Greater Downtown Miami Annual Residential Market Study

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1 Greater Downtown Miami Annual Residential Market Study Prepared for the Miami Downtown Development Authority (DDA) by Integra Realty Resources (IRR) April 2018

2 Greater Downtown Miami Annual Residential Market Study Prepared for the Miami Downtown Development Authority (DDA) by Integra Realty Resources (IRR) April 2018 For more information, please contact IRR-Miami/Palm Beach The Dadeland Centre 9155 S Dadeland Blvd, Suite 1208 Miami, FL

3 Contents 2 Introduction 5 Greater Downtown Miami Market Submarket Map 6 Greater Downtown Miami Condo Pipeline 7 What changed? Q2-Q4 8 Greater Downtown Miami Market Sizing 10 Greater Downtown Miami Market Condo Delivery and Absorption of Units 15 Analysis of Condominium Resale 17 Currency Exchange and Purchasing Patterns 18 Current Cycle Completions 19 Major Market Comparison 20 Condominium Rental Activity 24 Conventional Rental Market Supply 28 Land Prices Trends 29 Conclusions 30 Condo Development Process Appendix

4 Introduction Integra Realty Resources Miami Palm Beach (IRR-Miami) is pleased to present the following Residential Real Estate Market Study within the Miami Downtown Development Authority s (Miami DDA) market area, defined as the Greater Downtown Miami market. This report updates IRR-Miami s findings on the local residential real estate market through January Key findings are as follows: Millicento The downtown Miami residential market has been expanding rapidly since This coming year will mark the high point of the residential expansion, with close to 2,800 condominium units and nearly 4,000 conventional Class A rental units delivering in Higher levels of resale condo inventory and slower absorption on resales resulted in the second consecutive decline in condo resale pricing. This is coupled with declines in condominium rental pricing for the first year since , reflective of both higher turn-over in the condominium rental sector, and increasing competition from new conventional rental projects entering the market. The effects of Hurricane Irma are still being felt as deal-flow and momentum were disrupted at the close of Q This disrupted both traffic and sales on new projects, and construction timing due to supply chain and labor issues. Remarkably, the market continued to move, albeit more slowly. With good fortune, the physical damage was fairly limited, owing to a combination of luck and forward planning for storm resiliency. The recently delivered conventional inventory is demonstrating strong occupancy (90%-95%) while older Class A-/B+ rental occupancies are slightly higher (96%-100%). While condominium rental rates declined for the first time in years (-4%), this change was surprisingly muted considering the number of conventional rental units that entered the market in IRR presents a new snapshot of unit mix and sizes, with studio units at 10%-14% of total unit mix; 1 Bedrooms 45%- 55%; 2 Bedrooms 33% - 43%; and 3 Bedrooms < 10% of total project mix. The unit mix varies slightly by submarket, with smaller average unit sizes in Brickell overall. 2 Integra Realty Resources

5 Introduction Foreign exchange rates improved on 2017, recovering on both stronger international productivity and a weakening dollar. This has yet to set-off an international condo buying frenzy like we experienced in , but it is an encouraging sign following three sustained years of foreign currency erosion which adversely affected sales. Foreign buyers took advantage of the over-supplied market during , and may see good buying opportunities again in as resale pricing retreats back towards replacement cost. The downtown condominium market is becoming more highly differentiated on price and product, and is showing strong demand for higher end product. Well capitalized developers starting recent projects are targeting luxury and ultra-luxury buyers at price points rarely experienced in downtown. This differentiation is good for the market since the higher-end $1 - $2 Million product will not likely enter the shadow rental pool. Downtown Miami has emerged as a top-tier location relative to other markets within Miami-Dade county, well below the pricing on Miami Beach which includes oceanfront product averages, but on par/slightly superior to Aventura and Coral Gables on pricing. The declines in pricing experienced downtown were similar to county-wide market movements and were not unique to downtown. The past year marked a high point in downtown land transactions not seen since 2014, with a total of 15 major transactions. The majority of these sites were reportedly slated for rental or hotel development with few buyers identifying their intent for condo development. Notably, of the last 10 major land transactions in downtown, 40% were backed by foreign buyers from Israel, China, Columbia, and the Netherlands Integra s overall report card for the downtown market is mixed, but encouraging. The bulk of the remaining deliveries will occur in the coming months. This hurts the supply-side grading, although this is a positive trend for buyers. Despite stockmarket volatility in early 2018, local and national economic indicators remain positive, with wage growth likely accelerating into a tighter labor market. This favors continued strong rental demand. Developers and investors have activated the land market, but construction costs and supply must moderate before new major project announcements are likely. 3 Integra Realty Resources

6 Introduction The rumors of the death of the Miami residential market proved once again greatly exaggerated in Lack of lender distress, strong development sponsors, and heavy institutional equity behind the rental developments all kept the market moving despite sluggish foreign demand. The coming twelve months will represent another inflection point where buyers (both foreign and domestic) can and should capitalize on the markets supply-side concerns. Provided continued strength in the US debt and equity markets in the coming year, the next round of project planning is about to commence, with developers planning for market deliveries. Respectfully, Integra Realty Resources (IRR) Miami/Palm Beach Anthony M. Graziano, MAI, CRE, FRICS Senior Managing Director Dan Bowen Market Research Analyst 4 Integra Realty Resources

7 Greater Downtown Miami Market Submarket Map The map opposite illustrates the boundaries of the Miami DDA, as well as each submarket within the Miami DDA market. 5 Integra Realty Resources

8 Greater Downtown Miami Condo Pipeline The following chart summarizes IRR Miami s update of the current condo activity within the entire Greater Downtown Miami Market area, including the number of units, submarket location, and phase of development. The chart illustrates the different stages of the condo development process, including Proposed, Reservations, Contracts, Under Construction and Completed as identified in our prior annual report. These classifications are significant because they provide a framework for how projects move through the development cycle. Figure 1 Current Greater Downtown Miami Condo Pipeline Submarket Complete Under Construction Contracts Reservations Proposed Totals A&E ,291 2,887 Brickell 4, ,287 11,295 CBD ,406 6,660 Edgewater 1,050 2, ,389 5,288 Midtown Wynwood Total (2017 Q4) 6,312 5, ,016 27,194 Total (2017 Midyear) 5,180 5,078 1, ,381 26,369 6 Integra Realty Resources

9 What changed? Q2-Q4 As outlined within IRR s mid-year 2017 report, the condo deliveries were going to clear much of the product pipeline. By the end of 2017, over 1,132 additional units delivered in the second half of the year, 722 were in Brickell including: 1010 Brickell (+387 units), Echo Brickell (+180), Brickell Ten (+155) and Hyde (+410) in Midtown. For the first time since IRR started tracking the downtown pipeline, the number of projects actively selling through reservations has gone to zero with the exception of one condo hotel project (Bentley Edgewater). All active sales offices now are going straight to contracts. Brickell House Active market participants report that well-capitalized developers may move forward on some of the contracted projects without the typical 50%-60% pre-contract ratio, signaling strength and confidence by this new wave of developers with strong equity. It s a fine line between confidence and over-confidence, and developers so far have shown restraint as key indicators have slowed. Groundbreakings were announced for Aston Martin (+390), Missoni Baia (+249), Elysee (+100), and Gran Paraiso (+317). Smart Brickell (+170) and One Riverpoint (+350) are now taking contracts, while the construction pipeline in Brickell is now at its lowest level in over a decade, with fewer than 1,000 units under construction. Midtown and Wynwood have no active new projects in the development or contract pipeline. There has been little meaningful construction since the announced ground-breaking of Spark in Edgewater, but it remains in the under-construction category as of this report. Wyn 26 has been canceled after the developer reportedly failed to secure financing. The current cycle has officially passed the mid-point on deliveries, with over 6,300 units delivered, and approximately 5,000 units under construction, with another 850+/- potentially commencing construction. Approximately 60% of the projects under construction will deliver in 2018, with the balance of the under construction pipeline delivering in 2019 through early Integra Realty Resources

10 What changed? Q2-Q4 The balance of deliveries in 2018 will mark the high-point of all downtown deliveries since the commencement of the market recovery in By 2019, fewer than 1,200 new units will be finalizing delivery. Based on the current contract pipeline, there will be little competition for new downtown projects by Despite speculation in the media over the past 24 months that the downtown market was being overbuilt, continued strength in the U.S. economy coupled with a recovering global economy has provided the stability lacking during prior cycles. As noted in prior IRR reports, the pipeline of construction also represented a significantly smaller delivery profile than the prior cycle with Q being the high-point in units under construction at 7,500 units. Since mid 2016, more inventory has been delivered than has entered the construction pipeline. The desirability of downtown Miami as a livable downtown has also enhanced the success of residential projects downtown, both for-sale and rental. 8 Integra Realty Resources

11 Greater Downtown Miami Market Sizing Figure 2 Greater Downtown Miami Condo Market Size Q Current Market Potential Long Term % Growth Submarket Size [1] Current Growth % Growth Growth Longterm A & E 4, % 2,291 57% Brickell 24,332 1,519 6% 5,287 22% CBD 6, % 5,406 81% Edgewater 5,102 2,849 56% 1,389 27% Midtown 1, % % Wynwood % % Total (2017) 41,625 5,866 14% 15,016 36% [1] Long-Term Growth is the remaining Conceptual units, net of current growth [2] Current Growth is all Under Construction, Contracts and Reservations As in prior years, Wynwood and the CBD represent the two submarkets with the largest expansion potential over their existing base, as demonstrated by their highest long-term growth percentage (planned units versus current growth). The 2017 delivery of Brickell Heights, Echo, and Brickell Ten reduced the current growth in Brickell to a healthy 6% of current inventory. The Edgewater submarket will experience a 56% increase in units in the coming 24 months, which bodes well for commercial activity in Edgewater and Midtown. The coming year (2018) will be a critical turning point for Edgewater as it surpasses the CBD in terms of total units in the market, and arrives as the second largest condominium submarket behind Brickell. 9 Integra Realty Resources

12 Greater Downtown Miami Market Condo Delivery and Absorption of Units Figure 3 Greater Downtown Miami Historical Condo Development ( ) Year Built Number of Units Delivered Cumulative Deliveries , ,953 3, ,860 5, ,500 7, ,111 11, , , , , , , ,227 23, ,202 25, ,231 27,911 Total Delivery 27, Year Cycle ( ): 2, Year Cycle ( ): 1,744 IRR Miami Estimated Typical Annual Demand +/- 2,000 The table above shows historic condo deliveries and absorption since Over an 11 year cycle, the market delivered and absorbed over 2,000 units per year. In the past 16 year cycle, the average is slightly less at 1,744 units per year. 10 Integra Realty Resources

13 Greater Downtown Miami Market Condo Delivery and Absorption of Units IRR has previously concluded to normalized annual absorption of 2,000 units per year. Including the 410-unit Hyde Midtown, 2,231 units were delivered in 2017, in line with historical delivery patterns. IRR had previously forecast (in 2015) that 2016 would be a year when pent-up demand would begin to decline, forcing projects to compete more aggressively on quality, location, or both. Since mid 2016, project sales slowed as a result of changing global demand and increases in the competitive supply of new projects. The following figure shows pent-up demand estimates since 2013 based on annual demand of +/- 2,000 units against delivered units. Figure 4 Greater Downtown Miami Condo Demand Current Cycle Projected Normalized Cumulative Delivered Units Pent-Up Demand ,000 2, ,000 3, ,227 2,000 4, ,202 2,000 4, ,231 2,000 3, ,899 2,000 2, ,061 2,000 3, ,000 5, TBD 2,000 TBD 2022 TBD 2,000 TBD 11 Integra Realty Resources

14 Greater Downtown Miami Market Condo Delivery and Absorption of Units This coming year will represent the bottom of the pent-up demand curve in Greater Downtown Miami, and if average historic demand returns, IRR concludes that pricing will stabilize and start to increase again by early-mid This has implications in the resale market as well. IRR s interviews with sales offices, project developers and their brokers infer approximately 1,800 2,000 units available for sale (currently under construction). While sales in 2017 were slower than desired, explicit pricing concessions remained muted. The market offered enhanced commissions to brokers, guaranteed leasebacks, and developer or alternative financing to drive sales. While these concessions may remain for most of 2018, the change in supply/availability by 2019 signals a shift back to a stronger market for developers. 12 Integra Realty Resources

15 Greater Downtown Miami Market Condo Delivery and Absorption of Units Figure 5 Current Greater Downtown Miami Under Construction Pipeline Submarket Name/Location # Units Avg Price Avg SF Avg $/SF A&E 1000 Museum 83 $6,940,000 5,389 $1,288 A&E Canvas 513 $450, $504 Total A&E 596 Brickell Flatiron 549 $1,000,000 1,334 $750 Brickell One River Point 350 $2,900,000 2,117 $1,370 Brickell SLS Lux 450 $750,000 1,250 $600 Brickell Smart Brickell 170 $360, $430 Total Brickell 1,519 CBD Paramount Miami 512 $1,080,000 1,793 $602 CBD Aston Martin Residences 390 $1,750,000 2,045 $856 Total CBD 902 Edgewater Aria on the Bay 647 $790,000 1,317 $600 Edgewater 26 Edgewater 86 $310, $481 Edgewater Bentley Edgewater Condo-Hotel 207 $600, $663 Edgewater Elysee 100 $2,310,000 3,278 $705 Edgewater The Edgewater 30 $340, $437 Edgewater Gran Paraiso 317 $1,210,000 1,549 $781 Edgewater Paraiso Bay Tower I 360 $780,000 1,360 $574 Edgewater One Paraiso 272 $1,150,000 1,682 $684 Edgewater Missoni Baia 249 $1,580,000 1,956 $808 Edgewater Spark 56 $690,000 1,378 $501 Edgewater Paraiso Bayviews 388 $900,000 1,464 $615 Edgewater Naranza 137 $483, $513 Total Edgewater 2,849 Total/Average 5,866 $1,220,000 1,660 $735 [1] Pricing reflects published pricing averaged against all floorplan options. 13 Integra Realty Resources

16 Greater Downtown Miami Market Condo Delivery and Absorption of Units review of secondary pricing sources coupled with broker and sales office interviews provides A an array of average pricing and sizes by project. Distinguishable from prior reports is the level of diversity in end unit pricing across the balance of the new inventory. Historically, the unit sizes, amenities, and project design targeted price points in the $500,000 - $800,000 price range, with few projects demonstrating average pricing over $1 Million. The current projects offer pricing below $500,000; over $1 Million; over $2 Million, and the stand-out 1000 Museum with average pricing over $6 Million. This pricing diversity offers benefits to market stability (not every project is competing with every other project), but also reflects a maturing downtown which is attracting higher-end buyers. The higher priced projects are also much less likely to enter the shadow rental pool upon completion. 14 Integra Realty Resources

17 Analysis of Condominium Resale Figure 6 Average $/SF Sale Price Trend Greater Downtown Miami Resale Market $500 $400 $372 $457 $431 $426 $405 $300 $200 $221 $224 $240 $305 $ The resale market retreated further in 2017, the second year of average price declines. Average pricing held level at $403-$405 PSF between the midyear 2017 and this annual report, with sales volume increasing in the second half of The market has so far avoided the worst predictions of doom and remains vibrant, registering well over 1,000 transactions of post-2000 urban condos in The average monthly available listings remain above 3,000 units, which suggests a 36 month supply (excluding new projects availability) at current velocity. Resale market pricing should recover once the excess resale inventory burns off. Current average resale pricing is nearing replacement cost. IRR considers it unlikely average pricing will retreat below $350 per SF, but acknowledges that to stem further average price declines, either demand must increase, supply\listings must slow or both; otherwise additional resale pricing declines could follow into Integra Realty Resources

18 Analysis of Condominium Resale The market should remain more or less stable throughout 2018, reflecting the end of the price corrections. Provided continued strength in the US economy, and improvements in global currency and a return of Miami s foreign buyer pool, we expect price declines will abate by early Figure 7 Current Resale vs. New Product Pricing $/SF n Existing n New $800 $600 $400 $500 $482 $430 $725 $691 $626 $509 $359 $364 $365 $409 $200 0 A&E Brickell CBD Edgewater Midtown Wynwood The spread between new and resale prices widened as of the close of This widening was a result of retreating resale prices on existing product, and the entry of new product at higher price points (overall and on a per SF basis). This widening spread also supports the likelihood that resale pricing is nearing the bottom. The CBD, Edgewater and Midtown resale averages were all relatively consistent at $360 - $365 per SF, with Brickell and A&E resale lifting the average resale pricing overall. Brickell also weights the average pricing upward given the total number of transactions that occur in the submarket because of the overall market size. 16 Integra Realty Resources

19 Currency Exchange and Purchasing Patterns In contrast to the deterioration seen from , benchmark currencies recovered ground in 2017 as the US dollar weakened. Only Argentina saw a continued deterioration, while both Europe and Mexico saw double-digit improvement. Figure 8 U.S. Dollar vs. Foreign Currency Exchange - At USD $1.00 Purchasing Purchasing Purchasing Power Power Power Cumulative % Change % Change % Change % Change Country Currency Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 ( ) ( ) ( ) ( ) Brazil Real % % % % Argentina Peso % % % % Mexico Peso % % -7.41% % Colombia** Peso % % -8.04% % Venezuela Bolivar Fuerte % % % % Canada Dollar % % -6.57% % Europe Euro % % 4.10% -5.16% China Yuan % -8.54% 8.61% 5.96% Russia Rouble % % -6.06% % N/A Bitcoin , ,396.60% 17.27% Source: Google Public Data/SIX Financial and Coinbase, obtained (note: standard bitcoin price indices began in mid-2013) The international buyer pool remained two sides of the same coin. On one hand, the lack of new international buyers has dampened sales, while at the same time, international sellers are seeking to exit and capitalize on economic opportunities in their home country, resulting in increasing condo inventory available for sale. Some market participants remain encouraged that the international buyers will return in force. Sales inquiries and traffic from international buyers reportedly saw an early uptick in Q Europe and Canada are the two likely early returning buyer pools, though Colombia, Chile and Argentina all likely play a bigger factor in Integra Realty Resources

20 Current Cycle Completions Figure Completions Submarket Building # Units Delivery Brickell MyBrickell Brickell Brickell House Brickell Millecento Brickell Nine at Mary Brickell Brickell Brickell Heights - East Brickell Brickell Heights - West (BH02) Brickell Le Parc Brickell Brickell CityCentre - Reach Brickell Brickell CityCentre - Rise Brickell SLS Hotel & Residences Brickell The Bond Brickell Cassa Brickell Brickell Brickell Ten Brickell Echo Brickell Brickell 1010 Brickell CBD Centro Edgewater 23 Biscayne Edgewater Bay House Edgewater Icon Bay Edgewater The Crimson Edgewater Biscayne Beach Midtown Hyde Midtown Wynwood 250 Wynwood Total of Above 6, Integra Realty Resources

21 Major Market Comparison Figure 10 Major Market Comparison $/SF n 2013 n 2014 n 2015 n 2016 n 2017 Doral $158 $184 $177 $185 $191 Aventura Coral Gables $271 $383 $399 $396 $352 $325 $386 $328 $341 $274 Miami Beach $541 $869 $1,253 $1,124 $1,025 Downtown Miami $372 $431 $456 $426 $405 0 $300 $600 $900 $1,200 $1,500 Although it remains a bargain when compared to Miami Beach, Downtown Miami saw the most consistent pricing growth and the second-highest pricing performance of any luxury-condo submarket on the Miami mainland , with three consecutive years of annual increases in average PSF price. The 2016 pricing retreat was evident market-wide throughout Miami, and with the exception of Doral, continued into The downtown market averages will very likely continue to outpace other mainland Miami-Dade markets as higher-priced downtown product will elevate the market average pricing relative to other inland markets the same way Miami Beach s oceanfront product elevates the pricing metrics in that market. 19 Integra Realty Resources

22 Condominium Rental Activity IRR s reporting in Summer 2017 provided in-depth analysis of the rental demand and pricing for both conventional rental properties and the shadow condo market. This update focuses on condo rentals, in line with the prior annual reports. Condominium lease rates in the greater Downtown Miami increased sharply from before stabilizing in 2016 at a 1% YoY increase. However, 2017 marks the first year condominium average rents have declined (-4%). Rental volume increased significantly, from 273 transactions per month in 2016 to 325 per month in 2017, as the universe of rentable units grew and condo landlord/owners adjusted to more condo product, and a sharply increasing level of new Class A conventional inventory. Figure 11 Greater Downtown Miami Condominium Average Leasing Price n Rental $/Unit n % Change $2,700 $2,600 $2,500 $2,400 $2,300 $2,200 0% $2, % $2, % $2,481 $2, % $2,630 1% $2,525 6% 4% 2% 0-2% $2,100-4% -4% $2, % 20 Integra Realty Resources

23 Condominium Rental Activity F igure 12 illustrates the average monthly lease price ($) for each submarket. The Arts & Entertainment district continues to command the highest pricing, and indeed has set a new pricing record because of a number of large unit transactions including three transactions over 3,000 square feet. A similar phenomenon in Midtown is also driven by larger units transacting. Figure 12 Greater Downtown Miami Condominium Rental $/Unit by Submarket n 2012 n 2013 n 2014 n 2015 n 2016 n 2017 $5,000 $4,000 $3,000 $2,000 $2,438 $2,619$2,627 $2,606 $2,505 $2,342 $2,408 $2,445 $2,294 $2,241 $2,305 $2,123 $3,005 $3,889 $3,442 $3,896 $4,072 $4,223 $2,532 $2,675 $2,321 $2,448 $2,281 $2,006 $2,654 $2,584 $2,572 $2,364 $2,119 $2,758 $1,000 0 Brickell CBD A & E Edgewater Midtown % YoY Change -2.14% -5.74% 8.40% -8.48% 6.75% $ Change -$56 -$140 $327 -$227 $ Integra Realty Resources

24 Condominium Rental Activity T he figure below presents the average PSF asking lease price versus the achieved lease price and the average number of executed leases for each submarket. While A&E and Midtown have both set records for overall pricing, on a PSF basis they both remain in line with or below the prior two years, reflecting larger unit sizes. As for asking rents, the following table (18a) shows trends with gross and PSF asking rents. Since 2015, asking rents have remained fairly level, moving up and down slightly, but in general those for 2017 are stronger than those for Figure 13 Greater Downtown Miami Condominium Rental $/SF by Submarket n 2012 n 2013 n 2014 n 2015 n 2016 n 2017 $3.50 $3.00 $2.50 $2.00 $1.50 $2.37 $2.18 $2.63 $2.57 $2.58 $2.54 $2.26 $2.11 $2.51 $2.40 $2.51 $2.46 $2.30 $2.47 $2.70 $2.87 $2.69 $2.78 $2.58 $2.46 $2.49 $2.55 $2.49 $2.47 $2.30 $2.38 $2.25 $2.18 $2.10 $1.93 $1.00 $ Brickell CBD A & E Edgewater Midtown % YoY Change -1.40% -2.13% 3.13% -4.47% -0.87% $ Change -$0.04 -$0.05 $0.08 -$0.11 -$ Integra Realty Resources

25 Condominium Rental Activity Figure 13a YoY Asking Rent Changes (Gross and PSF) by Submarket n 2015 Asking n 2016 Asking n 2017 Asking $6,000 $5,508 $5,000 $5,044 $4,826 $4,000 $3,000 $3,436 $3,709 $3,372 $3,102 $2,827 $2,857 $3,450 $2,915 $3,561 $3,707 $3,028 $3,068 $2,000 $1,000 0 $4.00 $3.00 Brickell CBD A & E Edgewater Midtown $3.45 $3.04 $3.07 $3.17 $3.16 $3.10 $2.78 $2.70 $2.83 $2.83 $2.62 $2.83 $2.74 $2.75 $2.47 $2.00 $ Brickell CBD A & E Edgewater Midtown 23 Integra Realty Resources

26 Conventional Rental Market Supply Figure 14a illustrates the under construction, proposed, and recently completed rental pipeline in Greater Downtown Miami. The most recent deliveries are Solitair (+438), Midtown 29 (+309) and 2500 Biscayne (+156 units), with Panorama and Muze (formerly Avant at Met Square) set to deliver in early With nearly 3,600 conventional rental units delivered since 2014, downtown Miami has become the fastest growing rental submarket in South Florida. With an additional 6,500+ units under construction, the conventional rental pipeline is set to outpace condominium construction by This level of conventional rental supply has become a catalyst that is driving expansion of commercial and recreational opportunities downtown. Figure 14a Greater Downtown Miami Rental Pipeline Under Construction and Complete Projects Submarket Building 2017 Q4 Status # Units A&E Melody Complete 500 Brickell SoMa Complete 418 Broadstone at Brickell Complete 372 Brickell View Terrace Complete 76 Solitair Brickell (former Brickell Bayview Center) Complete 438 CBD Flagler on the River Complete 250 Monarc at Metropolitan 3 Complete 462 Edgewater 2500 Biscayne Complete 156 Midtown Midtown 5 Complete 400 Eve at the District Complete 197 Pearl Midtown 29 Complete 309 A&E Square Station Under Construction 710 Brickell Panorama Under Construction 821 MaiZon at Brickell Under Construction 262 CBD Muze Met Square Under Construction 391 Park Line MiamiCentral Under Construction 816 X Miami (formerly Vice) Under Construction 464 Caoba (fka 7th St Promenade) Under Construction 444 7th Street Promenade Tower 2 Under Construction 429 Edgewater Biscayne 27 Under Construction 330 Modera Edgewater Under Construction 297 Midtown Midtown 6 Under Construction 447 Midtown 8 Under Construction 387 Wynwood Wynwood 25 Under Construction 289 Total # of Units Under Construction 6,593 Total # Units Completed ,448 Total # Units Completed ,130 Conventional Rent Survey (Class A) 2,474 Conventional Rent Survey (Class A-/B) 2,344 Total # Units U/C or Proposed 25, Integra Realty Resources

27 Conventional Rental Market Supply Figure14b Greater Downtown Miami Rental Completions Unit Mix # Units in Survey % Studio Avg SF % 1 Bed Avg SF % 2 Bed Avg SF % 3 Bed Avg SF Brickell % % % % 1173 CBD/A&E % % % % 1415 Midtown/Edgewater % % % % 1581 Integra s survey of unit mix and average unit size of new projects reflects a new edition to the annual report. Some markets have been combined due to a limited number of projects in a specific submarket. Overall, the unit mix reflects the core demand from young urban workers with a predominance of studio and one bedroom units representing 60%+ of total units. This mix also considers smaller unit sizes to keep gross monthly rental rates down. 25 Integra Realty Resources

28 Conventional Rental Market Supply Figure 14c Greater Downtown Miami Rental Pipeline Proposed Projects Submarket Building 2017 Q4 Status # Units A&E 17 Edgewater Proposed Plaza Proposed 760 School Board Proposed 1000 Melody II Proposed 630 The Arts Proposed TBD Art Plaza Proposed 655 Miami Plaza Proposed 425 Awana Forest Proposed TBD NE 17th St Proposed 225 Brickell One Brickell II Proposed 500 Brickell Market Place Proposed TBD TBD Allen Morris/Related Proposed TBD Megacenter Brickell Proposed Brickell (Yacht Club Phase II) Proposed 897 Brickell Fire Station Proposed Brickell (TBD) Proposed TBD CBD Luma at Miami World Center Proposed 439 Lynx Tower Proposed 483 Miami World Center Block E Proposed 418 Miami River Village Proposed TBD M-Tower Proposed 440 Grand Station Proposed 300 Nexus Riverside Proposed 462 Nexus Riverside Central Proposed West Flagler Proposed SE 2nd St Proposed TBD M-Tower Proposed 440 Miami Station Tower f/k/a Krystal Proposed NMA Proposed NE 2 Ave Proposed 150 One Bayfront Plaza (RENTAL) Proposed Biscayne (RENTAL) Proposed 690 Potential Olympia Theater Proposed 300 The Sterling Proposed Plaza Proposed TBD Submarket Building 2017 Q4 Status # Units Edgewater 1900 Biscayne Proposed Biscayne (Possible Condo) Proposed Edgewater Proposed TBD AR Edgewater Proposed 171 Quadro 3900 Biscayne Proposed 198 Ellipsis Proposed 34 The Village Proposed TBD Miami 18 Proposed Biscayne (Rental) Proposed Edgewater Proposed 444 Midtown Midtown East Phase 2 Proposed 256 Midtown 7 Proposed 391 Midtown East Phase 1 Proposed 208 Wynwood 2801 NW 3rd Avenue Proposed N Miami Ave Proposed NW 24th St Proposed 80 Wynwood Plant Proposed 306 Wynwood 26 Proposed Wynwood Proposed 35 Westdale Wynwood Proposed 202 Total # of Units Proposed 18, Integra Realty Resources

29 Conventional Rental Market Supply IRR has completed a survey of estimated occupancy rates for conventional rental properties in greater downtown Miami. The table below consists of data aggregated from several public and private sources. In general, occupancy is higher for Class A- properties versus the newer deliveries. Occupancy for stabilized properties is at a healthy level of around 95%, ranging from 88% to over 98%. This is associated with a market that s generally in balance and is successfully absorbing new deliveries. Figure 15 Greater Downtown Miami Class A and A- Occupancy Dashboard Class A Average Rounded to Nearest Percent Monarc 90.6% 91.0% Soma 94.3% 94.0% Eve at the District 94.4% 94.0% Broadstone 88.1% 88.0% Melody 99.2% 99.0% Midtown % 95.0% Class A in Lease-Up Solitair 2500 Biscayne Midtown 29 Class A- Average Rounded to Nearest Percent Camden 96.4% 96.0% 25 Biscayne Park 98.4% 98.0% Filling Station 100.0% 100.0% Second Plaza 95.6% 96.0% We expect the majority (+4,000) of under-construction deliveries to occur in 2018, with 763 units expected to deliver in Integra Realty Resources

30 Land Prices Trends 2017 was a busy year for land transactions in Greater Downtown Miami, with over a dozen large-scale transactions including a number in Brickell (El Eden, Taplin, Maizon, 90 SW 8th Street, Perricone s, and the Mexican consulate). Figure 16 Greater Downtown Miami Land Sites Location Submarket Sale Price Transaction Date Planned Use 444 Brickell Brickell $104,000,000 Dec-13 Mixed-Use 700 NE 26th Terrace Edgewater $41,187,000 Feb-14 Residential Condo 200 SE 2nd Street CBD $23,100,000 Mar-14 Apartment/Mixed-Use 30 SE 8th Street CBD $28,500,000 May-14 Residential Condo 1151 NW 1st Avenue A & E $53,700,000 Jun-14 Mixed-Use Epic Marina Site CBD $125,000,000 Jul-14 Residential Condo SW 3rd Avenue Brickell $97,500,000 Jul-14 Mixed-Use Chetrit Miami River Site Brickell $85,048,000 Jul-14 Special Area Plan (Mixed Use) 1400 Biscayne A & E $57,300,000 Oct-14 Mixed-Use 3000 Biscayne Boulevard Edgewater $19,200,000 Oct-14 Mixed-Use 3201 NE 1st Avenue Midtown $14,000,000 Oct-14 Mixed-Use 300 Biscayne Boulevard CBD $80,000,000 Dec-14 Residential Condo Capital at Brickell Brickell $74,740,000 Dec-14 Mixed-Use NWC NE 2nd Ave & 17th St. Edgewater $64,000,000 Jan-15 Mixed-Use 501 NE 1st Avenue CBD $8,250,000 Jan-15 TBD 1021 SW 1st Ave Brickell $26,000,000 Feb-15 Mixed-Use 2201 N Miami Ave Wynwood $15,000,000 Mar-15 Mixed-Use Edge Brickell $18,000,000 Jul-15 Condo Hotel 230 SW 3rd St CBD $14,250,000 Aug-15 Residential Rental 2900 NE 2nd Ave Midtown $55,000,000 Nov-15 Residential Rental 175 SE 25th Rd Brickell $48,000,000 Nov-15 Residential Condo 350 Biscayne Blvd CBD $65,000,000 Nov-15 Mixed-Use Rosenberg Wynwood Wynwood $18,000,000 Jun-16 Mixed-Use UPS Site CBD/Overtown $31,000,000 Jul-16 Mixed-Use 27th & 2 Wynwood Wynwood $30,750,000 Sep-16 Mixed-Use Wynwood Land +/- 1 Acre Wynwood $53,500,000 Oct-16 Mixed-Use Edelstein Wynwood Sites Wynwood $13,125,000 Oct-16 Mixed-Use Doronin/Jesuit Sites Edgewater $54,000,000 Nov-16 Residential Condo Midtown 8 Midtown $25,000,000 Nov-16 Residential Rental Wynwood 29 Portfolio Wynwood $12,000,000 Nov-16 Mixed-Use El Eden Site Brickell $18,400,000 Jan-17 Mixed-Use Taplin Site/1428 Brickell Brickell $50,000,000 Jan-17 Residential TBD Marriott Marquis Site CBD $45,000,000 Mar-17 Hotel Modera Edgewater Edgewater $21,700,000 Mar-17 Residential Rental 501 NMA Site CBD $18,095,000 Mar-17 Residential TBD Wynwood Two Sites Wynwood $11,000,000 Mar-17 Retail Maizon Sites Brickell $14,101,600 May-17 Residential Rental S&S Assemblage Edgewater $33,000,000 Jun-17 Residential TBD Five Plaza CBD $10,000,000 Jul-17 Residential Rental 90 SW 8 St (LAND) Brickell $29,450,000 Jul-17 Retail Mexican Consulate (LAND) Brickell $31,750,000 Aug-17 Residential TBD Midtown 6 Site Midtown $27,900,000 Aug-17 Residential Rental Village/Naranza Sites Edgewater $10,640,000 Aug-17 Residential Condo Perricone s (Land) Brickell $16,180,167 Sep-17 Hotel Edgewater Site Edgewater $18,400,000 Sep-17 Residential TBD 400 Biscayne Church Site CBD $55,000,000 Jan-18 Mixed-Use 28 Integra Realty Resources

31 Conclusions Although pricing decreased somewhat in the first half of 2017, Miami s overall economy and market remain strong, and the second half in particular saw signs of improvement relative to the first half. Improvements in international currencies have made Miami more affordable to European, Latin, and Chinese buyers. Greater Downtown Miami Residential Report Card Subject Comments New Demand/ Pricing Resale Demand/ Pricing Rental Demand Local Economic Conditions Inventory Spikes International Stability A+ A B- A- A- B- A- A A- B+ A A B B- C B C C+ New demand remains slow, but declining pipeline and diversity in B- pricing are positive. Inventory levels are still building; prices retreated for second C+ consecutive year. The grading reflects seller perspective; buyers should view resale pricing as A+. Conventional occupancy is strong with new rental product absorbing B+ quickly. Condo rental pricing retreats for first time in five years. New conventional rental deliveries in 2018 may pose short term pricing declines. Local economy remains healthy. Residential construction projects A slowing, but overall conditions robust will be the critical bulge of new deliveries in both condo C and conventional apartments. Weakening USD has made Miami condos more affordable to B international buyers. Global economic conditions generally improving. Construction Costs Domestic Housing Market Lifestyle Amenities B- C- B- B- B C- C+ C+ B+ B B- B+ Tariff changes could increase construction material costs, but pipeline slack should bring construction pricing back in line with project feasibility. Countywide market rebounded in 2017; supply and pricing are stable in most sectors. Local demand drivers remain strong. Affordability Land Pricing Wage Growth C C- B- C- D C+ D C+ B B+ C+ B+ Decreasing resale prices benefit affordability and new conventional 2018 rental supply expanding, which should favor affordability. Increased velocity of land sales, particularly in Brickell, but land pricing remains high. Local economy remains vibrant, and US tax breaks coupled with strong job growth signal probable wage increases. 29 Integra Realty Resources

32 Condo Development Process Appendix Proposed Reservations Contracts Under Construction Completed The proposed phase is the initial phase of the development process; a conceptual plan for a new building or project is initiated by a developer or property owner. The developer may release a press release or a news story with an initial rendering to gauge the interest in the project, but the project size may change over time to conform to market demand and/or as site due diligence constrains the process. The reservations phase is the second phase of the development process; the developer and architectural/ design team produce additional renderings and floor plans; the sales centers are opened and the finishes, amenities, and features of the project are disclosed. The developer files with the State of Florida to be able to take reservations and deposits for units during this stage. This begins the pre-sale phase during which reservations are taken. The contracts phase is when the initial proposition and reservation of a completely undefined development idea meets the actual contracting for sale upon the receipt of further deposits. The architectural and construction drawings are completed; the developer obtains government permitting and approvals. The final unit floor plans are defined as the reservations are converted to sales contracts with additional buyer deposits upon filing of the Master Declaration of Condominium. Changes to these documents are costly, and therefore the development plan tends to be more static following this phase. The Contracts stage is typically the make-or-break stage of development as the project was either well-received by buyers, investors, and lenders, or it was not. If the developer has as a sufficient number of sale contracts, buyer deposits, and a commitment for financing, the project s construction will most likely commence. If the project was not well-received, either by a lack of pre-sales, or insufficient equity from initial investors or debt financing, a project may be scrapped, shelved, or significantly altered in another future attempt (either later in the cycle or in the next one). Projects which fail the Contracts stage may move all the way back to Proposed during this process. The site improvements and vertical construction have commenced. At this stage of development, the project has secured sufficient pre-sales with significant deposits and most likely a financing commitment. These projects will enter the market under a reasonably definitive timeline of months, depending upon the scale of the project and surrounding infrastructure requirements. This is the final stage of the development process; as the construction of the units is completed, CO s (Certificates of Occupancy) are issued, and the closing of the unit sales are finalized. 30 Integra Realty Resources

33 Disclaimer & Acknowledgment The information provided herein is for informational purposes. This publication does not render legal, accounting, appraisal, counseling, investment, or other professional advice. Should such services or other expert assistance be needed, it is recommended that the services of a competent person or firm, having access to the details of the situation, be employed. 31 Integra Realty Resources

34 Images Cover: Photo courtesy of Miguel Gonzalez. Page 2: Photo credit: 2015 IRR-Miami/Palm Beach. Page 5: Photo credit: 2015 IRR-Miami/Palm Beach. Map courtesy Miami DDA. Page 6: Photo credit: 2015 IRR-Miami/Palm Beach. Page 7: Photo credit: 2015 IRR-Miami/Palm Beach. Page 9: Photo credit: 2015 IRR-Miami/Palm Beach. Page 10: Photo courtesy Miami DDA. Page 15: Brickell, artist s rendering of Brickell CityCentre used by permission of Swire Properties Inc. Page 18: Photo credit: 2015 IRR-Miami/Palm Beach. Page 19: Photo credit: 2015 IRR-Miami/Palm Beach. Page 20: Photo credit: 2015 IRR-Miami/Palm Beach. Page 24: Photo credit: 2015 IRR-Miami/Palm Beach. Page 28: Photo credit: 2015 IRR-Miami/Palm Beach. 32 Integra Realty Resources

35 About Integra Realty Resources With corporate headquarters in Denver, Colorado, Integra Realty Resources (IRR) is the largest independent commercial real estate market research, valuation, and consulting firm in North America, with 56 offices and more than 200 MAI-designated members of the Appraisal Institute who are among its more than 600 employees located throughout the United States and the Caribbean. Founded in 1999, the firm specializes in real estate appraisals, feasibility and market studies, expert testimony, and related property consulting services. Many of the nation s largest and most prestigious financial institutions, developers, corporations, law firms, and government agencies are among its clients. For more information, visit or blog.irr.com.

36 Contact Information: 200 S. Biscayne Blvd, Suite 2929 Miami, Florida T F W - MiamiDDA.com