U.S. Capital Markets Glide Path to Clearer Skies

Lenders were more disciplined this go around

Share of CRE Loans Over 65% LTV by Time Frame CMBS Underwriting: Better Buffers for Debt-service Post-GFC

40% 45% 50% 55% 60% 65% 70% 75%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

1.0 1.4 1.8 2.2 2.6 3.0

Pre-GFC (2000 2007)

GFC Recovery (2010-2017)

Past 5 Years

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Banks CMBS Life Cos

LTV DSCR (RHS)

• Leading up to the GFC, LTVs were upwards of 73% for Banks and in the mid- to high-60s% for Life Cos and CMBS. More than 60% of loans were made above 65% LTV across lender types. • Owners now have more skin in the game, with LTVs trending lower at high-50s to mid-60s%, helping to insulate them from facing underwater circumstances as values reset.

• DSCRs were very healthy in recent years, averaging 2.5 over the 2017 2022 period, so owners have had more than double the NOI needed to pay their monthly mortgage (even if dramatically rising debt costs will stress floating rate and maturing mortgages). • Keep in mind that it’s primarily the lower quality assets that are more exposed to weakening NOI (think low quality office) that will face the greatest challenges.

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Source: MSCI Real Capital Analytics, JP Morgan, Trepp, Cushman & Wakefield Research