dallas - fort worth multifamily trends & … · 96.0% 0 5,000 10,000 15,000 20,000 25,000...

MORAN & COMPANY

DALLAS - FORT WORTH

MULTIFAMILY TRENDS & OBSERVATIONS

1ST QUARTER 2018

Photography: Steve Hinds

DALLAS - 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 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 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 LTV’s 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, & Sperling’s Best

&


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 SPERLING’S 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

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

2017

Multifam

ily Permits

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 1985

3,624,952

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

&


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)

Dallas‐Fort Worth(4)

Atlanta(9)

Miami(7)

Washington DC(6)

Boston(10)

Los Angeles(2)

New York(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%

Dallas‐FortWorth

(667,200)

Miami(434,100)

Atlanta(447,700)

Houston(455,200)

Los Angeles(762,400)

Boston(305,700)

New York(1,088,200)

Chicago(455,200)

Washington DC(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

DFW Metro Dallas Fort Worth

Existing Apartment Units 723,249 539,213 184,036

Units added since 2010 117,950 98,352 19,598

Units absorbed since 2010 136,371 111,067 25,304

Average Gross Occupancy Q1 2018 94.3% 94.2% 94.6%

Annual % Change ‐0.7% ‐0.7% ‐0.5%

Current Period Effective Rent Q1 2018 $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

&


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 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

5,000

10,000

15,000

20,000

25,000

30,000

35,000

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

Occupa

ncy

Units

Supply Demand Occupancy

Demand 2010 - YTD Q1 2018 exceeded supply by 18,400+ units

Source: Axiometrics

Source: Axiometrics


DFW APARTMENT SALES

MF INVESTMENT ACTIVITY BY BUYER TYPE

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 2017

Volume # of Properties

0% 0% 0% 1% 1% 1%

57%51% 49%

63%67%

60%

5%

3% 5%

12% 2%

5%11%

6%

17%

4%7%

9%

27%

41%

29%21% 23% 25%

2013 2014 2015 2016 2017 2017

Institutional

Cross‐Border

Public Listed/REITs

Private

User/Other

Property or portfolio sales $10 million or greater

Source: Real Capital Analytics

Source: Real Capital Analytics

288 Properties $9 Billion Total Volume

$31.3 Million Average Deal Size

58 Properties $1.15 Billion Total Volume

$19.9 Million Average Deal Size

DFW US

& PAGE 12&

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 Holdings SOLID Inc.Titan Laboratories

Toyota North AmericaToyota Industries Commercial FinanceTrend MicroUnited Scientific GroupVendor Resource ManagementW3global

WASHINGTONAllied BioScienceBlucora

NEVADACoreSpace

COLORADOCagney Global LogisticsHarris Broadcast

OKLAHOMAGlobal Power EquipmentGroup, Inc.HiltiLinkAmerica

AUSTINGreenstreamSeven Hills Commercial

NEBRASKAHeartlandAutomotive Services

MINNESOTAMoneyGramSpeed Commerce (Navarre)

SAMPLE OF HEADQUARTER RELOCATIONS TO DALLAS FORT WORTH 2010-2017

ARIZONAPei Wei

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

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 Digility, Inc.

SAMPLE OF HEADQUARTER RELOCATIONS TO DALLAS FORT WORTH 2010-2017

TENNESSEEDynamic Energy Alliance

ARKANSASGolden Living

NEW HAMPSHSIREOculus Health

PENNSYLVANIASonoco L.P.

OTHER NEW HQ ESTABLISHMENTSBlackberry North America HQ (Canada)* Commemorative Air Force (Midland, TX) GuestLogix U.S. HQ (Canada) Hisun Motors North AmericanHQ (China) Howard Hughes Corp. KidZania (Mexico)Leclanche (Switzerland) Lone Wolf Real Estate Technologies (Canada)NGC Renewables North America HQ (China) Nutribiotech (South Korea) Triathlon Battery Solutions (Germany) Taleris Zinwave (UK)

& PAGE 14

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

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

&


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).

&

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• 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)

& PAGE 16


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.

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.

&

Joe MiloASSOCIATE

Joe Milo has valued over $18 billion in multifamily/mixed-use property with Moran. His responsibilities include economic underwriting, financial analysis, property valuations, and due diligence for assignments in the Southwest region. He assists with the overall production of writing materials as well as with other aspects of the marketing process. Prior to joining Moran & Company, Joe was a Senior Analyst for the Pricing & Cash Management Services group at Fidelity Investments, where he delivered daily valuations of Fidelity’s retail mutual funds.

Education• ELON UNIVERSITY, B.S. FINANCE (2009)

Work Experience • MORAN & COMPANY - BROKERAGE (2012-PRESENT)• FIDELITY INVESTMENTS - PRICING & CASH MGMT. SERVICES

(2010-2012)



&

Education• UNIVERSITY OF CALIFORNIA, SANTA BARBARA, B.A. (2012)

Work Experience • MORAN & COMPANY - BROKERAGE (2016-PRESENT)• FIDELITY INVESTMENTS - PRICING & VALUATION (2013-2016)

Jose BlancASSOCIATE

Jose Blanc joined Moran & Company in 2016 as a Financial Analyst. Jose is responsible for property valuations, economic underwriting, financial analysis, and writing offering memorandums for the Southwest region. He also assists with daily market research and economic analysis data.

Janet ValladaresOFFICE MANAGER

Janet is responsible for all aspects of operation including accounts payable/receivables, and state licensing. She supports event coordination activities and administrative duties. Prior to joining Moran & Company, Janet was the Project Administrator for Goldman Sachs and was responsible for all aspects of construction project administration from the bidding process to project close-outs, and all job cost tracking and accounting reporting.

Education• MTSU, B.B.A. (1999)

Work Experience • MORAN & COMPANY - BROKERAGE (2007-PRESENT)• PROFESSIONAL MORTGAGE CORPORATION - LOAN MARKETING

(1992-1993)

• NORTHCORP REALTY ADVISERS - LOAN MARKETING (1992)• AMWEST SAVINGS ASSOCIATION - ACCOUNTING (1990-1992)• FEDERAL ASSET DISPOSITION ASSOCIATION -

ASSET MANAGEMENT (1986-1989)

Sherry ShultsSENIOR ASSOCIATE

Sherry Shults is a Senior Associate for the Southwest region. She is responsible for writing and editing offering memoranda; the design and creation of all electronic marketing materials; market research; due diligence coordination; client events; and public relations initiatives.

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

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