Low Vacancy Stimulates New Developments

Research & Forecast Report LAS VEGAS MULTIFAMILY Q3 2015 Low Vacancy Stimulates New Developments > > Multifamily vacancy dipped below 5 percent in the third quarter of 2015 ELECTRIC Meter Hookups NEW HOME Median Price THIRTY YEAR Mortgage Rate > > High demand is stimulating new construction; more projects under construction now than in years -0.2 > > Asking rates continued to increase, but may be pushed down as new inventory enters the market +7.2% +5.3% Points According to statistics provided by REIS, multifamily vacancy in Southern Nevada decreased in the second quarter of 2015 (the most recent quarter of available data), extending a three year long streak. Vacancy stood at 4.7 percent in the second quarter, 0.8 percentage points lower than one year ago, and 0.4 percentage points lower than in the first quarter of 2015. Class A properties were 5.1 percent vacant in the second quarter, 0.3 percentage points lower than last quarter. Class B/C properties were 4.4 percent vacant, 1 percentage point lower than last quarter. This suggests that demand for multifamily is strong across the board, and presages success for new multifamily developments. Market Indicators Relative to prior period Market Q3 2015 Market Q4 2015* VACANCY NET ABSORPTION COMPLETIONS RENTAL RATE *Projected Historical Vacancy Rates and Rental Rates 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% $920 $900 $880 $860 $840 $820 Summary Statistics Q3 2015 Las Vegas Market Q2-2015 Q1-2015 Q2-2014 Vacancy Rate 4.7% 5.1% 5.5% Rent (Per Unit) $906 $889 $866 Net Absorption YTD (Units) 645 370 608 New Completions YTD (Units) 840 270 255 1.00% 0.00% 2 Q 2013 3 Q 2013 4 Q 2013 1 Q 2014 2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 $800 $780 Overall Asking Rents Per Unit Per Month Current Quarter Previous Quarter Vacancy Rate Average Rental Rate Class A $1,023 $1,011 REIS predicts that multifamily vacancy has bottomed out, and will begin climbing due to increased construction and increased competition by single-family residences. Class B/C $774 $774

All eight multifamily submarkets showed positive net absorption in the second quarter of 2015, with the highest net absorption found in Northwest/Southwest (173 units) despite a negative contribution from Class B/C multifamily in that submarket. On a property class basis, Class A multifamily had 345 units of net absorption in the second quarter of 2015. Class B/C properties absorbed 300 units net. There were three new multifamily completions in the second quarter of 2015, Somerset Hills (360 units, Northwest/Southwest submarket), Boulder Highway Family Apartments (120 units, Henderson submarket) and Elysian at the District (360 units, Henderson submarket). This is a total of 840 units added to the multifamily inventory. A total of 1,617 units of multifamily are under construction in the Valley, with another 2,222 units planned to begin construction within the next twelve months. This forward supply represents the largest expansion of inventory in the Valley in over five years, and is a response to the strong demand multifamily has experienced since the end of the Great Recession. Asking rents for multifamily stood at $906 per unit in the second quarter of 2015, increasing by $40 psf year-over-year, and $17 psf since last quarter. Class A properties had an average asking rent of $1,023 per unit, representing 1.2 percent quarterly growth. Class B/C properties had an average asking rent of $774, with no growth since last quarter. Rents are climbing more quickly than during 2014, which is not surprising considering the low vacancy rate and net absorption enjoyed by Southern Nevada s multifamily market. REIS predicts that multifamily vacancy has bottomed out, and will begin climbing due to increased development and competition by single-family residences. They predict that vacancy will reach 6.0 percent in 2019, after 5,452 units have been added to Southern Nevada s multifamily inventory. Historical Net Absorption vs. Completions 900 800 700 600 500 400 300 200 100 0 2 Q 2013 3 Q 2013 4 Q 2013 1 Q 2014 2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 Net Absorption (Units) Sales (Units) vs. Price Per Unit 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Completions (Units) $105,000 $95,000 $85,000 $75,000 $65,000 $55,000 0 $45,000 2 Q 2013 3 Q 2013 4 Q 2013 1 Q 2014 2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 Total Sales (Units) Average Price Per Unit Unemployment in the Las Vegas-Paradise MSA stood at 7.0 percent as of August 2015, down from 7.6 percent in August 2014. Unemployment averaged 7.9 percent in 2014, compared to 10 percent in 2013. Since August 2014, total employment in Southern Nevada increased by 22,000 jobs, the majority in leisure and hospitality (+6,400 jobs), construction (+4,400 jobs), and education and health services (+3,900 jobs). The return of the leisure and hospitality and construction sectors Demographics Submarket Estimated Households Renter Occupied Median Household Average Household Proj. Annual Growth Rental Households (2015-2020) Downtown 49,000 59% $30,100 2.8 69 East 56,000 44% $41,000 2.7 241 Henderson/Southeast 139,000 37% $57,000 2.6 720 North Las Vegas 113,000 38% $49,000 3.1 584 Northeast 48,000 48% $38,000 3.3 194 Northwest/Southwest 148,000 33% $63,000 2.7 840 University 35,000 77% $32,000 2.2 113 West Central 106,000 54% $44,000 2.4 458 TOTAL 694,000 43% $49,000 2.7 3,521 Source: Claritas 2 Las Vegas Research & Forecast Report Q3 2015 Multifamily Colliers International

to the fore of job growth is a return to form for Southern Nevada. It is worth noting, though, that despite recent improvements, construction employment in Southern Nevada remains approximately 60,000 jobs below its peak in 2006. The only key sector showing a loss of jobs yearover-year was financial services (-1,500 jobs). According to data provided by the Nevada Department of Motor Vehicles, the number of out-of-state driver s licenses turned in to the DMV was 29,192 in the first half of 2015. This is slightly lower than in the first half of 2014, when they reported 30,959 out-of-state licenses turned in, and suggests that population growth, despite rebounding from the lows of the Great Recession, remains sluggish by Clark County s standards. Since Las Vegas s birth in 1905, population growth has been a major driver of economic growth. In the past, population growth was driven by the Valley s low unemployment rate and retirees looking to escape the dramatic weather and high cost of living elsewhere in the United States. It is likely that a lack of quality job growth is at the heart of this slow-down. Multifamily sales decreased in 2014 compared to 2013, with 13,423 units selling at an average price per unit of $74,875. Sales continued to fall in 2015, with 6,198 units selling in the first half of 2015, compared with 5,965 units selling in the first half of 2014. Sales volume also fell from the first half of 2014 to the first half of 2015, by approximately $60 million. The average sales price per unit, on the other hand, decreased to $77,603, from $84,836 one year ago. Southern Nevada s multifamily market is now out of the recovery phase and into the expansion phase. Development has been close to nil for the past several years, and demand has finally driven vacancy down to the point that new developments are inevitable. Over the next 24 months, as many as 5,500 new multifamily units may be added to inventory, all of it on or near the I-215 Beltway, stretching from Henderson to Summerlin. With the passing of the Great Recession, it is likely that we have seen a shift in the balance of demand from single-family to multifamily residential. Younger folks are now leaving college with more debt than past generations, and appear to be delaying marriage and childbearing, two key life events that move people from multi- to singlefamily residential. With people staying in multifamily longer, the need for a higher level of multifamily development will likely persist for the next decade. Complex Under Construction Submarket Units Paseo Verde Gibson Apartments Henderson 162 TGP at Horizon Ridge Henderson 221 Post Apartments Northwest/Southwest 240 Warmington Martin Apartments Northwest/Southwest 190 Hualapai/Peace Apartments Northwest/Southwest 338 Elysian at Hacienda Northwest/Southwest 466 TOTAL 1,617 Sales Data 2015 YTD 2014 2013 2012 2011 Units Sold 6,198 14,019 17,808 21,840 7,554 Average Price Per Unit $80,401 $73,627 $75,600 $65,425 $50,324 Cap Rate* 5.9% 6.0% 5.7% 7.3% 6.9% *Cap Rate Source: Real Capital Analytics, CoStar and Colliers International With people staying in multifamily longer, the need for a higher level of multifamily development will likely persist for the next decade. South Valley Apartment Homes 3 Las Vegas Research & Forecast Report Q3 2015 Multifamily Colliers International

215 NORTHEAST Significant Multifamily Sales Activity NORTHWEST 95 15 Alexander Gardens 480 Units - $44,200,000 $92,000/Unit August 2015 Year Built - 1996 DOWNTOWN Regency Heights 144 Units - $6,800,000 $47,000/Unit August 2015 Year Built - 1986 SUMMERLIN WEST 95 EAST Silver Creek Apartments 224 Units - $16,500,000 $73,000/Unit July 2015 Year Built - 2002 SOUTHWEST 215 HENDERSON/ GREEN VALLEY Martinique Bay Apartments 256 Units - $33,300,000 $130,000/Unit July 2015 Year Built - 1989 Parc West Apartments 248 Units - $27,300,000 $110,000/Unit July 2015 Year Built - 1989 Sales Activity Continued Property Name Sale Date Units Price Price/Unit Year Built Mayan Plaza Apartments Jul 2015 316 $23.1 MM $73,000 1989 Evergreen Apartments Jul 2015 228 $9.8 MM $43,000 1986 Arville Street Apartments Jul 2015 112 $4.8 MM $42,000 1977 Verona Jun 2015 275 $40.0 MM $145,000 2007 Parkwood Apartments Jun 2015 160 $7.8 MM $49,000 1988 Source: Real Capital Analytics 4 Las Vegas Research & Forecast Report Q3 2015 Multifamily Colliers International

Market Comparisons - Las Vegas Multifamily Market CLASS TOTAL INVENTORY CURRENT VACANCY RATE PRIOR QTR VACANCY RATE NET ABSORPTION NET ABSORPTION YTD CURRENT QTR COMPLETIONS YTD UNIT COMPLETIONS UNDER CONSTRUCTION PLANNED CONSTRUCTION TOTAL SALES AVERAGE PRICE PER UNIT AVERAGE RENTAL RATE DOWNTOWN A 2,773 1.6% 2.1% 13 30-80 - - - n/a $876 B/C 13,454 2.4% 2.7% 46 126 - - n/a n/a 1,042 $62,068 $732 Total 16,227 2.2% 2.6% 59 156-80 - - 1,042 $62,068 $750 EAST LAS VEGAS A 6,383 4.0% 4.5% 30 35 - - - - - n/a $871 B/C 8,939 3.6% 4.3% 62 103 - - n/a n/a 707 $86,068 $744 Total 15,322 3.8% 4.4% 92 138 - - - - 707 $86,068 $800 HENDERSON/GREEN VALLEY A 19,377 6.2% 6.7% 64 147 480 670 383 477 - n/a $1,090 B/C 8,068 7.1% 7.4% 25 69 - - n/a n/a 275 $145,455 $955 Total 27,445 6.4% 6.9% 89 216 480 670 383 477 275 $145,455 $1,046 NORTH LAS VEGAS A 13,042 5.7% 6.1% 17 59 - - - - - n/a $924 B/C 9,552 5.1% 5.6% 47 116 - - n/a n/a 160 $48,500 $732 Total 22,594 5.4% 5.9% 64 175 - - - - 160 $48,500 $848 NORTHEAST A 2,172 4.7% 4.9% 4 (1) - - - - - n/a $797 B/C 6,643 8.4% 9.4% 68 129 - - n/a n/a 304 $60,855 $710 Total 8,815 7.5% 8.3% 72 128 - - - - 304 $60,855 $724 NORTHWEST/SOUTHWEST A 17,012 5.9% 5.4% 186 346 360 360 1,234 1,745 - n/a $1,159 B/C 5,452 3.3% 3.1% (13) (16) - - n/a n/a 138 $86,957 $1,012 Total 22,464 5.3% 4.8% 173 330 360 360 1,234 1,745 138 $86,957 $1,136 UNIVERSITY A 2,180 1.8% 2.2% 8 34 - - - - - n/a $979 B/C 12,321 5.0% 5.4% 42 116 - - n/a n/a - n/a $707 Total 14,501 4.6% 4.9% 50 150 - - - - - n/a $723 WEST CENTRAL A 5,671 2.5% 2.9% 23 42 - - - - - n/a $942 B/C 6,860 0.9% 1.3% 23 53 - - n/a n/a - n/a $747 Total 12,531 1.6% 2.0% 46 95 - - - - - n/a $880 MARKET TOTAL A 68,610 5.1% 5.4% 345 692 840 1,110 1,617 2,222 - n/a $1,023 B/C 71,289 4.4% 5.4% 300 696 - - n/a n/a 2,626 $77,603 $774 Total 139,899 4.7% 5.4% 645 1,388 840 1,110 1,617 2,222 2,626 $77,603 $906 QUARTERLY COMPARISON AND TOTALS Q2-15 * 139,899 4.7% 5.4% 645 645 840 1,110 1,617 2,222 2,626 $77,603 $906 Q1-15 139,059 5.0% 5.4% 370 370 270 270 1,617 2,222 3,572 $82,458 $889 Q4-14 138,219 5.4% 5.2% 370 1,549 170 511 1,617 2,222 3,572 $82,458 $878 Q3-14 138,049 5.2% 5.5% 348 1,179-341 729 601 3,886 $70,279 $873 Q2-14 138,049 5.5% 5.7% 608 831 255 341 985 601 2,262 $84,836 $866 Q1-14 137,794 5.7% 5.9% 223 223 86 86 985 601 3,703 $66,298 $859 * Most recent quarter of data Source: REIS Sales Data provided by Colliers International 5 Las Vegas Research & Forecast Report Q3 2015 Multifamily Colliers International

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