taking interest shortfalls in 2011 bear watching.
2011 Opportunities and RisksFurther Thoughts
Late into the low-interest-rate cycle, liquidity is plentiful and the credit curve flat and likely getting flatter. At this phase, there is a latent danger of underpricing risk, in our view. High commodity and energy prices mean that any further stimulus would likely be inflationary and, therefore, harmful to consumers. Risk assets have priced in healthy growth where private domestic demand and rising exports neatly take the baton after two years of stimulus and inventory driven growth. Recent prints in the leading indicators, exports and business fixed investment point to this scenario materializing. At the same time, we are still operating in an environment with thick risk tails:
Interest rate volatility from Q4 may carry over into the new year, as a standoff over the debt ceiling looms. In the 1996 standoff over the debt ceiling, the 10-year Treasury jumped nearly 100 bps and Moodys put the U.S. on downgrade watch. A 2% cut in Social Security taxes to keep tax registers ringing over the holidays is precisely the reason why U.S. creditworthiness may be called into question. Sovereign default risk persists. The EU/IMF rescue fund would be under severe pressure if a bailout of Spain and/or Italy were needed. The Irish elections in March are an inflection point to watch. Rhetoric over currency exchange rates has been tense. Consumers are still fragile. Real average weekly earnings fell 0.2% in December. The mean unemployment duration at 34.2 weeks remains near the all-time high. The employment-to-population ratio at 58.3% remains at a level not seen since 1983. And, the recovery in the housing market has turned into Waiting for Godot. State and local governments are likely to cut spending and hike taxes as federal aid rolls off this spring.
2011 Opportunities and RisksFundamentals and Performance
Delinquencies have shown little sign of easing. We continue to see a steady stream of about $4 billion in newly delinquent loans each month. Given that the most recent recession ended in June 2009 and there is typically a lag of around two years for commercial real estate, we expect delinquencies to continue to rise for at least another six months. There is also continued upward pressure on delinquencies due to the fact that the size of the CMBS market continues to shrink by $4 billion$5 billion each month as loans mature, amortize or liquidate. We estimate the 60+ day delinquency rate will peak at 10%. While liquidations and severity rates have leveled off, there is still more than $70 billion outstanding in special servicing. Many large loans remain in the pipeline, and we anticipate more bulk loan sales by special servicers next year. Therefore, we expect losses to remain substantial in 2011. The impact on the capital stack could be considerable as premium dollar price front-pay bonds could be affected by the ongoing threat of quick paydowns. Meanwhile, the lower-rated tranches will likely continue to feel pressure as losses rise up the capital stack. Our commercial real estate fundamentals forecast shows strong improvement from a year ago, largely due to a better outlook in 2012. We believe the office, warehouse and retail property sectors are at or near the bottom in terms of fundamental deterioration, while the apartment sector and more volatile hotel sector are already in recovery mode thanks to shorter lease terms that allow them to react more quickly to improving economic conditions. Robust demand throughout 2010 in the apartment sector has surprised to the upside, while relaxed corporate travel restrictions and the return of the business traveler have increased hotel occupancies steadily this year over last year. Preliminary data from Reis show office properties registered positive absorption in Q4 2010 for the first period since 2007.
Regulation: From Rulemaking to Implementation
Regulation: From Rulemaking to Implementation
For CMBS investors, regulation and the climate for securitization is vital to how loan maturities are addressed in the coming years. From a macro perspective, greater friction in credit formation may hold implications for overall economic growth. Key takeaways on regulation are

The Dodd-Frank Wall Street Reform and Consumer Protection Act is taking priority. The FDIC Safe Harbor provisions coincided with securitizations coming on balance sheet. (New safe harbor rules became effective on Jan. 1, 2011). Reg AB enhancements were proposed by the SEC in April 2010, addressing the marketing process and disclosure requirements for ABS securities along with risk retention requirements. (The comment period ended Aug. 2, 2010).
* A detailed timeline on in-process rulemaking is available from the American Securitization Forum at http://www.americansecuritization.com/uploadedFiles/ASFDodd-Frank_Rulemaking_Schedule.pdf
Wells Fargo Securities, LLC 7
Regulation: Dodd-Frank
The Dodd-Frank Wall Street Reform and Consumer Protection Act vests the decision-making on financial regulation to administrative agencies that are now drafting rules. As it concerns securitization markets, key areas are the following:
The Financial Stability Oversight Council: The Council would have the authority to designate nonbank financial companies as systemically important and subject these to higher prudential standards. (Interconnected bank holding companies are automatically subject to the stricter standards). The Council will be empowered to order the breakup of systemically important institutions. Systemically significant institutions would come under the FDICs resolution authority, possibly tying into the FDICs safe harbor preconditions. Risk Retention: Risk retention can be differentiated by asset class and must take the unique nature of commercial real estate into account. For CMBS transactions, a third party may meet the risk retention requirement (although there is no such provision in the FDIC safe harbor rulemaking). Increased ABS Disclosure: Asset level and loan level disclosure is required along with broker compensation. Credit Rating Agency Reform: Increased disclosure by the agencies. Volker Rule: The FSOC and the Federal Reserve Bank are responsible for writing the regulations that will enforce this piece of Dodd-Frank. The FSOC is currently finalizing a study.
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Regulation: FDIC Safe Harbor

The FDIC safe harbor rules were implemented on Jan. 1, 2011. Banks may potentially respond by issuing securitizations out of nondepository entities. However, the FDICs oversight role has been expanded beyond depository institutions. Key elements include:
Grandfathering Provision. Deals issued on or before Dec. 31, 2010, can be grandfathered in under the previous safe harbor rules. (Paragraph (d)(2) of the proposed rule.) A Higher Hurdle for RMBS. Under the proposed rule, residential mortgage-backed securities face higher hurdles to qualify for safe harbor under each prerequisite for coverage. Specific examples include a limit on the number of tranches, a ban on pool level guarantees, a limit on servicer advances and a reserve for repurchases for breach of representations and warranties. Risk Retention. A sponsor must retain no less than 5% of credit risk in the form of vertical slice or representative sample of collateral at issuance. Resolution mechanics. In response to the feedback from the rating agencies, the standard has been revised to clarify that, in the event a securitization is repudiated, the recovery to investors will be based on the par value of the debt rather than the market value of the assets. Contingent approach addressed. Disclosure requirements have been revised to address the transaction documentation rather than making the disclosure itself a condition for the safe harbor. Private placement deals held to the public standard. Full disclosure is required regardless of whether a deal is public or private. In fact, the proposed rule stipulates that information about the obligations and the securitized financial assets shall be disclosed to all potential investors at the financial asset or pool level.
9
Regulation: Reg AB Revisions

On April 7, 2010, the SEC Filed a Notice of Proposed Rulemaking addressing the offering process and disclosure and reporting requirements for future ABS issuance. Whereas shelf registration previously relied on ratings, shelf eligibility would now rely on 1) risk retention, 2) third-party review of repurchase obligations, 3) certification of the depositors CEO, and 4) ongoing reporting. The document weighs in at 667 pages. The comment period for the proposed regulation ended Aug. 2, 2010. Highlights include the following:

Disclosure and reporting enhancements, including the Python waterfall model Offering Process and Alignment of Incentives Provisions, that require a sponsor to retain a 5% unhedged interest in each tranche Certain types of transactions are disqualified from registration Applies essentially the same disclosure framework to private placement transactions that rely on the Reg. D or 144A exemptions. Separately, as of June 1 all ABS issuers must provide detailed information electronically to the public regarding conversations/documents provided to the rating agencies. This may result in hostile ratings where rating agencies not hired for the transactions issue ratings.
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Regulation: Also Out There
Accounting standards FAS 166/167 eliminated the QSPE concept and require an ongoing analysis for consolidation of off-balance-sheet entities. As risk-retention rules take shape, consolidation remains a risk for securitization issuers and b-piece buyers. A group of 10 legislators, as well as a group of 52 academics and commentators, submitted letters to the joint regulators in December 2010 supporting the creation of a national servicing standard. In the early phase, the discussion has been targeted at residential mortgages. Foreclosure Gate: Early cases challenging residential foreclosures have been marked by weak legal representation on behalf of bondholders and problems in document transfer procedures at securitization. (See, Kemp v. Countrywide and U.S. Bank Natl Assn v. Ibanez. Executed deal documents were not produced at trial in either case). Increased scrutiny of foreclosures may delay resolution times and could raise liquidation expenses. Basel III: With phased implementation periods from 2015 to 2018, Basel III appears to require significant additional capital for banks because of stricter Tier 1 and Tier 2 capital requirements, higher capital for counterparty credit risk, a leverage ratio limit and a conservation capital buffer.
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Commercial Real Estate Debt Landscape
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Outstanding US Commercial Real Estate Loans
Commercial, $2.36, 17% Farm, $0.13, 1%
Governmentsponsored enterprises $251.30 8% Finance companies $65.90 2% Savings institutions $180.10 6% Home, $10.61, 76% Life insurance companies $298.60 9%
Other $338.60 11%
Multifamily Residential, $0.85, 6%
Commercial banks $1,428.00 44%
CMBS, CDO and other ABS issuers $640.00 20%
Source: Federal Reserve Flow of Funds Report 3Q010 (12/9/10).
Based on Federal Reserve Flow of Funds data, 44% of commercial real estate loans are held on bank balance sheets. Private-label CMBS accounts for about 20% of all commercial mortgages. DUS and GSE sponsored transactions account for another 8% of the market.
13
CMBS Accounts for 16% of 2011 CRE Debt Maturities
Estimated Commercial Mortgage Maturities

($billion) Banks Insurance Companies CMBS Total TOTAL 2010E 227.8 23.7 48.5 299.9 2011E 250.5 26.7 54.2 331.5 2012E 275.6 27.3 59.9 362.7
Source: ACLI, Federal Reserve Board of Governors and Wells Fargo Securities, LLC's estimates. *CMBS total includes large-loan floating rate to first maturity.
Bank CRE portfolios are weighted toward three- to five-year floating-rate debt. Comparatively, insurance company portfolios have higher concentrations of 10-year and 15-year maturities.
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CMBS Delinquencies Move Above Bank Loan Levels

Commercial Mortgage Delinquencies
8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
2006 -- Q1 2006 -- Q2 2006 -- Q3 2006 -- Q4 2007 -- Q1 2007 -- Q2 2007 -- Q3 2007 -- Q4 2008 -- Q1 2008 -- Q2 2008 -- Q3 2008 -- Q4 2009 -- Q1 2009 -- Q2 2009 -- Q3 2009 -- Q4 2010 -- Q1 2010 -- Q2 2010 -- Q3
C MBS (60+ days)
Life C ompanies (60+ days)
Banks & Thrifts (90+ days)
Source: Mortgage Bankers Association.
Credit performance is deteriorating more for bank loans and CMBS than for life company loans. Bank loans are fairly easy to modify, so problem loans can be cured quickly with modifications. Modifications within CMBS are more prevalent now than any time in history.
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US CMBS Maturities
160
Fixed-Rate C onduit 136.7
140 120
Maturities ($Billions)
133.6
Large-Loan Floating-Rate / Single Asset
100 80 60 40 20 0
1.61.9 0.2 0.2 0.4 37.3 34.5 54.9 40.4 52.3
97.9
0.2
0.8
6.9
2010
2011
2012
2013
2014
2015
2016
2017
2018
No te: Flo ating-rate maturities are to the first maturity date. So urce: Wells Fargo Securities, LLC and Intex So lutio ns, Inc.
CMBS debt maturities will likely accelerate over the next few years with peak levels occurring in 2016 and 2017. In 2009, about 70% of maturing CMBS loans were able to refinance; however, in 2010 that number declined to about 54%.
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CMBS Maturities Fixed Rate
Future Maturities by Deal Vintage ($billion outstanding) Fixed-Rate Conduit/Fusion Deals

Month 1995-1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TOTALS
Ext.* Mat.** 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 TOTALS
0.37 0.02 0.36 1.03 1.66 0.09 0.06 0.19 0.68 0.73 0.15 0.09 5.43
0.71 0.01 0.22 0.11 1.20 0.20 0.08 0.03 0.02 0.38 0.17 0.07 3.21
1.67 0.22 0.13 0.21 0.17 0.06 0.16 0.03 0.03 0.04 0.04 0.06 2.81
0.28 0.44 10.58 0.15 0.29 0.11 0.06 0.35 0.02 0.08 0.03 0.10 12.49
0.03 0.03 3.21 13.14 0.22 0.03 0.01 0.13 0.23 0.01 0.04 0.02 17.10
0.85 0.12 0.25 4.62 21.28 0.74 0.28 0.10 0.16 0.52 0.05 0.06 29.05
1.05 0.16 4.36 0.73 6.42 31.75 0.66 0.73 0.11 0.30 0.91 0.01 47.20
3.97 0.98 2.82 8.64 0.90 8.80 79.17 1.39 1.00 0.20 0.26 1.32 109.47
0.48 0.78 11.78 1.92 4.55 0.65 15.69 111.75 1.55 0.94 0.28 0.39 150.77
0.03 0.01 2.56 20.78 3.23 9.28 0.82 18.45 128.74 1.16 0.50 0.07 185.62
0.00 0.00 0.05 0.76 0.30 0.43 0.01 0.10 6.21 2.44 0.00 0.00 10.29
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.05 0.74 0.00 0.16 0.00 0.00 0.86 1.80
9.43 2.77 36.33 52.07 40.22 52.20 97.76 133.26 138.93 6.81 2.43 3.04 575.24
* Extended at least two months beyond the maturity date. ** At maturity. Includes loans extended 1 month. Note: Excludes defeased loans. Sources: Wells Fargo Securities, LLC, Intex Solutions, Inc., Trepp, LLC.
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CMBS Maturities Floating Rate
Future Maturities by Deal Vintage ($billion outstanding) Large-Loan Floating-Rate and Single Asset/Single Borrower Deals - Current Maturity Date
Month 2002 2003 2004 2005 2006 2007 2008 2009 2010 TOTALS
Ext.* Mat.** 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 TOTALS
0.00 0.00 0.00 0.04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.15 0.19
0.00 0.00 0.12 0.07 0.18 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.37
0.00 0.00 0.43 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.43
0.00 0.44 1.60 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.26 0.00 2.30
0.00 0.10 14.84 0.00 0.00 0.00 0.20 0.80 0.00 0.00 0.00 1.04 16.98
2.03 1.67 17.32 0.05 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 21.07
0.00 0.00 1.44 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.44
0.00 0.00 0.00 0.00 0.00 0.40 0.00 0.00 0.46 0.00 0.50 0.00 1.35
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.44 2.44
2.03 2.22 35.75 0.16 0.18 0.40 0.20 0.80 0.46 0.00 0.76 3.63 46.58
* Extended at least two months beyond the maturity date. ** At maturity. Includes loans extended 1 month. Note: Excludes defeased loans. Sources: Wells Fargo Securities, LLC, Intex Solutions, Inc., Trepp, LLC.
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US CMBS Issuance Trends

250 225
Issuance ($Billions)
230 204 169
200 175 150 125 100 75 50 25 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 14 17 16 16 27 37 74 57 47 68 52 78 94
50 12 2005 2006 2007 2008 7 13 2009 2010 2011 Est
Note: Excludes agency deals and resecuritizations. 2011 is an estimate. Source: Wells Fargo Securities, LLC and Intex Solutions, Inc.
Annual CMBS issuance peaked in 2007 at $230 billion. Since then, issuance volume remains below 1992 levels. Based on the current forward pipeline of $13 billion in process and the velocity of lending we are seeing from the collateral providers, we anticipate U.S. CMBS issuance will total about $50 billion in 2011.
CMBS Collateral Performance by Originator (20032008) as of October 2010.

Underwriting Metrics
1.75 1.70 1.65
Original DSCR
Bear Stearns Goldman Morgan Stanley Principal Lehman Wells Fargo Merrill Lynch GACC Prudential Credit Suisse Citi BofA Wachovia Nomura JPMorgan GE LaSalle UBS Midland CIBC 64 65 66 67 68 69 70 71 72 73 74 75
1.60 1.55 1.50 1.45 1.40 1.35 1.30
Greenwich
Original LTV (%)

Source: Wells Fargo Securities, LLC and Intex Solutions, Inc.
Collateral Performance Metrics

22.0% 20.0% 18.0%
Specially Serviced %
GACC Merrill Lynch Bear Stearns Greenwich Credit Suisse Lehman Nomura LaSalle Midland CIBC
16.0% 14.0%
Wachovia 12.0% Morgan Stanley 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 0.0% 0.2% 0.4% BofA Citi UBS
GE Prudential
JPMorgan
Goldman Wells Fargo
Principal
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
Cumulative Loss %
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CMBS Defaults and Losses
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CMBS 60+ Day DelinquenciesFixed-Rate Conduit

10.0% 9.5% 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 1/00 7/00 1/01 7/01 1/02 7/02 1/03 7/03 1/04 7/04 1/05 7/05 1/06 7/06
Projected Peak: 10.0%
Delinquency Rate (% of current balance)
Currently: 8.32%
1/07
7/07
1/08
7/08
1/09
7/09
1/10
7/10
1/11
7/11
Source: Wells Fargo Securities, LLC , and Intex Solutions, Inc.
We anticipate a continued rise in CMBS delinquencies over the next 6-12 months before peak levels are reached, similar to the performance from the early 1990s recession. We also anticipate peak CMBS delinquency levels to exceed peak levels from the early 1990s due to significant pro forma cash flows.
1/12
Historical CMBS Loss Severities

Loss Severity by Time of Loss
70% 60% 50% 40% 30% 20% 10% 0% Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12
Note: Excludes severities below 2%. Source: Wells Fargo Securities, LLC , Intex Solutions, Inc., and Trepp, LLC .
Next 12 Mos: Around 60%
Severity (%)
Currently: 59%
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CMBS Recovery Times

Average Time of Months to Recover by Year the Liquidation Occurred
18.0 16.0 Months to Liquidate 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 8.2 13.2 10.7 11.5 16.1 16.7 16.9 16.7 15.2 14.5 14.4
Year Liquidation Occurred

Source: Wells Fargo Securities, LLC, Intex Solutions, Inc., and Trepp, LLC.
Length of Time in Special Servicing for Currently Outstanding Loans

7.0 Amount Outstanding ($Billions) 6.0 5.0 4.0 3.0 2.0 1.0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 >24
5.7
5.7 4.9 4.3
3.3 3.4 2.2 2.3 2.5
3.6 2.8
3.6
3.9 3.0 3.2 2.7 2.2 1.7 2.2 1.8
3.7
2.2 1.7 1.2 1.0
Source: Wells Fargo Securities, LLC, and Trepp LLC.
Months in Special Servicing
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CMBS Monthly Losses

900 800 Total Losses ($Millions) 700 600 500 400 300 200 100 48 29 24 21 1 1 1 9 9 4 57 1 5 8 27 9 48 38 1 9 30 54 28 52 45 251 1 1 43 34 15 1 1 63 1 20 31 31 2 6 245 459 490 385 332 284 455 803
70% 60% 50% 40% 30% 20% 10% 0% CMBS Severity %
Losses ($)
* This only includes loans that suffered loss severities greater than 2%. Source: Wells Fargo Securities, LLC, and Intex Solutions, Inc.
Losses totaled $4.3 billion in 2010.

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Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Severity - 6 Mo. Avg (All) Severity - 6 Mo. Avg (>2%)*
Summary of CMBS Losses from January 2009 May 2010

Vintage 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Geographic Region Midwest Southeast Southwest Northeast West Other Losses ($Mil) 0.8 9.1 40.2 116.0 134.7 175.2 149.4 153.3 98.6 162.7 325.6 341.2 230.8 21.5 Losses ($Mil) 566.5 466.6 453.5 236.7 202.4 33.4 Loan Severity Severity Property >2% All Loans Type Count 1 2 16 73 157 133 55 50 32 76 90 85 78 6 31.7% 47.4% 54.6% 68.4% 55.0% 61.0% 57.6% 59.3% 65.8% 53.7% 66.8% 63.0% 60.5% 44.5% 31.7% 47.4% 46.7% 42.5% 21.1% 26.3% 44.7% 50.2% 63.5% 21.9% 26.4% 61.8% 59.6% 44.5% MF RT OF IN HT MH OT MX SH SS Losses ($Mil) 693.8 565.5 443.8 92.2 78.3 28.2 25.8 17.9 7.7 6.2 Loan Severity Severity Orig Loan Count >2% All Loans Size ($Mil) 261 275 168 53 39 24 2 13 9 10 64.7% 60.0% 56.1% 59.2% 56.0% 81.7% 73.0% 66.0% 35.9% 69.1% 49.7% 35.6% 27.4% 33.0% 22.9% 44.7% 73.0% 53.5% 22.1% 11.8% >50 25 - 50 10 - 25 1 - 10 <1 Losses ($Mil) 81.6 206.1 463.8 1,200.2 7.5 Loan Severity Severity Count >2% All Loans 10 28 94 680 42 93.6% 51.7% 57.7% 62.6% 47.3% 10.2% 23.7% 37.3% 47.9% 28.2%
Loan Severity Severity Orig LTV >2% All Loans (%) Count 201 226 174 138 108 7 67.3% 58.9% 65.1% 50.7% 52.1% 78.2% 52.3% 35.3% 52.1% 17.9% 31.9% 16.0% >90 80 - 90 70 - 80 60 - 70 50 - 60 <50
Losses ($Mil) 22.8 229.1 1,301.0 312.1 73.0 3.8
Loan Severity Severity Orig DSCR Count >2% All Loans 16 88 515 164 54 10 51.9% 57.3% 63.1% 58.9% 52.4% 13.5% 43.3% 34.8% 43.1% 24.9% 23.3% 3.1% >1.8 1.6 - 1.8 1.4 - 1.6 1.2 - 1.4 1.0 - 1.2 <1.0
Losses ($Mil) 165.6 170.9 570.6 694.4 215.1 142.5
Loan Severity Severity >2% All Loans Count 75 105 265 332 53 23 63.3% 56.8% 61.0% 60.1% 68.3% 55.5% 20.4% 23.6% 37.2% 39.6% 64.1% 50.3%
Notes: 1) For original DSCR we used the NOI DSCR unless it was unavailable. 2) For the property types: HT = hotel, IN = industrial, MF = multifamily, MH = manuf housing, MX = mixed use, OF = office, RT = retail, SH = senior housing, OT = other, SS = self storage. 3) We inlcude two severity rate calculations. One includes all loans that were liquidated with a loss and the other excludes loans with loss severities below 2%. Source: Wells Fargo Securities, LLC and Intex Solutions, Inc.
Liquidation Expenses
Year of Liquidation 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Trepp, LLC. Liquidation Expenses as a % of the Disposed Loan Amount 12.18% 9.15% 14.79% 17.45% 16.55% 14.91% 16.70% 16.86% 11.03% 12.70% 12.95% Property Type HT HC MF MU OF IN RT OT SS MH Liquidation Expenses as a % of the Disposed Loan Amount 22.16% 16.34% 15.83% 13.71% 12.35% 12.09% 11.29% 10.83% 9.89% 7.84%
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CMBS Historical Loss Experience

3.00% 2.75% 2.50% 2.25% 2.00% 1.75% 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0.00% 1
1 998
2000 1998
2001
1999
2002 2008 2006 2007 2005 2004 2003
17 25 33 41 49 57 65 73 81 89 97 105 113 121 129 137 145 153

1 999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Historical 10-year CMBS cumulative losses range between 1.5% and 3.5%. We anticipate a significant dispersion in losses on recent-vintage deals based on the amount of pro forma cash flows. In aggregate, we anticipate the 2007 vintage will post 9% cumulative losses, the late 2006 vintage will post 8% losses and the 2005 and early 2006 vintage will post 5%6% cumulative losses.
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Cumulative Losses by Vintage
10.0% 9.0% 8.0% Cumulative Loss % 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2000 2001 2002 2003
3.5% 2.7% 1.9% 2.1% 1.2% 1.2% 0.7% 0.7% 0.2% 3.5% 3.5% 3.5% 3.5% C umulative Losses as of 12/2009 C umulative Losses as of 12/2010 Estimated 10Yr C umulative Loss 6.0% 8.0%
9.0%
9.0%
0.8% 0.6% 0.7% 0.5% 0.7% 0.2% 0.2% 0.1% 0.1% 0.0%
2004 Vintage
2005
2006
2007
2008
Source: Wells Fargo Securities, LLC , and Intex Solutions, Inc.
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CMBS Historical Cumulative Default Experience

20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 1
1 998
2000
2007 2008 2006 2005 2004 2003 2002 2001
1999 1998
10
1 999
19
28
2000
37
46
55
2002
64
73
2003
82
91 100 109 118 127 136 145 154

2004 2005 2006 2007 2008
2001
29
Percentage Delinquent versus Percentage Specially Serviced
20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 Months Since Origination
Source: Wells Fargo Securities, LLC and Intex Solutions, Inc. 04 Delinq% 07 Delinq% 06 SS% 05 SS% 07 SS%
06 Delinq% 05 Delinq% 04 SS%
30
CMBS Delinquency Trends

12 Newly Delinquent ($) 10 8 6
$Billions
10% Newly Current ($) Change in Total CMBS Bal ($) 30+ Delinquency (%) 60+ Delinquency (%)
% Delinquent
8% 6% 4% 2%
4 2 0 -2 -4 -6 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 0% -2% -4% -6%
31
Severity Rates and Recovery Time

Monthly CMBS Liquidations
1,800 1,600
Loss Amount ($)

1,400
Ending Loan Bal ($)

1,200 $Millions 1,000 800 600 400 200 -
Loss Severity and Liquidation Expenses Compared to Recovery Time

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 Months to Recover
Source: Wells Fargo Securities, LLC and Trepp, LLC .
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10
Loss Severity % Liquidation Expenses as a % of the Disposed Loan Balance
32
Modifications and Appraisal Reductions
33
Recent Modification Experience

16 14 12 $ Billions 10 8 6 4 2 Mar-09 Mar-10 Apr-09 Nov-09 Apr-10 Jul-09 Jan-09 Jan-10 May-10 Jun-10 Jul-10 May-09 Dec-09 Sep-09 Aug-09 Sep-10 Jun-09 Aug-10 Feb-09 Feb-10 Oct-09 Oct-10 Loan Balance ($Billions) Loan Count 100 90 80 70 60 50 40 30 20 10 0 Loan Count
Month of Modification
Source: Wells Fargo Securities, LLC, and Bloomberg.
Summary of Loan Maturity Extensions

Year 2010 2009 2008 2007 Number of Extensions 206 126 6 2 Average 34 27 19 31 Months Max 99 78 27 47 Min 3 2 12 14
Source: Bloomberg, LP.
34
Recent Modification Experience

All Modifications
Including GGP
Vintage 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Geographic Region West Northeast Southeast Midwest Southwest Other Orig Bal ($Mil) 6.0 286.8 303.1 243.8 439.4 20.7 1,043.0 2,719.4 4,992.5 4,013.5 2,532.0 143.6 Orig Bal ($Mil) 4,914.5 2,954.0 2,953.8 2,912.1 2,729.0 280.4 Loan Count 2 8 43 21 19 5 24 87 79 83 73 11 Loan Count 95 65 96 93 104 2 Property Type RT MF OF HT MX IN SH OT SS MH Orig Bal ($Mil) 10,980.6 1,796.4 1,560.5 927.9 577.7 345.2 229.6 227.7 68.3 29.8 Loan Count 174 116 72 36 14 27 2 5 2 7 Orig Loan Size ($Mil) >50 25 - 50 10 - 25 1 - 10 <1 Orig Bal ($Mil) 12,404.3 1,830.2 1,402.8 1,104.3 2.0 Loan Count 91 50 91 220 3
Only Maturity Extensions

Including GGP
Vintage 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Geographic Region West Southeast Northeast Midwest Southwest Other Orig Bal ($Mil) 255.4 242.7 192.6 303.8 1.4 689.3 2,581.2 3,906.2 2,350.2 1,118.7 49.0 Orig Bal ($Mil) 3,728.2 2,201.6 2,031.0 1,833.9 1,615.5 280.4 Loan Count 3 40 18 7 1 14 79 44 14 17 1 Loan Count 61 50 34 41 50 2 Property Type RT OF MF HT SH MX OT IN MH Orig Bal ($Mil) 8,699.2 981.4 886.3 391.7 229.6 222.3 177.1 83.4 19.7 Loan Count 106 35 58 14 2 6 2 9 6 Orig Loan Size ($Mil) >50 25 - 50 10 - 25 1 - 10 <1 Orig Bal ($Mil) 9,490.5 1,035.8 682.5 479.9 2.0 Loan Count 65 28 43 99 3
Orig LTV (%) >80 70 - 80 60 - 70 50 - 60 <50
Orig Bal ($Mil) 570.6 5,697.5 4,281.8 5,368.7 820.8
Loan Count 9 249 128 57 11
Orig DSCR >1.8 1.6 - 1.8 1.4 - 1.6 1.2 - 1.4 1.0 - 1.2
Orig Bal ($Mil) 5,415.6 3,089.7 2,089.6 4,973.7 1,113.5
Loan Count 66 50 93 217 24
Orig LTV (%) >80 70 - 80 60 - 70 50 - 60 <50
Orig Bal ($Mil) 570.6 2,831.4 3,146.5 4,702.5 439.6
Loan Count 9 114 69 39 7
Orig DSCR >1.8 1.6 - 1.8 1.4 - 1.6 1.2 - 1.4 1.0 - 1.2
Orig Bal ($Mil) 4,693.8 2,570.0 1,503.8 2,328.2 594.9
Loan Count 55 37 42 92 12
Excluding GGP
Vintage 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Geographic Region West Northeast Midwest Southwest Southeast Other Orig Bal ($Mil) 6.0 286.8 258.1 243.8 166.6 20.7 154.8 1,183.4 1,716.5 1,346.1 2,175.0 94.6 Orig Bal ($Mil) 1,925.2 1,922.7 1,294.9 1,291.9 937.2 280.4 Loan Count 2 8 42 21 15 5 12 71 55 69 69 10 Loan Count 74 58 77 91 77 2 Property Type RT MF OF HT MX IN SH OT SS MH Orig Bal ($Mil) 1,889.3 1,796.4 1,560.5 927.9 577.7 345.2 229.6 227.7 68.3 29.8 Loan Count 98 116 72 36 14 27 2 5 2 7 Orig Loan Size ($Mil) >50 25 - 50 10 - 25 1 - 10 <1 Orig Bal ($Mil) 4,067.1 1,139.0 1,339.9 1,104.3 2.0 Loan Count 36 33 87 220 3
Excluding GGP
Vintage 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Geographic Region
Orig DSCR >1.8 1.6 - 1.8 1.4 - 1.6 1.2 - 1.4 1.0 - 1.2 Orig Bal ($Mil) 1,631.2 861.6 895.2 3,113.1 1,089.5 Loan Count 42 29 83 197 23
Orig Bal ($Mil) 255.4 242.7 192.6 31.1 1.4 86.5 1,131.6 1,053.3 253.6 873.7 Orig Bal ($Mil) 1,160.1 1,023.7 732.8 482.8 442.0 280.4
Loan Count 3 40 18 3 1 5 66 25 7 15 Loan Count 46 28 32 35 40 2
Property Type RT OF MF HT SH MX OT IN MH Orig LTV (%) >80 70 - 80 60 - 70 50 - 60 <50
Orig Bal ($Mil) 1,130.4 981.4 886.3 391.7 229.6 222.3 177.1 83.4 19.7 Orig Bal ($Mil) 570.6 1,646.8 726.2 1,132.5 45.7
Loan Count 51 35 58 14 2 6 2 9 6 Loan Count 9 103 44 23 4
Orig Loan Size ($Mil) >50 25 - 50 10 - 25 1 - 10 <1
Orig Bal ($Mil) 2,291.5 677.9 670.6 479.9 2.0
Loan Count 20 19 42 99 3
Orig DSCR >1.8 1.6 - 1.8 1.4 - 1.6 1.2 - 1.4 1.0 - 1.2
Orig Bal ($Mil) 1,220.8 800.3 364.3 1,141.5 594.9
Loan Count 35 22 33 81 12
Orig LTV (%) >80 70 - 80 60 - 70 50 - 60 <50
Orig Bal ($Mil) 570.6 3,802.0 1,587.6 1,572.0 115.8
Loan Count 9 227 98 38 6
West Northeast Midwest Southeast Southwest Other
Source: Wells Fargo Securities, LLC and Bloomberg, LP.
Source: Wells Fargo Securities, LLC and Bloomberg, LP.
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Appraisal Reductions
ARA Calculation 1) Outstanding Exposure = Current Loan Balance + Unpaid Interest + Outstanding Advances 2) Total Property Value = (Appraised Value x 90%) + Outstanding Escrows ARA = Outstanding Exposure - Total Property Value ASER Calculation 1) Interest Advance % = (Current Loan Balance - ARA) / Current Loan Balance 2) Interest Advance = Monthly Interest Payment x Interest Advance % ASER = Monthly Interest Payment - Interest Advance
Source: Wells Fargo Securities, LLC and Fitch.
Ending Loan Balance Realized Loss
$10,000,000 $5,250,000
Priority of Payment
1
Proceeds from the Sale $6,000,000
Re-pay the servicer for advances, fees, and expenses $1,000,000
2 3
Pay down the most senior tranches that suffered interest shortfalls $250,000
Use the remaing proceeds to pay down the unpaid loan balance $4,750,000 Source: Wells Fargo Securities, LLC
36
Principal Write-Downs
CMBS Loans with Principal Write-downs
Deal Ticker JPMCC 2006-CB15 LBUBS 2004-C2 MSC 2006-HQ8 HCC 2006-1 LBUBS 2007-C1 CSFB 2005-C2 MLMT 2006-C2 GECMC 2003-C2 LBUBS 2006-C7 BACM 2004-1 CD 2006-CD3 JPMCC 2007-LDPX CSFB 2005-C2 JPMCC 2007-LDPX COMM 2006-C8 COMM 2006-C8 JPMCC 2007-LDPX CSMC 2007-C1 MLMT 2005-MCP1 GECMC 2002-2A MLCFC 2006-2 WBCMT 2007-C31 MSC 2005-IQ9 CD 2006-CD3 BACM 2005-5 LBUBS 2007-C1 CGCMT 2007-C6 JPMCC 2005-LDP4 LBUBS 2006-C7 MLMT 2006-C2 CSMC 2006-C4 MLMT 2006-C1 WBCMT 2007-C32 LBUBS 2006-C1 MSC 2007-HQ11 MSC 2007-IQ14 MSC 2007-HQ11 MSC 2005-IQ10 BSCMS 2006-PW13 MSC 2006-IQ12 JPMCC 2005-LDP4 CSMC 2007-C2 MLMT 2006-C2 Orig Bal Loan Name ($MM) Landmark Building 8.50 Shops at Cumberland Place 5.11 The Shoppes at Mirador Square 8.30 Turtle Creek Apartments 14.46 Lubbock Square Apartments 4.55 Providence Apartments 6.40 Casa Carranza Mesa 8.55 Crossings at Roswell 4.79 Lakewood Apartment Portfolio 4.10 Sterling University Estates 10.69 Spectrum Centre 7.00 Sagebrook Apartments - Las Vegas, NV 10.60 Indigo on Forest Apartments 37.00 Ashton Oaks Apartments 14.25 University Commons - Urbana 16.58 JPIM Self Storage Portfolio 66.40 Tanque Verde Apartments 17.30 La Vista Townhomes 7.47 HSA Industrial Portfolio I - EGL Eagle Global 63.00 Sterling University Court 13.04 Brookview Apartments 4.89 400 Centennial Parkway 5.18 Bermuda Run 8.99 2020 Hurley Way 8.00 Arboretum Apartments 19.00 Bethany Blanding Place 16.70 Serino's Italian Foods (A-1 note) 2.09 The Crescent 8.80 Edgewater & Westcourt Apartments 3.75 The Shops of Fairlawn (A note) 13.38 A&F Service Center 4.14 Country Inn & Suites - Deer Valley 7.39 Sunset Ridge Center 6.00 Palmiers Apartments 5.10 Yearling Green Apartments 2.57 Cedar Run Corporate Center 8.00 Central Park I 4.24 Corte Freccia 6.99 Days Inn Banning 2.44 College Park Athens 12.00 University Club 13.70 Tartan Square 3.24 The Lake in the Woods 13.29 Cur Bal ($MM) 3.55 1.85 3.50 7.00 2.33 3.04 3.45 1.99 2.25 5.07 3.96 6.25 20.01 8.50 9.92 40.00 11.00 4.75 11.70 7.10 3.25 3.50 6.30 4.63 13.00 12.00 1.43 6.50 2.83 9.92 3.00 4.52 4.00 1.58 5.50 3.43 4.35 2.03 9.74 11.72 2.60 12.47 Principal Writedown ($MM) 4.81 2.87 4.63 7.25 2.23 3.04 3.94 2.19 1.84 4.72 2.96 4.35 15.14 5.75 6.66 26.40 6.30 2.67 22.32 4.53 1.59 1.68 2.90 2.30 5.40 4.70 0.56 2.17 0.90 3.20 0.87 1.50 1.05 0.87 0.43 1.25 0.63 1.00 0.25 1.18 1.32 0.25 0.18 Writedown % of Orig Bal 56.5% 56.2% 55.8% 50.2% 48.9% 47.5% 46.1% 45.7% 44.9% 44.2% 42.3% 41.0% 40.9% 40.4% 40.2% 39.8% 36.4% 35.8% 35.4% 34.7% 32.5% 32.4% 32.2% 28.8% 28.4% 28.1% 27.0% 24.6% 24.0% 23.9% 20.9% 20.3% 17.5% 17.1% 16.6% 15.6% 14.9% 14.3% 10.2% 9.8% 9.6% 7.6% 1.3% Loan Assumed Yes Yes No Yes Yes Yes Yes Yes No Yes No No Yes No Yes Yes Yes Yes Yes Yes Yes No Yes No Yes Yes No No No No No No No Yes No No No Yes No Yes Yes No No Modification Date 18-Dec-09 14-Jun-10 30-Apr-10 05-May-10 21-May-10 10-Jun-10 28-Apr-10 14-Jun-10 01-Jan-10 11-Dec-08 29-Dec-09 09-Mar-10 10-Jun-10 07-Apr-10 15-Dec-08 18-Mar-10 25-Mar-10 22-Jun-09 29-Dec-09 09-Dec-08 22-Apr-10 11-Jan-10 07-Jan-10 11-Aug-09 30-Dec-09 26-Mar-10 03-May-10 30-Sep-09 01-Jan-10 08-Dec-09 08-Jun-10 01-Mar-10 25-Sep-09 11-Mar-09 14-Dec-09 01-Jun-10 01-Sep-08 18-May-10 23-Feb-10 23-Oct-09 15-May-09 01-Dec-09 08-Mar-10 Property Type OF RT RT MF MF MF MF RT MF MF OF MF MF MF MF SS MF MF IN MF MF OF MF OF MF MF MU OF MF RT RT LO RT MF MF OF RT RT LO MF MF RT MF
Source: Wells Fargo Securities, LLC, Trepp, LLC, and trustee reports.
Summary of Principal Write-downs

Vintage LnCnt 2007 13 2006 18 2005 8 2004 2 2003 1 2002 1 Property Type LnCnt MF 23 RT 9 OF 6 LO 2 IN 1 MU 1 SS 1 Orig Loan Size ($MM) >20 15 - 20 10 - 15 5 - 10 1-5 LnCnt 3 4 9 16 11 Special Servicer JE Roberts Midland LNR Partners CWCapital C-III Asset Management Helios AMC ING Clarion Partners LnCnt 17 8 7 6 2 2 1
37
Source: Wells Fargo Securities, LLC, Trepp, LLC, and trustee reports.
IO Loans Rolling to Amortization
38

Based on current loan balances, partial IO loans account for 20.8% ($33.0 billion) of the 2006 vintage and 22.4% ($42.7 billion) of the 2007 vintage. Partial IO loans only account for about 10.2% of the 2005 vintage, but that is largely because many of those loans have already switched over to amortization. Partial IO Loans in CMBS by Vintage
Remaining Partial IO Loans Vintage 2005 2006 2007 2008 Cur Loan Bal ($Bil) 12.9 33.0 42.7 4.2 % of Vintage 10.2% 20.8% 22.4% 39.5% Loan Count 665 1,605 3,113 288 % of Vintage 6.6% 13.6% 26.4% 35.3% Vintage Total Cur Loan Bal ($Bil) 126.0 158.3 190.2 10.6 Loan Count
Loan Balance ($Blns) 35 30 25 20 15 27.4 10 5 0 2010 2011 2012 2013 2014 Year Partial IO Period Ends
Source: Wells Fargo Securities, LLC and Trepp, LLC.
Most of the remaining partial IO terms are ending over the next three years, with 2010 being the single largest year at $31.5 billion spread across 2,236 loans. Another $27.4 billion and $28.6 billion amortization in 2011 and 2012, respectively. roll to
Partial IO Loans Rolling to Amortization

2,500 Loan Bal ($) Loan Count 1,500 31.5 28.6 1,000
10,115 11,795 11,807 816
2,000 Loan Count
Source: Wells Fargo Securities, LLC and Trepp LLC.
3.9 0.8
500
39

Largest IO Loans Projected to Have a DSCR below 1.0x after Rolling to Amortization
Deal Name WBCMT 2006-C23 WBCMT 2005-C22 MLCFC 2007-9 MLMT 2006-C2 JPMCC 2005-LDP4 LBUBS 2005-C5 MLCFC 2007-9 JPMCC 2005-LDP2 WBCMT 2005-C22 WBCMT 2005-C22 JPMCC 2006-LDP9 WBCMT 2007-C30 JPMCC 2005-LDP4 MSC 2007-IQ16 GECMC 2005-C2 WBCMT 2006-C24 CD 2006-CD3 JPMCC 2007-LD11 BACM 2005-5 JPMCC 2007-LD12 LBUBS 2005-C3 JPMCC 2006-CB14 WBCMT 2007-C31 CSMC 2007-C4 GMACC 2006-C1 CGCMT 2008-C7 JPMCC 2005-LDP2 JPMCC 2005-CB13 CSFB 2005-C6 LBUBS 2008-C1 LBUBS 2006-C6 MLCFC 2006-4 CD 2006-CD2 LBUBS 2007-C2 CSMC 2006-C5 BSCMS 2007-PW18 CGCMT 2007-C6 LBUBS 2007-C6 Loan Name 1775 Broadway Hyatt Center(1) DLJ West Coast Hotel Portfolio Mall at Whitney Field Creekside Apartments Palmolive Building Retail St. Louis Flex Office Portfolio Cross Creek Shopping Center Monte Viejo Apartments Birtcher Phoenix Pool Crossroads Center Eastland Center Sterling Pointe Shopping Center Crowne Plaza- Addison Wellington Meadows Apartments Woodbridge Hilton Pool(2),(3) St. Ives Apartments Doubletree Bakersfield Thunder Hollow Apartments Comfort Inn - San Diego Zoo Medlock Crossing Concord Commons Colonial Grande at Promenade Sweetwater Crossings Southwind Hilton Garden Inn Lincoln at Wolfchase Jacaranda Plaza The Retreat at Fossil Creek Memphis Retail Portfolio Sylmar Square Colonial Village at Haverhill Apt Homes Colonnade at Germantown Castle Creek Corporate Park Legacy at Friendly Manor ANC - Tech park I & II Hilton Garden Inn - Detroit Washington Square Apartments IO Periods Cur Bal ($) Remaining 1 250,000,000 11 162,500,000 7 130,100,000 7 74,750,000 8 68,000,000 8 52,800,000 2 52,450,000 6 46,000,000 10 41,500,000 10 40,960,000 10 39,500,000 10 39,500,000 8 38,775,000 9 37,000,000 4 36,000,000 12 36,000,000 9 35,800,000 6 35,000,000 5 33,500,000 8 33,500,000 5 32,325,000 12 31,200,000 3 30,400,000 8 29,000,000 11 28,125,000 1 27,320,000 6 27,080,000 8 27,000,000 9 26,300,000 11 25,600,000 7 24,900,000 5 22,200,000 12 22,140,000 11 22,000,000 8 21,550,000 9 20,600,000 4 20,000,000 7 20,000,000 Cur DSCR 1.09 1.21 1.12 1.17 1.21 1.18 1.01 1.09 1.20 1.21 1.17 1.14 1.04 1.13 1.00 1.13 1.16 1.16 1.05 1.09 1.06 1.16 1.15 1.14 1.01 1.04 1.16 1.21 1.15 1.14 1.09 1.14 1.16 1.01 1.09 1.11 1.13 1.16 DSCR After Prop % of Amort Delinq Status Type Deal Bal Location 0.89 Grace Period OF New York, NY 6.04% 0.97 Current OF Chicago, IL 6.65% 0.97 90+ LO Various 4.66% 0.96 <30 RT Leominster, MA 5.62% 0.95 Current MF Bensalem, PA 2.69% 0.95 Current RT Chicago, IL 2.32% 0.88 Current IN Various, MO 1.88% 0.87 30+ RT Memphis, TN 1.63% 0.96 Current MF Phoenix, AZ 1.70% 0.98 Current OF Phoenix, AZ 1.68% 0.93 Current RT Waterloo, IA 0.82% 0.81 Current RT Harper Woods, MI 0.50% 0.83 Current RT Lincoln, CA 1.54% 0.96 Current LO Addison, TX 1.43% 0.79 Current MF Las Vegas, NV 2.30% 0.87 Current MU Iselin, NJ 2.21% 0.98 Current MF Philadelphia, PA 1.02% 0.98 90+ LO Bakersfield, CA 0.65% 0.87 30+ MF Bensalem, PA 1.81% 0.94 <30 LO San Diego, CA 1.34% 0.88 Current RT Duluth, GA 1.66% 0.92 90+ RT Concord, NC 1.16% 0.94 Current MF Montgomery, AL 0.52% 0.93 Current RT National City, CA 1.40% 0.86 30+ MF Memphis, TN 1.74% 0.92 Current LO Fairfax, VA 1.48% 0.93 Current MF Cordova, TN 0.96% 0.95 Current RT Plantation, FL 1.04% 0.92 <30 MF Fort Worth, TX 1.10% 0.98 Current RT Various, TN 2.57% 0.93 Current RT Sylmar, CA 0.82% 0.96 Current MF San Antonio, TX 0.50% 0.95 <30 MF Germantown, TN 0.73% 0.83 Current OF Indianapolis, IN 0.62% 0.91 Current MF Greensboro, NC 0.63% 0.93 Current OF Henderson, NV 0.83% 0.93 Current LO Detroit, MI 0.42% 0.95 Current MF Lakewood, NJ 0.67% Maturity Date 11-Jan-16 11-Nov-15 06-Jul-12 05-Jul-16 11-Aug-15 11-Aug-15 08-Aug-17 01-Jun-15 11-Oct-15 11-Oct-15 05-Oct-16 11-Oct-16 01-Aug-15 01-Sep-17 01-Apr-15 11-Dec-15 01-Sep-16 10-Jun-12 01-Jun-12 11-Aug-17 11-May-20 01-Dec-15 11-Mar-17 11-Aug-17 01-Dec-15 06-Jan-18 01-Jun-12 01-Aug-15 11-Oct-15 11-Nov-17 11-Jul-16 01-Nov-16 01-Dec-15 11-Nov-16 11-Aug-16 01-Sep-14 01-Apr-17 09-Jul-17
Source: Wells Fargo Securities, LLC and Trepp, LLC.
40
Underwater Performing Loans
41

Vintage Trends - Loans with Below 1.0x DSCR Among the more recent vintages, the percentage of loans with DSCRs below 1.0x is highest in the 2007 vintage with 21.5%, while the rest of the vintages are in the 10% to 12% range. The 2007 vintage also has the highest percentage of loans with DSCRs below 1.0x that are still performing at 81.4%. This compares with the 2005 and 2006 vintages in which only 67.3% and 70.8% of the loans with DSCRs below 1.0x are still performing.
24.00% % of Outstanding Bal Below 1.0 DSCR 22.00% 20.00% 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2000 2001 2002 2003 2004 2005 2006 2007 2008 % Delinquent % Current
Vintage 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total
Total Bal ($Bln) 7.63 16.61 18.80 32.41 51.21 120.23 157.95 190.01 10.63 605.49
Below 1.0x DSCR ($Bln) 1.73 2.84 2.45 2.90 5.33 12.67 20.43 40.76 1.04 90.15
% Below 1.0x 22.7% 17.1% 13.0% 8.9% 10.4% 10.5% 12.9% 21.5% 9.8% 14.9%
Below 1.0x and Current ($Bln) 0.94 2.07 1.89 2.25 4.20 8.52 14.46 33.20 0.80 68.35
% Current 54.7% 72.9% 77.4% 77.7% 78.7% 67.3% 70.8% 81.4% 76.8% 75.8%
Below 1.0x and Delinquent ($Bln) 0.78 0.77 0.55 0.65 1.14 4.15 5.97 7.56 0.24 21.81
% Delinquent 45.3% 27.1% 22.6% 22.3% 21.3% 32.7% 29.2% 18.6% 23.2% 24.2%
Notes: Data includes loans from 2000 - 2008 and excludes defeased loans. Used the most recent NCF DSCR figures. Source: Wells Fargo Securities, LLC and Trepp LLC, Inc.
42

Deals with Largest Exposure to Performing Loans with Below 1.0x DSCR
Ticker MSC 2007-HQ12 MSC 2007-IQ13 WBCMT 2007-C30 GCCFC 2007-GG11 WBCMT 2007-C31 GECMC 2007-C1 MLCFC 2007-5 WBCMT 2007-C32 MLCFC 2007-6 CSMC 2007-C4 JPMCC 2007-LD12 WBCMT 2006-C24 WBCMT 2007-C33 CWCI 2007-C3 CSMC 2007-C3 CSMC 2007-C2 LBUBS 2007-C7 CSMC 2007-C1 BSCMS 2005-PW10 JPMCC 2007-LD11 GECMC 2005-C2 BACM 2007-2 BACM 2007-3 CWCI 2007-C2 LBCMT 2007-C3 BSCMS 2007-PW15 LBUBS 2006-C3 GSMS 2007-GG10 CSMC 2006-C5 MSC 2005-HQ6 JPMCC 2007-CB20 SOVC 2007-C1 COMM 2006-C8 MSC 2007-IQ15 JPMCC 2007-CB18 JPMCC 2007-LDPX CSMC 2006-C4 BACM 2007-1 Deal Bal ($) 1,951,175,600 1,616,052,967 7,886,387,413 2,681,045,109 5,811,971,228 3,913,867,539 4,351,902,090 3,813,081,593 2,131,026,724 2,062,187,743 2,494,653,394 1,628,883,875 3,595,706,579 2,011,274,752 2,667,913,284 3,267,881,889 3,166,254,465 3,339,203,560 2,526,360,709 5,377,757,241 1,561,852,010 3,147,387,101 3,507,933,899 2,378,733,206 3,231,042,654 2,771,024,590 1,710,583,114 7,535,398,044 3,391,740,966 2,640,301,548 2,530,984,981 891,964,084 3,680,941,691 2,036,234,506 3,832,726,979 5,306,716,244 4,218,895,985 3,093,983,595 Deal Loan Count 100 176 265 122 191 198 328 144 146 212 166 116 166 124 240 210 100 257 209 265 137 180 151 147 117 206 126 201 304 183 137 230 171 134 222 219 359 157 Below 1.0x and Current Bal ($) 786,712,192 604,041,729 2,941,851,087 894,192,740 1,905,432,432 1,169,626,254 1,250,122,687 1,064,980,833 589,027,412 521,875,831 598,986,378 380,702,130 835,621,867 458,430,137 602,755,348 731,939,025 672,501,449 682,150,716 507,763,251 1,062,239,682 303,985,108 611,819,954 671,070,737 449,234,875 590,931,553 504,687,406 311,281,819 1,360,656,319 610,426,481 455,211,088 431,289,001 151,805,586 615,641,587 339,917,806 602,149,265 825,418,001 645,799,096 465,524,388 % Below 1.0x and Current ($Bal) 40.32% 37.38% 37.30% 33.35% 32.78% 29.88% 28.73% 27.93% 27.64% 25.31% 24.01% 23.37% 23.24% 22.79% 22.59% 22.40% 21.24% 20.43% 20.10% 19.75% 19.46% 19.44% 19.13% 18.89% 18.29% 18.21% 18.20% 18.06% 18.00% 17.24% 17.04% 17.02% 16.73% 16.69% 15.71% 15.55% 15.31% 15.05% Below 1.0x and Current (Ln Cnt) 14 27 26 23 28 27 40 26 18 33 30 16 24 13 28 35 14 37 26 43 18 21 17 17 20 21 20 22 51 28 20 48 24 11 30 34 70 23 % Below 1.0x and Current (Ln Cnt) 14.00% 15.34% 9.81% 18.85% 14.66% 13.64% 12.20% 18.06% 12.33% 15.57% 18.07% 13.79% 14.46% 10.48% 11.67% 16.67% 14.00% 14.40% 12.44% 16.23% 13.14% 11.67% 11.26% 11.56% 17.09% 10.19% 15.87% 10.95% 16.78% 15.30% 14.60% 20.87% 14.04% 8.21% 13.51% 15.53% 19.50% 14.65% Current Delinq % 6.41 2.57 3.19 2.21 6.84 6.43 3.12 5.67 2.18 13.19 3.99 6.78 3.78 2.56 8.65 3.79 1.31 16.37 3.05 12.63 2.08 6.03 11.44 3.70 8.43 4.96 6.57 13.14 5.41 5.68 4.29 4.23 11.38 7.51 4.96 7.15 11.46 4.90
Notes: Data excludes defeased loans. Used the most recent NCF DSCR figures. This chart only consists of 2005 - 2008 vintage deals. Source: Wells Fargo Securities, LLC and Trepp LLC, Inc.
43
Commercial Real Estate Valuations
44
Risk Premium Above Long Term Average

All Core Properties (Office, Strip Retail, Apartment, Industrial)
12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% Jul-01 Jul-02 Jul-03 Jan-01 Jan-02 Jan-03 Jan-04 Long Term Average Spread 342 bps 550 500 450 400 350 300 250 200 150 100 Jul-08 Jul-09 Jan-09 Jan-10 Jul-10
Jul-04
Jul-05
Jul-06
Jan-05
Jan-06
Jan-07
Jul-07
Source: Real C apital Analytics, Wells Fargo Securities, LLC
10-Year Treasury All Property Spread
All Property Cap Long Term Avg
Investors aware of declining property fundamentals (increasing vacancies and declining rents) have been requiring higher-risk premiums for investing in commercial properties with higher vacancy rates, putting upward pressure on capitalization rates. Pricing is competitive for well-leased stabilized trophy assets with strong rent rolls in major markets, and the premium investors are willing to pay for a stabilized asset has increased. This is producing a two-tiered market in which value losses are accelerated for properties with vacancies and lessened for properties with high occupancy.
45
Jan-08
Spread (bps)
Cap Rates Move Lower

10.0% 9.5% 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Apt
Hotel
Industrial
Office
Retail
Grand Total
Sources: Real C apital Analytics, Inc., Wells Fargo Securities, LLC .
Cap Rates have trended down throughout 2010 for the core property types (office, retail, apartment, industrial). The hotel sector has the greatest proportion of troubled assets among property types, according to Real Capital Analytics, and, because lenders are experiencing such low recovery rates on hotel properties, they are opting to extend or restructure mortgages in an effort to avoid foreclosure. Only the best hotel properties in the best markets are trading, and investors are focused on the price on a per unit basis. This resulted in volatility in the cap rate data given the currently low revenue in the hotel sector. As the economy improves, look for greater hotel transaction volume in 2011, which should help stabilize cap rates for the sector.
46
Sales Transaction Volume Picking Up

$160 $140 $120 $100 Billions $80 $60 $40 $20 $0 01Q1 01Q4 02Q3 03Q2 04Q1 04Q4 05Q3 06Q2 07Q1 07Q4 08Q3 09Q2 10Q1 10Q4 7.5% 7.0% 6.5% 6.0% 9.5% 9.0% 8.5% 8.0%
Total Transaction Volume
C ap Rate
Sources: Real C apital Analytics, Inc., Wells Fargo Securities, LLC .
Lenders are willing to lend on quality properties with stabilized cash flows and strong tenant rent rolls. Total transaction volume in 2010 eclipsed $120 billion versus $54.5 billion in 2009. Cap rates have been moving steadily downward since 2009 as transaction volume increased.
47
Property Values Projected to Ultimately Decline 32-40%

Moody's CPPI Quarterly Index by Prop Type Current Decline -30.2% -38.1% -33.4% -35.8% WFC Forecast Delta from High to 2012F -27.5% -34.1% -32.1% -35.9% Index High Apt Ind Off Ret 194.5 192.5 177.6 195.2 Date Q1 2007 Q4 2007 Q2 2007 Q3 2007 Q3 2010 135.9 119.2 118.2 125.3 2011F 137.5 119.0 118.0 123.9 2012F 140.9 126.9 120.6 125.1 Delta YTD to 2012F 2.61% 4.02% 1.33% -0.13%
Sources: Moody's CPPI, MIT Center for Real Estate, Real Capital Analytics, Wells Fargo Securities, LLC.
200 190 180 170 160 150 140 130 120 110 100 90 80
Moody's CPPI
2000-4
2001-2
2001-4
2002-2
2002-4
2003-2
2003-4
2004-2
2004-4
2005-2
2005-4
2006-2
2006-4
2007-2
2007-4
2008-2
2008-4
2009-2
2009-4
Apt
Ind
Off
Ret
So urce: M o o dy's CP P I, M IT Center fo r Real Estate, Real Capital A nalytics, Wells Fargo Securities, LLC.
We expect property pricing for the major property types to continue to bounce around through the first half of 2011, with the greatest drop in pricing behind us at this point. Losses may be putting in a bottom this year. We anticipate it will take about 12-15 months (2011/2012) before property revenues and cap rates stabilize, preventing further declines in value. Strong investor interest in stabilized core assets has kept pricing competitive, and cap rates for these products are actually compressing, limiting further declines in value. Value-add (higher vacancy) properties are not attracting a lot of interest at this point, but as the economy improves in 2011 more investors will likely look outside of the competitively priced major markets and at assets that are troubled. Apartment pricing is up 15.5% from a year ago, according to CPPI, and may very well be in full pricing 48 recovery mode now.
2010-2
2011F
Property Market Outlook
49
Our Property Forecast Anticipates Improvement Through 2012

Sector Office Retail (SC) Apartment Industrial Hotel Totals Previous Forecast (Q4 2009) No. of Metros with Revenue Overall Rating Declining Stable Growing Watch 54 0 0 Decline 52 0 0 Decline 54 0 0 Decline 50 0 0 Watch 50 0 0 260 0 0 Current Forecast (Q4 2010) No. of Metros with Revenue Overall Rating Declining Stable Growing Stable 18 36 0 Decline 42 10 0 Stable 0 51 3 Stable 3 37 10 Growth 0 4 46 63 138 59
Note: We added 50 Hotel Markets to our coverage universe Q3 2009. Source: Wells Fargo Securities, LLC
Leasing velocity slowed across all property types. Rising vacancies have forced landlords to increase concessions, thereby reducing effective revenue. It is likely to remain a tenants market for the next six months, but vacancy rates are likely nearing their peak. Apartment sector revenue should outperform that of the office, industrial and retail sectors. Continued high unemployment will likely slow absorption, but the housing downturn and increased underwriting standards for home mortgages should keep more people in rentals. Echo Boomers (currently aged 15-28) will likely generate long-term demand for all types of housing. 2010 will most likely represent the bottom in terms of property fundamentals. Markets with a forecast for negative near-term revenue growth showed improvement at 63 markets (Q4 2010) from 260 markets (Q4 2009). The volatile hotel sector should experience growing revenue as it snaps back from the lows at the end of 2009. The short, overnight lease term gives operators the ability to quickly adjust rates as the economy improves.
Property Market Outlook Revenue Declines Lessening

Retail: The poor financial health of the consumer will likely lead revenues lower through 2011, in our view. Consumers are boxed in by tighter credit, falling home values and high unemployment. Sublease space is typically offered at a discount to available direct space and is elevated and will likely keep downward pressure on direct space rents. Underutilized space will likely need to be absorbed before meaningful absorption gains significantly tighten the vacancy rate. Demand for goods slowly returning and trade flows with Asia have been improving with container volume increasing in West Coast ports. Lack of confidence in the housing market and higher qualifying requirements for home mortgages may keep more people in the renters pool. We are forecasting stable revenue through 2011, and the apartment sector should continue to outperform the other three core sectors. Hotel should post strong improvement in 2010 over 2009.
Office:
Warehouse: Apartment:
Hotel:
Sector Apartment Industrial Office Retail (strip centers) Hotel*

Note: *Hotel based on RevPAR change.
Market Score Q4 2010-2012 Stable Stable Stable Decline Growth
% US Metros w/ Decline or Watch Scores 0% 6% 33% 81% 0%
Annual Change in Effective Revenue 2010F 1.2% -4.8% -4.0% -3.1% 5.0% 2011F 1.6% -0.1% -0.1% -1.1% 4.3% 2012F 2.6% 6.6% 2.1% 0.9% 8.0% Current 7.0% 13.2% 17.6% 10.7% 39.1%
Vacancy Trough Vac 9.0% 13.2% 17.6% 0.7% 42.0% Trough Year 2009 2010 2010 2010 2009
Source: REIS, Inc., Property & Portfolio Research, Smith Travel Research, Real Capital Analytics, Inc. and Wells Fargo Securities, LLC.
51
Effective Revenue Trends by Property TypeThe Worst Is Behind Us

15%
10%
5%
0%
-5%
-10%
-15% 2010F 2011F 2012F 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Apartment Eff Rev C hng
Office Eff Rev C hng
Retail Eff Rev C hng
Industrial Eff Rev C hng
Source: Reis, Inc., Property & Portfolio Research, Inc., Wells Fargo Securities, LLC .
The severity of property revenue declines has likely passed with the close of 2009; however, fundamentals remain weak, particularly for the office and retail sectors. The apartment sector should continue to lead the recovery in 2011. Tougher requirements for a home mortgage, the echo boomers (born 1981-2000) entering adulthood, and the likelihood for economic recovery leading to job growth should support demand for apartments over the next several years.
52
Limited Supply Headed into Downturn Eases Road to Recovery

10.0%
Completions as % of Inventory
9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
Avg. '85-'89=5.0%
Avg. '97-'01=2.4% Avg. '04-'08=1.5% Avg. '10F-'12F=0.63%
2010F
Apt
Off
Ret
Ind
Aggregate
So urce: REIS, Inc., P ro perty & P o rtfo lio Research, Wells Fargo Securities, LLC.
Completions as a percentage of inventory were rather light heading into this recession compared to past cycles thanks to rising commodity prices through this past decade, which made development costs higher. Demand destruction has resulted in higher vacancies, but at least the deterioration in fundamentals is not likely to be exacerbated by heavy new levels of supply in the pipeline. As recovery begins, fundamentals may improve at a quickened pace.
53
2012F
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Sublet Availabilities Weigh on Office Markets Recovery

30% 25% 20% 15% 10% 5% 0% Q1 2010 Q2 2010 Q3 2010 Q2 '09 2002 2003 2004 2005 2006 2007 2008 2009 26% 21% 15% 11% 9% 13% 14%
15% 15% 14% 14%
9%
National sublet availabilities leveled off at around 15% and now are slowly starting to decline, remaining stable at 14% over the past two quarters.
National Office Sublet Availabilities as % of Total Vacant Stock Source: Reis, Inc. Wells Fargo Securities, LLC
35% Q3 2010 30% 25%
Markets with higher levels of sublet availabilities could experience a delayed recovery. New York has the highest sublet availability rate at 29%, but this is down from 32% a few quarters back.
20% 15% 10% 5% 0% Nashville Long Island San Jose Denver CNJ NNJ San Francisco Palm Beach San Diego Richmond Ft Lauderdale New York Orange County Los Angeles Ft Worth Sub MD Boston Orlando Chicago Seattle D.C.
Office Sublet Availabilities as % of Vacant Stock

Source: Reis, Inc., Wells Fargo Securities, LLC.
U.S. Average
54
Office-Using Employment Losses Lead to Underutilized Space

Employees (thousands) National Office-Using Employment 29500 29000 28500 28000 27500 27000 26500 Jan-08 Jan-09 Mar-08 May-08 Sep-08 Mar-09 May-09 Sep-09 Jul-08 Nov-08 Jul-09 Nov-09
down 818,000 jobs from Jan-08 to Nov-10.
Jan-10
Mar-10
May-10
Sep-10
Jul-10
Note: Sectors represented are prof essional & business services, information, and financial act ivities. Dat a is seasonally adjusted.
Source: Bureau of Labor Statistics, Wells Fargo Securities, LLC .
Based on 225 SF per employee, job losses of 818,000 would suggest total unoccupied space of 184.050 million SF; but actual absorption losses in the U.S. office market since 2008 total 136.65 million SF. The amount of square footage per building occupant has increased to 435 SF in 2009, up from 396 SF in 2007, according to International Facility Management Assoc. (IFMA), not because employers are allocating more space per employee, but because layoffs have left fewer workers occupying the same amount of space.
55
Nov-10
Office Sector Top 10/ Bottom 10

MARKET SCORE Growth - 4 METROS New York Pittsburgh District of Columbia Charlotte Austin Stable-3 Richmond Raleigh-Durham Nashville San Antonio Baltimore US Metro Total Sacramento Kansas City Detroit Phoenix Decline-2 Miami Tampa-St. Petersburg Fairfield County Denver Hartford Inland Empire Annual Revenue Change 2010Q4-2012 Avg 2.5% 2.3% 2.1% 2.0% 2.0% 2.0% 1.9% 1.4% 1.2% 1.1% 0.7% -0.4% -0.5% -0.6% -0.6% -0.6% -0.7% -1.0% -1.0% -1.3% -1.5% Current 11.6% 16.7% 9.8% 15.4% 21.4% 16.2% 16.9% 12.4% 18.5% 16.2% 17.4% 20.2% 17.0% 26.7% 26.4% 15.0% 21.4% 19.2% 20.6% 23.7% 25.1% VACANCY 4Q11 F 10.6% 16.6% 9.6% 15.0% 20.3% 15.3% 16.6% 12.2% 17.4% 16.0% 17.5% 21.1% 17.2% 26.9% 26.3% 15.5% 21.6% 20.0% 21.1% 25.1% 26.4% 4Q12 F 10.0% 16.4% 9.4% 14.3% 19.3% 14.3% 16.1% 11.7% 17.1% 15.6% 16.9% 20.6% 17.5% 26.7% 25.5% 15.7% 21.1% 19.7% 20.8% 24.0% 25.1% EMPLOYMENT GROWTH 2011 F 2012 F -3.9% -4.0% -0.9% 0.0% 1.3% -2.2% 0.1% -1.0% 0.7% -3.1% -2.4% -3.4% -3.5% -4.0% -2.8% -1.7% -0.4% -3.6% -2.6% -3.2% -1.5% 2.2% 2.0% 1.9% 3.1% 3.4% 1.4% 3.0% 2.8% 2.9% 0.4% 2.5% 3.3% 2.4% 1.8% 1.8% 3.7% 3.6% 2.2% 2.4% 1.9% 5.2% CMBS LOAN DELINQUENCIES 2010Q2 3.61% 10.08% 1.99% 9.54% 8.32% 6.91% 6.99% 2.51% 3.88% 5.38% 8.04% 4.77% 6.57% 14.52% 17.34% 9.81% 11.77% 8.68% 11.61% 9.83% 6.90% 2010Q3 3.26% 13.19% 2.83% 9.20% 10.57% 9.11% 8.18% 5.65% 2.02% 5.57% 8.61% 7.04% 6.68% 15.98% 19.16% 9.95% 16.17% 11.35% 11.40% 10.07% 9.97%
Sources: Among the sources considered are Bureau of Labor Statistics, Intex Solutions, Inc., Property & Portfolio Research, Dodge Pipeline, Real Capital Analytics, Marcus & Millichap, Reis, Inc., National Real Estate Index, Grubb & Ellis, CushmanWakefield, Colliers, ABR, Economy.com, and CB Richard Ellis. Final conclusions by Wells Fargo Securities, LLC.
Metros with a better fundamental outlook include older established metros like D.C., Baltimore, New York and Philadelphia. Nashville and Pittsburgh have remained rather stable throughout the recession with the vacancy rate remaining range bound. Volatile Austin jumped to the top 10 thanks to a more stable revenue outlook as vacancies tighten, after a rough prior 12 months. Higher vacancies in Phoenix, Miami, Chicago (weak suburbs), Denver, and weaker leasing trends in Detroit, Inland Empire and South Florida place those metros at the bottom of our forecast.
56
Property Markets: Office Supply/Demand Summary

National Office Supply / Demand Summary 150,000 100,000 50,000 000's SF 0 -50,000 -100,000 -150,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
Supply (left scale)
Demand (left scale)
Vacancy Rate (right scale)
Source: Reis, Inc. and Wells Fargo Securities, LLC .
57
Retail Sector Top 10 / Bottom 10

MARKET SCORE METROS Pittsburgh Raleigh-Durham Northern New Jersey Philadelphia San Francisco Austin Columbus Cleveland Fort Worth Portland US Metro Total Fort Lauderdale San Antonio Sacramento Suburban Maryland Annual Revenue Change 2010Q4-2012 Avg 1.4% 0.9% 0.6% 0.5% 0.5% 0.4% 0.2% 0.2% 0.2% 0.1% -0.4% -0.8% -0.8% -0.9% -0.9% -1.0% -1.1% -1.1% -1.3% -1.4% -2.0% Current 10.3% 9.6% 6.0% 9.4% 4.0% 8.4% 15.7% 14.2% 14.0% 7.3% 10.6% 10.6% 12.2% 12.2% 8.9% 10.0% 11.8% 13.0% 14.2% 11.4% 12.5% VACANCY 4Q11 F 10.2% 10.0% 6.5% 9.2% 4.3% 9.6% 16.1% 15.1% 13.8% 7.9% 11.2% 11.1% 12.7% 13.2% 9.5% 10.4% 12.2% 14.0% 15.3% 12.2% 13.0% 4Q12 F 9.5% 9.8% 6.4% 9.3% 4.2% 9.2% 16.2% 14.1% 14.5% 8.3% 11.0% 11.1% 13.4% 13.1% 9.5% 10.2% 12.2% 14.1% 15.2% 12.4% 12.7% EMPLOYMENT GROWTH 2011 F 2012 F -4.0% 0.1% -3.6% -3.6% -5.9% 1.3% -1.6% -3.6% 0.8% -1.9% -2.3% -1.1% 0.7% -3.4% -1.3% -1.5% -2.1% 0.6% 0.7% -0.4% 3.8% 2.0% 3.0% 1.8% 2.1% 3.0% 3.4% 2.5% 2.1% 3.3% 3.0% 2.5% 3.6% 2.9% 3.3% 1.6% 5.2% 3.0% 3.3% 3.7% 3.6% 3.4% CMBS LOAN DELINQUENCIES 2010Q2 4.71% 4.46% 5.06% 3.55% 3.50% 6.25% 9.12% 7.74% 7.69% 4.68% 6.76% 5.99% 2.05% 6.39% 1.65% 11.56% 11.59% 16.76% 9.13% 7.75% 17.15% 2010Q3 5.16% 3.87% 4.09% 4.05% 4.81% 6.97% 6.94% 7.89% 6.53% 3.39% 6.91% 7.13% 3.42% 6.20% 1.61% 11.12% 7.79% 15.73% 9.62% 7.13% 17.65%
Stable-3
Decline-2
Inland Empire Memphis Orlando Atlanta Tampa-St. Petersburg Las Vegas
Texas metros that largely avoided the worst of the housing crisis/job losses populate the top of our forecast, along with San Francisco (high median incomes/ high barrier to entry). Markets that experienced steep home price declines Las Vegas, Florida Metros, Detroit, Phoenix populate the bottom of our retail forecast.
58
Property Markets: Retail Supply/Demand Summary

50,000 40,000 30,000 000's SF 20,000 10,000 0 -10,000 -20,000 -30,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F 2% 0% 8% 6% 4% Retail Supply/Demand Summary 12% 10%
Supply (left scale)
Demand (left scale)
59
Warehouse Sector Top 10 / Bottom 10

MARKET SCORE METROS Seattle WA Memphis TN Baltimore MD Orange County CA Charlotte NC San Antonio TX Jacksonville FL Raleigh NC Miami FL Denver CO US Metro Total Cleveland OH Detroit MI Chicago IL Hartford CT Stamford CT San Jose CA Tampa FL North - Central New Jersey NJ San Francisco CA Palm Beach County FL Annual Revenue Change 2010Q4-2012 Avg 4.4% 4.3% 3.5% 3.2% 3.2% 3.1% 3.1% 3.0% 3.0% 2.7% 1.6% 0.7% 0.7% 0.5% 0.4% 0.3% 0.3% 0.1% -0.1% -0.3% -0.5% VACANCY Current 4Q11 F 4Q12 F 11.2% 19.8% 14.1% 11.5% 17.8% 14.1% 14.9% 17.7% 14.6% 6.1% 13.2% 12.4% 15.8% 14.6% 14.3% 15.7% 9.9% 13.7% 17.7% 10.8% 12.8% 10.4% 19.2% 15.5% 11.3% 15.7% 14.6% 12.8% 17.2% 13.1% 6.9% 12.9% 12.6% 14.8% 14.9% 12.4% 13.9% 9.4% 15.1% 17.9% 11.6% 13.2% 6.0% 14.4% 9.5% 6.8% 12.6% 9.1% 10.4% 13.7% 10.7% 3.5% 9.5% 10.4% 13.0% 9.9% 11.9% 14.7% 7.1% 10.0% 14.5% 8.8% 9.3% EMPLOYMENT GROWTH 2011 F 2012 F -4.1% -2.1% -3.1% -4.1% 0.0% -3.1% -0.8% 0.1% -1.7% -2.6% -2.4% -3.6% -4.0% -4.0% -3.2% -0.9% -5.9% -0.4% -3.2% -3.6% -0.9% 3.2% 3.0% 0.4% 2.9% 3.1% 2.5% 3.8% 3.0% 3.7% 2.4% 2.5% 2.1% 1.8% 2.7% 1.9% 2.4% 3.0% 3.6% 1.7% 2.0% 3.7% CMBS LOAN DELINQUENCIES 2010Q2 2010Q3 4.62% 3.55% 16.22% 21.63% 5.70% 5.83% 2.29% 2.33% 0.00% 2.82% 4.77% 4.77% 12.59% 8.10% 5.08% 5.08% 6.66% 10.70% 2.38% 2.56% 6.00% 6.16% 3.98% 0.00% 26.99% 32.17% 10.59% 7.60% 10.22% 5.11% 1.19% 1.22% 0.00% 0.00% 7.92% 8.57% 3.65% 5.39% 0.98% 1.69% 17.75% 16.46%
Growth - 4
Stable - 3
Decline-2
The Seattle and Orange County markets should benefit from increasing demand as shippers look for alternatives to L.A./Long Beach ports. Metros with increasing populations such as Charlotte and Raleigh should benefit from favorable demographics, while Jacksonville and Miami should benefit from Latin American growth and the future widening of the Panama Canal. The Midwest remains weak. Palm Beach remains more local and reliant on a healthy housing market. San Francisco gets stiff competition from the cheaper Oakland market.
60
Property Markets: Warehouse Supply/Demand Summary

200 150 100 000's SF 50 0 -50 -100 -150 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F Warehouse Supply/Demand Summary 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
Supply
Demand
Vacancy
Source: Property & Portfolio Research, Inc. and Wells Fargo Securities, LLC .
61
Warehouse Sector
West Coast port traffic increasing A harbinger of increasing demand for warehouse
1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 Jan-08 Jan-09 May-08 Mar-08 Mar-09 May-09 Jan-10 Mar-10 May-10 Sep-08 Sep-09 Sep-10 Nov-08 Nov-09 Jul-08 Jul-09 Jul-10
West Coast Imports West Coast Exports Source: Bloomberg, LP., Wells Fargo Securities, LLC.
West Coast Total
Increasing port traffic signals are increasing the demand for warehouse and distribution space. Total traffic for West Coast ports is up 12.7% in October 2010 versus October 2009 and is up 15.1% YTD October 2010 versus the same period a year ago.
62
Apartment Sector Top 10 / Bottom 10

MARKET SCORE METROS New York Charlotte District of Columbia Raleigh-Durham Growth - 4 Chicago Phoenix Richmond Long Island Las Vegas San Jose US Metro Total Fairfield County Norfolk Milwaukee Memphis Stable - 3 Indianapolis Inland Empire Orlando Hartford Cleveland Cincinnati Annual Revenue Change 2010Q4-2012 Avg 4.2% 3.4% 3.3% 3.1% 2.8% 2.8% 2.6% 2.6% 2.5% 2.5% 2.2% 1.6% 1.5% 1.5% 1.5% 1.4% 1.3% 1.1% 0.9% 0.6% 0.3% Current 3.6% 8.9% 5.7% 7.1% 5.9% 10.3% 7.7% 3.9% 9.9% 3.9% 7.0% 5.2% 5.7% 4.8% 12.0% 8.3% 7.1% 9.8% 5.0% 6.1% 6.9% VACANCY 4Q11 F 3.0% 7.8% 4.7% 6.3% 5.5% 9.6% 6.8% 3.3% 8.3% 3.7% 6.5% 4.9% 5.4% 4.8% 10.7% 8.6% 6.4% 9.2% 5.2% 6.1% 7.0% 4Q12 F 2.4% 6.6% 4.5% 5.8% 5.2% 9.1% 6.7% 3.0% 7.5% 3.6% 6.1% 4.5% 5.1% 4.3% 9.8% 8.1% 6.0% 8.7% 4.4% 5.8% 6.9% EMPLOYMENT GROWTH 2011 F -3.9% 0.0% -0.9% 0.1% -4.0% -2.8% -2.2% -3.3% 3.8% -4.1% -2.4% -3.6% -1.6% -4.4% -2.1% -1.7% -1.5% 0.6% -3.2% -3.6% -2.0% 2012 F 2.2% 3.1% 1.9% 3.0% 2.7% 1.8% 1.4% 2.0% 3.4% 3.2% 2.5% 2.2% 1.6% 2.4% 3.0% 1.7% 5.2% 3.3% 1.9% 2.1% 1.8% CMBS LOAN DELINQUENCIES 2010Q2 2.85% 5.54% 3.33% 6.22% 6.68% 22.67% 6.44% 2.20% 23.37% 1.58% 8.51% 5.88% 3.30% 0.00% 22.38% 15.68% 11.54% 15.91% 18.66% 18.37% 10.14% 2010Q3 2.61% 8.70% 3.45% 5.42% 7.29% 21.88% 8.67% 1.10% 26.96% 0.00% 8.41% 6.25% 3.30% 0.00% 17.78% 13.41% 12.31% 18.84% 19.96% 18.18% 8.82%
Sources: Among the sources considered are Bureau of Labor Statistics, Intex Solutions, Inc., Property & Portfolio Research, Dodge Pipeline, Real Capital Analytics, Marcus & Millichap, Torto Wheaton Research, Reis, Inc., National Real Estate Index, Grubb & Ellis, CushmanWakefield, Colliers, ABR, Economy.com, and CB Richard Ellis. Final conclusions by Wells Fargo Securities, LLC.
Top markets of New York, Long Island, Northern New Jersey, D.C., San Jose, and Boston have higher median home prices, with many renting by necessity. Job growth is solid in the D.C. area. Suburban (northern) Virginia job growth is improving. Growth metros that attract younger populations such as Denver, Austin, Charlotte, and Raleigh-Durham should also perform well over the forecast. Midwest metros offering fewer job opportunities for echo boomers lag the forecast.
63
Property Markets: Apartment Supply/Demand Summary

250 200 150 100 50 0 -50 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F National Apartment Supply / Demand Summary 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%
Units (000's)
Supply (left scale)
Demand (left scale)
64
Apartment Sector
Home prices more affordable now
190 180 170 160 150 140 130 -10.00% 120 110 100 Q1 2002 Q3 2002 Q1 2003 Q3 2003 Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 -20.00% 10.00% Premium to Buy vs Rent 20.00% 40.00% % Median Income vs Qualifying Income 30.00%
Lack of confidence in the housing market is pushing more people to rentals. Renting means freedom from a mortgage and the mobility to pursue job opportunities in other areas.
0.00%
-30.00%
So urce: NA R, REIS, Wells Fargo Securities, LLC
Affordability Index
Premium to Buy vs Rent
Echo boomers aged 35-44 are projected to eclipse the number of baby boomers when they were the same age by more than 5.9 million driving demand for housing Recession wiped out wealth that might have gone to defray educational costs of children. Larger student loans could delay transition from renter to homeowner.
yet the homeownership rate continues to decline.

69.0% 68.5% 68.0% 67.5% 67.0% Q3 '10 rate of 66.9% lowest since Q3 '99 66.5% Q3'00 Q3'01 Q3'02 Q3'03 Q3'04 Q3'05 Q3'06 Q3'07 Q3'08 Q3'09 Q3'10
So urce: U.S. Census B ureau, CNNM o ney.co m, Wells Fargo Securities, LLC.
Drop since peak in 2005 represents nearly 3 million fewer homeowners now
65
Property Markets: Hotel Top and Bottom 10 Metros

MARKET SCORE METROS
Palm Beach County FL Orlando FL Las Vegas NV Tampa FL Minneapolis MN Chicago IL Pittsburgh PA Baltimore MD Orange County CA
Annualized Change in RevPAR 2010Q3-2011Q4 Avg

8.8% 8.0% 6.6% 6.6% 6.5% 6.0% 5.9% 5.4% 5.4% 5.3% 4.8% 3.4% 3.3% 2.9% 2.9% 2.8% 2.7% 2.5% 1.9% 1.4% 0.0%
Occupancy Rate 08:3 09:3 10:3

62.4% 66.5% 67.8% 57.9% 63.7% 64.7% 63.7% 62.0% 69.9% 67.7% 65.2% 67.4% 58.7% 65.8% 59.8% 64.8% 62.3% 58.2% 59.7% 60.1% 55.9% 57.0% 60.2% 57.6% 52.2% 55.6% 56.8% 61.6% 58.8% 63.7% 62.0% 58.4% 61.7% 54.5% 61.4% 52.9% 60.3% 52.6% 52.8% 52.6% 52.7% 51.0% 61.4% 61.5% 58.6% 54.6% 59.6% 60.6% 65.4% 61.0% 67.3% 67.8% 60.9% 62.3% 56.4% 64.0% 55.0% 54.5% 56.9% 53.9% 55.5% 56.2% 51.8%
Supply Growth (Rooms) 09:3 10:3

493 1,117 3,906 1,273 861 3,262 -289 1,950 529 459 77,529 554 1545 610 1397 1658 520 1285 1007 889 411 366 3,450 7,562 783 56 -535 1,049 586 500 75 53,158 1418 1228 662 1356 4464 809 969 220 1717 426
High Growth-5
Growth-4
Boston MA US Metro Total Austin TX St. Louis IL Philadelphia PA Jacksonville FL Houston TX Milwaukee WI Indianapolis IN Stamford CT Atlanta GA Cincinnati OH
Stable-3
Sources: Among the sources considered are Bureau of Labor Statistics, Property & Portfolio Research, Smith Travel Research, Dodge Pipeline, Real Capital Analytics, Marcus & Millichap, Reis, Inc., National Real Estate Index, Grubb & Ellis, CushmanWakefield, Colliers, ABR, Economy.com, and CB Richard Ellis. Final conclusions by Wells Fargo Securities, LLC.
With no markets forecasted to experience declining revenue through Q4 2011, the hotel sector appears firmly in recovery mode. Major cities should perform well with stronger recovery likely in select Florida metros and Las Vegas, which traditionally benefit from increased business meetings and convention traffic.
66
Property Markets: Hotel Supply/Demand Summary

National Hotel Supply / Demand Summary 150 100 50 0 60% -50 -100 -150 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 55% Occupancy Rooms 65% 75%
70%
50%
Supply (left scale)
Demand (left scale)
Occupancy Rate (right scale)
Source: Property & Portfolio Research, Inc. and Wells Fargo Securities, LLC .
Developers poorly timed the current market, with projects coming on line at a time when demand has receded. Given the drastic declines in RevPAR in 2009, our forecast through 2011 shows strong improvement across the majority of markets. As the economy recovers, hotels should benefit with increasing occupancies. Domestic airline traffic has been up in eight out of nine months through September 2010 versus the same period a year ago, according to Bureau of Transportation Statistics.
CMBS Relative Value
68
Relative Value: Time for DUS to Shine

As 2005 vintage superseniors tightened 120 bps in 2010, DUS spreads widened 32 bps. DUS registers a 107-bp spread to Treasuries at a time when spreads across other asset classes have compressed. The 4.4% Yield on DUS Bonds Exceeds the Return on 2007 Dupers
Fannie Mae DUS 10/9.5 Sat the 2010 Spread Rally Out
1200 1000 800
DUS: The Guaranty Hasn't Been This Cheap in Some Time
1200 1000 800

bps
bp s to swaps
600 400 200 0 12/10 10/10 12/08 12/09 2/09 4/09 6/09 8/09 2/10 4/10 10/09 8/10 6/10
600 400 200 0 12/09 10/10 6/10 10/08 8/10 4/09 2/10 6/09 8/09 4/10 12/10
69
12/08
FNMA DUS 2005 Vintage 10YR AAA Weak 2007 Supersenior 10YR
Source: Wells Fargo Securities, LLC.
2005 Supersenior/FNMA DUS Spread Differential

Source: Wells Fargo Securities, LLC.
10/09
2/09
Relative Value: 2007 Dupers Now Rich to Corporates
As seasoning CMBS bonds roll down a steep Treasury curve, nominal yields on 2007 dupers are now inside investment-grade corporates. CMBS merit a yield premium to reflect uncertainty in the timing of cash flows as well as a liquidity concession versus corporates. Weak credit 2007 dupers are now 48 bps inside the BBB REIT Index. At a 4.1% yield 2007 Dupers Are Being All They Can Be
CMBS Superseniors versus Corporate Indices 19% 17% 15% 13% 11% 9% 7% 5% 3% 11/09 11/10 1/09 3/09 5/09 9/09 7/10 1/11 7/09 9/10 1/10 3/10 5/10 '07 Duper IG Correlation in 2010: 0.82 '07 Duper HY Correlation in 2010: 0.88 16% 14% 12% 10% 8% 6% 4% 2% 7/07 1/10 10/07 10/08 4/10 10/10 10/09 1/08 1/09 4/09 1/11 1/07 4/07 4/08 7/08 7/09 7/10 CMBS Superseniors versus Corporate Indices
10-Yr '07 Super Sr. Yield Investment-Grade Index (Avg. YTM) High-Yield Index (Avg. YTM)
Source: Bloomberg LP and Wells Fargo Securities, LLC.
10-Yr '05 CMBS Super Sr. Yield 10-Yr '07 Super Sr. Yield BBB REIT Index Yield
Source: Bloomberg LP and Wells Fargo Securities, LLC.
70
CMBS Yields versus Corporates

Yields: Corporates Versus CMBS
1/20/2011 5-Yr. Corporates Composite (%) AA A BBB BB B BB BB BB A2 A4 AM A2 A4 AM 2.87 3.13 3.76 5.13 6.18 5.54 4.81 5.37 2.95 4.29 5.77.0 2.97 4.27 5.56.9 9/15/2010 2.41 2.81 3.52 5.55 6.69 6.84 5.12 5.51 3.00 5.09 5.98.6 4.20 5.25 5.78.1 6/9/2010 3.08 3.45 4.09 6.04 7.40 6.78 5.98 5.49 3.93 7.26 8.99 4.01 7.26 810 3/22/2010 1/13/2010 3.25 3.73 4.51 6.22 7.42 6.73 5.97 6.2 3.8 7.1 7.313 4.3 7.1 010 3.31 3.83 4.77 6.56 7.55 7.33 6.17 6.43 4.3 7.8 8.010.0 4.8 7.5 7.59.5
Finance Industrials Retail CMBS (loss adjusted)
CMBS (With 2-Yr Extension)
Note: CMBS runs assume 3 CDR, 50% severity and a 12-mo. recovery lag. Source: Bloomberg Fair Market Value Curves, Bloomberg LP and Wells Fargo Securities, LLC.
71
New Issue: Pipeline

As much as $13 billion is possible for the primary market in Q1although this is probably at the high side. We forecast 2011 issuance of $50 billion.
Amount FIRST QUARTER Deutsche Bank, UBS, Ladder Morgan Stanley, Bank of America Wells Fargo, RBS, Basis Capital, Natixis J.P. Morgan Hines partnership (California office portfolio) Genesis Healthcare/JER (healthcare portfolio) Goldman Sachs Cerberus Partners/Kyo-ya (hotel portfolio)
Source: Commercial Mortgage Alert.
Lead Manager Deutsche Bank, UBS Morgan Stanley, BofA Wells Fargo, RBS J.P. Morgan J.P. Morgan Citigroup, BofA, Barclays Goldman Goldman
Deal Type Multiple borrower Multiple borrower Multiple borrower Multiple borrower Single borrower Single borrower Multiple borrower Single borrower
Rate Type Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed
($Mil.) $2,900 1,800 1,700 1,500 1,500 1,500 1,250 900 $13,050
72
New Issue: Recent Pricing
Pool Size/WAC Price Date Loan Sellers Master/Special B-Buyer Operating Advisor DSCR LTV Debt Yield Total Debt LTV Total Debt DY Long AAA AA A ABBB+ BBB BBBBB B+ B BNR
1,101.3mm / 5.62% 10/7/10 JP Morgan Midland Loan Services, Inc H/2 Capital Pentalpha Surveillance LLC (Sr. Trust Adv.) UW 1.66x 58.9% 11.6% 60.9% 11.2% C/E 18.25% 14.88% 10.00% 7.00% 5.00% 3.50% 2.25% 2.00% 0.00% WAL 9.79 9.89 9.91 9.97 9.97 9.97 9.97 9.97 9.97 Fitch 1.32x 82.6% 11.0% 85.4% 10.6% Px (S+) 150 250 320 400 NAV NAV NAV NAV NAV S&P 1.34x 81.7% 11.1% 84.5% 10.7% DY 14.20% 13.64% 12.90% 12.49% 12.22% 12.03% 11.88% 11.85% 11.61%
JPMCC 2010-C2
856.6mm / 6.03% 10/20/10 DB / Ladder Capital / Natixis Wells Fargo / Midland BlackRock UW 1.71x 58.8% 12.2% 61.4% 11.7% C/E 17.38% 14.50% 11.13% 5.00% 3.50% 2.00% 0.00% Moody's 1.25x 83.1% 11.4% 86.8% 11.1% WAL 9.64 9.90 9.92 9.92 9.92 9.92 9.92 Px (S+) 140 240 310 425 NAV NAV NAV Fitch 1.40x 82.8% 11.6% 83.3% 11.1% DY 14.81% 14.31% 13.77% 12.88% 12.68% 12.49% 12.24%
COMM 2010-C1
735.9mm / 5.71% 10/28/10 BofAML / WFB / Basis Wells Fargo Bank NA / Midland Rialto Pentalpha (Sr. Trust Adv.) UW 1.82x 58.3% 12.8% 60.5% 12.3% C/E 17.75% 14.75% 10.50% 5.88% 4.00% 2.00% 0.00% WAL 9.71 9.91 9.91 9.93 9.99 9.99 9.99 Moody's 1.31x 80.6% 11.5% 83.9% 11.0% Px (S+) 135 220 290 400 Not Off. Not Off. Not Off.
WFCM 2010-C1
Source: Wells Fargo Securities, LLC
73
The Case for Seasoned Credit

Current Debt Yield by Vintage
Vintage Sample Size (Loan Count) Wtd. Avg. Debt Yield
2001 2002 2003 2004 2005 2006 2007 2008
2,285 2,203 3,380 3,952 7,591 9,056 7,399 132
16.2% 16.5% 14.5% 15.3% 11.1% 10.4% 9.3% 9.7%
In our view, seasoned CMBS credit as an investment offers a spread advantage to comparable short-duration products without the assumption of undue credit risk. On average, 20012004 collateral shows debt yields of 14.5%16.5% based on in-place cash flow. This indicates these loans are easily refinanced even in the current tight commercial real estate lending environment. Using a net asset value (NAV) approach that compares the supportable loan amount versus mortgage balance shows that the 20012004 vintages are overcollateralized at NAVs of 130% or more. This shows there is significant borrower equity in these transactions. Prepayment in the open period and even defeasance of these loans is highly likely, particularly if lending standards improve. Defeasance within the group ranges from 34% on average for the 2001 vintage to 14% for the 2004 vintage.
Notes:NOIbasedonannualizedavailable2009 financials;excludesdefeasedloans. Source:BloombergLPandWellsFargoSecurities,LLC.
Supportable Loan Amount by Vintage

Supportable Loan Amount Inputs Base Stress
RequiredDSCR AssumedLoanTerm AssumedCoupon MortgageConstant
1.25 30 6.00% 7.26%

Base Case Supportable Loan Amount vs Mortgage Balance
1.30 30 7.50% 8.47%

Stress Case Supportable Loan Amount vs Mortgage Balance
Vintage
Sample Size (Loan Count)
2001 2002 2003 2004 2005 2006 2007 2008
2,285 2,203 3,380 3,952 7,591 9,056 7,399 132
1.78 1.81 1.60 1.68 1.22 1.15 1.02 1.07
1.47 1.50 1.32 1.39 1.01 0.95 0.84 0.88
Notes:NOIbasedonannualizedavailable2009financials;excludesdefeasedloans. Source:BloombergLPandWellsFargoSecurities,LLC.
74

Based on Moodys REAL All Property CPPI data, property values are now back to 2002 levels. The impact of this decline is most acute for the 2005 and later vintages, where property price declines imply current LTV ratios may be at or above 100%. On average, 2005 transactions were underwritten at 69.7% LTV, and after applying a 27.2% value decline based on CPPI, the current LTV ratio would reach 96%. For the 2006 vintage, an implied LTV goes to 103% and for the 2007 vintage implied leverage is 115%. In contrast, properties underwritten in 2002 at a 69.1% LTV would be at around 60% levered based on CPPI data and eight years of amortization. Moodys REAL CPPI National All Property Index
Avg. Annual CPPI Index at Origination 1.030 1.061 1.157 1.308 1.560 1.692 1.873 1.749 Implied Value Change 10.3% 7.1% -1.8% -13.1% -27.2% -32.9% -39.3% -35.1% 2.0 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 12/00 12/01 12/02 12/03 12/04 12/05 12/06 12/07 12/08 12/09
Vintage 2001 2002 2003 2004 2005 2006 2007 2008
Note: Implied change based on Index reading for Dec. 2009. Source: Moody's Investors Service, Inc. and Wells Fargo Securities, LLC.
Source: Real Capital Analytics (RCA).
75

Defeasance within the group ranges from 34% on average for the 2001 vintage to 14% for the 2004 vintage. Defeased Balance by Vintage
200 180
% Currently Defeased 2000 - 34.0% 2002 - 29.2% 2004 - 14.4% 2001 - 34.4% 2003 - 19.9% 2005 - 4.00%
Outstanding Bal ($Billions)
160 140 120 100 80 60 40 20 0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Defeased Bal ($)

Source: Wells Fargo Securities, LLC, and Trepp, LLC.
Non-Defeased Bal ($)
76

Within the seasoned vintages, there are a number of distinctions that may be material to performance. Specifically, the proportion of total interest-only (IO) loans ranges from 12% for the 2001 vintage to 44% for 2004. Current collateral-weighted average coupons (WAC) range from 7.4% for the 2001 vintage to 5.5% to the 2004 vintage. Although loans within these vintages, on average, are well collateralized, we would expect these differences to affect the maturity repayment timing experience between vintages. Underwriting Quality by Vintage
Settle Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Securitized Loan Bal. ($mm) Count 2,951 862 9,994 2,474 22,024 4,130 51,398 9,670 37,391 7,367 28,678 5,005 38,843 5,733 34,514 4,331 53,425 5,647 73,502 6,701 135,489 10,117 161,314 11,701 191,475 11,768 10,707 819 Orig. LTV 67.8 68.0 69.7 70.3 69.9 68.1 68.1 69.1 67.8 68.8 69.7 69.1 70.0 68.1 Orig. DSCR 1.39 1.45 1.39 1.48 1.43 1.41 1.45 1.53 1.72 1.64 1.55 1.43 1.38 1.35 Net Full Cpn IO % 9.07 0.00 8.65 0.00 8.44 0.00 7.36 0.02 7.44 0.02 8.12 0.01 7.51 0.03 6.90 0.02 5.62 0.08 5.48 0.14 5.32 0.26 5.84 0.32 5.86 0.57 6.20 0.31 Avg Orig. Partial Total Ln. Sz. Lock-Out IO % IO % ($mm) Per. 0.03 0.03 3.42 46 0.02 0.02 4.04 45 0.03 0.03 5.33 40 0.05 0.07 5.32 40 0.05 0.07 5.08 40 0.07 0.08 5.73 38 0.08 0.12 6.78 30 0.09 0.11 7.97 30 0.15 0.24 9.46 30 0.30 0.44 10.97 31 0.38 0.65 13.39 27 0.42 0.74 13.79 28 0.29 0.86 16.27 25 0.50 0.81 13.07 29
Source: Intex Solutions, Inc., Trepp, LLC, U.S. Treasury and Wells Fargo Securities, LLC.
77

Underwriting Quality by Vintage
2000 Still Outstanding 14.1% Paid at Maturity 25.6% Paid Post Maturity 3.3% Prepay During Open 43.6% Prepay with YM or Penalty Pts 5.8% Defeased 7.6% Source: Trepp, LLC and Wells Fargo Securities, LLC. 2001 14.1% 21.5% 4.5% 21.8% 30.3% 7.9% 2002 7.3% 42.7% 3.0% 32.7% 11.1% 3.3% 2003 23.5% 15.5% 4.3% 25.2% 30.7% 0.8% Total 14.4% 25.9% 3.4% 39.4% 10.4% 6.5%
Prepayment during the open period has been the most common resolution for loans from the 20002003 vintages that maturated from January 2009 to February 2010. The lions share of seasoned loan maturities during the measurement period came from the 2000 vintage. Of the nondefaulted loans from the 2000 vintage that reached maturity from January 2009 to February 2010, 43.6% prepaid during the open period. The results are mixed for the 20012003 vintages but are based on small sample sizes.
2000-2003 Vintage Maturities by Balance ($million)

Vintage 2000 2001 2002 2003 Total Still Outstanding 1,063.8 81.6 70.6 256.9 1,473.0 Paid at Maturity 1,936.3 124.7 412.7 169.2 2,642.9 Paid Post Maturity 248.0 25.9 29.0 46.6 349.5 Prepay During Prepay with YM Open or Penalty Pts 3,297.8 126.2 316.1 275.1 4,015.3 438.3 175.8 107.4 334.7 1,056.2 Liquidated / Impaired Before Maturity 661.7 37.1 10.3 0.0 709.2 Liquidated / Impaired At Maturity or After 167.3 13.3 32.3 0.0 213.0 Other Defeased 109.7 0.8 10.3 7.3 128.0 572.3 45.9 31.7 9.0 658.9
Note: Includes all fixed-rate conduit loans with maturity dates between January 2009 and February 2010. Source: Wells Fargo Securities, LLC and Trepp, LLC.
2000-2003 Vintage Maturities by Count

Vintage 2000 2001 2002 2003 Total Still Outstanding 217 12 8 21 258 Paid at Maturity 473 37 57 24 591 Paid Post Maturity 89 18 5 6 118 Prepay During Prepay with YM Open or Penalty Pts 707 32 38 29 806 187 82 21 47 337 Liquidated / Impaired Before Maturity 138 18 2 0 158 Liquidated / Impaired At Maturity or After 42 3 3 0 48 Other Defeased 19 3 2 4 28 125 22 5 1 153
Note: Includes all fixed-rate conduit loans with maturity dates between January 2009 and February 2010. Source: Wells Fargo Securities, LLC and Trepp, LLC.
78
DISCLOSURE APPENDIX Additional information is available on request. This report was prepared by Wells Fargo Securities, LLC. About Wells Fargo Securities, LLC Wells Fargo Securities, LLC is a U.S. broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the New York Stock Exchange, the Financial Industry Regulatory Authority and the Securities Investor Protection Corp. Important Information for Non-U.S. Recipients EEA The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. For certain non-U.S. institutional reader (including readers in the EEA), this report is distributed by Wells Fargo Securities International Limited (WFSIL). For the purposes of Section 21 of the UK Financial Services and Markets Act 2000 (the Act), the content of this report has been approved by WFSIL a regulated person under the Act. WFSIL does not deal with retail clients as defined in the Markets in Financial Instruments Directive 2007. This research is not intended for, and should not be relied upon, by retail clients. The FSA rules made under the Financial Services and Markets Act 2000 for the protection of retail clients will therefore not apply, nor will the Financial Services Compensation Scheme be available. Australia Wells Fargo Securities, LLC is exempt from the requirements to hold an Australian financial services license in respect of the financial services it provides to wholesale clients in Australia. Wells Fargo Securities, LLC is regulated under U.S. laws which differ from Australian laws. Any offer or documentation provided to Australian recipients by Wells Fargo Securities, LLC in the course of providing the financial services will be prepared in accordance with the laws of the United States and not Australian laws. Hong Kong This report is issued and distributed in Hong Kong by Wells Fargo Securities Asia Limited (WFSAL), a Hong Kong incorporated investment firm licensed and regulated by the Securities and Futures Commission to carry on types 1, 4, 6 and 9 regulated activities (as defined in the Securities and Futures Ordinance, the SFO). This report is not intended for, and should not be relied on by, any person other than professional investors (as defined in the SFO). Any securities and related financial instruments described herein are not intended for sale, nor will be sold, to any person other than professional investors (as defined in the SFO). Japan This report is distributed in Japan by Wells Fargo Securities (Japan) Co., Ltd, registered with the Kanto Local Finance Bureau to conduct broking and dealing of type 1 and type 2 financial instruments and agency or intermediary service for entry into investment advisory or discretionary investment contracts. This report is intended for distribution only to professional customers (Tokutei Toushika) and is not intended for, and should not be relied upon by, ordinary customers (Ippan Toushika). The rating stated on the document is not a credit rating assigned by a rating agency registered with the Financial Services Agency of Japan but a rating assigned by a group company of a registered rating agency. The rating agency groups call respectively Fitch Ratings, Moodys Investors Services Inc or Standard & Poors Rating Services. Any decision to invest in securities or transaction should be made after reviewing policies and methodologies used for assigning credit ratings and assumptions, significance and limitations of credit rating stated on the web site of rating agencies. Important Disclosures Relating to Conflicts of Interest and Potential Conflicts of Interest Wells Fargo Securities, LLC may sell or buy the subject securities to/from customers on a principal basis or act as a liquidity provider in such securities. Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions. Wells Fargo Securities, LLC research analysts receive compensation that is based on and affected by the overall profitability of their respective department and the firm, which includes, but is not limited to, investment banking revenue. Wells Fargo Securities, LLC Fixed Income Research analysts interact with the firms trading and sales personnel in the ordinary course of business. The firm trades or may trade as a principal in the securities or related derivatives mentioned herein. The firms interests may conflict with the interests of investors in those instruments. For additional disclosure information please go to: www.wellsfargo.com/research. Analysts Certification The research analyst(s) principally responsible for the report certifies to the following: all views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers discussed; and no part of the research analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the research analyst(s) in this research report.
79
This report, IDs, and passwords are available at www.wellsfargo.com/research This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments named or described in this report. Interested parties are advised to contact the entity with which they deal, or the entity that provided this report to them, if they desire further information. The information in this report has been obtained or derived from sources believed by Wells Fargo Securities, LLC, to be reliable, but Wells Fargo Securities, LLC does not represent that this information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of Wells Fargo Securities, LLC, at this time, and are subject to change without notice. Performance analysis is based on certain assumptions with respect to significant factors that may prove not to be as assumed. You should understand the assumptions and evaluate whether they are appropriate for your purposes. Performance results are often based on mathematical models that use inputs to calculate results. As with all models, results may vary significantly depending upon the value of the inputs given. Models used in any analysis may be proprietary making the results difficult for any third party to reproduce. The securities referenced herein are more fully described in offering documents prepared by the issuers, which you are strongly urged to request and review. Wells Fargo Securities, LLC, and its affiliates may from time to time provide advice with respect to, acquire, hold, or sell a position in, the securities or instruments named or described in this report. If you are subject to ERISA, this report is being furnished on the condition that it will not form a primary basis for any investment decision. For the purposes of the U.K. Financial Services Authoritys rules, this report constitutes impartial investment research. Each of Wells Fargo Securities, LLC, and Wells Fargo Securities International Limited is a separate legal entity and distinct from affiliated banks. Copyright 2011 Wells Fargo Securities, LLC.
SECURITIES: NOT FDIC-INSURED * NOT BANK-GUARANTEED * MAY LOSE VALUE
80

2011 Jan Wells Fargo CMBS Outlook

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2011 Jan Wells Fargo CMBS Outlook

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Current CMBS Outlook

January 24, 2011

Wells Fargo Securities, LLC

2011 Opportunities and Risks

Wells Fargo Securities, LLC

2011 Opportunities and RisksRecommendations

Wells Fargo Securities, LLC

2011 Opportunities and RisksFurther Thoughts

Wells Fargo Securities, LLC

2011 Opportunities and RisksFundamentals and Performance

Wells Fargo Securities, LLC

Regulation: From Rulemaking to Implementation

Wells Fargo Securities, LLC

Regulation: From Rulemaking to Implementation

Wells Fargo Securities, LLC

Regulation: FDIC Safe Harbor

Wells Fargo Securities, LLC

Regulation: Reg AB Revisions

Wells Fargo Securities, LLC

Regulation: Also Out There

Wells Fargo Securities, LLC

Commercial Real Estate Debt Landscape

Wells Fargo Securities, LLC

Outstanding US Commercial Real Estate Loans

Commercial, $2.36, 17% Farm, $0.13, 1%

Other $338.60 11%

Multifamily Residential, $0.85, 6%

Commercial banks $1,428.00 44%

CMBS, CDO and other ABS issuers $640.00 20%

Source: Federal Reserve Flow of Funds Report 3Q010 (12/9/10).

Wells Fargo Securities, LLC

CMBS Accounts for 16% of 2011 CRE Debt Maturities

Estimated Commercial Mortgage Maturities

Wells Fargo Securities, LLC

CMBS Delinquencies Move Above Bank Loan Levels

C MBS (60+ days)

Life C ompanies (60+ days)

Banks & Thrifts (90+ days)

Source: Mortgage Bankers Association.

Wells Fargo Securities, LLC

Large-Loan Floating-Rate / Single Asset

Wells Fargo Securities, LLC

CMBS Maturities Fixed Rate

Future Maturities by Deal Vintage ($billion outstanding) Fixed-Rate Conduit/Fusion Deals

Wells Fargo Securities, LLC

CMBS Maturities Floating Rate

Wells Fargo Securities, LLC

US CMBS Issuance Trends

230 204 169

50 12 2005 2006 2007 2008 7 13 2009 2010 2011 Est

CMBS Collateral Performance by Originator (20032008) as of October 2010.

1.60 1.55 1.50 1.45 1.40 1.35 1.30

Original LTV (%)

Collateral Performance Metrics

Goldman Wells Fargo

Wells Fargo Securities, LLC

Source: Wells Fargo Securities, LLC and Intex Solutions, Inc.

CMBS Defaults and Losses

Wells Fargo Securities, LLC

CMBS 60+ Day DelinquenciesFixed-Rate Conduit

Delinquency Rate (% of current balance)

Source: Wells Fargo Securities, LLC , and Intex Solutions, Inc.

Historical CMBS Loss Severities