Multi Family Sector2014 Review & 2015

Forecast

Todd Blonsley, MBA, CCIMVice President Investments

Thursday, January 15, 2015

Atlantis Casino Resort Spa

“Stability & Strength”

Tight lines and a fairly strong header for a closet

2014 Stability & Strength

The Economic Indicators 2014 U.S. GDP estimated to end at 5% (A Huge Recovery)

2015 Projections for U.S. GDP range from 3.0% to 3.3%

2015 Projections for Global GDP Growth at 2.9%

U.S. GDP Growth Averaged 3.24% (1947 to 2013)

U.S. Unemployment decreased from 7.0% (end 2013) to 5.8%

(end 2014) , which was a 17% decrease

Washoe County Unemployment decreased from 8.2% (end 2013) to 6.4%

(end 2014), which was a decrease of 22%

Remember when…Washoe County ended 2010 at 13.2% unemployment and

the current unemployment rate is 6.4% , a 52% decrease in four short years

Sources: U.S. Bureau of Labor Statistics, St. Louis Fed.The World BankThe Economist

Source: U.S. Dept. of Labor-Bureau of Labor Statistics

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

0%

2%

4%

6%

8%

10%

12%

14%

Historical Unemployment Rates Washoe County (1994 to 2014)

(November 1st of each year)

2.7%

4.2%4.4%

8.6%

13.2%

8.2%

6.4%

4.7%

2014 Influences on the Apartment Market

Washoe County home prices increased 9% from

Nov. 2013 to Nov. 2014

Home prices are expected to rise in 2015

No major apartment projects came on line

The factors above bolster improvements and

strength in the apartment market (i.e. rising rents

and continued declining vacancy rates)

Source: Reno-Sparks Association of Realtors*

2007 2008 2009 2010 2011 2012 2013 2014 20152%

3%

4%

5%

6%

7%

8%

9%

10%

$780

$800

$820

$840

$860

$880

$900

6.50%

9.63%

8.54%

7.16%

6.56%

5.60%

5.10%

4.35%

2.13%

$885

$875

$848

$824

$822

$834

$850

$865

$887

Reno-Sparks Apartments Historic DataYear Ending Vacancy Rate & Average Rent

2007-2012 = End of 4th Q2013 = Forecast End of 4th Q2014 = Forecast End of 3rd Q 2007-2012 Source: Johnson-Perkins & Associates, Inc

Apparently the Incas had a slight soil compaction problem in this one area

Apartment Sales 2014

Project Name City Sale Price Units Price/Unit Cap RateClosing

Date

Mountain View Apartments Reno $950,000 25 $38,000 - 5/8/2014

Banbridge Sparks $5,300,000 128 $41,406 6.37% 11/20/2014

Moran Apartments Reno $1,402,500 28 $50,089 - 7/29/2014

Green Leaf Pines Reno $5,925,000 116 $51,078 6.60% 1/28/2014

Carlin Apartments Reno $1,125,000 22 $51,136 7.25% 8/15/2014

Woodside Village Reno $14,900,000 250 $59,600 6.82% 1/23/2014

Talus Point Condominiums Reno $9,000,000 125 $72,000 5.75% 7/2/2014

310 Maine Street Reno $1,029,000 13 $79,154 - 5/7/2014

Eastland Hills Sparks $27,500,000 296 $92,905 6.01% 8/19/2014

The Alexander @ S. Virginia Reno $55,300,000 350 $158,000 5.65% 4/23/2014

2015 Outlook & Influencers

Continued Improving Employment RatesContinued Improving Consumer Confidence Leveling, but Stable Increases in U.S. GDP Modest increases in Apartment Supply (should be

easily absorbed, no negative effect on vacancy rates or average rents)

Housing Prices Rise (8%-12%) Similar to 2014Mortgage Rates Remain Low (3.25% to 4%)Regional Population & Job Growth = New Housing

Formation = Demand for Apartments and SFR

2015 Outlook & Influencers

#1 San Francisco, #3 San Jose, #4 Oakland, #6 San Diego, #8 Los Angeles (5 of the top 10 strongest apartment markets in the U.S. are in California = Nevada apartments benefit)

National vacancy rates dipped as low as 4.2% in 2014 and ended the year at 4.7%

Homeownership dropped to a 19-year low of 64.4% nationally (more renters by choice)

238,000 apartment units were completed in the U.S. in 2014 and all absorbed easily

210,000 units estimated for completion in 2015

2015 Outlook & Influencers

Nationally, 2014 apartment values were 13% above 2007 peak values (caused by cheap capital and soaring investor sentiment)

Existing Class A assets often priced at a premium to replacement cost (opportunity for new development or renovation of old assets)

Apartments are the most favored asset class due to the direct and immediate benefit that job growth and new housing formation provide

Probably not OSHA approved ladder & scaffolding

Multi Family 2015 Forecast

Vacancy Rate Ends 3Q 2015 at 3.2%

Slight uptick, but at the low end of our

long term healthy range of 3% to 5%

Average Rents Rise By 2.0% to End 3Q

2015 at $900

$900 Average Rent will be a first for the

Reno-Sparks area, a new benchmark