2017 NMHC Apartment Strategies Outlook Conference January 24, 2017

Apartment Markets: A Deep Dive

2017 Forecast Completions

SUDDENLY, NOT SO HOT

EFFECTIVE RENT GROWTH BY SUBMARKETHOUSTON, TX

2014 2015 2016

Source: Axiometrics

EFFECTIVE RENT GROWTH BY SUBMARKETSAN FRANCISCO BAY AREA

2014 2015 2016

Source: Axiometrics

OVERSUPPLIED?

URBAN BOOM: BARRIERS TO ENTRY, NO MORE

SUPPLY IS LIMITING URBAN RENT GROWTH

DEMAND & RENEWAL TRENDS BEST IN TOP-TIER ‘BURBS

URBAN INVESTORS BANK ON APPRECIATION, NOT NOI

4.0% 4.5% 5.0% 5.5% 6.0%

CBD: Superior Job Growth Metro

CBD: Slow Job Growth Metro

SUBURB: High Rent/Superior JobGrowth Metro

SUBURB: High Rent/Inferior JobGrowth Metro

SUBURB: Low Rent/Superior JobGrowth Metro

SUBURB: Low Rent/Inferior JobGrowth Metro

NCREIF Income Return By Geography Type

10-Year Income Return 3-Year Income Return

0% 2% 4% 6% 8%

CBD: Superior Job Growth Metro

CBD: Slow Job Growth Metro

SUBURB: High Rent/Superior JobGrowth Metro

SUBURB: High Rent/Inferior JobGrowth Metro

SUBURB: Low Rent/Superior JobGrowth Metro

SUBURB: Low Rent/Inferior JobGrowth Metro

NCREIF Capital Return By Geography Type

10-Year Capital Return3-Year Capital Return

LATE TO THE PARTY

LATE-RECOVERY MARKETS CONTINUE TO SHINE

*Late Recovery Group includes Atlanta, Las Vegas, Orlando and Phoenix

SOLID GROWTH, BUT...

WHAT HAPPENS IF WE CHANGE THE SCALE?

DO YOU REALLY NEED TO BE > 4% TO BE “GOOD”?

ANNUAL RENT GROWTH (DECEMBER 2016)SEATTLE, WA

Source: Axiometrics

4%

6%

ANNUAL RENT GROWTH (DECEMBER 2016)SOUTHERN CALIFORNIA

Source: Axiometrics

6%

4%

STEADY EDDIE

2016 OCCUPANCY RATES

Source: Axiometrics

Minneapolis 96.9%

New York 96.6%

Miami 96.4%

Anaheim 96.2%

San Diego 96.2%

National 95.0%

TWO FACTORS LET’S ALL AGREETO STOP WORRYING ABOUT

DON’T BUY THE “AFFORDABILITY CRISIS” HEADLINES

Based on Rent Roll Data for Market-Rate Apartments in the U.S.

RENT-TO-INCOME RATIOS HIGHEST IN CHEAPEST UNITS

Based on Rent Roll Data for Market-Rate Apartments in the U.S.

AFFORDABILITY VARIES BY RENTER PROFILE

Based on Rent Roll Data for Market-Rate Apartments in the U.S.

SINGLE-FAMILY HOUSING IN DALLAS, TX

Source: Axiometrics, Wall Street Journal

BIG QUESTIONS

Slide Number 1Slide Number 2SUDDENLY, NOT SO HOTEffective rent growth by submarket�Houston, txEffective rent growth by submarket�San Francisco bay areaoversupplied?Urban boom: Barriers to entry, no moreSupply is limiting urban rent growthDemand & renewal trends best in top-tier ‘burbsUrban investors bank on appreciation, not NOILATE TO THE PARTYlate-recovery markets continue to shinesolid growth, but...What happens if we change the scale?��Do you really need to be > 4% to be “good”?Annual rent growth (December 2016)�Seattle, WAAnnual rent growth (December 2016)�Southern Californiasteady eddie2016 Occupancy ratesTwo factors let’s all agree�to stop worrying aboutDon’t buy the “affordability crisis” headlinesRent-to-income ratios highest in cheapest unitsAffordability varies by renter profileSingle-family housing in dallas, txBig questions