Why Purpose Built Single Family Rentals? January 11, By: Tim Sullivan Meyers Research LLC

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1 Why Purpose Built Single Family Rentals? January 11, 2018 By: Tim Sullivan Meyers Research LLC

2 Of the 117 Million Units in U.S., 36% are Rented

3 U.S. Homeownership Rate Near a 20-Year Low

4 28% of Rental Units (~12 Million) are SFD Renter-Occupied Housing Units

5 NMHC & NAA: 4.6M Apt Units Needed by 2030 Source: National Multifamily Housing Council 39 million people live in apartments In one million new renter households were formed every year for last five years Need at least 325,000 new apartment homes every year to meet demand; yet, on average, just 244,000 apartments annually were delivered from 2012 through 2016). Some factors that are leading to the increased demand for rental units include: Delayed home purchases The aging population Immigration

6 Single Family Rental Offers Further Segmentation

7 Single Family Rental REITs Concentrated in West and South Top 3 = 127K units Source: CartoDB, Evercore ISI

8 American Homes 4 Rent Portfolio Overview American Homes 4 Rent s portfolio includes 20 major MSAs, led by Dallas-Fort Worth and Atlanta (8% to 9% of their total portfolio in each). It should be noted that AH4R also owns over 7,000 homes in other MSAs, totaling 15% of the portfolio. The highest lease rates are being achieved in Chicago ($1,740 per month on average), while the highest occupancy rates are in Phoenix, Las Vegas and Salt Lake City (+/-97%). Source: Evercore ISI

9 Invitation Homes Portfolio Overview Invitation Homes portfolio includes 13 geographic regions, led by Atlanta (15.6% of the total portfolio). It should be noted that INVH uses large geographic regions to define their home locations such as Northern California, Southern California and South Florida each of these regions contain several MSAs. The highest lease rates are being achieved in Southern California and South Florida ($2,197 and $2,169 per month on average), while the highest occupancy rates are in Northern California (97.3%). Source: Evercore ISI

10 Investor Segmentation by Volume Source: Investability Solutions Up to this point, Institutional REITs control ±2% of the SFR market

11 Meyers Competitive Ranking Scenario A The table below includes the ranking and percentage point score for all 56 MSAs in Scenario A, a blended considers absolute values and growth rates. Houston, Dallas, Atlanta, Orlando and Phoenix have tremendous markets offer robust job growth and a high percentage of lower-income households (renters, not buyers) making worth considering for a single family rental development strategy. It is also worth noting that a smaller market Coral-Ft. Myers, Florida ranks relatively high in the Scenario A analysis (9th). approach that upside. These these markets such as Cape

12 Top Segments in the Phoenix MSA: Ideal for SF Rentals The top psychographic profiles in the Phoenix MSA are Up and Coming Families and The Elders, which both represent single family home dwellers, but both are predominately home owners rather than renters. The third and fourth segments are Young and Restless and Barrios Urbanos, which have ownership rates that are below average (60% or less). Metro Fusion and Bright Young Professional round out the top 10, and both of these categories have a low homeownership rate (24% and 43%).

13 Purpose Built Single Family Rental Communities Active purpose built single family rental communities are shown below, including developments by BB Living (red) and Avilla (purple). Generally these communities are located in solid suburban areas of the Phoenix MSA (good schools, low crime areas).

14 Phoenix Rental Submarkets

15 Phoenix Single Family Rentals by Submarkets Single family homes are summarized by submarket below. North Scottsdale offers the highest volume of listings (1,130) and also has a wide variety of rental rates ($1,150 to $25,000).

16 Phoenix Single Family Rentals in Maricopa County Individual single family homes that are currently listed for rent in Maricopa County (per MLS) are detailed on the map below. The majority of rentals in the central Phoenix area are in the $1,000 to $1,999 range (orange), while higher priced rentals in the $2,000 to $2,999 range (yellow) are concentrated in Tempe, Chandler, North Phoenix and Sun City/ Surprise/ Peoria. Scottsdale clearly offers higher priced rentals, with many priced at $5,000 and up (purple).

17 Single Family Rental Listings Summary Source: MLS, Zillow

18 Product Examples

19 Single Family Rental Community Profile: Avilla Preserve 184 units 93% leased 1, 2, 3 bedrooms $965 - $1,350/mo. Tucson, Arizona Opened 2013 Detached garage Source: Avilla Homes

20 Duplex Rental Community Profile: BB Living at Vistancia 136 units 90% leased 3-4 bedrooms $1,500 - $1,700/mo. Peoria, Arizona Opened Early ,500 1,600 SF

21 Townhome Rental Community Profile: BB Living at Verrado 135 units Attached garage $1,500 - $1,950/mo. Buckeye, Arizona Opened March ,750 2,470 SF

22 The Compelling Case for Purpose Built SF Rental Expands community segmentation Appeals to multiple market segments Product flexibility Detached deconstructed apartments (SF with attached 2-car garages) Attached: townhome or duplex Note: think about garage impacts Economic motivations for residents No down payment No mortgage qualifying process Monthly payment driven Sociological motivations for residents Flexible: can test drive a location Entré to a community Can present a higher quality lifestyle than what a purchase would afford Economic considerations for owner/landlord SF renters stay in place longer than apartment dwellers SF renters also typically have higher incomes than apartment renters Purpose built SF detached has much lower maintenance costs than older products owned by REITS

23 The Competitive Landscape for Renters