REAL ESTATE The strength of U.S. CRE throughout most of 2014 suggests a positive outlook for 2015 and beyond. The multifamily, industrial, office and retail segments all posted improvements in the second half of 2014 in vacancy rates, rents and valuations. The continued slow-but-steady economic recovery has translated into generally improving trends for CRE.

FARM AND RANCH LAND In the tail end of 2014, farm and ranch land has been moving back to trend. Growth has been more normal — that is, slower — for corn, soybeans and wheat, following significant volatility earlier in the year. As a result, farmers who might have been in the market to buy land seem to be sitting on their cash reserves. This should allow farm investors to purchase land closer to “true value” prices rather than competing with buyers who are willing to pay premiums above the economic value of the land. We think that now may be one of the better times to buy farm land than in recent years.

TIMBERLAND Consistent with our observations of the first half of 2014, expanding demand coupled with supply constraints has continued to drive positive and sustained market growth in timberland through the second half of the year — and probably beyond. Middle-market deals (transactions worth $1 million to $10 million and involving several hundred to several thousand acres) remained available in all three of the major investment wood basins: the Southeast (East Texas to the Carolinas), the Northeast (Maine to the Appalachian Plateau) and the Pacific Northwest (Washington and Oregon, west of the Sierras to the coast). Demand for these niche acquisitions is limited as they are large for local purchasers and small for institutional purchasers. Disciplined investors should continue to be able to negotiate attractive deals in this middle market. Large deals, which are regularly the domain of timberland investment management organizations (TIMOs) and timber real estate investment trusts (TREITs), increased throughout the year. We expect this growth to continue as there have been reports of large acreage deals in excess of $50 million becoming more common.