2012 statewide conference indiana multifamily housing market and it’s future september 18, 2012
TRANSCRIPT
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