U.S. Capital Markets Glide Path to Clearer Skies

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Slide Number 1	1
Questions Today	2
C&W’s Baseline Glide Path	3
Glide Path to Clearer Skies:Key Takeaways	4
Market positives to keep in mind	5
Slide Number 6	6
Slide Number 7	7
Inflation must cool to allow the Fed to pause & pivot	8
Key measures of inflation are still running too hot	9
Wage growth must cool to bring inflation down	10
We probably need a recession to cool wage growth	11
Odds are high a recession is imminent	12
And this is what it will look like	13
This is when it will be over	14
In case you didn’t get the memo…	15
Glide path to inflation approaching Fed target	16
Allowing the Fed to pivot in Q1 2024	17
Historically, buy property when Fed starts cutting	18
Slide Number 19	19
Banks are an important lender for CRE	20
SVB wasn’t the only bank with explosive deposit growth	21
Many banks loaded up on treasuries and MBS	22
All banks are on a mission to shore up their balance sheets	23
Taking a step back….	24
Slide Number 25	25
CRE exposure is manageable for most banks	26
Small & community banks have more exposure	27
Lenders were more disciplined this go around	28
And better supply fundamentals	29
Slide Number 30	30
Debt markets down but still functioning	31
CMBS issuance volume also constrained	32
Conduit spreads still very volatile and elevated	33
It’s time for debt, distressed & opportunistic capital to step In	34
Slide Number 35	35
Even if you can get a loan, terms are increasingly onerous	36
Key lending thresholds pressured amid rising rates	37
Smaller deals more likely to make it to finish line	38
Higher end office product will still attract debt	39
Slide Number 40	40
Triggers to stress & distress = confluence of factors	41
Cross-sector loan maturities vary by magnitude	42
Loan maturities a particular challenge for office	43
Quantifying one layer of distress: increasing obsolescence	44
Stress & DistressKey Points	45
Slide Number 46	46
Must pass other macroeconomic milestones first	47
Impact of tighter lending standards on CRE investment	48
Slide Number 49	49
A lot more than this…	50
REITs signaling a 20-50% price correction still on the horizon for private CRE market	51
It’s all about the 10-Year (Treasury)	52
If 10-Year goes to 3.5%, Baa goes to 5.0%	53
Which means cap rates go to 6.0% - 7.5%	54
Anything not trophy faces even greater pressure	55
Anything not trophy faces even greater pressure	56
Slide Number 57	57
Slide Number 58	58
Sell-side: crystallizing strong returns & the go/no-go decision	59
CRE stacks up well against other assets	60
Buy-side: strong vintage years follow periods of dislocation	61
Buy-side: income resilience remains key to next chapter	62
Buy-side: an income-focused era is upon us….	63
Strategic Recommendations	64
Slide Number 65	65
Slide Number 66	66

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