THE MULTIFAMILYINVESTORYour Local Apartment Advisors

The Multifamily Investor

Q4 2018

SUMMARYMultifamily investment sales continue to see very

healthy activity backed by solid underlying market fundamentals. But the fast times and skyward valuations are likely to cool off to some degree as interest rate spikes offset the effective yield attributed to rising rents. Even if the furious increase in values slows, there is very little indication that it will have much negative impact in the foreseeable future. Market vacancy is relatively low at 5.8%. And, despite the “boom” in new construction over the past several years, 12-month absorption continues to outpace new unit completions. Something for existing owners to begin watching is the what kind of impact increased construction costs will have on the viability of new construction over the next year or two.While investors don’t like seeing rates climb, at

least one silver lining is the impact residential rates are having. Many first-time homebuyers are getting pushed back into the “would be” first-time homebuyers.

MULTIFAMILY Statistics2018 Q2 2018 Q3

Rent $1,047 $1,054

Vacancy 5.2% 5.8%

Number of Sales (12 mo.) 68 65

Total Sales Volume (12 mo.) $773,087,000 $559,152,000

Average Price/Unit (12 mo.) $135,387 $137,911

Median Price/Unit (12 mo.) $85,544 $87,500

Under Construction 1,867 1,878

OLIVE REAL ESTATE GROUP, INC www.olivereg.com

► 12 Month Absorption is 741 units, with -75 units absorbed in 18Q3

► 12 Month Rent Growth was down to 2.7% in 18Q3; this time last year it was 6.1%

► The average vacancy rate increased to 5.8% in 18Q3; was 5.2% in 18Q2

HIGHLIGHTS

102 N CASCADE AVE, SUITE 250, COLORADO SPRINGS, CO 80903

t. 719.598.3000 | www.olivereg.com

Absorption, Net Deliveries & Vacancy

Absorption Net Deliveries Vacancy

800

600

400

200

0

-200

-400

-600

8.0%

7.5%

7.0%

6.5%

6.0%

5.5%

5.0%

4.5%2014 2015 2016 2017 2018

• Federal Reserve Rate Hike* The Fed has raised the federal funds rate 3 times already in 2018, and is expected to do so once more before the end of the year.

• Single Family Sales* Year-over-year sales were down 15.6% in September and 7.8% in October, according to the Pikes Peak Association of Realtors. The increasing cost of mortgages as well as continued robust growth in home values have priced many buyers out of the market.

WHAT TO LOOK FOR in Q4 2018

MULTIFAMILY RENT & SALES

Key Statistics

The Multifamily Investor

Property Name Zip Code Sales Price Price/Unit # Units Sale Date

Union Heights 80918 $35,000,000 $159,091 220 8/13/2018Esperanza Village 80909 $13,900,000 $125,225 111 7/17/2018Broadview Ridge 80906 $5,300,000 $203,846 26 8/1/20181

Solar Vista Apartments 80905 $2,590,000 $92,500 28 7/26/2018Red Rocks Terrace 80904 $2,225,000 $96,739 23 8/7/2018The Bonfoy Apartments 80909 $2,207,000 $68,969 32 7/27/2018601 Manitou Ave 80829 $948,000 $86,182 11 7/20/20182403-2413 E St. Vrain St 80909 $785,000 $41,316 19 8/2/20181201 Delaware Dr 80909 $750,000 $125,000 6 9/27/20181. Includes land parcels

2018: Third Quarter Sales

Vacancy, Asking Rent & Rent Growth

$1,200

$1,000

$800

$600

Asking Rent Vacancy Rent Growth

Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

6.0%

4.0%

2.0%

0.0%

-1.0%Q1 18 Q2 18 Q3 18

Total Sales Volume & Avg. Price/Unit

2013

$400M

$300M

$0M

Average Price/Unit (12 mo)Total Sales Volume

2014 2015 2016 2017 2018 YTD

$200M

$100M

$500M

$600M

$700M $210K

$0K

$120K

$90K

$60K

$30K

$180K

$150K

Olive Real Estate Group, Inc. Copyright 2018. Information contained herein, while not guaranteed, is from sources deemed to be reliable. Prices, terms and information subject to change. path:S:\Admin\@Multifamily\4-Newsletters\2018\Q4\OREG-MultifamilyInvestorNewsletter-Nov2018-4pg

***Disclaimer*** Some third quarter sales may not be recorded at time of publishing and are not listed

Contact us if you’re interested in learning more about the Colorado Springs market or are considering purchasing or selling a property in the next few years. We have qualifi ed investors seeking to purchase properties of all types from $500,000 to $50 million. We also provide Broker Opinions of Value and Financial Reviews. 719-598-3000

Asking Rent Per SF

RentColorado Springs Multi-Family

From 2015-2017, Colorado Springs produced some ofthe strongest rent growth in the nation, an averageannual increase of 7%, while metros targeted bydevelopers earlier in the cycle largely saw rents comeback to earth.

But Colorado Springs, now at the onset of its largestsupply test to date (that will stretch through at least2019) has finally seen rent growth come back to earth.As of 18Q3, rents were growing by closer to 3% year-over-year. In the North and Northwest El Paso Countysubmarkets (where virtually all of the active developmentis located), rents grew by closer to 2% year-over-yearas of 18Q3, a sign of supply beginning to have animpact.

While rent growth has moderated, the concessionenvironment remains highly favorable. In the year-ending September 2018, discounts of at least one-month's free rent were tied to slightly less than 3% of allavailable apartments, one of the lowest rates in thecountry. In fact, only two of the largest 100 metro areasin the country had a lower incidence of such concessions(Sacramento and Oxnard). Nationally, about 10% of allavailable apartments were tied to a one-month discountin the year ending September 2018.

This does represent an uptick from 2016, whenconcessions of at least one-month's free rent were tiedto a mere 1% of all availabilities (then the lowest level inthe country), but concessions nonetheless remain wellcontrolled, and outsized discounts almost nonexistent.

DAILY ASKING RENT PER SF

11/1/2018Copyrighted report licensed to Olive Real Estate Group - 912813.

Page 6

MAYOR DELIVERS HIS FOURTH STATE OF THE CITY ADDRESSSome highlights:

• 7,300 new jobs/year since 2015• Median salary for posted jobs higher than

Denver and statewide• Banning Lewis Ranch annexation – 35,000 jobs,

$47B in investment over next 30 years• City for Champions – Olympic Museum opens

next year, Downtown Stadium and Event Center, etc.

• Downtown development – 4+ hotels, multiple apartments, restaurants (Oskar Blues, Denver Biscuit Company, etc.)

• Education – economic impact over $2.2B• Colorado Springs Airport enplanements

increased 50% from 600,000 in 2015 to a projected 900,000 in 2018

• 22+ Hotels planned or under construction in El Paso County

• 100+ new police and fi refi ghters in the next 2 years

• I-25 expansion (Mind the Gap) broke ground• Future Issues – Homelessness, Affordable

Housing, Cog RailwayA 220,000-SQUARE-FOOT SCHEELS PLANNED FOR COLORADO SPRINGS - CSBJ 10/12/18

Scheels is planning to open its second Colorado Springs location in April 2021 in Interquest Marketplace. The store will include 75 specialty shops and entertainment attractions like a Ferris Wheel, saltwater aquarium, a wildlife mountain, and a candy shop. The store will employ more than 350 associates.

BLS: JOB OPENINGS “REACHED A SERIES HIGH OF 7.1 MILLION” NATIONALLY IN AUGUST- BLS 10/16/18

For the fi fth consecutive month, there were more job openings than people unemployed. It is getting harder for businesses to fi nd qualifi ed applicants to fi ll open positions, which will continue to drive up wages. Additionally, quits are up 13% year-over-year, which are voluntary separations, as more employees seek greener pastures and higher income.

MULTIFAMILY CONSTRUCTION

NEWS ARTICLES

UNDER CONSTRUCTION

PROPOSED

RECENTLY CONSTRUCTED

Property Name Address # UnitsSprings at Allison Valley 11320 New Voyager Hts 300Crowne at Cordera 9124 Grand Cordera Pkwy 276Crowne at Briargate 9110 Crown Springs Vw 272Watermark on Union 9915 N Union Blvd 243Copper Range 7535 Copper Range Hts 240Enchanted Springs Apartments 3075 Tutt Blvd 200Cascade Apartments 609 S Cascade Ave 183La Bella Vita Phase II 4986 Amarosa Heights Dr 146Greenway Flats 31 W Las Vegas St 65Casa Mundi 418 S Tejon St 27

OLIVE REAL ESTATE GROUP, INCVisit www.olivereg.com for more information

Under Construction and Proposed

Proposed Apts.xlsx

All items

Recent Constructed Apartments

All items

Under Construction Apts.xlsx

All items

EconomyColorado Springs Multi-Family

Source: Moody’s Analytics

YEAR OVER YEAR JOB GROWTH

DEMOGRAPHIC TRENDS

Current ChangeCurrent Level

Local U.S.Local U.S.Demographic Category

10-Year Change Forecast Change (5 Yrs)

Local U.S. Local U.S.

Population 328,701,996737,564 1.4% 0.7% 1.7% 0.8% 1.2% 0.6%Households 126,710,703277,774 1.8% 1.1% 1.3% 0.9% 1.7% 1.1%Median Household Income $62,011$68,583 3.6% 3.6% 1.9% 1.7% 2.2% 2.8%Labor Force 162,103,775352,020 3.1% 0.9% 1.2% 0.5% 1.5% 0.8%Unemployment 3.8%3.2% -0.2% -0.4% -0.3% -0.2% - -

Source: Moody’s Analytics

POPULATION GROWTH

Source: Moody's Analytics

LABOR FORCE GROWTH INCOME GROWTH

11/1/2018Copyrighted report licensed to Olive Real Estate Group - 912813.

Page 16

Demographic Trends

102 N Cascade Ave, Suite 250Colorado Springs, CO 80903t. 719.598.3000 f.719.578.0089 www.olivereg.com

THE MULTIFAMILY INVESTOR

Stuart Sloatstuartsloat@olivereg.com

Adam Reznerarezner@olivereg.com

WHY Use your Local Broker?

Working with a local broker adds valuable insight to help maximize your investment dollars. An inside track on developments in the commercial real estate market, fi rst-hand knowledge of troop deployments and insight on job growth are just a few of many things that have substantial impacts on investment property in both the short and long term. Put this knowledge to work for you.

RECENT APARTMENT LISTINGS

To learn more about the Colorado Springs market or to receive a free Broker Opinion of Value or Financial Review, Call Us at 719-598-3000

Olive Real Estate Group, Inc. Copyright 2018. Information contained herein, while not guaranteed, is from sources deemed to be reliable. Prices, terms and information subject to change. path:S:\Admin\@Multifamily\4-Newsletters\2018\Q4\OREG-MultifamilyInvestorNewsletter-Nov2018-4pg

Delaware Townhomes1201 Delaware Dr.,

Colorado Springs, CO 80909• $750,000• 6 units, Townhome style• Off -Street Parking

SOLD

LOCAL EXPERTISEWe are the ONLY team based in Colorado Springs that focuses

exclusively on Multifamily Investment Properties!

Lelaray Apartments2115 Lelaray St.,

Colorado Springs, CO 80909• 48 Units• New tapered roof system, vinyl windows, newer boiler, security gate, LED exterior lights, and parking lot sealcoat

UNDER

CONTRACT EXCELLENCE

Top Sales Firm: 2013, 2014, 2016, 2017Top Sales Broker: 2014, 2016, 2017

Best in Business AwardBest Commercial Real Estate Broker:

2014, 2015, 2017, 2018

EXPERIENCESince 2014:

Over $100 million in multifamily sales

60+ multifamily transactions

Foothills West720 Melany Ln.,

Colorado Springs, CO 80907• $3,550,000• 34 Units• All 2 and 3 bd.• Washer/Dryer hookups in all units

SOLD