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U.S. Apartment Markets: Is the Bad News True? Agenda for Call National Market Overview Market Update Demand Drivers Supply Drivers Rental Market Outlook Local Market Prospects A Tale of Three Markets The Landscape from Here Q&A U.S. Apartment Market Update

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U s apartment markets is the bad news true l.jpg

U.S. Apartment Markets:Is the Bad News True?

Conference Call for Lehman Brothers

July 10, 2008


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Agenda for Call

  • National Market Overview

    • Market Update

    • Demand Drivers

    • Supply Drivers

    • Rental Market Outlook

  • Local Market Prospects

    • A Tale of Three Markets

    • The Landscape from Here

  • Q&A

Conference Call for Lehman Brothers

July 10, 2008


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U.S. Apartment Market Update

Conference Call for Lehman Brothers

July 10, 2008


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1Q occupancy off less than expected; rent growth just shy of forecast

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008


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Propensity to rent at a six-year high; steady in 1Q08

Source: U.S. Department of Commerce

Conference Call for Lehman Brothers

July 10, 2008


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Single-family rentals losing favor?

Source: Witten Advisors calculations

Conference Call for Lehman Brothers

July 10, 2008


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Apartment Demand Drivers Easing

Conference Call for Lehman Brothers

July 10, 2008


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Losses in 2008; 2009 a mild recovery year

Source: Historical data from U.S. Bureau of Labor Statistics; consensus forecast

Conference Call for Lehman Brothers

July 10, 2008


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Employment Growth

12 Months ending April 2008

Houston 71.1k

Dallas47.4k

Atlanta 28.6k

Washington DC 28.4k

Raleigh27.7k

Seattle 27.6k

Riverside-17.9k

Orange County -19.7k

Detroit-50.9k

April 2008 Actuals:Job Growth Highlights

Employment Growth Rate

12 Months ending April 2008

Raleigh+3.5%

Houston+2.8%

Austin+2.7%

San Francisco+2.3%

San Antonio+2.3%

Dallas+2.3%

Fort Worth+2.2%

Salt Lake City +2.2%

Source: U.S. Bureau of Labor Statistics

Conference Call for Lehman Brothers

July 10, 2008


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Wide rent-buy spread still helps rental demand

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008


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Housing market remains overbuilt

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008


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SF starts in freefall, approaching 25+ year lows

Source: U.S. Department of Commerce

Conference Call for Lehman Brothers

July 10, 2008


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Home prices plummeting; more declines ahead

Source: Calculated from OFHEO home price series 1976-1987; Case-Schiller home price series1988+; forecast by Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008


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Multifamily Supply Drivers Muted

Conference Call for Lehman Brothers

July 10, 2008


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MF financing volumes fall; other RE much more so

Source: Flow of Funds Report, Federal Reserve Board

Conference Call for Lehman Brothers

July 10, 2008


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Apartment cap rates rise, but less than other RE

Source: Real Capital Analytics

Conference Call for Lehman Brothers

July 10, 2008


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Are apartment values holding?

Conference Call for Lehman Brothers

July 10, 2008


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MF development cost picture is mixed

Sources: U.S. Bureau of Labor Statistics, Federal Reserve Board study

Conference Call for Lehman Brothers

July 10, 2008


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Banks remain cautious about RE lending in general

Source: Federal Reserve Board survey

Conference Call for Lehman Brothers

July 10, 2008


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MF rental starts expected to pull back

Predicted starts based on return on new development relative to U.S. Treasuries and inflation, availability of debt and equity financing

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008


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Outlook for the U.S. Apartment Market

Conference Call for Lehman Brothers

July 10, 2008


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Demand lags net supply until mid-2009

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008


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Occupancy, rent growth ease in 2008, better in 2009

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008


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Local Market Prospects

Conference Call for Lehman Brothers

July 10, 2008


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Mid-2008 Snapshot: A Tale of 3 Markets

  • Orlando FL: Too little growth, too much housing

  • Dallas TX: Strong economy, easy to buy, starts peaking?

  • Seattle WA: From great to good as supply surge arrives

Conference Call for Lehman Brothers

July 10, 2008


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Orlando: Too little growth, too much housing

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008


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Dallas: Strong economy, easy to buy, starts peaking?

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008


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Seattle: From great to good as supply surge arrives

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008


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Most markets challenged before recovery in 2009

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008


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Summary

  • 2008: Challenging

  • 2009: Turning the corner

  • 2010-2011: Return to strong market fundamentals

Conference Call for Lehman Brothers

July 10, 2008


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Questions

Conference Call for Lehman Brothers

July 10, 2008


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