glenn r. mueller, ph.d. professor university of denver franklin l. burns school of real estate
DESCRIPTION
Glenn R. Mueller, Ph.D. Professor University of Denver Franklin L. Burns School of Real Estate & Construction Management & Real Estate Investment Strategist Dividend Capital Research [email protected]. Dr. Glenn Mueller. Real Estate Investment Strategist – Dividend Capital Group - PowerPoint PPT PresentationTRANSCRIPT
Glenn R. Mueller, Ph.D.Professor
University of DenverFranklin L. Burns School of Real Estate
& Construction Management&
Real Estate Investment Strategist
Dividend Capital [email protected]
Dr. Glenn MuellerReal Estate Investment Strategist – Dividend Capital Group
Professor – University of Denver – Franklin L. Burns School of Real Estate & Construction Management
Visiting Professor – Harvard University, 2002-2008 & summer executive education semesters
Guest Lecturer – Wharton School, Yale, Berkeley, Ohio State, UNC, USC, European Business School, University of Regensburg
Previous Experience
Legg Mason – Real Estate Investment Strategist
PriceWaterhouseCoopers – National Director of Real Estate Research
Alex. Brown Kleinwort Benson – Head of Real Estate Research
Prudential Real Estate Investors – Vice President of Real Estate Research
B.S.B.A. in finance from the University of Denver
MBA from Babson College
Ph.D. in Real Estate from Georgia State University
• 550 Students Earning Degrees
• Undergraduate - BSBA
• Graduate – MBA & MS
• Executive – MSReal Estate, Construction Management, RECM,
RE & Accounting, Finance, Marketing,
Management, International Business, Law
DU Founded 1864
Daniels COB ranked top 50 - WSJ
Why Real Estate Fits A Portfolio = SizeU.S. Real Estate vs. Other Asset Classes - 12/06
Source: Pension & Investments, October 30, 2006 and Prudential Real Estate Investors, December 2006.
All Real Estate = Half - 12/06
Source: Prudential Real Estate Investors, December 2006.
U.S. Real Estate Values = $33.3 Trillion
Market Cycle AnalysisMarket Cycle Analysis
Physical CyclePhysical Cycle
Demand & Supply drive Occupancy Demand & Supply drive Occupancy
Occupancy drives Rental GrowthOccupancy drives Rental Growth
Legg Mason Real Estate Research
Market Cycle Quadrants
Declining V
acancy N
ew C
onstruction
No New Constructio
n
Increasing
Vacancy
Declining Vacancy
Increasing
Vacancy
More C
ompletions
New Constr
uction
Phase 1 - Recovery
Phase 2 - Expansion
Phase 4 - Recession
Demand/Supply Equilibrium Point
Long Term Vacancy Average
Occ
up
ancy
Time
Phase 3 - Hypersupply
PhysicalMarket Cycle
Characteristics
Negative Rental Growth
Below Inflation Rental Growth
Rents Rise Rapidly Toward New Construction Levels
High Rent Growth in Tight Market
Demand/Supply Equilibrium
Rent Growth Positive But Declining
-Below Inflation & Negative Rent Growth
Cost Feasible New
Construction RentsLong Term Average Occupancy
Occ
up
ancy
Time
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
up
ancy
Time
2
54
3
89
7
10
16
15
13
1
6
11
14
1
12
-2.1%
Historic National Industrial Rental Growth %
0.4%
0.8%
2.8%
3.0%
4.6%
5.1%
8.3%
8.5%
6.8%
3.8%
-0.4%0.7%
4.8%
4.6%
5.9%
30 Year Cycle - Periods 1968-1997
Long Term Avg Occupancy
Occ
up
ancy
Time
Retail - 2nd Tier Regional Malls
National Property Type Cycle Locations
1st Qtr 2008
LT Average Occupancy
Source: Mueller, 2008
Phase II - Expansion
Phase I - Recovery
Phase III-Hypersupply
Phase IV - Recession
11
1467
89
10 12
13
11654321
Office - Downtown
15ApartmentSenior HousingHotel - Ltd. Service
Retail - Factory OutletIndustrial - Warehouse
Industrial - R&D Flex
Health Facility
Retail - 1st-Tier Regional Malls
Office - Suburban
Hotel - Full-Service
Retail - NH & ComPower Center Retail
LT Average Occupancy
Source: Mueller, 2008
11
1467
89
1012
13
115
1654321
Office Market Cycle Analysis1st Quarter, 2008
AtlantaChicago
JacksonvilleNashville
Philadelphia
Riverside-1N. New Jersey
RichmondWilmington
AlbuquerqueBaltimoreCincinnatiClevelandColumbus
Detroit Milwaukee
NorfolkPittsburgh
AustinCharlotte+1DenverHoustonNew York
BostonEast Bay OrlandoPortlandSacramentoSan DiegoSan FranciscoSeattleNATION
Dallas FWFt. Lauderdale-1
HartfordIndianapolis Kansas CityLong IslandLas Vegas-1
MemphisMinneapolis
St. LouisStamford
W. Palm Beach-1
HonoluluMiamiWash DC
Los AngelesNew Orleans-1 Oklahoma CityOrange CountyPhoenix-1Raleigh-DurhamSalt LakeSan JoseTampa
San Antonio+1
Austin-1Charlotte
DenverHonolulu
Long IslandMemphis
MiamiNashville
N. New JerseyOklahoma City
Raleigh-DurhamWash DCNATION
ChicagoCincinnati Dallas FW-1 IndianapolisMilwaukee MinneapolisNew YorkOrlando-1PhiladelphiaSt. Louis+1Stamford
Source: Mueller, 2008
11
1467
89
10 12
13
115
1654321
1st Quarter, 2008
LT Average Occupancy
Industrial Market Cycle Analysis
AtlantaBaltimore
BostonColumbus
HartfordTampa
ClevelandDetroitPittsburgh
JacksonvillePhoenixSacramentoSan AntonioSan Diego
PortlandSan FranciscoSan Jose
Ft. LauderdaleHoustonKansas City+1Norfolk+1RichmondSalt LakeSeattle
Orange County Riverside-1
East BayNew Orleans+1 W. Palm Beach
Los Angeles
Las Vegas
IndianapolisRaleigh-Durham
New Orleans+2Salt Lake
Source: Mueller, 2008
11
1467
89
10 12
115
1654321Charlotte-1Cleveland DetroitMemphisPittsburghSan AntonioStamford
LT Average Occupancy
Apartment Market Cycle Analysis1st Quarter, 2008
HartfordMilwaukee
13
East BayN. New JerseyPortlandSan JoseNATION
ChicagoLos Angeles
New YorkSan Francisco
AtlantaBostonColumbusDallas FWHonoluluKansas CityMinneapolisOklahoma City
Cincinnati+1Houston
Long IslandNashville
Richmond-1St. Louis
BaltimoreDenver
PhiladelphiaSeattle
Austin+2JacksonvilleLas VegasFt. LauderdaleMiamiNorfolkSacramentoWash DC
Orange County+1Phoenix+1Riverside+1San Diego+1
Orlando+1Tampa+1W Palm Beach+1
East BayLong Island
New York Orange County
San DiegoSan Francisco
Wash DC
Source: Mueller, 2008
11
1467
89 12
13
115
1654321
Retail Market Cycle Analysis
10
LT Average Occupancy
1st Quarter, 2008
N. New Jersey
Philadelphia
Dallas FWDenverHouston-1MinneapolisStamford
Charlotte-1Detroit-1
Indianapolis
BostonLos Angeles
San Jose
Memphis-1New Orleans
Riverside-1 San Antonio
BaltimoreFt. LauderdaleHonolulu+1PortlandRichmond+1SeattleSt. LouisNATION
AtlantaAustinJacksonville-3Las Vegas
Cincinnati-1ClevelandColumbusHartford-1
Milwaukee-1Nashville
W. Palm Beach-1
Kansas CityPittsburgh
Raleigh-Durham
Miami+1Norfolk+1
SacramentoSalt LakeTampa+1
Oklahoma City
Chicago+1Orlando+1Phoenix+1
CharlotteJacksonvilleMiamiNashvilleOklahoma CityOrange CountyOrlandoSan JoseWash DC
Boston+1DallasLas VegasMemphisMilwaukeeMinneapolisSacramentoSalt Lake-1
Baltimore-1DetroitKansas CityNew Orleans N. New Jersey
Cleveland
Source: Mueller, 2008
1467
89 12
13
115
165
4321
1110
LT Average Occupancy
Hotel Market Cycle Analysis1st Quarter, 2008
ColumbusSt. Louis
AtlantaChicagoDenverFt. Lauderdale+1NorfolkPhiladelphia-1Phoenix-1 PortlandRaleigh-DurhamRichmondRiverside-1San AntonioStamfordSeattleW. Palm Beach
NATIONCincinnati Hartford+1
IndianapolisPittsburghTampa-1
AustinEast BayHonolulu+1Long IslandLos Angeles
HoustonNew YorkSan DiegoSan Francisco+1
1970s Cycle
•Factors Driving The First Half Cycle (5 Year)
•Strong Demand from the 1960s that stopped
•Recession 1974
•Capital Flow - Mortgage REITs produced oversupply
•Factors Driving The Second Half Cycle (5 Year)
•Baby Boom Generation Goes to Work = Demand
•Capital Flow Shut Down = no supply = Lenders Recover
•Markets tighten and reach peak occupancy 1979 (5% vacancy)
1970s Office Demand & Supply
0%
2%
4%
6%
8%
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
Demand Supply
Source: FW Dodge, CB Commercial, BLS, Mueller
Oversupply Years Baby Boomers Go To Work
1980s Cycle•Factors Driving The First Half Cycle (5 Year)
•Tight market in 1979 pushes rents and prices up
•Tax Act of 1981 attracts taxable investors supply up
•Inflation pushes real estate prices higher
•Thrift Deregulation allows capital to flow•Factors Driving The Second Half Cycle (5 Year)
•Tax Act of 1986 slows taxable investors, but not tax free
•Poor stock market attracts Pension & Foreign capital
•Rising R.E. prices masks poor income returns
1980s Office Demand & Supply
0%
2%
4%
6%
8%
10%
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
Demand Supply
Source: FW Dodge, CB Commercial, BLS, Mueller
Oversupply Years
1990s Cycle
•Factors Driving The First Half Cycle (5 Year)
•Moderate but stable demand growth (1991 recession minor)
•Oversupply and Foreclosures shut down construction
•Excess space absorbed - bringing markets back
•Factors Driving The Second Half Cycle (5 Year)
•Moderate Demand growth Continues
•Oversupply absorbed and return performance improves
•Construction “constrained” causing rents & prices to rise
•More efficient markets match supply to demand
1990s Office Demand & Supply
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%19
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
Demand Supply
Source: FW Dodge, CB Commercial, BLS, Mueller
Oversupply Absorbed
Demand Supply
Matched
2000s CycleDemand
•Globalization - creates stable U.S. economy
•Job Growth out of Technology Change
•2.7 million population growth per year for 10 years
•Baby boomers at “highest income earning” years
•second home market wave
•Echo boom children – college, first job, & renting
•Aging population not a major factor till 2014
•Employment growth drives commercial demand
Source: U.S. Census Bureau, November 2006.
DemandAge 0-60: Percent of Total Population
2000s Cycle
2000s Cycle
Baby Boom
Echo Boom
Gen X
Change in 20-29 Year Old Age Cohort
(1,000,000)
(500,000)
-
500,000
1,000,000
1,500,000
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
E
2010
E
2012
E
2014
E
Source: National Center for Health Statistics and Mueller estimates
Government Stimulus Working?Top Federal Budget Deficits Since 1932
0
5
10
15
20
25
30
351
94
3
19
45
19
46
19
34
19
85
19
84
19
91
19
39
10
76
19
35
19
93
20
03
% o
f G
DP
Source: U.S. Census Bureau, Office of Management & Budget
Source: World Bank estimates
Export growth supports demand for industrial space.
Any U.S. Recession Should be MILDThe Rest of the World is Growing Well
Source: World Bank estimates
2008 GDP % Growth
Supply Constraint
•Public Markets make R.E. Capital markets efficient
•Economically driven capital - low spec construction
•500 + Research watchdogs – Data Available
•Constrained Supply (economically driven capital)
•construction labor harder to find
•materials costs increasing
•infrastructure problems constrain growth
•Feedback loop keeps demand and supply in better balance
•greater transparency
•Faster reaction to demand slowdown
2000s Cycle
Office Demand & Supply
-3%
-2%
-1%
0%
1%
2%
3%
2000 2002 2004 2006 2008 2010 2012
Demand Supply
2000s US Office Demand & Supply
Supply Reacted to Demand Slow Down
FORECAST
Demand 1.41%
Supply 1.44%
Source: Property & Portfolio Research, Grubb & Ellis, Mueller 2007.
Hotel - Ltd. Service
Retail 2nd -Tier Regional Malls
National Property Type Cycle Forecast
1st Qtr 2009ESTIMATE
LT Average Occupancy
Apartment
Source: Mueller, 2008
Phase II - Expansion
Phase I - Recovery
Phase III-Hypersupply
Phase IV - Recession
11
1467
89
10 12
13
116432 1
Industrial - R&D Flex
155
Office - SuburbanSenior Housing
Health FacilityHotel - Full-Service
Office – DowntownRetail - Factory Outlet
Retail - 1st Tier Regional Malls
Industrial –Warehouse
Neighborhood/Community Retail+1Power Center Retail
80
84
88
92
-9%
-6%
-3%
0%
3%
6%
9%
12%Office Occupancy Rent Growth
Office Occupancy & Rent Cycle
Source: Property & Portfolio Research, Grubb & Ellis, Mueller 2008.
1.7%
Forecast
AtlantaFt. Lauderdale-1HartfordIndianapolisLong IslandLos AngelesNashvillePhoenix-1Raleigh-DurhamTampaW. Palm Beach-1
BostonCharlotteEast BayPortlandSan DiegoSan JoseSeattleWash DC
NATION
Dallas FWNew OrleansMiami-1Oklahoma CityOrange CountyOrlando-1SacramentoSalt Lake
Austin-1Honolulu
Houston-1San AntonioSan Francisco
Source: Mueller, 2008
11
1467
89
10 12
13
115
164321
1st Quarter, 2009 Estimate
LT Average Occupancy
Office Market Cycle FORECAST
5
BaltimoreCincinnatiClevelandColumbus DetroitMilwaukeePhiladelphiaPittsburgh
ChicagoJacksonvilleKansas CityLas Vegas-1
MemphisMinneapolis
NorfolkN. New Jersey
RichmondRiversideStamfordSt. Louis
DenverNew York
BaltimoreCincinnatiClevelandColumbus DetroitMilwaukeePhiladelphiaPittsburgh
-4.0%
-2.0%
0.0%
2.0%
4.0%
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
89.0%
90.0%
91.0%
92.0%
93.0%
Industrial Rent Growth industrial Occupancy Rate
Industrial Occ. Cycle & Rent Growth
1.2%
Source: Property & Portfolio Research, Grubb & Ellis, Mueller 2007.
Source: Mueller, 2008
11
1467
89
10 12
13
115
16531
DenverHouston
JacksonvilleLong Island
MemphisMilwaukee
NorfolkPhoenix
Raleigh-Durham+1Richmond
SacramentoSalt LakeWash DC LT Average Occupancy
Industrial Market Cycle FORECAST
San JoseSan FranciscoW. Palm Beach
4
AtlantaBaltimoreClevelandColumbus
HartfordPittsburghSt. Louis
2
BostonChicago
CincinnatiDallas FW Indianapolis
MiamiNashville-1
N. New JerseyOklahoma City
San AntonioStamford
Tampa
AustinCharlotteFt. LauderdaleHonoluluKansas CityMinneapolisNew YorkOrlandoPhiladelphiaSeattle-1NATION
PortlandSan Diego
East Bay
Orange County
Los AngelesNew Orleans
Detroit
Las VegasRiverside
1st Quarter, 2009 Estimate
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
92.0%
92.5%
93.0%
93.5%
94.0%
94.5%
95.0%
95.5%
Apartment Rent Growth Apartment Occupancy Rate
Apartment Occ. Cycle & Rent Growth
3.8%
Source: Property & Portfolio Research, Grubb & Ellis, Mueller 2008.
San Jose+1 San Francisco
East BayN. New Jersey
CincinnatiDallas FW-1HoustonLong IslandPittsburghStamford
Source: Mueller, 2008
11
1467
89
10 12
13
115
164321
AtlantaColumbusDenverHonoluluNashvilleMinneapolisPhiladelphiaSeattleNATION
LT Average Occupancy
Apartment Market Cycle FORECAST
BaltimoreBostonKansas CityOklahoma CityRichmondSt. LouisCharlotte
ClevelandDetroitIndianapolis
HartfordMilwaukee-1
RaleighDurham
5
Chicago
1st Quarter, 2009 Estimates
New Orleans+1San DiegoWash DCSalt Lake
Los AngelesNew York Portland
AustinFt. Lauderdale+1 Las Vegas+1Miami+1Norfolk+1Orange CountyRiverside
MemphisSan Antonio
Jacksonville+1Phoenix+2Sacramento+2
Orlando+2Tampa+2
W. Palm Beach+2
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
80.0%
82.0%
84.0%
86.0%
88.0%
90.0%
92.0%
Retail Rent Growth Retail Occupancy Rate
Retail Occ. Cycle & Rent Growth
1.4%
Source: Property & Portfolio Research, Grubb & Ellis, Mueller 2007.
Orange County San FranciscoWash DC
HoustonN. New JerseyRaleigh-Durham
Los Angeles
Source: Mueller, 2008
11
147
89
10 12
13
115
1654321
LT Average
Retail Market Cycle FORECAST
Dallas FW DenverMilwaukeeMinneapolisW. Palm Beach Cleveland-1
IndianapolisLas VegasNashvilleRiverside
6
East BayNew York
Oklahoma City
1st Quarter, 2009 Estimates
Boston
Baltimore
Ft. LauderdaleHonolulu+1Long Island
Norfolk
Portland San Diego
SeattleSt. Louis
NATION
CharlotteCincinnatiColumbusDetroitHartford-1Kansas CityMemphis
Occupancy
JacksonvilleNew Orleans
AtlantaAustinOrlando+1San AntonioSacramento+1
ChicagoMiamiRichmondTampa
PittsburghStamford
PhiladelphiaSan Jose
PhoenixSalt Lake
-10.0%
-6.0%
-2.0%
2.0%
6.0%
10.0%
14.0%
60.0%
62.0%
64.0%
66.0%
68.0%
70.0%
Hotel RevPar Growth Hotel Occupancy Rate (%)
Hotel Occ. Cycle & Rent Growth
6.5%
Source: Property & Portfolio Research, Grubb & Ellis, Mueller 2007.
Baltimore-2DetroitKansas CitySt. LouisTampa-1
AtlantaBostonFt. Lauderdale-1Las Vegas MilwaukeeNorfolkPhoenixSacramentoSalt LakeSeattle
Source: Mueller, 2008
11
1467
89
10 12
13
115
1654321
LT Average Occupancy
Hotel Market Cycle FORECAST
ClevelandCincinnatiColumbusIndianapolisN. New JerseyPittsburghSan Antonio-1W. Palm Beach-1
Dallas FWHartfordMemphisMinneapolis Raleigh-Durham-2Stamford
CharlotteDenverJacksonville-1NashvilleOklahoma CityOrange CountyPortlandRichmondRiversideWash DCNATION
AustinChicagoHonoluluMiamiOrlandoPhiladelphiaSan Diego-1
East BayHoustonLong IslandSan JoseSan Francisco
1st Quarter, 2009 Estimates
Los AngelesNew York
New Orleans-1
Market InformationMarket Information
used to:used to:
• determine competitive positiondetermine competitive position
• set lease strategyset lease strategy
• determine improvements programdetermine improvements program
Real Estate Financial Cycles
Capital Flows
Affect Prices
Hyper Supply
LT Occupancy Avg.
Market Cycle Capital Flow Impact
Capital Flows to Existing Properties
Capital Flows to New Construction
Total Capita
l Flow CycleProperty M
arket Cycle
Cost Feasible Rents Reached
National Office Physical Market Cycle vs. Financial Cycle = New Permit Values
80
84
88
92
96
1972 1976 1980 1984 1988 1992 1996 2000 2004
Oc
cu
pa
nc
y
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
Va
lue
($M
il)
Market Cycle PermitSource: CB Commercial, Census Bureau
PhysicalFinancial
Source: BEA, CB Commercial, Mueller
6 year lag
No Lag
-10,000
-5,000
0
5,000
10,000
15,000
20,000
25,000
1970
Q1
1972
Q1
1974
Q1
1976
Q1
1978
Q1
1980
Q1
1982
Q1
1984
Q1
1986
Q1
1988
Q1
1990
Q1
1992
Q1
1994
Q1
1996
Q1
1998
Q1
2000
Q1
Flow of Funds Commercial MortgagesAll Sectors (1976 - 2001)
False Price AppreciationSupport
?($ M
ils)
Source: Federal Reserve
Public MarketVolatility
Property Price MovementHistoric Cap Rates
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.01
98
9
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
Office - CBD Office - suburban Industrial - WarehouseIndustrial - R&D Apartments
Source: Real Estate Research Corporation - Chicago
Property Prices Strong
Source: Real Estate Research Corporation - Chicago
Historic Cap Rates
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.01
98
9
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
Hotels Regional MallPower Center Neighborhood Comm.
Transaction Pricing
Source: Real Capital Analytics, New York www.rcanalytics.com
Q1 2004 Cap Rates9.3 9.3
8.4
7.1
7.8
8.4
7.7
6.9
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
Office Industrial Retail Apartment
Denver
US
36/1636 deals 25/1319 deals 33/1624 deals 37/1798 deals
Transaction Pricing
Source: Real Capital Analytics, New York www.rcanalytics.com
94/3512 deals 26/2871 deals 39/2703 deals 63/3922 deals
Q3 2006 Cap Rates
6.9
7.5
6.3
5.8
6.4
7.1
6.6
5.5
5.8
6.0
6.5
7.0
7.5
8.0
8.5
9.0
Office Industrial Retail Apartment
Denver
US
Source: Property & Portfolio Research & Dividend Capital Research.
Supply
Commercial Real Estate Supply Growth
– The new supply of space was down in 2006 and 2007 and the forecast is for moderate supply growth – well below the long-term average
garden apt
industrial
off CBD
off suburbanstrip ctr
NNN retail
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
8.50%
9.00%
1'04
2 3 4 1'05
2 3 4 1'06
2 3 4 1'07
2 3 4
Average Cap Rates
net acquisitions by capital sector (all core)
-20
-15
-10
-5
0
5
10
15
20
inst'l foreign reit/public user/other fund syndicator private condoconverter
Quarterly Transactions 2001 -2007
Source: Real Capital Analytics 2008, www.rcanalytics.com
Globalization of Real Estate MarketsU.S. Still Looks Cheap
Office Prices ($/Sq. Ft.)
$621
$324
$1,081
$641 $627
Office Cap Rates
4.8%
6.6%
4.8%
5.3%
4.3%
Source: Real Capital Analytics, January 2008– rcanalytics.com
US Property Acquisitionsoffice, industrial, multifamily & retail properties $5 mil.+
$-
$50
$100
$150
$200
$250
$300
$350
2001 2002 2003 2004 2005 2006 2007
billions
Privatization
Portfolio
One-Off
Transactions Growing
Source: Real Capital Analytics, 2008
5.25%
5.50%
5.75%
6.00%
6.25%
6.50%
Ja
n 0
4
Ap
r 0
4
Ju
l 0
4
Oct 0
4
Ja
n 0
5
Ap
r 0
5
Ju
l 0
5
Oct 0
5
Ja
n 0
6
Ap
r 0
6
Ju
l 0
6
Oct 0
6
Ja
n 0
7
Ap
r 0
7
Ju
l 0
7 100
120
140
160
180
200
Mtg Rates (7-10 yr fixed conduit) Moody's/REAL CPPI (monthly, all property types)
Mortgage Rates & Price Appreciation
Debt Rates having Little Effect on Prices
Source: Real Capital Analytics, 2008
Composition of Equity Buyersoffice, industrial, retail and multifamily properties $5 mil.+
32% 30%34%
22%
7% 12% 3%
6% 5%
3%
7%9%
14%40%
17% 13% 11%
10%
8% 8%7%
11%
17% 19% 22%13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004 2005 2006 2007
inst'l
foreign
reit/public
user/other
fund
syndicator
condoconverter
private
Diversified Buyer Group
Source: Real Capital Analytics, 2008
Source: Real Estate Alert
Number of Funds
0
50
100
150
200
250
300
350
400
450
2002 2003 2004 2005 2006 2007
Targeted Equity Raisein billions
$0
$50
$100
$150
$200
$250
2002 2003 2004 2005 2006 2007
The Universe of Private Equity Funds
Private Funds a Major Source of Capital
Source: Real Estate Alert
0
5
10
15
20
25
30
35
2002 2003 2004 2005 2006 2007
Bill
ions
Other
Latin America
Euro
Pac Rim
Canada
UK
Australia
Mid East
German
Foreign Acquisitions of US Property(trailing 12 months, office, industrial, apartment, retail properties)
Source: Real Capital Analytics, January 2008 rcanalytics.com
2008 Physical CycleDemand & Supply Affect Vacancies Rental Growth
Demand Growth – SLOWER / LOWER 2008
Economic growth – Positive?
Supply Slowing - balanced absorption?
Return to Growth Phase in 2009/2010?
2008 Financial CycleCapital Flows Affect Prices – Stock Market Fear
Real Estate the SAFEST Investment Alternative?
R E Equity – dominated by Private Markets (diversified buyer groups)
Yield Spread drives SOME Buyers (low interest rates?)
Public Debt Market in Turmoil – Big Capital Source
Confidence in R E prices in 200?
For an electronic copy
of the
Real Estate Market Cycle MonitorGo to
dividendcapital.com