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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

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

Conference Call for Lehman Brothers

July 10, 2008

agenda for call
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

u s apartment market update

U.S. Apartment Market Update

Conference Call for Lehman Brothers

July 10, 2008

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

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008

propensity to rent at a six year high steady in 1q08
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

single family rentals losing favor
Single-family rentals losing favor?

Source: Witten Advisors calculations

Conference Call for Lehman Brothers

July 10, 2008

apartment demand drivers easing

Apartment Demand Drivers Easing

Conference Call for Lehman Brothers

July 10, 2008

losses in 2008 2009 a mild recovery year
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

april 2008 actuals job growth highlights
Employment Growth

12 Months ending April 2008

Houston 71.1k

Dallas 47.4k

Atlanta 28.6k

Washington DC 28.4k

Raleigh 27.7k

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

wide rent buy spread still helps rental demand
Wide rent-buy spread still helps rental demand

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008

housing market remains overbuilt
Housing market remains overbuilt

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008

sf starts in freefall approaching 25 year lows
SF starts in freefall, approaching 25+ year lows

Source: U.S. Department of Commerce

Conference Call for Lehman Brothers

July 10, 2008

home prices plummeting more declines ahead
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

multifamily supply drivers muted

Multifamily Supply Drivers Muted

Conference Call for Lehman Brothers

July 10, 2008

mf financing volumes fall other re much more so
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

apartment cap rates rise but less than other re
Apartment cap rates rise, but less than other RE

Source: Real Capital Analytics

Conference Call for Lehman Brothers

July 10, 2008

are apartment values holding
Are apartment values holding?

Conference Call for Lehman Brothers

July 10, 2008

mf development cost picture is mixed
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

banks remain cautious about re lending in general
Banks remain cautious about RE lending in general

Source: Federal Reserve Board survey

Conference Call for Lehman Brothers

July 10, 2008

mf rental starts expected to pull back
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

outlook for the u s apartment market

Outlook for the U.S. Apartment Market

Conference Call for Lehman Brothers

July 10, 2008

demand lags net supply until mid 2009
Demand lags net supply until mid-2009

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008

occupancy rent growth ease in 2008 better in 2009
Occupancy, rent growth ease in 2008, better in 2009

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008

local market prospects

Local Market Prospects

Conference Call for Lehman Brothers

July 10, 2008

mid 2008 snapshot a tale of 3 markets
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

orlando too little growth too much housing
Orlando: Too little growth, too much housing

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008

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

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008

seattle from great to good as supply surge arrives
Seattle: From great to good as supply surge arrives

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008

most markets challenged before recovery in 2009
Most markets challenged before recovery in 2009

Source: Witten Advisors

Conference Call for Lehman Brothers

July 10, 2008

summary
Summary
  • 2008: Challenging
  • 2009: Turning the corner
  • 2010-2011: Return to strong market fundamentals

Conference Call for Lehman Brothers

July 10, 2008

questions

Questions

Conference Call for Lehman Brothers

July 10, 2008

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