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InvestorInvestor PresentationPresentation
LehmanLehman BrothersBrothers 20062006 MortgageMortgage && SpecialtySpecialty FinanceFinance ConferenceConference
DecemberDecember 20062006 Forward Looking Statements ®
This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this presentation that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “expect,” “estimate,”, “forecast,” “project,” “should,” “plan,” and similar expressions are generally intended to identify forward-looking statements. Examples of these forward-looking statements include, but are not limited to: our belief that we will elect REIT tax status with our 2006 tax year; and our belief that our shares should trade at a tighter yield and faster growth rate than comparable companies. All forward-looking statements (including statements regarding future financial and operating results) involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. The forward-looking statements in this presentation regarding our anticipated results and performance as a REIT commencing in 2006 are subject to particular risks including, but not limited to: events that may require a change in the timing of our REIT election; our ability to position our assets in the most advantageous manner between the REIT and our taxable REIT subsidiary; material variance in the expected level of our cumulative earnings and profits or our projected dividend payout, and the implications of any such variance on our stock price; our ability to access the capital markets on attractive terms or at all to obtain the additional capital we will require to operate as a REIT; our management’s ability to operate our business in accordance with the complex rules and regulations governing REITs as necessary to ensure our qualification for and maintenance of our REIT status; potential changes in tax laws that could reduce the benefits we associate with the REIT election; and the relative attractiveness of our dividend payout as compared to other investment options should market interest rates continue to rise. More detailed information about factors we believe could cause our actual results, performance or achievements to differ materially from anticipated levels is contained in our filings with the SEC, including the sections captioned “Risk Factors” and “Business” in our Annual Report on Form 10-K as filed with the SEC on March 9, 2006. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.
Lehman Brothers Conference 2 December 2006 Roadmap for Discussion ®
1. CapitalSource Overview
2. The Environment
3. Selected Segments
Commercial Real Estate Market
Leveraged Finance Market
Healthcare Finance Market, Specifically Long Term Care
(Not Discussed: Asset Based Lending, Asset Management, Other Healthcare Segments, Rediscount Finance)
4. CapitalSource Value Equation
Lehman Brothers Conference 3 December 2006 CapitalSource Overview ®
Leading, Specialized Commercial Finance Company Providing Highly Customized Financing to Small & Medium-Sized Businesses Large Scale, Broad-Based Middle Market Lending Platform “Super REIT” Structure Blending Asset Based Loans, Corporate Loans, Commercial & Healthcare Real Estate Loans and Investments Market Leadership Position in All Major Business Lines Proprietary, Direct Origination Capability 552 Employees in 20+ Offices $7.6 Billion in Commercial Loans & Investments 1,047 Loans to 679 Borrowers Strong Growth Opportunities Across the Business Seasoned, Proven Management Team Balanced, Diversified, Tax Advantaged Enterprise Delivering a Growing & Predictable Dividend
As of September 30, 2006 Lehman Brothers Conference 4 December 2006 Superior Business Attributes ®
Focused Business Model All Lending Groups Compete on Service, Expertise and Insight Derived from Being an “Insider” All Lending Groups offer Non-Commodity Products Generates Superior Risk Adjusted Returns and Superior Credit Outcomes Strong Shareholder Alignment At the beginning of November, Management and Board Affiliates Owned Approximately 40% of Outstanding Shares Compelling Financial Model Large, Broad, Diversified Lending Platform High Return on Equity Modest Leverage, Diverse Funding Sources Tax Efficient Structure High Asset Quality; >90% of Loan Assets are Senior Secured Match Funded and Hedged to Minimize Interest Rate Sensitivity
Data is as of September 30, 2006 Lehman Brothers Conference 5 December 2006 Multiple Lending Groups ®
CorporateCorporate Finance Finance Healthcare Credit Healthcare Real Estate Senior Secured Debt Asset-Based First Mortgage Debt to Finance Leveraged Lending to & Sale Leasebacks on Buy-Outs Healthcare Companies Healthcare Properties
Commercial Real Estate Rediscount Finance Business Credit Svcs
Asset Based Lending to ABL(1) (Including DIP Loans) First Mortgage Debt Secured Middle Market Finance & Distressed Investing to by All Real Estate Asset Types Companies Non-Healthcare
Security Finance Fee Businesses CapitalAnalytics
Asset-Based Lending Asset Management Business Captive In-House Audit, to Security Alarm and Servicing Businesses to Due Diligence and Loan Companies Lever Platform Expertise Approval Functions
(1) ABL: Asset-Based Lending Lehman Brothers Conference 6 December 2006 Seven Attributes Of A Superior Business Model ®
1. Broad-Based, Diversified Franchise
2. True Middle Market Focus
3. Direct Origination Platform
4. Deep Credit and Investment Culture
5. Superior Financial Model
6. Tax Efficient Structure
7. Stable and Growing Dividend
TheThe CapitalSourceCapitalSource BusinessBusiness ModelModel GeneratesGenerates SuperiorSuperior ReturnsReturns
Lehman Brothers Conference 7 December 2006 Attribute #1: A Broad-Based, Diversified Franchise ®
BenefitsBenefits ofof aa BroadBroad-Based,-Based, DiversifiedDiversified FranchiseFranchise Predictable Growth
Diversification
Greater Management Discipline
Stronger Funding Platform
Stable Stream of Cash Flow
Application of Best Lending Practices
Helps Attract and Retain People
Economies of Scale
Lehman Brothers Conference 8 December 2006 True Diversification Across All Products and Businesses ®
Portfolio(1) by Lending Groups Portfolio(1) by Product Mix
Mezzanine 7% Healthcare Senior Secured Structured & Asset Based Finance Specialty First Mortgage 34% Finance 33% 35% 39%
Corporate Senior Secured Finance Cash Flow 27% 25%
Data as of September 30, 2006 (1) Commercial Lending & Investment Segment only. Includes loans, loans held for sale and receivables under repurchase agreements, but excludes direct real estate investments (sale-leasebacks). Lehman Brothers Conference 9 December 2006 Attribute #1: A Broad-Based, Diversified Franchise ®
(1) Skilled Nursing - 19.86% Portfolio by Loan Type Business Prods & Svc - 14.79% Consumer Prods & Svc - 7.61% Land Portfolio - 7.38% <1% <1% 14.8% Genrl Healthcare Svc - 6.57% <1% 19.9% Mortgage Lender - 5.03% Direct Money Lender - 4.66% <1% Resort Finance - 4.27% <1% Media - 4.25% Security-Alarm - 4.06% <1% Value-Added Manufact - 3.94% 7.6% <1% Condo Conversion - 2.77% Office/ Retail/ Industrial RE - 2.56% <1% Hard Money Lender - 2.08% 1.0% Special Situations - 1.73% 1.0% Retail - 1.57% 7.4% Auto Lender - 1.35% 1.7% 1.1% Hospitality - 1.23% 2.1% 1.2% Acute Care - 1.06% 2.6% Enhanced Mezzanine - 1.00% 1.3% Multi-Family Real Estate - 1.00% 1.6% 2.8% 6.6% Rehabilitation - <1% Non-Reimb Healthcare - <1% 3.9% Home Building - <1% 5.0% Assisted Living - <1% 4.1% Home Health - <1% 4.7% 4.2% 4.3% Mental Health - <1% Rediscount (Other) - <1% Commercial Real Esta - <1% CapitalSourceCapitalSource HasHas AA LargeLarge andand DiverseDiverse PortfolioPortfolio
(1) As of September 30, 2006 Lehman Brothers Conference 10 December 2006 Attribute #2: A True Middle Market Focus ®
TheThe OnlyOnly “Pure“Pure Play”Play” MiddleMiddle MarketMarket LenderLender
“Bulge Bracket” Capabilities Applied to Middle Market
+ Direct Origination Platform, Not Reliant on the Street
+ Execution Focused Business Model
+ “Audit” Orientation Designed For Smaller Companies
== AA BusinessBusiness BuiltBuilt ForFor thethe MiddleMiddle MarketMarket
Lehman Brothers Conference 11 December 2006 Attribute #3: A Direct Origination Platform ® Benefits of Controlling Deal Flow:
Permits a High Degree of Selectivity
Produces Higher Yielding Opportunities
Generates More Consistent Growth
Allows for More Favorable Deal Structures
Results in Better Credit Outcomes
CapitalSource’sCapitalSource’s DirectDirect OriginationOrigination CapabilityCapability isis aa KeyKey AdvantageAdvantage
Lehman Brothers Conference 12 December 2006 Direct Origination Platform ®
pe uroope EEur
552 Employees ~380 Investment Professionals (1) 20+ Offices $410 Billion of Deals Reviewed From Inception to September 30, 2006 (2)
(1) Investment professionals include Credit Committee, Development Officers, Investment Officers, Loan Officers, Portfolio, Managers, Underwriting Officers, Loan Analysts, Attorneys and related support staff. As of September 30, 2006 (2) Source: CapitalSource DealTracker, unaudited. As of September 30, 2006. Lehman Brothers Conference 13 December 2006 Direct Origination Platform ®
$45 10% $42.5
$40 $36.6 9% $34.8 $34.9 $35 $32.9 8% $29.9 $30 $26.4 $24.4 7% $25 $21.7 $20.5 $20 6% $17.6 5.6% 5.5% 5.5% 5.2% 5.2% $15 5.1% 5.0% 5.1% Closing Rate 4.6% Dollars (Billions) 5% 4.3% $10
3.6% 4% $5
$0 3% 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006
Screened Prospects ($ Billions) (1) Closing Rate (2)
AA GrowingGrowing PipelinePipeline WhileWhile MaintainingMaintaining DisciplineDiscipline
Source: Unaudited, CapitalSource DealTracker (1) Screened Prospects equals the total value of potential transactions entered into DealTracker during the specified time period (2) Closing Rate is the dollar amount of transactions closed during the time period divided by Screened Prospects for that time period Lehman Brothers Conference 14 December 2006 Attribute #4: Deep Credit and Investment Culture ®
CoreCore ElementsElements ofof thethe CapitalSourceCapitalSource CreditCredit AdvantageAdvantage Industry or Sector Focus
Numerous Checks and Balances in the System
Disciplines Investment Philosophy
Experienced Team
Rigorous Asset Management
OurOur CreditCredit andand InvestmentInvestment CultureCulture ResultsResults inin BetterBetter CreditCredit OutcomeOutcome
Lehman Brothers Conference 15 December 2006 Attribute #4: Deep Credit and Investment Culture ®
Areas of Focus Industries Healthcare Media Retail Financial Services Security Technology Commercial Real Estate Consumer Products Resort and Vacation Ownership Manufacturing Business Services
Products (Senior Debt for) Acquisitions Growth Distressed Recapitalization Also, Asset Management Lehman Brothers Conference 16 December 2006 Attribute #4: Deep Credit and Investment Culture ® CapitalAnalyticsCapitalAnalytics atat thethe CoreCore ofof thethe CreditCredit ProcessProcess
Wholly Owned Subsidiary of CapitalSource “BackBone” of the Dual Track Underwriting Process Capital Provides Unique Diligence and Audit Analytics • Massive Check Capabilities •• More More Resources Resources • Massive Check on the System •• Better Better Quality Quality on the System • All Staff Report ~90 Professionals •• Better Better Execution Execution • All Staff Report to the CCO •• Ongoing Ongoing Monitoring Monitoring to the CCO Specialized Industry Groups Customized Credit and Underwriting Tools
Lehman Brothers Conference 17 December 2006 Attribute #5: Superior Financial Model ®
StrongStrong ReturnsReturns
100% 25% …… 5.0x 90% onon HighHigh QualityQuality
80% 20% AssetsAssets 4.0x 70% …… withwith ConservativeConservative 60% 15% 3.0x
50% 93% LeverageLeverage 22.6% 10% 40% 2.0x 3.67x 30%
5% 20% 1.0x
10%
0% 0% 0.0x Adjusted ROE (1) % Senior (2) Debt to Equity Ratio (2)
Data is from the Commercial Lending & Investment segment (1) Twelve months ended September 30, 2006 (2) As of September 30, 2006 Lehman Brothers Conference 18 December 2006 Attribute #6: Tax Efficient Structure ®
39% 39% 40% 38%
30%
21% 20%
10%
0% 2003 2004 2005 2006 1H*
OptimizingOptimizing thethe CorporateCorporate StructureStructure forfor TaxTax EfficienciesEfficiencies
* Excludes the effect of a reduction in net deferred tax liabilities as a result of our REIT Election Lehman Brothers Conference 19 December 2006 Attribute #7: Stable and Growing Dividend ®
AA DiverseDiverse CollectionCollection ofof BusinessesBusinesses AbilityAbility ForFor GreaterGreater ROEROE
PrudentPrudent PayoutPayout RatioRatio AbilityAbility ToTo RetainRetain EarningsEarnings HighHigh QualityQuality AssetAsset ProfileProfile
StableStable DividendDividend && GrowingGrowing DividendDividend Lehman Brothers Conference 20 December 2006 ®
TheThe EnvironmentEnvironment The Environment ( From Our Perspective) ®
Lending Group Business Growth Potential Competition
Cash Flow Consistent High Corporate Finance Asset Management Strong NA
Healthcare Real Estate Strong - REIT Enabled Moderate Healthcare Asset Based Consistent Moderate Healthcare & Specialty Business Credit Services Consistent High Finance Security Finance Consistent Moderate Asset Management Strong NA
Real Estate Strong - REIT Enabled High but Consistent Structured Finance Rediscount Consistent Moderate Asset Management Strong NA
FullyFully Built-Out Built-Out Platfo Platformrm + + Strength Strength of of the the REIT REIT Election Election = = Increased Increased Growth Growth Opportunities Opportunities TotalTotal Deals Deals Revi Reviewed….ewed…. up up 20+% 20+%YearYear Over Over Year* Year* RealReal Estate Estate Deals Deals Reviewed… Reviewed… up up 60+% 60+%YearYear Over Over Year* Year* AllAll Lending Lending Businesses Businesses showing showing Growth Growth in in Volume Volume of of Deals Deals Reviewed Reviewed
* Unaudited, from CapitalSource DealTracker, January through August of 2006 versus 2005 Lehman Brothers Conference 22 December 2006 The Credit Environment ®
The Macro Credit Environment Looks “Good” Right Now Default Rates are at or Near Cyclical Lows Over the Last 18 Months, the Middle Market Lending Marketplace has been Affected by a Significant Influx of Liquidity and New Entrants The Result has been Tighter Spreads and Higher Leverage We Anticipate a Correction in the Credit Markets within +/- the Next 12 Months Industry Default Rates Increase Credit Availability Will Generally Tighten Number of Entrants Will Consolidate CapitalSource is Positioned to Withstand a Downturn in the Credit Markets without Significant Impact
Lehman Brothers Conference 23 December 2006 Risk Assessment by Product ®
Product Environment CSE Posture
Highly Selective Growth has Slowed Cash Flow Risk Increasing Manage to Lower Hold Sizes Moving "Up Market" and Syndicating
LTV's Consistent at ~70% HealthCare ABL Risk Stable No Credit Losses in 10+ Years of Lending
Other ABL Risk Stable LTV's Consistent at ~80%
LTV's Consistent at ~85% HealthCare RE Supported Stable Cash Flows; No Credit Losses Real Estate Risk Stable 10+ Years Other Real Estate Generally Transitional in Nature
Note: “LTV” = Loan to Value Lehman Brothers Conference 24 December 2006 CapitalSource Credit Posture ®
We are Maintaining Discipline The Business Model is Founded on a “Credit First” Mentality We have Maintained a High Degree of Selectivity Across a Growing Pipeline Our Focus in on Senior, Secured Lending ~ 70% of CapitalSource’s Loan Portfolio is Asset-Based or First Mortgage Loans, and 93% are Senior Secured Loans (1) Maintaining Prudent LTV’s on in All of our Lending Products Contrary to the Market, We are Maintaining Consistent Debt to EBITDA Multiples on our Cash Flow Lending Strict Portfolio Management “High-Touch” Portfolio Management Leads to Early Detection of Issues We Engage in Active Problem Resolution Strategies CapitalSource has Excellent Historical Loss Rates and Recovery Rates A “Credit Correction” Should Lead to Increased Lending Opportunities for CapitalSource’s Disciplined Lending Platforms
(1) At September 30, 2006 Lehman Brothers Conference 25 December 2006 ® MarketMarket OverviewOverview ofof SelectedSelected SegmentsSegments
Commercial Real Estate Market Leveraged Finance Market Long Term Care Market (Not Discussed: Asset Based Lending, Other Healthcare Sectors, Asset Management, Rediscount) Commercial Real Estate - Competitive Environment ®
Significant Liquidity Generally Exists in the Markets Today and in Varying Degrees within our Target Markets Real Estate Capital Markets, in Particular, are Demonstrating Unprecedented Levels of Liquidity Given Significant Investor Demand which has Resulted in Relaxed Underwriting Standards, Higher Leverage, Lower Pricing. Currently More Than $2 Trillion in Mortgage Debt Outstanding in the Commercial Market Accelerating Growth and Liquidity: Commercial Mortgage Market has Grown at a 10% Compound Rate Over the Past 50 years Compound Annual Growth Accelerated to 16% Between 2003 and 1Q06 Over the Past 15 Years the Securitization Market has Grown Dramatically Year to Date Volume (as of 9/15/06) of $167.5 Billion Represents a Significant Increase Over 2005
TheThe TremendousTremendous LiquidityLiquidity ofof thethe CurrentCurrent EnvironmentEnvironment hashas PutPut SignSignificantificant PressurePressure onon AssetAsset Spreads,Spreads, ParticParticularlyularly withinwithin CommodityCommodity BusinesBusinessesses
Sources: Federal Reserve and Commercial Mortgage Alert Lehman Brothers Conference 27 December 2006 Commercial Real Estate – CapitalSource Has Strategic and Competitive Advantages ®
CapitalSource is a Market Leader in Structured and Customized Real Estate Finance, an Inherently Less Liquid Section of the Market. Fully Built-Out, Dominant, National Direct Origination Platform Strong Credit Culture, In-House Underwriting and Checks and Balances to Ensure Quality Established and Disciplined Portfolio Management
LackLack ofof ProprietaryProprietary AdvantageAdvantage ForcesForces Most of the OthersOthers toto CompeteCompete onon Credit & Pricing Competition Outsources Credit & Pricing at Least One of these Critical Elements
Lehman Brothers Conference 28 December 2006 Leveraged Finance - Middle Market Lending ®
400 Number of Middle-Market $50 Total Middle-Market 1 1 Deals 328 Volume
$40 300
266 $33.8
$30 $26.0 200 In Billions 143 $20 136 $17.2 118 110 $15.0 $12.5 100 $11.9 $10
0 $0 2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006 1H 2H 1H 2H
SinceSince CapitalSourceCapitalSource’s’s Founding,Founding, ActivityActivity inin CorporateCorporate FinanceFinance’s’s MiddleMiddle MarketMarket LendingLending SpaceSpace HasHas IncreasedIncreased
Source: Standard and Poor’s LCD (1) Issuers with EBITDA of $50 Million or Less Lehman Brothers Conference 29 December 2006 Leveraged Finance - Middle Market Lending ®
(1) 75% Primary Market for Highly Leveraged Loans
Institutional
50% t Share of Marke 25%
Finance Co. Domestic Bank Foreign Bank Securities Firm 0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 LTM 6/30/06
Since 2001, There has been an Influx of New Liquidity into the Middle Market More Importantly, the Composition of Lenders in the Market has Changed
Source: Standard and Poor’s LCD (1) Issuers with EBITDA of $50 Million or Less Lehman Brothers Conference 30 December 2006 Leveraged Finance - Middle Market Lending ®
Purchase Price Breakdown 45% Equity Contribution
10.0x 8.7x 8.5x 8.6x
7.0x 7.2x 6.7x 40% 5.9x
5.0x
35%
0.0x 30% 2001 2002 2003 2004 2005 1H06 2Q06 2001 2002 2003 2004 2005 1H06 2Q06
Senior Debt/EBITDA Sub Debt/EBITDA Equity/EBITDA Others
We Also Have Seen an Increase in the Purchase Prices Being Paid for Middle Market Businesses, With a Corresponding Increase in the Amount of Debt Lenders are Providing
Source: Standard and Poor’s LCD Issuers with EBITDA of $50 Million or Less Lehman Brothers Conference 31 December 2006 Leveraged Finance – CapitalSource is Dynamically Adapting to Changes in the Market ® Recognize the Existence of An Inverted Market
Smaller-Sized Middle Market Companies Borrowing at “Larger Size” Company Terms and Structures
Inherent Risks of Smaller Companies Demand Premium
Risk Premium is Currently Unavailable Given Influx of Liquidity
Shift Business a More Capital Markets Focused Model
Targeting Larger Sized Transactions and Using Syndication
Capital Markets Provides Risk Management and Fee Income
Safe Credits at Same Spreads
Participation in Capital Markets Offers Better Insight to Relative Risk/Reward
Lehman Brothers Conference 32 December 2006 Healthcare Finance Market ®
Large Size of Middle Market
Underserved by Traditional Lenders
Middle Market Commands Premium Pricing
Rewards Speed and Execution
Rewards Industry Specific Knowledge
Real Estate Businesses Further Enabled by REIT Election
Long Term Care Business Most Attractive
Lehman Brothers Conference 33 December 2006 Long Term Care - Overview ®
The Skilled Nursing Industry is a Significant Target Market for Large National Owners Healthcare Real Estate 15%
Focus is on Operators with Solid Management
Area of Strength is in Financing Opportunistic Acquisitions
Strategic Strengths are Speed and Small Owners and Expert Industry/Market Knowledge Regional Chains 85% Currently in the US there are ~ 16,000 Nursing Homes ~ 7,100 Assisted Living Facilities
CapitalSource’sCapitalSource’s TargetTarget MarketMarket isis thethe SmallSmall OwnerOwner andand thethe RegionaRegionall ChainChain whichwhich isis ~~ 85%85% ofof thethe MarketMarket
Lehman Brothers Conference 34 December 2006 Long Term Care Market - Favorable Skilled Nursing Fundamentals ® Nursing Home Supply is Decreasing …While Demand is Increasing
17.5 20 4% % of Total Population% 16.5 15 3%
15.5 10 2% Millions Thousands
14.5 5 1%
13.5 0 0% 1995 1998 2000 2005 2000A 2010E 2020E 2030E 2040E
85+ Population 85+ as % of Total Population
Nationwide Skilled Nursing Facility Occupancy Currently Exceeds 90% Nursing Home Supply is Declining 85+ Population is Growing and Growing Faster than the General Population Lehman Brothers Conference 35 December 2006 Long Term Care Market – Healthcare Real Estate – Skilled Nursing Facilities ® Why Skilled Nursing Facility Assets Retain Value Certificates of Need Create a Significant Barrier to Entry Long-Term Medicaid Contracts Provide Revenue Stability Limited Availability of Land & Increasing Construction Costs Reduces Competitive Supply Pressure Local Business Facility is Integral to the Operating Business Capitalization Rates have Ranged from 12-14%
Other Favorable Characteristics Facilities Located Nationwide Resulting in a Highly Diverse by both Geography and by Operator Numerous Takeout Sources, Including CMBS, HUD, and Banks
Lehman Brothers Conference 36 December 2006 ®
ValueValue EquationEquation Value Equation ®
Comparative2007 Yield Lending Type (1)
Commercial Real Estate 7.8% Healthcare Real Estate 6.2% Asset-Based Lending 6.2% Cash Flow Lending 8.5%
Blended Yield (2) 7.1%
Yield on CSE Shares 8.8%
Implied Discount to Blended Yield 23.4%
TheThe “Whole”“Whole” ShouldShould bebe WorthWorth MoreMore thanthan thethe “Sum“Sum ofof thethe Parts”Parts”
Source: ThomsonOne, 11/6/06. (1) Comparative yield is the median of all analyst dividend estimates for each respective company by lending type divided by closing share price. For c-corporations with low dividend yields we assumed an 85% payout ratio of the net income per share estimates. Implied discount to blended yield is not a guarantee of future performance. (2) Average lending type comparative yields weighted by CapitalSource portfolio at September 30, 2006. See “Forward Looking Statements.” Lehman Brothers Conference 38 December 2006 Value Equation ®
HealthCare Real Estate Commercial Real Estate 10% Asset Based Lenders Cash Flow Lenders Commercial Mortgage REIT MCGC 9% ABR NCT AINV AHR CIT JRT 8% ALD ACAS
GKK GLAD 7% SFI HR HCN CT SNH 6% OHI FIF
2006E Dividend Yield GMT NHP HCP 5%
VTR 4% 0% 5% 10% 15% 20% 25% 2006E-2007E Dividend Growth
Source: ThomsonOne, 11/6/06. Analyst consensus dividends are based on the mean of all analyst estimates for each respective company by lending type. For non dividend paying entities we assumed an 85% payout ratio of net income per share estimates. Consensus dividend yields and growth percentages are not a guarantee of future performance. See “Forward Looking Statements.” Lehman Brothers Conference 39 December 2006 ®