2015 Property Tax Institute 1 DATA MINING: IT AIN T DIAMONDS NOTABLE DATA QUOTES: 2 IF WE HAVE DATA, LETS LOOK AT DATA. IF ALL WE HAVE IS OPINIONS, LET S GO WITH MINE. ~ JIM BARKSDALE, FORMER NETSCAPE CEO YOU CAN HAVE DATA WITHOUT INFORMATION, BUT YOU CANNOT HAVE INFORMATION WITHOUT DATA. ~ DANIEL KEYS MORAN 3 DATA REALLY POWERS EVERYTHING THAT WE DO. ~JEFF WEINER, LINKEDIN 1
WHAT IS DATA MINING? 4 A process used by companies to turn raw data into useful information. Investopedia Practice of automatically searching large stores of data to discover patterns and trends that go beyond simple analysis. - Oracle Practice of searching through large amounts of computerized data to find useful patterns or trends. Merriam Webster IS DATA MINING USEFUL? 5 IBM WATSON Uses natural language processing: Helps understand unstructured data which makes up as much as 90% of the world s current data (news articles, research reports, social media posts) Hypothesis generation and evaluation: Applies analytics to weight/evaluate responses based on evidence PRISM (NSA) Data mining program operated by the NSA since 2007 publicly acknowledged by Edward Snowden leak Monitors private phone, email, and other internet communications Gets information from Apple, Google, Microsoft, YouTube (Some of the largest databases in the world) Evidence based learning: Allows Watson to get smarter with each iteration and Google has stored every web search ever done on its servers interaction. It is constantly learning Source: IBM Sources: Washington Post, USA Today GOOGLE S DATA MINING 6 Source: Wall Street Journal 2
DATA MINING AND MASS APPRAISAL 7 WHAT IS MASS APPRAISAL? 8 IAAO DEFINITION: Mass appraisal is the systematic appraisal of groups of properties as of a given date using standardized procedures and statistical testing. Mass appraisal requires the development of a valuation model capable of replicating the forces of supply and demand over a large area. Mass appraisal utilizes statistical methods to gauge accuracy and consistency of valuations. MASS APPRAISAL MODELS 9 CREATING APPLYING TESTING Classifying appraisal groups Apply model to appraisal groups Primary tool is a ratio study Collect data Interpret data Create model Make adjustments for individual characteristics Allow for changes as data changes Median level Average Absolute Deviation Coefficient of Dispersion 3
PRIMARY SOURCES OF DATA 10 Residential Commercial Multiple Listing Service MLS Settlement statements Fee appraisals Cost manuals Market publications CoStar Loopnet Income statements / rent rolls Settlement statements SEC documents Market publications Private data sources RESIDENTIAL DATA Multiple Listing Service - used for decades and is the most reliable data source for homogeneous residential neighborhoods. Has limitations in high end residential markets. Settlement statements - invaluable part of mass appraisal and contain several valuable pieces of information: Loan amount, Fee appraisal, Broker commissions, etc. Fee appraisals - provide an opinion of value, square footage, and comparable property information. Comparable property information is key to increasing your data intake. Cost manuals - help with unique properties without adequate sales comps. Market publications - real estate journals, newspapers, and other publically available information. Residential = Comparable Sales = MLS 11 COMMERCIAL DATA CoStar Most utilized form of sales data collection. Not as comprehensive as MLS, and some data is incorrectly reported. Loopnet Provides ample asking rents and for sale prices. Confirmed sales information varies and less accurate than CoStar. Income statements/rent rolls Give a great snapshot of a property, but may not reflect current occupancy or rent potential. Great for model building if accurate Settlement statements Same as residential - invaluable part of mass appraisal and contain several valuable pieces of information: Loan amount, Fee appraisal, Broker commissions, etc. SEC Documents Publicly traded companies will report sales prices and other information on their 10- K and 10- Q documents Great for investment grade properties Internet Publicly available data sources that should be utilized 12 4
SEC DOCUMENTS 13 PURE MULTIFAMILY REIT These sales represent Pure Multifamily REIT s 2012 2014 property acquisitions Data includes: Property name, Number of units, Going- in cap rate, Loan to value, Physical and Leased occupancies You can also calculate property NOI SEC DOCUMENTS CONT. PURE MULTIFAMILY REIT 2014 ACQUISITIONS 14 OnJune27, 2014, Pure Multi,through the US REIT,acquired WalkerCommons,a multi- family apartment community, located in Houston, Texas, for a purchase price of $43,800,000,p lus standard closing costsand adjustments. The acquisition was financed withproceedsfrom the May 2014Offering anda new fiveyearmortgageinthe amount of $28,470,000. On August 28, 2014, Pure Multi, through the US REIT, acquired the Preserve, a multi- family apartment community, located in Plano, Tex as, for a purchase price of $41,000,000,plus standard closingcosts andadjustments. This acquisition was financed withproceedsfrom the July 2014Offering anda newsevenyearmortgageinthe amount of $24,600,000. COMMERCIAL MARKET PUBLICATIONS These are the supplemental data providers that can boost your mass appraisal product! 15 All of the above icons are hyperlinked to the websites Twitter, Freddie Mac,Fannie Mae, Facebook, YouTube, Texas A&M Real Estate Center, Industry websites, Company websites, BizNow, Compstak, Real Massive, etc. 5
EX. OF SUPPLEMENTAL DATA 16 April 2014 So u rce: Ho u sto n Bu sin ess P ress Here are the highlights: A stand- alone, 1 4,0 0 0 - square- foot building dubbed The Jewel Box will be built on thecheesecake Factory s existing parking deck f acing Westheimer. The space w ill house luxury retailers w ho w ant visibility. Noble said several new- to- market tenants have expressed interest in the plans, but would not elaborate on which retailers are interested or how much rent the space will charge. Saks Fifth Avenue will move into a renovated 198,000- square- fo o t space located next to its existing space. Saks is set to open in early 2016. The existing Saks building w ill be renovated, providing 110,000 square feet of space for new restaurants and retail. Construction will begin on this space af ter Saks moves into its new building. Saks will stay open during the renovation. Saks will take up part of Macy s Inc. (NYSE: M), which will consolidate into its Galleria store facing Hidalgo Street. The consolidation will affect 136 positions, according to the Texas Workf orce Commission. However, the company is confident that most of those employees will find jobs at other local Macy's stores. SUPPLEMENTAL DATA CONT. Financial Data at the time of Refinance: New loan amount of $150,000,000 Interest Rate 3.31% Note Date 2/24/2015 Maturity Date 3/1/2025 Interest- Only Period 120 months Amortization Type Interest Only Additional Debt Balance $734,000,000 $316,000,000 LTV with all debt 47.7% 10% NOI growth from 12-14 17 Implied cap rate of 4.06%with Underwritten NOI and Appraised Value SUPPLEMENTAL DATA CONT. 18 Harwood Center In Dallas, TX UBS has originated a $90 million fixed- rate loan on a Dallas office building. The 724,000- square- foot Harwood Center is owned by Fortis Property of Brooklyn. The 36- story building, at 1999 Bryan Street in the central business district, is 84.8% leased, according to CoStar. The tenants include Omnicom (339,000 sf until 2019), Jacobs Engineering (81,000 sf until 2025) and the U.S. Department of Education s Office for Civil Rights (61,000 sf until April 2015). 6
SUPPLEMENTAL DATA CONT. HARWOOD CENTER 19 Fee Appraisal value at time of refinance Harwood Center - $124,000,000 Appraisal Date 6/2/2014 LTV = 72.6% Most recent financials at time of refinance EGI - $15,145,993 Operating Expenses - $6,731,687 (44% with Taxes) NOI - $8,414,306 Implied Cap Rate 6.78% on appraised value SUPPLEMENTAL DATA CONT. Columbus Pacific Properties Acquires The Cottages of College Station 20 College Station, Texas Columbus Pacific Properties (CPP) has acquired The Cottages of College Station, a 1,354- bed cottage community that was developed by Capstone Collegiate Communities and opened in August 2013. It is billed as the largest student housing community in the College Station market. CPP says the Cottages of College Station is the company s first recently built class A community and the only cottage product in the portfolio. Will Baker, senior vice president and managing director, partnered with Tim Bradley of TSB Capital Advisors, originated and structured $66.4 million as a 10- year loan with two years of interest only and 30- year amortization for Cottages of College Station in College Station, Texas. Cottages of College Station is a 1,3 5 4 - bed cottage/garden style community consisting of 192 one, two and three- story apartment buildings. TWITTER + FREDDIE MAC 21 WHAT IS FREDDIE MAC Was chartered in 1970 by Congress to stabilize the nation s residential mortgage markets Expand opportunities for homeownership and affordable rental housing Participate in secondary mortgage market by purchasing mortgage loans and mortgage related securities Issue guaranteed mortgage- related securities CMBS, CME http://freddiemac.mwnewsroom. com/news.aspx?categoryname= Mortgage%20Securities 7
FREDDIE MAC K-DEAL 22 K-DEAL GUIDELINES 23 K-DEAL GUIDELINES CONT. 24 8
SECURITIZATION INFORMATION 25 SECURITIZED DEAL STRUCTURE 26 FREDDIE MAC SERVICERS 27 If you see these lender names Their loans are going to be securitized at some point.. 9
REMEMBER THIS TWEET? Columbus Pacific Properties Acquires The Cottages of College Station College Station, Texas Columbus Pacific Properties (CPP) has acquired The Cottages of College Station, a 1,354- bed cottage community that was developed by Capstone Collegiate Communities and opened in August 2013. It is billed as the largest student housing community in the College Station market. CPP says the Cottages of College Station is the company s first recently built class A community and the only cottage product in the portfolio. 28 Will Baker, senior vice president and managing director, partnered with Tim Bradley of TSB Capital Advisors, originated and structured $66.4 million as a 10- year loan with two years of interest only and 30- year amortization for Cottages of College Station in College Station, Texas. Cottages of College Station is a 1,354- bed cottage/garden style community consisting of 192 one, two and three- story apartment buildings. STRUCTURED PASS THROUGH CERTIFICATES 29 FREDDIE MAC (K-DEAL) COTTAGES OF COLLEGE STATION 30 Property Name Loan Originator Address 10
COTTAGES OF COLLEGE STATION 31 Type of Housing Occupancy Loan Purpose COTTAGES CONTINUED 32 Appraisal Date Appraisal Amount Loan to Value COTTAGES CONTINUED 33 LTV @ Maturity Underwritten Proforma 11
COTTAGES CONTINUED 34 Most Recent Financials Second Most Recent Financials COTTAGES CONTINUED 35 Monthly Replacement Reserve SUMMARY OF DATA 36 LOAN AMOUNT AND PURPOSE Loan Amount - $66,460,000 Purpose - Acquisition INTEREST RATE AND D.S. Int. Rate 3.9699% Debt Service $319,978.11 (Monthly) AMORTIZED TERM AND ACTUAL TERM Amortized term - 30 years Actual Loan Term 10 years APPRAISED VALUE AND L.T.V. Appraised Value - $ 84,000,000 L.T.V. 79.1% FINANCIALS U.W. EGI - $10,401,951 U.W. Exps. - $4,603,000 U.W. NOI - $5,798,951 $5,798,951 / $84,000,000 = 6.9% Cap Rate ESCROW AMOUNTS Tax Escrow - $383,236 Initial plus $63,873 monthly Reserves - $16,925 (Monthly) 12
FANNIE MAE 37 WHAT IS FANNIE MAE Leading source of residential mortgage credit in the U.S. secondary mortgage market Guarantee and purchase loans from mortgage lenders Single family mortgaged backed securities Multifamily mortgage backed securities http://fapt.efanniemae.com/mfsec uritieslocator/jsp/general/welcome. jsp THE MANSIONS AT LAKEWAY 38 THE MANSIONS AT LAKEWAY 39 13
THE MANSIONS AT LAKEWAY 40 Cap rate at time of appraisal - $3,626,769 / $65,700,000 = 5.52% Estimated purchase price of $64,517,400 FACEBOOK PAGES 41 YOUTUBE 42 REAL ESTATE VIDEOS Virtual Tours of properties For sale property videos Real estate video podcasts and updates Several large commercial firms have YouTube channels you can subscribe to REAL ESTATE CHANNELS Realtor.com CBRE Jones Lang LaSalle Cushman and Wakefield GlobeSt.com Tex as A&M R. E. Center Transwestern REIT.com 14
TEXAS A&M REAL ESTATE CENTER 43 RECON WEBSITE FEATURES INCLUDE: Sign up to receive RECON updates with this link: http://recenter.tamu.e du/ rec on/ rec onsubsc ribe.as p Information updated twice weekly Currently has around 40,000 subscribers Website address: http:/ / www.recenter.tamu. edu/ The Blog News Talk Texas Red Zone Podcast Tierra Grande magazine link Videos Market Data Sources Presentations Texas Economy Reports Data, Data, Data Source: Texas A&M Real Estate Center Website GREAT DATA LINKS 44 Berkadia Commercial Mortgage - http:/ / www.berkadia.com/newsandresearch/default.aspx Arbor Commercial Mortgage - http:/ / www.arbor.com/ CBRE Capital Markets (multi- housing) - http://www.cbre.us/services/capitalmarkets/multihousing/pages/home.aspx Axiometrics - http:/ / axiometrics.com/index.html Gobest.com - http:/ / www.globest.com/ Cus hman and Wakefield - http:/ / www.cushmanwakefield.com/ Intergra Realty Resources - http:/ / www.irr.com/ Index.asp?x=010 010&~= HFF L.P. - http:/ /www.hfflp.com/default.aspx Hillwood Investment Properties - http:/ /www.hillwoodinvestmentproperties.com/ List of publicly traded REIT s in U.S. - http:/ /en.wikipedia.org/wiki/list_of_public_reits_in_the_united_states List of Hotel REIT s - http:/ / www.bloomberg.com/ markets/ companies/ reits- hotels/ Low- income Housing Tax Credit Underwriting Reports - http:/ / www.tdhca.state.tx.us/rea/reports- all- other.htm Real Estate Investor HQ - http:/ / www.reihq.com/ PRIVATE DATA SERVICE PROVIDER 45 DATA CONSULTING FOR HIRE Professional data service provider Data for the following property types: Hotels Office Buildings Multifamily Retail Industrial Proven way to integrate the data and present it to property owners and the ARB More affordable than CoStar DATA MINING: IT AIN T DIAMONDS 15
QUESTIONS 46 16