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TA M A L PA I SC O M M O N S

M A R K E T V A L U A T I O N & P O S I T I O N I N G

M I X E D - U S E D E V E L O P M E N T

P R O P E R -T Y

5 0 5 M I L L E R A V EM I L L VA L L E Y, C A 9 4 9 4 1

N O N - E N D O R S E M E N T & D I S C L A I M E R N O T I C E

C O N F I D E N T I A L I T Y & D I S C L A I M E RThe information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Marcus

& Millichap and should not be made available to any other person or entity without the written consent of Marcus & Millichap. This Marketing Brochure has been prepared

to provide summary, unverified information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained

herein is not a substitute for a thorough due diligence investigation. Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect

to the income or expenses for the subject property, the future projected financial performance of the property, the size and square footage of the property and improvements,

the presence or absence of contaminating substances, PCB's or asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon,

or the financial condition or business prospects of any tenant, or any tenant's plans or intentions to continue its occupancy of the subject property. The information contained

in this Marketing Brochure has been obtained from sources we believe to be reliable; however, Marcus & Millichap has not verified, and will not verify, any of the information

contained herein, nor has Marcus & Millichap conducted any investigation regarding these matters and makes no warranty or representation whatsoever regarding the accuracy

or completeness of the information provided. All potential buyers must take appropriate measures to verify all of the information set forth herein. Marcus & Millichap is a service

mark of Marcus & Millichap Real Estate Investment Services, Inc.

© 2018 Marcus & Millichap. All rights reserved.

N O N - E N D O R S E M E N T N O T I C EMarcus & Millichap is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation's

logo or name is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or

any agent, product, service, or commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to

prospective customers.

A L L P R O P E R T Y S H O W I N G S A R E B Y A P P O I N T M E N T O N L Y.P L E A S E C O N S U L T Y O U R M A R C U S & M I L L I C H A P A G E N T F O R M O R E D E T A I L S .

OFFICES THROUGHOUT THE U.S. AND CANADAwww.marcusmillichap.com

ERICH REICHENBACHFirst Vice President Investments

San Francisco OfficeDirect: (415) 625-2146 // Fax: (415) 963-3010

[email protected]: CA 01860626

TABLE OF CONTENTS

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P R O P E R T Y D E S C R I P T I O N / / 0 701 F I N A N C I A L A N A LY S I S / / 1 9

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This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Any projections, opinions, assumptions or estimates used herein are for example purposes only and do not represent the current or future performance of the property. Marcus & Millichap Real Estate Investment Services is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. © 2018 Marcus & Millichap

Property Description

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PROPERT Y OVERVIEW // Tamalpais Commons

Tamalpais Commons, located in the heart of Mill Valley at 505 Miller Ave., is Marin’s newest mixed-use luxury home development. This unique luxury project combines two live/work spaces, six residential condos, an office space and retail space to provide unparalleled access and convenience for its residents. Tamalpais Commons provides the ease and convenience of pedestrian urban living while retaining the small town character and feel of Mill Valley. As Marin’s first ‘Build It Green’ mixed-use project, sustainable and environmentally friendly elements have been incorporated into all aspects of the development creating a highly efficient and resource friendly project while still retaining the luxury feel tenants have come to expect in today’s luxury market. The three story mixed use building consists of retail and office space on the ground floor and a mix of condo, loft and affordable units on the second and third floors. The second and third floors consist of the following condo units: Two Live/Work 1 bedroom, 1 bath Loft spaces, Three 2 bedroom, 1 bath condo, Two studio, 1 bath condo and One 1 bedroom, 1 bath condo. Mill Valley is surrounded by hundreds of acres of park lands. In addition, there are many municipally maintained open-space reserves, parks, and coastal habitats which, when taken together, ensconce the city of Mill Valley in a natural wilderness. This close and constant proximity to nature has left generations of Mill Valley residents with a strong sense of conservancy toward much of this natural environment.

PROPERT YHIGHLIGHTS // Tamalpais Commons

• Marin’s first ‘Build It Green’ mixed-use project

• All Units are individual condominiums, allowing for future individual sale

• Home Owners Association in-place with all dues covering the cost of building operations

• The property consists of one three story, mixed use building, a total of 26 spaces are available

• Walk to shopping, transportation, entertainment and schools

• Compelling Valuation and Attractive Financing Options

P R O P E R T Y D E S C R I P T I O N8

PROPERT YHIGHLIGHTS // Tamalpais Commons

MIXED-USE

P R O P E R T Y D E S C R I P T I O N 9

MIXED-USE


Financial Analysis

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PRICING DETAIL // Tamalpais Commons

PRICE $10,700,000

Down Payment $5,350,000

Number of Units 8

Number of Commercial Suites 7

Price Per SqFt $811.71

Lot Size (Acres) 0.60

Rentable SqFt 13,182

Approx. Year Built 2010

RE TURNS CURRENT YEAR 1

Cap Rate 3.07% 3.95%

Cash-on-Cash 1.65% 3.40%

Debt Coverage Ratio 1.37 1.76

FINANCING 1ST LOAN

Loan Amount $5,350,000

Loan Type New Loan

Interest Rate 4.50%

Amortization 30 Years

Year Due 2029

Loan information is subject to change. Contact your Marcus & Millichap Capital Corporation representative.

F I N A N C I A L A N A L Y S I S20

PRICING DETAIL // Tamalpais Commons

# OF SUITES TYPE GLA CURRENT RENT PRO FORMA RENT

2 Retail 3,830 $10,331 $11,977

5 Office 1,660 $7,635 $8,730

# OF UNITS UNIT TYPE SQFT/UNIT CURRENT RENTS MARKET RENTS

3 2 Bedroom 1.5 Bath 1,178 $3,733 $4,200

1 1 Bedroom 1 Bath 992 $3,300 $3,750

2 Studio 1 Bath 493 $1,732 $2,275

2 Loft 1 Bath 1,091 $3,500 $4,000

F I N A N C I A L A N A L Y S I S 21

INCOME CURRENT YEAR 1

Multifamily

Gross Scheduled Rent $299,556 $346,800

All Other Income $0 $3,840

Vacancy 2.0% ($5,991) 2.0% ($6,936)

Effective Gross Income $293,565 $343,704

Commercial Suites

Gross Scheduled Rent $215,592 $248,484

Expense Reimbursements $21,930 $32,895

All Other Income $0 $0

Vacancy 0.8% ($1,832) 0.8% ($2,095)

Effective Gross Income $235,690 $279,284

Combined Effective Gross Income (CEGI) $529,254 $622,988

Less: Expenses ($200,418) ($200,418)

Net Operating Income $328,836 $422,570

Cash Flow $328,836 $422,570

Debt Service ($240,750) ($240,750)

Net Cash Flow After Debt Service 1.65% $88,086 3.40% $181,820

Total Return 1.65% $88,086 3.40% $181,820

OPERATING DATA // Tamalpais Commons

EXPENSES CURRENT YEAR 1

Real Estate Taxes 27.2% $143,821 23.1% $143,821

Repairs & Maintenance - HOA Fees 9.7% $51,597 8.3% $51,597

Misc. Expenses 0.9% $5,000 0.8% $5,000

Total Expenses $200,418 $200,418

Expenses as % of Combined EGI 37.9% 32.2%

Net Operating Income $328,836 $422,570


OPERATING STATEMENT // Tamalpais Commons

INCOME CURRENT YEAR 1 PER UNIT PER SF

Multifamily

Gross Scheduled Rent $299,556 $346,800 $43,350 $45.09

All Other Income $0 $3,840 $480 $0.50

Vacancy 2.0% ($5,991) 2.0% ($6,936)

Effective Gross Income $293,565 $343,704 $42,963 $44.68

Retail

Gross Scheduled Rent $123,972 $143,724 $37.53

Expense Reimbursements $21,930 $32,895 $8.59

All Other Income $0 $0 0.00

Vacancy $0 $0

Effective Gross Income $145,902 $176,619 $46.11

Office $529,254 $622,988

Gross Scheduled Rent $91,620 $104,760 $63.11

Expense Reimbursements $0 $0

All Other Income $0 $0

General Vacancy 2.0% ($1,832) 2.0% ($2,095)

Effective Gross Income $89,788 $102,665 $61.85

Combined EGI $529,254 $622,988 $47.26


RENT ROLL DETAIL // Tamalpais Commons

CURRENT SCHEDULED POTENTIAL

UNIT UNIT TYPE UNIT SF RENT/MONTH RENT/SF/MONTH RENT/MONTH RENT/SF/MONTH RENT/MONTH RENT/SF/MONTH

2 2 Bdr 1.5 Ba 1,153 $3,800 $3.30 $3,800 $3.30 $4,200 $3.64

4 2 Bdr 1.5 Ba 1,190 $3,750 $3.15 $3,750 $3.15 $4,200 $3.53

6 Loft 1 Ba 1,190 $3,650 $3.07 $3,650 $3.07 $4,000 $3.36

10 2 Bdr 1.5 Ba 1,190 $3,650 $3.07 $3,650 $3.07 $4,200 $3.53

12 Studio 1 Ba 524 $1,647 $3.14 $1,647 $3.14 $2,275 $4.34

14 Studio 1 Ba 461 $1,816 $3.94 $1,816 $3.94 $2,275 $4.93

16 1 Bdr 1 Ba 992 $3,300 $3.33 $3,300 $3.33 $3,750 $3.78

18 Loft 1 Ba 992 $3,350 $3.38 $3,350 $3.38 $4,000 $4.03

Total 7,692 $24,963 $3.25 $24,963 $3.25 $28,900 $3.76


RENT ROLL SUMMARY // Tamalpais Commons

CURRENT SCHEDULED POTENTIAL

UNIT UNIT TYPE UNIT SF RENT/MONTH RENT/SF/MONTH RENT/MONTH RENT/SF/MONTH RENT/MONTH RENT/SF/MONTH

2 2 Bdr 1.5 Ba 1,153 $3,800 $3.30 $3,800 $3.30 $4,200 $3.64

4 2 Bdr 1.5 Ba 1,190 $3,750 $3.15 $3,750 $3.15 $4,200 $3.53

6 Loft 1 Ba 1,190 $3,650 $3.07 $3,650 $3.07 $4,000 $3.36

10 2 Bdr 1.5 Ba 1,190 $3,650 $3.07 $3,650 $3.07 $4,200 $3.53

12 Studio 1 Ba 524 $1,647 $3.14 $1,647 $3.14 $2,275 $4.34

14 Studio 1 Ba 461 $1,816 $3.94 $1,816 $3.94 $2,275 $4.93

16 1 Bdr 1 Ba 992 $3,300 $3.33 $3,300 $3.33 $3,750 $3.78

18 Loft 1 Ba 992 $3,350 $3.38 $3,350 $3.38 $4,000 $4.03

Total 7,692 $24,963 $3.25 $24,963 $3.25 $28,900 $3.76

TENANT NAME TYPE SUITE SQUARE FEET % BLDG SHARE LEASE TERM RENT PER SQ FT TOTAL RENT/MONTH CHANGES ON CHANGES TO

PE Office 1 286 2.17%11/1/16 to

4/30/19$50.35 $1,200 Apr-2019 $1,430

JB Office 2 284 2.15%12/1/16 to 11/30/19

$47.87 $1,133 Nov-2019 $1,420

VC Office 3 321 2.44%2/2/18 to 6/30/19

$46.73 $1,250 Jun-2019 $1,605

VC Office 4 555 4.21%2/2/18 to 6/30/19

$58.38 $2,700 Jun-2019 $2,775

FC Office 5 214 1.62% 7/1/16 to 7/1/19 $75.81 $1,352 Jul-2019 $1,500

Salon Anya Retail 505 1,085 8.23% 7/1/16 to 7/1/19 $42.92 $3,881 0/01/2019 $4,882

Toy Store Retail 513 2,745 20.82% 1/1/15 to 1/1/20 $28.20 $6,450 Jan-2020 $7,095

Subtotal Retail 2 3,830 29.05% $10,331

Subtotal Retail 5 1,660 12.59% $7,635

Total 5,490 $17,966

Occupancy Retail: 100.00% Office: 100.00%

Total Annualized Rent 7 $215,592


Sales Comparables

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PROPER TIES# OF

UNITSPRICE/

SFYEARBUILT

TAMALPAIS COMMONS // 505 M i l ler Ave, M i l l Val ley, CA, 94941 15 $811.71 2010

1 316 M i l ler Ave, M i l l Val ley, CA, 94941 4 $562.83 1961

2 55 Roque Moraes Ct , M i l l Val ley, CA, 94941 6 $1,008.06 1974

3 32 Ross Common, Ross, CA, 94957 9 $674.66 1982

SALES COMPARABLES // Tamalpais C ommons

S A L E S C O M P A R A B L E S 29


Avg. 3 .45%

Avg. 4.10%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Mixed-UseTam Commons

316 MillerAve

55 RoqueMoraesCourt

32 RossCommon

Average Cap Rate

Avg. $785.45Avg. $674.66

$0.00

$200.00

$400.00

$600.00

$800.00

$1,000.00

$1,200.00

$1,400.00

$1,600.00

$1,800.00

$2,000.00

Mixed-UseTam Commons

316 MillerAve

55 RoqueMoraesCourt

32 RossCommon

Average Price Per Square Foot

SALES COMPARABLES

ON MARKET COMPARABLES

SALES COMPS AVG

ON MARKET COMPS AVG

3 1 6 M I L L E R A V E316 Mi l ler Ave, Mi l l Val ley, CA 94941

1

UNITS UNIT T YPE

Offering Price: $10,700,000 3 2 Bdr 1.5 Ba

Price/Unit: $811.71 1 1 Bdr 1 Ba

CAP Rate: 3.07% 2 Studio 1 Ba

Year Built: 2010 2 Loft 1 Ba

Total Apartment Units 8 2 Retail

Total Commercial Suites 7 5 Office

TotalUnits15 Year

Built 2010M I X E D - U S E T A M C O M M O N S505 Mi l ler Ave, Mi l l Val ley, CA, 94941

TotalUnits 4 Year

Built 1961UNITS UNIT T YPE

Sales Price: $3,180,000 1 0 Bdr 0 Ba

Price/SF: $562.83 1 3 Bdr 0 Ba

CAP Rate: 4.19% 2 Office

Year Built: 1961

Total Apartment Units 2

Total Commercial Suites 2


3 2 R O S S C O M M O N32 Ross Cmn, Ross , CA, 94957

3

TotalUnits 6 Year

Built 1974

TotalUnits

YearBuilt 1982

2

UNITS UNIT T YPE

Close of Escrow: 5/14/2018 6 2 Bdr 1 Ba

Days on Market: 60

Sales Price: $5,000,000

Price/Unit: $833,333

Price/SF: $1,008.06

CAP Rate: 2.70%

GRM: 23.20

Total No. of Units 6

Year Built: 1974

5 5 R O Q U E M O R A E S C T55 Roque Moraes Ct , Mi l l Val ley, CA, 94941

9UNITS UNIT T YPE

On Market: 2 Retail

List Price: $4,925,000 7 Office

Price/SF: $674.66

CAP Rate: 4.10%

Year Built: 1982

Total Commercial Suites: 9


Rent Comparables

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PROPER TIES

TAMALPAIS COMMONS // 505 M i l ler Ave, M i l l Val ley, CA, 94941

1 THE COVE // 50 Barbaree Way, Belvedere Tiburon, CA, 94920

2 TAM RIDGE // 199 Tamal Vista B lvd, Cor te Madera , CA, 94925

3 PINERIDGE APAR TMENTS // 396 Pine H i l l Rd, M i l l Val ley, CA, 94941

4 BELVEDERE PLACE // 1 Belvedere Pl , M i l l Val ley, CA, 94941

5 20 SUNNYSIDE // 20 Sunnyside Ave, M i l l Val ley, CA, 94941

6 38 MILLWOOD STREE T // 38 M i l lwood St , M i l l Val ley, CA, 94941

7 129 MILLER AVE // 129 M i l ler Ave, M i l l Val ley, CA, 94941

RENT COMPARABLES // Tamalpais C ommons

R E N T C O M P A R A B L E S 37

M I X E D - U S E T A M C O M M O N S505 Miller Ave // Mill Valley, CA, 94941

Type Tenant Avg SF Avg Monthly Rent Rent/SF

2 Bdr 1.5 Ba 3 $3,733 $3.17

1 Bdr 1 Ba 1 992 $3,300 $3.33

Studio 1 Ba 2 $1,732 $3.52

Loft 1 Ba 2 1,091 $3,500 $3.21

Total/Avg. 8 1,058

T H E C O V E50 Barbaree Way // Belvedere Tiburon, CA, 94920

1

Unit Type Units SF Rent Rent/SF

1 Bdr 1 Ba 100 595-1,140 $3,232-$4,535 $4.48

2 Bdr 1 Ba 134 1,020-1,275 $4,340-$5,000 $4.07

3 Bdr 2 Ba 38 1,391-1,500 $6,300-$7,200 $4.67

2,610

Total/Avg. 272 1,086 $4,671 $4.30


T A M R I D G E199 Tamal Vista Blvd // Corte Madera, CA, 94925

2 3 P I N E R I D G E A P A R T M E N T S396 Pine Hill Rd // Mill Valley, CA, 94941


1 Bdr 1 Ba 51 600-965 $3,025-$3,525 $4.19

2 Bdr 1 Ba 98 967-1,091 $3,649-$4,400 $3.91

3 Bdr 2 Ba 31 1,237-1,307 $4,800-$6,395 $4.40

Total/Avg. 180 1,001 $4,083 $4.08


1 Bdr 1 Ba 24 600-600 $2,359-$2,659 $4.18

2 Bdr 1 Ba 14 780-780 $2,750-$3,050 $3.72

Total/Avg. 38 666 $2,653 $3.98


4 B E L V E D E R E P L A C E1 Belvedere Pl // Mill Valley, CA, 94941

2 0 S U N N Y S I D E 20 Sunnyside Ave // Mill Valley, CA, 94941

5

Survey Date 4/1/2019

Rentable SF 43,258

Available SF 4,750

Asking Rent/SF $60.00

Year Built 2000

Occupancy 97%

Lease Type Modified Gross

Lot Size 4.28

Parking Ratio 4/1000

Survey Date 4/1/2019

Rentable SF 8,223

Available SF 1,603

Asking Rent/SF $54.00

Year Built 1964

Occupancy 100%

Lease Type Modified Gross

Lot Size 0.28

Parking Ratio 6/1000


3 8 M I L L W O O D S T R E E T38 Millwood St // Mill Valley, CA, 94941

6 7 1 2 9 M I L L E R A V E129 Miller Ave // Mill Valley, CA, 94941

Total GLA Available SF Asking Rent/SF

4,048 SF 465 SF $77.40

Total GLA Available SF Asking Rent/SF

1,500 SF 3,272 SF $53.00

OCCUPANCY: 100% | YEAR BUILT: 1950 OCCUPANCY: 100% | YEAR BUILT: 2018


Market Overview

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COUNTY OFM A R I N

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M A R K E T O V E R V I E W44

Located in the North Bay across the Golden Gate Bridge from San Francisco, Marin County is a dynamic community of 250,000 well-educated and involved residents. From its tidelands to the top of Mt. Tamalpais, Marin enjoys a high quality of life marked by beautiful beaches, groves of redwoods and oaks, rolling foothills, and scenic valleys. The mild, year-round Mediterranean climate is highlighted by cool, coastal fog tempering the warm inland temperatures of summer. Incorporated communities include Belvedere, Corte Madera, Fairfax, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael (the County seat), Sausalito, and Tiburon.

Marin County is known for its combination of rural and suburban lifestyles. It is a recreation destination for the entire Bay Area - the Golden Gate National Recreation Area and Point Reyes National Seashore are just two destinations out of more than 140,000 acres of public lands within Marin. The County’s active economy includes insurance related (e.g., Fireman’s Fund), finance, movie and video production (e.g., Lucas Films), agriculture, bio-technology (e.g., BioMarin), computer software (e.g., Autodesk), communications equipment, printing, and tourism. Marin County children excel in school with test scores well above the average. The 19 school districts in Marin range in attendance from 20 to 8,000, the Marin Community College has two campuses (Kentfield and Novato).

M A R I N C O U N T Y

ECONOMIC PROFILEMarin County had yet another strong economic year and is forecasted to continue to grow. As of August 2016, Marin County has a residential unemployment rate of 3.1 percent seasonally adjusted, among the lowest county rates in California. Marin County’s personal income level per capita remains the highest in California by almost $20,000 per person at approximately $96,000 per person. Marin County’s median household income level is topped only by San Francisco and San Mateo counties; Marin’s households generate approximately $86,000 at the median as of 2015.

Employment growth continues in Marin County. As of August 2016, Marin County employers added more than 3,300 jobs since August of 2015. Marin County is estimated to have inflation-adjusted (real) gross county product (GCP) growth of approximately 0.8 percent since 2015, a sign that businesses are generating income but the cost of living is also increasing.

REAL ESTATE AND FINANCIAL MARKE TSMarin County housing prices continue to increase in the face of regional demand and low inventories. According to the California Association of REALTORS®, Marin County’s median home price for a single-family home was approximately $1.087 million in August 2016, up over 11 percent from 2015. With continued low interest rates, the threat of interest rates rising soon, and a continued lack of inventory across the Bay Area, Marin County is a microcosm of what remains a tight housing market with excess demand.

The short-term future of residential real estate prices depends on how interest rates adjust to any central banking decisions and global growth, but also to local supply conditions. Rental markets are in similar conditions to homes for purchase. A lack of inventory in rental housing also continues to support relatively high prices regionally. The longer-term depends on jobs and population growth and demographic shifts in demand for the housing stock available.

The placement of both new commercial and residential units in Marin County has continued to be a controversial subject for elected officials and local residents and employers. Issues of drought, traffic and other socioeconomic and environmental issues are part of all these local decisions.

M A R K E T O V E R V I E W 45

Marin County had yet another strong economic year and is forecasted to continue

to grow. As of August 2018, Marin County has a residential unemployment rate of

3.1 percent seasonally adjusted, among the lowest county rates in California. Marin

County’s personal income level per capita remains the highest in California by almost

$20,000 per person at approximately $96,000 per person. Marin County’s median

household income level is topped only by San Francisco and San Mateo counties;

Marin’s households generate approximately $86,000 at the median as of 2015.

Employment growth continues in Marin County. As of August 2018, Marin County

employers added more than 3,300 jobs since August of 2017. Marin County is

estimated to have inflation-adjusted (real) gross county product (GCP) growth of

approximately 0.8 percent since 2017, a sign that businesses are generating income

but the cost of living is also increasing.

ECONOMIC SUMMARY


TOP EMPLOYERSEMPLOYER Number of Employees

Kaiser Permanente 1,972

BioMarin Pharmaceuticals 1,770

Marin General Hospital 1,204

Fireman’s Fund Insurance Company 1,220

Autodesk 900

Dominican University 405

Safeway Inc. 925

Comcast 682

Macy’s 418

Bradley Real Estate 440

LEADING INDUSTRIESNAICS Industry Percent of Employees

Marin County 21.19%

Retail Trade 14.78%

Health Care 13.27%

Accomodation and Food Service 10.27%

Professional, Scientific Technical 9.72%

Finance 8.59%

Administrative Support 8.04%

Construction 7.73%

Other Service 4.84%

Real Estate 4.02%

OCCUPATIONS WITH FASTEST JOB GROWTH (PERCENT OF CHANGE)

Occupation Estimate YearProjected Year

Estimated Employment

Projected Employment Employment Change # Employment Change %

Biomedical Engineers 2012-2022 540 910 370 68.5%Economists 2012-2022 760 1,190 430 56.6%Statisticians 2012-2022 450 680 210 46.7%

Personal Care Aids 2012-2022 26,760 39,260 12,500 46.7%Logisticians 2012-2022 1,250 1,780 530 42.4%

Market Research andMarketing Specialists 2012-2022 10,250 14,480 4,230 41.3%

Interpreters and Translators 2012-2022 860 1,210 350 40.7%Pipelayers 2012-2022 120 170 50 41.7%

Physician Assistants 2012-2022 330 460 130 39.4%Diagnostic Medical

Sonographers 2012-2022 250 350 100 40.0%


INVESTMENT TRENDS // Tam Commons

The North Bay market has continued to outperform the greater SF Metro MSA, with year-over-year Rent Growth of 4.60%. Furthermore, at 3.60% the North

Bay market’s Vacancy Rate remains one of the lowest in California. While some demand for multifamily units was prompted by one-time events such as the

Sonoma County Fires, overall rental demand should remain consistently strong into 2018. With an abundance of liquidity, historically low interest rates and

favorable TaxReform signed into law, we believe this year will be another strong year for multifamily assets in the North Bay.

MARIN

Marin remains one of the most desirable submarkets in the

US. With an average rent of $2,237 Marin boasts the highest

Effective Rent in the North Bay. WIth that said, 2017 saw a

gradual decline in the speed of rent increases in the submarket.

NAPA

Limited rental inventory and a booming wine tourism industry have combined to create

strong rental growth with Napa County establishing a record Average Effective Rent of

$1,688. The City of Napa is working to address the need for more affordable housing

options and approved over 630 units of new multifamily projects for construction in

2017. The largest approved project is the 495-unit Vista Tulocay development.

SONOMA

The catastrophic Sonoma County fires exacerbated an ongoing housing shortage and fueled calls by local officials

to dramatically accelerate the pace of new residential construction. Even with relaxed regulatory hurdles, housing

demand will outsize supply for many years to come. As a result, rental growth rates, vacancy trends and prices

paid per unit will continue to trend better than historical averages, while the pace of new construction will be

determined in the coming remainder of 2018.


MARKE T FAC TS SF Metro MSA Nor th Bay

Population 7,593,956 911,504

Annual 5 Year Growth 2.0% 3.1%

Total Households 2,778,811 353,347

Median Household Income $89,321 $79,157

Median Age 38.7 42.8

Employment 3,764,875 493,340

Vacancy Rate 4.60% 3.60%

Avg Effective $2,184 $1,806

Rent Growth 2.20% 4.60%

Net New Units 7,545 56

POPULATION

2,832 Increase in Total Population Y-O-Y

0.4% Decrease in Unemployment Y-O-Y

• 2017 was another year of steady decline in the unemployment rate at 3.9%. North Bay boasts one of the lowest unemployment rates in the country.

• Population growth increased slightly, but remains tempered by the cost and availability of housing.

SALES TRENDS

51% Increase in Price per Unit Y-O-Y

• 2017 brought about a substantial increase in the average price per unit sold in the North Bay. WIth an average unit cost of more than $400,000, the North Bay is one of the most expensive places to own in California.

• The 51% increase in price per unit can be attributed to a myriad of factors including, lack of inventory, better product being traded, increase in effective rents, lack of significant building pipeline and historically low interest rates.

CONSTRUC TION

328 New Units Delivered in 2017

• Number of new apartment units delivered has decreased significantly due to a lack of availabil-ity of high-density zoned land as well as the high cost of development. These two trends are expected to continue to constrain supply of new units in the near future.

• Absorption remains strong with demand for both low and high end units across the North Bay. Considering the softness in the apartment development pipeline, North Bay apartment market absorption should remain strong throughout the current year.

RENT & VACANCY

-0.3% Increase in Effective Rent Y-O-Y

4.36% Decrease in Market Vacancy Y-O-Y

• 2017 was another year of steady decline in the unemployment rate. At 3.9%, North Bay boasts one of the lowest unemployment rates in the country.

• Population growth increased slightly, but remains tempered by the cost and availability of housing.

U.S. CAPITAL MARKE TS

Fed Normalization Portends Rising Interest Rates; Capital Availability for Apartments Elevated

Fed cautiously pursues tighter policies. Investors have largely adapted to the modestly higher interest rate environment, and most anticipate additional increases in 2018 as the Federal Reserve normalizes both its policies and its balance sheet. The Fed is widely expected to continue raising its overnight rate through 2018 as it tries to restrain potential inflation risk and create some dry powder to combat future recessions. The Fed will, however, be cautious about pushing short-term rates into the long-term rates, which would create an inverted yield curve. The spread between the two-year Treasury rate and the 10-year Treasury rate has tightened significantly, and if the Fed is too aggressive in its policies, the short-term interest rates could climb above long-term rates. This inversion is a commonly watched leading indicator of an impending recession. The new chairman of the Fed, Jerome Powell, will likely make few changes to the trajectory of Fed policies, and he is widely expected to continue the reduction of the Fed balance sheet. Powell may consider accelerating the balance sheet reduction to ensure long-term rates move higher. That said, Powell is widely perceived to be a dovish leader who will advance rates cautiously.

Readily available debt backed by sound underwriting. Debt availability for apartment assets remains abundant, with a wide range of lenders catering to the sector. Apartment construction financing has experienced some tightening, a generally favorable trend for most investors. Fannie Mae and Freddie Mac will continue to serve a significant portion of the multifamily financing, with local and regional banks targeting smaller transactions and insurance companies handling larger deals with low-leverage needs. In general, lenders have been loosening credit standards on commercial real estate lending, but underwriting standards remain conservative with loan-to-val-ue ratios for apartments in the relatively conservative 66 percent range. An important consid-eration going forward, however, will be investors’ appetite for acquisitions as the yield spread between interest rates and cap rates tightens.

Fed Normalization Portends Rising Interest Rates; Capital Availability for Apartments Elevated

• Yield spread tightens amid rising interest rates. Average apartment cap rates have remained relatively stable in the low-5 percent range for the last 18 months, with a yield spread above the 10-year Treasury of about 280 basis points. Many investors believe cap rates will rise in tandem with interest rates, but this has not been the case historically. Given the strong performance of the apartment sector, it’s more likely the yield spread will compress, reducing the positive leverage investors have enjoyed in the post-recession era.

• Inflation restrained but could emerge. Inflation has been nominal throughout the current growth cycle, but pressure could mount as the tight labor market spurs rising wages. Elevated wages and accelerating household wealth could boost consumption, creating additional economic growth and inflation. The Fed has become increasingly proactive in its efforts to head off inflationary pressure, but the stimulative effects of tax cuts could overpower the Fed’s efforts.

• Policies likely to strengthen dollar and could pose new risks. One wild card that could create an economic disruption is the strengthening dollar. The economic stimulus created by tax cuts together with tightening Fed monetary policy place upward pressure on the value of the dollar relative to foreign currencies. This could restrain foreign investment in U.S. commercial real estate, but it could also weaken exports and make it more difficult for other countries to pay their dollar-denominated debt, which in turn weakens global economic growth.


ERICH REICHENBACHFirst Vice President Investments

San Francisco OfficeDirect: (415) 625-2146 // Fax: (415) 963-3010

[email protected]: CA 01860626

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