Real facts newsletter national 11 2012-r-ental trends_v3

in this issue...

2 NatioNal overview4 realFacts Meyers iNdex8 realFacts Meyers Market coverage9 about us

Rental trendsreal estate market insight for the multi -family industry

2 0 1 2n o V e m b e r

Monthly Multi-FaMily RepoRtu.S. MaRket update

A M e y e r s r e s e A r c h P u b l i c At i o n

™

A Meyers reseArch PublicAtion

2 Rental trends

n o v2012

-9%

-6%

-3%

0%

3%

6%

9%

12%

$700

$750

$800

$850

$900

$950

$1,000

$1,050

$1,100

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Aver

age

Ren

t

National Average Rent

Rent % Change Source: RealFacts

90.0% 91.0% 92.0% 93.0% 94.0% 95.0% 96.0% 97.0% 98.0% 99.0%

100.0%

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Ove

rall

Occ

upan

cy

National Occupancy Rate

Occupancy Rate Source: RealFacts

The U.S. multifamily market’s average national rent (for markets covered by RealFacts) continued its upward momentum,

reaching a new all-time high of $1,042 per month in the third quarter of 2012, an increase of 4.8% from a year ago. The new

peak also represents an increase of 1.3% from the previous quarter, with all three quarters of 2012 averaging monthly rents over

$1,000. Given the lingering effects of the recent housing market crisis which continues to push former homeowners into the

rental market and more Millennials entering the market, demand fundamentals should continue to be strong for rental units,

keeping rents growing in the near term.

Similarly, as households continue to postpone homeownership, occupancy rates have risen, with the average national occupancy

rate increasing slightly to 93.9% in the third quarter. Although occupancy levels remain below levels seen in the late 1990s, we

anticipate it will continue to edge higher in the short term, given the slow addition of new rental product to the existing stock,

as well as the continued difficulties in the home mortgage market. Overall for 2012, rental rates are forecast to increase 4.2%,

with an average occupancy rate of 93.6% for the year, as fundamentals continue to point to increased demand for apartments.

national market review


3Rental trends

n o v2012

Rental trends

1,731 13%

2,196 17%

8,955 70%

Existing Properties by Class

Class A

Class B

Class C

Source: RealFacts

90.5%

91.0%

91.5%

92.0%

92.5%

93.0%

93.5%

94.0%

$925

$945

$965

$985

$1,005

$1,025

$1,045

$1,065

4Q20

09

1Q20

10

2Q20

10

3Q20

10

4Q20

10

1Q20

11

2Q20

11

3Q20

11

4Q20

11

1Q20

12

2Q20

12

3Q20

12

Aver

age

Ren

t National Quarterly Trends

Rents Occupancy Source: RealFacts

$891 $904 $944

$1,192 $1,302 $1,329

$1,506

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

Studio 1 Bed/1 Bath 2 Bed/1 Bath 2 Bed/2 Bath 2 Bedroom Townhome

3 Bed/2 Bath 3 Bedroom Townhome

Average Asking Rent by Bed/Bath

1,731 13%

2,196 17%

8,955 70%

Existing Properties by Class

Class A

Class B

Class C

Source: RealFacts


4 Rental trends

n o v2012

Across the country, the rental market continues to strengthen. Consequently, RealFacts Meyers’ investment index tracks 28

metro areas throughout the United States. Eleven indicators including rental increases, occupancy, absorption, job growth,

multifamily permit levels, and estimated cap rates for stabilized properties are compiled and measured against historical averages.

The subsequent weighted investment index offers a benchmark of the apartment industry for each metro area from a standpoint

of an investor looking at ground-up development. The nation overall scored a 5.3 on the scale, increasing slightly from our

previous analysis. All but two of the areas (Las Vegas and Boston) saw an annual increase in rents (with Boston showing no

change), and almost three-fourths of the markets analyzed saw occupancy levels hold steady or increase from last year.

“Gateway cities” continue to characterize the top tier markets, which saw rents trend 7% higher from a year ago. Occupancy

rates in these markets average about 95%, and high investment interest keep CAP rate levels around 4% to 5%. Not surprising,

the bulk of the top markets have a heavy tech influence, a sector that continues to hire a younger-than-average workforce who

is generally well-paid and highly mobile. The most significant ground-up growth (based on multifamily permit level change)

can be found in Austin, San Jose, Minneapolis, Denver, and Charlotte. These markets have seen permit levels more than double

from a year ago.

The recent strength of the apartment market, an aging stock of apartment units, and the influx of the large Gen Y demographic

cohort has and will continue to reshape the apartment industry over the next decade. Since the recent recession, the trend in

apartment units, along with the for-sale market, has shifted toward smaller unit sizes. This has largely been due to the need to

offer homes and apartments at lower price points. Some of the newer apartment projects are even planning a majority of their

units as one bedroom offerings versus the prevalence of two-bedroom units in the recent past. The emergence of micro units

of roughly 300 square feet of space – even smaller than a typical studio – is drawing a lot of attention. These micro units are

popping up in high-density, urban areas such as San Francisco, New York, and Boston, and they are appealing to the Gen Y renter

who is searching for walkable, more affordable, urban living.

Another notable trend geared towards the needs of the Millennials is a strong technology focus in both the apartment units

themselves, as well as in the leasing offices and community amenities. Apartment communities targeting the Gen Y group are

transforming their leasing offices into a completely wireless experience, offering a modern and dynamic feel, similar to Apple

stores. Web-based technology is also a must for these prospective tenants, who desire the ability to contact management, pay

rent, and get service through the internet 24/7. The business center of old is now more of a cyber café with universal Wi-Fi

expected, and in-unit home networking and IPod docking stations the norm. These technology-focused features are important

to Millennials, and apartment communities looking to capture this group have begun offering these elements to meet their needs.

realfacts meyers index

Multi-family Product Trends


5Rental trends

n o v2012

Rental trends

The middle tier markets experienced an uptick in rent of 3% from year ago levels, while occupancy levels remained at 94%

on average. CAP rates in these markets are generally in the 5% to 6% range. This tier includes all of the Southern California

markets, along with Jacksonville, which was a bottom-tier market earlier this year. Jacksonville has improved significantly over

the past year, with rents rising 3%, occupancy increasing 1%, and multi-family permits increasing over 200% from the previous

year. While most investment activity has been focused on new ground-up construction near employment cores, with most A

locations already taken, interest in value-add investment opportunities will increase. Walkability or access to mass transportation

and proximity to jobs are key factors for these markets. Development activity will increase significantly over the next several

years, but timing of market entry and exit will be more critical.

The bottom tier only includes Las Vegas this quarter, with Jacksonville moving up to the mid-tier markets. Las Vegas experienced

a decline of 1% in both average rent and occupancy rate from a year ago. This market saw a significant ramp up in new for-sale

housing during the previous housing cycle and subsequently, was one of the hardest hit markets in terms of foreclosures and short

sales. The glut of newly built distressed housing that is affordably priced competes directly with the rental market. Although the

rent to mortgage payment ratio is only 1.58X in Las Vegas, qualifying for mortgages remains difficult, and the rental market can

expect to recapture many of these previous homeowners, particularly younger singles and couples.

7.1 Austin 5.9 Los Angeles 4.0 Las Vegas6.9 San Jose 5.7 Portland6.9 Washington D.C. 5.7 San Diego6.8 Minneapolis 5.7 Orange County6.8 San Francisco 5.3 Miami6.5 Dallas 5.3 United States6.5 Denver 5.2 Phoenix6.4 Charlotte 5.0 Tampa6.4 Oakland 4.5 Chicago6.3 Baltimore 4.4 Atlanta6.2 Houston 4.3 Jacksonville6.2 Seattle 4.2 Inland Empire6.2 New York/New Jersey 4.1 Sacramento6.1 Boston 4.1 Detroit

Top Tier Middle Tier Bottom Tier


6 Rental trends

n o v2012

Source RealFacts; Census; NAHB, Bureau of Labor Statistics; Indeed.com 1/Estimated Cap rate from a survey of brokers (CBRE, Marcus & Millichap) for stabilized properties. 2/United States rental stats reflect data collected by RealFacts, which includes coverage of 96 MSAs in 14 states.

RealFacts Meyers MF Investment IndexApartment Metrics Supply Demand

Metro Area3Q 2012

RentAnnual % Change

3Q 2012Occupancy

Annual % Change

% of Class A

2011 Units Absorbed

Rents vs. Mortgage Payment

Annualized MF Permits % Change

MF % of Total Permits Job Growth

Jobless Rate

Job Postings

Per Capita% of

RentersInvestment

Index Metro AreaAustin $950 6% 94% 0% 20% 2,199 1.22x 4.25 - 5.00 10,173 153% 55% 26,400 5.9% 76 47.9% 7.1 Austin

San Jose $1,980 10% 95% -1% 10% 815 0.83x 4.00 - 4.75 4,304 105% 74% 21,000 8.5% 153 43.3% 6.9 San Jose

Washington D.C. $1,669 3% 95% 0% 12% -74 1.26x 4.00 - 4.75 10,469 9% 47% 41,300 5.5% 120 37.4% 6.9 Washington D.C.

Minneapolis $1,116 3% 95% 4% 0% -19 1.63x 4.00 - 5.25 3,350 141% 39% 23,100 5.7% 70 39.2% 6.8 Minneapolis

San Francisco $2,372 11% 96% -1% 12% 960 0.88x 4.00 - 5.00 3,308 40% 89% 29,700 7.0% 77 52.2% 6.8 San Francisco

Dallas $831 4% 94% 0% 10% 6,466 1.41x 5.25 - 6.25 18,033 73% 50% 49,100 6.9% 61 37.9% 6.5 Dallas

Denver $1,009 8% 95% 1% 19% 1,303 1.07x 5.00 - 5.75 7,319 152% 57% 29,300 7.7% 85 38.0% 6.5 Denver

Charlotte $763 9% 94% 0% 2% 170 1.28x 4.75 - 5.50 5,784 347% 46% 8,500 9.7% 72 40.0% 6.4 Charlotte

Oakland $1,627 9% 97% 0% 10% 768 1.04x 4.75 - 5.75 1,478 9% 52% 21,800 9.2% 0 47.0% 6.4 Oakland

Baltimore $1,339 6% 94% 0% 4% 30 1.45x 4.00 - 4.75 2,577 26% 39% 6,300 7.7% 96 49.0% 6.3 Baltimore

Houston $835 5% 92% 1% 12% 5,432 1.37x 4.75 - 5.50 14,396 77% 33% 96,600 7.0% 61 35.5% 6.2 Houston

Seattle $1,158 6% 94% 0% 15% 468 1.10x 5.00 - 6.00 9,077 76% 53% 56,400 8.0% 75 41.5% 6.2 Seattle

New York/New Jersey $2,521 11% 96% -1% 19% 61 1.85x 4.75 - 6.50 19,434 28% 75% 138,300 9.1% 44 47.3% 6.2 New York/New Jersey

Boston $2,086 0% 96% 0% 28% 68 1.59x 4.00 - 5.00 4,862 88% 55% 49,300 5.9% 96 29.9% 6.1 Boston

Los Angeles $1,751 5% 96% 1% 20% 1,135 1.38x 4.75 - 5.50 8,742 14% 77% 66,100 10.2% 30 53.7% 5.9 Los Angeles

Portland $954 6% 96% 0% 12% 825 1.13x 5.00 - 6.25 2,715 32% 36% 12,400 8.1% 58 34.5% 5.7 Portland

San Diego $1,456 4% 95% 0% 15% 798 1.06x 4.25 - 5.00 4,098 31% 65% 28,000 9.0% 59 29.0% 5.7 San Diego

Orange County $1,628 5% 95% 0% 14% 513 0.87x 4.00 - 5.25 3,534 39% 63% 24,300 7.7% 0 41.4% 5.7 Orange County

Miami $1,259 4% 95% 1% 14% 300 1.69x 5.00 - 6.00 7,920 142% 62% 7,600 8.9% 28 36.5% 5.3 Miami

United States 2/ $1,042 5% 94% 0% 13% 37,785 1.59x 4.75 - 5.75 271,388 45% 36% 1,806,000 7.8% 11 34.5% 5.3 United States

Phoenix $755 3% 92% 0% 14% 4,322 1.41x 5.00 - 5.75 2,700 67% 17% 48,900 7.4% 62 31.6% 5.2 Phoenix

Tampa $870 3% 93% 0% 8% 532 1.65x 5.50 - 6.50 3,560 95% 38% 11,900 9.0% 57 43.7% 5.0 Tampa

Chicago $1,221 2% 94% -1% 10% 92 1.80x 5.25 - 6.50 2,651 -27% 33% 38,700 8.8% 51 32.9% 4.5 Chicago

Atlanta $875 3% 92% -1% 18% 211 2.35x 5.00 - 5.75 5,073 107% 36% 31,400 8.9% 61 25.1% 4.4 Atlanta

Jacksonville $846 3% 92% 1% 15% 296 1.76x 6.25 - 7.00 2,178 227% 33% 6,300 8.7% 54 36.9% 4.3 Jacksonville

Inland Empire $1,107 2% 94% 0% 22% 427 1.67x 5.75 - 6.50 1,517 12% 27% 16,400 12.3% 22 36.9% 4.2 Inland Empire

Sacramento $963 1% 94% -1% 12% 457 1.57x 6.00 - 7.25 303 -51% 10% 16,600 10.3% 49 41.0% 4.1 Sacramento

Detroit $879 3% 94% -1% 21% 5 4.04x 7.25 - 8.00 416 -18% 9% 28,600 10.0% 47 38.0% 4.1 Detroit

Las Vegas $746 -1% 92% -1% 13% 872 1.58x 5.75 - 6.75 1,277 5% 17% 5,100 12.3% 49 47.9% 4.0 Las Vegas

Class AEst. Cap Rate 1/


7Rental trends

n o v2012

Rental trends

RealFacts Meyers MF Investment IndexApartment Metrics Supply Demand

Metro Area3Q 2012

RentAnnual % Change

3Q 2012Occupancy

Annual % Change

% of Class A

2011 Units Absorbed

Rents vs. Mortgage Payment

Annualized MF Permits % Change

MF % of Total Permits Job Growth

Jobless Rate

Job Postings

Per Capita% of

RentersInvestment

Index Metro AreaAustin $950 6% 94% 0% 20% 2,199 1.22x 4.25 - 5.00 10,173 153% 55% 26,400 5.9% 76 47.9% 7.1 Austin

San Jose $1,980 10% 95% -1% 10% 815 0.83x 4.00 - 4.75 4,304 105% 74% 21,000 8.5% 153 43.3% 6.9 San Jose

Washington D.C. $1,669 3% 95% 0% 12% -74 1.26x 4.00 - 4.75 10,469 9% 47% 41,300 5.5% 120 37.4% 6.9 Washington D.C.

Minneapolis $1,116 3% 95% 4% 0% -19 1.63x 4.00 - 5.25 3,350 141% 39% 23,100 5.7% 70 39.2% 6.8 Minneapolis

San Francisco $2,372 11% 96% -1% 12% 960 0.88x 4.00 - 5.00 3,308 40% 89% 29,700 7.0% 77 52.2% 6.8 San Francisco

Dallas $831 4% 94% 0% 10% 6,466 1.41x 5.25 - 6.25 18,033 73% 50% 49,100 6.9% 61 37.9% 6.5 Dallas

Denver $1,009 8% 95% 1% 19% 1,303 1.07x 5.00 - 5.75 7,319 152% 57% 29,300 7.7% 85 38.0% 6.5 Denver

Charlotte $763 9% 94% 0% 2% 170 1.28x 4.75 - 5.50 5,784 347% 46% 8,500 9.7% 72 40.0% 6.4 Charlotte

Oakland $1,627 9% 97% 0% 10% 768 1.04x 4.75 - 5.75 1,478 9% 52% 21,800 9.2% 0 47.0% 6.4 Oakland

Baltimore $1,339 6% 94% 0% 4% 30 1.45x 4.00 - 4.75 2,577 26% 39% 6,300 7.7% 96 49.0% 6.3 Baltimore

Houston $835 5% 92% 1% 12% 5,432 1.37x 4.75 - 5.50 14,396 77% 33% 96,600 7.0% 61 35.5% 6.2 Houston

Seattle $1,158 6% 94% 0% 15% 468 1.10x 5.00 - 6.00 9,077 76% 53% 56,400 8.0% 75 41.5% 6.2 Seattle

New York/New Jersey $2,521 11% 96% -1% 19% 61 1.85x 4.75 - 6.50 19,434 28% 75% 138,300 9.1% 44 47.3% 6.2 New York/New Jersey

Boston $2,086 0% 96% 0% 28% 68 1.59x 4.00 - 5.00 4,862 88% 55% 49,300 5.9% 96 29.9% 6.1 Boston

Los Angeles $1,751 5% 96% 1% 20% 1,135 1.38x 4.75 - 5.50 8,742 14% 77% 66,100 10.2% 30 53.7% 5.9 Los Angeles

Portland $954 6% 96% 0% 12% 825 1.13x 5.00 - 6.25 2,715 32% 36% 12,400 8.1% 58 34.5% 5.7 Portland

San Diego $1,456 4% 95% 0% 15% 798 1.06x 4.25 - 5.00 4,098 31% 65% 28,000 9.0% 59 29.0% 5.7 San Diego

Orange County $1,628 5% 95% 0% 14% 513 0.87x 4.00 - 5.25 3,534 39% 63% 24,300 7.7% 0 41.4% 5.7 Orange County

Miami $1,259 4% 95% 1% 14% 300 1.69x 5.00 - 6.00 7,920 142% 62% 7,600 8.9% 28 36.5% 5.3 Miami

United States 2/ $1,042 5% 94% 0% 13% 37,785 1.59x 4.75 - 5.75 271,388 45% 36% 1,806,000 7.8% 11 34.5% 5.3 United States

Phoenix $755 3% 92% 0% 14% 4,322 1.41x 5.00 - 5.75 2,700 67% 17% 48,900 7.4% 62 31.6% 5.2 Phoenix

Tampa $870 3% 93% 0% 8% 532 1.65x 5.50 - 6.50 3,560 95% 38% 11,900 9.0% 57 43.7% 5.0 Tampa

Chicago $1,221 2% 94% -1% 10% 92 1.80x 5.25 - 6.50 2,651 -27% 33% 38,700 8.8% 51 32.9% 4.5 Chicago

Atlanta $875 3% 92% -1% 18% 211 2.35x 5.00 - 5.75 5,073 107% 36% 31,400 8.9% 61 25.1% 4.4 Atlanta

Jacksonville $846 3% 92% 1% 15% 296 1.76x 6.25 - 7.00 2,178 227% 33% 6,300 8.7% 54 36.9% 4.3 Jacksonville

Inland Empire $1,107 2% 94% 0% 22% 427 1.67x 5.75 - 6.50 1,517 12% 27% 16,400 12.3% 22 36.9% 4.2 Inland Empire

Sacramento $963 1% 94% -1% 12% 457 1.57x 6.00 - 7.25 303 -51% 10% 16,600 10.3% 49 41.0% 4.1 Sacramento

Detroit $879 3% 94% -1% 21% 5 4.04x 7.25 - 8.00 416 -18% 9% 28,600 10.0% 47 38.0% 4.1 Detroit

Las Vegas $746 -1% 92% -1% 13% 872 1.58x 5.75 - 6.75 1,277 5% 17% 5,100 12.3% 49 47.9% 4.0 Las Vegas

Class AEst. Cap Rate 1/


8 Rental trends

n o v2012

realfacts geographic footprint

For more information on RealFacts, contact Nick Grotjahn at 415.884.2480 x:2

RealFacts Database Facts ■ Database of 12,861 Properties ■ 2.8 Billion Square Feet of Apartments ■ 92 Consecutive Quarterly Updates of Rents & Occupancy ■ 96 MSA’s in 16 States ■ More than 3,300,000 Units ■ 136 Individual Search Criteria Used Alone or Combined ■ Over 4,800 Sales Transactions Recorded in the Past Eight Years ■ 95% of the Database Resurveyed Each Quarter ■ 19 Year History for Individual Complexes ■ 23 Years of Experience 1989-2012


9Rental trends

n o v2012

Rental trends

about us

upcoming events

Nov. 15 Milken Institute Summit California

Jan. 22 NAHB International Builders’ Show

Feb. 26 2013 Housing Market Summit

Mar. 17 Crittenden Multifamily Conference 2013

Valuation

• portfolio strategy

• feasibility study

• highest and best use analysis

• product repositioning

• assest management

Financial analysis

• debt, equity, and partnership

restructuring

• sell/hold sensitivity

• investment fund strategy

• recapitalization

Market insight

• quarterly newsletter tracking nation’s

largest markets

• database of land sales

• strategic partnerships with state

economists

Market valuation on over $2 billion in assets in 2010.

Proprietary cash flows on all property types. Over $500 million in land transactions tracked quarterly.

Meyers LLC Advisory Services & Analysis ■ Multi-family feasibility studies ■ Highest and best use analysis ■ Consumer research ■ Portfolio strategy ■ Cash flow analysis ■ Planning and entitlements ■ Mitigation management ■ Project management and development

REALFACTS is the original apartment data source….the source behind the source. We are trusted by our clients for good reason. Our data is always reliable, always dependable. We conduct surveys that are 100% primary research. All the data we publish is collected, updated and maintained in our own office by our highly trained and competent staff.

To learn more about RealFacts visit www.realfacts.com or contact us at 415.884.2480 x 2.

372 Bel Marin Keys Blvd # HNovato, CA 94949-5639415.884.2480 www.realfacts.com

Meyers LLC has extensive experience in the real estate development industry, advising a long list of national and local apartment developers and financial institutions. We understand the challenges our clients face, and can apply our expertise in research, analysis and capital sourcing to ensure they prosper—today and in the future.

To learn more about Meyers visit www.meyersllc.com

18401 Von Karman Ave., Ste. 350Irvine, CA 92612949.640.0050 | 949.640.0055 (fax)www.meyersllc.com

Methodology and source list can be made available by request.

Documents

Real facts newsletter national 11 2012-r-ental trends_v3