2012 Statewide Conference

Indiana Multifamily Housing Market and It’s Future

September 18, 2012

The Apartment Market

Total Apartment Base - Indianapolis 134,000 units

Total Apartment Base – IndianaEstimated - (we track 293,000 units)

300,000 – 325,000 Units

Number of Communities – IndianapolisNumber of Communities - Indiana

7131,700 - 2000

Average Occupancy Rate (2012 prelim) – Indy 91.4%

Rent Growth Rate (2011 to 2012 Prelim.) - Indy 2.6%

Average Rent - Indianapolis $700

Average Rent Per Square Foot – Indianapolis $0.78

Average Property Age – Indianapolis 38 Years

Overall Market Vacancy RateIndianapolis Metro Area

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 prelim

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

9.4%

9.3%

10.4

%

12.0

%12

.2%

11.0

%

10.4

%

9.9%

9.2%

10.7

%

9.2%

8.6%

8.6%

Source: Tikijian Associates

Annual Revenue Growth (2011)30 Property Sample – Class A & B - Well Managed

Rental Revenue Total Revenue

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

-1.4% -1.3%

1.5%1.0%

4.9% 4.8%

2005 2006 2007 2008 2009 2010 2011

Source: Tikijian Associates and Property Owners

Total Residential Building PermitsIndianapolis Metro Area

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Ann.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

13,4

18 15,6

20

13,9

90

13,2

35

13,0

25

13,2

32

9,99

2

7,55

4

4,56

1

3,73

24,

088

3,77

74,

173

2,118

1,938

2,918

2,5492,330 2,387

1,349

744

2,421

1,868 1,7361,482

665

Single Family (1 - 4 units) Multi-family (5+ units, incl. Condos)

Nu

mb

er

of

Pe

rmit

s

Source: US Census Bureau Residential Construction Branch

7 Months annualized

Total Residential Building PermitsState of Indiana

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Ann.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

32,0

8633

,946

32,6

7934

,175

34,3

69

33,8

38

26,0

37

20,4

92

12,3

04

10,0

39

10,5

50

9,83

511

,085

5,817 5,1716,917 5,246

4,8644,638

3,032

3,349

4,327

2,516 2,5332,783 2,393

Single Family (1 - 4 units) Multi-family (5+ units, incl. Condos)

Nu

mb

er

of

Pe

rmit

s

7 Months annualized

Source: US Census Bureau Residential Construction Branch

Monthly Residential Building PermitsIndianapolis MSA

01-0

504

-0507

-0510

-0501

-0604

-0607

-0610

-0601

-0704

-0707

-0710

-0701

-0804

-0807

-0810

-0801

-0904

-0907

-0910

-0901

-1004

-1007

-1010

-1001

-1104

-1107

-1110

-1101

-1204

-1207

-12

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

Single Family Permits Multifamily Permits

Nu

mb

er

of

Pe

rmit

s

Peak 9/051,982 Units

Latest 7/12384 Units

Source: US Census Bureau Residential Construction Branch

Valley 1/09195 Units

New Apartment DevelopmentIndianapolis Metro Area

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 est.

2013 proj.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1,8

46

2,3

45

2,2

61

1,9

17

1,0

99

2,3

77

94

6

1,0

99

2,5

26

2,5

66

1,7

52

2,8

00 3,1

00

1,9

38

2,9

18

2,5

49

2,3

30

2,3

87

1,3

49

74

4

2,4

21

1,8

68

1,7

36

1,4

82

94

3

Placed in Service (Tikijian Associates) Building Permits (US Government)

Nu

mb

er

of

Un

its

Source: Tikijian Associates

Trailing 12 Mos. 7/12

New Market Rate Projects in the Pipeline

Project Developer # Units

The Hamilton JC Hart 245 units

Union Street Flats at Grand Junction JC Hart 237 units

Stadium Flats Core Redevelopment 132 units

Axis at Block 400 Flaherty & Collins 332 units

Arden Woods Glick 50 units

82 Flats at the Crossing Hearthview Residential 232 units

Solana Apartments at the Crossing Milhaus 404 units

Mozzo Milhaus 64 units

Residences at Market I Milhaus 258 units

Many More…..

Source: Tikijian Associates

Total Tax Credit DevelopmentState of Indiana

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

1,51

3

2,25

4

1,50

3

1,43

9

1,34

4

2,22

5

4,51

3

2,77

7

2,32

6

3,28

3

2,78

8

1,62

8

1,16

7

2,21

8

3,72

73,

763

1,53

4

1,42

9

Tax Credit Units

Nu

mb

er

of

Un

its

Source: IHCDA

Average Sale Cap RatesIndianapolis Metro Area - Class “B” or better

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20125%

6%

7%

8%

9%

10%

11%

8.4% 8.5%

8.0%7.7%

6.7%6.5%

6.0% 5.9%

6.6%

8.6%

6.7%

7.2%

6.0%

9.2%

10.2%

8.9%8.6%

8.4%

7.6%

7.0% 6.9%

8.2%

9.6%

8.8%8.6%

7.8%

Actual Cap Rate Forecast Cap Rate

Ca

p R

ate

Prelim.

Source: Tikijian Associates

Why? How?3.5% rate, 30 year amortization

= 5.4% Constant

2011 National Lender Composition

65%

20%

8%

5%

2%

Lender

GSE's

Bank

Insurance

Private

CMBS

GSE (Government Sponsored Enterprises) – in 2011 represented 65% of new loans

 Freddie Mac:

o up to 80% LTV, mostly likely 70% to 75% LTV in Indianao 3.50% to 4.00% interest rates (7 & 10 Year Term)o Some Flexibility on Terms: fixed or floating rate, potential interest

only periodo Capped ARM is comparable to a Bank Term Loan

Fannie Mae: o up to 80% LTV, most likely 65% to 70% LTV in Indianao Indiana is a Pre-Review Stateo 3.50% to 4.00% interest rates (7 & 10 Year Term)

FHA/HUD 223(f):o up to 83.3% LTV acquisition, 80% LTV refinanceo 35 Year Fully Amortizing, Non-Recourse Loano 2.75% -3.75% All-in Rate (incl. .45% MIP increasing to .60%)o 6 Month +/- Time Frameo Downside: Higher fees, potentially higher reserves, required audit

and bi-annual limit on owner distributions (surplus cash calculations)

Bank Loans - in 2011 represented 20% of new loanso Development Loans (up to 90% loan to cost)o Bridge Loanso Offers more flexibility (prepayment) but almost always recourseo More variation on rates and terms, typically a floor rate around 4%o Decisions based on global financial analysis of borrower

CMBS o Still not active in our marketo Potential loan for lower quality product and borrower credit quality

 Life Companies

o Up to 75% LTV (won’t go higher – prefer 60% – 65% LTV)o Rates 4.25 – 4.00o Advantages: no required replacement reserves, Loan sizes range

from$2M and can do very large deals

Questions & Discussion