las vegas residential real estate investment

7/28/2019 Las Vegas Residential Real Estate Investment

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Features

Vacancy and me on market trends

Rental rates

Capitalizaon rates

Factors that inuence investments

- Lender owned homes

- Loan default acvity

- Geographic variables

- Age of inventory

-Seasonal paerns

Real estate investment terms and concepts

Where the funds are buying

SUMMER 2013 INVESTOR IQ- LAS VEGAS RESIDENTIAL REAL ESTATE INVESTMENT

Coldwell Banker Premier Realty

Produced by

John McClelland - Vice President, Research Market IQContact

Coldwell Banker Premier Realty-Market IQ

Strategic Services

Phone: 702-938-1375

Email: [email protected]

Web. www.lasvegashomes.com

8290 W. Sahara Ave, Suite 200

Las Vegas, NV 89117


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2

Real estate investors demand up-to-date market intelligence in order to make informed decisions. Coldwell Banker Premier Realty Market IQ, along with our

Strategic Services division is specially equipped to assist investors in navigang and prong in this dynamic investment environment.

Market IQ provides custom market studies for the residenal, land and commercial asset classes as well as geographic informaon system (GIS) and related spa-

al research.

As a client of a Coldwell Banker Premier Realty agent, resources available to you include:

Monthly Residenal

Summarizing the Las Vegas

residenal real estate market.

Notes market trends for

condominiums and single

family homes.

Separate breakouts for bank

owned, short sales and

tradional sales.

Examines factors inuencing

the market in a short synopsis.

Luxury Single Family


luxury residenal market.

Illustrates trends in the luxuryreal estate market.

Notes key areas of concern or

interest.

Las Vegas High-Rise


residenal high-rise market.

Illustrates trends in the high-

rise market at both the

aggregate and building levels.


interest.

Contains street level

knowledge from those working

close to the market.

Includes charts on sales

velocies and pricing, as well as

current inventory.

Year-End Review

Reects on the prior years

residenal market and examines

legislave and economic factors

that may inuence the market in

the coming year.

Illustrates trends in the new

home, resale and luxury

sectors.


interest.

Provides an in-depth view of

how homes are sold and

purchased in todays market.

Commercial Trends

Examines the commercial

property market.

Illustrates trends in oce,

retail and industrial

Discusses key inuencers such

as employment, gaming

revenue and visitor volume as

well as retail sales

Notes selected deals that took

place during the study period.

Class A Mulfamily

Examines the Class A apartment

market in Las Vegas.

Illustrates trends in sale prices,occupancy rates and

capitalizaon rates.

Invesgates points of interest

in the market and the likely

causes of shis in the market.

Emphasizes ground level

intelligence and depicts recent

transacons in a simple to read

format that details sale price,

unit count and capitalizaon

rates when obtainable.


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Las Vegas connues to be a target area for both the single family rental model in the burgeoning SFR REIT space and remains a popular area

for private and individual investors. Most investors we interact with remain yield driven, however capitalizaon rates have compressed sub-

stanally since we rst added coverage to this segment of the property market back in 2009. A majority of this cap rate compression has

come from asset price increases. In observing these price increases, as well as zooming out and nocing that prices remain below trend val-

ues, investors have given more thought to the potenal for appreciaon.

Movang factors for entering the space are manifold; some investors characterize their purchase as a buy below trend play and expect to

use the exit from the trough as a way to capture returns. Others look at the dierence between current prices and replacement costs as a

key signal that homes remain undervalued. We believe that a major component of buyer interest is the low interest rate environment in

which there is a broad search for yield. Rental homes become more like bonds, albeit with more maintenance. Comparable nancial instru-

ments connue to be low yielding. 5 year CD rates are about 1.2%. 10 Year U.S treasuries are about 2.12%. These low yielding instruments

have likely pushed investors into either higher risk products or towards alternave investments. A key queson for the housing market is;

will the Fed begin the so-called tapering or will other factors lead to an increase in interest rates?

The story of Las Vegas is compelling. The region experienced one of the largest bub-

bles in its housing market and one of the largest declines when that bubble deated.

In the trough, Las Vegas home prices fell far below long-run, pre-bubble trends. In

nominal terms, the typical home value fell to early 1990s levels. Prices rose substan-

ally since 2012, much of which is related to severe supply restricons, combined

with investor demand, second home use and an owner-occupant class that is

reemerging. This has moved pricing to the levels of the early 2000s in nominal terms.

Since cap rates have compressed so much, the challenge for investors is in determin-ing if potenal appreciaon merits both the operaonal and the economic risks.

The adjacent exhibit reveals the magnitude of the housing bubble, the depth of the

trough and the recent trend of increasing prices. In addion, the Case-Shiller futures

contracts are ploed. While nong the thin trading of these contracts, the forward

curve does provide some picture of investor expectaons, which is posive but not

nearly as vibrant as the increases as we have observed since mid-2012. While this

appears to be a plausible trajectory, state level legislaon may alter this path sub-

stanally, possibly even magnifying the supply problems we have had. Further, it is

unclear as to how investors will perceive risks going forward and how adequately

those risks have been priced recently.

0

50

100

150

200

250

J

an-93

O

ct-93

Jul-94

A

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J

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Jul-97

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Jul-00

A

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O

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indexValue(year2000=100)

Las Vegas S&P/Case-Shiller Home Price Index and Futures Contracts

Index Value Jan 1993 to Mar 2013

Futures contracts as of 5-31-2013

Source: Standard & Poors.

Note: LAV Case-Shiller futures contracts are thinly traded.

SINGLE FAMILY KEY METRICS

Year-over-Year

change in Single Family $/Sq.

31.7%

Available Lisngs

-26.9%

Median Days on Market

16


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CHARACTERISTICS OF THE HOUSING STOCK

Copyright 2013 Coldwell Banker Premier Realty.


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VACANCY AND HOMEOWNERSHIP

HOMEOWNERSHIP AND VACANCY RATES

Source: U.S Census.

Note: There are some noteworthy denional issues when looking at t hese me series. Las Vegas is well known as a second ho me/vacaon home market and hence, some units may a ppear to be vacant when they should be classied sepa-

rately. Time-share and fraconal deliveries in the recent ve years may also be biasing measurement.



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THE RENTAL MARKET

11.8

8.3

7.8

8.4

10.3

8.3

9

10.8

9.59.9

11.912.1

15.2

12.9

15.2

16

16.7

15

12.912.8

13

15.1

13.613.5

11.511.2

13.2

12.3

11

10.8

13.7

11.0

14.9

0

2

4

6

8

10

12

14

16

18

1Q

2005

2Q

2005

3Q

2005

4Q

2005

1Q

2006

2Q

2006

3Q

2006

4Q

2006

1Q

2007

2Q

2007

3Q

2007

4Q

2007

1Q

2008

2Q

2008

3Q

2008

4Q

2008

1Q

2009

2Q

2009

3Q

2009

4Q

2009

1Q

2010

2Q

2010

3Q

2010

4Q

2010

1Q

2011

2Q

2011

3Q

2011

4Q

2011

1Q

2012

2Q

2012

3Q

2012

4Q

2012

1Q

2013

Vacancy%

LAS VEGAS RENTAL VACANCY RATE

Source: U.S Census.Note: Includes aached and detached homes.



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7

THE RENTAL MARKET

Source: Mlxchange, Coldwell Banker Premier Realty.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

#ofHomes

New Listings Leased

MULTIPLE LISTING SERVICE NEW FOR LEASE LISTINGS AND LEASED HOMES

Note: Includes aached and detached homes.



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8


SINGLE FAMILY DAYS ON MARKET - Monthly Series

0

10

20

30

40

50

60

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

Apr-13

DaysonMarket

Median DOM Average DOMSource: Mlxchange, Coldwell Banker Premier Realty

0

10

20

30

40

50

60

70

80

Aug-08

O

ct-08

Dec-08

Feb-09

Apr-09

Ju

n-09

Aug-09

O

ct-09

Dec-09

Feb-10

Apr-10

Ju

n-10

Aug-10

O

ct-10

Dec-10

Feb-11

Apr-11

Ju

n-11

Aug-11

O

ct-11

Dec-11

Feb-12

Apr-12

Ju

n-12

Aug-12

O

ct-12

Dec-12

Feb-13

Apr-13

DaysonMarket

Median DOM Average DOM

ATTACHED HOME DAYS ON MARKET - Monthly Series

Source: Mlxchange, Coldwell Banker Premier Realty

Note that strong seasonality is present in

single family rental property markeng mes.

We suggest investors should factor this into

their pro-forma analysis.

Seasonality in condominiums does appear tobe present, however it is not exhibited as

strongly as we observe in single family rentals.

Condos do have a higher overall average

markeng me.

THE RENTAL MARKET


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TREND IN SINGLE FAMILY LEASE RATES - $/Sq. - Las Vegas Valley

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

Apr-13

%ChangeYear-Ov

er-Year

$/Sq.ft

Y-O-Y Change in Average PPSF Median $/Sq.ft Avg. $/Sqft

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

Apr-13

%ChangeYear-Ov

er-Year

$/Sq.ft

Y-O-Y Change in Average PPSF Median $/Sq.ft Avg. $/SqftSource: Mlxchange, Coldwell Banker Premier Realty

TREND IN CONDOMINIUM/TOWNHOME LEASE RATES - $/Sq. - Las Vegas Valley

THE RENTAL MARKET



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10

$0.69

$0.76

$1.57

$0.73

$0.00 $0.25 $0.50 $0.75 $1.00 $1.25 $1.50 $1.75 $2.00 $2.25

SFR

Condo

High-Rise

Average All Types

$/Sq.Ft

Average Rental Rates Per Square-foot - Q1 2013

THE RENTAL MARKET



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89002

89103 89134

89011 89107 89135

89012 89108 89139

89014 89109 89141

89015 89113 89144

89030 89115 89145

89031 89117 89147

89032 89118 89148

89044 89119 89149

89052 89121 89178

89074 89122 89183

89081 89123 89166

89084 89128

89102 89129

ZIP CODE LEVEL RENTAL $/Sq. Trends - Selected Zip Codes - Aug 2008 to Apr 2013 Las Vegas Valley Zip Codes

NOTE: WE OBSERVE THAT MANY ZIP CODES HAVE

EXPERIENCED FLAT RENTAL PRICE PER SQUAREE-FOOT

TRENDS. SEVERAL MORE EXHIBIT A MILD DOWNWARD

BIAS. FEW HAVE RISING TRENDS.


THE RENTAL MARKET



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CAPITALIZATION RATE AND SALE PRICE RELATIONSHIP

THE RENTAL MARKET

Source: GLVAR,Coldwell Banker Premier Realty.

Rehab is esmated and is based on our own observaons.



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THE RENTAL MARKET

CAPITALIZATION RATES (Esmated), RENTS AND SALE PRICES (indexed)

0.00

0.50

1.00

1.50

2.00

2.50

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Oct-01

Feb-02

Jun-02

Oct-02

Feb-03

Jun-03

Oct-03

Feb-04

Jun-04

Oct-04

Feb-05

Jun-05

Oct-05

Feb-06

Jun-06

Oct-06

Feb-07

Jun-07

Oct-07

Feb-08

Jun-08

Oct-08

Feb-09

Jun-09

Oct-09

Feb-10

Jun-10

Oct-10

Feb-11

Jun-11

Oct-11

Feb-12

Jun-12

Oct-12

Feb-13

Rent&SalePriceIndex

CapRate

Cap Rate Re nt I ndex Sale IndexSource: GLVAR, U.S Census, Coldwell Banker Premier Realty.

Note: Not seasonally adjusted.

CAP RATE SPREAD OVER 10-YEAR TREASURIES (Bp)

Source: GLVAR, U.S Census, FRED II, Coldwell Banker Premier Realty. Copyright 2013 Coldwell Banker Premier Realty.


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THE RENTAL MARKET

Source: GLVAR, U.S Census, Coldwell Banker Premier Realty.

RENTAL PRICE PER-SQUARE FOOT



14


15/26

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THE RENTAL MARKET

ESTIMATED GROSS RENTAL YIELD



15


16/26

16

THE RENTAL MARKET

ESTIMATED CAPITALIZATION RATES



16


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17

MEASURES OF FUNDAMENTAL VALUE

0

25

50

75

100

125

150

175

200

225

250

Jan-02

Apr-02

Jul-02

Oct-02

Jan-03

Apr-03

Jul-03

Oct-03

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

HousingAffordabilityIndex(Jan-02=100)

HOUSING AFFORDABILITY INDEXFINANCED BUYERS

Source: GLVAR, Bankrate.com, Clark County, Coldwell Banker Premier Realty.

The Aordability Index is formulated as the monthly income required to purchase the median home with a convenonal mort-

gage, by a median income family. Monthly Payment=(median home price, mortgage payment, insurance, taxes, household income)

Aer a level of what we would consider extreme aordability by households employing nancing, recent home price increas-

es has diminished aordability. Despite diminished aordability, the typical monthly cost burden is sll in a moderate range.

Mortgage rates remain extremely low, however there are a great number of households that cannot eecvely access the

mortgage market and some nanceable buyers must compete with cash buyers. So, while aordability remains, many buyers

may face challenges in purchasing a home.

PRICE/INCOME RATIO

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jan-0

2

Apr-0

2

Jul-0

2

Oct-0

2

Jan-0

3

Apr-0

3

Jul-0

3

Oct-0

3

Jan-0

4

Apr-0

4

Jul-0

4

Oct-0

4

Jan-0

5

Apr-0

5

Jul-0

5

Oct-0

5

Jan-0

6

Apr-0

6

Jul-0

6

Oct-0

6

Jan-0

7

Apr-0

7

Jul-0

7

Oct-0

7

Jan-0

8

Apr-0

8

Jul-0

8

Oct-0

8

Jan-0

9

Apr-0

9

Jul-0

9

Oct-0

9

Jan-1

0

Apr-1

0

Jul-1

0

Oct-1

0

Jan-1

1

Apr-1

1

Jul-1

1

Oct-1

1

Jan-1

2

Apr-1

2

Jul-1

2

Oct-1

2

Jan-1

3

Apr-1

3

Ratio

Source: GLVAR, Census.gov, Coldwell Banker Premier Realty.

CASE-SHILLER HOME PRICE INDEX - LAS VEGAS

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

0

50

100

150

200

250

Feb-1987

Oct-1987

Jun-1988

Feb-1989

Oct-1989

Jun-1990

Feb-1991

Oct-1991

Jun-1992

Feb-1993

Oct-1993

Jun-1994

Feb-1995

Oct-1995

Jun-1996

Feb-1997

Oct-1997

Jun-1998

Feb-1999

Oct-1999

Jun-2000

Feb-2001

Oct-2001

Jun-2002

Feb-2003

Oct-2003

Jun-2004

Feb-2005

Oct-2005

Jun-2006

Feb-2007

Oct-2007

Jun-2008

Feb-2009

Oct-2009

Jun-2010

Feb-2011

Oct-2011

Jun-2012

Feb-2013

Year-over-YearChange

IndexValue(Jan2000=100)

While fundamental values of property are unobservable, we can get a sense of values based on price -to-

rent and price to income raos. Further, cap rates also provide us with informaon about values. Price-to-

rent and price-to-income raos can shi over me as expectaons of fut ure returns from the asset changes

(Krainer and Wei, 2004)1. That makes it dicult to assess the meaning of the volality in the series. Howev-

er, examinaon of the series relave to the pre -bubble period does add some color regarding fundamental

values. While the rao has increased markedly in t he past year, it hasnt reached the level of the early

2000s

1. John Krainer & Chishen Wei, 2004. House prices and fundamental value. FRBSF Economic Leer

Federal Reserve Bank of San Francisco, issue Oct 1.

The Case-Shiller home price index provides us with a longer-term view of prices for the Las Vegas MSA. The t rajectory of prices in the

past year have been alarming and to a large extent reects supply problems as well a s demand from investors and owner -occupants.

Prior to the bubble, prices rose quite consistently with an average increase of about 3% per year, essenally matching the ina on rate

and therefore, eecvely at in real terms. Interest by investors has not been surprising since values fell substanally below long -run,

pre-bubble trends. Even with recent price increases, prices have not intercepted the trend line (shown as the nave trend li ne in or-

ange). Certainly, following a long period of weak employment and diminished household formaon, below -trend growth in home prices

has some intuive appeal. The challenge for investors is i n determining if the rental market can support greater inventories and if the

labor market and household formaon can ulmately catch up to the strength of home price increases.

Source: S & P Dow Jones.

Median Home PriceMedian Household Income



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18

LOAN DEFAULT ACTIVITY

0

5,000

10,000

15,000

20,000

25,000

1972Q4

1973Q4

1974Q4

1975Q4

1976Q4

1977Q4

1978Q4

1979Q4

1980Q4

1981Q4

1982Q4

1983Q4

1984Q4

1985Q4

1986Q4

1987Q4

1988Q4

1989Q4

1990Q4

1991Q4

1992Q4

1993Q4

1994Q4

1995Q4

1996Q4

1997Q4

1998Q4

1999Q4

2000Q4

2001Q4

2002Q4

2003Q4

2004Q4

2005Q4

2006Q4

2007Q4

2008Q4

2009Q4

2010Q4

2011Q4

2012Q4

#ofServicedLoansinForeclosure

NEVADA NUMBER OF SERVICED LOANS IN FORECLOSURE - STARTED

Source: Mortgage Bankers Associaon, Economy.com.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Jan-11

Feb-11

Mar-11

Apr-11

May-11

Jun-11

Jul-11

Aug-11

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

Apr-13

May-13

#ofHomes

Notice of Sale Notice of Default

CLARK COUNTY NVNOTICES OF DEFAULT AND NOTICES OF SALE

Source: Foreclosureradar.com,Ticor Title,Clark County NV.

The level of foreclosure acvity in Nevada and Clark County has declined signi-

cantly from its highs. Following AB 284 in 2011, a law that added stricter require-

ments to the foreclosure process, as well as the Naonal Foreclosure Selement,

which appeared to slow foreclosure acvity naonwide, noces of default fell

signicantly.

Recently, noce of default issuance has been on an uptrend, however it is far

from what was registered in prior me periods. In the recent legislave session,

AB 3001

was adopted and this session and it is intended to clarify language re-

garding personal knowledge. Personal knowledge refers to the knowledge the

signatory on an adavit of authority has regarding the proper documents to

foreclose.

SB 321 is also now Nevada law. Referred to as a Homeowner Bill of Rights, the bill

is intended to eliminate dual tracking (pursuance of a loan modicaon while

simultaneously processing a foreclosure). The bill also has previsions for dissemi-

naon of foreclosure prevenon alternaves by servicers as well as requiring a

single-point of contact in servicing, mediaon and other measures. While the

new laws inuence on foreclosure acvity is uncertain, similar laws in California

and other States points towards connued slow foreclosure acvity.

1.hp://openstates.org/nv/bills/77/AB300/documents/NVD00011139/

2. hp://www.housingwire.com/fastnews/2013/05/29/nevada-homeowner-bill-rights-inches-closer-

becoming-law

hp://www.leg.state.nv.us/Session/77th2013/Bills/SB/SB321.pdf



19/26

19

TRENDS IN BANK OWNED HOMES

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

#ofHomes

Acquisitions Disposit ions REO inventory Notices of Default

BANK OWNED ACQUISITIONS, DISPOSITIONS, NOTICE OF DEFAULT ACTIVITY AND INVENTORY HELD BY FINANCIAL INSTITUTIONS

Source: Clark County,foreclosureradar.com,salestraq, Coldwell Banker Premier Realty.



20/26

20

MIGRATION AND HOUSEHOLD GROWTH

In surveys of household moves, United Van Lines found that in-

bound moves to Nevada exceeded outbound moves.

Atlas found that Nevada was a balanced state where inbound

trac nearly matched outbound trac.

-2%

0%

2%

4%

6%

8%

10%

12%

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Jan-87

Dec-87

Nov-88

Oct-89

Sep-90

Aug-91

Jul-92

Jun-93

May-94

Apr-95

Mar-96

Feb-97

Jan-98

Dec-98

Nov-99

Oct-00

Sep-01

Aug-02

Jul-03

Jun-04

May-05

Apr-06

Mar-07

Feb-08

Jan-09

Dec-09

Nov-10

Oct-11

Sep-12


#ofElectricMeterHookups

CLARK COUNTY NVRESIDENTIAL ELECTRIC METER HOOKUPSCLARK COUNTY NVSURRENDERED DRIVERS LICENSES

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Jan-87

Dec-87

Nov-88

Oct-89

Sep-90

Aug-91

Jul-92

Jun-93

May-94

Apr-95

Mar-96

Feb-97

Jan-98

Dec-98

Nov-99

Oct-00

Sep-01

Aug-02

Jul-03

Jun-04

May-05

Apr-06

Mar-07

Feb-08

Jan-09

Dec-09

Nov-10

Oct-11

Sep-12


#ofSurrenderedDriversLicenses

Year-over-Year Change Surrendered Drivers Licenses 12 per. Mov. Avg. (Surrendered Drivers Licenses)

Source: Mlxchange, Coldwell Banker Premier Realty. Source: Mlxchange, Coldwell Banker Premier Realty.

Moderate uptrends in surrendered drivers licenses (although

we cant measure how many individuals are leaving) and the

level of electric meter hookups, point towards a return to

household growth in the region.


21/26

21

INVENTORY

SINGLE FAMILY INVENTORY BY TYPE (NOT UNDER CONTRACT)

Source: GLVAR.



22/26

22

ECONOMIC DRIVERS

TOTAL NONFARM EMPLOYMENT AND LEISURE AND HOSPITALITY EMPLOYMENT

TAXABLE SALES GROSS GAMING REVENUE VISITOR VOLUME

YEAR-OVER-YEAR CHANGE IN TOTAL EMPLOYMENT

YEAR-OVER-YEAR CHANGE IN LEISURE AND HOSPITALITY

Source: Nevada Department of Taxaon,Las Vegas Convenon and Visitors Authority.

Source: Nevadaworkforce.com.



23/26

23

NOTES ON THE SFR-RENTAL MODEL


The trough established following the collapse of residenal real estate values opened the door

to many opportunies. One of these opportunies centered around purchasing single family

homes and renng them out on a very large scale.

Common to mom and pop investors, the recent poron of the real estate cycle is the only

one that has seen instuonal investors entering the space. I n prior periods, the model did not

make economic sense since managing disparate assets of dierent qualies, locaons and

tenants is not simple. Yields generally did not jusfy the eorts and there were dicules in

achieving the scale necessary from an operaonal standpoint. However, with low interest rates

and hence, a low cost of capital for qualied investors, combined with home values adjusted a

decade or more back in real (inaon adjusted) terms, and a global search for yield, the model

has become aracve. Coastal markets like Los Angeles and San Francisco had seen early ins-

tuonal buying. Florida cies like Miami and Tampa Bay and sunbelt cies like Phoenix and Las

Vegas have also been extremely sought aer. Several of the Georgia markets are popular as

well.

Several large rms are in the single family rental business including early entrants, now publi-

cally traded, Silver Bay Realty Trust and American Residenal Properes. Addionally, ColonyCapital entered the business with its Colony American Homes and Blackstone Group has a

large posion with its Invitaon Homes. American Homes 4 Rent, Waypoint Homes, Beazer

Pre-owned, Haven Realty Partners and many others have entered the business and each have a

sizeable book.

The lenders have also responded to the increased depth of the business with the creaon of

several lending facilies to buy-to-rent strategy rms. Deutsche Bank has extended signicant

credit of $2.1 Billion to Blackstone in 2012 and arranged another credit line of $1.5 billion for

Blackstone this year. Deutcsche Bank has also provided loans to Apollo Global Management

LLC and Tricon Capital Group Inc. Wells Fargo and bank of America have also been large lend-

ers with customers employing this business model.1

Inially, players in the space were very yield centric, however, given the posion of home pric-

es relave to trend values, many buyers have been encouraged to add appreciaon in their

pro-formas. See page 13 for an examinaon of cap rates and the recent direcons of asset

prices.

The exhibits to the right reveal the stock prices for the two publically trade SFR-Rental rms,

Silver Bay Realty Trust and American Residenal Properes. These share prices will be closely

monitored by other rms seeking an IPO.

1.hp://www.bloomberg.com/news/2013-06-17/deutsche-bank-leading-wall-street-rental-loans-

0

5

10

15

20

25

ClosingPrice

SILVER BAY REALTY TRUST CLOSING PRICES

0

5

10

15

20

25

ClosingPrice

AMERICAN RESIDENTIAL PROPERTIES CLOSING PRICES

Source: Yahoo Finance.

Source: Yahoo Finance.

$18.4/Share

Dec-17-2012

$16.53/Share

Jun-21-2013

$21/Share

May-9-2013

$17.66/Share

Jun-21-2013


24/26

24

PURCHASES BY LARGE INVESTORS

AMERICAN HOMES 4 RENT AMERICAN RESIDENTIAL PROPERTIES APPLETON PROPERTIES

BEAZER PRE-OWNED BLACKSTONE COLONY AMERICAN HOMES

GTIS PARTNERS HAVEN REALTY CAPITAL SILVER BAY

January through April 2013 Closings

Source: Clark County Assessor, Coldwell Banker Premier Realty. Includes arms-length transacons and aucon purchases.



25/26

25

Glossary of Terms

Adjusted cost basis: The investors cost of the property for tax purposes.

Depreciaon: An expense deducted from income for tax purposes which allows the owner to recapture the investment inan asset over its economic life by a periodic deducon from the income generated by the asset on a before tax basis.

Feasibility study: An analysis based upon esmates to determine if the investment makes sense and whether or not to

proceed with it.

Net operang income: Gross scheduled income less vacancy allowance and annual operang expenses.

Capitalizaon rate: An indicator of value and the rate at which investors are willing to invest their capital. Dividing net

operang income by the desired rate equals the purchase price the investor is willing to pay. This is a measure of real

estate yield.

Rate of return on equity: The rate which equates the present value of the net cash ow inows to the inial equity

investment.

Cap rate spread: In the case we referenced, this is the dierence between the capitalizaon rate and the 10-year U.S

treasury. In some cases, cap rate spreads have been referenced as the dierence between the cap rates on either dierent

asset classes or geographies.


26/26

26

AUTHOR

John McClelland, Vice President, Research

CONTACT

Coldwell Banker Premier Realty

Strategic Services-Market IQ

Phone: 702-938-1375

Email: [email protected]

Web. www.lasvegashomes.com

8290 W. Sahara Ave, Suite 200

Las Vegas, NV 89117

Coldwell Banker Premier has facilitated a multude of residenal investment transacons in Las Vegas. We draw on this experience andinformaon obtained from local government, U.S Census, third party data purveyors and the Greater Las Vegas mulple lisng service. The

informaon is deemed reliable but is not guaranteed. This material does not constute investment advise.

COLDWELL BANKER PREMIER REALTY

The informaon and opinions in this report are believed to be reliable and has been obtained from sources believed to be reliable. Coldwell Banker Premier Realty makes no representaon as

to the accuracy or completeness of such informaon.

The opinions expressed in the report constute the judgment of the authors only and may not reect the opinion of Coldwell Banker Premier Realty. This report is provided for informaonal

purposes only and does not constute investment advice.

This report may not be circulated or copied without our prior wrien consent.


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