EL PASO MULTIFAMILY REPORT THIRD QUARTER 2017

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1 MULTIFAMILY REPORT THIRD QUARTER 2017 MARKET AT A GLANCE OCCUPANCY RATE 92.2% Up 60 bps since 3Q16 ASKING RENT $ 774 Unchanged since 3Q16 CONCESSIONS 1.6% Unchanged since 3Q16 OCCUPANCY AND RENT TRENDS APARTMENT OCCUPANCY RISES 60 BPS AMID HEALTHY LEASING ACTIVITY During the last four quarters, apartment demand exceeded completions by more than two to one, fueling a 60-basis-point increase in occupancy. Operators recorded metrowide occupancy of 92.2% by the end of the third quarter. Despite negative apartment demand in the third quarter, leasing activity remained net positive in the trailing 12 months with 1,240 newly occupied apartments, up 42% from one year prior. Multifamily completions totaled 451 units annually, with most of the new inventory concentrated in northeast El Paso. For the remainder of the year, another 232 apartments are scheduled to be delivered as the Bella Estancias phase II project is completed and all 214 units at North Loop Apartments come online in El Paso s Lower Valley near the Loop 375 freeway. Average rent remained consistent over the past three years; the quarterly average since third quarter 2014 was $774. Third quarter 2017 was no different; average rent was $774 per month, the same as one year prior. Meanwhile, effective rent reached $762 per month in the third quarter, as concessions remained stable to the year-ago rate of 1.6% of asking rent. 94% 93% OCCUPANCY AND RENT TRENDS $825 $800 92% $775 91% $750 90% $725 89% 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 Occupancy Rate Asking Rent Effective Rent $700

2 MULTIFAMILY REPORT DELIVERIES AND DEMAND DELIVERIES 350 Units YTD 3,000 2,000 DELIVERIES AND DEMAND NET ABSORPTION 983 1,000 Units YTD 0 *Year to date * Deliveries Demand ECONOMIC TRENDS 2016 UNEMPLOYMENT* BPS 5.1% 310.9k 2016 EMPLOYMENT* % 2016 EXISTING SFH SALES** % 7.4k $ 148.9k 1.63% 4.3% 2016 MEDIAN SFH PRICE** % YEAR TREASURY** BPS 318.4k 8.1k $ 150.1k 2.20% El Paso-area employment expanded 2.4% in the trailing 12 months ending August 2017 and outpaced national job growth of 1.4%. Area companies added 7,500 workers to local payrolls. The professional and business services sector accounted for the most growth, 2,100 new jobs, representing a 6.2% year-over-year increase. The financial activities industry had the greatest rate of growth, 7.9%, as 1,000 positions were filled. In the education and health services segment, 1,300 workers were hired, representing a gain of 2.9%. The sector was boosted by more than 300 jobs when the 106-bed The Hospitals of Providence Transmountain Campus in El Paso opened in January. The leisure and hospitality industry rounded out the high-growth sectors as 1,100 jobs were created, an expansion of 3.2%. The construction industry was supported by the $670 million William Beaumont Army Medical Center bringing an estimated 1,200 skilled laborers to the project. The 1.1-million-square-foot William Beaumont Army Medical Center is slated to complete in *August; **September U.S. ANNUAL RENT 28.2% share of wallet METRO ANNUAL RENT 20.2% share of wallet THIRD QUARTER 2017 BERKADIA

3 MULTIFAMILY REPORT SUBMARKET BREAKDOWN OCCUPANCY AVG RENT INCREASE AVG RENT NET ABSORPTION DELIVERED UNITS SUBMARKET NAME 3Q16 3Q17 3Q16 3Q17 3Q16 3Q17 3Q17 ANNUAL 3Q17 ANNUAL El Paso, TX 91.6% 92.2% -0.9% 0.0% $774 $ , TOTALS 91.6% 92.2% -0.9% 0.0% $774 $ , BERKADIA THIRD QUARTER 2017

4 CORPORATE HEADQUARTERS 521 Fifth Avenue 20th Floor New York, NY (646) Fax: (646) ALBUQUERQUE, NM AMBLER, PA ATLANTA, GA AUSTIN, TX BAKERSFIELD, CA BATON ROUGE, LA BETHESDA, MD BIRMINGHAM, AL BOCA RATON, FL BOSTON, MA CAMAS, WA CHARLESTON, SC CHATTANOOGA, TN CHICAGO, IL CLEARWATER, FL CLEVELAND, OH COLORADO SPRINGS, CO DALLAS, TX DENVER, CO DETROIT, MI EL SEGUNDO, CA FRESNO, CA HOUSTON, TX IRVINE, CA JACKSONVILLE, FL KANSAS CITY, MO LAS VEGAS, NV LENOX, MA LOS ANGELES, CA MARBLEHEAD, MA MIAMI, FL MIDVALE, UT MURRIETA, CA NASHVILLE, TN NEW YORK, NY NEWPORT NEWS, VA ORLANDO, FL PASADENA, CA PHILADELPHIA, PA PHOENIX, AZ PORTLAND, OR RALEIGH, NC RICHMOND, VA SACRAMENTO, CA SALT LAKE CITY, UT SAN ANTONIO, TX SAN DIEGO, CA SAN FRANCISCO, CA SCOTTSDALE, AZ SEATTLE, WA SHREWSBURY, NJ ST. LOUIS, MO TACOMA, WA TAMPA, FL TEMECULA, CA TEMPE, AZ TUCSON, AZ WOODLAND HILLS, CA HYDERABAD - INDIA* *Back Office Support 2017 Berkadia Proprietary Holding LLC Berkadia is a trademark of Berkadia Proprietary Holding LLC. Axiometrics is a trademark of Axiometrics Inc. Commercial mortgage loan origination and servicing businesses are conducted exclusively by Berkadia Commercial Mortgage LLC and Berkadia Commercial Mortgage Inc. This website is not intended to solicit commercial mortgage loan brokerage business in Nevada. Investment sales and real estate brokerage businesses are conducted exclusively by Berkadia Real Estate Advisors LLC and Berkadia Real Estate Advisors Inc. For state licensing details for the above entities, visit:

5 MULTIFAMILY REPORT SECOND QUARTER 2017 MARKET AT A GLANCE OCCUPANCY RATE 92.8% Up 40 bps since 2Q16 ASKING RENT Down 0.1% since 2Q16 $ 769 CONCESSIONS 1.6% Up 50 bps since 2Q16 OCCUPANCY AND RENT TRENDS ROBUST RENTAL DEMAND IN FIRST HALF OF 2017 AMID HEALTHY JOB CREATION Healthy rental activity outpaced deliveries in the El Paso metro area. A surge in apartment demand was observed in the first half of the year, following two quarters of negative absorption. Renters occupied 1,158 additional apartments from January through June of this year. The recent increase in demand supported the absorption of 568 units on an annualized basis. During the same time, multifamily developers delivered 423 units, as five apartment communities completed construction. The largest project to finish construction in the second quarter was the 150-unit Bella Estancias Phase II in northeast El Paso near Fort Bliss. For the remainder of the year, the North Loop development was scheduled to bring all 214 apartments online near the popular Feather Lake wildlife sanctuary in El Paso s Lower Valley. While newly leased units outpaced supply, occupancy ticked up 40 basis points to 92.8% in June, reaching the highest quarterly occupancy rate in the prior two-year period. Metrowide asking rent dipped 0.1% annually to $769 per month at the end of the second quarter. 95% 94% OCCUPANCY AND RENT TRENDS $900 $850 93% $800 92% $750 91% $700 90% 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 $650 Occupancy Rate Asking Rent Effective Rent

6 MULTIFAMILY REPORT DELIVERIES AND DEMAND DELIVERIES 301 Units YTD 1, DELIVERIES AND DEMAND NET ABSORPTION 1,158 Units YTD * *Year to date Deliveries Demand ECONOMIC TRENDS 2016 UNEMPLOYMENT* BPS 5.0% 308.4k 2016 EMPLOYMENT* % 2016 EXISTING SFH SALES** % 5.9k $ 149.9k 1.64% 5.4% 2016 MEDIAN SFH PRICE** % YEAR TREASURY** BPS 316.8k 2.9k $ 152.8k 2.19% El Paso-area employment expanded 2.7% annually through May of this year and outpaced national job growth of 1.6%. Area companies added 8,400 workers to local payrolls. The largest rate of growth occurred in the professional and business services sector, as 2,600 workers were hired, a 7.8% year-over-year surge. Substantial expansion was also present in the trade, transportation, and utilities sector, with 1,700 new jobs. This sector was boosted by hundreds of new hires at The Fountains at Farah, as the shopping center continued to add national restaurants and build out the Promenade area, where J.Crew Mercantile recently opened. Construction is underway in northwest El Paso on West Towne Marketplace with Walmart and Cabela s as future tenants and scheduled to open this fall. Tenet Healthcare s new hospital campus created 300 jobs, contributing to the 1,400 workers added to the education and health services employment segment. Businesses in the leisure and hospitality industry rounded out the high-growth sectors as 1,600 jobs were created, an expansion of 4.7%. *May; **June U.S. ANNUAL RENT 27.3% share of wallet METRO ANNUAL RENT 20.5% share of wallet SECOND QUARTER 2017 BERKADIA

7 MULTIFAMILY REPORT SUBMARKET BREAKDOWN OCCUPANCY AVG RENT INCREASE AVG RENT NET ABSORPTION DELIVERED UNITS SUBMARKET NAME 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q17 ANNUAL 2Q17 ANNUAL El Paso, TX 92.4% 92.8% -0.4% -0.1% $770 $ TOTALS 92.4% 92.8% -0.4% -0.1% $770 $ Berkadia Real Estate Advisors LLC Berkadia is a registered trademark of Berkadia Proprietary Holding LLC Document sources: Axiometrics; Moody s; Berkadia Research BERKADIA SECOND QUARTER 2017

8 CORPORATE HEADQUARTERS 521 Fifth Avenue 20th Floor New York, NY (646) Fax : (646) ALBUQUERQUE, NM AMBLER, PA ATLANTA, GA AUSTIN, TX BAKERSFIELD, CA BATON ROUGE, LA BIRMINGHAM, AL BOCA RATON, FL BOSTON, MA CAMAS, WA CAPISTRANO BEACH, CA CHARLESTON, SC CHATTANOOGA, TN CHICAGO, IL CLEARWATER, FL COLORADO SPRINGS, CO DALLAS, TX DC METRO DENVER, CO DETROIT, MI EL SEGUNDO, CA FRESNO, CA HOUSTON, TX IRVINE, CA JACKSONVILLE, FL KANSAS CITY, MO LAS VEGAS, NV LEAWOOD, KS LOS ANGELES, CA MANCHESTER, MA MARBLEHEAD, MA MEMPHIS, TN MIAMI, FL MIDVALE, UT NASHVILLE, TN NEW YORK, NY NEWPORT BEACH, CA NEWPORT NEWS, VA OKLAHOMA CITY, OK ONTARIO, CA ORLANDO, FL PASADENA, CA PHILADELPHIA, PA PHOENIX, AZ PORTLAND, OR RALEIGH, NC RICHMOND, VA SACRAMENTO, CA SALT LAKE CITY, UT SAN ANTONIO, TX SAN DIEGO, CA SAN FRANCISCO, CA SCOTTSDALE, AZ SEATTLE, WA SHREWSBURY, NJ ST. LOUIS, MO TACOMA, WA TAMPA, FL TEMECULA, CA TEMPE, AZ THE PLAINS, CA TROY, MI TUCSON, AZ TULSA, OK WAUKESHA, WA WOODLAND HILLS, CA HYDERABAD - INDIA* *Back Office Support

9 MULTIFAMILY REPORT FIRST QUARTER 2017 MARKET AT A GLANCE OCCUPANCY RATE 91.2% Down 50 bps since 1Q16 ASKING RENT $ 761 Up 0.3% since 1Q16 CONCESSIONS 2.4% Up 130 bps since 1Q16 OCCUPANCY AND RENT TRENDS ASKING RENT RISES ANNUALLY AS EMPLOYMENT EXPANDS 2.6% Renters absorbed 137 apartments in El Paso since the first quarter of During the same period, multifamily developers delivered 417 apartments as four apartment communities were completed, the newest of which was the 128-unit Desert Sky Townhomes. Construction was underway at North Loop apartments with 72 of the 214 units anticipated to come online in the third quarter of this year. While new supply outpaced absorption by three-fold in the metro, the occupancy rate dipped 50 basis points to 91.2% in March of From the first quarter of 2015 to the first quarter of 2016, average asking rent decelerated 1.2%. During the most recent four quarters, however, the rate of rent growth increased 0.3%. By March of this year, average asking rent in El Paso was $761 per month. Average renter concessions rose 130 basis points to 2.4% of asking rent, resulting in nine days of free rent annually, compared to four days of free rent one year ago. Effective rent ended the first quarter at $743 per month. 96% OCCUPANCY AND RENT TRENDS $850 94% $800 92% $750 90% 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 4Q16 $700 Occupancy Rate Asking Rent Effective Rent

10 MULTIFAMILY REPORT DELIVERIES AND DEMAND DELIVERIES 54 Units YTD DELIVERIES AND DEMAND 200 NET ABSORPTION 269 Units YTD * *Year to date Deliveries Demand ECONOMIC TRENDS 2016 UNEMPLOYMENT* % 0 BPS 5.1% 2016 EMPLOYMENT* k 2.6% 2016 EXISTING SFH SALES** MEDIAN SFH PRICE** YEAR TREASURY** k 7.0k -40.0% 4.2k $ 144.1k 7.6% $ 155.1k 1.89% 60 BPS 2.48% El Paso payrolls expanded 2.6% annually through January of this year as employers created 7,900 jobs. The largest rate of growth occurred in the financial activities sector as 1,100 workers were hired, an 8.8% surge. Substantial expansion was also present in the trade, transportation, and utilities sector, with 1,600 new jobs, equating to 2.4% annual growth. Government agencies, including Fort Bliss, augmented payrolls 2.3% with 1,600 newly created positions. In January 2017, Tenet Healthcare opened its $120 million, 300,000-square-foot hospital campus creating 300 new jobs, contributing to the 1,200 workers added to the education and health services employment segment. Construction is underway on Aldea, a 200-acre development to encompass retail, entertainment, hotel, and office space to be built in west El Paso. Up to $500 million will be invested in the urban-village style development. Additionally, a 2.8 million-square-foot regional entertainment district has been proposed near the Ysleta Port of Entry in east El Paso. *January; **March U.S. SHARE OF WALLET U.S. ANNUAL RENT 27.0% share of wallet METRO ANNUAL RENT 20.6% share of wallet FIRST QUARTER 2017 BERKADIA

11 MULTIFAMILY REPORT SUBMARKET BREAKDOWN OCCUPANCY AVG RENT INCREASE AVG RENT NET ABSORPTION DELIVERED UNITS SUBMARKET NAME 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 1Q17 ANNUAL 1Q17 ANNUAL El Paso, TX 91.7% 91.2% -1.2% 0.3% $759 $ TOTALS 91.7% 91.2% -1.2% 0.3% $759 $ Berkadia Real Estate Advisors LLC Berkadia is a registered trademark of Berkadia Proprietary Holding LLC Document sources: Axiometrics; Moody s; Berkadia Research BERKADIA FIRST QUARTER 2017

12 CORPORATE HEADQUARTERS 521 Fifth Avenue 20th Floor New York, NY (646) Fax : (646) ALBUQUERQUE, NM AMBLER, PA ATLANTA, GA AUSTIN, TX BAKERSFIELD, CA BATON ROUGE, LA BIRMINGHAM, AL BOCA RATON, FL BOSTON, MA CAMAS, WA CHARLESTON, SC CHATTANOOGA, TN CHEVY CHASE, MD CHICAGO, IL CLEARWATER, FL CLEVELAND, OH COLORADO SPRINGS, CO DALLAS, TX DENVER, CO DETROIT, MI EL SEGUNDO, CA FRESNO, CA HOUSTON, TX IRVINE, CA JACKSONVILLE, FL KANSAS CITY, MO LAS VEGAS, NV LENOX, MA LOS ANGELES, CA MARBLEHEAD, MA MIAMI, FL MIDVALE, UT MURRIETA, CA NASHVILLE, TN NEW YORK, NY NEWPORT NEWS, VA ORLANDO, FL PASADENA, CA PHILADELPHIA, PA PHOENIX, AZ PORTLAND, OR RALEIGH, NC RICHMOND, VA SACRAMENTO, CA SALT LAKE CITY, UT SAN ANTONIO, TX SAN DIEGO, CA SAN FRANCISCO, CA SCOTTSDALE, AZ SEATTLE, WA SHREWSBURY, NJ ST. LOUIS, MO TACOMA, WA TAMPA, FL TEMECULA, CA TEMPE, AZ TUCSON, AZ WOODLAND HILLS, CA HYDERABAD - INDIA* *Back Office Support

13 MULTIFAMILY REPORT THIRD QUARTER 2016 MARKET AT A GLANCE OCCUPANCY RATE 91.5% Down 110 bps since 3Q15 ASKING RENT $811 Down 0.1% since 3Q15 CONCESSIONS 1.5% Up 40 bps since 3Q15 OCCUPANCY AND RENT TRENDS JOB GROWTH SUPPORTS POSITIVE ABSORPTION DESPITE SUPPLY-SIDE PRESSURE From January to September, renters occupied 102 units on a net basis, which was well above the average annual absorption of 64 units from 2010 to Multifamily inventory expanded by 349 units year to date as two apartment communities completed construction in the third quarter. The 263-unit, mid-rise community of Santi Dwellings at Montecillo, located approximately two miles north of the University of Texas at El Paso, is in full lease up after the remaining 20 units came online. Builders delivered the final 37 apartments at the 262-unit Avalon West apartment community. Near downtown, construction is scheduled to begin in the fourth quarter at The Campbell Apartments, an 87-unit, five-story apartment community which includes approximately 3,650 square feet of ground-floor retail space. Since the beginning of the year, construction outpaced newly-occupied units by more than three-fold. It is anticipated that rental demand will rebound concurrent with sustained employment growth and absorption of recent deliveries. Average rent has remained fairly consistent over the past three years, hovering in the $805 range. Third quarter was no different, average rent checked in at $811 per month, essentially unchanged from one year prior. 96% OCCUPANCY AND RENT TRENDS $850 94% $825 92% $800 90% $775 88% 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 $750 Occupancy Rate Asking Rent Effective Rent

14 MULTIFAMILY REPORT DELIVERIES AND DEMAND DELIVERIES 349 Units YTD 2,000 1,000 0 DELIVERIES AND DEMAND NET ABSORPTION 102 Units YTD -1,000-2, * *Year to date Deliveries Demand ECONOMIC TRENDS 2015 UNEMPLOYMENT* BPS 5.0% 303.7k 2015 EMPLOYMENT* % 2015 EXISTING SFH SALES** % 7.2k $ 141.4k 2015 MEDIAN SFH PRICE** % 2.17% 5.0% YEAR TREASURY** BPS 310.4k 7.3k $ 142.8k 1.63% Recently, Fort Bliss underwent one of the most significant economic developments in El Paso history. A total of $5 billion was invested into modernizing the base. The project supported the addition of 11,500 new troops to the area, resulting in one in nine El Paso County residents having a direct link to Fort Bliss. Since August 2015 metro-area employment expanded 2.2% with the addition of 6,700 workers. Employers in the leisure and hospitality sector led job growth by hiring 2,100 workers, a 6.3% expansion. Destination El Paso, estimates El Paso hosts 2.96 million visitors annually with an economic impact of $1.6 billion in direct spending, up 6.9% in the past five years. Two new downtown hotels recently hired staff to support the upswing in El Paso s visitor and convention traffic. The upscale, $12 million, 119-room Hotel Indigo El Paso Downtown and the $10 million, 100-room Starwood Aloft Hotel both opened in the last 12 months. The largest employment sector, trade, transportation, and utilities, expanded 2.7% as 1,800 workers were recruited. *August; **September U.S. ANNUAL RENT 28.0% share of wallet METRO ANNUAL RENT 24.0% share of wallet THIRD QUARTER 2016 BERKADIA

15 MULTIFAMILY REPORT SUBMARKET BREAKDOWN OCCUPANCY AVG RENT INCREASE AVG RENT NET ABSORPTION DELIVERED UNITS SUBMARKET NAME 3Q15 3Q16 3Q15 3Q16 3Q15 3Q16 3Q16 ANNUAL 3Q16 ANNUAL El Paso, TX 92.6% 91.5% 1.0% -0.1% $812 $ TOTALS 92.6% 91.5% 1.0% -0.1% $812 $ Berkadia Real Estate Advisors LLC Berkadia is a registered trademark of Berkadia Proprietary Holding LLC Document sources: Axiometrics; Moody s; Berkadia Research BERKADIA THIRD QUARTER 2016

16 SECOND QUARTER 2016 VACANCY & RENT PERMITS & DELIVERIES EMPLOYMENT GROWTH VACANCY & RENT COMPARISON El Paso-area employment expanded 2.6% in the last four quarters and outpaced national job growth of 1.7%. Area companies added 7,900 workers to local payrolls. The trade, transportation and utilities sector accounted for the most growth, 1,700 new jobs, equating to a 2.7% year-over-year increase. This sector was boosted by hundreds of new hires at the North Hills Crossing shopping center that opened in mid-2015 in north central El Paso. By the end of 2017, hundreds of additional retail workers will be hired among the West Towne Marketplace in northwest El Paso and the Eastlake Marketplace in Horizon City. Meanwhile, hundreds of construction jobs are expected to be generated as those retail destinations are developed. The construction industry was supported by the $5 billion expansion under way at Fort Bliss. The leisure and hospitality industry had the greatest rate of growth, 4.9%, as 1,600 positions were filled. In the education and health services segment, 1,600 workers were hired, representing a gain of 3.8%. Professional and business services rounded out the high-growth sectors as 1,500 jobs were created, an expansion of 4.7%. Sales of single-family homes increased 1.1% in the last 12 months with 4,500 annualized transactions. During that time, the median home price dipped 0.1% to $143,200. Developers continued adding to the planning pipeline, requesting 2,420 annualized permits, down 4.3% from one year prior. Renters occupied 60 additional apartments in the metro area in the first half of this year. From 2000 to 2015, net absorption from January to June averaged 90 apartments. Multifamily completions totaled 60 units in the first half of 2016, all in northwest El Paso. For the remainder of the year, another 100 apartments are scheduled to be delivered as the Santi Dwellings at Montecillo development is completed and all 87 units at The Campbell Apartments come online just outside downtown El Paso. Confident in sustained economic growth and the resulting apartment demand in the near term, developers began ramping up multifamily development in the area. Permits were issued for 1,290 annualized apartments, a three-fold increase over one year prior. Already, planning activity was set to outpace 2015's total issuance of 1,800 permits. Operators recorded marketwide vacancy of 7.3% one year ago. Negative apartment absorption at the end of 2015 and the beginning of 2016 resulted in vacancy peaking at 8.2% at the end of the first quarter of this year. Subsequent absorption in the second quarter was positive, fueling a decrease in vacancy. In the second quarter of this year, the vacancy rate was 7.6%, 30 basis points higher than one year prior, though 60 points below the recent peak. Rising vacancy in the last 12 months hindered rent growth. Asking rent averaged $804 per month in the second quarter of 2016, the same as one year ago. During the same time, however, effective rent advanced 0.4% to $793 per month. Berkadia.com ApartmentUpdate.com EL PASO OFFICE Berkadia Real Estate Advisors LLC For sources & disclaimer: apartmentupdate.com/sources

17 FIRST QUARTER 2016 VACANCY & RENT PERMITS & DELIVERIES EMPLOYMENT GROWTH VACANCY & RENT COMPARISON El Paso-area employment advanced a healthy 3.3% since March of 2015 with the addition of 10,000 workers to payrolls. Vigorous hiring in the leisure and hospitality industry resulted in 2,600 new jobs, a 7.6% year-over-year surge. Staffing additions were nearly as great in the education and health services segment, where 2,400 jobs were filled, a gain of 5.3%. Substantial growth was also present in the trade, transportation and utilities sector with 2,000 new hires, representing a 2.9% expansion. The sector was boosted by hundreds of jobs created at the opening of the North Hills Crossing retail center in mid Companies in the white-collar industries created 2,000 jobs among the professional and business services, financial activities and information segments. Meanwhile, public-sector employment advanced 1.7% as 1,200 government workers were hired. The manufacturing industry was the sole employment sector with losses, as 400 positions were eliminated, resulting in contraction of 2%. Despite the losses in the segment, Schneider Electric, an electronics manufacturing firm, hired more than 190 workers in Metrowide unemployment was 4.7% in March, 60 basis points lower than one year prior. The local jobless rate decreased each month in the first quarter of this year. Single-family home prices dipped 0.7% annually to $140,700 at the end of the first quarter, compared to a 1.6% increase in the prior four-quarter period. Home buyers took advantage of favorable pricing as sales rose 20.2% year over year to 5,600 annualized transactions in March. Operators recorded negative absorption of 40 apartments in the first quarter. One year ago, absorption totaled 190 units. In three of the last five years, first-quarter absorption was negative, but rebounded to positive activity in the following quarter. Builders completed 40 multifamily units in the metro area so far this year, all at the 263-unit Santi Dwellings at Montecillo apartment community, located approximately two miles north of the University of Texas at El Paso. Another 110 units are projected to be delivered metrowide by year-end with the completion of the Santi Dwellings at Montecillo and the 87-unit Campbell Apartments, one block east of downtown El Paso. An apartment community in north central El Paso is in the planning stage and could result in 370 units added to inventory if completed. Multifamily developers demonstrated optimism in the local economy as planning activity surged in March. Permit requests were submitted for 1,390 annualized units compared to 210 annualized units issued one year prior. Issuance of permits in the last five years averaged 1,230 multifamily units. In the last four quarters, builders completed 270 apartments as negative absorption of 190 units was recorded. Consequently, metrowide vacancy rose from 7.2% to 8.3% during that time. Vacancy has increased each quarter since March of Asking rents dipped 0.6% year over year to $803 per month in March. Renter inducements increased as vacancy rose. Concessions reached 1.7% of asking rents by the end of the first quarter, up from 1.4% of asking rents one year prior. Berkadia.com ApartmentUpdate.com EL PASO OFFICE Berkadia Real Estate Advisors LLC For sources & disclaimer: apartmentupdate.com/sources

18 THIRD QUARTER 2015 VACANCY & RENT PERMITS & DELIVERIES EMPLOYMENT GROWTH VACANCY & RENT COMPARISON Metro-area employment expanded 1.5% since September of 2014 with the addition of 4,500 workers to payrolls. This increase surpassed a 0.7% annual gain in the prior 12-month period. More than one-third of job growth in the last four quarters was attributed to the education and health services sector, with 1,600 new hires, an increase of 3.7%. The largest employment sector, trade, transportation and utilities, expanded 2.2% as 1,500 workers were recruited. The leisure and hospitality industry was another economic driver, growing 4% with 1,400 newly created jobs. Hiring in the white-collar trades was uneven, as 600 positions were filled in the professional and business services segment, while a total of 300 workers were laid off among the financial activities and information sectors. Additional contraction occurred in the government and manufacturing sectors with a total of 400 jobs eliminated. Metrowide unemployment was 4.8% at the end of the third quarter, down 150 basis points from one year earlier. The median home price in the third quarter of this year was the highest on record. Existing median home values reached $144,600, 4% annual appreciation, offsetting the 1.5% price decline during the prior year. The trend in sales velocity was similar. After falling 2.8% from September of 2013 to September of 2014, sales activity rose 11.1% in the most recent four quarters to 5,400 annualized transactions. Meanwhile, planning activity decreased 13.9% year over year as developers filed permits for 2,310 annualized homes in September. Leasing activity totaled 430 apartments in the third quarter, following negative absorption of 15 units in the second quarter. So far this year, renters occupied 600 apartments, twice the average annual absorption from 2010 to Multifamily inventory will expand as two apartment communities are completed this year and construction on one development commences. Construction continued at the Santi Dwellings at Montecillo apartment community, located approximately two miles north of the University of Texas at El Paso. Builders completed approximately 50 units at the development in the third quarter. The 263-unit mid-rise community is expected to be completed in the fourth quarter of this year as the final 50 units come online. In the east side of the metro, builders delivered 90 units at the 120-unit The Quest at Edgemere apartment community, which will be completed by year-end. Near downtown, construction will begin in the fourth quarter at The Campbell Apartments, an 87-unit mid-rise development. Anticipating sustained apartment demand, multifamily developers ramped up planning activity. Permits were filed for 890 annualized apartments in September, significantly outpacing issuance of 60 permits one year earlier. During the last 12 months, apartment demand exceeded completions by 72.8%, fueling a 60-basis-point decrease in vacancy. Operators recorded metrowide vacancy of 6.9% by the end of the third quarter. The vacancy rate was the lowest since the third quarter of Asking rents reached $815 per month in September. Market rents advanced 2.6% annually compared to cuts in the two prior 12-month periods. Effective rents also increased 2.6% since the third quarter of 2014 as operators kept concessions at an average of 1.3% of asking rents. Berkadia.com ApartmentUpdate.com EL PASO OFFICE Berkadia Real Estate Advisors LLC For sources & disclaimer: apartmentupdate.com/sources

19 SECOND QUARTER 2015 VACANCY & RENT PERMITS & DELIVERIES EMPLOYMENT GROWTH VACANCY & RENT COMPARISON Employers in the El Paso metro area hired 300 workers in the 12 months ending in June of this year, a 0.1% annual increase. The most substantial growth was in the leisure and hospitality industry as 1,100 jobs were created, a 3.4% gain. In the education and health services segment, 1,000 workers were hired, equating to 2.4% growth. Meanwhile, 500 jobs were added for 0.7% expansion in the trade, transportation and utilities sector. Layoffs were most significant in the government sector, which lost 1,700 jobs and the financial activities industry, where 600 positions were eliminated. The local jobless rate was 20 basis points below the national average and 450 basis points below the postrecession peak of 9.6% in April of Metrowide unemployment fell 70 basis points from June 2014 to the end of the year. In the next six months, the rate descended another 70 basis points to 5.1% in June. Single-family home sales velocity rose 5.1% year over year with 5,500 annualized transactions in June. In comparison, the number of transactions fell 4.4% in the prior 12-month period. Single-family planning activity averaged 2,860 permits from 2010 to In June, issuance totaled 2,370 annualized permits, a 4.9% annual decrease. In the last five years, absorption averaged 320 apartments. So far this year, renters occupied 100 additional apartments. During the same period in 2014, there was negative net absorption of 170 units. In the first half of this year, builders completed approximately 150 units among the Santi Dwellings at Montecillo apartment community in northwest El Paso and The Quest at Edgemere development in northeast El Paso. Completions in the first six months of this year were down 47.6% compared to the first half of Over the next six months, 180 additional apartments are expected to be delivered metrowide. Permits were issued for an average of 1,180 apartments in the last five years. Developers curtailed multifamily planning activity in the first half of 2015, resulting in a 24% year-over-year reduction in permits. By June, year-to-date issuance totaled 440 permits, while approximately 370 identified units were in the planning pipeline. Metrowide vacancy rose 40 basis points since the end of the first quarter. Despite the recent increase, the rate was down 20 basis points from mid-2014, to 7.7% in June of this year. The annual decline in vacancy was fueled by leasing activity that outpaced completions by 22%. Market rent decreased 0.3% from mid-2013 to mid During the most recent four quarters, however, asking rents appreciated 1.3% to $796 per month. Meanwhile, effective rents advanced at a slower rate, a 1% increase to $781 per month, as concessions edged up from 1.7% to 1.9% of asking rents. Berkadia.com ApartmentUpdate.com EL PASO OFFICE For sources & disclaimer: apartmentupdate.com/sources

20 FIRST QUARTER 2015 VACANCY & RENT PERMITS & DELIVERIES EMPLOYMENT GROWTH VACANCY & RENT COMPARISON Employment expanded 2.5% since March of 2014 with the addition of 7,400 workers to local payrolls. The majority of this growth occurred in the first quarter of this year as payrolls expanded 2.3% since December. Brisk gains were recorded in the trade, transportation and utilities sector as 2,100 jobs were created through March of this year, a 3.1% annual increase. In the leisure and hospitality industry, 1,900 workers were hired, a gain of 5.6%. White-collar hiring totaled more than 2,400 new jobs among the education and health services, professional and business services and information sectors. Contraction was limited to the financial activities industry where 300 jobs were eliminated. Job growth in the last 12 months fueled a steep drop in unemployment in the El Paso metro area. The jobless rate plummeted from 7.6% in March of 2014 to 5.8% in March of this year. The median home price reached $142,100 at the end of the first quarter, a 1.9% year-over-year gain. Following a 1% decrease in sales activity from March of 2013 to March of 2014, sales velocity advanced 6.4% to 6,100 annualized transactions by the first quarter of this year, 11.5% greater than average annual velocity from 2010 to In the last 12 months, the single-family planning pipeline contracted 1.1% to 2,200 annualized permits. During the last 12 months, renters occupied 450 additional apartments in the metro area, a decrease of 58% from the prior 12-month period. Despite the reduction in leasing activity, year-to-date absorption is on pace to exceed average apartment demand of 330 units from 2010 to First-quarter apartment completions decreased 65.1% year over year as 78 units were delivered at the Santi Dwellings at Monticello apartment community. Nearly 200 additional apartments are expected to be completed metrowide by year-end. Approximately 60% of these additions to inventory will be in northeast El Paso, while the remainder will come online in northwest El Paso. Permits were requested for 270 apartments in the first quarter of this year. During the same period last year, issuance totaled six apartments. From 2010 to 2014, developers requested an average of 1,190 permits. In the last 12 months, apartment demand exceeded completions by 60.6%, fueling a decrease in vacancy. By the end of the first quarter, metrowide vacancy was 7.6%, 30 basis points lower than the same period last year. In the prior 12-month period, the vacancy rate fell 160 basis points. Year-over-year rent growth was up in the first quarter of this year, the first positive annual rent growth in nine quarters. Monthly rents ascended 0.8% since the first quarter of 2014 to $794 in March. During this time, effective rents grew 1.2% to $781 per month as concessions decreased from 2% to 1.6% of asking rents. Berkadia.com ApartmentUpdate.com EL PASO OFFICE For sources & disclaimer: apartmentupdate.com/sources

21 QUICK FACTS POPULATION 847, % EMPLOYMENT 294, % MEDIAN HOME PRICE $145, % MEDIAN HOUSEHOLD INCOME $39, % 2014 REVIEW Sustained employment growth and aggressive apartment development marked the El Paso economy in Employers added 6,100 workers to local payrolls, a 2.1% year-over-year gain. Losses were confined to the manufacturing and information sectors. The professional and business services segment expanded 3.3% with 1,000 new workers, bolstered by hiring at payroll services company ADP. The trade, transportation and utilities industry grew 3.3% as 2,100 jobs were created. The sector was supported by the Fountains at Farah regional lifestyle-shopping center which opened in November 2013 and continued to fill out this year with hundreds of new hires. Developers accommodated this job growth with an increase in new inventory last year. Completions totaled 600 rentals, the greatest annual deliveries since Leasing activity was negative in the first quarter of During the next three quarters, apartment demand was positive, resulting in full-year absorption of 420 units, a reduction of 15.8% from the prior year. Leasing activity from 2009 to 2013 averaged 470 rentals. Multifamily builders added 600 apartments to inventory in 2014, 18.6% greater than the combined deliveries in the prior two years. Approximately 160 units were completed in the 263-unit Santi Dwellings at Montecillo apartment community in northwest El Paso. The remainder of completions came online in the eastern portion of the metro area. In the Eastside Crossings community, approximately three-quarters of the development s 188 units were finished. Development was completed at three additional projects in eastern El Paso: the 154-unit Casitas del Este, the 102-unit Ardent Quest and the 26-unit La Hacienda at Villa Victoria II. Seeking to curb a temporary increase in vacancy, multifamily developers scaled back planning activity last year. Permits were requested for 600 apartments, a decrease of 85.1% from the prior year. Permitting activity from 2009 to 2013 averaged 1,140 units. Apartment completions outpaced leasing activity last year. Consequently, metrowide vacancy edged up 30 basis points since year-end 2013, reaching 7.6% in December. Asking rents advanced 1% to $800 per month in 2014, following a 2.1% decline the prior year. Concessions were 1.1% of asking rents in December, the same as year-end SALES VELOCITY AVERAGE PRICE PER UNIT 15 $100 $100, $75 $50 $25 $75,000 $50,000 $25, * $0 $ * TRANSACTIONS SALES VOLUME (MILLIONS) * Estimate * Estimate VACANCY & RENT COMPARISON VACANCY AVERAGE RENT INCREASE AVERAGE RENT SUBMARKETS El Paso 7.6% 7.3% 1.0% -2.1% $800 $792 TOTALS 7.6% 7.3% 1.0% -2.1% $800 $792 42

22 FORECAST 2015 VACANCY & RENT Apartment fundamentals are expected to improve alongside continued economic expansion in the El Paso area in the next two years. The construction industry, in particular, will benefit from ongoing development of the Union Pacific Rail Hub in nearby Santa Teresa. Approximately 1,000 construction jobs will be supported at the project through An additional 1,000 specialty trade and general labor positions will be filled through 2016 at the William Beaumont Army Medical Center at Fort Bliss. In northwest El Paso, another hospital will open in late 2016, supporting additional construction workers until completion. Once open, this teaching facility, owned by Tenet Hospitals, will hire 300 medical workers. The construction and medical jobs will be significant contributors to 5,900 new hires this year throughout the metro area, a 2% annual increase. Next year, 6,300 new jobs will be created, a gain of 2.1%. The sustained employment expansion will spur apartment demand, as renters will occupy 1,200 additional apartments through 2016, driving vacancy down. Operators will capitalize on increased demand by raising asking rents 3.4% during the next two years. 10% 5% 0% VACANCY RENT GROWTH Multifamily property sales activity, particularly among institutional-sized properties, has been limited in the last several years. This modest sales volume is expected to continue during the forecast period. Sales of assets with more than 200 units are primarily being targeted by out-of-state investors, while local and Texas-based buyers are usually concentrating on smaller properties, most of which are selling for under $10 million. These smaller assets often range in price from $25,000 to $45,000 per unit, depending on location and condition. Newer properties can command as much as $90,000 to $100,000 per unit. Apartment demand will rise this year and then drop off slightly next year. Nearly 700 apartments will be absorbed in 2015, an annual increase of 65.6%. Next, year, demand is projected to decrease 18.1% as 570 additional rentals are occupied. Multifamily builders will complete 160 rentals this year. The majority of this inventory will be located at the Eastside Crossings and the Santi Dwellings at Montecillo apartment communities which are projected to be completed in the first quarter of this year. In 2016, builders will deliver 510 units in the metro area. Planning activity will rise 59.4% this year as multifamily developers request permits for 960 apartments. Next year, issuance is forecast to decrease 26.9% as 700 permits are requested. -5% * 15** 16** Conventional Average Market Rents $800 $816 $829 * Estimate; ** Forecast PERMITS & DELIVERIES PERMITS DELIVERIES 1,600 1, Over the next 12 months, leasing will outpace completions by a wide margin, resulting in a rapid decrease in vacancy. By year-end, the metrowide rate will be 6.4%, a decline of 120 basis points. In 2016, vacancy is projected to fall an additional 20 basis points to 6.2%. Operators will take advantage of increased demand during the next 24 months, raising asking rents 2% this year and 1.7% next year. By the end of 2016, average rent will be $829 per month * 15** 16** * Estimate; ** Forecast JOB EMPLOYMENT GROWTH ABSORPTION GAINED I LOST 4% METRO U.S. 2, , , (800) 2009 (3,200) , , , , * 6, ** 5, ** 6,300 2% 0% -2% -4% * 15** 16** 1, ,250-2, * 15** 16** * Estimate; ** Forecast * Estimate; ** Forecast * Estimate; ** Forecast Data and images pertaining to employment, income, permits, population, rents, single-family housing and vacancy are year-end figures. Absorption, construction and apartment sales figures are full-year totals. Numbers for 2014 are estimated values, while 2015 and 2016 figures are forecast projections. The sales information represents transactions of apartment properties with a sales price of $1 million or more. Apartment market data criteria and methodologies vary by market. 43

23 2014 SALES SUMMARY SALES VELOCITY 2013 ANNUAL SALES VOLUME $35.4 M SALES VOLUME % -61.2% 2014 ANNUAL SALES VOLUME $13.8 M TRANSACTION COUNT AVERAGE PRICE PER UNIT AVERAGE CAP RATE SALES COMPARABLES MARKET HIGHLIGHTS Investors purchased two apartment communities in the El Paso metro area in 2014, unchanged from the number of assets bought in Sales volume totaled $13.8 million last year, down from $35.4 million in the prior year. The sale of a large property built in 2006 contributed to the elevated sales volume in 2013, whereas both properties traded in 2014 were 1980s stock. In 2013, the average price per unit was $70,668, 54.1% higher than the average price during the prior five-year period. This increase was due to the newer makeup of properties sold that year. In 2014, the average price per unit was $34,196, a decrease of 25.4% from the average price between 2008 and The multifamily buyer profile was similar from 2013 to 2014, with one buyer from Texas and one from Utah. One of the apartment communities sold in 2013 was resold 15 months later in Berkadia.com ApartmentUpdate.com EL PASO OFFICE For sources & disclaimer: apartmentupdate.com/sources