WELCOME. December 5th, 2018

Transcription

1 WELCOME December 5th, 2018

2 Thank you to our Sponsors TITLE SPONSORS VENUE SPONSOR RECEPTION SPONSORS

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6 JOHN BURNS CEO & Founder John Burns Real Estate Consulting

7 Trusted Analysis for Executive Decisions Housing Market Insights December 5, 2018 Presented by: John Burns, CEO

8

9 Phoenix 1 Year Ago Vs. Today 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, , , , , , , , , , month Job Growth 68,500 34,400 73,500 Oct Oct Oct Canadian Air Passenger Arrivals 475, , ,000 April, 2016 April, 2017 April, 2018 $1,000 $800 $600 $400 $200 $- U-Haul In-Migration Truck Premium $816 $408 $ Q3 2017Q3 2018Q3

10 2018 Forecast: How Did We do? KEY ASSUMPTIONS Mortgage Rates Projected 4.2% average Fixed Rate mortgage Worse than expected. Actual YTD 4.5% Jobs Projected 47K additional jobs. Better than expected. Actual YTD Average 64K jobs 2018 FORECAST SF permits Projected growth from 21.1K in 2017 to 23.4K Actual was 20.7K in 2017 and current forecast is 23.0K Resale Prices Forecasted 6% price appreciation Actual on track to be 7-8% PHOENIX: STRONGEST MARKET IN THE COUNTRY

11 Legend Very Strong Strong Normal Slow Very Slow In our rating system, Normal market conditions reflect builders selling at a market s historically normal sales rate per community, typically 2 3 per month, with slightly rising net prices. Phoenix Now Only Strong Market of Top 30 Current Market Conditions *Metro division **Combination of metro divisions. (1) Bay Area, CA is composed of the East Bay, San Francisco, and San Jose MSAs. Source: John Burns Real Estate Consulting, LLC (Pub: Oct-18) May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Phoenix Strong Strong Strong Strong Strong Strong Las Vegas Strong Strong Strong Strong Strong Normal Orlando Strong Strong Strong Strong Strong Normal Riverside Strong Strong Strong Strong Strong Normal Salt Lake City Strong Strong Strong Strong Strong Normal San Diego Strong Strong Strong Normal Normal Normal Seattle* Strong Strong Strong Normal Normal Normal Tampa Strong Strong Strong Normal Normal Normal Atlanta Normal Normal Normal Normal Normal Normal Austin Normal Normal Normal Normal Normal Normal Bay Area, CA¹ Normal Normal Normal Normal Normal Normal Boston Normal Normal Normal Normal Normal Normal Charlotte Normal Normal Normal Normal Normal Normal Denver Normal Normal Normal Normal Normal Normal Houston Normal Normal Normal Normal Normal Normal Indianapolis Normal Normal Normal Normal Normal Normal Jacksonville Normal Normal Normal Normal Normal Normal Los Angeles* Normal Normal Normal Normal Normal Normal Miami* Normal Normal Normal Normal Normal Normal Minneapolis Normal Normal Normal Normal Normal Normal New York* Normal Normal Normal Normal Normal Normal Philadelphia Normal Normal Normal Normal Normal Normal Portland Normal Normal Normal Normal Normal Normal Raleigh Normal Normal Normal Normal Normal Normal Sacramento Normal Normal Normal Normal Normal Normal San Antonio Normal Normal Normal Normal Normal Normal Washington, DC (MSA) Normal Normal Normal Normal Normal Normal Nashville Strong Strong Strong Normal Normal Slow Dallas* Strong Strong Normal Normal Normal Slow Orange County Normal Normal Normal Slow Slow Slow Chicago** Slow Slow Slow Slow Slow Slow

12 Agenda Long-Term Tailwinds The Recovery to Date Rising Rates Phoenix Compared to the Rest 2019 and Beyond Investment Assumptions Conclusions

13 Phoenix has a 7% Demographic Demand Tailwind 2016 US POPULATION 700, , ,000 Foreign Born US Born 507K 579K 599K 643K 625K 640K 400, K 300, , K 100,000 67K s Savers Age s Achievers Age s Innovators Age s Equalers Age s Balancers Age s Sharers Age s Connectors Age s Globals Age 7-16 Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau 2015 Population Estimates, 2015 American Community Survey

14 Demand growth will be at opposite ends of the adult age spectrum. HOUSEHOLD FORMATION BY AGE GROUP, M 10.2 M 3.3 M Source: John Burns Real Estate Consulting, LLC

15 Agenda Long-Term Tailwinds The Recovery to Date Rising Rates Phoenix Compared to the Rest 2019 and Beyond Investment Assumptions Conclusions

16 Our New Framework for Assessing the Impact of Change on Your Business Government Economic Tech Societal Advancements Conditions Shifts Policies

17 Economic Conditions 9+ Year Expansion: Slow, steady growth 2 year Household Formation delays Reach 50% Household Formation rate by age 26 vs age 24 in year Homeownership delay Reach 50% Homeownership Rate by age 36 vs age 31 in : Federal Reserve keeps rates low, helping home prices appreciate

18 Uneven Expansion CURRENT JOBS IN EXCESS OF PRE- RECESSION PEAK Austin Dallas* Orlando Charlotte Salt Lake City Seattle* Portland Jacksonville Atlanta Weighted Average Bay Area, CA¹ Minneapolis Tampa Phoenix Orange County Los Angeles* Source: John Burns Real Estate Consulting, LLC 7% 7% 5% 5% 4% Note: The working age population has grown at different rates for each metro. 22% 21% 20% 20% 19% 19% 18% 17% 15% 15% 14% 14% 13% 13% 13% 13% 12% 11% 11% 10% 10% 10% 9% 9% 26% 24% 35% NEW BOOMTOWNS AVERAGE GROWTH STILL RECOVERING SLOW GROWTH 0% 5% 10% 15% 20% 25% 30% 35% JOBS IN EXCESS OF PEAK

19 Tech Advancements Consumer Knowledge Home values and home listings available to all Quick Action Online home offers Instant All-Cash offers Improved Construction BIM Software, 3-D Printing, Robotics, Offsite technologies imported from overseas, Smart homes New Lenders Startups make loans that banks use to make

20 Societal Shifts Renting No Longer A Stigma Professional SFR Landlords Newly built homes for rent Home Sharing Becomes Mainstream Child Before Marriage Privacy Less Important than Convenience Willing to trade privacy for phone app tools Amazon, Google, Apple entering the home Urban and Suburban Beat Rural / Exurban Living Affordable land and homes are in exurban areas

21 Government Policies 2008 Home Buyer tax credit stimulus 2010 Dodd-Frank Law Full loan documentation Banks cede low FICO lending market to less regulated non-banks No significant jumbo MBS market, so jumbos are high quality / on Bal Sheet 2014 QRM rules clarified Fed government sets policy, and insures or purchases 70%+ of all mortgages FHA market share rises to 24% (normally 6%), and has shifted the highest loan risk to the Federal government : Federal Reserve keeps rates low, helping home prices appreciate Rate hikes in 2013, 2015 and 2018 slow home sales and appreciation 2018 Tax Act Cash to corporations in 2018 Cash to consumers in Spring housing negatives that get too much attention on Wall Street. Mortgage deductibility limit of $750K will discourage some high-priced home buying. SALT deduction cap at $10K will encourage outmigration from expensive markets with high property taxes (NY, NY, CT, IL)

22 Agenda Long-Term Tailwinds The Recovery to Date Rising Rates Phoenix Compared to the Rest 2019 and Beyond Investment Assumptions Conclusions

23 Mortgage rates have risen 88 basis points this year an 11% increase in payments yr Fixed Rate Mortgage Rates /4 2/4 3/4 4/4 5/4 6/4 7/4 8/4 9/4 10/4 Source: Freddie Mac 4.83

24 Sales Rate Growth Per Community Has Been Slowing All Year Year-over-Year Sales Rate Growth 20% 15% 10% 5% 0% 10% 8% 6% 6% 5% 4% 1% 6% 8% 9% 9% 12% 3% 3% 4% 2% 5% 15% 15% 16% 10% 7% 6% 4% 3% 1% -5% -10% -15% -20% -7% -3% -12% -2% -2% -4% -1% -10% -2% -3% Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18-16% *Note: The above chart shows YOY comparisons only for builders who participated in the survey one year prior. For the May survey, YOY Source: John Burns Real Estate Consulting, LLC, independent survey of ~18% of all US new home sales, NSA (Data: May-18, Pub: Jun-18)

25 Rising rates will slow moveup home sales volumes an 11% hit to total home sales. Source: John Burns Real Estate Consulting online survey, June 2018

26 The median U.S. income is $63K. 44% of American households earn less than $50K. 50% 45% 40% 35% 30% 25% 44% US Household Distribution by Annual Income Are you only selling to the top 39% of American households? 20% 15% 17% 12% 14% 10% 5% 6% 7% 0% Under $50K $50-$75K $75-$100K $100-$150K $150-$200K $200k+ Source: Census Bureau American Community Survey

27 Each 100 basis point increase in mortgage rates reduces borrowing capacity by ~ 7%. $270,000 Maximum Mortgage Amount for $63K Median Income Household $260,000 $259,000 $250,000 11% $240,000 $230,000 $230,000 7% $220,000 $210,000 $200,000 $213,000 at 3.5% at 5.0% at 6.0% Mortgage Rate

28 Only 50% of American households earn enough income to qualify for a $230K mortgage (at a 5.0% rate). $300,000 Maximum Mortgage Amount for $63K Median Income Household $250,000 $259,000 $230,000 $213,000 $200,000 $150,000 $100,000 $50,000 $0 at 3.5% at 5.0% at 6.0% Mortgage Rate

29 Only 31% of American renters can afford the median-priced $267K resale home today. 35% 30% 25% Percentage of Renters Who Can Afford the Median Priced.. 24% 31% 20% 15% 10% 5% 0% New Home of $318,000 Resale Home of $267,000

30 36% of Phoenix Home Buyers Put Down Less than 10%. *Metropolitan Division **Combination of metro divisions Percentage of Home Purchases Using >=90% Loan-to-Value Ratio Washington DC (MSA) Atlanta Jacksonville Minneapolis Nashville Philadelphia Riverside-San Bern. Phoenix Tampa Charlotte Orlando Raleigh-Durham** Chicago** Las Vegas Denver Portland Sacramento San Diego Boston Miami* Seattle* Los Angeles* New York* Orange County Bay Area, CA¹ (1) The Bay Area is composed of East Bay, San Francisco, and San Jose MSAs. Note: Data is not available for Austin, Dallas, or Houston. Sources: CoreLogic; John Burns Real Estate Consulting, LLC. See methodology and market disclaimers. (Data: 2Q18, updated 12% 12% 18% 44% 39% 39% 38% 37% 36% 36% 36% 35% 35% 35% 34% 34% 34% 32% 31% 31% 28% 26% 25% 24% 23% 0% 10% 20% 30% 40% 50%

31 What Will President Trump s Mortgage Policies Be? The President Now Appoints Overseers for 70%+ of All US Mortgages. President Trump will appoint a new overseer of Fannie Mae and Freddie Mac later this year. Source: John Burns Real Estate Consulting, LLC (Pub: Oct-18)

32 Mortgage Availability Is Improving Senior mortgage executives are growing increasingly optimistic on mortgage availability, nearly matching consumer optimism. In 2Q18, 54% of executives believe it is easy for consumers to get a mortgage today. National Housing Survey: Mortgage Lender Sentiment on Mortgage Availability Easy Difficult 19% 15% 13% 28% 18% 18% 29% 31% 29% 28% 34% 35% 32% 41% 46% 52% 54% 81% 85% 86% 71% 82% 81% 70% 68% 70% 72% 65% 65% 69% 59% 54% 46% 45% 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Note: Rows may not add up to 100% because of rounding and "Don't know" responses that are not included in the chart. Pub: Aug-18 Source: Fannie Mae, Mortgage Lender Sentiment Survey, (Data: 2Q18, updated quarterly )

33 Mortgage Lending Today 2 Areas are Tight, and 2 Are Loose Historically Tight Credit: Only 9% of Loans to Sub 640 FICO Borrowers Character: Documentation Meticulously Proven Data Source: American Enterprise Institute

34 Mortgage Lending Today 2 Areas are Tight, and 2 Are Loose Historically Loose: Capacity: 44% of All Borrowers have a Debt-to- Income Ratio above 42%. More than ever (among documented loans)! Collateral: 57% of Borrowers Putting Down less than 10% (highest ever) Data Source: American Enterprise Institute

35 Home builders can t build real entry-level homes. 11 of the 19 public builders now have average home prices above $400,000. Home Builder Average Sales Price, 2018Q2 New Home Co. Toll Tripointe MDC / Richmond American Taylor Morrison William Lyon Green Brick Pulte Lennar Meritage KB Home M/I K Hovnanian NVR Century Beazer AV Homes Dr Horton LGI Source: Recent builder earnings call $813,000 $633,000 $496,000 $480,000 $479,000 $440,000 $427,000 $413,000 $408,000 $402,000 $387,000 $385,000 $380,000 $377,000 $365,000 $336,000 $302,000 $231,000 $1,211,000

36 Agenda Long-Term Tailwinds The Recovery to Date Rising Rates Phoenix Compared to the Rest 2019 and Beyond Investment Assumptions Conclusions

37 Phoenix Has 10% More Jobs than in 2007 Below the US Average Current Jobs in Excess of Pre-Recession Peak Austin Dallas* Nashville San Antonio Orlando Denver Raleigh-Durham** Salt Lake City Charlotte Houston Seattle* Riverside-San Bern. Portland New York* Jacksonville Atlanta Indianapolis Miami* Weighted Average Boston San Diego Bay Area, CA¹ Minneapolis Washington DC (MSA) Las Vegas Phoenix Tampa Sacramento Orange County Los Angeles* Philadelphia Chicago** 3% 7% 6% 6% 5% 22% 20% 20% 19% 19% 19% 18% 17% 17% 15% 13% 13% 13% 13% 13% 13% 12% 11% 11% 11% 10% 10% 10% 10% 24% 24% 0% 5% 10% 15% 20% 25% 30% 35% 40% Note: This chart displays the most recent month vs. the same month in peak years. Sources: BLS; John Burns Real Estate Consulting, LLC (Data: Aug-18, Pub: Oct-18) 35% Note: The working age population has grown at different rates for each metro. *Metro division **Combination of metro divisions (1) The Bay Area is composed of San Francisco and San Jose MSAs.

38 Phoenix Home Prices Have Finally Recovered Burns Home Value Index Percent above/below Peak 1 Denver Dallas* Austin Nashville Houston Seattle* Bay Area, CA² San Antonio Portland Raleigh-Durham** Salt Lake City Charlotte Atlanta Indianapolis Boston Weighted Average Los Angeles* Minneapolis San Diego Jacksonville Orange County Philadelphia Tampa Phoenix New York* Miami* Orlando Sacramento Washington DC (MSA) Riverside-San Bern. Las Vegas Chicago** -8% -9% -9% -1% -1% -2% -3% 12% 12% 11% 8% 7% 6% 3% 1% 0% 20% 19% 30% 29% 29% 26% 26% 36% 53% 50% 49% 45% 63% 60% 75% 72% -20% 0% 20% 40% 60% 80% 1. Peak BHVI values from Bay Area, CA is composed of the East Bay, San Francisco, and San Jose MSAs. *Metro division **Combination of metro divisions. Source: John Burns Real Estate Consulting, LLC (Data: Sep-18, Pub: Oct-18)

39 Phoenix has one of the best economies in the country. Employment Growth Aug-18 YOY % Orlando Seattle* Las Vegas Houston Phoenix Dallas* Riverside-San Bern. Austin Jacksonville Raleigh-Durham** Salt Lake City Denver Charlotte Portland Tampa Boston Bay Area, CA¹ Weighted Average Minneapolis Indianapolis Washington DC (MSA) Atlanta Miami* San Diego Philadelphia New York* Sacramento Nashville Los Angeles* San Antonio Chicago** Orange County 0.8% 0.7% 3.3% 3.1% 3.0% 3.0% 2.8% 2.7% 2.5% 2.5% 2.3% 2.3% 2.2% 2.1% 2.0% 2.0% 2.0% 1.9% 1.7% 1.7% 1.6% 1.5% 1.4% 1.4% 1.2% 4.1% 4.0% 3.7% 3.7% 3.6% 3.6% 3.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% Sources: BLS; John Burns Real Estate Consulting, LLC (Data: Aug-18, Pub: Oct-18) *Metro division **Combination of metro divisions (1) Bay Area, CA is composed of San Francisco and San Jose MSAs.

40 Phoenix is the 2 nd Largest Housing Market in the Country Top Sales Transaction Markets Trailing twelve month totals as of Aug-18 Atlanta Phoenix Chicago** Houston New York* Washington DC (MSA) Philadelphia (MSA) Dallas, TX* Tampa Los Angeles* Riverside-San Bern. Bay Area, CA** Denver Minneapolis Orlando Las Vegas Seattle* Austin Warren* Nashville 21K 20K 5K 29K 7K 12K 6K 24K 11K 4K 9K 7K 10K 6K 13K 10K 6K 17K 3K 9K 51K 48K 35K 48K 40K New Sales Resale Sales (Total sales) 104K 85K 86K 66K 72K 75K 65K 64K 59K 59K 49K 115K 112K 110K 88K (97K) (92K) (91K) (84K) (79K) (74K) (71K) (68K) (66K) (61K) (61K) (54K) (51K) (51K) (49K) (133K) (130K) (120K) (118K) (110K) 0K 25K 50K 75K 100K 125K 150K *Metro division **Combination of metro divisions Note: New sales and resale sales may not add up exactly to total sales due to rounding. Sources: CoreLogic; NorthstarMLS; RBI; Real Estate Center at TAMU; John Burns Real Estate Consulting, LLC (Data: Aug-18, Pub: Oct-18)

41 Phoenix Now Has the 5th Largest Construction Market Again Largest Construction Markets Trailing twelve months Houston Dallas* New York* Atlanta Phoenix Austin Bay Area, CA¹ Charlotte Washington DC Orlando Los Angeles* Raleigh-Durham** Seattle* Denver Nashville Minneapolis Tampa Boston Portland Chicago** Riverside-San Bern. Philadelphia Jacksonville Las Vegas San Diego Miami* San Antonio Indianapolis Sacramento Orange County Salt Lake City 6K 7K 6K 15K 7K 12K 13K 9K 14K 5K 6K 6K 11K 7K 10K 10K 4K 2K 8K 8K 7K 5K 5K Single-Family Permits Multifamily Permits (Total Permits) 18K 17K 14K 15K 8K 9K 2K 2K 4K 2K 26K 26K 22K 10K 8K 9K 4K 7K 3K 3K 4K (10K) (9K) (9K) (8K) 18K 20K 8K 15K 8K 5K 9K 4K (15K) (15K) (14K) (14K) (14K) (14K) (13K) (12K) (12K) (12K) 40K 32K 10K 12K 9K (20K) (19K) (18K) (18K) 13K 9K (25K) (24K) (22K) (22K) (27K) (27K) (26K) 10K (32K) (30K) 22K (39K) (36K) 0K 10K 20K 30K 40K 50K 1. Bay Area, CA is composed of San Francisco and San Jose MSAs. *Metro division **Combination of metro divisions. Source: U.S. Census Bureau (Data: Aug-18, Pub: Oct-18) 11K (48K) (52K)

42 Phoenix Home Sales are Up 6% YOY Total Resale Home Sales 12-month total, YOY% Charlotte Houston Atlanta Phoenix San Antonio Raleigh-Durham** Austin Jacksonville Philadelphia Indianapolis New York* Las Vegas Dallas* Orlando Weighted Average Washington DC (MSA) Tampa San Francisco** Sacramento East Bay Area* Miami* Nashville Riverside-San Bern. Chicago** Portland Salt Lake City Minneapolis Los Angeles* Denver Boston Orange County, CA San Jose San Diego Seattle* -7% -4%-3% -4% -4%-4% -5% -6% -3% -3%-2% 0% 0%0% -2% -2% -2% -2% -2% 0% 1% 1% 1%1%2% 2% 3%4% 6% 6% 5% 4% 7% 8% -8% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Source: CoreLogic, John Burns Real Estate Consulting, LLC; (Data: Aug-18; Pub: Oct-18) *Metropolitan division **Combination of metropolitan divisions

43 With Appreciation, Payments are up 15% YOY in Phoenix Entry-Level Mortgage Payment Change Year over year San Jose Las Vegas Seattle* San Francisco** East Bay Area* Salt Lake City Atlanta Charlotte Nashville Jacksonville Tampa Orlando Phoenix Denver Indianapolis Miami* Riverside-San Bern. Los Angeles* Sacramento Weighted Average Raleigh-Durham** Minneapolis Portland San Diego Philadelphia Boston Orange County Dallas* New York* San Antonio Houston Chicago** Austin Washington DC (MSA) 10% 11%12% 9% 10% 10% 10% 15% 15% 15%16% 14% 14% 14% 14% 15% 15% 13% 13% 13% 13% 13% 13% 13% 12%13% 21% 17% 17% 19% 21% 16%17% 0% 5% 10% 15% 20% 25% Home payment, entry-level home (mortgage): 5% down payment, 30-year fixed-rate mortgage, PITI (principal, interest, taxes and insurance) payment plus mortgage insurance payment. Sources: John Burns Real Estate Consulting, LLC; (Data: Aug-18, Pub: Oct-18) *Metro division, **Combination of metro divisions We define an entry-level home as one that sold for 80% of the market s median sales price. We forecast mortgage rates will average 4.5% in 2018, further worsening affordability. 25%

44 Affordability Stinks in Phoenix and Just About Everywhere Else Burns Affordability Index Top US markets Denver Houston Nashville Seattle* Bay Area, CA¹ Portland Salt Lake City Miami* Dallas* Los Angeles* Orange County Austin San Antonio San Diego Orlando Phoenix Las Vegas Riverside-San Bern. Sacramento Atlanta Tampa Jacksonville New York* Charlotte Boston Minneapolis Washington DC (MSA) Philadelphia Indianapolis Raleigh-Durham** Chicago** * Metro divison ** Combination of metro divisions (1) Bay Area is composed of San Francisco and San Jose MSAs Source: John Burns Real Estate Consulting, LLC; See Methodology Section (Data: Sep-18, Pub: Oct-18)

45 Phoenix Employment Growth / Permit (E/P) Ratio Is Strong Again Employment Growth / Permit Ratio: Top US Markets Boston Riverside-San Bern. Philadelphia Seattle* Bay Area, CA¹ Salt Lake City New York* Las Vegas Los Angeles* Washington DC (MSA) Phoenix Minneapolis Indianapolis Chicago** Houston Orlando Denver San Diego Portland National Dallas* Miami* Tampa Sacramento Jacksonville Atlanta Raleigh-Durham** Orange County Charlotte Austin San Antonio Nashville Balanced = (1) Bay Area is composed of San Francisco and San Jose MSAs. *Metro division ** Combination of metro divisions Source: John Burns Real Estate Consulting, LLC; See Methodology Section (Data: Aug-18, Pub: Oct-18) 4.2

46 Phoenix Resale Supply Very Low = Continued Home Price Appreciation Existing Home Months of Supply Sep-18 Bay Area, CA¹ Denver Sacramento Las Vegas Seattle* Phoenix Tampa Orlando Washington DC (MSA) New York* Portland San Diego Indianapolis Charlotte Weighted Average Austin Boston Los Angeles* Salt Lake City Atlanta Riverside-San Bern. Dallas* Orange County Raleigh-Durham** San Antonio Chicago** Houston Minneapolis Jacksonville Philadelphia Nashville Miami* months of supply* *We consider a balanced resale market to be around 4 5 months of supply. Click here to read our 4.0helpful BMI newsletter on months 4.0of supply ¹Bay Area composed of San Francisco and San Jose MSAs. *Metro division **Combination of metro divisions Source: John Burns Real Estate Consulting, LLC (Data: Sep-18, Pub: Oct-18) 6.1

47 Using Google Search Data, We Forecast Phoenix Home Sales Will Increase 5% in the Next 3 months Burns Predictive Analytics: 3-Month Existing Home Sales Forecast Charlotte Houston Raleigh-Durham** Atlanta Phoenix San Antonio Austin Jacksonville Tampa Orlando Miami* Philadelphia New York* Dallas* Indianapolis Weighted Average Washington DC (MSA) Las Vegas Nashville Sacramento East Bay Area* Chicago** San Francisco** Portland Salt Lake City Minneapolis Denver Riverside-San Bern. Boston Los Angeles* Orange County, CA San Jose San Diego Seattle* -4% -4%-3% -4%-4% -5% -5% -8% -7% -7% -6% -2% -2% -2%-2%-1% -3% -3% 1% 2%3% 1% 0%1% 0% 0% 0% 4% 5%5% 7% 5% 5% 7% -9% -8% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% Source: John Burns Real Estate Consulting, LLC; Google Trends (Pub: Oct-18) *Metropolitan division **Combination of metropolitan divisions

48 Agenda Long-Term Tailwinds The Recovery to Date Rising Rates Phoenix Compared to the Rest 2019 and Beyond Investment Assumptions Conclusions

49 Where will the Lots come from? Public and Private Builder Community Count Growth YOY % change 34 top metros 8% COMM. COUNTS 7% 7% 6% 5% 5% 5% 4% 3% 4% 4% 3% 2% 2% 1% 1% 1% 0% Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Source: John Burns Real Estate Consulting, LLC (Data: Oct-18, Pub: Oct-18)

50 Where will the land development capital come from? The Worst Risk-Adjusted Housing Industry Investment Today is: Buy Raw Land to Entitle in My Specific City 55% Buy 2-3 Home Builder Stocks 28% Buy Finished Lots to Build Homes in a Specific City 10% Buy a Portfolio of 50 homes to rent in a Specific City Buy 2-3 Building Products Company Stocks 2% 5% 0% 20% 40% 60% Source: John Burns Real Estate Consulting Summit Conference Client Poll, June 2018

51 Will Construction Wages Return to Pre- Mexican Immigrant Influx Levels, or Higher? $32

52 Where will the Labor Come from? HOUSEHOLD FORMATION BY AGE GROUP, M 10.2 M 3.3 M Source: John Burns Real Estate Consulting, LLC

53 Will A New Construction Process Reduce Costs Dramatically?

54 Plan for Cost Increases to Continue Lot shortage will keep land prices high. Builder demand > Supply Labor shortage will keep building costs high. Labor demand > Supply Inflation and potentially tariffs should keep materials costs high. Material Production Costs Go Up Significant offsite cost reductions for nicer single-family homes years away

55 Agenda Long-Term Tailwinds The Recovery to Date Rising Rates Phoenix Compared to the Rest 2019 and Beyond Investment Assumptions Conclusions

56 We see a very healthy economy today. Current 78 The Burns Economic Performance Index is designed to rank current economic conditions against previous economic cycles on a scale of 0-100, 0 being the lowest performing, and 100 being the highest performing economic conditions. The index includes 34 indicators grouped into 5 weighted categories: Employment, Housing, Economics, Stock Market, and Confidence, each with history back to Source: John Burns Real Estate Consulting, LLC (Pub: Nov-18)

57 Unemployment Rates Near the Same Lows as in 2001 and 2007 US Labor Force Unemployment Rate (SA) 17% Official Unemployment Rate = 3.9% U-6 Unemployment Rate = 7.4% The U-6 unemployment rate is a broader measure of unemployment that covers part-time workers who would like full-time work and those who have given up looking for work. 15% 13% 11% 9% 7% 5% 3% Source: BLS (Data: Aug-18, Pub: Sep-18)

58 Wages are Growing 5%+/- in Every Sector of the Economy, per ADP Full-Time Employed YOY Wage Growth: Private Sector 7% 5.9% 6% 5.2% 5.0% 5.0% 4.9% 5.0% 5% 4.8% 4.6% 6.2% 4% 4.0% 3% 2% 1% 0% Information Prof. and Bus. Services Construction Finance and Real Estate Manufacturing All Trade, Trans., and Utilities Nat. Resources and Mining Edu. and Health Services Leisure and Hospitality ADP processes ~20% of US payroll, controlling compositional shifts such as low-paid workers entering the labor pool and higher-paid workers exiting. Sources: ADP; John Burns Real Estate Consulting, LLC (Data: 2Q18, updated quarterly ) Pub: Aug-18

59 I expect continued new home price declines on a minority of new homes through the Spring. Bad News Rate Increases Hurt More When Affordability is Already a Problem Well-capitalized builders will keep building, discounting and selling Good News Economy will keep growing, increasing wages, especially for manual labor and highly skilled jobs Builders will pivot down in price to smaller, higher density, lower spec homes in slightly worse locations New FHA and GSE limits will likely rise 5%+ Mortgage terms likely to keep loosening Source: John Burns Real Estate Consulting Housing from the FrontLines Survey, November 2018

60 Agenda Long-Term Tailwinds The Up Cycle to Date Dealing with Supply Constraints 2018 s Slowdown From Now Until Spring 2019 and Beyond Conclusions and Strategies

61 Growth Eventually stops. Recession risks are higher than norm 48% within 2 years and 64% within 4 years very low risk low risk 27% normal risk 56% 48% high risk 64% very high risk A forward looking component of the index with data back to 1953 provides a lead on recession events as well as an early indication of coming growth cycles. We did a 64 year back test of this data which shows a normal risk of recession in any given year on average to be 27% 2 years out and 50% four years out. Source: John Burns Real Estate Consulting, LLC (Pub: Aug-18) Probability

62 67% of Economists forecast a recession in the next 2 years. When is the Current US Economic Expansion Most Likely to End? Percent of respondents May 2018 survey 60% 59% 50% 40% 30% 20% 22% 10% 8% 8% 0% Source: Wall Street Journal Survey of Economists, survey conducted May 4-8, 2018; John Burns Real Estate Consulting, LLC (Date: May-18) 4% Pub: Aug-18

63 Job Growth is Always the Critical Demand Factor to Watch. US Payroll Employment YOY % change, NSA 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% Source: BLS (Data: Sep-18, Pub: Oct-18)

64 Oversupply is not a risk. US Single-Family Residential Permits 1,800K 1,600K 1,400K 1,200K 1,000K 800K 600K 827K 870K 890K 890K 400K 200K 0K Current 2018P 2019P 2020P Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC forecasts (Data: Aug-18, Pub: Oct-18)

65 Affordability is the Primary Risk. At today s 4.72% Mortgage Rate, Home Prices Are Overvalued in Many Metros Burns Intrinsic Home Value Index Current mortgage rate (4.72%) Note: % equals the home price above/ below the intrinsic value. Please see our detailed methodology for explanation on our Intrinsic Home Value Index. Overvalued Fairly valued Undervalued Source: John Burns Real Estate Consulting, LLC (Data: Sep-18, Pub: Oct-18)

66 Expect Private Builder M&A Activity to Continue. Public builders no longer controlled by eager sellers. Long-term oriented owners to buy short-term oriented sellers. Builder M&A Activity

67 Agenda Long-Term Tailwinds The Up Cycle to Date Dealing with Supply Constraints 2018 s Slowdown From Now Until Spring 2019 and Beyond Conclusions and Strategies

68 Conclusions and Strategies Why Wait to Act? While there will be more clarity in the Spring, I can t find any reason to think the current slowdown is more than a hiccup. Competition likely to be more severe in the Spring Maintain Balance Sheet Discipline Next recession could easily result in 10%+ price and volume declines Recession impact muted by: Excellent industry discipline, from land investments to mortgage documentation to debt levels and maturities Likelihood that rates will decline in a recession Pivot to lower-price everything Further out lots, smaller lots, smaller homes, lower specification levels, lower rents

69 Stay vigilant There are always things we don t know Conclusions and Strategies Plan for Margin Compression Continued cost and expense increases less likely to be passed onto your customer Monitor Mortgage Policy Closely It is 90% of home sales revenue, and drives rental demand. Consider rental homes for diversity Strong consumer demand and institutional demand. Get smarter on new technologies from BIM software to smart homes to offsite techniques Empower Your Customer Before Somebody Steals Them Change from How can I get them to interact with me? to How can I empower them to act on their own 24/7?

70 Trusted Analysis for Executive Decisions Housing Market Insights December 5, 2018 Presented by: John Burns, CEO

71 CHRIS CAMACHO President & CEO Greater Phoenix Economic Council

72 GREATER PHOENIX OVERVIEW Chris Camacho, President & CEO, Greater Phoenix Economic Council December 5, 2018

73 GREATER PHOENIX ECONOMIC COUNCIL

74 OUR MISSION Attract and grow quality businesses and advocate for Greater Phoenix s competitiveness.

75 GREATER PHOENIX ECONOMIC COUNCIL ABOUT We are supported by Maricopa County, 22 cities and towns, and more than 150 private-sector investors. SINCE ,000+ $14.4B GPEC has assisted GPEC has brought GPEC has helped bring more than 740 more than 130,000 $14.4 billion in capital businesses as they jobs to the region. investment. relocate and expand to the region.

76 GREATER PHOENIX ECONOMIC COUNCIL GPEC SERVICES IN-DEPTH MARKET DATA & ANALYSIS Analysis of current wage rates, labor force, skill levels based on occupation and industry, etc. OPERATIONAL COST ANALYSIS Comparisons across major markets with analysis of transportation, real estate, tax incentives, labor costs, etc. CONNECTIVITY TO KEY RESOURCES Introductions to colleges, universities, workforce assets, state and local regulatory authorities, job training programs, startup resources, business leaders, etc. SPEED TO MARKET SUPPORT City permitting, entitlements and certificates of occupancy SITE-SELECTION ASSISTANCE Listing of value-based assets, unique buildings and shovel-ready sites ECONOMIC IMPACT ANALYSIS Evaluation of your project s economic impact and community benefit ECONOMIC POLICY COMPETITIVENESS Annual review of current economic development program offerings

77 GREATER PHOENIX ECONOMIC COUNCIL GPEC PARTNERS Member Community GPEC MEMBER COMMUNITIES Apache Junction Maricopa Avondale Mesa Buckeye Peoria Casa Grande Phoenix Chandler Queen Creek El Mirage Scottsdale Fountain Hills Surprise Gila Bend Tempe Gilbert Tolleson Glendale Wickenburg Goodyear Youngtown

78 GREATER PHOENIX ECONOMIC COUNCIL MARQUEE PROJECTS (1,500 JOBS) (1,000 JOBS) (1,000 JOBS) (800 JOBS) (810 JOBS) (785 JOBS) (710 JOBS) (700 JOBS) (700 JOBS) (300 JOBS) (200 JOBS) (150 JOBS)

79 LOCATE OVERVIEW GPEC ACTIVITY

80 OUR REGION

81 GREATER PHOENIX KEY INDUSTRIES DRIVERLESS VEHICLES WEARABLES INDUSTRY 4.0 CYBERSECURITY

82 GREATER PHOENIX DEMOGRAPHICS Population 4.7M Workforce 2.4M Median Age 36.7 Some College 63.7%

83 GREATER PHOENIX COMMUNITIES GREATER PHOENIX REPRESENTS 73% OF THE STATE S ECONOMY

84 GREATER PHOENIX MARKET SIZE (2017) GREATER PHOENIX 4,737,270 WEST VALLEY 840,000+ PHOENIX 1,626,085 EAST VALLEY 1,650,000+ MARICOPA COUNTY 4,307,033

85 GREATER PHOENIX MARKET GROWTH (2027) GREATER PHOENIX Projected growth of 20.5% to 5.6 million WEST VALLEY 1,067,700 PHOENIX 1,847,200 EAST VALLEY 1,927,027 MARICOPA COUNTY Projected growth of 19.5% to 5.0 million 27.4% 17.0% 17.1%

86 GREATER PHOENIX ESTABLISHED INFRASTRUCTURE: WATER ASSETS Arizona uses 1957 water levels despite large increases in both population and economic activity Arizona has stored nearly 3 trillion gallons of water for future use Metro Phoenix reuses or recharges nearly 100% of all wastewater

87 GREATER PHOENIX HOW WE COMPARE METRO Phoenix NYC Miami Denver 2013 POPULATION 4,390,550 20,023,535 5,863,042 2,696, POPULATION 4,816,795 20,410,949 6,236, ,625 PERCENT CHANGE 9.7% 1.9% 6.4% 8.9% MEDIAN HOME PRICE $258,300 $431,000 $278,400 $398,400 MEAN COMMUTE TIME 26.0 min 35.9 min 28.5 min 27.3 min MEDIAN HOUSEHOLD INCOME $55,227 $69,211 $50,064 $68,173 Sources: EMSI Q Data Set; Regional Comparison Report U.S. Census Bureau, American Community Survey 5-Year Estimates Zillow Home Value Index, September 2018

88 KEY ECONOMIC TRENDS

89 KEY ECONOMIC TRENDS JOB GROWTH SINCE THE RECOVERY Greater Phoenix recovered peak pre-recession job numbers in August 2016 Current total nonfarm payroll employment is 2,046,900 Since the recovery began the region has gained 399,700 jobs Jobs in Thousands Greater Phoenix Job Growth Source: AZ Office of Economic Opportunity Labor Statistics, July 2018, not seasonally adjusted, preliminary numbers

90 JOB RECOVERY FORECAST Greater Phoenix job growth is projected to be 2.8% from 2017 to 2018 AZ job growth is projected to be 2.5% from 2017 to 2018 U.S. job growth is projected to be 0.7% from 2017 to ,400.0 Projected Non-Farm Employment Growth 2, , , , , , , , ,500.0 KEY ECONOMIC TRENDS Source: University of Arizona Economic and Business Research Center, May Bureau of Labor Statistics, projections.

91 KEY ECONOMIC TRENDS CURRENT MAKEUP OF GREATER PHOENIX INDUSTRY The recovery was led by Professional and Business Services, Healthcare and Social Assistance, Leisure and Hospitality, Construction, and Finance and Insurance Current Employment by Industry Industry Job Gains in Recovery % Growth Total Nonfarm % Professional and Business Services % Health Care and Social Assistance % Leisure and Hospitality % Construction % Finance and Insurance % Retail Trade % Manufacturing % Transportation and Utilities % Educational Services % Information % Government 3.7 2% Real Estate, Rental, and Leasing % Other Services 1.6 3% Wholesale Trade 0.2 0% Natural Resources and Mining 0.2 7% Source: AZ Office of Economic Opportunity Labor Statistics, July 2018, not seasonally adjusted, preliminary numbers

92 KEY ECONOMIC TRENDS CURRENT MAKEUP OF ARIZONA INDUSTRY Total nonfarm payroll employment in Arizona is 2,755,000 as of July Year over year growth is at 2.7% Current Employment by Industry Industry Employment YoY % Growth Total Nonfarm 2, % Professional and Business Services % Health Care and Social Assistance % Leisure and Hospitality % Construction % Finance and Insurance % Retail Trade % Manufacturing % Transportation and Utilities % Educational Services % Information % Government % Real Estate, Rental, and Leasing % Other Services % Wholesale Trade % Natural Resources and Mining % Source: AZ Office of Economic Opportunity Labor Statistics, July 2018, not seasonally adjusted, preliminary numbers

93 KEY ECONOMIC TRENDS GREATER PHOENIX ECONOMY IS STEADILY GROWING Greater Phoenix real GDP in 2016 was $203.3 billion, growing by 2.6% over the previous year Arizona real GDP growth was 2.0% from 2015 to 2016 U.S. GDP real growth was 1.5% from 2015 to 2016 Real GDP (Millions of Chained 2009 Dollars) Greater Phoenix Gross Domestic Product $225,000 $200,000 $175,000 $150,000 $125,000 $100,000 Source: Bureau of Economic Analysis, September

94 KEY ECONOMIC TRENDS ARIZONA S ECONOMY IS STEADILY GROWING From , Arizona s economy grew 70.3% Real GDP (Millions of Chained 2009 Dollars) $300,000 $250,000 $200,000 $150,000 $100,000 Arizona Gross Domestic Product Source: Bureau of Economic Analysis, May 2018

95 KEY ECONOMIC TRENDS EMPLOYMENT GROWTH Arizona s rank out of 50 states Greater Phoenix s ranking among all metro areas with populations greater than 1,000,000 Year Rank Year Rank Year Rank # MSA s Year Rank # MSA s Source: Arizona State University, U.S Bureau of Labor Statistics

96 WORKFORCE

97 POPULATION DENSITY WORKFORCE

98 EMPLOYMENT DENSITY WORKFORCE

99 WORKFORCE HIGHER EDUCATION ENROLLMENT 71,828 31, ,000 44,831 20,500

100 WORKFORCE TALENTED WORKFORCE ARIZONA STATE UNIVERSITY Arizona State University is a public research university ranked #1 in the U.S. for innovation, dedicated to accessibility and excellence. ASU is committed to partnering with corporate, education, and government organizations to produce a skilled workforce. GRAND CANYON UNIVERSITY Arizona's premier private Christian university with over 200 academic programs and more than 20,000 on-campus students enrolled. MARICOPA COMMUNITY COLLEGES The largest community college district in the United States, the Maricopa Community College District includes 10 colleges throughout Greater Phoenix.

101 WORKFORCE TALENTED WORKFORCE UNIVERSITY OF ADVANCING TECHNOLOGY More than 800 students enrolled, primarily in technology-focused programs, including computer science. UAT's Mission is to educate students in advancing technology who innovate for our future. UNIVERSITY OF ARIZONA The University of Arizona is a public research university committed to partnering with government and corporations to train job-ready students. UNIVERSITY OF PHOENIX The largest private university in the United States focused on business curriculum. The learning model of the University is designed to provide an active, engaging learning environment that allows for practical application of knowledge and skills.

102 WORKFORCE TALENTED WORKFORCE GALVANIZE Galvanize offers both full and part-time curriculum in web development and data science. Immersive course offerings produce job-ready graduates. DEVMOUNTAIN DevMountain is an industry-leading coding school which has expert faculty who are passionate about sharing their craft and empowering the next wave of programmers, entrepreneurs, and designers. WOZ U Woz U specializes in technology and career-based programs designed to get people into the workforce quickly and affordably. Woz U is passionate about inspiring the next generation of innovators and developing the workforce of the future.

103 THE MODERN ECONOMY

104 A VISION OF THE REGION S POTENTIAL THE MODERN ECONOMY PLAN an economy driven by competitive and specialized industries a region of connected communities an environment where businesses start, grow, and thrive a workforce with access to quality jobs and opportunities for economic mobility

105 A REGIONAL FRAMEWORK THE MODERN ECONOMY PLAN Intentional Planning and Execution Marketbased Solutions Collaborative Leadership Multisector Partnerships

106 COMPONENTS TO THRIVE THE MODERN ECONOMY PLAN HIGH-IMPACT CLUSTERS DIGITAL INFRASTRUCTURE WORKFORCE INNOVATION ENTREPRENEURSHIP GLOBAL CONNECTIVITY ARTS & CULTURE PLACE-MAKING

107 THANK YOU GREATER PHOENIX: Where talent is bred, community is built, and business thrives Greater Phoenix Economic Council GPEC.ORG 2 N. CENTRAL AVE., SUITE 2500, PHOENIX, AZ INFO@GPEC.ORG (602)

108 MARK STAPP Center for Real Estate Theory and Practice Semi-Annual Commercial Brokers Survey (October 2018)

109 The Market Overall Where are we in the Cycle? 10/13 04/14 10/14 04/15 10/15 04/16 10/16 04/17 10/17 04/18 10/18 Trends Expansion 13% 47% 8% 58% 90% 71% 52% 59% 67% 69% 78% Recovery 87% 53% 92% 33% 10% 29% 22% 22% 9% 19% 3% Correction 0% 0% 0% 9% 0% 0% 3% 7% 3% 2% 2% Maturity 0% 0% 0% 0% 0% 0% 22% 12% 21% 11% 17% Recession 0% 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% In what direction is the Metro Phoenix Market moving? 10/13 04/14 10/14 04/15 10/15 04/16 10/16 04/17 10/17 04/18 10/18 Trends Up 33% 27% 84% 100% 100% 100% 88% 92% 90% 98% 98% Down 33% 7% 8% 0% 0% 0% 1% 1% 0% 2% 0% Stationary 34% 66% 8% 0% 0% 0% 11% 7% 10% 0% 2% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

110 The Market Overall Is uncertainty in the Federal Government affecting the commercial real estate market and hindering our local growth potential? 10/13 04/14 10/14 04/15 10/15 04/16 10/16 04/17 10/17 04/18 10/18 Trends Yes 100% 100% 83% 82% 71% 57% 37% 46% 43% 22% No 0% 0% 17% 18% 29% 43% 63% 54% 57% 78% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Where are Investor Returns headed in the next three months? 10/13 04/14 10/14 04/15 10/15 04/16 10/16 04/17 10/17 04/18 10/18 Trends Up 20% 7% 0% 6% 55% 36% 26% 19% 21% 20% 19% Down 47% 14% 8% 13% 9% 14% 23% 29% 22% 33% 24% Stationary 33% 79% 92% 81% 36% 50% 51% 52% 57% 46% 57% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

111 The Market Overall Has Cap Rate Compression helped effect gains in core real estate values over the past six months? 10/13 04/14 10/14 04/15 10/15 04/16 10/16 04/17 10/17 04/18 10/18 Trends Yes 60% 80% 100% 100% 100% 86% 86% 75% 75% 76% 73% No 20% 20% 0% 0% 0% 14% 14% 25% 25% 24% 27% No Opinion 20% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% What is the overall feeling about the Metro Phoenix commercial real estate market? 10/13 04/14 10/14 04/15 10/15 04/16 10/16 04/17 10/17 04/18 10/18 Trends Optimistic 100% 100% 100% 100% 100% 94% 97% 98% 98% 98% Pessimistic 0% 0% 0% 0% 0% 6% 3% 2% 2% 2% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

112 The Investment Market Will the flow of investment capital into the Phoenix market over the next 6 months 10/13 04/14 10/14 04/15 10/15 04/16 10/16 04/17 10/17 04/18 10/18 Trends Increase 29% 60% 46% 67% 70% Decrease 6% 0% 8% 0% 0% Dstay the Same 65% 40% 46% 33% 30% 0% 0% 0% 0% 0% 0% 100% 100% 100% 100% 100% Is the capital investment emphasis heading to 10/13 04/14 10/14 04/15 10/15 04/16 10/16 04/17 10/17 04/18 10/18 Trends Tier 1 Markets 63% 43% 20% 10% 40% Tier 2 Markets 37% 57% 80% 90% 50% Tier 3 Markets 0% 0% 0% 0% 10% 0% 0% 0% 0% 0% 0% 100% 100% 100% 100% 100%

113 The Land & Housing Market Have land prices reached their peak? 10/13 04/14 10/14 04/15 10/15 04/16 10/16 04/17 10/17 04/18 10/18 Trends Yes 14% 18% 18% 6% 7% 22% 14% 33% 10% 14% No 86% 82% 82% 94% 93% 78% 86% 67% 90% 86% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Are homebuilders backing out of land deals? 10/13 04/14 10/14 04/15 10/15 04/16 10/16 04/17 10/17 04/18 10/18 Trends Yes 93% 100% 33% 82% 43% 67% 69% 50% 29% 32% No 7% 0% 67% 18% 57% 33% 31% 50% 71% 68% 0% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

114 The Land & Housing Market Will the difficulty for buyers to qualify and get financing have a great impact on homebuilding over the next 6 months? 10/13 04/14 10/14 04/15 10/15 04/16 10/16 04/17 10/17 04/18 10/18 Trends Yes 33% 64% 28% 19% 32% No 67% 36% 72% 81% 68% 0% 0% 0% 0% 0% 100% 100% 100% 100% 100% What will have the greatest impact on homebuilding over the next 6 months? 10/13 04/14 10/14 04/15 10/15 04/16 10/16 04/17 10/17 04/18 10/18 Trends Land Prices 0% 0% 0% 0% 5% Labor Costs 33% 21% 17% 19% 23% Material Costs 0% 0% 6% 19% 9% All of the Above 67% 79% 77% 62% 63% 0% 0% 0% 0% 0% 0% 100% 100% 100% 100% 100%

115 BYRON SARHANGIAN Partner Snell & Wilmer, LLP

116 Opportunity Zone Program Byron Sarhangian Snell & Wilmer

117 3 Tax Incentive Benefits 1. Temporary Deferral of Eligible Gain Deferral until December 31, 2026 Applies to a capital gain from the sale or exchange of any property to an unrelated person 2. Partial reduction of Deferred Gain Up to 15% Income Tax reduction on the Deferred Gain 3. Forgiveness of Additional Gain Applies to the Appreciation in the Investment Snell & Wilmer

118 Opportunity Zone Fund Investment 1. Investment of Capital Gains Only Capital Gains receive favorable tax treatment $6 trillion of potential eligible capital 2. Greater Flexibility than 1031 Exchange No Qualified Intermediary/No Tracing of Funds 3. Ability to Form Captive Opportunity Funds Self Certification Snell & Wilmer

119 Opportunity Zone Fund Requirements 1. Investment in an Opportunity Fund Must invest in an Opportunity Fund within 180 days of realization of Capital Gains Potential to toil the 180 day period to start from the end of the tax year of a pass through entity 2. Substantial Improvement of Property Required within 30 months of the Opportunity Fund s investment in the real property (double the basis) Special exception for redevelop of existing assets Snell & Wilmer

120 Example* Investor sells stock for $20M ($10M of long term capital gain) on July 1, 2018 Investor invests $10M in an interest in an O-Fund on November 1, Does not need to invest the entire $20M December 31, 2026: Investor s tax basis in the O-Fund was increased by $1.5M (15% of $10M) $1M on November 1, 2023, and $500K on November 1, Investor has to pay tax on $8.5M long-term capital gain November 2, 2028: Investment in the O-Fund has appreciated from $10M to $25M ($15M in potential gain) If the investment in the O-Fund is sold, then there is no taxable gain on the $15M of appreciation. * Results/outcomes may vary Snell & Wilmer

121 GREG VOGEL CEO & Founder Land Advisors Organization

122 WELCOME December 5th, 2018

123 The Best Known Name in Land Founded ,000 37,000 61% of US Population Growth 59,000 56, , , ,000 3, , ,000 * State population growth 2016 to Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

124 Affiliate Companies Specializes in establishing strategic capital relationships between landowners, homebuilders, developers and capital providers. Institutional capital firms Hedge funds Opportunity funds Private equity firms Mezzanine providers Traditional/nontraditional debt providers Assists the development and home building communities with the construction of projects using district financing structures (e.g. SID, CFD, DID, PID etc.) and other financing mechanisms designed to meet the unique characteristics and financing goals of our clients. State and local tax consulting firm specializing in real and personal property tax reductions. Specialized areas of expertise involve all real estate asset classes. Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

125 Metro Phoenix A Mature & Steady State December 5 th, 2018

126 Mastering the Market Cycles We cannot predict the future, we can only better understand the present. Howard Marks Co-founder Oaktree Capital $122 Billion Under Management Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

127 The Pendulum Swings of Psychology The Market Pendulum Swings Between Fear & Greed Fear Greed Optimism and Pessimism Risk Tolerance and Risk Aversion Bear Market Anxiety Neutral Smug Bubble Faith in Value and Insistence in Concrete Valuation Urgency to Buy and Panic to Sell Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

128 Cycle of Market Emotions Optimism Thrill Excitement Euphoria Anxiety Denial Fear Desperation Panic Capitulation Past Cycles Present Optimism Relief Hope Despondency SUPER CYCLES 15 +/- YEARS Depression Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

129 Decennial Population Growth 2018 PHOENIX MSA POPULATION ESTIMATE : 4,837,000 Actual Projected Source: Arizona Department of Employment and Population Statistics Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

130 Annual Population Growth Year over year population change Population Growth 1990 s: 1,013, s: 941, s: 836, s: 845, s: 855,000 Jul 90 - Mar 91 Mar 01 - Nov 01 Dec 07 - Jun 09 In-Migration Natural Growth Projected Recession Natural Growth 2007 Peak: 44, : 21,000 Change: -23,700 Lowest natural growth rate since K 21.0K Source: Arizona Department of Employment and Population Statistics, Arizona Department of Health Services, US Census Bureau, Phoenix Blue Chip Forecast Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

131 Annual Net Migration Year over year population change not including natural growth. Total Net Migration Million Jul 90 - Mar 91 Mar 01 - Nov 01 Dec 07 - Jun 09 In-Migration Projected Recession Average: 61K Persons per Year Source: Arizona Department of Employment and Population Statistics, Arizona Department of Health Services, US Census Bureau, Phoenix Blue Chip Forecast Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

132 Phoenix In Migration Where Are New Residents From? Seattle Minneapolis Salt Lake City Chicago Detroit Boston New York Sacramento San Francisco Las Vegas Denver Washington DC Albuquerque Los Angeles San Diego El Paso Austin Dallas-Ft Worth Low High San Antonio Houston Tampa Jacksonville Miami Source: IRS Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

133 Phoenix In Migration Truck Rental Rates Between Phoenix and Competing Cities Seattle $1,730 to Phx $700 to Seattle Moving to Phx Leaving Phx $1,200 to Phx $120 to SF $650 to Phx $300 to Denver $2,250 to Phx $1,190 to Chicago Denver Chicago San Francisco Los Angeles $810 to Phx $694 to Houston Low High $735 to Phx $90 to LA Houston Source: IRS Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

134 Population Growth - Top 10 Metro Areas 2016 to 2017 Source: US Census Bureau Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

135 Housing Opportunity Index of Top 10 Population Growth Markets Share of Homes Sold Affordable to the Median Family Income More Affordable Less Affordable Source: National Association of Home Builders Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

136 Year Over Year Monthly Employment Change 76,700 Jobs Added Oct to Oct Source: Arizona Department of Employment and Population Statistics, Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

137 Annual Employment Change 12 Month Average of Annual Change in Jobs Unemployment Rate October Change National: 4.2% 3.7% 0.5% Arizona: 4.7% 4.7% 0.0% Phoenix: 4.0% 3.9% 0.1% Source: Arizona Department of Employment and Population Statistics, Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

138 Employment Growth - Top 10 Metro Areas Oct to Oct 2018 Source: BLS, Arizona Department of Employment and Population Statistics Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

139 Housing Opportunity Index of Top 10 Employment Growth Markets Share of Homes Sold Affordable to the Median Family Income More Affordable Less Affordable Source: National Association of Home Builders Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

140 Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data. Source: Land Advisors Organization West Valley Land Transactions 2015 to Present Metro Phoenix Developed Land Sun Valley Pkwy Sun City West Surprise Sun City White Tank Mountain Regional Park Peoria Glendale Tonopah Phoenix Avondale Buckeye Laveen

141 Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data. Source: Land Advisors Organization Northeast Valley Land Transactions 2015 to Present Anthem Cave Creek Carefree Metro Phoenix Developed Land Tonto National Forest Fountain Hills Scottsdale Phoenix

142 Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data. Source: Land Advisors Organization Southeast Valley Land Transactions 2015 to Present Metro Phoenix Developed Land Phoenix Tonto National Forest Mesa Apache Junction Gold Canyon Gilbert Chandler Queen Creek Sun Lakes

143 Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data. Source: Land Advisors Organization Pinal County Land Transactions 2015 to Present Metro Phoenix Developed Land Maricopa Florence Coolidge Casa Grande Eloy

144 Median Home Sales Price in Selected Markets 3 rd Quarter 2018 Metro Phoenix Median Household Income: $59,000 Monthly Payment: $1,775 Source: National Association of Realtors Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

145 Percent Change in Home Price in Selected Markets 3 rd Quarter 2017 to 3 rd Quarter 2018 Source: National Association of Realtors Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

146 New and Resale Home Sales Volume Source: RL Brown, ASU Center for Real Estate Data does not include attached, trustee, REO or HUD sales Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

147 Metro Phoenix Resale Days of Supply Source: Cromford Report Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

148 New & Resale Median Home Price $316,000 $142/sqft 2,225 sqft 491 sqft delta $255,000 $147/sqft 1,734 sqft Source: RL Brown, ASU Center for Real Estate Data does not include attached, trustee, REO or HUD sales Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

149 Phoenix Metro - Single Family Permits 1990 s 285K Permits 2000 s 341K Permits K Permits (Est.) Source: Land Advisors Organization, HBACA, US Census Bureau Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

150 Public vs. Private Homebuilder s Market Source: RL Brown Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

151 Top 20 Homebuilders by Permits 3Q Q 2017 Top 10 Builders 12,400 Permits 54% Market Share Builders ,134 Permits 21% Market Share Total Permits: 22,130 Top 20: 71% Market Share Source: RL Brown Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

152 Top 21 to 40 Homebuilders by Permits 3Q Q 2017 Top Builders 1,481 Permits 6% Market Share Builders Permits 3% Market Share Total Permits: 22,130 Top 21-40: 9% Market Share Source: RL Brown Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

153 Top Builders Average Home Price SPLIT INTO TWO WHERE IS TOLL BROS FHA Limit $294K $294K to $350K Total Sales: $6.91B Avg. Price: $378K $350K to $500K Over $500K Source: RL Brown Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

154 Active Adult Community Permits Source: RL Brown Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

155 Permits by Submarket CUT OUT PHX WEST VALLEY 50% Single Family Permits Issued in the Last 12 Months Maricopa County (not shown) Permits: 1,642 Market Share: 7% 12 Mo Change: 53% Northwest Permits: 2,812 Market Share: 13% 12 Mo Change: 9% Southwest Permits: 3,742 Market Share: 17% 12 Mo Change: 11% Phoenix Permits: 3,603 Market Share: 18% 12 Mo Change: 32% Southeast Permits: 5,777 Market Share: 26% 12 Mo Change: 0% Northeast Permits: 488 Market Share: 2% 12 Mo Change: -6% Pinal County Permits: 4,067 Market Share: 18% 12 Mo Change: 32% Source: HBACA, Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

156 Permits by City Single Family Permits Issued in the Last 12 Months 3Q Q 2017 Increasing Declining Source: HBACA Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

157 Active Subdivisions & Sales Velocity Metro Phoenix Developed Land Sales per Active Subdivision Last 12 Months 3-10 (107) (223) Greater than 50 (75) Government Active Subdivisions: 405 Source: RL Brown & Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

158 Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data. Source: RL Brown, BLS, US Census & Land Advisors Organization Active Subdivisions Over Employment Metro Phoenix Developed Land Sales per Active Subdivision Last 12 Months 3-10 (107) (223) Greater than 50 (75) Sun Valley Pkwy Employment Density High Low Government Active Subdivisions: 405

159 Built-out Subdivisions Over Next 12 Months Metro Phoenix Developed Land Sales per Active Subdivision Last 12 Months Sun Valley Pkwy 3-10 (107) (223) Greater than 50 (75) Built-out in 12 Mo (205) Government Active Subdivisions: 405 Source: RL Brown & Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

160 Top Master Plans - Eastmark Metro Phoenix Developed Land 733 Permits 832 Sales Source: RL Brown & Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

161 Top Master Plans Verrado/Victory Metro Phoenix Developed Land Sun Valley Pkwy 465 Permits 398 Sales Source: RL Brown & Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

162 Top Master Plans - Tartesso Metro Phoenix Developed Land Sun Valley Pkwy 391 Permits 315 Sales Source: RL Brown, BLS, US Census & Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

163 Top Master Plans - Vistancia Metro Phoenix Developed Land 365 Permits 390 Sales Sun Valley Pkwy Source: RL Brown Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

164 Top Master Plans Cooley Station Metro Phoenix Developed Land 342 Permits 341 Sales Source: RL Brown & Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

165 Top Master Plans Estrella Mountain Ranch Metro Phoenix Developed Land Sun Valley Pkwy 341 Permits 311 Sales Source: RL Brown & Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

166 Top Master Plans Sun City Festival/Festival Foothills Metro Phoenix Developed Land 328 Permits 316 Sales Source: RL Brown & Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

167 Lot Development Demand Pressure Metro Phoenix Developed Land Sales per Active Subdivision Last 12 Months 3-10 (107) (223) Greater than 50 (75) Today 3 Yrs 1 5 Yrs Need to Add 25,000 Lots/Year Source: RL Brown & Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

168 Finished Lot Inventory Conventional* Finished Lots Active/Inactive & Owner Type Total Inventory 2015: 51,221 Lots 2018: 37,982 Lots Delta: -13,239 Lots * Conventional lot width is between 40 and 94 feet. Source: Belfiore Real Estate Consulting Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

169 Investor Finished Lot Inventory by Location Conventional* Finished Lots Total Inventory: 8,597 Lots * Conventional lot width is between 40 and 94 feet. Source: Belfiore Real Estate Consulting Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

170 Land Transactions Annual Volume Source: Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

171 Total Land Acres & Sales Volume Belmont 19.9K Ac 43.5K Ac Source: Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

172 Homebuilder s Annual Land & Lot Spend 45% of Total Transactions Source: Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

173 Finished Lots Number of Lots & Sales Volume Source: Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

174 Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data. Source: Land Advisors Organization Single Family Residential Finished Lot Sales Last 12 Months Metro Phoenix Developed Land Metro Phoenix Finished Lot Sales 5 50 Lots Lots Greater than 100 Lots Government Total Lots: 6,829* $ Volume: $404M * Finished Lot sales or equivalent.

175 Platted & Engineered/Partially Improved Lots Number of Lots & Sales Volume Source: Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

176 Platted & Engineered/Partially Improved Lots Number of Lots & Sales Volume Homebuilders Investors/Developers Source: Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

177 Platted & Engineered/Partially Improved Lot Sales Last 12 Months Metro Phoenix Developed Land Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data. Source: Land Advisors Organization Metro Phoenix Finished Lot Sales 5 50 Lots Lots Greater than 100 Lots Government Total Lots: 21,937 $ Volume: $702M

178 Agricultural Land Acres & Sales Volume 3% of Total Transactions Average $9,700/Acre Source: Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

179 Commercial Land Office, Retail, Mixed Use Municipal 17% of Total Transactions Source: Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

180 Industrial Land Acres & Sales Volume 11% of Total Transactions Average Sale Price $2.70/Sq Ft Source: Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

181 Multifamily Trends Source: Marcus & Millichap Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

182 Multifamily Permits Source: US Census Bureau, Axiometrics Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

183 Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data. Source: AxioMetrics Apartments Metro Phoenix Developed Land 2018 Apartments with 50+ Units Recently Completed Under Construction Infill Fed Government 7,741 Units 9,340 Units

184 Apartment Land Number of Units & Sales Volume 8% of Total Transactions Average $36,500/Unit Vast Sum is Luxury Source: Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

185 Expert Single Family Permit Projections Last Year 19,854 Actual (HBACA) Source: RL Brown, Cromford Report, Elliott D Pollack, RL Brown, HBACA Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

186 Expert Single Family Permit Projections 2018 Source: RL Brown, Cromford Report, Elliott D Pollack, RL Brown, HBACA Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

187 Retail Vacancy 8.3% Up 0.1% from 2017 Office Vacancy 15.7% Down 2.0% from 2017 Industrial Vacancy 5.7% Down 1.6% from 2017 Rentable Area: 151.5M Sqft YTD Net Absorption: 147.5K Sqft Under Construction: 714.2K Sqft Rentable Area: 88.7M Sqft YTD Net Absorption: 1.497M Sqft Under Construction: 3.285M Sqft Rentable Area: 314.6M Sqft YTD Net Absorption: 8.690M Sqft Under Construction: 7.740M Sqft Pop Ratio: Needed by 2040: 32 Sqft/Person 66.7M Sqft 6.0K Acres Pop Ratio: Needed by 2040: 19 Sqft/Person 38.3M Sqft Pop Ratio: Needed by 2040: 66 Sqft/Person 134.1M Sqft 9.2K Acers Source: CBRE, Arizona Department of Employment and Population Statistics, Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

188 Metro Phoenix Proposed Freeways Metro Phoenix Developed Land Pinal North South Corridor Source: Land Advisors Organization Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

189 Metro Phoenix Developed Land Year Built Population Before K M M M M State Land Fed Government Source: Land Advisors Organization

190 Metro Phoenix Developed Land Year Built Population Before K M M M M M State Land Fed Government Source: Land Advisors Organization

191 Opportunities In Land & Housing Raw Land within 5-20 years of Development Still Compressed in Valuation Not Correlated to Overall Recovery Less Competition and Perception of Risk is High in Reality is Low Anyone can Invest - $50k - $100+M Compounded Returns over 3-10 years 10%-20% Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

192 Opportunities In Land & Housing Traditional Lot Banking $2 - $20M Per Transaction 15% Deposit 2-4 Lots per Month 1 4 Year Team Unleveraged Compounded Returns 12% - 14% Leveraged - 18% - 22% Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

193 Opportunities In Land & Housing Equity Investments in Home Building Projects Builders have ability to obtain Bank Financing for 50-65% LTC Need is for 80-95% of the Equity Term 1 4 years Returns 20% 25% Leveraged Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

194 Opportunities In Land & Housing Model Sale Lease Back Financing 90% of Value 7.5% - 9% Lease Back Share Back End Sale Negotiable Term 1-3 years Overall Return 9% - 11% No Tenancy Risk, No Turn Over, Triple Net Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

195 Opportunities In Land & Housing Infrastructure Tax Free CFD Bonds 5.5% - 6.5% Funding Infrastructure to Unlock Value JV with Owners 12% 20% Purchase/Pre-Payment of Impact Fees 12%-16% Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.

196 Conclusions It s Different this Time Observe Where We/You Are in the Cycle Population and Job Growth will Remain Very Strong More Begets More Watch Affordability Metrics and Must Create Affordable Alternatives Rising of all Costs Continual State of Cautious Optimism Fear Greed Anxiety Neutral Smug Land Advisors Organization 2018 All Rights Reserved While Land Advisors Organization makes every effort to provide accurate and complete information, there is no warranty, express or implied as to the accuracy, reliability or completeness of furnished data.