Marvis Burns

1
Real Estate Sector Update

• Marvis Burns
• Liya Ma
• Real Estate Analysts

2
Real Estate Industry Overview

• YTD, total return -9.93
• Liquidity concerns and the threat of a recession
  continue to weigh down the overall market.
• In terms of capital structure, asset quality, and
  long term FFO, the Real Estate industry has a
  lot of upside potential. (people will ask you
  questions about this)
• Tighter lending standards due to the collapse of
  the subprime mortgage market should benefit
  existing asset values and equity REIT portfolios.
  (people will ask you questions about this)
• However, tighter lending standards will slow 2008
  FFO growth among equity REITs (reduced investment
  volumes and spreads) (people will ask you
  questions about this)
• Note FFO, Funds From Operations. A financial
  measure used by REITs to define their operating
  performance. FFO is calculated by adding
  depreciation and amortization expenses to
  earnings.

3
Starwood Hotels Overview

• Brief overview
• Over 6 billion in assets under management
• Frits van Paaschen appointed CEO (9/24/07)
• Investments include residential and commercial
  land development, office, retail, mixed-use,
  industrial, health clubs and golf courses.
  Starwood has more than 880 properties in more
  than 95 countries.
• And it continues to put a emphasis on brands
  rather than lodging-specific expertise.

4
Starwood Hotels Summary - HOLD

• The Ugly
• Currently trading at 10.9x the 2008 EBITDA
  compared with 13.2x in the middle of July. (what
  is the industry trading at?)
• The shares have declined 19 since then. SP,
  benchmark, only down 5.
• The Good
• Globalization, Starwood is focusing its attention
  on the global market. Half of the new Hotels in
  the pipeline are international, see newly
  announced 200 room hotel in Kolkata, India
• Other markets and not as real estate intensive as
  the past, growing fee business (statement is not
  quite clear be prepared to elaborate)
• Balance Sheet clear-current debt to EBITDA ratio
  of 2.2x (what is its industry trading at?)
• CEO, While Mr. van Paaschen has no prior hotel
  industry experience, he has 20 years in
  consumer-focused, global lifestyle brands. (Key
  to Global Expansion). He also has a proven record
  at Coors and earlier Nike where he headed Nike in
  Europe, Middle East and Africa