dallas - moran & company...commercial metals company 535 $4,652 flowserve corporation 589 $3,992...

MORAN & COMPANY

Paul Harris Managing Partner Southwest

D: 972.764.8490 M: 214.232.8689

[email protected]

Thad Wetterau Director - Dallas D: 972.764.8491 M: 972.754.5420

[email protected]

Greg Smith Director - Dallas D: 972.764.8499 M: 817.313.7081

[email protected]

Jeffrey SkipworthDirector - Houston D: 713.425.4942 M: 214.533.3322

[email protected]

Eric Calub Director - Dallas D: 972.764.8492 M: 972.567.3560

[email protected]

DALLAS OFFICE 5440 Harvest Hill, Ste. 146

Dallas, TX 75230 972.387.2500

HOUSTON OFFICE 12 Greenway Plaza, Ste. 1100

Houston, TX 77046 712.425.4942

DALLAS - FORT WORTH

MULTIFAMILY TRENDS & OBSERVATIONS

3RD QUARTER 2017

DALLAS - FORT WORTH MULTIFAMILY TRENDS & OBSERVATIONS | 3RD QUARTER 2017

DALLAS-FORT WORTH TRENDS TO WATCH

DFW Job Growth #1 in the Nation: DFW is the #1 MSA for Job Growth in the country, jumping past New York in the

latest quarter. DFW added 93,600 new jobs Year-Over-Year. Unemployment rate of just 3.9%, well below the national average. A, B C’s 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: While new deliveries exceed absorption in 2017, occupancy still over 95% Absorption vs. Deliveries trend forecasted to turn positive again in 2018 with

approximately 2,500 more units absorbed than delivered New multifamily supply peaking in 2017 and forecasted to begin decline in 2018

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

communities to rezone new multifamily parcels supports higher land prices and longer lead times

New construction costs continue to rise with rebuilding related to hurricanes Harvey and Irma expected to put further pressure on labor and material costs

Conservative construction lending also continues to provide some discipline in new development

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

compression among B and C classes Some traditionally value-add capital is shifting its focus to newer, more stabilized

assets chasing a higher going in yield with lower capital risk Institutional investors are still cautious in the core space, but private investors fill

the gap Institutional investors considering suburban over urban core locations in attempt

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

submarkets with a higher new development pipeline

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3RD QUARTER 2017 STATS AT A GLANCE

TOTAL UNITSUNITS ADDED

SINCE 2010UNITS ABSORBED

SINCE 2010

715,309 +110,013 +134,457

CURRENTOCCUPANCY

PROJECTEDOCCUPANCY Q3 2018 NEW UNITS DELIVERED

95.1% 95.3% YTD: 18,550 2017F: 27,207

CURRENT AVERAGE EFFECTIVE RENT

EFFECTIVE RENT GROWTH SINCE 2010

EFFECTIVERENT GROWTH

$1,127 34%

YOY Q3 2017: 2.8%

PROJECTED YOY Q3 2018: 3.49%

DALLAS - FORT WORTH MULTIFAMILY TRENDS & OBSERVATIONS

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

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ECONOMIC DRIVERS AT A GLANCE

SEPTEMBER 2017WORKFORCE

JOB GROWTH #1 IN THE NATION

SEPTEMBER 2017UNEMPLOYED

3,624,000 SEPT. 2018 YOY:93,600+

2010-2016:579,000+

DFW: 3.4% U.S. 4.8%

CENSUS BUREAUJULY 31, 2016 POPULATION

2010-2016 POPULATION GROWTH

2010-2050 PROJECTED POPULATION GROWTH

7,233,323 807,109+ 10MM+

PUBLIC/PRIVATE PARTNERSHIPS

FORTUNE 500COMPANIES

CLASS A OFFICESPACE Q3 2017

$246,550,000 21 151 MM SF $28+/SF

Q3 2017MEDIAN HOME PRICES

YOY % GROWTHMEDIAN HOME PRICES

COST OF LIVING INDEX SPERLING’S BEST PLACES

$249,000 7.4% DALLAS: 95

DENVER: 128

HOUSTON: 101

ATLANTA: 102

BENCHMARK: 100

DALLAS - FORT WORTH MULTIFAMILY TRENDS & OBSERVATIONS

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0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Mul

tifam

ily P

erm

its

Popu

latio

n

Population MF Permits

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 2016

7,233,323

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

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2010-2016 POPULATION GROWTH OF TEN LARGEST US METROS

Population increase DFW 2010-2016 = 807,109Average = 115,301/year

5 7

14.4%

12.6%

9.5%9.0% 8.8%

5.3%

3.8%

3.0%

1.8%

0.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Houston Dallas-Fort Worth Atlanta Miami Washington DC Boston Los Angeles New York Philadelphia Chicago

20%

18%17% 17%

13%

11% 11%

10%

8%

6%

0%

5%

10%

15%

20%

25%

Dallas-FortWorth

(579,000)

Miami(389,800)

Atlanta(391,700)

Houston(434,500)

Los Angeles(676,300)

Boston(271,200)

New York(936,600)

Chicago(408,400)

Washington DC(243,300)

Philadelphia(172,200)

2010-2016 YTD JOB GROWTH TO TEN LARGEST U.S. METROS

September 2017 T12 = 93,600 Jobs Added - 2.7% Year-Over-Year Growth Rate

DFW JOBS CREATED2010 - 2016

579,000+


Source: Bureau of Labor Statistics

5 4 9 8 7 10 2 61 3

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AT&T STADIUM KLYDE WARREN PARK

DART RAIL LINE I-35 CORRIDOR PARKLAND HOSPITAL

PUBLIC & PRIVATE CAPITAL INVESTMENT

21%

17%

12%12%

11%

8%

8%

6%4%

2% Trade, Transportation, and Utilities (768,000)

Professional and Business Services (612,000)

Education and Health Services (441,000)

Government (416,000)

Leisure and Hospitality (391,000)

Financial Activties (294,000)

Manufacturing (273,000)

Mining, Logging, and Construction (211,000)

Other Services (128,000)

Information (82,000)

DFW EMPLOYMENT BY SECTOR – 3,624,000 JOBS – September 2017

Source: Bureau of Labor Statistics

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COMPANIES HEADQUARTERED IN DFW

2017 Fortune 500 / 1000

COMPANY RANK REVENUE(Millions)

DallasAT&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 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 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

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CALIFORNIAAcacia Research GroupAccentCareACTIVE NetworkAmeriflight LLCC&S PropellerCaliber Collision CentersChannell Commercial Corp.Ciao TelecomCinepolisConsolidated Electrical DistributorsCopartDaegis Inc.Farmers Brothers CoffeeFlour*FonalityGlenmount Global SolutionsIronclad Performance Wear Corp.Jacobs Engineering GroupJamba Inc.Kubota Tractor Corp.loanDepotMimi’s CafeMonkey Sports Inc.

Motorsport AftermarketGroup and MAG RetailMV TransportationOmnitracsPacific Union FinancialPrimorisRaytheon Space and Airborne-Systems (SAS)Rixi Recovery ServicesSolera HoldingsTitan LaboratoriesToyota North AmericaToyota Industries

Commercial FinanceTrend MicroUnited Scientific Group (USG)Vendor Resource ManagementW3global

WASHINGTONAllied BioScienceBlucora

NEVADACoreSpace

COLORADOCagney Global LogisticsHarris Broadcast

OKLAHOMAGlobal Power EquipmentGroup, Inc.HiltiLinkAmerica

AUSTINGreenstreamSeven Hills Commercial

NEBRASKAHeartlandAutomotive Services

MINNESOTAMoneyGramSpeed Commerce (Navarre)

SAMPLE OF COMPANY HEADQUARTER MOVES TO DALLAS FORT WORTH 2010-2016

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HOUSTONInx Inc.Magnum Hunter ResourcesU.S. Concrete

SAN ANTONIOAT&T*Christus Health

GEORGIANYLO Hotels

ALABAMATorchmark*Zoes Kitchen

FLORIDACCS MedicalFiesta Restaurant Group

CONNECTICUTAccudyne IndustriesiCall Inc.Revere Capital LLC

Note: Companies with an * moved to Dallas-Fort Worth prior to 2010

ILLINOISBar Louie Restaurant GroupFerris ManufacturingNevoia Logistics ServicesTopGolf

MICHIGANComerica*

MASSACHUSETTSNTT Data Inc.VCE

NEW YORKGreatbatchHMS HoldingsSignature Systems GroupSix Flags Entertainment

MISSOURIGKNAerostructures*

NEBRASKAHeartlandAutomotive Services

NEW JERSEYComparexCVE Technology Group

TENNESSEEDynamic EnergyAlliance

ARKANSASGolden Living

SAMPLE OF COMPANY HEADQUARTER MOVES TO DALLAS FORT WORTH 2010-2016

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DFW APARTMENT MARKET FUNDAMENTALS TODAY - Q3 2017

DFW EFFECTIVE RENT GROWTH AND OCCUPANCY

DFW Metro Dallas Fort Worth

Existing Apartment Units 715,309 533,097 182,212

Units added since 2010 110,013 92,237 17,776

Units absorbed since 2010 134,454 109,495 24,959

Average Gross Occupancy Q3 2017 95.1% 95.1% 95.2%

Annual % Change -0.5% -0.5% -0.4%

Current Period Effective Rent Q3 2017 $1,127 $1,154 $1,047

Annual % Change 2.8% 2.3% 4.2%

$803

$1,140

92.5%

93.0%

93.5%

94.0%

94.5%

95.0%

95.5%

$500

$600

$700

$800

$900

$1,000

$1,100

$1,200

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

Rent Occupancy

2010 – 2018 (projection)34% rent increase 2010 to 2016 YTD

Source: Axiometrics

Source: Axiometrics

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DFW TOTAL HOUSING PRODUCTION

DFW HOME OWNERSHIP

9,8224,990

25,517

49,644

15,581

29,703

59,466

20,571

55,220

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Hous

ing

Perm

its

Multifamily (5+) Single Family Total

Total housing production still below peakDFW added 890,000(+/-) people since 2009

0

2

4

6

8

10

12

14

16

160,000

180,000

200,000

220,000

240,000

260,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Avg Price Months Inventory

Dearth of affordable single-family homes as prices rise and inventory declinesCurrent 1.8 month inventory = 25-year low

Building fewer homes and at higher price point


Source: Real Estate Center at Texas A & M University

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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

5,000

10,000

15,000

20,000

25,000

30,000

35,000

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

Occ

upan

cy

Uni

ts

Supply Demand Occupancy

Demand outpaced new supply 2010-2015; this trend is expected to continue in 2018

Actual (Demand outperforms expectations)

Demand Projection as of Q2 2016

Source: Axiometrics

Source: Axiometrics

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DFW APARTMENT SALES

MF INVESTMENT ACTIVITY BY BUYER TYPE

Property or portfolio sales $10 million or greater

0

50

100

150

200

250

300

350

$0

$1,000,000,000

$2,000,000,000

$3,000,000,000

$4,000,000,000

$5,000,000,000

$6,000,000,000

$7,000,000,000

$8,000,000,000

$9,000,000,000

$10,000,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

# of

Pro

pert

ies

Volu

me

Volume # of Properties

293 Properties$8.8 Billion Total Volume

$30.0 Million Average Deal Size58 Properties$1.15 Billion Total Volume

$19.9 Million Average Deal Size

DFW MARKET USA MARKET

0.0% 0.4% 0.1% 0.8% 1.0%

57%51% 49%

63%58%

5%

3% 5%

12%

5%

11%

6%

17%

4%

6%

27%

41%

29%21%

29%

2013 2014 2015 2016 2016

Institutional

Cross-Border

Public Listed/REITs

Private

User/Other

Property or portfolio sales $5 million or greater

Actual (Demand outperforms expectations)

Demand Projection as of Q2 2016

Source: Real Capital Analytics

Source: Real Capital Analytics

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WE AREMORAN & COMPANY

––––––––– With over 22 years in business, we are the team you want on your side. –––––––––

We are... Nationally recognized leader in providing disposition, capitalization and advisory services

... Exclusively serving the multifamily industry

... Passionate client advocates with seasoned, dedicated professionals

... Capable, offering national coverage provided by 12 highly experienced partners operating from 8 regional offices

... Regarded as a dominant intermediary for transactions in excess of $100 Million and for ex-ecutions requiring higher levels of senior expe-rience and focused attention

THOMAS F. MORAN

FOUNDER & CO-CHAIRMAN

MARY ANN KING

CO-CHAIRMAN

DAVID MARTIN PRESIDENT | WESTERN REGION

PETER EVANS

PRESIDENT | EASTERN REGION

Moran & Company––––––––– National Leadership –––––––––

Moran & Company Southwest––––––––– Regional Team –––––––––

Paul Harris Managing Partner Southwest Thad Wetterau

Director - DallasGreg Smith

Director - Dallas

Jeffrey SkipworthDirector - Houston

Eric Calub Director - Dallas

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SOUTHWEST LEADERSHIP

Education• BAYLOR UNIVERSITY, M.B.A. (1988)• BAYLOR UNIVERSITY, B.A. (1986)

Work Experience • MORAN & COMPANY (1999-PRESENT)• LEND LEASE (1998-1999)• L&B GROUP (1997-1998)• AMRESCO (1996-1997)• M/PF RESEARCH (1994-1996)• COMMERCIAL REAL ESTATE APPRAISAL (1989-1994)

Thad WetterauDIRECTOR | SOUTHWEST

Since joining Moran & Company in 1999, he has completed over $3 billion in multifamily transactions, pri-marily in Texas, but also in major markets across the southeastern U.S. He brings to bear his background in institutional real estate research, development consulting, appraisal, and transactions on every investment assignment. His current responsibilities cover the entire multifamily investment sales process, including cli-ent service, relationship management, deal management, property valuation, economic analysis, marketing and due diligence.

Education• TEXAS TECH UNIVERSITY, B.A. (1977)

Work Experience • MORAN & COMPANY (2003-PRESENT)• ARCHON GROUP (1994-2003)• NORTHCORP REALTY ADVISORS (1989-1994)

Professional Affiliations• NATIONAL MULTIFAMILY HOUSING COUNCIL• DALLAS REAL ESTATE COUNCIL

Paul HarrisMANAGING PARTNER | SOUTHWEST

Since opening the Dallas office in 2003, Paul has been responsible for all marketing assignments and client re-lationships in the Southwest Region with particular emphasis on the major Texas markets. Paul and his team have closed over $4.4 billion in multifamily dispositions and recapitalization since joining Moran. Prior to joining Moran, Paul was Director of Multifamily Investments for Archon Residential, a Goldman Sachs subsidiary, with responsibility for Archon’s national multifamily acquisition and disposition efforts. During his eight years with Archon, Paul completed the sale of 255 multifamily properties comprising over 56,000 units in 32 states with $3 billion in value. Paul has focused exclusively on multifamily transactions since 1995 and he is active in the National Multi Housing Council (NMHC).

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Education• TEXAS CHRISTIAN UNIVERSITY, M. B.A. (1997)• TEXAS A&M UNIVERSITY, B.B.A. (1989)

Work Experience • MORAN & COMPANY (2005-PRESENT)• GOLDMAN SACHS / ARCHON GROUP (1997-2005)• TEXAS COMMERCE BANK (1995-1997)• THE WALT DISNEY COMPANY (1992-1995)• COOPERS & LYBRAND CPA’S (1989-1992)

Professional Affiliations• NATIONAL MULTIFAMILY HOUSING COUNCIL• URBAN LAND INSTITUTE• DALLAS REAL ESTATE MINISTRIES (DREM)

Greg SmithDIRECTOR | SOUTHWEST

Greg’s responsibilities include business development, economic underwriting, marketing, and due diligence for assignments in the Southwest region. Prior to Moran & Company, he managed investment sale transactions for Goldman Sachs of all property types. Gregory is a licensed CPA and real estate broker and also has experience in commercial banking and public accounting, along with positions at two Fortune 500 companies. Greg graduated as a Neeley Scholar from the Masters of Business Administration program at Texas Christian University and cum laude with a BBA from Texas A&M University.

Education• SOUTHERN METHODIST UNIVERSITY, M.B.A. (2005)• AUSTIN COLLEGE, B.A. (1999)

Work Experience • MORAN & COMPANY - BROKERAGE (2006-PRESENT)• FIDELITY INVESTMENTS - FINANCIAL & TAX ANALYSIS (2005-2006)• FIDELITY INVESTMENTS - INSTITUTIONAL MANAGEMENT (1999-2005)

Jeffrey SkipworthDIRECTOR | SOUTHWEST

Jeffrey Skipworth is the Director for Moran & Company in Houston, an office he opened with Paul Harris in 2011. Jeffrey started his career with Moran & Company in 2006, and has worked on $1 billion of real estate during his tenure at the firm. Jeffrey has extensive experience at all levels of the marketing process including underwriting, marketing presentation, research and investor solicitation. Prior to joining Moran & Company, Jeffrey was a senior analyst and relationship manager for Fidelity Investments, where he represented a num-ber of billion dollar companies in large investment transactions in addition to conducting tax analysis for large multinational firms. He is a licensed real estate broker for the state of Texas.

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Education• UNIVERSITY OF MICHIGAN-ANN ARBOR, B.B.A.

Work Experience • MORAN & COMPANY• PASSCO COMPANIES, INC• THE KISLAK ORGANIZATION• BERKSHIRE REALTY• WALDEN RESIDENTIAL• THE PRIME GROUP

Professional Affiliations• NATIONAL MULTI HOUSING COUNCIL• THE REAL ESTATE COUNCIL - DALLAS

Eric CalubDIRECTOR | SOUTHWEST

Eric has spent most of his career in the multi-family sector on the principal side as both an Acquisitions and Dispositions officer in addition to asset managing a portfolio of properties. Eric has worked for both large public entities (Berkshire Realty and Walden Residential - REITS) and smaller private companies (The Kislak Organization and Passco Companies – TIC/DST sponsor). Eric has over two decades of experience include executing transactions involving single asset entities and portfolios of core, core-plus, and value-add properties, as well as performing and non-performing loans. Throughout his career Eric has successfully closed acquisitions and dispositions in excess of $2 billion.

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SOUTHWESTDALLAS, TX

HOUSTON, TX

MOUNTAIN STATESDENVER, COPHOENIX, AZ

PACIFIC NORTHWESTSEATTLE, WA

WESTSAN FRANCISCO, CAIRVINE, CA

MIDWESTCHICAGO, IL

SOUTHEASTATLANTA, GA

Moran & Company Offices

Paul Harris Managing Partner Southwest

D: 972.764.8490 M: 214.232.8689

[email protected]

Thad Wetterau Director - Dallas D: 972.764.8491 M: 972.754.5420

[email protected]

Greg Smith Director - Dallas D: 972.764.8499 M: 817.313.7081

[email protected]

Jeffrey SkipworthDirector - Houston D: 713.425.4942 M: 214.533.3322

[email protected]

Eric Calub Director - Dallas D: 972.764.8492 M: 972.567.3560

[email protected]

DALLAS OFFICE 5440 Harvest Hill, Ste. 146

Dallas, TX 75230 972.387.2500

HOUSTON OFFICE 12 Greenway Plaza, Ste. 1100

Houston, TX 77046 712.425.4942

NORTHEAST & MID-ATLANTIC

BOSTON, MAWASHINGTON, DC

Photo: Steve Hinds

dallas - moran & company...commercial metals company 535 $4,652 flowserve corporation 589 $3,992...

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