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  • MORAN & COMPANY

    DALLAS - FORT WORTH

    MULTIFAMILY TRENDS & OBSERVATIONS

    1ST QUARTER 2018

    Photography: Steve Hinds

  • PAGE 2&

  • PAGE 3DALLAS - FORT WORTH MULTIFAMILY TRENDS & OBSERVATIONS | Q1 QUARTER 2018 &

    DALLAS-FORT WORTH TRENDS TO WATCH

    DFW Job Growth Among the Highest in the Nation DFW, second only to New York, continues its trend of prolific job growth. DFW added 101,200 new jobs Year-Over-Year as of March 2018. The unemployment rate of just 3.7% is well below the national average. A, B Cs For Future DFW Job Growth:

    A Affordable D Diversified EconomyB Business-Friendly E Educated WorkforceC Centrally Located F Fair-Weather Climate

    DFW Apartment Market Fundamentals Remain Strong Stable occupancy is reported at 94.3% with 2019 projected to be 95%+. Absorption is projected to match deliveries in 2018 and exceed deliveries in 2019 by

    approximately 4,149 units. New multifamily deliveries peaked in 2017 while 2019 forecasts reveal declining new

    supply.

    Headwinds Slowing Down New Development Diminished available apartment sites along with resistance among suburban

    communities to rezone new multifamily parcels are resulting in higher land prices and longer lead times.

    New construction costs continue to rise as labor and material costs have been increasing 5% per year along with rising land prices.

    Tightening credit standards for multifamily construction loans result in higher equity requirements.

    Average return on cost for new developments has declined from 9.5% to 6.6% between 2002 and 2017.

    Transaction Market Remains Robust with some Caution Ample low-cost debt and equity for all multifamily asset classes still exists. Value-add deals are still the darling of the investment market with in-place cap rates the

    lowest among all classes. Some traditionally value-add capital is shifting its focus to newer, more stabilized assets

    chasing higher going in yields with lower capital risk. Institutional investors are considering suburban over urban core locations in an attempt

    to find higher yields. There is continuing caution in underwriting rent growth in the near term for submarkets

    with a higher new development pipeline.

    Rising interest rates combined with compressed cap rates result in low LTVs and higher equity requirements.

  • & PAGE 4

    QUARTER ONE 2018 STATS AT A GLANCE

    TOTAL UNITSUNITS ADDED

    SINCE 2010UNITS ABSORBED

    SINCE 2010

    723,249 117,950+/- 136,371+/-

    CURRENTOCCUPANCY

    PROJECTEDOCCUPANCY Q1 2019

    ANNUAL # NEW UNITS DELIVERED

    94.3% 95.1% YTD: 26,406

    CURRENT AVERAGE EFFECTIVE RENT

    EFFECTIVE RENT GROWTH SINCE 2010

    EFFECTIVERENT GROWTH

    $1,102 39%

    YOY Q1 2018: 1.6%

    PROJECTED YOY Q1 2019: 3.3%

    DALLAS - FORT WORTH MULTIFAMILY TRENDS & OBSERVATIONS

    Source: Axiometrics, Bureau of Labor Statistics, U.S. Census Bureau, Natl. Asso. of Realtors, Fortune 500, & Sperlings Best

    &

  • PAGE 5DALLAS - FORT WORTH MULTIFAMILY TRENDS & OBSERVATIONS | Q1 QUARTER 2018 &

    ECONOMIC DRIVERS AT A GLANCE

    MARCH 2018WORKFORCE JOB GROWTH

    MARCH 2018UNEMPLOYED

    3,656,800 MARCH 2018 YTD:101,200+/-

    2010-2017:667,200+

    DFW: 3.7% U.S. 4.1%

    CENSUS BUREAUJULY 1, 2017 POPULATION

    2010-2017 POPULATION GROWTH

    2010-2050 PROJECTED POPULATION GROWTH

    7,399,662 973,448+ +10MM+

    PUBLIC/PRIVATE PARTNERSHIPS

    FORTUNE 500COMPANIES

    CLASS A OFFICESPACE Q1 2018

    $246,550,000 21 152.8 MM SF $29/SF

    Q4 2017MEDIAN HOME PRICES

    YOY % GROWTHMEDIAN HOME PRICES

    COST OF LIVING INDEX SPERLINGS BEST PLACES

    $246,100 6.7% DALLAS: 95

    DENVER: 128

    HOUSTON: 102

    ATLANTA: 102

    BENCHMARK: 100

    DALLAS - FORT WORTH MULTIFAMILY TRENDS & OBSERVATIONS

  • & PAGE 6

    0

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    Multifam

    ilyPermits

    Popu

    latio

    n

    Population MFPermits

    DFW MULTIFAMILY STARTS - A HISTORY LESSON!!!

    The challenge boom or bust perception vs recent history and reality todayHalf the MF permits with twice the total population vs. the 1980s

    DFW POPULATION PROJECTIONS 2010 - 2050

    2010 2050 (Estimate) = + 10 million peopleAt 2.7 people per HH = 3.7MM HHs

    = 92,500 HH per year

    19702,428,365 19853,624,952

    20106,341,740

    20177,399,662

    205016,367,293

    0

    2,000,000

    4,000,000

    6,000,000

    8,000,000

    10,000,000

    12,000,000

    14,000,000

    16,000,000

    18,000,000

    1970 1980 1990 2000 2010 2020 2030 2040 2050

    Source: U.S. Census Bureau/Real Estate Center at Texas A & M University

    Source: U.S. Census Bureau

    &

  • PAGE 7DALLAS - FORT WORTH MULTIFAMILY TRENDS & OBSERVATIONS | Q1 QUARTER 2018 &

    16.4%

    15.1%

    11.3%10.7% 10.3%

    6.2%

    4.1% 3.9%

    2.2%

    0.8%

    0.0%

    2.0%

    4.0%

    6.0%

    8.0%

    10.0%

    12.0%

    14.0%

    16.0%

    18.0%

    Houston(5)

    DallasFortWorth(4)

    Atlanta(9)

    Miami(7)

    WashingtonDC(6)

    Boston(10)

    LosAngeles(2)

    NewYork(1)

    Philadelphia(8)

    Chicago(3)

    2010-2017 POPULATION GROWTH OF TEN LARGEST U.S. METROS

    Population increase DFW 2010-2017 = 973,448Population increase DFW 2016-2017 = 146,238*

    * The largest numerical increase of all U.S. metros in 2017

    23%

    20% 20%

    18%

    14%

    13% 13%

    11%

    10%

    8%

    0%

    5%

    10%

    15%

    20%

    25%

    DallasFortWorth

    (667,200)

    Miami(434,100)

    Atlanta(447,700)

    Houston(455,200)

    LosAngeles(762,400)

    Boston(305,700)

    NewYork(1,088,200)

    Chicago(455,200)

    WashingtonDC(292,700)

    Philadelphia(212,000)

    2010-2017 YTD JOB GROWTH OF TEN LARGEST U.S. METROS

    2010 - 2017 Job Growth Rate 23%

    DFW JOBS CREATED2010 - 2017

    667,200+

    Source: U.S. Census Bureau

    Source: Bureau of Labor Statistics

  • & PAGE 8

    DFW APARTMENT MARKET FUNDAMENTALS TODAY - Q1 2018

    DFW EFFECTIVE RENT GROWTH AND OCCUPANCY

    DFWMetro Dallas FortWorth

    ExistingApartmentUnits 723,249 539,213 184,036

    Unitsaddedsince2010 117,950 98,352 19,598

    Unitsabsorbedsince2010 136,371 111,067 25,304

    AverageGrossOccupancyQ12018 94.3% 94.2% 94.6%

    Annual%Change 0.7% 0.7% 0.5%

    CurrentPeriodEffectiveRentQ12018 $1,102 $1,136 $1,002

    Annual%Change 1.6% 1.2% 3.0%

    $810

    $1,125

    $1,173

    94.7%

    95.3%

    90.5%

    91.0%

    91.5%

    92.0%

    92.5%

    93.0%

    93.5%

    94.0%

    94.5%

    95.0%

    95.5%

    96.0%

    $500

    $600

    $700

    $800

    $900

    $1,000

    $1,100

    $1,200

    $1,300

    2010 2011 2012 2013 2014 2015 2016 2017 2018(P) 2019(P)

    Rent Occupancy

    2010 2019 Projected Effective Rent Growth - 45%

    Source: Axiometrics

    Source: Axiometrics

    &

  • PAGE 9DALLAS - FORT WORTH MULTIFAMILY TRENDS & OBSERVATIONS | Q1 QUARTER 2018 &

    COMPANIES HEADQUARTERED IN DFW

    2017 Fortune 500 / 1000

    COMPANY RANK REVENUE(Millions)Dallas

    AT&T 9 $163,786Energy Transfer Equity, L.P. 79 $37,504Tenet Healthcare Corporation 134 $21,070Southwest Airlines Co. 138 $20,425Texas Instruments Incorporated 206 $13,370HollyFrontier Corporation 274 $10,536Dean Foods Company 351 $7,710Builders FirstSource 421 $6,367Neiman Marcus Group LTD LLC 515 $4,950Trinity Industries 539 $4,588Alon USA Energy 605 $3,832Brinker International 664 $3,258Atmos Energy Corporation 670 $3,350Comerica Incorporated 736 $2,960Primoris Services Corporation 938 $1,997

    PlanoJ.C. Penney Company 221 $12,547Alliance Data Systems Corporation 378 $7,138Dr Pepper Snapple Group 416 $6,440Rent-A-Center 735 $2,963Cinemark Holdings 744 $2,919

    RichardsonLennox International 627 $3,642Fossil Group 723 $3,042

    IrvingExxon Mobil Corporation 4 $205,004Fluor Corporation 149 $19,037Kimberly-Clark Corporation 155 $18,202Celanese Corporation 484 $5,389The Michaels Companies 496 $5,197Commercial Metals Company 535 $4,652Flowserve Corporation 589 $3,992Pioneer Natural Resources Company 606 $3,824Darling Ingredients 665 $3,398

    DentonSally Beauty Holdings 592 $3,953

    Fort WorthAmerican Airlines Group 67 $40,180D.R. Horton 232 $12,157

    CoppellNationstar Mortgage Holdings 852 $2,340

    Source: Fortune 500

    &

  • & PAGE 10

    WHERE IS THE PIPELINE CONCENTRATED? THINK JOBS!!!

    DFW THE DEMAND DRIVEN MARKET

    Current lease-ups and projects under construction

    90.5%

    91.0%

    91.5%

    92.0%

    92.5%

    93.0%

    93.5%

    94.0%

    94.5%

    95.0%

    95.5%

    96.0%

    0

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    2010 2011 2012 2013 2014 2015 2016 2017 2018(F) 2019(F)

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