3/18/2012 WELCOME. Stephanie Sanker, CCIM, SIOR S.L. Nusbaum Realty Co.

Transcription

1 E.V. Williams Center for Real Estate and Economic Development (CREED) Old Dominion University Presents the 17 TH ANNUAL HAMPTON ROADS REAL ESTATE MARKET REVIEW AND FORECAST Wednesday, March 14, 2012 WELCOME John R. Lombard, Ph.D. Director E.V. Williams Center for Real Estate and Economic Development CREED Chair Department of Urban Studies and Public Administration Old Dominion University Stephanie Sanker, CCIM, SIOR S.L. Nusbaum Realty Co. Chair E.V. Williams Center for Real Estate and Economic Development (CREED) Gilbert R. Yochum, Ph.D., Dean College of Business & Public Administration, Old Dominion University Program Moderator 17 TH Annual Hampton Roads Real Estate Market Review and Forecast 1

2 Industrial Review Office Review Retail Review Special Thanks to the 2012 MARKET REVIEW PUBLICATION COMMITTEE Bill Throne, Cushman & Wakefield THALHIMER Stephanie Sanker, S.L. Nusbaum Realty Co. Casey J. O Hearn, Jones Lang LaSalle David Machupa, Cushman & Wakefield THALHIMER Kyllie Brinkley, CREED, Old Dominion University David Chapman, Department of Urban Studies and Public Administration, ODU Multi Family Review Charles Dalton, Real Data Residential Review New Homes Existing Homes Ron Wildermuth and Blair Hardesty, Residential DataBank James Pritchard, REIN Inc. Capital Markets & Real Estate Finance Review Victor L. Pickett, GRANDBRIDGE REAL ESTATE CAPITAL, LLC Special Thanks to the 2012 MARKET REVIEW EDITORIAL COMMITTEE Kyllie Brinkley David Chapman Albert Duncan Brian Dundon Nancy Gossett Dove Elizabeth Hancock Janice Hurley Joy Learn John Lombard Maureen Rooks Brad Sanford Lane Shea Kristi Sutphin 2

3 Chair Director Membership Chair Publications Chair Sponsorship Chair Curriculum Co Chairs By Laws Chair Past Chair At Large 2011/2012 CREED Executive Committee Officers Stephanie Sanker, S.L. Nusbaum Realty Co. John Lombard, CREED Craig Cope, Liberty Property Trust Brian Dundon, Dundon & Associates Candi James, HBA Architecture & Interior Design, Inc. Jon Crunkleton, Ph.D., Faculty Emeritus, ODU Brad Sanford, Dominion Realty Advisors, Inc. E. Andrew Keeney, Kaufman & Canoles, PC Brad Sanford Tom Dillon Billy King, Harvey Lindsay Commercial Real Estate WELCOME NEW CREED MEMBERS Judy Boone Judy Boone Realty Tom Elder Hampton Roads Economic Development Alliance Charles E. Rigney, Sr. City of Norfolk Department of Development Worth Remick CB Richard Ellis Hampton Roads Michael Zarpas Global Real Estate Investment Inc. Industry Professional Advisors to the Center IPAC Honorary Member Robert M. Stanton, CSM and CPM Stanton Partners, Inc. Jeff Ainslie Ainslie Group G. Robert Aston, Jr. TowneBank Ramon W. Breeden, Jr. The Breeden Company Sanford (Sandy) M. Cohen Divaris Real Estate, Inc. Craig Cope Liberty Property Trust Cecil V. Cutchins Olympia Development Corporation Robert L. Dewey Willcox & Savage, PC Thomas M. Dillon N. Joseph Dreps BB&T Pamela J. Faber BridgeTrust Title Joel T. Flax, CPA Dixon Hughes Goodman LLP David M. Gianascoli Gee s Group Real Estate Development John L. Gibson, III Ellis Gibson Development Group Warren Harris City of Virginia Beach Economic Development Miles B. Leon S. L. Nusbaum Realty Company Michael W. McCabe Harvey Lindsay Commercial Real Estate Jeremy McLendon, MBA CONTINENTAL Capital Management Michael Newsome Clark Whitehill Enterprises, Inc. Harrison J. Perrine Perrine Investments Victor L. Pickett Grandbridge Real Estate Capital, LLC Thomas E. Robinson Robinson Development Group Jim V. Rose Rose & Womble Realty Co., LLC Bradley R. Sanford, MAI Dominion Realty Advisors Burrell F. Saunders, AIA, IIDA, NCARB Lyall Design Architects Reese Smith, Sr. Reese Smith & Associates Tony Smith Robinson Development Group Deborah K. Stearns, CPM, SIOR Harvey Lindsay Commercial Real Estate Richard Thurmond William E. Wood & Associates Jon S. Wheeler Wheeler Interests Robert T. Williams Tri City Developers, LLC Steven Wright City of Chesapeake Economic Development CREED Council J. Scott Adams, CCIM William G. Darden Carl Hardee April Koleszar CB Richard Ellis/Hampton Roads Hearndon Construction Co. Lawson Realty Corporation Koleszar Properties, Inc. Tom Atherton Laura B. de Graaf John C. Harry Barry M. Kornblau Atherton Real Estate Development Bank of America Merrill Lynch John C. Harry, Inc. Summit Realty Group, Inc. Judy Boone Michael Divaris Judy Boone Realty Divaris Real Estate, Inc. Dorcas T. Helfant Browning Tyler Leinbach DTH Properties, LLC Meredith Construction Company Stewart Buckle, II Helen Dragas The Dragas Companies The Morgan Real Estate Group Charles Hutchison John R. (Jack) Lewis, II Vanasse Hangen Brustlin, Inc. ECS Mid Atlantic, LLC Brian J. Dundon M. Albert Carmichael Dundon & Associates Harvey Lindsay Commercial Real Estate Michael A. Inman Harvey Lindsay, Jr. Tom Elder Inman & Strickler, P.L.C. Harvey Lindsay Commercial Real Estate W. Page Cockrell Hampton Roads Economic Hurt & Proffitt Development Alliance Candi James Jeffrey R. Mack David Collier Sandra Ferebee HBA Architecture & Interior Design, Inc. The CIM Group GSH Residential Sales First Atlantic Restoration Cherie James Mike Mausteller Bart Frye, Jr. Lawrence J. Colorito, Jr., MAI Cherie James, CPA Harvey Lindsay Commercial Real Estate Frye Properties, Inc. Axial Advisory Group, LLC Brian E. Gordineer, A.A.S Terry Johnson G. Cliff Moore Hahns L. Copeland City of Hampton, Abbitt Realty VIRTEXCO Corporation DARVA Group LLC Office of the Assessor Ann K. Crenshaw Howard E. Gordon Mallory Kahler Michael Nice Kaufman & Canoles, P.C. Williams Mullen City of Portsmouth Economic Development George Nice and Sons, Inc. Don Crigger, CCIM Dennis W. Gruelle E. Andrew Keeney Thomas O Grady Appraisal Consultation Group CB Richard Ellis/Hampton Roads Kaufman & Canoles, P.C. Clancy & Theys Construction Elizabeth Hancock Jon R. Crunkleton, Ph.D. Office of the Real Estate Assessor R. I. King, II James N. Owens, CCIM Old Dominion University Cushman & Wakefield/THALHIMER Harvey Lindsay Commercial Real Estate Russell G. Hanson, Jr. Kim Curtis Hanson Capital, LLC William E. King, SIOR Robert L. Philips, Jr. Tidewater Home Funding Harvey Lindsay Commercial Real Estate Cushman & Wakefield/THALHIMER Hampton CREED Roads Council Office Market Chris Read CB Richard Ellis/Hampton Roads Anthony W. Smith F. Craig Read Read Commercial Properties Worth Remick CB Richard Ellis/Hampton Roads Robinson Development Group Jeremy R. Starkey Monarch Bank Commercial Real Estate Finance/Monarch Capital, LLC George D. Vick, III Harvey Lindsay Commercial Real Estate Edward W. Ware Norfolk Redevelopment and Housing John C. Richards, Jr. CB Richard Ellis/Melody & Co. Rennie Richardson Richardson Real Estate Corporation Charles E. Rigney, Sr. City of Norfolk Department of Development Maureen G. Rooks Jones Lang LaSalle J. Randy Royal Kimley Horn and Associates Robert J. Ruhl City of Virginia Beach Economic Development Stephanie Sanker, SIOR, CCIM S.L. Nusbaum Realty Co. Robert M. Sherman III, CPM Harrison & Lear, Inc. Daniel R. Stegall Daniel Richard Stegall, A Professional Law Corporation Terrie L. Suit The Office of Commonwealth Preparedness Leo Sutton EXIT Realty Central Commercial Michael Sykes Bank of Hampton Roads Robert M. Thornton, CRE, CCIM, SIOR Cushman & Wakefield/THALHIMER William C. Throne, SIOR, CCIM, ALC Cushman & Wakefield/THALHIMER Jamie Tollenaere McKenzie Construction Company H. Mac Weaver, II Edward M. Williams William E. Wood & Associates F. Blair Wimbush Norfolk Southern Corporation Peter E. Winters, Jr. Bank of Hampton Roads Chris Wood JD & W John P. Wright Waverton Associates Michael P. Zarpas Global Real Estate Investment Inc. Contrary to Popular Belief Victor L. Pickett Senior Vice President/Regional Manager Kenneth Sisk, P.E. Bowman Consulting Group Stewart Tyler, ASA Right of Way Acquisitions & Appraisals 3

4 Mortgage Bankers Originations Historical and Forecast ($billions) Quarterly Commercial Mortgage Commitments by Life Insurance Companies MBA Commercial/Multifamily Property Sales Volume Quarterly Issuance of Commercial Mortgage-Backed Securities (CMBS) and Commercial Real Estate Collateralized Debt Obligations (CDOs) MBA Financial Gaps-Relief for Storied Properties Panel MBA Total Debt Outstanding $2.37 Trillion as of Third Quarter 2011 Federal, State, and Local Governments 7.0% Life Insurance Companies 13.1% Finance Companies 2.4% Others 4.3% Commercial Banking 33.4% Commercial and Multifamily Mortgage Debt Outstanding Agency and GSE Portfolios and MBS 14.2% CMBS, CDO, and other ABS Issues 25.6% Commercial Quarterly Data Book 3 rd Q 2011 Mortgage Bankers Association MBA 4

5 UPB of Non-Bank Commercial/ Multifamily Mortgages, by Year of Maturity CMBS Maturities Year Total DSC < 1.0 DSC > 1.2 LTV > 100% LTV < 80% 2012 $71.8B 12% 75% 21.3% 71.2% B B B B B B TREPP MBA Forecast vs. Actual 10-Yr Treasury Rates 2010 Interest Rates MBA MBA Forecast vs. Actual 10-Yr Treasury Rates 2011 Selected Interest Rates (percent) MBA 5

6 Belmont at Providence Virginia Beach, VA Multifamily Permanent Financing Insurance Company Stonebridge Apartments Norfolk, VA Multifamily Refinance Fannie Mae River House Apartments Norfolk, VA Multifamily New Permanent Financing HUD Maple Ridge Apartments Blacksburg, VA Multifamily Refinance CMBS Taylor Pointe Apartments Chesapeake, VA Multifamily Acquisition Financing Freddie Mac Chesapeake Square Shoppes Chesapeake, VA Retail Acquisition Financing Insurance Company 6

7 Food Lion Greenwood, SC Retail Acquisition Financing Insurance Company Battlefield Corporate Center Chesapeake, VA Office Acquisition Financing Insurance Company Towne Bank Center Newport News, VA Office Refinance Insurance Company ECPI Newport News, VA Office Refinance Insurance Company Jack Rabbit Virginia Beach, VA Self-Storage Refinance Insurance Company AAAA Norfolk, VA Self-Storage Refinance Insurance Company 7

8 25 th Street Courtyard Marriott Virginia Beach, VA Limited Service Hotel Refinance CMBS Holiday Inn Express Virginia Beach, VA Limited Service Hotel Refinance Insurance Company LEANING INTO LEANING: Moving Forward Presented by: William C. Throne, CCIM, SIOR, ALC LEANING INTO 2012 LEANING INTO LEANING: Moving Forward Vacancy incrementally better % % % Large deals leading the way 1. LEANING: Moving Forward Large deals leading the way Cal Cartage 385,320 New lease Ace Hardware 340,000 BTS Green Mountain 330,000 Purchase Navy Exchange 325,000 BTS Lumber Liquidators 257,218 New lease Lumber Liquidators 250,000 Renewal US Auto Parts 159,294 Expansion Dana Unlimited 126,000 Expansion Total Distribution 110,000 New lease 8

9 LEANING INTO 2012 LEANING INTO LEANING: Moving Forward 2. LEANING: Still resistance Vacancy incrementally better % % % Large deals leading the way Some sub-sectors are really tightening up LEANING INTO 2012 LEANING INTO LEANING: Still resistance Lending Foreclosures No Speculative building Development: EPA, VDEQ, Army Corps Roads and infrastructure Energy costs Tolls? 2. LEANING: Still resistance Tolls? Virginian Pilot LEANING INTO 2012 LEANING INTO LEANING: Better than we think? 3. LEANING: Better than we think? We are in better shape than before Class A warehouse absorption Port of Virginia Intermodal Right to Work State Unemployment rate Land available Development ready sites 9

10 LEANING INTO 2012 LEANING INTO LEANING: Close to the finish line? 4. LEANING: Close to the finish line? IN 2012, the Hampton Roads industrial market: Vacancy rate will continue to decline Broker frustration with limited availability More large transactions New buildings planned, construction started LEANING INTO 2012 THANK YOU Hampton Roads Real Estate Office Market Review and Forecast Maureen G. Rooks Vice President Jones Lang LaSalle 2011 Economic Recap and 2012 Economic Forecast Hampton Roads Office Market Defense Budget Cuts and the Effects on Hampton Roads Jobs and Unemployment Office Absorption - Leasing - Sales Construction deliveries - New deliveries for 2012 Trends and Opportunities in the Office Market Government spending Hampton Roads is dependent on government spending VA Defense spending: $56.9 billion Gov t contract budget: $39 billion 11% of the GRP 16% of the GSP 1,000,000 employed by Government Contract services in VA U.S. defense budget cuts: - $487 billion over 10 years - $259 billion over 5 years *2009 numbers are most recent

11 The Upside Hampton Roads Office Market Unemployment Trends Information Technology / Cyber Technology - United States Joint Forces Command s 120,000 square-foot vacated office will be back filled by the Navy Cyber Command in ,000 jobs intact Military Strategy - Less manpower in war - More information and cyber technology - Modest continuation of modeling and simulation Unemployment Past 12 months Unemployment in Hampton Roads Where we ve been where we re headed 10% 8% 7.4% 7.0% 7.2% 6.9% 6% 4% 5.8% 4.8% 2% 0% Moody s Analytics / Precis US Metro / South / November Key Market Indicators Hampton Roads Office Market Outlook: What to expect Much of the same Net new supply, net absorption and total vacancy Net new supply Net absorption total vacancy sf 1,200,000 20% 800,000 15% 400,000 10% 0 5% -400,000 0% Landlord expectations - Hold onto warm bodies extend leases; early renewals - Expect signs of recovery in 2013 Tenant expectations - Continued control due to double digit vacancy rate - Secure longer term leases to lock in below market rates Why?? - More time required for stabilization of the market - Adoption of a strong Wait-and-See approach by business - Presidential Election November

12 2011 Lease Transactions Hampton Roads Office Market 2011 Office Sales Hampton Roads Office Market Top completed lease transactions Top completed sale transactions Building / Address Submarket Tenant sf Address Submarket Buyer / Seller sf Price Main Street Tower Downtown Norfolk United States Coast Guard 187, Lake View Parkway Harbour View Suffolk Salus Government Properties / Inland America Office Mgmt 115,783 $22.5 million Lake View Technology Center I Harbour View Suffolk General Services Administration (GSA) 115, / 870 Greenbrier Circle Greenbrier Chesapeake First Potomac Realty Trust / Parkway Properties, Inc. 172,064 $16.7 million 1434 Crossways Boulevard Greenbrier Hewlett Packard Development Co 112, Cleveland Street Newtown / Witchduck Virginia Beach Olympia Development Corp / Levitt Properties 136,000 $12.8 million 741 Monticello Avenue Downtown Norfolk Norfolk Department of Human Services 60, Independence Parkway Battlefield Chesapeake First Potomac Realty Trust / VJM, LLC 96,720 $8.7 million Dominion Tower Downtown Norfolk CACI Enterprise Solutions, Inc. 47, Lynnhaven Parkway Lynnhaven Virginia Beach Continental Capital Mgmt / Berman Kappler Properties 79,182 $8.45 million Construction Deliveries Hampton Roads Office Market 2012 Construction To Be Delivered Hampton Roads Office Market Top 2011 construction deliveries 2012 Top under construction properties Building / Address Submarket Leasing/Occupied Delivery RBA Occupied Building / Address Submarket Leasing/Occupied Expected Delivery RBA Pre-leased 5424 Discovery Park Blvd New Town Williamsburg Tidewater Physicians Multi- Specialty Group (TPMG) Q , % Operation Smile Global Headquarters Princess Anne Virginia Beach Operation Smile Telethon Q , % Harbour View Blvd. Harbour View Suffolk Towne Bank Q , % Sidney Kellam Office Building at 31 Ocean Oceanfront Virginia Beach GoldKey / PHR Q ,980 30% Interstate Professional Center Phase I Oyster Point Newport News Divaris Real Estate, Inc. Q ,000 35% NIA Laboratory Building Hampton Roads Center Hampton Harvey Lindsay Commercial Real Estate Q , % Interstate Professional Center Phase II Oyster Point Newport News Divaris Real Estate, Inc. Q , % Chesapeake Eye Center Greenbrier Chesapeake Jones Lang LaSalle Q ,000 50% Greenbrier Medical Office II Greenbrier Chesapeake S.L. Nusbaum Realty Co. Q , % Trends and Opportunities Hampton Roads Office Market Summary Government contracting Information / Cyber technology / Cyber security Healthcare (Baby Boomers) Education (Generation Y) Legal and Financial

13 Acknowledgments Hampton Roads Office Market CoStar Realty Information, Inc. Moody s Analytics Virginia Unemployment Commission Geoff Thomas, Research Analyst Jones Lang LaSalle Casey J. O Hearn, Author of 2012 Hampton Roads Office Market Review Thank you Copyright Jones Lang LaSalle IP, Inc ODU / CREED RETAIL REVIEW 2012 ODU / CREED RETAIL REVIEW 2009 THEME WEATHERING THE STORM Closed for business Under construction Open for business Presented by: David Machupa 13

14 2010 THEME THE CALM AFTER THE STORM 2012 ODU / CREED RETAIL REVIEW 2011 THEME SLOW AND STEADY WINS THE RACE 2012 ODU / CREED RETAIL REVIEW 2012 ODU / CREED RETAIL REVIEW 2012 ODU / CREED RETAIL REVIEW OVERVIEW COMING TO MARKET Southside Peninsula Total NUMBER OF PROPERTIES GLA IN SF 34,150,108 18,494,461 52,644,569 VACANT SF 2,534,765 1,944,109 4,478,874 % VACANT 7.42% 10.51% 8.51% AVERAGE RENTAL RATE $16.03 PSF $15.28 PSF $15.79 PSF OCCUPIED IN SF 31,615,343 16,550,352 48,165, ODU / CREED RETAIL REVIEW 2012 ODU / CREED RETAIL REVIEW WATCH LIST NEW DEVELOPMENTS 14

15 2012 ODU / CREED RETAIL REVIEW 2012 ODU / CREED RETAIL REVIEW INVESTMENT SALE INVESTMENT SALE 2012 ODU / CREED RETAIL REVIEW 2012 ODU / CREED RETAIL REVIEW NEW TREND??? 2012 OUTLOOK & FORECAST 2012 HAMPTON ROADS REAL ESTATE MARKET REVIEW MULTI-FAMILY PRESENTED BY: DWIGHT D. DUNTON III PRESIDENT Hampton Roads Overview The average rent is currently $926/month ($.98/SF) +$26 over 2010 and +$64 since 2007 Vacancy is 6.4% +0.7% over 2010 and +1.3% since 2007 Rent growth is currently at 2.81%** There are currently 90,378 completed units in this market over 2010 and +6,502 over There are currently 1,940 units under construction +833 increase over units U/C in 2010 **Rent growth versus previous calendar year *Data from Apartment Index 15

16 Occupancy Southeast US* vs. Hampton Roads vs. National Total Units vs. Occupancy By Submarket 96% 16,000 98% 94% 92% 90% 88% 86% 84% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 14,000 12,000 10,000 8,000 6,000 4,000 2, % 94% 92% 90% 88% 86% 84% Southeast US Hampton Roads National *Includes 19 markets in the Southeast United States: Asheville, Charleston, Charlotte, Chattanooga, Columbia, Gainesville, Greensboro, Greenville, Jacksonville, Myrtle Beach, Norfolk/VA Beach, Orlando, Raleigh/Durham, Richmond, Roanoke, Savannah, Tallahassee, Tampa Bay, Wilmington *Data from Real Capital Analytics and Apartment Index *Data from Apartment Index Units Occupancy Rent Growth Southeast US* vs. Hampton Roads vs. National Mortgage Cost vs. Rent Cost Hampton Roads Market 6% 4% $1,800 $1,600 2% $1,400 0% $1,200 $688 2% $1,000 4% $800 6% Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Southeast US Hampton Roads National $600 $400 Apr 06 Apr 07 Apr 08 Apr 09 Apr 10 Apr 11 *Includes 19 markets in the Southeast United States: Asheville, Charleston, Charlotte, Chattanooga, Columbia, Gainesville, Greensboro, Greenville, Jacksonville, Myrtle Beach, Norfolk/VA Beach, Orlando, Raleigh/Durham, Richmond, Roanoke, Savannah, Tallahassee, Tampa Bay, Wilmington Average Mortgage Payment Average Monthly Rent *Data from Real Capital Analytics and Apartment Index *Data from Apartment Index Mortgage Cost vs. Rent Cost Hampton Roads Market Multi Family Drivers $1,800 $1,600 Despite record low home mortgage rates, credit still remains tight without the best credit history and capability to make a large down payment. $1,400 $1,200 $1,000 $443 ($248) Cost of home mortgages may soon meet or dip under the cost to rent in our market; but only for few qualified loan applicants. Homeownership rates continue to fall. $800 $600 $400 Apr 06 Apr 07 Apr 08 Apr 09 Apr 10 Apr 11 Average Mortgage Payment Average Monthly Rent Average Rent of New Construction The apartment sector s recovery is supported by favorable demographic trends such as echo boomers, government sponsored entity financing and a limited supply pipeline. Household formation dropped to 500,000 from , well below the long term average of 1.2 million. *Data from Apartment Index *Data from National RE Investor 16

17 Existing Units 90,378 95% Hampton Roads Market Breakdown Market Unit Breakdown 5+ Years 82,754 91% Market Unit Breakdown (Age) $1,400 $1,300 Average Rents by Age Hampton Roads Market $1,200 6% Units U/C 1,940 2% Planned Units 2,563 3% Total Market Pipeline % Total Units in Market 1 5 Years 6,166 7% Lease Up 1,458 2% $1,100 $1,000 $900 $359 5% Average 4% 3% 2% Apr 07 Oct 07 Apr 08 Oct 08 Apr 09 Oct 09 Apr 10 Oct 10 Apr 11 Oct 11 *Data from Apartment Index $800 $ Lease Up 1 5 Years 6+ Years Total Market *Data from Apartment Index 8% 7% 6% 5% 4% 3% 2% Vacancy by Age Hampton Roads Market Submarket Scorecard 2011 vs 2010 Market Health Submarket Total Units Pipeline 6 Month Change in Change in Units Absorption* Occupancy Market Grade** Rent/Month NN South 3, % $ Williamsburg 3, % $ Chesapeake 9,886 1, % $ Norfolk 13,341 1, % $ Hampton East 2, % $ NN North 8, % $ York 2, % $ VA Beach West 4, % $ Hampton West 7, % $ NN Central 8, % $ Portsmouth 7, % $ Suffolk 1, % $ VA Beach Central 9, % $ VA Beach East 7, % $ Total 90,378 4, % $ Years 6+ Years Total Market = Total of 4 Achievable for 4 Categories *Data from Apartment Index *Data from Apartment Index National Transaction Overview 2011 Transaction/Buyer Trends Volume: $51.4 billion +47% year over year # of Properties: 3,361 Properties +43% year over year Price per Unit: $101,204 +5% year over year CAP Rate: 6.3% 25bps year over year Hampton Roads Multi Family Transactions Total Transactions 2011 Transaction Breakdown 88% Private Capital (19)* 6% REIT (1) 6% Community Redevelopment Corp (1) 2010 Transaction Breakdown 80% Private Capital (4) 20% University (1) National Average CAP: ~6.3% *One Portfolio Transaction accounts for 9 properties under Private Capital *Data from Real Capital Analytics *Data from Real Capital Analytics 17

18 Transaction/Buyer Trends Apartment Mortgage Originations by Lender Hampton Roads Multi Family Transactions Transaction Breakdown 88% Private Capital (19)* 6% REIT (1) 6% Community Redevelopment Corp (1) 2010 Transaction Breakdown 80% Private Capital (4) 20% University (1) NO Transaction Growth w/o Great Atlantic Management National Average CAP: ~6.3% Excluding Great Atlantic Including Great Atlantic *One Portfolio Transaction accounts for 9 properties under Private Capital $88.3B $52.5B $68.8B $91.6B *Data from Real Capital Analytics *Data from Marcus & Millichap 2012 Apt Report What Does it All Mean? Lenders want to lend to multi family projects. SFH Mortgages may be affordable, but not necessarily accessible Tenants are moving from Class B/C properties, to class A. Class A rents are increasing much faster than B/C can it continue? Construction pipeline remains in check Can developers be trusted to overdue a good thing RESIDENTIAL MARKET UPDATE 2012 Van Rose, MIRM President, Rose and Womble New Homes 18

19 15 Year Closing New Construction & Resale History Hampton Roads Residential Inventory 2007 to ,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Analysis by: FORECLOSURES GOING DOWN Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan % 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Hampton Roads 2011 Average Closing Price Existing Homes: $208, % New Homes: $309, % Analysis by: Total Short Sale/ Foreclosure Closings % Market Share Analysis by: $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $- Hampton Roads Average Closing Price History Existing Homes New Construction The Return to Detached. #1 19

20 90% 80% 70% 60% 50% 40% 30% New Construction Closing Mix Average Size New Construction Single Family Detached 2003 $105 per sq ft 2,559 SF 2007 $154 per sq ft 2,746 SF 20% 10% 0% Detached TH/Plex Condo 2011 $125 per sq ft 2,484 SF Existing Home Average Closing Price Versus Standard Appreciation Returning to a Balanced Market Analysis by: Returning to a Balanced Market New Construction Returning to a Balanced Market Existing Homes Months to Absorb Current Inventory Months to Absorb Current Inventory Analysis by: Detached Attached Analysis by: Detached Attached 20

21 Hampton Roads Net Migration Hampton Norfolk Hampton Roads 2011 Top 5 Builders Isle of Wight Internal Revenue Service Analysis by: # 5 # # 3 #

22 # Consumer Confidence Index Bloomberg Builder Confidence Index Builder Financial Improvements % 20% 15% 20.8% 15.3% 14.4% 13.1% 17.4% 14.7% % 7.7% Bloomberg 5% 0% 5% NAHB 0.5% Gross Profit Margin Operating Expenses Net Profit Margin 3.0%

23 The Housing Cycle has Bottomed Building Permits with 2015 Forecast 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 Inventory is Going Down Jan 07 Apr 07 Jul 07 Oct 07 Jan 08 Apr 08 Jul 08 Oct 08 Jan 09 Apr 09 Jul 09 Oct 09 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Analysis by: 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Yr Fixed Rate Freddie Mac Interest Rates are LOW! Construction Lending Short Sales Existing Homes Current Inventory 19% 9% 72% Regular Listings Short Sale Bank/ Govt Analysis by: 23

24 Ever Changing Buyer Profile LOCAL MARKET IMPROVEMENT INDICATORS Resale Inventory 21% New Homes Inventory 14% Price Changes 26% Foreclosure Sales 26% Building Permits 37% Interest Rate 0.25% Home Affordability Index 70% approx Capture Ratio 1:11 (was 1:25) Cautiously Optimistic 2012? CREED UPCOMING EVENTS Ted C. Constant Convocation Center Old Dominion University CREED Annual Meeting June 2012 Hampton Roads Residential Market Review November 2012 Monday, May 7 th Tuesday, May 8 th Introduction to Commercial Investment Real Estate William C. Overman, CCIM S.L. Nusbaum Realty Co. Wednesday, May 9 th Thursday, May 10 th Real Estate Financial Analysis Using Excel Jeffrey L. Engelstad, Ph.D., CCIM Daniels College of Business, University of Denver Friday, May 11 th Ethics and Leadership Management Connie Merriman, Ph.D. Assistant Dean, CBPA Old Dominion University Doug Ziegenfuss, Ph.D. Chair, Accounting Dept., CBPA Old Dominion University 24

25 Hampton Roads Office Market It s coming...don t miss out SAVE THE DATE: May 17, 2012 Ted Constant Convocation Center Old Dominion University Presented by the Hampton Roads Chapter of the Urban Land Institute, In partnership with Old Dominion University and the E.V. Williams Center for Real Estate and Economic Development (CREED), Hampton Roads Planning District Commission, and the Hampton Roads Partnership RAISE A RAQUET at the Coming September 2012! Folkes/Stevens Indoor Tennis Center Sponsored by: E.V. Williams Center for Real Estate and Economic Development CREED ANNUAL ADVISORY BOARD MEMBERSHIP OPPORTUNITIES Industry Professional Advisors to the Center CREED Council For membership inquiries, please contact: Craig Cope, Membership Chair, ccope@libertyproperty.com or Kyllie Brinkley, CREED Program Manager, kbrinkle@odu.edu Thank You for Attending! Please Join Us For The 17 th Annual Hampton Roads Real Estate Market Review Cocktail Reception 25