OFFERING MEMORANDUM. BECKHAM AMAZON APARTMENTS 420 NW 10th St Miami, FL 33136

Transcription

1 OFFERING MEMORANDUM BECKHAM AMAZON APARTMENTS 420 NW 10th St Miami, FL 33136

2 NON- ENDORSEMENT AND DISCLAIMER NOTICE Non-Endorsements Marcus & Millichap Real Estate Investment Services of Florida, Inc. ("Marcus & Millichap") is not affiliated with, sponsored by, or endorsed by any commercial tenant or lessee identified in this marketing package. The presence of any corporation's logo or name is not intended to indicate or imply affiliation with, or sponsorship or endorsement by, said corporation of Marcus & Millichap, its affiliates or subsidiaries, or any agent, product, service, or commercial listing of Marcus & Millichap, and is solely included for the purpose of providing tenant lessee information about this listing to prospective customers. ALL PROPERTY SHOWINGS ARE BY APPOINTMENT ONLY. PLEASE CONSULT YOUR MARCUS & MILLICHAP AGENT FOR MORE DETAILS. Disclaimer THIS IS A BROKER PRICE OPINION OR COMPARATIVE MARKET ANALYSIS OF VALUE AND SHOULD NOT BE CONSIDERED AN APPRAISAL. This information has been secured from sources we believe to be reliable, but we make no representations or warranties, express or implied, as to the accuracy of the information. References to square footage or age are approximate. Buyer must verify the information and bears all risk for any inaccuracies. Marcus & Millichap is a service mark of Marcus & Millichap Real Estate Investment Services, Inc. Â 2017 Marcus & Millichap. All rights reserved. 420 NW 10TH ST Miami, FL ACT ID Y

3 TABLE OF CONTENTS INVESTMENT OVERVIEW SECTION 01 Property Overview Regional Map Local Map Aerial Photo FINANCIAL ANALYSIS SECTION 02 Rent Roll Summary Rent Roll Detail Operating Statement Notes Pricing Detail Proposal Price MARKET COMPARABLES SECTION 03 Sales Comparables Rent Comparables MARKET OVERVIEW SECTION 04 Market Analysis Demographic Analysis MARKETING TEAM SECTION 05 Vicente Rodriguez Arthur D. Porosoff

4 INVESTMENT OVERVIEW

5 PROPERTY OVERVIEW INVESTMENT OVERVIEW Marcus and Millichap is proud to present The Beckham Downtown Miami Apartments at 420 NW 10 th Street, Miami FL The two-story property consists of 34 one-bedroom/one-bathroom units totaling 14,787 rentable square feet. This building was built in 1953 and fully renovated in It is situated on a 0.5-acre site zoned T5R. The property is being offered at $4,350,000 representing a 4.99% cap rate. After increasing rents to market average, the year one cap is expected to rise to 5.51%. This property is in a location that is experiencing massive developments that will not only benefit the immediate community but also the city in general. Examples of these expected developments are the Miami Innovation Center, the Miami Central Brightline, the Beckham Stadium and the Amazon 2HQ among others (Miami making the shortlist of 20 proposals for its $5 billion second headquarters) In addition to the aforementioned list of upcoming developments, this property is located in close proximity to Bayside Marketplace, Downtown Miami, Adrienne Arsht Center for the Performing Arts, Midtown shopping Center, Bayfront Park, Wynwood Arts District, Miami Design District, and American Airlines Arena. South Beach, Coconut Grove, Coral Gables/Miracle Mile, Key Biscayne, Viscaya Museum & Gardens and Port of Miami are all within a twenty-minute drive from the building. PROPERTY HIGHLIGHTS High Occupancy Rapidly Appreciating Market Upside in Rents Upcoming Developments in the Area o Beckham Stadium o Miami Innovation Center o Brightline Train o Amazon 2HQ (Miami is a finalist in a shortlist of 20 cities) 5

6 420 NW 10TH ST AERIAL PHOTO 6 6

7 420 NW 10TH ST AERIAL PHOTO 7 7

8 AERIAL PHOTO 8

9 PROPERTY PHOTO 9 9

10 PROPERTY PHOTO 10 10

11 REGIONAL MAP 11

12 LOCAL MAP 12

13 LOCAL MAP 13 13

14 BECKHAM STADIUM David Beckham BECKHAM STADIUM IN OVERTOWN David Beckham declared Overtown the final choice for Major League Soccer to Miami in an interview with Channel 10 s Glenna Milberg. The Beckham Group already owns six acres in Overtown off of Northwest Sixth Avenue, and has an agreement to purchase adjoining three acres under a deal with Miami-Dade that gives the partnership until later this year to close on the property. REFERENCE:

15 BRIGHTLINE MIAMI INNOVATION BENEFITS OF THE MIAMI INNOVATION DISTRICT The Miami Innovation District urban renewal project will bring great benefit to the community, activating inefficiently utilized parcels and bringing them into the tax rolls, creating jobs and opportunities for economic growth for the Park West/Overtown neighborhood and city of Miami. Quick facts about the Miami Innovation District: Approximately 7 million square feet across 10.4 acres 3,850,000 square feet of office programs 2,400,000 square feet of residential Micro units (economy apartments under 300 square feet) Large, flexible open floor plates for high-tech office uses Consider some of the benefits: The developer will pay the Community Redevelopment Agency $5 million before building the Miami Innovation Tower. After the tower has been built, the developer will pay $1 million per year or 3% of gross sales, whatever is higher. The tower will bring 1,700 construction jobs and 700 permanent jobs in Overtown. It will serve as a catalyst for the Miami Innovation District, which will bring more than 13,000 high-paying jobs to the city of Miami. This project will elevate the city s brand on a global level, enhance the city skyline, and complement and enhance the surrounding community, activating the long-neglected area as an engine for sustainable economic growth and creating jobs. REFERENCE:

16 MIAMI CENTER WAY TO TRAVEL IN FLORIDA MiamiCentral is home to the new Brightline inter-city express train that connects Southeast Florida more comfortably, quickly and reliably than ever before. Presenting the reinvention of train travel in America, Brightline is one of the most advanced passenger rail systems in the nation. Soon, travel between Miami, Fort Lauderdale, West Palm Beach and Orlando, will be a quick, comfortable journey for vacationers and commuters alike. REFERENCE:

17 MIAMI CENTRAL MIAMI CENTRAL MiamiCentral spans over six downtown city blocks delivering the true mixed-use urban experience Miami has been waiting for. Featuring Central Fare, the city s first food hall experience, innovative retail shops, 800+ rental residences, uniquely connected urban offices and a major transit hub providing both local and multi-city transit options, MiamiCentral is set to transform Florida s urban landscape forever. Downtown Miami is where culture, arts, leisure, entertainment and business collide. Discover Miami s Arts & Entertainment district downtown featuring the Adrienne Arsht Center for the Performing Arts, Museum Park s panoramic bayfront garden housing the Perez Art Museum Miami (PAMM), and the new Patricia and Phillip Frost Museum of Science. Neighborhood entertainment options include world-class music, theater and dance along with professional sporting events and top chart concerts hosted at the American Airlines Arena. MiamiCentral is located at NW 1st Ave between NW 3rd Street and NW 8th Street, within Miami s core of bustling neighborhoods. Its central location allows for maximum connectivity with public transit options including the Metromover, Metrorail, Metrobus, City of Miami Trolley Systems, future Tri-Rail Coastal Link and the new Brightline inter-city express train. REFERENCE:

18 TAX CARD 18 18

19 ZONING 19 19

20 FINANCIAL ANALYSIS

21 RENT ROLL SUMMARY FINANCIAL ANALYSIS 21

22 RENT ROLL DETAIL FINANCIAL ANALYSIS 22

23 OPERATING STATEMENT FINANCIAL ANALYSIS 23

24 PRICING DETAIL FINANCIAL ANALYSIS 24

25 MARKET COMPARABLES

26 SALES COMPARABLES MAP 26

27 PROPERTY 420 NW 10TH NAME ST SALES COMPARABLES SALES COMPARABLES SALES COMPS AVG Average Price Per Square Foot Average Price Per Unit $ $ Avg. $ $200,000 $180,000 $ $160,000 Avg. $145,260 $ $140,000 $ $120,000 $ $100,000 $ $80,000 $90.00 $60,000 $60.00 $40,000 $30.00 $20,000 $ NW 10th St 401 SW 5th St 1328 NW 4th St 427 SW 6th St 409 SW 8th Ave 369 SW 5th St 565 NW 33rd St 251 NW 30th St $0 420 NW 10th St 401 SW 5th St 1328 NW 4th St 427 SW 6th St 409 SW 8th Ave 369 SW 5th St 565 NW 33rd St 251 NW 30th St 27

28 PROPERTY 420 NW 10TH NAME ST SALES MARKETING COMPARABLES TEAM SALES COMPARABLES 401 SW 5TH ST 401 SW 5th St, Miami, FL, NW 4TH ST 1328 NW 4th St, Miami, FL, SW 6TH ST 427 SW 6th St, Miami, FL, rentpropertyname1 rentpropertyname1 rentpropertyname1 Units Unit Type Units Unit Type Units Unit Type Close Of Escrow: 4/8/ Bdr 1 Bath Close Of Escrow: 5/24/ Bdr 1 Bath Close Of Escrow: 11/30/ Studio Bath Sales Price: $630,000 Sales Price: $940,000 Sales Price: $930,000 Price/Unit: $157,500 Price/SF: $ rentpropertyaddress1 Price/Unit: $156,667 Price/SF: $ rentpropertyaddress1 Price/Unit: $155,000 Price/SF: $ rentpropertyaddress1 Total No. of Units: 4 Total No. of Units: 6 Total No. of Units: 6 Year Built: 1973 Year Built: 1973 Year Built:

29 PROPERTY 420 NW 10TH NAME ST SALES MARKETING COMPARABLES TEAM SALES COMPARABLES 409 SW 8TH AVE 409 SW 8th Ave, Miami, FL, SW 5TH ST 369 SW 5th St, Miami, FL, rentpropertyname1 rentpropertyname1 Units Unit Type Units Unit Type Close Of Escrow: 12/27/ Bdr 1 Bath Close Of Escrow: 11/22/ Bdr 1 Bath Sales Price: $2,312, Bdr 1 Bath Sales Price: $1,125,000 Price/Unit: $144,531 Price/Unit: $140,625 Price/SF: $ Total No. of Units: 16 rentpropertyaddress1 Price/SF: $ Total No. of Units: 8 rentpropertyaddress1 Year Built: 1971 Year Built:

30 PROPERTY 420 NW 10TH NAME ST SALES MARKETING COMPARABLES TEAM SALES COMPARABLES 565 NW 33RD ST 565 NW 33rd St, Miami, FL, NW 30TH ST 251 NW 30th St, Miami, FL, rentpropertyname1 Units Unit Type Units Unit Type Close Of Escrow: 7/25/ Bdr 1 Bath Close Of Escrow: 6/15/ Bdr 1 Bath Sales Price: $690,000 Sales Price: $885,000 Price/Unit: $115,000 Price/Unit: $147,500 Price/SF: $ Total No. of Units: 6 rentpropertyaddress1 Price/SF: $ Total No. of Units: 6 Year Built: 1972 Year Built:

31 8 RENT COMPARABLES MAP 420 NW 10TH ST NE 19th St 3240 NW 10th Ave 1627 NW 18th St 950 NW 11th St 753 NW 3rd St

32 PROPERTY 420 NW 10TH NAME ST AVERAGE RENT - MULTIFAMILY RENT COMPARABLES 1 Bedroom $2,000 $1,800 $1,600 $1,400 $1,200 Avg. $1,142 $1,000 $800 $600 $400 $200 $0 420 NW 10th St 231 NE 19th St 3240 NW 10th Ave 1627 NW 18th St 950 NW 11th St 753 NW 3rd St 32

33 PROPERTY NAME RENT MARKETING COMPARABLES TEAM BECKHAM AMAZON APARTMENTS rentpropertyname1 420 NW 10th St, Miami, FL, rentpropertyaddress1 231 NE 19TH ST 231 NE 19th St, Miami, FL, NW 10TH AVE 3240 NW 10th Ave, Miami, FL, rentpropertyname1 rentpropertyname1 rentpropertyname1 Unit Type Units SF Rent Rent/SF Unit Type Units SF Rent Rent/SF Unit Type Units SF Rent Rent/SF 1 Bdr 1 Bath $917 $ Bdr 1 Bath $1,200- $1,200 $ Bdr 1 Bath $1,200- $1,200 $1.81 Total/Avg $917 $2.11 Total/Avg $1,200 $2.27 Total/Avg $1,200 $1.81 YEAR BUILT: 1953 rentpropertyaddress1 YEAR BUILT: 1928 rentpropertyaddress1 YEAR BUILT: 1953 rentpropertyaddress1 33

34 PROPERTY NAME RENT MARKETING COMPARABLES TEAM 1627 NW 18TH ST 1627 NW 18th St, Miami, FL, NW 11TH ST 950 NW 11th St, Miami, FL, NW 3RD ST 753 NW 3rd St, Miami, FL, rentpropertyname1 rentpropertyname1 rentpropertyname1 Unit Type Units SF Rent Rent/SF Unit Type Units SF Rent Rent/SF Unit Type Units SF Rent Rent/SF 1 Bdr 1 Bath $1,060- $1,060 $ Bdr 1 Bath $1,200- $1,200 $ Bdr 1 Bath $1,050- $1,050 $1.71 Total/Avg $1,060 $1.63 Total/Avg $1,200 $2.09 Total/Avg $1,050 $1.71 YEAR BUILT: 2006 YEAR BUILT: 1975 YEAR BUILT: 1974 rentpropertyaddress1 rentpropertyaddress1 rentpropertyaddress1 34

35 MARKET OVERVIEW

36 MIAMI-DADE OVERVIEW Miami-Dade County includes 35 incorporated towns and cities and many unincorporated areas. The 2,400-square-mile county extends from the Florida Everglades east to the Atlantic Ocean. It is bordered to the north by Broward County and to the south by Monroe County. The main portion of the city of Miami lies on the shores of Biscayne Bay and is separated from the Atlantic Ocean by barrier islands, the largest of which holds the city of Miami Beach. The metro, with a population of roughly 2.7 million, is located entirely within Miami-Dade County. Miami is the most populous city, with slightly more than 400,000 residents, followed by Hialeah and Miami Gardens. METRO HIGHLIGHTS BUSINESS-FRIENDLY ENVIRONMENT The metro has no local business or personal income taxes, which attracts businesses and residents to the area. INFRASTRUCTURE GATEWAY Miami is a gateway for international trading activities and immigration, connecting to ports to the south and beyond. MEDICAL COMMUNITY The county contains the largest concentration of medical facilities in Florida, drawing residents needing services throughout the state

37 420 NW 10TH ST ECONOMY Various industries provide a diverse economy. Trade, international finance, healthcare and entertainment have become major segments in the local business community. A strong tourism industry has developed, with ties to Latin America and the Caribbean. Tourism and trade depend on a large transportation sector. PortMiami and Miami International Airport are both major contributors to employment and the economy. The Miami metro gross metropolitan product (GMP) expansion is expected to outpace the U.S. GDP in 2017 and retail sales for the county are also rising. MAJOR AREA EMPLOYERS Baptist Health South Florida University of Miami American Airlines Precisions Response Corp. Publix Supermarkets Winn-Dixie Stores Florida Power & Light Co. Carnival Cruise Lines AT&T Mount Sinai Medical Center * Forecast SHARE OF 2016 TOTAL EMPLOYMENT 3% MANUFACTURING 15% PROFESSIONAL AND BUSINESS SERVICES 12% 12% 7% GOVERNMENT LEISURE AND HOSPITALITY FINANCIAL ACTIVITIES 26% TRADE, TRANSPORTATION AND UTILITIES 4% CONSTRUCTION + 15% EDUCATION AND HEALTH SERVICES 2% INFORMATION 5% OTHER SERVICES 37 37

38 420 NW 10TH ST DEMOGRAPHICS The metro is expected to add nearly 140,000 people through During the same period, approximately 50,000 households will be formed, generating demand for housing. The homeownership rate of 54 percent is below the national rate of 64 percent, maintaining a strong rental market. The cohort of 20- to 34-year-olds composes 21 percent of the population. SPORTS 2018 Population by Age 6% 0-4 YEARS 17% 5-19 YEARS 7% YEARS 28% YEARS 27% YEARS 15% 65+ YEARS EDUCATION 2018 POPULATION: 2.7M Growth *: 5% 2018 HOUSEHOLDS: 933K Growth *: 5.6% 2018 MEDIAN AGE: 39.3 U.S. Median: MEDIAN HOUSEHOLD INCOME: $43,900 U.S. Median: $54,500 QUALITY OF LIFE Miami-Dade County has developed into a cosmopolitan urban area offering a vibrant business and cultural community. The metro has an abundance of popular attractions. Miami hosts the Capital One Orange Bowl and is home to several professional sports teams, including the Miami Dolphins, the Miami Marlins and the Miami Heat. The county has a broad array of cultural attractions, historic sites and parks. These include the Adrienne Arsht Center for the Performing Arts, Zoo Miami and Everglades National Park. The region is home to a vibrant and diverse culture, family-friendly neighborhoods, a plethora of shops and restaurants, and beautiful weather and beaches. It also offers easy access to Latin America and the Caribbean. ARTS & ENTERTAINMENT * Forecast Sources: Marcus & Millichap Research Services; BLS; Bureau of Economic Analysis; Experian; Fortune; Moody s Analytics; U.S. Census Bureau 38 38

39 420 NW 10TH ST Job Growth, In-Migration Supporting Household Formation But Development Growing Faster Rental demand lifted by rising cost of homeownership. A shortage of single-family homes for sale sent the median home price up 4.4 percent last year, more than seven times faster than median household income growth. This keeps many residents in the renter pool, and developers have responded by boosting multifamily inventory. Development will remain robust to meet the needs of a growing workforce, underscored by substantial in-migration trends, bringing deliveries this year to a new high for the current cycle. Construction will be heavily weighted to the urban corridors of downtown Miami, South Beach and Coral Gables, resulting in fewer projects rising in more suburban settings than previously. The number of units completed this year will outpace absorption of rentals, pushing the average vacancy rate to its highest level in years. As apartments lease up, effective rent growth will slow in the process as incentives are likely to increase over the coming year. Abundance of capital, development support investor confidence. Investment demand will remain strong in Miami, though limited listings will restrain sales activity. Investors seeking to tap their equity in existing assets may exchange into larger assets but will need to be flexible in their approach. Private parties searching for value-add opportunities will be active in the transitioning neighborhoods of Little Havana, Little Haiti and Allapattah, though competition from institutional buyers has intensified. Investors will readjust search parameters this year, eyeing properties farther from the urban core where rents are more affordable. First-year yields in suburban locations such as North Miami Beach and Hialeah fall in the upper-5 to mid-6 percent band on average. Increased construction has drawn significant interest from buyers looking for newly developed product, and Class A assets often trade at cap rates in the low- to mid-4 percent range. * Estimate; ** Forecast; Through 3Q; Trailing 12-month average Sources: CoStar Group, Inc.; MPF Research; Real Capital Analytics 39 39

40 420 NW 10TH ST 2018 Market Forecast NMI Rank 20, down 5 places Increases in development and vacancy, combined with a downtick in job expansion, lead to a slip in the Index. Employment up 1.5% Employment growth slows from the 2.5 percent expansion registered a year ago as 18,000 jobs are anticipated to be created. Construction 7,100 units Miami s construction boom will extend for another year as 7,100 apartments are slated for completion this year. In 2017, nearly 5,000 units were delivered. Vacancy up 120 bps Net absorption will be eclipsed by construction, pushing the vacancy rate up to 5 percent, adding to a 160-basis-point jump posted last year. Rent up 4.0% The average effective rent rises moderately in 2018, reaching $1,550 per month at year end, a decline from the 7.6 percent year-over-year pace in Investment Markets beyond the Greater Downtown Miami area will register sharp declines in completions, motivating investors to place capital in fully occupied Class B and C complexes due to their stable rent growth. * Estimate ** Forecast Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics 40 40

41 420 NW 10TH ST 2018 PRICING & VALUATION TRENDS Yield Range Offers Compelling Options for Investors; Most Metros Demonstrate Strong Appreciation Rates * Average annualized appreciations in price per unit Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics 41 41

42 420 NW 10TH ST AVERAGE PRICE PER UNIT RANGE** (Alphabetical order within each segment) ** Price per unit for apartment properties $1 million and greater Sources: Marcus & Millichap Research Services; CoStar Group, Inc.; Real Capital Analytics 42 42

43 420 NW 10TH ST 2018 NATIONAL MULTIFAMILY INDEX U.S. Multifamily Index Coastal Markets Top National Multifamily Index; Several Unique Markets Climb Ranks Trading places. Seattle-Tacoma leads this year s Index after moving up one notch, driven by robust employment in the tech sector and soaring home prices that keep rental demand ahead of elevated deliveries. The metro outperforms last year s leader, Los Angeles (#2), which slid one spot. Midwest metro Minneapolis-St. Paul (#3) rose one notch as its diverse economy generates steady job growth and robust rental demand, maintaining one of the lowest vacancy rates among larger U.S. markets. San Diego (#4) jumped five spots as deliveries slump while household formation proliferates, resulting in sizable rent growth. Portland (#5) inches up a slot to round out the top five markets. East Coast markets fill the next two positions: Boston (#6) moves down three slots as rent growth slows while vacancy ticks up, and New York City (#7) rises three places as stout renter demand holds vacancy tight. Index reshuffles with big moves. Sacramento (#8) posted the largest increase in the Index, vaulting 12 positions to lead a string of California markets that fill the next five slots. Robust rent growth and low vacancy pushed the market up in the ranking. Other double-digit movers were Orlando (#17) and Detroit (#28), which each leaped 10 places. Employment gains and in-migration are generating the need for apartments in Orlando, maintaining ample rent advancement. In Detroit, steady employment and a slow construction pipeline keep demand above supply, allowing rents to flourish. The most significant declines were registered in Austin, Nashville and Baltimore. Austin (#31) tumbled nine spaces as elevated deliveries overwhelm demand slowing rent growth. Nashville (#35) and Baltimore (#45) each moved down six steps as demand has yet to absorb multiple years of elevated inventory gains. Although Kansas City (#46) retains the bottom slot, there is greater change in the lower half of the NMI as more Midwest markets rise

44 420 NW 10TH ST U.S. ECONOMY Growth Cycle Invigorated by Confidence; Tax Laws Could Transform Housing Tight labor market restrains hiring as confidence surges. The steady economic tailwind benefiting apartment performance is poised to carry through 2018 as a range of positive factors align to support growth. Consumer confidence recently reached its highest point since 2000 while small-business sentiment attained a 31-year record level, both reinforcing indications that consumption and hiring will be strong. The total number of job openings has hovered in the low-6 million range through much of 2017, illustrating that companies have considerable staffing needs, but with unemployment entrenched near 4 percent, companies will continue to face challenges in filling available positions. These tight labor conditions should place additional upward pressure on wages, potentially boosting inflationary pressure in the coming year. The strong employment market, rising wages and elevated confidence levels could unlock accelerated household formation, particularly by young adults. Last year, the number of young adults living with their parents ticked lower for the first time since the recession, signaling that these late bloomers may finally be considering a more independent lifestyle. Housing preferences may change under new tax laws. The new tax laws could play a significant role in shaping both the economy and housing demand in Reduced taxes will be a windfall for corporations, potentially sparking invigorated investment into infrastructure. The rise in CEO confidence over the last year already boosted companies investment by more than 6 percent, accelerating economic growth. However, the tax incentive-based stimulus will likely offer only a modest bump to GDP in 2018 because corporate investment comprises just 12 percent of economic output. One factor that could weigh on economic expansion under the new tax laws is the housing sector, which added just 3 percent to the economy last year, about two-thirds of normal levels. The increased standard deduction and restrictions on housing-related deductions will reduce some of the economic incentive to purchase a home, further sapping the strength of the housing sector. Nonetheless, the increased standard deduction could benefit apartment investors, encouraging renters to stay in apartments longer and reducing the loss of tenants to homeownership. * Forecast ** Through 3Q 44 44

45 420 NW 10TH ST U.S. ECONOMY 2018 National Economic Outlook Labor force shortage weighs on job creation. The economy has added jobs every month for more than seven years, the longest continuous period of job creation on record. The trend will continue in 2018, but the pace of job additions will moderate, falling below 2 million for the year as the low unemployment rate restricts the pool of prospective employees. Wage growth poised to accelerate. Average wage growth has been creeping higher in the post-recession era, with compensation gains in construction, professional services and the hospitality sectors outpacing the broader trend. The tight labor market will continue to pressure wage growth, potentially sparking inflation in the process. Tax laws could invigorate apartment demand. Since 2011 household formations have outpaced total housing construction, a key ingredient in the tightening of apartment vacancies. The new tax laws could cause homebuilders to reduce construction while shifting a portion of the housing demand from homeownership to rentals, and a rental housing shortage could ensue. If this behavior change occurs in conjunction with additional young adults moving out of their own, apartment demand could dramatically outpace completions. * Forecast ** Through 3Q 45 45

46 420 NW 10TH ST U.S. APARTMENT OVERVIEW Demand Outlook Sturdy as Pace Of Construction Begins to Retreat Investors wary of apartment construction. The wave of apartment completions entering the market in recent years has permeated the investor psyche, raising concerns of overdevelopment and escalating vacancy rates, but numerous demand drivers have held this risk in check. Steady job creation, positive demographics, above-trend household formation and elevated single-family home prices have converged to counterbalance the addition of 1.37 million apartments over the last five years, at least on a macro level. Though a small number of markets have faced oversupply risk, the affected areas tend to be concentrated pockets, with upper-echelon units facing the greatest competition. For traditional workforce housing, Class B and C apartments, the risks stemming from overdevelopment have been nominal, and in most metros, even the Class A tranche has demonstrated sturdy performance. In the coming year, rising development costs, tighter construction financing and mounting caution levels will curb the pace of additions from the 380,000 units delivered in 2017 to approximately 335,000 apartments. However, the list of markets facing risk from new completions will stretch beyond the dozen metros that builders have concentrated on thus far. This will heighten competition, requiring investors to maintain an increasingly tactical perspective integrating vigilant market scrutiny and strong property management. Competitive nuances increasingly granular. Although the pace of apartment completions will moderate in 2018, additions will still likely outpace absorption. This imbalance will most substantively affect areas where development has been focused, such as the urban core where vacancy rates have risen above suburban rates for the first time on record. Nationally, Class A vacancy rates have advanced to 6.3 percent in 2017 and will continue their climb to the 6.8 percent range over the next year. Vacancy rates for Class B and C assets will rise less significantly in 2018, pushing to 5.0 percent and 4.7 percent, respectively. Although vacancy levels are rising, three-fourths of the major metros have rates below their 15-year average. Still, the magnitude of new completions coming to market and the high asking rents these new units command will spark increased competition for tenants, generating a more liberal use of concessions in 2018 as landlords attempt to entice move-up tenants. * Forecast 46 46

47 420 NW 10TH ST U.S. APARTMENT OVERVIEW 2018 National Apartment Outlook Rent growth tapers as concession use edges higher. Average rent growth will taper to 3.1 percent in 2018 as concessions become more prevalent, particularly in Class A properties. Rent gains in the Class C space, which were particularly strong last year, will face greater challenges as affordability restrains demand. Although job growth has been steady for seven years, wage growth has been relatively weak, particularly for low-skilled labor. Congress may nudge apartment demand. The new tax laws could reinforce apartment living as the larger standard deduction reduces the economic incentive of homeownership. Previous tax rules encouraged homeownership with itemized deductions for property taxes and mortgage interest that often surpassed the standard deduction. These advantages have largely been eliminated, particularly for first-time buyers. Are millennials finally moving out on their own? The 80 million-strong millennial age cohort, now pushing into their late 20s, may finally be showing independence. Since the recession, the percentage of young adults living with their parents increased dramatically, but last year that trend reversed. Should the share of young adults living with family recede toward the long-term average, an additional 3 million young adults would need housing. ** Estimate 47 47

48 420 NW 10TH ST U.S. CAPITAL MARKETS Fed Normalization Portends Rising Interest Rates; Capital Availability for Apartments Elevated Fed cautiously pursues tighter policies. Investors have largely adapted to the modestly higher interest rate environment, and most anticipate additional increases in 2018 as the Federal Reserve normalizes both its policies and its balance sheet. The Fed is widely expected to continue raising its overnight rate through 2018 as it tries to restrain potential inflation risk and create some dry powder to combat future recessions. The Fed will, however, be cautious about pushing short-term rates into the long-term rates, which would create an inverted yield curve. The spread between the two-year Treasury rate and the 10-year Treasury rate has tightened significantly, and if the Fed is too aggressive in its policies, the short-term interest rates could climb above long-term rates. This inversion is a commonly watched leading indicator of an impending recession. The new chairman of the Fed, Jerome Powell, will likely make few changes to the trajectory of Fed policies, and he is widely expected to continue the reduction of the Fed balance sheet. Powell may consider accelerating the balance sheet reduction to ensure long-term rates move higher. That said, Powell is widely perceived to be a dovish leader who will advance rates cautiously. Readily available debt backed by sound underwriting. Debt availability for apartment assets remains abundant, with a wide range of lenders catering to the sector. Apartment construction financing has experienced some tightening, a generally favorable trend for most investors. Fannie Mae and Freddie Mac will continue to serve a significant portion of the multifamily financing, with local and regional banks targeting smaller transactions and insurance companies handling larger deals with low-leverage needs. In general, lenders have been loosening credit standards on commercial real estate lending, but underwriting standards remain conservative with loan-to-value ratios for apartments in the relatively conservative 66 percent range. An important consideration going forward, however, will be investors appetite for acquisitions as the yield spread between interest rates and cap rates tightens. * Through December 12 ** Through December

49 420 NW 10TH ST U.S. CAPITAL MARKETS 2018 Capital Markets Outlook Yield spread tightens amid rising interest rates. Average apartment cap rates have remained relatively stable in the low-5 percent range for the last 18 months, with a yield spread above the 10-year Treasury of about 280 basis points. Many investors believe cap rates will rise in tandem with interest rates, but this has not been the case historically. Given the strong performance of the apartment sector, it s more likely the yield spread will compress, reducing the positive leverage investors have enjoyed in the post-recession era. Inflation restrained but could emerge. Inflation has been nominal throughout the current growth cycle, but pressure could mount as the tight labor market spurs rising wages. Elevated wages and accelerating household wealth could boost consumption, creating additional economic growth and inflation. The Fed has become increasingly proactive in its efforts to head off inflationary pressure, but the stimulative effects of tax cuts could overpower the Fed s efforts. Policies likely to strengthen dollar and could pose new risks. One wild card that could create an economic disruption is the strengthening dollar. The economic stimulus created by tax cuts together with tightening Fed monetary policy place upward pressure on the value of the dollar relative to foreign currencies. This could restrain foreign investment in U.S. commercial real estate, but it could also weaken exports and make it more difficult for other countries to pay their dollar-denominated debt, which in turn weakens global economic growth. * Through December 12 Estimate 49 49

50 420 NW 10TH ST U.S. INVESTMENT OUTLOOK Apartment Investors Recalibrate Strategies; Broaden Criteria to Capture Upside Opportunities Appreciation flattens as buyers recalibrate expectations. The maturing apartment investment climate has continued its migration from aggressive growth to a more stable but still positive trend. Investors have reaped strong returns in the post-recession era through significant gains in fundamentals and pricing, but the growth trajectory has flattened as the market has normalized. The pace of apartment rental income growth has moved back toward its mid-3 percent long-term average and investor caution has flattened cap rates, moderating appreciation. With much of the gains created by the post-recession recovery absorbed and most of the valueadd opportunity already extracted, it has been increasingly difficult for investors to find opportunities with substantive upside potential. At the same time, apartment construction has finally brought macro-level housing supply and demand back toward equilibrium, restraining upside potential in markets with sizable deliveries. These challenges have been compounded by a widened bid/ask gap, with many would-be apartment sellers retaining a highly optimistic perception of their asset s value. It will take time for investor expectations to realign, but buyers and sellers are discovering a flattening appreciation trajectory. Still, a range of opportunities remain. Investors broaden criteria as they search for yield upside. Investors are recalibrating strategies, broadening their search and sharpening their efforts to find investment options with upside potential. They have expanded criteria to include a variety of Class B and Class C assets, outer-ring suburban locations, and properties in secondary or tertiary markets. The yield premium offered by these types of assets has drawn an increasing amount of multifamily capital. In the last year, nearly half of the dollar volume invested in apartment properties over $1 million went to secondary and tertiary markets, up from 42 percent of the capital in This influx of activity has caused cap rates in tertiary markets to fall from the high-8 percent range in 2010 to their current average near 6 percent. During the same period, national cap rates of Class B/C apartment properties have fallen by 200 basis points to the mid-5 percent range. Considering the low cost of capital, these yields have remained attractive to investors with longer-term hold plans. * Through 3Q ** Trailing 12 months through 3Q 50 50

51 420 NW 10TH ST U.S. INVESTMENT OUTLOOK 2018 Investment Outlook New tax laws could shift investor behavior. Additional clarity on taxes should alleviate some of the uncertainty that held back investor activity over the last year while helping to mitigate the expectation gap between buyers and sellers. Reduced tax rates on pass-through entities could spark some repositioning efforts, bringing additional assets to market and supporting market liquidity. Tighter monetary policy could narrow yield spreads. Prospects of a rising interest rate environment could weigh on buyer activity as the yield spread tightens. Cap rates have held relatively stable over the last two years, and the sturdy outlook for apartment fundamentals is unlikely to change substantively in the coming year. As a result, investors pursuit of yield will likely push activity toward assets and markets that have traditionally offered higher cap rates. Transaction activity retreats from peak levels. Apartment sales continued to migrate toward more normal levels last year as investors search for upside and value-add opportunities delivered fewer candidates. Markets with a limited construction pipeline but with respectable employment and household formation growth will see accelerated activity, while markets facing an influx of development could see moderating investor interest. * Through 3Q ** Trailing 12 months through 3Q 51 51

52 420 NW 10TH ST REVENUE TRENDS Five-Year Apartment Income Growth by Metro Percent Change * FIVE-YEAR TREND: Outperforming Through Development Cycle * U.S. creates 11.8 million jobs over five years Developers add 1.5 million new apartments Absorption totals 1.4 million apartments U.S. vacancy rate to match 2013 at 5.0 percent U.S. average rent rises 23.2 percent * Forecast 52 52

53 420 NW 10TH ST 2018 NATIONAL INVENTORY TREND Five-Year Development Wave Transforms Rental Landscape Inventory Growth Inventory Change by Market 2013 to 2018 Sources: Marcus & Millichap Research Services; MPF Research 53 53

54 420 NW 10TH ST 2018 NATIONAL INVENTORY TREND Top 10 Markets by Inventory Change Largest Growth Five-Year Inventory Change Five-Year Rent Growth Austin 23.6% 22% Charlotte 22.9% 30% Nashville 21.7% 31% Salt Lake City 20.9% 31% Raleigh 19.5% 27% San Antonio 18.7% 20% Denver 17.9% 41% Seattle-Tacoma 15.9% 41% Orlando 15.3% 35% Dallas/Fort Worth 15.3% 30% U.S. 9.8% 23% Smallest Growth Five-Year Inventory Change Five-Year Rent Growth Cincinnati 6.6% 24% Chicago 6.2% 21% Oakland 5.8% 40% Riverside-San Bernardino 5.6% 36% St. Louis 5.5% 14% Los Angeles 5.4% 31% New York City 4.6% 15% Cleveland 4.6% 15% Sacramento 3.8% 48% Detroit 2.9% 25% Sources: Marcus & Millichap Research Services; MPF Research 54 54

55 PROPERTY NW NW 10TH 10TH NAME ST ST Created on February 2018 POPULATION 1 Miles 3 Miles 5 Miles 2022 Projection Total Population 44, , , Estimate Total Population 42, , , Census Total Population 38, , , Census Total Population 31, , ,942 Daytime Population 2017 Estimate 143, , ,884 HOUSEHOLDS 1 Miles 3 Miles 5 Miles 2022 Projection Total Households 18, , , Estimate Total Households 17, , ,563 Average (Mean) Household Size Census Total Households 15, , , Census Total Households 11,623 81, ,156 Growth % 9.94% 7.18% HOUSING UNITS 1 Miles 3 Miles 5 Miles Occupied Units 2022 Projection 18, , , Estimate 19, , ,122 Owner Occupied 2,108 28,935 69,781 Renter Occupied 15,096 82, ,781 Vacant 2,250 12,915 26,560 Persons In Units 2017 Estimate Total Occupied Units 17, , ,563 1 Person Units 44.73% 36.05% 36.43% 2 Person Units 26.96% 28.86% 29.08% 3 Person Units 12.46% 15.10% 14.87% 4 Person Units 8.23% 10.09% 9.88% 5 Person Units 4.23% 5.21% 5.08% 6+ Person Units 3.40% 4.70% 4.65% MARKETING DEMOGRAPHICS TEAM HOUSEHOLDS BY INCOME 1 Miles 3 Miles 5 Miles 2017 Estimate $200,000 or More 1.37% 3.81% 4.59% $150,000 - $199, % 2.56% 2.86% $100,000 - $149, % 6.89% 7.16% $75,000 - $99, % 6.81% 7.27% $50,000 - $74, % 12.42% 13.42% $35,000 - $49, % 12.27% 12.58% $25,000 - $34, % 11.88% 11.38% $15,000 - $24, % 15.62% 15.32% Under $15, % 27.74% 25.43% Average Household Income $35,558 $55,856 $61,313 Median Household Income $20,514 $30,112 $32,890 Per Capita Income $15,063 $22,743 $25,256 POPULATION PROFILE 1 Miles 3 Miles 5 Miles Population By Age 2017 Estimate Total Population 42, , ,474 Under % 19.06% 19.22% 20 to 34 Years 27.42% 25.24% 24.14% 35 to 39 Years 8.21% 8.03% 7.81% 40 to 49 Years 13.90% 14.25% 14.44% 50 to 64 Years 17.41% 17.77% 18.27% Age % 15.66% 16.14% Median Age Population 25+ by Education Level 2017 Estimate Population Age , , ,391 Elementary (0-8) 19.29% 16.07% 12.94% Some High School (9-11) 13.33% 10.28% 10.07% High School Graduate (12) 29.79% 29.09% 28.79% Some College (13-15) 10.54% 10.65% 11.92% Associate Degree Only 6.41% 6.42% 7.22% Bachelors Degree Only 10.63% 15.38% 16.21% Graduate Degree 6.90% 9.52% 10.34% Population by Gender 2017 Estimate Total Population 42, , ,474 Male Population 53.52% 51.06% 50.33% Female Population 46.48% 48.94% 49.67% Source: 2017 Experian 55 55

56 8 DEMOGRAPHICS 56

57 PROPERTY NAME MARKETING DEMOGRAPHICS TEAM Population In 2017, the population in your selected geography is 42,561. The population has changed by 34.84% since It is estimated that the population in your area will be 44, five years from now, which represents a change of 5.44% from the current year. The current population is 53.52% male and 46.48% female. The median age of the population in your area is 37.31, compare this to the US average which is The population density in your area is 13, people per square mile. Race and Ethnicity The current year racial makeup of your selected area is as follows: 59.93% White, 28.99% Black, 0.04% Native American and 1.11% Asian/Pacific Islander. Compare these to US averages which are: 70.42% White, 12.85% Black, 0.19% Native American and 5.53% Asian/Pacific Islander. People of Hispanic origin are counted independently of race. People of Hispanic origin make up 63.35% of the current year population in your selected area. Compare this to the US average of 17.88%. Households There are currently 17,205 households in your selected geography. The number of households has changed by 48.03% since It is estimated that the number of households in your area will be 18,882 five years from now, which represents a change of 9.75% from the current year. The average household size in your area is 2.14 persons. Housing The median housing value in your area was $169,220 in 2017, compare this to the US average of $193,953. In 2000, there were 985 owner occupied housing units in your area and there were 10,638 renter occupied housing units in your area. The median rent at the time was $387. Income In 2017, the median household income for your selected geography is $20,514, compare this to the US average which is currently $56,286. The median household income for your area has changed by 60.64% since It is estimated that the median household income in your area will be $23,294 five years from now, which represents a change of 13.55% from the current year. Employment In 2017, there are 69,980 employees in your selected area, this is also known as the daytime population. The 2000 Census revealed that 33.68% of employees are employed in white-collar occupations in this geography, and 66.93% are employed in blue-collar occupations. In 2017, unemployment in this area is 6.66%. In 2000, the average time traveled to work was minutes. The current year per capita income in your area is $15,063, compare this to the US average, which is $30,982. The current year average household income in your area is $35,558, compare this to the US average which is $81,217. Source: 2017 Experian 57

58 PRESENTED BY Vicente Rodriguez Associate Member - National Multi Housing Group Miami Office Tel: (786) Fax: (786) vicente.rodriguez@marcusmillichap.com License: FL SL Arthur D. Porosoff First Vice President Investments Senior Director - National Multi Housing Group Miami Office Tel: (786) Fax: (786) arthur.porosoff@marcusmillichap.com License: FL SL