The global real estate market suffered in 2008 due to the financial crisis and economic downturn. U.S. REITs rebounded in the 4th quarter of 2008 and may lead a recovery in 2009 if the U.S. economy rebounds. Credit markets remain largely frozen, which is impacting commercial mortgage backed securities and new lending. Defensive investment strategies focused on liquidity and balance sheet strength are positioned to perform best in 2009 until economic and market conditions stabilize further. Opportunities may arise in undervalued REITs and direct commercial real estate if accessed with a long/short hedge fund strategy.

1. Real Estate Commentary
4th Qtr
January 2009

2. Global REIT Markets
2008 Theme: flight to safety, de-leveraging.
Global REITs showed signs of a bottom November 20, 2008 as credit turmoil and economic slowdown
fears may have peaked. U.S. REITs lead the rise from November (+16%). Economists believe the U.S.
economy began the downturn and may lead other regions in an upturn sometime in 2009.
NAREIT U.S. +16.39% Dec -37.7% 2008 stimulus help, began the downturn, may lead upside
EPRA NAREIT Asia +4.82% Dec -52.48% 2008 economy slowing and investors reduce risk
EPRA NAREIT Europe +7.64 Dec -51.13% 2008 weakening economy, UK heavy in financial industry
Major EPRA NAREIT Indexes YTD 12/31/08
2008 Total Return
U.S. REITS were up YTD Sept.
Global -9.26%
Lehman (key provider of credit to RE)
Files Bankruptcy September
Bear Stearns bailout CDS Market sent into turmoil
January 22
U.S. Equity REIT Index leads the
Bear Stearns bailout December bounce. +16%
March ‘08 CMBS still frozen
Global REIT Index +9.66% Dec.
November 21, ’08
NAREIT U.S. Equity REIT European REIT Index +7.64% Dec.
Index
Dividend yield reaches Asia REITS +4.82% Dec.
12% was 5% in Sept.

3. Index returns
YTD December 31, 2008 with World Major Indexes
Global Deleveraging and Commodity Weakness brought a re-pricing of Risk
Mostly in Q4 ‘08

4. U.S. REIT Value vs NAV
at historic levels Q4 ’08 market “bottomed” November 20 2008

5. European and UK REIT Equities
Companies reach historic Discount to NAV not seen since the “value” days of 2002
Worst performance for Global REITS were in Norway and Spain both down over 70%
xxxxxxxxxx xxxxxxx

6. U.S. REITs
U.S. REIT Index 2008
Mostly, had One Bad Quarter in 2008
one bad quarter
500
450
400
350
300
250
Q4 07 Q1 08 Q2 08 Q3 08 Q4 08

7. New Credit Supply to Real Estate
Mostly from Insurance Companies and Pension Funds
Lending standards have improved and focus is on refinancing of their existing loans
Hedge Funds are opening up to lend and securitize, but in early stages.
GIC reportedly funded a new fund with $1.5 Billion for Commercial RE loans and CMBS.
Corporate Bonds Issued by RE Companies and REITS reached 14% Yield Q4 ’08, was 7% June ‘08
CMBS Issuance
($billion)
300
250
236
200
$ (Billion)
150 CMBS Issuance
($billion)
100
92
50
26
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
CMBS issuance nil for 2008 Real Estate Corporate Bond Spreads widen
$235 billion in 2006 S&P changes criteria for REIT credit ratings.
Preferred Stock now considered Debt for
leverage calculation
Source: Bloomberg
(Source: ML index 12/31/08)

8. Structured Finance is a Foundation ... not Cheap until Q4
Quote from Blackrock CIO:
There is quot;unbelievable valuequot; in triple-A-rated commercial mortgage-backed securities,
or CMBS, the global Chief Investment officer for fixed income at New York money
management firm BlackRock said Q1 2008
BlackRock’s income was reduced by investment losses of $91m
from investing its own capital in in real estate products.

9. Structured Finance is the Foundation ... it is frozen
No. Industry U.S. Avg Rating Avg Price Avg Yield Avg OAS
Real Estate Baa2 $ 71.52 14% 1,240
1
CMBS AAA $ 77.42 13% 1,173
2
Banking A+ $ 90.51 654
8%
3
Consumer Cyclical A- $ 91.11 584
8%
4
Energy Baa2 $ 93.52 556
7%
5
Brokerage A+ $ 94.39 527
7%
6
Technology & Electronics A- $ 95.08 527
7%
7
Telecommunications A- $ 97.67 476
7%
8
Utility Baa1 $ 97.23 454
7%
9
Consumer Non-Cyclical A- $ 101.91 378
6%
10
Residential MBS Agency AAA $ 103.58 180
3%
11
Agency AAA $ 99.51 97
2%
12
Treasury AAA $ 120.17 0
2%
13
(Source: Merrill Lynch Agg and CMBS Indexes Jan 15, 2009)

10. Cap Rates seem headed for 9%
Source: Rosen Consulting

11. Good News:
U.S. Office Vacancies ok
Washington DC is perhaps best for 2009. Prices off about 20%, Vacancy better
Office Vacancy
18 U.S. vs DC
16
14
12
DC
10
%
US
8
6
4
2
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20
Source: CBRE Office Vacancy Index

12. Good News:
Libor Improved dramatically
3 Mo Libor Rate %
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
2002 2003 2004 2005 2006 2007 2009
Source: Bloomberg to Jan 9, 2009

13. Good News:
Strategia allocation to defensive strategies has done well
Global L/S allocation exceeded market by 14%
U.S. L/S allocation exceeded U.S. market by 32%
European L/S allocation exceeded Europe market by 58%
Strategia’s Funds:
WRELF 2008 return exceeded EPRA/NAREIT
Global Index by 13.38%
USPF 2008 return exceeded US NAREIT
Index by 25.99%

14. Real Estate Commentary
2009 Outlook: until the global economy and investor sentiment improves
Defense/Liquidity
REIT:
Company balance sheet strength and liquidity should drive returns for 1 or 2 more quarters.
Weakest balance sheets of companies exposed to fundamental weakness such as in General
Growth Properties should result in a bankruptcy that could lead to an opportunity to buy
strong REITs All could suffer from the market digesting of bad news. REITS globally have
“value” as measured by NAV and other metrics, but investors should be patient to add
exposure when “cheap”. Cheap implies values skewed to high reward and lower or
quantifiable risks. Best case would be if the CMBS market were to function well again.
Direct Commercial Property:
Uncertainty of financing, tenant strength, and occupancy could lead to the best results in NNN
buildings and Apartments. Weakest results could be in Hotels and Office portfolios dependent
on tenants from the financial industry. Opportunity funds might buy REITs.
CMBS:
Fixed income opportunities could reward investors well vs REITs and Direct as it can now
offer Higher current Cash Flow, Liquidity, more senior position in capital structure/risk.
Long/Short:
Until economic conditions become clearer and credit markets flow to RE again, the best
opportunities will be to strategies that can get long in severe drops and short severe rallies.
Volatility can be taken advantage in hedge funds. Also, there are opportunities for 2009 in
separate accounts as a vehicle to add Transparency and Liquidity.