CBRE MULTI-HOUSING MARKET UPDATE

Transcription

1 CBRE MULTI-HOUSING MARKET UPDATE Provided by the CBRE Multi-Housing Private Capital Group (PCG) in South Florida SPRING 2010 Red Hot South Florida Apartment Market Shows No Sign of Cooling Down. FOR SALE :: 93 UNITS :: PALM SPRINGS FOR SALE :: 69 UNITS :: PEMBROKE PINES FOR SALE :: 54 UNITS :: MIAMI BEACH INTRODUCTION The South Florida apartment market continues to enjoy strong fundamentals at levels not seen since before the recession. In 2012, South Florida properties in the $1 million to $10 million range saw over $490 million in sales accounting for over 13,700 units. This is the highest sales volume within South Florida in the last five years. Nevertheless, there remains a limited number of properties for sale and investors are aggressively competing for quality assets. Some of the more aggressive activity has come from foreign and first-time buyers who are diversifying their overall investment portfolios to include a multi-housing component. In addition, lenders have loosened criteria to include these new apartment investors, with attractive rates in the high-3% range with 75% leverage of purchase price. Positive market fundamentals, attractive new debt solutions and a plethora of domestic and foreign buyers have contributed to significantly higher sale activity. Rents in Miami-Dade, Broward, Palm Beach County are at record levels, exceeding those set in Since 2009 rents in Miami-Dade, Broward and Palm Beach have increased by 12.4%, 9.2% and 11.2% respectively. We anticipate rents to continue to increase in 2013 and beyond as strong rental demand and near record occupancies give landlords the upper hand in lease negotiations. Occupancies remain near record levels. Submarkets such as Coral Gables/South Miami (2.3%), Hialeah/Miami Lakes (2.3%) and Downtown Miami/South Beach (2.5%) are the top performing for occupancy rates, whereas the lowest occupied submarkets of West Palm Beach (6.6%), North Palm Beach County (6.1%), and Sunrise/Lauderhill (5.7%) still exhibit overall strong fundamentals. In fact, of the 21 submarkets in the South Florida market, only 3 have recorded an increase in vacancy during the past year. SOLD :: 54 UNITS :: POMPANO BEACH The CBRE Multi-Housing Private Capital Group (PCG) focuses specifically in the sale, marketing and financing of multi-housing properties on behalf of private investors in South Florida. Long-term, South Florida is primed to produce superb fundamentals for multihousing investors due to: Future rent appreciation and valu-add upside Long-term trend of condominium conversions depleting rental inventory, resulting in no net increases in inventory Positive demographic trends Recent declining home ownership rate and higher propensity to rent from young professionals Limited new inventory Attractive new debt opportunities Strong occupancy levels For available listings and more information, please visit For more information, please contact Calum Weaver T calum.weaver@cbre.com Richard Tarquinio T richard.tarquinio@cbre.com

2 2013 SOUTH FLORIDA MULTI-HOUSING MARKET OUTLOOK There are now significantly more lenders willing to loan on $1 to $10 million properties. While there are ample sources of capital for stable assets and strong borrowers, there is dearth of capital for non-stable assets and challenged borrowers. Some of the major apartment developments currently underway in South Florida include: - The Bridges at Kendall Place 228 Kendall Construction began Doral Grande 360 Doral Construction began Modera Miramar 349 Miramar Construction began One Plantation 321 Plantation Construction began Broadstone at N Boca Village 384 Boca Raton Construction began Midtown Delray 116 Delray Beach Construction began 2012 Rents have increased in Miami-Dade, Broward and Palm Beach by 3.1%, 3.1% and 4.5% over the past 12 months. Average rents are forecasted to cumulatively increase in Dade, Broward and Palm Beach over the next five years by 13.4% 16.3% and 13.8% respectively. In Miami-Dade, Broward, and Palm Beach average apartment rents are above the record high rents that were recorded in Occupancies in Miami-Dade, Broward and Palm Beach have increased to 96.8%, 95.4% and 94.7%, respectively. Miami-Dade boasts the #1 highest occupancy level of any MSA in the U.S. Over the next three years, we anticipate occupancies will continue to increase to record levels in Miami- Dade and Broward. Improving rents and occupancies is translating into higher net operating income (NOI) for many multi-housing properties in South Florida. Cap rates for Class A product range between 4.75% to 5.25%, Class B between 5.75% to 6.25% and Class C between 6.50% to 8.00%. During 2012, there were over $490 million in sales for properties between the $1 million and $10 million range. Most multi-housing properties are experiencing higher occupancies and rent which is translating into higher net operating income (NOI). 2 As a result of the rapidly improving South Florida apartment market, new apartment developments are coming out of the ground at break-neck speed. New unit completions nearly quadrupled from 2011 to 2012 jumping from approximately 750 new unit completions to over 2,900 new unit completions. In 2013, the number of new unit completions is expected to more than double once again, with developers throughout the region set to complete over 6,900 new units during the year. In all, as the South Florida region rebounds from the global recession of 2009, it should see more than 14,000 post-recession new units built by Despite all of this new development, the new supply will barely keep pace with demand due to several factors: over 20,000 Class A units were taken off market and converted to condos between 2000 and 2005, no significant Class A product has been developed during the last decade, falling homeownership has increased demand for high-end apartment rentals, and South Florida has continued to have strong population growth since There are many other development sites that will not materialize in the short-term as there is a shortage of equity capital. That being said, it highlights the strength of the overall market that investors are willing to invest in development deals at a 7.0% return on development costs based on today s rents. This is primarily because they don t want to pay a 5.0% cap rate for existing product, they have a compelling need to be invested, and like the long-term prospects for multihousing market in South Florida. Overall, we expect the South Florida apartment market to continue to perform strongly throughout the current development cycle, as the region s population growth is forecasted to outpace housing unit growth through Additionally, the population is projected to become significantly younger, with the median age dropping from 51 to 45 by 2017, presumably growing the number of renters who, historically, tend to be younger. RENTS Rents have increased in Miami-Dade, Broward and Palm Beach by 3.1%, 3.1% and 4.5% over the past 12 months. Miami-Dade, Broward, and Palm Beach average apartment rents are above the record high rents that were recorded in We anticipate rents to increase anywhere between 3.5% to 5.5%, depending on the submarket, over the next two years. OCCUPANCIES Occupancies in Miami-Dade, Broward and Palm Beach are at 96.8%, 95.4% and 94.7%, respectively. Miami-Dade boasts the 4th highest occupancy level in the U.S. Over the next three years, we anticipate occupancies will continue to increase to record levels in Miami-Dade and Broward. Improving rents and occupancies are translating into higher net operating income (NOI) for many multi-housing properties in South Florida. CAP RATES Cap rates, particularly for newer properties, are near record lows. Cap rates on Class A properties ranges from 4.75% to 5.25%; Class B properties from 5.75% to 6.25%; and Class C properties range from 6.5% to 8.0%. We anticipate cap rates will remain stable in While cap rates have compressed, most investors feel more confident about cap rate levels today. Confidence has been raised by the lower interest rates that have created positive debt arbitrage, along with strong occupancies, a lack of new supply, expected rent growth, favorable demographics, and a continued decline in home ownership. A lack of viable product available for sale is often cited as investors biggest frustration in the South Florida market. DEMOGRAPHIC TRENDS Echo-Boomer and Gen-Y Demographics will Drive Demand Population, personal income, and, most importantly, total employment are the primary economics of multi-housing demand; however, demographic trends, with a booming population

3 MIAMI-DADE HISTORICAL SNAPSHOT Year , $1, , $1, , $1,072 (0.4) , $1,052 (1.8) , $1, , $1, , $1, MIAMI-DADE FORECAST SNAPSHOT , $1, , $1, , $1, , $1, , $1, MIAMI-DADE SNAPSHOT BY SUBMARKET (AS OF 4Q 2012) Submarket Bal Harbour/North Miami Beach 40, $1, Coral Gables/South Miami 39, $1, Downtown Miami/South Beach 59, $1, Hialeah/Miami Lakes 39, $1, Homestead/South Dade County 18, $ North Miami 40, $1, West Miami/Doral 19, $1, Westchester/Kendall 29, $1, Miami-Dade Total 292, $1, SOURCE :: CBRE and Torto Wheaton BROWARD HISTORICAL SNAPSHOT Year , $1, , $1,165 (0.2) , $1,162 (0.2) , $1,120 (3.7) , $1, , $1, , $1, BROWARD FORECAST SNAPSHOT , $1, , $1, , $1, , $1, , $1, BROWARD SNAPSHOT BY SUBMARKET (AS OF 4Q 2012) Submarket Coral Springs 15, $1, Fort Lauderdale 37, $1, Hollywood 24, $1, Margate/Coconut Creek/North Lauderdale 12, $1, Pompano Beach/Deerfield Beach 25, $1, Pembroke Pines/Miramar 16, $1, Plantation/Davie/Weston 15, $1, Sunrise/Lauderhill 21, $1, Broward Total 168, $1, SOURCE :: CBRE and Torto Wheaton CBRE MULTI-HOUSING GROUP SOUTH FLORIDA of younger people, will also drive demand for apartments over the next 5 years. Echo-boomer and Gen-Y households will be a key driver of apartment demand over the intermediate and long-term, as the age cohort has the highest propensity to rent and will be growing in size. Coupled with a healthy renter capture rate, this is offsetting employment issues. In South Florida, this age group has grown from 923,000 recorded in the in 2000 census to over 1 million. This has led to more potential renters entering the market precisely when home ownership rates are decreasing and rental capture rates are increasing. NET ABSORPTION TRENDS The South Florida rental market has experienced positive net absorption over the last four years, when comparing the net change in occupied units on a year-over-year basis. During that time an average of more than 4,500 units were being absorbed per year. In 2012, there was a net absorption of 4,853 units, resulting in 5,905 more occupied units compared to one year ago. When compared to three years ago, however, there are 17,420 more occupied units. Assuming these same patterns continue, and they should improve with an improving economy and resulting job growth, the South Florida rental market is predicted to remain strong in CBRE projects an overall South Florida vacancy rate of 3.2% by the 4th quarter of Given these metrics, rent spikes are a foregone conclusion and the market is already experiencing 5%-10%+ effective rent growth on a year-over-year basis. PALM BEACH HISTORICAL SNAPSHOT Year , $1, , $1,125 (4.2) , $1,106 (1.7) , $1,061 (4.0) , $1, , $1, , $1, PALM BEACH FORECAST SNAPSHOT , $1, , $1, , $1, , $1, , $1, PALM BEACH SNAPSHOT BY SUBMARKET (AS OF 4Q 2012) Submarket Boca Raton 17, $1, Boynton Beach/Delray Beach 18, $1, Lake Worth/Greenacres/ Wellington 20, $1, North Palm Beach County 13, $1, West Palm Beach 24, $ Palm Beach Total 96, $1, SOURCE :: CBRE and Torto Wheaton 3

4 CBRE MULTI-HOUSING GROUP SOUTH FLORIDA With improving market conditions and an abundant amount of investors seeking multi-housing opportunities, now may be a good time to get a confidential broker opinion of value for your multi-housing investment. The CBRE Private Capital Group specializes in selling apartment properties between $1 to $20 million. Our clients are typically individuals and partnerships who have their own capital at risk for the purpose of building personal wealth, and their investment goals are met by maximizing value in every assignment and by providing them the finest advisors in the industry. Within the last two years, the CBRE Private Capital Group has closed over 30 multi-housing transactions totaling over $121 million dollars. There is no other platform in the industry that can source buyers as efficiently and effectively as CBRE. Our South Florida database includes detailed owner contact information for every multi-housing property over 10 units in South Florida. Coupled with 450 offices in more than 50 countries around the world, the CBRE platform is truly global, providing access to the most local, national and international investors in the industry. In fact, seven out of our last eight multi-housing sales were to foreign private buyers. RECENT CBRE PRIVATE CAPITAL GROUP MULTI-HOUSING SALES 27 UNITS :: MIAMI BEACH $2,607,000 DECEMBER UNITS :: DEERFIELD BEACH $1,750,000 DECEMBER UNITS :: NORTH MIAMI $3,200,000 NOVEMBER UNITS :: WEST PALM BEACH $1,225,000 OCTOBER UNITS :: FORT LAUDERDALE $2,300,000 SEPTEMBER UNITS :: AVENTURA CONFIDENTIAL AUGUST UNITS :: HOMESTEAD $7,450,000 AUGUST UNITS :: MIAMI BEACH $2,600,000 AUGUST ACRES :: MIAMI $6,000,000 MAY UNITS :: CORAL GABLES $4,500,000 MARCH UNITS :: DEERFIELD BEACH $1,760,000 MARCH UNITS :: DEERFIELD BEACH $6,914,560 MARCH UNITS :: DEERFIELD BEACH $2,240,000 MARCH UNITS :: HOMESTEAD $4,550,325 FEBRUARY UNITS :: JUPITER $9,750,000 DECEMBER UNITS :: MIAMI BEACH $750,000 NOVEMBER UNITS :: BOCA RATON $7,300,000 AUGUST UNITS :: MIAMI BEACH $2,700,000 AUGUST UNITS :: LAKE WORTH $7,800,000 JUNE UNITS :: NORTH MIAMI $594,000 JUNE UNITS :: PEMBROKE PINES $4,421,946 MAY UNITS :: MIAMI BEACH $1,215,000 MAY UNITS :: KENDALL $28,000,000 SEPTEMBER UNITS :: CORAL GABLES $1,625,000 AUGUST UNITS :: BOYNTON BEACH $8,200,000 JULY UNITS :: NORTH BAY VILLAGE CONFIDENTIAL DECEMBER UNITS :: MIAMI $2,200,000 JANUARY UNITS :: DELRAY BEACH $9,000,000 SEPTEMBER UNITS :: MIAMI BEACH $3,225,000 JULY UNITS :: HOLLYWOOD $5,500,000 APRIL 2009 For available listings and more information, please visit or call Calum Weaver

5 RECENT MIAMI-DADE MULTI-HOUSING PRIVATE CAPITAL TRANSACTIONS Property Address City Sale Date Sales Price Per Unit Carlyle Ave Miami Beach 22 Feb-13 $2,347,613 $106, th St Miami Beach 15 Jan-13 $1,470,000 $98, NE 6th Ave Miami 39 Dec-12 $6,650,000 $170, E Bay Harbor Dr Miami Beach 134 Dec-12 $15,325,000 $114, Indian Creek Dr Miami Beach 43 Dec-12 $4,150,000 $96, SW 2nd Ave Miami 20 Dec-12 $3,395,000 $169, NE 184th Ter Aventura 16 Dec-12 $1,850,000 $115, Santander Ave Coral Gables 16 Dec-12 $2,500,000 $156, Harding Ave Miami Beach 18 Dec-12 $1,800,000 $100, SW 6th St Miami 24 Dec-12 $1,150,000 $47, SW 75th Circle Ln Miami 190 Dec-12 $15,200,000 $80, Capri St Coral Gables 21 Dec-12 $2,482,500 $118, W 2nd Ct Hialeah 64 Dec-12 $3,950,000 $61, Biarritz Dr Miami Beach 30 Dec-12 $2,600,000 $86, Marseille Dr Miami Beach 12 Dec-12 $2,610,000 $217, Meridian Ave Miami Beach 24 Dec-12 $2,275,000 $94, NW 23rd St Miami 50 Dec-12 $3,060,000 $61, NW 18th Ct Miami 28 Dec-12 $1,680,000 $60, NE 117th Rd Miami 10 Dec-12 $2,115,000 $211, SW 75th Circle Ln Miami 190 Dec-12 $15,200,000 $80, Biarritz Dr Miami Beach 30 Dec-12 $2,600,000 $86, NE 1st Ave, 15 Residential Miami 318 Nov-12 $11,740,000 $36, NE 1st Ave Miami 5 Nov-12 $3,500,000 $700, NW 22nd Ave Miami 20 Nov-12 $1,326,000 $66, NE 167th St North Miami Beach 60 Nov-12 $3,200,000 $53, NW 26th Ave Miami 84 Nov-12 $2,874,000 $34, NW 155th Ln Miami 207 Nov-12 $11,600,000 $56, NW 22nd Ave Miami Gardens 320 Nov-12 $10,762,500 $33, SW 5th Ave Miami 18 Nov-12 $1,550,000 $86, NW 135th St Opa Locka 65 Nov-12 $2,643,300 $40, SW 13th St Miami 14 Nov-12 $2,885,000 $206, W Trade Ave Miami 15 Nov-12 $1,500,000 $100, NW 11th St Miami 44 Nov-12 $2,640,000 $60,000 CBRE MULTI-HOUSING GROUP SOUTH FLORIDA RECENT BROWARD MULTI-HOUSING PRIVATE CAPITAL TRANSACTIONS Property Address City Sale Date Sales Price Per Unit 649 S Cypress Rd Pompano Beach 54 Feb-13 $11,000,000 $203, Johnson St Pembroke Pines 20 Jan-13 $1,275,000 $63, Johnson St Pembroke Pines 37 Jan-13 $2,450,000 $66, SW 25 St Fort Lauderdale 114 Dec-12 $3,900,000 $34, NE 26th Ave Fort Lauderdale 18 Dec-12 $1,400,000 $77, NE 8th Ave Wilton Manors 18 Dec-12 $1,350,000 $75, NE 36th St Lighthouse Point 24 Dec-12 $2,300,000 $95, NW 61st St, 212 units Tamarac 291 Dec-12 $15,000,000 $67, NE 18th Ave Fort Lauderdale 22 Nov-12 $1,375,000 $62, NW 2nd Ave Hallandale Beach 16 Nov-12 $1,300,000 $81, NE 18th Ave Fort Lauderdale 30 Nov-12 $2,221,000 $74, Sheridan St Hollywood 18 Oct-12 $1,300,000 $72, N 15th Ave Hollywood 16 Oct-12 $1,140,000 $71, SW 6th St Plantation 18 Oct-12 $1,350,000 $75, S Riverside Dr Pompano Beach 18 Oct-12 $1,450,000 $80,556 GreenView South Nob Hill Circle Tamarac 128 Sep-12 $4,300,000 $33,594 Palm Plaza Resort Riomar St Fort Lauderdale 12 Sep-12 $1,425,000 $118,750 Palm Court SW 16th Street Pompano Beach 22 Sep-12 $2,600,000 $118, Miami Rd Fort Lauderdale 24 Sep-12 $2,300,000 $95,833 Whispering Palms NW 36th St Lauderdale Lakes 315 Sep-12 $13,700,000 $43,492 Boardwalk at Inverrary NW 60th Ave Sunrise 310 Sep-12 $12,300,000 $39,677 Country Club Apts NE 25th Ave Fort Lauderdale 14 Aug-12 $1,190,000 $85,000 RECENT PALM BEACH MULTI-HOUSING PRIVATE CAPITAL TRANSACTIONS Property Address City Trade Sales Price Per Unit 5865 Haverhill Rd West Palm Beach 206 Dec-12 $7,000,000 $33, Park Pl West Palm Beach 23 Oct-12 $1,225,000 $53, Bucida Rd Delray Beach 12 Oct-12 $1,950,000 $162, Colonial Palms Way Palm Springs 23 Oct-12 $2,400,000 $104, Palm Trail Delray Beach 13 Sep-12 $1,100,000 $84, Pine Circle Boca Raton 16 Jun-12 $737,000 $46,063 SOURCE :: CBRE and Real Capital Analytics 5

6 CBRE MULTI-HOUSING GROUP SOUTH FLORIDA CAP RATE STUDY Submarket Low / High Class A 4.75% % Class B 5.75% % Class C 6.50% % Calculation based on trailing 3 months at time the deal goes hard with adjustments for taxes and insurance VACANCY & RENT INCREASE FORECASTS Submarket Miami-Dade Rent Increase Broward Rent Increase Palm Beach Rent Increase 2.8% 2.2% 4.7% 2.3% 6.6% 3.1% 1.4% 3.8% 5.0% 3.0% 5.8% 5.0% 1.2% 4.5% 4.6% 3.5% 5.2% 5.1% 1.7% 3.2% 4.1% 2.9% 5.1% 3.3% ARE THERE ANY NEGATIVES? First and foremost, a sudden rise in long-term interest rates remains a concern, although that appears unlikely in 2013 as the Fed has pledged to keep interest rates low until the unemployment rate falls to 6.5%. The Fed is now using benchmarks in the U.S. labor markets for the timing of any potential rate increases. Secondly, an over-supply of new units could appear in a select few submarkets, but is likely to be a pause rather than a problem. LENDING FOR PRIVATE INVESTORS There are now significantly more lenders willing to loan on $1 to $10 million properties. However while there are ample sources of capital for stable assets and strong borrowers, there is a dearth of capital for non-stable assets and challenged borrowers. With local banks actively looking to lend, the majority of sub $3mm transactions are occurring with financing from local banks or other lenders. The readily available access to cheap debt is perversely encouraging investors into taking greater risk since they can t make money in bonds or money markets. Lenders are willing to finance stabilized properties at up to 75% LTV in the high 3 to low 4% range. See page 7 for more information. Despite Fed assurances about keeping rates at present levels, we believe interest rates will begin to edge upwards in Investors should plan defensively for possible rate spikes. CBRE believes most investors should try to lock in long term fixed rates while the going is good. Keeping financing costs down over the investment holding period can be as valuable an asset as the building itself, creating future gains when rates go up. WHO IS BUYING MULTI-HOUSING PROPERTIES TODAY? Currently there are numerous private investors seeking multi-housing opportunities in South Florida. Well-located, infill properties are commanding the most investor interest. Foreign private capital remains very active in multi-housing opportunities in South Florida. Seven out of our last nine CBRE Private Capital Group transactions were to foreign buyers. WHAT TYPE OF MULTI-HOUSING PROPERTIES ARE INVESTORS FOCUSED ON BUYING? In the past two years investors were focused on newer properties in desirable locations. We are now starting to see increased investor interest in less marquee properties as a lack of available product and intense buyer competition is causing buyers to expand their focus to include more Class B and C assets. With Class A cap rates around 5%, investors are increasingly looking for lower quality properties in the anticipation of higher returns. Hence we are seeing a significant increase in the number of value-add type transactions. Today s investors are back at value-add, but capping their rehab dollars at $3,000 to $7,000 per unit (with a corresponding 15% to 20% return or 5.0+/- year payback), and in the best assets, a maximum of $10,000 per unit. Residents are accepting the higher renovation rents and are staying put for the time being, as the mentality shifts from home ownership to rental ownership. With cheap debt being readily available most buyers are seeking financing on new deals. All cash buyers, which in previous years, had the advantage to move quickly and close transactions are now facing stiff competition from buyers who are financing deals. Abstractly, a buyer will value an investment at a 6 cap, leverage 75% at a 4% interest rate which provides an investor a levered cash-on-cash over 10%. This is an attractive proposition in a low-yield environment, especially as inflation risks emerge given the unprecedented pace of synchronized central bank liquidity injections. WHAT TYPE OF RETURNS ARE INVESTORS LOOKING TO ACHIEVE Investors return requirements will vary on location and the asset class. In general an investor will underwrite to at least a five yearhold period and seek a steady predictable cash flow generating a 6.0% to 8.0% allcash IRR provides a solid alternative to the opportunistic and more risky investments that took place in the last cycle as investors stretched for yield. On a levered basis IRR s are around 15%. With attractive debt options, many buyers are taking advantage of the low interest rates to finance the properties which will provide them more attractive returns. CONCLUSION Multi-housing properties are undoubtably the strongest and most desired commercial property type by investors in South Florida. Higher rents and occupancies, cheap debt, abundant investors, limited for sale product, and historically low cap rates are continuing to drive pricing. As in previous years, multi-housing properties continue to be the unmatched, preferred asset class for commercial real estate investors. Unusually the current market conditions provide an opportune time for both buyers and sellers. If you are thinking of selling, low cap rates and a high amount of investors will provide you premium pricing. Conversely, attractive financing and anticipated future improved property performance provide an ideal opportunity for buyers. Alternatively, multi-housing owners that have any debt maturing over the next five years should evaluate from both a disposition and refinance perspective to determine what is their best investment strategy. This report is produced by Calum Weaver with CBRE in Miami. Calum exclusively focuses on the marketing and disposition of multi-housing properties on behalf of private owners in South Florida. Over the past four years, Calum has participated in the sale and marketing of more than 45 multi-housing properties (from $500,000 to $59 million) totaling over $300 million in total volume. 6

7 CBRE Capital Markets Multi-Housing Finance Update WEEKLY UPDATE: Week of February 18, 2013 Multi-Housing Group Charles Foschini Christopher Apone Debt & Equity Finance For more information on Debt our team, & Equity Finance please visit Lending For Private Investors Agency Briefs A Synopsis of Current Trends The good news on the private capital front is that more nonrecourse lenders have entered the market to lend on smaller In America we have moved from the drama of the election, to the assets and loan sizes that range from $1 Million to $10 Million. There have always been local and regional banks will- ing to lend capital on a recourse basis to this segment of the market but there typically was a dearth of capital on the nonrecourse side. Several new small balance CMBS lenders are now in slow the economic market recovery and will and quote disappointing loans as job small market. as $2 While Million. job creation results have been revised upward over the past few months, In addition, a number of banks are now lending capital on a the unemployment rate also ticked up to 7.9% as more unemployed non-recourse people returned basis to at the competitive market. Expectations terms with are that loans the as Fed small will as $750,000. The information listed in the tables below outline the general long term terms rates, we spur are spending seeing and from investment, these and lending encourage sources: hiring. Fed Vice Chairwoman Janet Yellen, a leading candidate to Small succeed Balance Ben Bernanke CMBS as Chair of the Fed when his term expires in Maximum January Leverage 2014, recently 75% endorsed LTV the current approach of the Fed buying approximately $85 billion a month of treasury and mortgage Minimum loan size - $2 Million backed securities. While there is an emerging faction at the Fed Loan advocating Terms 5, an 7, end and to these 10 years bond-buying programs by midyear, most Amortization market observers 30 years put any major policy adjustment into 2014 as long Interest Rate 4.0% to 4.5% Pre-Payment Typically 2 year lockout followed by defeasance Yields on treasury securities have increased approximately 40 bps from the beginning of 4Q2012, and now have settled into a trading range around 2% for the ten year UST. Credit spreads have remained Bank Lender Maximum at the low Leverage end of their 65% historical (can ranges. go to Agency 80% and with CMBS partial spread recourse compression to borrower) have taken some of the sting out of rising yields on Minimum USTs. Thus loan the size typical - $1 75% Million LTV GSE loan is getting done just under 4%, while low leverage loans are in the 3.25% % range. Full Loan Terms 3, 5, 7, and 10 years Amortization are around 3.00% incredible years positive leverage. Interest Rate 3.75% to 4.5% Pre-Payment Conference Flexible, season for but the industry typically concluded a step down last week structure in San Diego i.e. 5%, 4%, where 3%, the Annual 2%, 1%, MBA Par CREF/Multifamily Conference took place. Like the mood at the CREFC and NMHC Conferences that occurred in January, the mood at the MBA Conference was downright For loan sizes larger than $3 Million and for assets that meet bullish. CBRE has had over 70 organized meetings with debt capital the criteria, providers, the and agency all of the lenders lending continue groups have to said be they a very want compelling choice increase for their multifamily allocations and borrowers. volumes in Agency Life debt Insurance continues to to be Companies, a reliable Commercial and attractive banks, option CMBS Lenders, for multifamily Debt Funds, borrowers looking Bridge Lenders to acquire and the or Agencies refinance all have assets capacity in South and a Florida. desire to Yields on treasury securities have increased approximately 40 up. Multifamily loans continue to be in high demand as the market bps from fundamentals the beginning continue to of be 4Q2012, positive for apartments, and now even have though settled into a rent trading growth range may be around slowing and 2% vacancies for the may ten tick year up UST. modestly. Credit spreads The have one consistent remained concern stable expressed after a by powerful most of our rally lenders in the is a last quarter view of that 2012 interest and rates are will now rise at this the year. low Many end forecast of their a ten historical year ranges. UST Agency yield of 2.5% and by CMBS the end spread of the year, compression so it may be prudent have taken to get some of the sting out of rising yields on USTs. Thus the typical tight by historical averages, we expect any increase in UST yields will 75% LTV GSE loan is getting done just under 4%, while low leverage competitive loans lender are in landscape the 3.25% is changing, % it range. pays to use Full your leverage CBRE seven year loans are still around 3.5% and five year loans are around property. 3.00% incredible positive leverage. Conference season for the industry concluded last week in San Diego where the Annual MBA CREF/Multifamily Conference took place. Like the mood at the CREFC and NMHC Conferences that occurred in January, the mood at the MBA Conference was downright bullish. CBRE has had over 70 organized meetings with debt capital providers, and all of the lending groups have said they want to increase their allocations Econ and volumes Update in Life Insurance Companies, Commercial Economic banks, reports CMBS Lenders, due this Debt week Funds, Bridge Lenders and the Agencies all have capacity and a desire to lend more in Monday, This increased February liquidity 18: in the debt markets will benefit all borrowers this year as we expect competition will heat US Holiday: President s Day - All Markets Closed up. Multifamily Tuesday, loans February continue 19: to be in high demand as the market Housing fundamentals Market Index continue - 10:00AM to be positive ET 3-Month for apartments, Bill Auction - 11:30AM rent growth ET may 6-Month be slowing Bill Auction and - 11:30AM vacancies ETmay tick up Wednesday, modestly. The February one consistent 20: concern expressed by even though most of Housing our lenders Starts - is 8:30AM a view ET that Producer interest Price rates Index will - rise this year. Many 8:30AM forecast ET 4-Week a ten year Bill Auction UST yield - 11:30AM of 2.5% ET by FOMC the end of the Minutes year, so - 2:00PM it may be ET prudent to get deals financed before rates Thursday, go up. February Since credit 21: spreads are already tight by historical Consumer averages, Price we Index expect - 8:30AM any increase ET Jobless in UST Claims yields - will be passed 8:30AM along ET to PMI the Manufacturing borrower. Since Index the Flash market - 8:58AM is in flux and the ET competitive Existing Home lender Sales landscape - 10:00AM is ET changing, Philadelphia it pays to use your Fed CBRE Survey finance - 10:00AM professional ET EIA Petroleum to help you Status find Report the best - capital 11:00AM solution ET for your 30-Yr property. TIPS Auction - 1:00PM ET Friday, February 22: CBRE Capital Jerome Powell Markets Speaks originated over $11.4 billion of multifamily loans in 2012 with over 189 lenders. The MBA Commercial/Multifamily Mortgage Origination Survey confirms that CBRE was the largest Agency originator in America in 2012 with over $8.9 billion in volume. While we are best in class in the Agency space, we also placed 21% of our 2011 volume with non-agency sources. Our ability to canvass the market for the best multifamily debt capital for our clients is unsurpassed. Lending Rates FIXED RATE PRICING FIXED RATE PRICING Key Key Rates Rates Freddie Mac Leverage 1.25x/80% 1.35x/65% Leverage 1.05x*/80% Term Spread Rate Spread Rate Term Spread Rate Max Rate 5 year* 2.55% % 3.41% % 2.30% % 3.16% % 7 year 3.37% 3.57% 7.00% 7 year 2.42% % 3.78% % 2.17% % 3.53% % Priced over 1 month Libor. Prepayment 10 year 2.11% % 4.11% % 1.86% % 3.86% % 3%, 2%, 1%, then 1% thereafter. *Based on a stressed interest rate. Pricing based on standard yield maintenance. *DSCR/LTV parameters may vary on 5 year structures. Fannie Mae Leverage 1.25x/80% 1.35x/65% Leverage 1.00x**/80% Term Spread Rate Spread Rate Term Spread Rate Max Rate 5 year* 2.54% % 3.40% % 2.34% % 3.20% % 7-6 ARM* 3.12% 3.32% 7.60% 7 year 2.37% % 3.73% % 2.17% % 3.53% % *Prepay consists of 1 year lockout, 1% 10 year 2.10% % 4.10% % 1.90% % 3.90% % thereafter. **Based on the max interest rate. Pricing based on standard yield maintenance. *DSCR/LTV parameters may vary on 5 year structures. Apartment New Construction Term Leverage* Spread (10-YR T) /83.3% 0.90% 3.55% /83.3% 0.65% 3.25% Healthcare New /75% 0.90% 3.67% Construction /80% 0.65% 3.30% HUD FHA Recent Closings Transactions completed by CBRE s Multi-Housing Finance Team FLOATING RATE PRICING FLOATING RATE PRICING Rate** Pricing based on lock out for 2 years, then 8%, 7%, 6%, 5%, 4%, 3%, 2%, 1%, 0% thereafter. Over the yield of 10-year treasuries. Includes mortgage insurance premium of 0.45%-0.77%; based sheet preparation. *Market rate projects. Affordable transactions have lower DSC and higher loan ratios. **Rate includes MIP. MIP has increased, effective October 1, The new MIP rates, included in the overall rate, are: Formerly Effective 10/1/12 Apartment New Construction/Sub Rehab.45%.65%.45% *.60% Healthcare New Construction/Sub Rehab.57%.77%.50% *.65% The rates for Freddie Mac, Fannie Mae and HUD FHA as published are indicative only, based on information collected and are subject to change at any time without notice. Freddie Mac, Fannie Mae and HUD FHA price each loan individually. Freddie Mac and HUD FHA does not publish pricing. Freddie Mac, Fannie Mae and HUD FHA have not pre-approved any of these rates. 5.00% 5.00% 4.50% 4.50% 4.00% 4.00% 3.50% 3.50% 3.00% 3.00% 2.50% 2.50% 2.00% 2.00% 1.50% 1.50% 1.00% Current 90 Days Ago Current 1 Year Ago 90 Days Ago 1 Year Ago TREASURY YIELDS TREASURY YIELDS 1.00% 0.50% 3.50% 3.00% 5 year 7 year 10- year 30 year 5 year 7 year 10- year 30 year 0.50% 3.00% 5 year 7 year 10- year 30 year 5 year 7 year 10- year Recent Closings Transactions completed by CBRE s Multi-Housing Finance Team 30 year Click here to download charts. 7.50% 7.00% 7.00% 6.50% 6.50% 6.00% 6.00% 5.50% 5.50% 5.00% 5.00% 4.50% 4.50% 4.00% 4.00% 3.50% 90 Days Ago Current 1 Year Ago 90 Days Ago INTEREST RATES 25 Biscayne Park Miami, FL 214 $32,000,000 $149,533 CLOSING TYPE San Tropez Apartments LOAN AMOUNT Pembroke Pines, FL RATE 246 PURPOSE TERM AMORTIZATION $24,200,000 $98,374 MSA Feb Freddie Mac CME $67,410, % 7 2 yr I/O; 30 Amort. Fairfax, VA Polos East Apartments Jan Fannie Mae Fixed Orlando, FL $39,600, % $21,680, yr I/O; 30 Amort. $70,390 Tampa, FL Feb. Palmetto 2013 Place Apartments Bank Miami, $13,900,000 FL 1.96% 416 $20,370, yr I/O $48,966 Jacksonville, FL Feb Fannie Mae Floating Fairway View Apartments $23,900,000 Hialeah, FL 3.09% Fully Amort. Los Angeles, CA $16,220,000 $53,887 Feb Freddie Mac CME $39,925, % 7 1 yr I/O; 30 Amort. Metro San Second Plaza Miami, FL 90 $12,970,000 $144,111 Francisco, CA Feb CBRE HMF, Inc. Fountain Lakes at Bradenton $13,250,000 Tampa, FL 2.60% $12,700, Amort. San Jose, CA $63, % PROPERTY NAME LOCATION SIZE (SF OR UNITS) Current 1 Year Ago TRANSACTION AMOUNT INTEREST RATES - become effective with commencement of the second year of the mortgage loan. MIP Rates for all projects identi- HUD/FHA guidelines remain unchanged. PRICE PER SF UNIT Florida 3 Portfolio Miami, FL 1,217 $75,050,000 $61,668 Tallahassee Student Housing Tallahassee, FL 274 $8,000,000 $29,197 Fountain Square Apartments Lakeland, FL 148 $4,900,000 $33,108 7

8 CBRE MULTI-HOUSING MARKET UPDATE About the CBRE Multi-Housing Private Capital Group (PCG) in South Florida The CBRE Multi-Housing Private Capital Group specializes in the sale and financing of multi-housing properties on behalf of private investors in South Florida. The typical CBRE Private Capital Group deal size is between $1 to $20 million. Our clients private investors are typically individuals and partnerships who have their own capital at risk for the purpose of building personal wealth, and their investment goals are met by maximizing value in every assignment and by providing them the finest advisors in the industry. Based in Miami and Ft. Lauderdale, our team has completed in #1 excess of $9.4 billion in transactions, representing over multihousing buildings sales in and South 52,800 Florida There units throughout South Florida. is a 200 apartment By any metric, the CBRE Multi-Housing team is consistently ranked #1 in multi-housing sales in South Florida and nationally. With the most powerful platform in the marketplace, we provide unrivaled market knowledge to our clients. KEY FACTS 625 SANTANDER, CORAL GABLES :: 16 UNITS The T CBRE Multi-Housing team in South Florida consists of seven members. The team provides a fully integrated platform for selling and financing multi-housing properties. This allows our clients to evaluate all alternative investment strategies.whether you are looking to sell, finance or refinance your multi-housing property, CBRE offers the broadest scope of services to provide you the most comprehensive disposition solutions in South Florida and anywhere around the globe. There There is no other platform in the industry that can source buyers buyers as efficiently and effectively as CBRE. Our South Florida database includes detailed owner contact information for every multi-housing property over 10 units in South Florida. Coupled with 450 offices in more than 50 countries around the world, the CBRE platform is truly global providing access to the most local, national and international investors in the industry. For Calum more Weaver information, please contact Calum Weaver Richard Tarquinio T T calum.weaver@cbre.com richard.tarquinio@cbre.com 8