Glenn R. Mueller, Ph.D.Professor

University of DenverFranklin L. Burns School of Real Estate

& Construction Management&

Real Estate Investment Strategist

Dividend Capital Researchglenn.mueller@du.edu

Source: Mueller, Real Estate Finance 1995

Market Cycle Quadrants

Phase 1 - Recovery

Phase 2 - Expansion

Phase 4 - Recession

Demand/Supply Equilibrium Point

Long Term Occupancy Average

Occ

upan

cy

Time

Phase 3 - Hypersupply

2

54

3

89

7

10

16

15

13

1

6

11

14

1

12

0.3%

2.7%

-3.0%

-1.5%

1.7%

4.0%

6.4%

11.0%

12.5%

10.5%

6.7%

-1.0%1.6%

3.3%

6.1%

10.0%

Historic National Office Rental Growth

30 Year Cycle - Periods 1968-1997

Long Term Average Occupancy

Occ

upan

cy

Time

700.00

800.00

900.00

1000.00

1100.00

1200.00

1300.00

1400.00

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Denver NON-AGR. EMPLOY. (000)

-0.1

-0.05

0

0.05

0.1

0.15

78.0

80.0

82.0

84.0

86.0

88.0

90.0

92.0

94.0

Denver Office Occupancy Denver Office Rent Growth

AlbuquerqueCincinnatiDetroitEast Bay Hartford+2Kansas CityNorfolkSan Antonio

Source: Mueller, 2014

11

1467

89

10 12

13

115

164321

3rd Quarter, 2015 Estimates

LT Average Occupancy

Office Market Cycle FORECAST

N. New JerseyStamford

ChicagoLong IslandLos Angeles

MilwaukeeSt. LouisWash DC Austin

HonoluluNashville+1

BaltimoreBostonDallas FWJacksonvilleMinneapolisNew Orleans

5 CharlotteColumbusMiamiOklahoma CityOrlandoPittsburghRiverside

Salt Lake

Palm BeachPhiladelphiaPhoenixRichmondSacramento San DiegoSan JoseSeattleTampaNATION

New YorkPortlandRaleigh-DurhamSan Francisco+1

AtlantaCleveland

DenverFt. Lauderdale+1

HoustonIndianapolis

Las Vegas+1Memphis

Orange County

Top 11 Markets = 50% of all 54 largest markets = 0.25% Emp & 0.86% Pop growthSecond Tier 17 Markets = 27% of 54 largest markets = 0.86% Emp & 1.23% Pop growth

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

0.2

87.0

89.0

91.0

93.0

95.0

97.0

99.0

Denver INDUSTRIAL Occupancy Denver INDUSTRIAL Rent Growth

Source: Mueller, 2014

11

14

89

10 12

13

115

16531

LT Average Occupancy

Industrial Market Cycle FORECAST

42

NorfolkOrange CountySacramentoStamford

RichmondLong Island

HartfordMilwaukee

New Orleans+1Oklahoma City

OrlandoPhiladelphia

PhoenixWash DC

AtlantaBostonBaltimoreChicagoCleveland DetroitEast BayJacksonvilleKansas CityLas Vegas Memphis+1NashvilleNew YorkRaleigh-DurhamSt. Louis+1Tampa

Charlotte+1Cincinnati

Columbus-1Ft. Lauderdale+1

MiamiMinneapolis

PittsburghNATION

HoustonIndianapolisN. New JerseySan AntonioSan Diego

76

AustinDallas FWHonoluluPortlandRiversideSeattle

3rd Quarter, 2015 Estimates

DenverLos Angeles+1Palm Beach+1Salt LakeSan Francisco+1San Jose

Top 12 Markets = 50% of all 54 largest marketsSecond Tier 17 Markets = 27% of all 54 largest markets

-0.06

-0.04

-0.02

0

0.02

0.04

0.06

0.08

0.1

86.0

88.0

90.0

92.0

94.0

96.0

98.0

Denver APT Occupancy Denver APT Rent Growth

-2000

2000

4000

6000

8000

10000

12000

14000

APARTMENT ABSORPTION (units) APARTMENT COMP. (units)

Source: Mueller, 2014

11

146

89

10 12

13

115

164321

LT Average Occupancy

Apartment Market Cycle FORECAST

Norfolk

5

AtlantaBoston

ChicagoColumbus-1Dallas FW

HartfordJacksonvilleLong IslandLos Angeles

Miami

Las Vegas

7

3rd Quarter, 2015 Estimates

Austin

DenverOrlandoRaleigh-DurhamSeattleWash DC

Honolulu

CharlotteCleveland

Ft. LauderdaleHouston

IndianapolisKansas City

MemphisMinneapolis

Nashville

BaltimoreCincinnati

East BayMilwaukeeNew York

Sacramento-1San Diego-1

Detroit

Oklahoma CityOrange CountyPalm BeachPhoenixSan Antonio San FranciscoStamfordSt. LouisTampa

New Orleans-1N. New JerseyPhiladelphiaPittsburghPortlandRichmondSalt LakeSan JoseNATION

Riverside+3

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

91.0

91.5

92.0

92.5

93.0

93.5

94.0

94.5

95.0

Denver Retail Occupancy Denver Retail Rent Growth

Source: Mueller, 2014

11

147

910 12

13

115

164321

LT Average

Retail Market Cycle FORECAST

6OccupancyCleveland

DetroitSt. Louis

ChicagoCincinnatiKansas CityMemphisNorfolkOklahoma CityOrange CountyRichmondRiverside

CharlotteFt. Lauderdale HartfordIndianapolisJacksonville San AntonioStamford

New Orleans+1Orlando

Palm BeachTampa+1NATION

DenverPortland

Baltimore Houston+1Long IslandLos Angeles

Raleigh-DurhamSeattle

AtlantaColumbus+1

Dallas FWLas Vegas

MilwaukeeNashville

N. New JerseyPhiladelphia

PhoenixSacramento

5

8

3rd Quarter, 2015 Estimates

AustinEast Bay+1

MinneapolisPittsburghSan Diego

San JoseWash DC

BostonHonoluluMiamiNew YorkSalt LakeSan Francisco

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

Denver HOTEL Occupancy Denver HOTEL Rent Growth

CincinnatiHartfordRichmond LT Average Occupancy

Source: Mueller, 2014

11

1467

89

10 12

13

115

1654321

Hotel Market Cycle FORECAST

Kansas City+1 MemphisOklahoma CityPhoenixRaleigh-Durham

ColumbusJacksonvilleRiversideSacramentoSan AntonioStamford

BaltimoreClevelandDetroitIndianapolisMilwaukeeOrange County

Norfolk

Charlotte+1Las Vegas+1

NashvilleNew Orleans

Wash DCNATION

Dallas FWOaklandSt. LouisSalt Lake

N. New JerseyPhiladelphia

AustinBostonDenverEast Bay Ft. LauderdaleHonoluluOrlandoPittsburgh+3PortlandSan Diego+1San FranciscoSan JoseSeattle

3rd Quarter, 2015 Estimates

Atlanta+1ChicagoHouston

Los AngelesMinneapolis

Tampa+1

Long IslandMiamiNew YorkPalm Beach

Real Capital Analytics — Real Commercial Property Price Index (CPPI)

Property Price Cycle

Source: Real Capital Analytics, Inc., September 2014.

Current Price Recovery from 2007 Peak %

CBD Office— 108%

Apartment— 116%

Retail— 84%

Industrial— 90%

Suburban Office— 80%

http://www.rcanalytics.com

Major Market Pricing

RCA CPPI –Major Markets % of 07 Peak

80.00

100.00

120.00

140.00

160.00

180.00

200.00

220.00

240.00

260.00

San Francisco 139%

Los Angeles 124%

New York 122%

Wash DC103%

Texas 102%

Boston 100%

Chicago 89%

http://www.rcanalytics.com

Second Tier Market Pricing

RCA CPPI – 2nd Tier Markets % of 07 Peak

60.00

80.00

100.00

120.00

140.00

160.00

180.00

200.00

220.00

240.00

Denver 111%

Hartford 106%

Seattle 104%

Philly 100%

Miami 85%

Atlanta 75%

Tampa 75%

Orlando 73%

Jacksonville 67%

Las Vegas 61%