Multifamily Market Report

2015 3rd Quarter Twin Cities Multifamily Market Report

Multifamily Overview The Twin Cities Metro Area (TCMA) continues to experience a flourishing economy and robust multifamily fundamentals such as low vacancy, rapid absorption and steady rent growth. These are a few of the reasons there are a growing number of investors and developers from around the country drawn to the TCMA. While there have been over 13,000 multifamily units added since 2013, there is still a tremendous demand for more multifamily product throughout this Metropolitan Statistical Area (MSA). The dramatic growth in the renter pool from both the Boomers and Millennials has driven the demand and absorption for multifamily product. According to the Urban Institute, the growth in rental households will exceed that of homeowners by four million from 2010 to 2030, with an increase of thirteen million rental households and nine million homeowner households. Historically, people in the 18-34 year old demographic comprise the largest pool of renters and in 2009, more people turned 18 than at the peak of the Baby Boom. Additionally, the National Multifamily Housing Council (NMHC) predicts Baby Boomers will make up more than 65% of the renter pool in the next three to five years. Thus, we anticipate the renter pool to be the largest of record for the next five to seven years, which will drive development demand. This trend is being driven by a number of factors, the greatest being the number of Baby Boomers entering the rental market due to a desire for live-work-play lifestyle. Many are seeking the type of urban living that typically has been associated with young college graduates so much so that boomers are renting apartments and buying condos at more than twice the rate of their millennial children. Harvard University s Joint Center for Housing Studies found that Baby Boomers accounted for 42% of the growth in renters over the past decade. Baby Boomers, those ages 50-69, account for 24.2% of the population in the Twin Cities, or 847,161 people. Additionally, Millennials are beginning to build their first independent households, which typically means more renting. Pew Research notes that the Millennial population in the United States will increase to 75.3 million in 2015, and is projected to peak in 2036 at 81.1 million due to immigration adding to the Millennial pool. More jobs will be created for Millennials over the next few years due to more Baby Boomers retiring. It is estimated that by 2020, Millennials will make up more than 50% of the work force. As more jobs become available, many Millennials are moving out of their parent s homes; most choose to rent due in part to student loan debt and the flexibility to move if their job provides opportunities for upward mobility. Local apartment owners report that one in four of their apartments are rented to Millennials moving to the TCMA for a job. As of 2014, the Twin Cities Millennial population, those between ages 18-34, was 823,780. 2

Multifamily Overview The increased number of people choosing to move to multifamily housing continues to fuel demand for new product to fit the desires of both generations. Baby Boomers and Millennials alike are looking for housing in walkable areas that are rich in retail, restaurant and entertainment options. Additionally, they are looking to belong to a community. Large common area spaces, more amenities and planned activities help bridge the gap between Millennials and Baby Boomers and build a stronger sense of community. Developers are just beginning to build for the mix of Baby Boomers and Millennials. While Millennials prefer smaller unit sizes, Baby Boomers are typically looking for twobedroom and three-bedroom units with larger kitchens and more closet space. Ideally urban area developments should incorporate a mix of these unit types to attract and retain both generations, as well as to keep Millennials living in the property throughout their life stages. For single Millennials, small one-bedroom units work great. However, once they get married and start families, there is a need and demand for units that allow them to grow in place. Many cities in the -Saint Paul metro area are working to provide areas to incentivize people to stay in their cities throughout their life stages. Some are adding schools, public parks and entertainment options for all ages to attract and keep people in the cities. While some developers/owners are concerned about oversaturation, we predict the need for more multifamily units will continue to thrive for the next several years based on the large number of Millennials and Baby Boomers entering the rental market. As developers begin designing and delivering product with blending the Millennial and Baby Boomer generations in mind, we predict rental rates will increase, occupancy will continue to thrive and land prices will continue to increase for well-located urban and first ring suburban sites as well as for well-located/walkable suburban sites. rates in the TCMA averaged 2.3% in Q3 2015, with the lowest vacancy rates being 1.4% in the NonDowntown Saint Paul submarket. Downtown vacancy rates averaged 6.4% and Downtown Saint Paul rates averaged 2.8%. The higher than average vacancy rates in the downtown areas is primarily due to the large volume of new units delivered that are still in lease- up. Rental rates increased an average of 5.7% year-over-year, with the largest increases in NonDowntown (8.1%) and Downtown Saint Paul (6.8%). Absorption totaled 1,173 units, while 1,276 units were delivered in Q3 2015. Investors have discovered the TCMA, increasing demand for product. Currently, the Twin Cities are on pace to exceed $1 billion in sales volume for 2015, which will break the record volume in 2014 of $937.2 million. Historically low interest rates, a surplus of capital, investors chasing yield and outstanding fundamentals have fueled an aggressive sales market in the TCMA. The average price per unit in the TCMA in Q3 2015 was $132,405, a 29% increase from the previous year. Capital demand for multifamily assets is at an all-time high, especially for well-located Class A urban and first-ring suburban assets as well as for value-add assets across the metro area. 3

Multifamily Overview 35,154 jobs were added in past 12 months 5 years of multifamily vacancy rates below 3.0% 2,545 market rate units and 827 affordable units were delivered through September 2015 Absorption for the first three quarters of 2015 was 2,702 units NonDowntown Saint Paul submarket had lowest vacancy rate at 1.4% Highest average market rate rents were reported in Downtown at $1,330 Unemployment rate in TCMA as of September 2015 was 3.1%, nearly 2% below the US unemployment rate of 4.9% Twin Cities Employment 2,000,000 1,950,000 1,900,000 1,850,000 1,800,000 1,750,000 1,700,000 Employment Twin Cities & United State Unemployment Rates 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% TCMA US 4

2015 Rankings Twin Cities Overview Twin Cities #2 Lowest Unemployment Rate for Large Metropolitan Areas (Bureau of Labor Statistics) #2 Best Cities for Recent Grads (Realtor Mag) #2 Greenest Cities in America (Travel + Leisure) #2 Most Playful Cities for Families (Travel Pulse) #3 Friendliest Cities in America (Time Magazine) #3 Top Midwest Cities for Jobs (ZipRecruiter.com) #9 Most Educated Cities (wallethub.com) #25 World s Friendliest Cities (Travel + Leisure) #1 Top 10 Healthiest Cities (Livability.com) #1 Most Bikeable Cities (grindtv.com) #3 Best Cities for 20-Somethings (greatist.com) #5 Best Destination for Culturephiles (USA Today) #7 Most Recession-Recovered Cities (wallethub.com) #28 Top 50 Meeting Destinations in the United States (cvent.com) Saint Paul #9 Top 10 Best Places to Live (Mens Journal) #19 Best Cities for 20-Somethings (greatist.com) #24 Most Recession-Recovered Cities (wallethub.com) 5

Market Conditions The demand for new developments, both urban and suburban, is evident as new projects are leasing up well ahead of pro forma projections. There were two market rate projects in that delivered in 3Q 2015. Latitude 45, a 318 unit mid-rise development in Downtown, opened in September and was 66% leased by the end of October. Elements of Linden Hills is a 31 unit in the Uptown neighborhood of which was 55% leased within one month of opening. New suburban developments continue to lease up quickly as well. Siena Apartments, a 138 unit project in Saint Louis Park, opened in July and is 85% leased by the end of October. The first phase of 71 France, a 246 unit project in Edina, opened in September and was 42% leased within one month. There are a total of 591 urban market rate, 911 suburban market rate and 149 urban affordable units expected to deliver before year end. Twin Cities Metro Area (TCMA) vacancy rates averaged 2.3% in Q3 2015 (This reflects market rate, affordable, and mixed income units). vacancy rates have remained at or below 3.0% in the TCMA for the past five years. Rental rates across the TCMA in Q3 2015 averaged $1,063/month, which is an increase of 5.7% year-over-year. Both Downtown and Downtown St. Paul exceeded the TCMA average, experiencing rental rate increases of 6.7% at $1,330/month and 6.80% at $1,287/month, respectively. Twin Cities Rental Rates $1,100 $1,000 $900 $800 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 Overall Twin Cities Rates 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 Overall 6

Submarket Conditions Downtown NonDowntown Saint Paul East Suburbs Avg Rent: $1,330 Avg Rent: $ 971 Avg Rent: $ 986 : 6.4% : 1.4% : 1.6% NonDowntown West Suburbs Southeast Suburbs Avg Rent: $1,083 Avg Rent: $1,108 Avg Rent: $1,011 : 2.2% : 2.0% : 2.0% Downtown Saint Paul North Suburbs Southwest Suburbs Avg Rent: $1,287 Avg Rent: $ 923 Avg Rent: $1,184 : 2.8% : 1.7% : 2.7% Twin Cities Metro Area Avg Rent: $1,063 : 2.3% North Suburbs Downtown East Suburbs West Suburbs Downtown Saint Paul NonDowntown Saint Paul Southwest Suburbs NonDowntown Southeast Suburbs 7

Twin Cities Metro Area Submarket Conditions Q3 15 vs. Q3 14 Rents 0.0% 5.7% Q3 15 vs. Q2 15 Rents 0.1% 0.9% Rental Type Total Surveyed* Rent Per Unit Unit Size (SF) Rent Per SF Delivered Absorbed Market Rate 147,141 2.40% $1,082 883 $1.23 889 949 Affordable 25,755 1.40% $ 850 798 $1.07 387 190 Mixed Income 13,886 1.80% $1,155 942 $1.24 0 34 Overall 186,782 2.30% $1,063 878 $1.21 1,276 1,173 $1,200 $1,100 $1,000 $900 $800 $700 $600 Rental Rates 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Rates *Properties included in survey exclude Senior Housing units, Student Housing units, and properties under 25 units For information on a specific city or neighborhood, please contact Erin Hartwig at ehartwig@naieverest.com 8

Downtown Q3 15 vs. Q3 14 Submarket Conditions Rents 0.6% 6.7% Cities Included: Rental Type Total Surveyed* Rent Per Unit Unit Size (SF) Rent Per SF Delivered Absorbed Market Rate 9,864 7.80% $1,404 750 $1.87 319 231 Affordable 2,558 2.10% $ 749 586 $1.30 251 112 Mixed Income 1,447 2.30% $1,695 951 $1.78 0 (15) Overall 13,869 6.40% $1,330 746 $1.79 570 328 $1,900 Rental Rates 12.0% Rates $1,700 10.0% $1,500 $1,300 $1,100 $900 8.0% 6.0% 4.0% $700 2.0% $500 0.0% *Properties included in survey exclude Senior Housing units, Student Housing units, and properties under 25 units For information on a specific city or neighborhood, please contact Erin Hartwig at ehartwig@naieverest.com 9

NonDowntown Q3 15 vs. Q3 14 Submarket Conditions Rents 0.6% 8.1% Cities Included: Rental Type Total Surveyed* Rent Per Unit Unit Size (SF) Rent Per SF Delivered Absorbed Market Rate 15,267 2.40% $1,165 749 $1.56 31 95 Affordable 7,066 1.50% $ 884 725 $1.23 0 (1) Mixed Income 3,206 2.00% $ 992 799 $1.27 0 46 Overall 25,539 2.20% $1,083 751 $1.45 31 140 $1,200 $1,100 $1,000 $900 $800 $700 $600 Rental Rates 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Rates *Properties included in survey exclude Senior Housing units, Student Housing units, and properties under 25 units For information on a specific city or neighborhood, please contact Erin Hartwig at ehartwig@naieverest.com 10

Downtown Saint Paul Submarket Conditions Q3 15 vs. Q3 14 Rents 0.8% 6.8% Cities Included: Saint Paul Rental Type Total Surveyed* Rent Per Unit Unit Size (SF) Rent Per SF Delivered Absorbed Market Rate 2,257 2.90% $1,417 821 $1.73 0 8 Affordable 808 1.30% $ 973 730 $1.33 0 3 Mixed Income 285 5.60% $ 994 807 $1.20 0 0 Overall 3,350 2.80% $1,287 800 $1.61 0 30 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 Rental Rates 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Rates *Properties included in survey exclude Senior Housing units, Student Housing units, and properties under 25 units For information on a specific city or neighborhood, please contact Erin Hartwig at ehartwig@naieverest.com 11

NonDowntown Saint Paul Q3 15 vs. Q3 14 Submarket Conditions Rents 0.6% 6.2% Cities Included: Saint Paul Falcon Heights Lauderdale Rental Type Total Surveyed* Rent Per Unit Unit Size (SF) Rent Per SF Delivered Absorbed Market Rate 15,139 1.40% $ 979 801 $1.22 0 31 Affordable 5,405 1.20% $ 794 800 $1.00 68 2 Mixed Income 2,381 1.70% $1,214 1,001 $1.22 0 (5) Overall 22,925 1.40% $ 971 821 $1.18 68 28 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 Rental Rates 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Rates *Properties included in survey exclude Senior Housing units, Student Housing units, and properties under 25 units For information on a specific city or neighborhood, please contact Erin Hartwig at ehartwig@naieverest.com 12

West Suburbs Q3 15 vs. Q3 14 Submarket Conditions Rents 0.0% 5.6% Cities Included: Corcoran Crystal Excelsior Golden Valley Greenfield Hopkins Long Lake Loretto Maple Grove Minnetonka Mound New Hope Plymouth Robbinsdale Rogers Saint Louis Park Spring Park Wayzata Rental Type Total Surveyed* Rent Per Unit Unit Size (SF) Rent Per SF Delivered Absorbed Market Rate 29,344 2.10% $1,128 942 $1.20 180 370 Affordable 2,125 1.80% $ 827 863 $0.96 68 52 Mixed Income 1,839 1.00% $1,078 948 $1.14 0 (2) Overall 33,308 2.00% $1,108 938 $1.18 248 420 $1,200 $1,100 $1,000 $900 $800 $700 $600 Rental Rates 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Rates *Properties included in survey exclude Senior Housing units, Student Housing units, and properties under 25 units For information on a specific city or neighborhood, please contact Erin Hartwig at ehartwig@naieverest.com 13

North Suburbs Q3 15 vs. Q3 14 Submarket Conditions Rents 0.1% 3.7% Cities Included: Anoka Arden Hills Blaine Brooklyn Center Brooklyn Park Champlin Circle Pines Columbia Heights Coon Rapids Fridley Ham Lake Lexington Lino Lakes Mounds View New Brighton Osseo Ramsey Saint Anthony Saint Francis Shoreview Spring Lake Park Rental Type Total Surveyed* Rent Per Unit Unit Size (SF) Rent Per SF Delivered Absorbed Market Rate 19,709 1.80% $ 915 894 $1.02 0 (8) Affordable 2,133 0.90% $ 884 857 $1.03 0 0 Mixed Income 723 1.20% $1,227 979 $1.25 0 2 Overall 22,565 1.70% $ 923 893 $1.03 0 (4) $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 Rental Rates 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Rates *Properties included in survey exclude Senior Housing units, Student Housing units, and properties under 25 units For information on a specific city or neighborhood, please contact Erin Hartwig at ehartwig@naieverest.com 14

East Suburbs Q3 15 vs. Q3 14 Submarket Conditions Rents 0.2% 4.0% Cities Included: Cottage Grove Forest Lake Little Canada Mahtomedi Maplewood Newport North Saint Paul Oak Park Heights Oakdale Roseville Saint Paul Park Stillwater Vadnais Heights White Bear Lake Woodbury Rental Type Total Surveyed* Rent Per Unit Unit Size (SF) Rent Per SF Delivered Absorbed Market Rate 14,200 1.60% $1,019 925 $1.10 0 (5) Affordable 2,695 1.20% $ 833 882 $0.94 0 (10) Mixed Income 982 1.30% $ 874 853 $1.02 0 (2) Overall 17,877 1.60% $ 986 915 $1.08 0 (17) $1,100 $1,000 $900 $800 $700 $600 Rental Rates 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Rates *Properties included in survey exclude Senior Housing units, Student Housing units, and properties under 25 units For information on a specific city or neighborhood, please contact Erin Hartwig at ehartwig@naieverest.com 15

Southeast Suburbs Submarket Conditions Q3 15 vs. Q3 14 Rents 0.4% 6.0% Cities Included: Apple Valley Burnsville Eagan East Bloomington Farmington Hastings Inver Grove Heights Lakeville Mendota Heights Northfield Richfield Rosemount South Saint Paul West Saint Paul Rental Type Total Surveyed* Rent Per Unit Unit Size (SF) Rent Per SF Delivered Absorbed Market Rate 25,783 2.10% $1,005 910 $1.10 113 47 Affordable 1,426 0.60% $ 890 857 $1.06 0 0 Mixed Income 1,587 1.30% $1,185 1,100 $1.07 0 10 Overall 28,796 2.00% $1,011 919 $1.10 113 57 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 Rental Rates 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Rates *Properties included in survey exclude Senior Housing units, Student Housing units, and properties under 25 units For information on a specific city or neighborhood, please contact Erin Hartwig at ehartwig@naieverest.com 16

Southwest Suburbs Q3 15 vs. Q3 14 Submarket Conditions Rents 0.1% 6.2% Cities Included: Belle Plaine Chanhassen Chaska Eden Prairie Edina Jordan New Prague Prior Lake Shakopee Waconia Watertown West Bloomington Rental Type Total Surveyed* Rent Per Unit Unit Size (SF) Rent Per SF Delivered Absorbed Market Rate 15,578 2.90% $1,199 964 $1.24 246 178 Affordable 1,579 2.00% $ 994 1,064 $0.95 0 35 Mixed Income 1,436 1.30% $1,171 1,018 $1.15 0 0 Overall 18,593 2.70% $1,184 975 $1.21 246 213 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 Rental Rates 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Rates *Properties included in survey exclude Senior Housing units, Student Housing units, and properties under 25 units For information on a specific city or neighborhood, please contact Erin Hartwig at ehartwig@naieverest.com 17

How Apartments and Their Residents Strengthen the TCMA Economy Multifamily Overview 437.9k 261.8k $10.5b 111.7k Apartment residents Occupied Apartment homes Economic Contribution Total jobs supported Living In Apartments Apartment Residents 437,850 Spending Power $3,567,744,058 Direct Jobs Supported 32,429 Total Economic Contribution $7,192,572,020 Total Jobs Supported 83,720 Managing Apartments Total Apartment Homes 261,820 Operation Dollars Spent $993,028,089 Direct On-site Jobs 6,634 Total Economic Contribution $1,970,245,186 Total Jobs Supported 16,451 Building Apartments Construction Dollars Spent $605,001,542 Direct Jobs 3,491 Total Economic Contribution $1,361,192,970 Total Jobs Supported 11,543 Source: www.weareapartments.org This website offers this information for states, metro areas and congressional districts throughout the United States. 18

Construction Trends Multifamily construction activity in the Twin Cities is on par with previous years. There were approximately 5,000 units delivered in 2013 and another 4,900 units delivered in 2014. Currently there are an estimated 5,000 units expected to be delivered by year end 2015. There were 2,545 market rate and 827 affordable units delivered through September 2015. Currently, there are 26 market rate developments under construction in the TCMA, with a total of 5,010 units expected for delivery between 2015 and 2017. Approximately 60% of the units under construction are located in the suburban market, primarily in the South and West Metro areas. In addition to the projects currently under construction, there are 63 more developments in planning or proposed stages across the TCMA, which together total 12,137 market rate units. Areas with the greatest concentration of planned/proposed market rate developments are the West Metro (twelve projects, 2,738 units), South Metro (nine projects, 1,787 units) and Saint Paul (eight projects, 973 units). For affordable housing projects, there are four developments under construction in the TCMA, totaling 392 units projected for delivery between 2015 and 2016. Nearly all of these projects are in the city of. In addition to the projects currently under construction, there are seven developments in the planning or proposed stages across the TCMA, which total 643 units. Student housing construction near the University of Minnesota campus has slowed. There are no projects currently under construction, but there are five student housing projects that are planned or proposed, totaling approximately 1,309 units. As of 2014, there were 823,780 Millennials in the Twin Cities (ages 18-34). According to the Census Bureau, approximately 25%, or 206,000 people, live with their parents. With the increase of job openings, we expect to experience a large number of Millennials finding employment, and moving out of their parent s homes in the next few years. In addition, the millennial generation is projected to increase over the next decade as immigration picks up. They are looking for developments in walkable neighborhoods with amenities that accommodate their live-work-play lifestyle. These include amenities such as neighborhoods with a plethora of retail, entertainment and recreational amenities; access to public transportation; and properties with amenities such as concierge services, on-demand fitness studios, dog runs, media rooms and guest suites. As many companies are moving their headquarters to the Central Business Districts (CBDs), the cities of and Saint Paul are working on ways to attract more residents to the area. In, there is currently a new Minnesota Vikings football stadium under construction that is scheduled to be completed in 2016. Additionally, there is a new downtown park that is being designed to help create more green space in the CBD, new schools are opening up in the downtown area and Nicollet Mall is being redesigned to be more pedestrian friendly. Saint Paul recently announced a new major league soccer stadium will be built along the light rail and a new baseball stadium for the Saint Paul Saints opened up in May 2015. 19

Construction Trends Market Rate Developments Under Construction Downtown 4Marq 262 Edition 195 Encore 122 North Loop District 600 78 South Zest Apartments 45 University of Minnesota 22 on the River 125 Uptown 2622 Lake Street 90 3118 W Lake Street 164 Laguna Apartments 45 St. Paul 2700 W University Avenue Saint Paul 248 Custom House Saint Paul 202 Seven Corners Hardware Site Saint Paul 191 Victoria Park (Phase II) Saint Paul 193 Vintage on Selby Saint Paul 206 West Metro The Island Residences Minnetonka 174 Overlook on the Creek Minnetonka 100 Plymouth City Flats Plymouth 157 The Shoreham Saint Louis Park 150 North Metro 610 West Brooklyn Park 484 Cielo Fridley 260 South Metro 6725 York Avenue Edina 242 Parkside at Gabella Apartments Apple Valley 196 Luxembourg Bloomington 282 Remington Cove Apple Valley 101 The Springs Apple Valley 280 For more information, to correct information, or for a copy of the complete pipeline and maps, contact Erin Hartwig at ehartwig@naieverest.com. 20

Construction Trends Affordable Housing Developments Under Construction Downtown Mill City Quarter North Broadway Flats Commons at Penn Saint Paul Hamline Station 140 103 45 Saint Paul 104 For more information, to correct information, or for a copy of the complete pipeline and maps, contact Erin Hartwig at 21 ehartwig@naieverest.com.

Construction Trends Most Active Developers in the TCMA Developer Doran Companies 1,172 Lennar 914 DLC Residential 738 Opus 702 Sherman Associates 677 Ryan Companies 571 CPM Companies 516 Mortenson Development 512 United Properties 443 Dominium 437 For more information, to correct information, or for a copy of the complete pipeline and maps, contact Erin Hartwig at ehartwig@naieverest.com. 22

Sales Activity Vélo (2014) Notable Sales Transactions Q3 2015 City: $/unit: $306,683 Marketplace & Main (2012) City: Hopkins $/unit: $241,509 Second Street Lofts (1915/1996) City: $/unit: $234,615 Calhoun Beach Apts (1926) City: $/unit: $147,577 2434 Dupont Ave S (1929) City: $/unit: $131,579 3411 Hennepin Ave (1922) City: $/unit: $130,769 1435 W 31st St (1922) City: Hopkins $/unit: $241,509 Groveland Terrace (1997) City: Maple Grove $/unit: $126,042 Provence Apartments (2001) City: Burnsville $/unit: $124,494 2446 Colfax Ave S (1930) City: $/unit: $118,060 There were 24 sale transactions in the third quarter of 2015 totaling $225.7 million, bringing the year to date total to $732.9 million. The average price per unit in the TCMA in Q3 2015 was $132,405, a 29% increase from the previous year. The largest transaction by sales price in Q3 2015 was for Concierge Apartments (fka Crossroads at Penn). This 698 unit, Class B suburban project sold for $41,000,000, or $58,739 per unit. Ten notable transactions from third quarter 2015 are detailed on the left. The transaction with the highest price per unit in Q3 2015 was Vélo, a 101-unit mid-rise apartment development in the North Loop neighborhood of. The total sale was $30,975,000, or $306,683 per unit. The largest suburban transaction was Marketplace & Main, a 53-unit, Class B mid-rise community in Hopkins, MN, which sold for $241,509 per unit. Capital demand for multifamily assets is at an all-time high, especially for well-located Class A urban and first-ring suburban assets. Currently, the Twin Cities are on pace to exceed $1 billion in sales volume for 2015, which will break the record volume in 2014 of $937.2 million. Historically low interest rates, a surplus of capital, outstanding fundamentals and a lack of available product have contributed to a record low cap rate environment. Due to excess capital demand, investors have increased their risk tolerance, are paying higher prices and continue to broaden their acquisition criteria to include value-add assets, new development, pre-sales and suburban locations. Institutional, private and foreign investors are drawn to the stability of the /Saint Paul multifamily market. This competition has driven cap rates down to the mid-to-low 4% range for welllocated urban Class A assets. Class B urban, as well as Class A suburban assets will trade in the mid-to-low 5% range. Suburban Class B and C assets are experiencing cap rate compression as well. As cap rates continue to remain low, we anticipate more local owners will be enticed to sell. (Year Built/Renovated) Source: Real Capital Analytics 23

NAI Everest Team About NAI Everest NAI Everest brings industry-leading resources to its disposition and acquisition services. Speed, agility, and keen insight are hallmarks of our services. The result is connecting properties with our exclusive list of investors and institutions. NAI Everest disposition services rely upon the skills and insight of our experienced team of brokerage, marketing and data resource management professionals. Our process begins with an internal launch meeting that unifies clients objectives with marketing and sales strategies. This launch is the beginning of a process that involves the following phases: Comprehensive Property Profile - market analysis, competitive review, capital market summary Marketing Promotional Strategy Development - advertising, direct mail, e-mail, web listings, and public relations tactical outline Sales Planning & Execution - database profile analysis, identification of network connections, direct contact with exclusive list of buyers Client Communication - communication of progress through activity reports and updates Maximum Price - the result is the capitalization of market dynamics in achieving a competitive bid environment and the maximum sales price Gina Dingman, CCIM President P. 612.424.7541 M. 612.801.1855 F. 612.333.1744 gdingman@naieverest.com Brian Scholten Associate P. 612.424.8451 M. 763.567.3226 F. 612.333.1744 bscholten@naieverest.com Nick Naboka Associate P. 612.424.8453 M. 612.229.8854 F. 612.333.1744 nnaboka@naieverest.com Erin Hartwig Senior Analyst P. 612.235.4902 F. 612.333.1744 ehartwig@naieverest.com 24

NAI Everest Multifamily Market Report Q3 2015 4150 Olson Memorial Highway, Suite 110, MN 55422 612.424.7542 naieverest.com