mmha SurvEy SAyS! the A PA r T m E N T r E P O r T 8% Annual Rent Increase Concessions Decline Vacancies Decrease Apartment Shortage Predicted

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1 Promoting Quality Rental Housing mmha NON-MEMBER ANNUAL SUBSCRIPTION $99 the A PA r T m E N T r E P O r T OrEgON SurvEyED ArEAS 1. Portland & Vancouver 2. Salem & Vicinity 3. Eugene & Springfield 4. Bend & Redmond FALL 2011 vol 15 POSITIvE TrENDS CONTINuE Craig McConachie, C&R Real Estate Services, Co., Apartment Report Committee Our fall 2011 Apartment Report survey results underscore the continued strength and health of the apartment market in the Portland/Vancouver area, while other areas in the State are experiencing a slowdown. The average overall vacancy rate continues to decline in the Portland area, and currently stands at 3.34%. This low of a vacancy has not been seen in the area since late 2007, when we hit our historic low of 2.94%. Average effective rents are $.97 per s.f., representing an 8% annual increase. The multifamily market is one of the true bright spots in an otherwise stalled economic recovery. Portland/Vancouver Most landlords have been able to regain some lost ground on rent rates. Overall rates are pushing towards $1.00 per sq. ft. and average rents are up 8% over one year ago. Downtown rent rates are leading the way at $1.61 s.f., with new class A product pushing the average. Northwest comes in a solid second place at $1.34 s.f., with Inner Central NE and SE in third at $1.11 s.f. Not all areas have seen rent increases, with five of the twenty surveyed areas seeing slight declines. The average rent for a two bedroom, one bath unit in the area is $743. Vacancy levels are below 4% in all areas with the exception of Oregon City, Troutdale/Fairview and East Vancouver. Three bedroom units have the highest vacancy factor. Concessions are declining in most areas, with Aloha, Wilsonville and East Vancouver still offering move-in incentives at 15% of the surveyed properties. Water and sewer bill-backs to residents have reached a 43% penetration level and continue to be utilized by landlord s to help defray escalating utility expenses. While increasing rents would seem to be relatively easy with vacancy rates so low, a lack of qualified residents has some landlords nervous. Delinquent rent and collection problems are plaguing class C apartment owners, as tenants struggle to find work and maintain income levels. Employment uncertainty, higher gasoline prices and utility increases, combined with increased rents has put lower income households in a difficult position to meet monthly obligations. New apartment construction is trending to about 1,500 units for 2011, up from 2010 but still significantly below our 4,000 per year average over the last 15 years. Most of this activity is in the urban Portland area. Developers have projects in the pipeline, but it s a long process and recent economic problems may result in some projects being delayed, or put on hold. Many pundits are anticipating an apartment shortage in the coming months. Other Areas Other areas are not faring as well as Portland and continue to struggle with a painfully slow recovery. Vacancy levels have increased and rent rates are down. Salem and vicinity vacancy has increased to 4.6%, while rents have declined by 4.8%. Eugene/Springfield vacancy increased to 4.7%, with rents declining over 6%. Bend/Redmond vacancies are over 5% and rents have declined in that market by 8.5%. Nearly 18% of the Bend properties are offering concessions. Clearly the lack of job growth in these areas is having a serious impact on landlord s abilities to sustain revenue levels. Our Contributors Although job growth in the Portland metro area has slowed, Amy Vandervliet from the Oregon Employment Department, points out that the local economy is still adding jobs and we are not in another recession. The unemployment rate of 9% hasn t changed since spring, but she predicts the pace of job growth will pick up in the fourth quarter and carry into Both Greg Frick, a partner with HFO Investments and Jeremy Snow, an MAI multifamily appraiser with Colliers, examine the investment climate in their articles. Greg notes that investment capital has been surging out of bonds and into apartments, driving demand and pricing up for institutional grade product. Class B and C market values are holding steady. Historically low interest rates are available for financing, and CAP rates between 6.5% and 7.25%, have made positive leverage very attainable. He expects transaction volume to increase over the next year as buyers realize the strength of our market. continued on page 2 SurvEy SAyS! 8% Annual Rent Increase Concessions Decline Vacancies Decrease Apartment Shortage Predicted TA B L E O F C O N T E N T S PORTLAND METRO MAP...2 TENANT PAID UTILITIES...2 AVERAGE RENT PER SQUARE FOOT AVERAGE MARKET VACANCY RATE...3 SURVEY RESULTS...4 & 5 APARTMENT TRENDS...6 TREND REPORT...8 EMPLOYMENT...9 SECTION 42 SURVEY RESULTS...9 MULTIFAMILY INVESTMENT MARKET...10 AVERAGE NUMBER OF DAYS VACANT...11

2 POrTLAND metro ArEA multnomah COuNTy 5 DOWNTOWN PORTLAND 1 NW PORTLAND 13 INNER & CENTRAL SE (PORTLAND) 17 INNER & CENTRAL NE (PORTLAND) 18 NORTH PORTLAND ST. JOHNS 6 SW PORTLAND 14 OUTER SE (PORTLAND) 16 OUTER NE (PORTLAND) 15 TROUTDALE FAIRVIEW WOOD VILLAGE GRESHAM CLACkAmAS COuNTy 12 CLACKAMAS 8 LAKE OSWEGO WEST LINN 11 MILWAUKIE 10 OREGON CITY GLADSTONE 9 WILSONVILLE CANBY washington COuNTy 3 ALOHA 4 BEAVERTON 2 HILLSBORO NORTH OF HWY 26 7 TIGARD TUALATIN SHERWOOD CLArk COuNTy 19 WEST VANCOUVER 20 EAST VANCOUVER TENANT PAID utilities map ArEA water heat garbage Nw POrTLAND hillsboro N OF hwy 26 ALOhA BEAvErTON DOwNTOwN POrTLAND Sw POrTLAND TIgArD TuALATIN ShErwOOD LAkE OSwEgO west LINN wilsonville CANBy OrEgON CITy gladstone milwaukie CLACkAmAS INNEr & CENTrAL SE PTLD OuTEr SE POrTLAND TrOuTDALE FAIrvIEw wood village gresham OuTEr NE POrTLAND INNEr & CENTrAL NE PTLD NOrTh PTLD ST. JOhNS west vancouver EAST vancouver SALEm vicinity EugENE SPrINgFIELD BEND redmond 21.4% 25% 16.7% 50.9% 57.1% 44.6% 67.6% 51.5% 48.7% 33.3% 19.5% 23.5% 61.2% 69.2% 56.3% 59.4% % 64% 47.6% 39.1% 68.8% 64.3% 55.2% 43.3% 81.1% % 75.8% % 92.3% 95.9% % % % % 95.1% % 39.6% 42.9% 32.1% 56.8% 45.5% 30.8% 16.4% 21.8% 24% 13.3% 9.8% 5.9% 38.8% 23.8% 38.5% 43.8% 40.6% 28.1% 14.4% 34.8% 71.4% 64.3% (continued from page 1) Our Contributors Jeremy s article explains how current strong market conditions, competitive lending, and the lack of new construction have combined to create a red hot multifamily market. He notes that concessions have dropped off and the market is so strong that there are once again plans for new downtown apartments in the works. He points out that with lenders offering interest only loans, returns are good for buyers and cap rates will continue to decline. There is a lack of good unit properties on the market and a short supply to trade into if they do sell. This survey represents 47,616 units from 757 properties. All of the articles have been reprinted without editing the content, in order to present unbiased opinions. We d like to thank all of the management companies and property owners who have submitted information. Their participation is critical in insuring the accuracy of our data and the continued success of this report. 2

3 $1.60 $1.55 $1.50 $1.45 $1.40 $1.35 $1.30 $1.25 $1.20 $1.15 $1.10 $1.05 $1.00 $0.95 $0.90 $0.85 $0.80 $ AvErAgE rent PEr SquArE FOOT $ 1.34 Northwest Portland Hillsboro N of Hwy Aloha.89 Beaverton.96 SW Portland.99 Tigard Tualatin Sherwood Lake Oswego West Linn 1.05 AvErAgE market vacancy rate % NW Portland 2.4 Hillsboro N of Hwy Aloha 3.7 Beaverton 1.61 Downtown Portland.88 Wilsonville Canby.90 Oregon City Gladstone Downtown Portland SW Portland Tigard Tualatin Sherwood Lake Oswego West Linn Wilsonville Canby Oregon City Gladstone Milwaukie.88 Milwaukie 2.9 Clackamas.93 Clackamas 3.8 Inner & Central SE (Ptld) 1.11 Inner & Central SE (Portland) 2.1 Outer SE (Ptld).85 Outer SE (Ptld) 3.9 Troutdale Fairview Wood Village Gresham.84 Troutdale Fairview Wood Village Gresham 4.8 Outer NE (Ptld).84 Outer NE (Ptld) 3.7 Inner & Central NE (Ptld) 1.10 Inner & Central NE (Ptld) 3.3 North Portland St. Johns.96 N Portland St. Johns 3.1 West Vancouver.82 West Vancouver 3.7 East Vancouver.88 East Vancouver 5.0 Salem.80 Salem 4.6 Eugene Springfield.97 Eugene Springfield 4.7 Bend Redmond.75 } OuTLyINg ArEAS Bend Redmond 5.2 } OuTLyINg ArEAS Vacancy levels are below 4% in all areas with the exception of Oregon City, Troutdale/Fairview and East Vancouver. 3

4 POrTLAND / vancouver metro ArEA SurvEy results FALL 2011 ArEA NAmE # OF SPr 10 1 BED 2 BED 2 BED 2 BED 3 BED 3 BED DATA ALL STuDIO PrOP report ChANgE 1 BATh 1 BATh 2 BATh TwNhS 1 BATh 2 BATh DOwNTOwN POrTLAND 22 Avg market vacancy rate % (5) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED Nw POrTLAND 44 Avg market vacancy rate % (1) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED INNEr & CENTrAL SE 106 Avg market vacancy rate % (POrTLAND) Avg rent PEr Sq FOOT $ (13) Avg rent PEr unit TyPE $ Sum OF units SurvEyED INNEr & CENTrAL NE 84 Avg market vacancy rate % (POrTLAND) Avg rent PEr Sq FOOT $ (17) Avg rent PEr unit TyPE $ Sum OF units SurvEyED N POrTLAND ST. JOhNS 7 Avg market vacancy rate % (18) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED SOuThwEST POrTLAND 37 Avg market vacancy rate % (6) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED OuTEr SE (POrTLAND) 47 Avg market vacancy rate % (14) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED OuTEr NE (POrTLAND) 29 Avg market vacancy rate % (16) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED TrOuTDALE FAIrvIEw 22 Avg market vacancy rate % wood village gresham Avg rent PEr Sq FOOT $ (15) Avg rent PEr unit TyPE $ Sum OF units SurvEyED CLACkAmAS 7 Avg market vacancy rate % (12) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED LAkE OSwEgO west LINN 13 Avg market vacancy rate % (8) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED milwaukie 26 Avg market vacancy rate % (11) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED OrEgON CITy gladstone 12 Avg market vacancy rate % (10) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED wilsonville CANBy 10 Avg market vacancy rate % (9) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED ALOhA 37 Avg market vacancy rate % (3) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED

5 POrTLAND / vancouver metro ArEA ArEA NAmE # OF SPr 10 1 BED 2 BED 2 BED 2 BED 3 BED 3 BED DATA ALL STuDIO PrOP report ChANgE 1 BATh 1 BATh 2 BATh TwNhS 1 BATh 2 BATh BEAvErTON 53 Avg market vacancy rate % (4) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED hillsboro N OF hwy Avg market vacancy rate % (2) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED TIgArD TuALATIN 47 Avg market vacancy rate % ShErwOOD Avg rent PEr Sq FOOT $ (7) Avg rent PEr unit TyPE $ Sum OF units SurvEyED west vancouver 16 Avg market vacancy rate % (19) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED EAST vancouver 12 Avg market vacancy rate % (20) Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED TOTAL Avg market vacancy rate % TOTAL Avg rent PEr Sq FOOT $ TOTAL Avg rent PEr unit TyPE $ TOTAL Sum OF PrOPErTIES SurvEyED TOTAL Sum OF units SurvEyED vacancy rate SINCE 2007 POrTLAND/vANCOuvEr metro ArEA SPr 07 FALL 07 SPr 08 FALL 08 SPr 09 FALL 09 SPr 10 FALL 10 SPr 11 FALL 11 STuDIO 1 BED/1 BATh 2 BED/1 BATh 2 BED/2 BATh 2 BED Th 3 BED/1 BATh 3 BED/2 BATh OThEr ArEAS SALEm & vicinity 33 Avg market vacancy rate % Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED EugENE SPrINgFIELD 14 Avg market vacancy rate % Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED BEND redmond 7 Avg market vacancy rate % Avg rent PEr Sq FOOT $ Avg rent PEr unit TyPE $ Sum OF units SurvEyED TOTAL Avg market vacancy rate % TOTAL Avg rent PEr Sq FOOT $ TOTAL Avg rent PEr unit TyPE $ TOTAL Sum OF PrOPErTIES SurvEyED TOTAL Sum OF units SurvEyED *Surveys received from Sec 42, Sec 8 and other subsidized affordable housing programs are not included in the current survey data. 5

6 POrTLAND APArTmENT INvESTmENT TrENDS Jeremey Snow, MAI, Colliers International The Portland Metro Area (PMA) apartment market has definitely been on a rollercoaster ride over the past 4 to5 years. From the very hot conditions in 2006 to mid 2008, to the recessionary times of late 2008 to early 2010, to the current red hot conditions, the market has seen its share of changes. In this article I will discuss current market conditions, focusing specifically on investment trends that I believe to be relevant to owners and investors in this strong market. vacancy/concessions Vacancy in all submarkets in the PMA has decreased in the past months. Most of Colliers recent surveys show vacancy typically in the 2-4% range for stabilized properties, which is generally similar to published market surveys. While concessions were very common in 2009, they have generally been removed from the entire PMA market, especially for the larger suburban complexes where they were used extensively in The downtown market has also seen a strong recovery after absorbing more than 3,000 units in the past few years. Vacancy rates appear to be stabilizing and most of the projects have been stabilized. Concessions have also dropped off dramatically and the days of 2 months free and free parking for a year are gone; however, there are still some minor concessions to be found. In fact the market is so strong that there are once again plans for new downtown apartments in the works. rental rates Similar to occupancy, rental rates are increasing in all market areas. In higher demand suburban areas like Clackamas, Tigard, and Beaverton/Sunset Corridor, it is common to see asking rents that are $100 to $200 higher than months ago. Effective rents are also higher due to discontinued use of concessions. The downtown market has also seen healthy rent increases, and effective rent increases are even higher due to the discontinuing of high concessions and also because owners are now able to charge higher rates for parking. Overall, most investors and brokers in the market are projecting 3-6% annual income growth in the next few years, recognizing the current lack of new construction in most suburban areas. INvESTmENT market CONDITIONS The current investment market conditions are very strong in the PMA at this time. Over the past 2 years, capitalization rates have decreased for all property classes, but especially for Class A and B type properties with good investor appeal. There is a massive amount of national investment money looking to be placed in larger, national, investment grade apartments. Many national investors would prefer to invest in safe real estate recognizing the current economic issues, nationally and globally. I will try to briefly comment on my observations of the market. These observations are based on completing and reviewing apartment appraisals a month over the past 2 years, continuous discussions with brokers, as well as discussions with buyers and owners during my normal course of business. Cap Rates: Currently, the strongest demand in the market, and lowest capitalization rates, are for national investment grade properties. Downtown (newer, elevator served) have the strongest demand generally in the 5% +/- range, with the recent sale of Kearney Plaza at a reported 4.7% rate. Suburban properties of generally units or more are the next highest in demand, and cap rates are generally in the 5.5% to 6% range for most areas. East County and some of the other periphery areas have slightly higher cap rates in the range of 6.5% to 7.. Vancouver has seen higher rates than Oregon and rates on the most recent sales have been generally in the range of 6. to 6.7% range for national investment grade properties. 30 unit Victorian Apartments located at 2186 NW Glisan Sreet. This property sold in June 2011 for $2,460,000, or $82,000 per unit. One very interesting trend that is occurring is that properties in the 50 to 150 unit range are seeing higher capitalization rates than the national investment grade product. I recently had conversations with 6 area brokers, and all agreed that a 100 unit property, located next to an identical (unit type, amenities, etc) 300 unit property would have a 25 to 50 basis point higher capitalization rate. The sales trends in the market support this clearly. Overall, the brokers agreed that this is because of the buyer profile of the different sized properties. Buyers of the 50 to 150 unit properties are typically more local and regional buyers and it is often their own money continued on page 7 6

7 (continued from page 6) which makes them slightly more conservative and risk adverse with slightly higher return requirements. Typically unit buyers are looking nationally, have investment money, or funds behind them and have different return requirements. A prime example of this is a recent listing of a 3 property portfolio in the market. The 3 properties listed were all in the 80 to 120 unit range (about 300 units total) and the brokers listed them as a portfolio sale to increase the appeal to national investors. Historically, these properties would have been sold separately to achieve their highest price, but in current market conditions the brokers knew that listing them as a package would see the lowest capitalization rate/highest value. The listing of the portfolio saw strong market demand and the properties are under contract at below a 6% capitalization rate for the portfolio, whereas it is likely the properties individually would have been in the 6-6.5% cap rate range. Currently there is a definite lack of good unit properties on the market. Brokers are reporting that sellers aren t too interested in selling right now with market conditions as good as they are and because the capitalization rates for their properties are higher than the rates for investment grade properties. Also, if owners sell, there is not a large supply of good product available for them to trade into and thus that also is putting pressure on owners not to sell due to lack of money placement options. While I cannot predict the future, if market conditions remain as they are, I could definitely see cap rates decreasing for the good appeal unit complexes simply due to lack of product available for purchase on the market. Lending and Financing The lending market for apartments at this time is extremely competitive. Fannie Mae and Freddie Mac are still extremely active in the market, especially for the larger properties. Fannie is also active in the unit size as well. Local, regional, and national banks are very active in the lending market right now, as most feel that multi-family loans are a safe real estate investment. Insurance companies are very interested in multi-family lending, but typically are more selective, and are not doing as many loans. As for smaller properties (10 to 60 units), banks are also very competitive right now. There are various lenders (banks and Fannie Mae lenders) out there lending on the unit complexes and competition appears to be very intense. Currently for an 8 LTV / 1.25 DCR loan, 7 year interest rates are as low as 4.15% and 10 year rates are in the 4.6% range. Also, depending on the buyer, interest only loans are achievable typically for the first 1-3 years. With these extremely low rates, and interest only loans, the cash on cash returns are good for many buyers, and the loan terms are helping to decrease capitalization rates. I have heard various brokers over the years say that they typically see cap rates 100 to 200 basis points above interest rates. If interest rates stay where they are (and most mortgage lenders I speak with say they will) for an extended period of time, then capitalization rates should continue to decline as buyers feel they can afford more. Overall, underwriting by lenders seems to have remained stable. Lenders are placing emphasis on current income (trailing 1, 3 and 6 months), are underwriting reasonable expenses, and typically minimum reserves of $250/unit in Fannie and Freddie loans are required. Reserves can be higher, or lower for new properties, and are dictated by property condition reports completed in conjunction with financing. For problem properties with unstable occupancy, below average property condition, deferred maintenance, etc, financing can still be difficult to obtain and typically requires a relationship with a bank. Most lenders are not interested in lending to problem properties; however, there are still loans available to qualified parties but likely not at prime rates and terms. SummAry Overall, apartment market conditions in the Portland Metro Area are very strong with low vacancy and increasing rents. This will likely continue into the near future due to the lack of new apartment construction and the continued depressed single family market. Investment conditions are also very strong and should continue, especially if the extremely low financing rates continue for an extended period of time. In January 2011, PGP Valuation rebranded into Colliers International Valuation and Advisory Services (CIVAS). CIVAS/PGP Valuation has been serving the Portland Metro Area and Greater Oregon for the past 33 years. We have the largest real estate appraisal and consulting firm in Oregon and serve all property types including Industrial, Office, Retail, Apartment, and Land. Feel free to call the office to speak with an industry expert for any real estate consulting or appraisal needs. Jeremy Snow, MAI is the Multi-Family Director in the Portland/Vancouver office. His team completes more investment grade apartment appraisals in Oregon and SW Washington than any firm. Jeremy also has a specialty in restricted rent apartments (LIHTC, Section 8, and RD) and has completed these appraisals all over the State of Oregon. Feel free to contact Jeremy for investment grade apartment questions or for your appraisal/consulting needs throughout the State of Oregon and SW Washington. IS YOUR PROPERTY PART OF A PROJECT BASED SUBISIDED PROGRAM? PROJECT-BASED SUBSIDIZED 7.6% 7.1% 5.4% 2.6% 18.2% 4.1% 25% 14.3% 9.4% 5.2% 10.9% 8% 1.1% 4.8% 14.6% % 17.7% SURVEY SAYS! MAP AREA NW Portland Hillsboro North of Hwy 26 Aloha Beaverton Downtown Portland SW Portland Tigard Tualatin Sherwood Lake Oswego West Linn Wilsonville Canby Oregon City Gladstone Milwaukie Clackamas Inner & Central SE (Portland) Outer SE (Portland) Troutdale Fairview Wood Village Gresham Outer NE (Portland) Inner & Central NE (Portland) North Portland St. Johns West Vancouver East Vancouver Salem Vicinity Eugene Springfield Bend Redmond ACCEPTS SEC 8 34% 42.9% 32.4% 25% 30.3% 25.6% 24.5% 23.1% 18.1% 22.2% 56.3% 92.9% 53.1% 42.9% 52.7% 52% 35.7% 36.6% 59.4% % 47.8% 64.7% DO YOU ACCEPT SEC 8 VOUCHERS? 7

8 TrEND report : PORTLAND METRO AREA CoStar: Search criteria Research Status: Published; Market: Portland; PropType: Multi Family; Sale Date: 4/2008 9/2011; unit: 5 units and greater. CAP rate NumBEr OF TrANSACTIONS % % % % 2q08 3q08 4q08 1q09 2q09 3q09 4q09 1q10 2q10 3q10 4q10 1q11 2q11 3q11 0 2q08 3q08 4q08 1q09 2q09 3q09 4q09 1q10 2q10 3q10 4q10 1q11 2q11 3q11 $95 $90 $85 $80 $75 $70 median PrICE PEr SquArE FOOT median PrICE PEr unit (IN ThOuSANDS) $85 $80 $75 $70 $65 $60 $55 $65 2q08 3q08 4q08 1q09 2q09 3q09 4q09 1q10 2q10 3q10 4q10 1q11 2q11 3q11 $50 2q08 3q08 4q08 1q09 2q09 3q09 4q09 1q10 2q10 3q10 4q10 1q11 2q11 3q11 year 2q08 3q08 4q08 1q09 2q09 3q09 4q09 1q10 2q10 3q10 4q10 1q11 2q11 3q11 # OF TrANS TTL $ volume $98,749,248 $398,534,200 $110,039,150 $67,236,000 $52,954,511 $83,871,476 $119,831,301 $77,125,098 $163,183,750 $89,329,323 $321,383,853 $121,914,656 $173,661,069 $151,478,096 TTL BLDg SF 1,123,767 2,994,183 1,230, , ,934 1,745,317 2,074, ,147 1,444,080 1,421,853 2,551,325 1,925,379 1,607,795 1,977,624 TTL units 1,377 3,420 1, ,053 2, ,760 1,578 2,597 1,839 1,685 2,275 Avg PrICE $3,405,146 $7,246,076 $2,895,767 $2,241,200 $2,521,643 $2,995,410 $4,279,689 $2,856,485 $5,263,992 $2,481,370 $8,034,596 $2,973,528 $4,134,787 $3,155,794 Avg # OF SF 35,118 50,749 30,018 26,111 27,877 52,888 57,618 28,338 42,473 40,624 62,227 40,966 35,729 36,623 Avg PrICE BLDg SF $ $ $91.71 $84.75 $79.04 $74.87 $89.41 $92.25 $ $55.09 $ $65.66 $ $89.17 med PrICE P/SF $87.05 $87.84 $85.78 $93.76 $84.32 $68.54 $80.95 $73.24 $74.92 $72.39 $86.31 $68.87 $78.25 $72.92 Avg PrICE P/uNIT $79,765 $120,988 $80,087 $73,003 $61,863 $62,967 $87,724 $80,172 $93,730 $49,638 $124,039 $69,705 $104,176 $77,245 med PrICE P/uNIT $78,125 $71,591 $69,722 $74,893 $55,406 $55,792 $58,013 $60,375 $58,333 $56,250 $68,656 $58,688 $71,250 $61,396 Avg # OF units ACTuAL CAP rate % 6.49% 5.87% 7.19% 7.34% 7.75% 6.35% 5.96% 6.98% % 7.81% Avg grm Avg gim

9 EmPLOymENT: ThE STArT STOP recovery Amy Vander Vliet, Oregon Employment Department After a strong start to the year, job growth in the Portland metro area has slowed. Higher gasoline and commodity prices, Japan s earthquake, falling consumer confidence, and the European debt situation have taken their toll on the national and local economy. While growth has been painfully slow, we are not, however, in another recession. Nationally, the gross domestic product is still rising (albeit slowly). Locally, the economy is still adding jobs (albeit fitfully). Employment in the Portland area is up 10,000 jobs over the year, or by about one percent. The private sector is carrying the day, more than offsetting declining government employment. Most major private-sector industries have expanded over the year with the exception of construction. The weak housing market continues to be a drag on the economy. Home prices are still falling and residential permits have yet to recover. An uptick in business spending and exports has benefitted local manufacturers, who have added more than 2,000 jobs over the year. Consumers, up until very recently, have also been spending. Retail and the hospitality industries have generated thousands more new jobs. Healthcare, which grew throughout the recession, continues to bolster our local economy. Budget shortfalls have caught up with the public sector, which comprises about 15 percent of the area s employment. Stimulus funds are no longer available and tax revenues have not improved enough to cover expenditures. Consequently, all three levels of government federal, state, and local have cut thousands of jobs with more to come. This has dampened our jobs recovery, and will continue to do so moving forward. Meanwhile the unemployment rate, at about 9 percent, is down off its recessionary high of 11.2 percent but hasn t budged since the spring. SALES AND TrANSACTION volume Looking forward, the chance of a double-dip recession, while greater than just a few months ago, remains low. Short of a major shock to the economy such as a run-up in oil prices, economists expect that the pace of job growth will pick up in the fourth quarter and carry into 2012 as some of the headwinds we faced earlier in the year subside. Amy Vander Vliet is an Economist for the Oregon Employment Department, covering the Portland metropolitan area. She produces and analyzes employment trends, including the unemployment rate and monthly job growth in the region s major industries. DO YOU OFFER INCENTIVES? MAP AREA NW Portland Hillsboro/North of Hwy 26 Aloha Beaverton Downtown Portland SW Portland Tigard/Tualatin/Sherwood Lake Oswego/West Linn Wilsonville/Canby Oregon City/Gladstone Milwaukie Clackamas Inner & Central SE (Portland) Outer SE (Portland) Troutdale/Fairview/Wood Village/Gresham Outer NE (Portland) Inner & Central NE (Portland) North Portland/St. Johns West Vancouver East Vancouver Salem/Vicinity Eugene/Springfield Bend/Redmond SPRING % 11.1% 26.2% 15.3% 2.9% 20.9% 13.1% 7.1% 25% 14.3% 12.5% 3.1% 13.6% 18.9% 16.7% 2.1% 5% 10.5% 15.6% 12.5% 4.8% 7.6% 7.1% 13.5% 12.5% 7.7% 6.1% 3.1% FALL % 7.1% 1.7% 9.1% 12% 25% 2.2% 4.8% 14.3% 9.8% 4.4% 17.7% SECTION 42 SurvEy results FALL 2011 TOTAL # OF PrOPErTIES = 62 TOTAL # OF units = 5341 unit TyPES vacancy Avg. rent rate (%) PEr Sq FT ($) STuDIO BED / 1 BATh BED / Th BED / 1 BATh BED / 2 BATh BED / 1 BATh BED / 2 BATh TOTALS

10 multifamily INvESTmENT market warming up IN 2011 Greg Frick, Founding Partner, Hagerman Frick O Brien LLC This past summer in Portland resembled the Portland Multifamily Investment market wet and cold with a late, but much needed warming. After a dreadful Multifamily Investment market in 2009 and 2010, the market finally started to warm up in In 2009 and 2010, the Portland Apartment market (Multnomah, Washington, and Clackamas Counties in Oregon and Clark County in Washington) had the lowest levels of apartment sales activity in over a decade. The warming of apartment sales activity that started in the second half of 2010 has continued to heat up throughout As the graph indicates; year-to-date 2011 figures have nearly matched the total number of apartment transactions larger than 10 units and have surpassed the total in dollar volume achieved in The growth in sales volume has been driven by the increase in institutional size transactions (apartments valued at more than $15 million). The dollar volume of sales for transactions $15 million and larger will account for approximately 75 percent of the total dollar volume of all sales in 2010 and This is well over the typical ratio for the Portland market of 50 to 60 percent. A massive amount of institutional investment capital has been on the sidelines looking for a suitable place to invest. Large institutions such as pension fund companies that usually invest in bonds, are searching for stable yields to pay to their members. With the positive indicators and forecast for the apartment market, specifically the Portland area, the capital has been surging out of bonds and into apartments. This flooding of investment has driven demand and pricing up for institutional grade communities and driven cap rates down. Examples of some of the large institutional sales this year: Russellville Commons Apartments: 283 units sold for $31.6 million; Heritage Green Apartments: 333 units in Vancouver sold for $30 million; Kearney Plaza: 132 units in the Pearl District, sold for $ million; One Jefferson Parkway: 341 units in Lake Oswego sold for $51.2 million; Tanasbourne Terrace and the Club at Tanasbourne: 725 units sold for $69.4 million. There are numerous other institution-size deals that have already or will be closing before the end of the year. As bonds continue to remain low, cap rates of the mid 4s will continue to be attractive. Russellville Commons Apartments: 283 units sold for $31.6 million. As one example of what we re seeing, our office was recently retained to market a 3-property apartment portfolio ranging in size from 90 to 120 units. We positioned the portfolio as a package with a total price over $30 million with the ability to break out the properties individually. The conventional wisdom argument would be that the seller would get better pricing by selling these three communities individually, but with institutional money pushing so hard to find deals in the Portland market, we were able to achieve a higher total selling price as a portfolio. continued on page 11 Sales and Transac on Volume SALES AND TrANSACTION volume 200 $900,000, $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000, Million Plus Under15 Million Transac on Volume * $0 Source: Costar Multi Family 10+ Units 10

11 (continued from page 10) In the Class B and C non-institutional apartment market values have held relatively steady. The money which usually invests in these types of deals still vividly remembers 2009 and is less eager jump back in head first like the institutional buyers. Still, we are beginning to see more investors slowly looking to dip their toes back into the Portland apartment market as fundamentals heat up. This increased demand is fueled by the strong market forecasts for apartments referenced throughout this report and others like it, along with the historically low interest rates and the continued instability of the stock market and other investments. Today a qualified buyer is able to find loans with 5 to 10 year fixed interest rates below 5%. With cap rates in the B and C Apartments market at 6.5% to 7.25%, positive leverage is easily attainable. Investors are starting to feel that this is the time to get into the market and take advantage of high demand, low supply, and the incredibly low interest rates, climbing rents and positive leverage returns. We expect transaction volume to increase over the next year with more non-institutional buyers re-entering the market upon fully realizing the strength and value in the Portland Apartment market. Pressure from potential changes to the tax code may also spur investors to restructure their holdings, which should also add to the increase in activity. Investors that are considering exiting the market may be prompted do so before the potential increases in the capital gains tax, while investors looking to take advantage of historically low interest rates will be waiting in the wings to buy. In addition, with national institutions fighting over large class A apartment properties, driving down cap rates and raising prices, many larger local investors are looking at class B assets as a better value for the dollar. Considering these factors, Class B and C apartment properties are projected to follow the rebound seen in Class A assets with an increase in transaction volume in The Portland apartment market is still far from the pre-recession numbers in terms of transaction and sales volume, but the warming has begun, led by the institutional market and historically low interest rates. You may not need to wear your sunglasses yet but make sure to bring them along things are getting brighter. Mr. Frick graduated from PSU with a B.S. in Business Administration and Finance and in 1999 was a founding partner of Hagerman Frick O Brien LLC (HFO). Since its founding, HFO has brokered sales of $700 million and over 11,000 units in Oregon and SW Washington. Greg can be reached at or by at greg@hfore.com. Kearney Plaza: 132 units in the Pearl District, sold for $ million AvErAgE NumBEr OF DAyS vacant POrTLAND / vancouver ArEA NW Portland Hillsboro N of Hwy Aloha Beaverton Downtown Portland Tigard Tualatin Sherwood 46 SW Portland Lake Oswego West Linn Wilsonville Canby Oregon City Gladstone Clackamas Inner & Central SE (Portland) Milwaukie 23 9 Outer SE (Ptld) 29 Troutdale Fairview Wood Village Gresham 41 Outer NE (Ptld) 19 Inner & Central NE (Portland) 16 N Portland St. Johns 13 West Vancouver SPrINg 11 FALL East Vancouver Salem Eugene Springfield Bend Redmond } OuTLyINg ArEAS 11

12 the A PA r T m E N T r E P O r T Promoting Quality Rental Housing Thank you to all who contributed to the making of this report. A Square, LLC A&G Rental Management, LLC Action Management Inc. Affinity Property Management Affinity Realty Alan Marie Properties, LLC Alco Properties Allen Crossing Apartments Allied Group, Inc. Alpine Property Management & Maintenance Altamont Summit Apartments Amazon Properties, Inc. American Condominium Homes American Property Management Andrews Management, LTD. Ankeny Court Annand Properties Arcadia Management Ashton Property Management Aspen Square Management Asset Management, LLC Aumsville Mini Storage Aurora Tech/APW Rentals Autumn Park Apartments Avila Inspection Group, LLC B & B Investments Barclay Square Apartments Barrington Square BB Management Group, LLC Beaumont Properties Bender Properties Bill Lamb, Inc. Black Irish Investments Bluebird I, LLC BMS Properties Inc. BNS, LLC Borgensgard LP Boulders On The River Inc Bowen Property Management Co. Braun Pathways, LLC Brice Properties Brickey Properties, LLC Bridgetown Properties Bristol Equities, Inc. Bunting Management Group C&R Real Estate Services C.R. Padot Investments Calhoun, LLC Cambridge Real Estate Services Canby Court Apartments, LLC Canyon Property Management, LLC Capital Property Management Service, Inc. Capitola Commons CareFree Property Management, Inc. Carla Properties Cascade Crest Cascadian Village Apartments CastleCrest Development, LLC Central Bethany Development Central Improvement Enterprises Charholm Property Management Chestnut Place Apartments Chinook Way Apartments Circum Pacific Properties CK Property Management Cmcyo Holdings,LLC Coast Real Estate Services Colonial East Apartments Columbia Equities Commerce Investment Inc Commonwealth Real Estate Services Conifer Group Courtyard Properties Crown Plaza Apartments Crown Point, LLC Crown Property Management CSM Corporation CTL Management, Inc. Cypress Management, LLC D & T Properties D&D Development Dalton Management, Inc. DEBLAZE Enterprises Deems, Inc. Dieringers Properties, Inc. Division Sunset Apartments DJ Investment Holdings Doris & Co. DS & G Properties, LLC Eberle-Sunset, LLC Elkhorn Property Management, LLC Elliott Associates, Inc. Emmert Development Company EP Property Management Group, LLC Equity Residential Erickson Properties/Pacifica Properties, LLC Exit Realty, Your Next Move / McFeters Real Estate Exum Group, LLC Faden & Christopher Fanno Creek Village FatBack Properties, LLC Finama Manor, LLC Fir Cones Limited First Class Property Management Fishback Engineering, LLC Forest Hills Apartments Forest View Apartments Forsythe Development, LLC Fort Vancouver Terrace Apartments Foudy Properties, LLC FRJ Development, LLC G&P Nelson Capital Management, LLC G&S Estates, LLC Galewood Commons Gardenview Estates Gateway Village Apartments GCS George & Alana s Property Management Glacier Management GLI Properties, Inc. GMC Properties Corporation Golden Star Invest, Inc. Golfside Apartments Grand Peaks Property Management, Inc. GSL Properties, Inc. Guardian Management, LLC Guild Apartments GVE Apartments, LLC Hall Equities Group Hallinan Property Management Hanks Property Harprop, Inc. Harr Properties Harrington Homes Harsch Investment Properties Hayden Group, LLC Hazelton Las Brias, LLC HDT Properties Hendricks & Partners High Lakes Apartments Highland Park Hilltop Investment Co., LLC HNR Real Estate Hogan Woods Apartments Homai Financial Group Home Again Property Management & Rentals, LLC Hometown Property Management House of Usher Housing Authority of Clackamas County Housing Authority of Portland Housing Authority of Washington County HSC Real Estate, Inc. Hughes Prop Ltd Partnership ICM Resources II by IV Urban Development ILP Corporation Images Properties Income Property Management Interwest Properties, Inc. Intution Real Estate Group, Inc. Isacson Properties Jake Associates, LLC Jeffrey A. Polk Properties Jennings & Co. JK Management Co., Inc. JLW Property Management John Randolph Properties Johnson Heights Condos Joki Properties JPM Real Estate Services Judy DeLuca Enterprise Junco Co. JWP Properties, LLC KBC Management Kelsall Properties, LLC Kenneth Alan Apartments Kenton Hotel, LLC Metro Multifamily Housing Association SW Upper Boones Ferry Road Suite 105 Tigard, OR This report would not be possible without the dedication and commitment of the MMHA staff and the Apartment Report Committee. Thank you to the many contributors, writers and consultants who have generously taken the time to provide this information. Keppel & Winquist, LLC Kingswood Investment Co. Kippie Investments, LLC Knoll West Properties, LLC K-Star KW Multi-Family Management Group, Ltd. L&M Rentals L&R Properties and Investments L.J. Properties Lafayette Properties, LLC Lake Crest Limited Partner Lamplighter Apartments Landmark Apartments, LLC Larry Grant Investment Lawrence Investments Co., Inc. Ledart Properties Liberty Management Group Lloyd Place Apartments Lorig Management Services, LLC LRG Enterprises Macole, LLC Madison Park Apartments Magdefrau Properties, LLC Mainlander Property Management, CRMC Marilynn Adams Property Management Mark Lee Construction Markram Properties Marsh Rental Properties, LLC Matrix Holdings Matson Properties, LLC MB Rentals, LLC McCann Properties, LLC McKee Enterprises McKenzie Court McMonies, LLC McWilliams Real Estate Services Metro-Solid Waste & Recycling Mid-Valley Property Management Mike & Larry Kay, LLC Miller Properties Milligan Apartments NE, LLC MJP Management Monarch Apartments Muddy Creek Properties, LLC Mudrick Family Limited Partner Munoz Sanchez Properties, LLC Myers Property Management Inc. National Apartment Association New Haven Apartments, LLC Nguyen Asset Mangement, Inc. Northshore Northwest Communities, LLC Northwest Group Investments, LLC Northwest Housing Alternatives Northwest Plex Group Oak View Terrace Oleson View Apartments Oregon Housing & Community Services Oswald Properties, LLC Oswego Gardens Apartments, LLC Pacific Northwest Property Services, LLC Palermo Properties Paramount Apartments, LLC Pardue Management Park Hollywood Apartments Parker Properties Parkrose Properties Parkrose Terrace Patterson Properties PEC Properties, LLC Peters & Co. Real Estate Management Peters EnPointe Properties Pikes NW, Inc. Pilcher Properties, LLC Pineview Properties Inc Pinewood Apartments Pinnacle, an AMS NW Company Portland Community Reinvestment Initiative Portland Impact Portland Towers Apartments, LLC Powell Court Apartments Premium Rental Properties, LLC Prime Group Princeton Property Management Professional Property Management Prometheus Real Estate Group, Inc. Quail Ridge Apartments For more information on MMHA or to comment on this report, please visit us on the web at The opinions contained in this report are those of the authors and do not necessarily represent the opinions or positions of MMHA. 12 Quantum Residential R. Lawrence Properties, LLC Raab Family LLC Railton Properties Raleigh Scholls Apartments Inc Rappold Property Management, LLC Reach Community Development Inc Real Estate Solutions Realty Management Advisors Realvest Asset Management Regency Management, Inc. Regional Water Providers Consortium Residential Property Management, Inc. Resources NW, Inc. Riel & Pillers Right-Of-Way Associates, Inc. Riva Properties, LLC Riverstone Residential Group RKB Properties Rock Realty Group Rockwood Holdings, LLC Rogovoy Properties, LLC Romero & Sons Property Management, LLC Rose Place Apartments, LLC S.L.S. Properties, Inc. Sabin Community Development Corp Sandycrest Partners, LLC Satellite Properties, LLC Schaeffer & Associates, LLC Schoen House Apartments SCR Management LLC Seamast Vista LLC Semler Building, LLC Sequoia Apartments Shangri-La Corporation Shara Alexander, LLC Sheldon Development Shelter Management, Inc. Silverado Group, LLC Simpson Property Group SKL Properties, LLC SkyNat Limited Partnership Solares Homes South Park at Bethany Southpark Square Apartments Sterling Management Group, Inc. Studehouse, LLC Subtext Media Susbauer Properties, LLC Tandem Property Management, Inc. Taylene Court, LLC Tellco Property Management Terjeson Investments The Lodges at Lake Salish, LLC The Management Group The Park at Fox Pointe, LLC The Perotti Group The Pines The RW Fullerton Company Theresa Terrace Apartments Tokola Properties Tree Crest Apartments Trevor Anthony Apartments Trinity Property Consultants Tucci Investments UDR Urban La Residence V.I.P. Property Management, Inc. Valentino Bonser Properties, LLC Valley View Estates Village at Sunrise Vista Highlands Walchae & Associates Walker Investment / Hammond Residential Warner Pacific College Wells Rentals Western States Development Westridge Properties, LLC Whispering Pines Apartments Wigrich Farms, Inc. Wildwood, Inc. Wilfert Investments Wilkinson, LLC William Chan Property Management Williams Downing, LLC Wilsonville Summit Windsor Properties Woodland Park Estates WPL Associates WWL Corporation 2011 mmha board of directors Chris Hermanski Mainlander Property Management PrESIDENT Jeff Denson Dalton Management, Inc. vice PrESIDENT Eve Henderson C&R Real Estate Services SECrETAry Liz Zuanich Princeton Property Management TrEASurEr Gary Fisher Background Investigations ImmEDIATE PAST PrESIDENT Kirsten Bailey Bristol Equities Mary Daggett Income Property Management Andy Hahs Bittner & Hahs Paul Hoevet HD Supplies Facilities Maintenance Greg Knakal Princeton Property Management Pam McKenna Guardian Management LLC Rick Martinson Carla Properties Kris Tanaka The Oregonian Jim Wiard Guardian Management LLC Korah Young Tenant Technologies