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• Connecticut Multi Family Market Trends •

2010. Connecticut Commercial Real Estate Conference. • Connecticut Multi Family Market Trends •. Presented by : Steve Witten. Presented In February:. Economy Gaining Traction; Risk Levels Remain Elevated. Gross Domestic Product. Monthly Employment. 2005: 3.1%. 2007: 2.1%. 2009: -2.4%.

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• Connecticut Multi Family Market Trends •

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  1. 2010 Connecticut Commercial Real Estate Conference • Connecticut Multi Family Market Trends • Presented by: Steve Witten

  2. Presented In February:

  3. Economy Gaining Traction; Risk Levels Remain Elevated Gross Domestic Product Monthly Employment 2005: 3.1% 2007: 2.1% 2009: -2.4% 2006: 2.7% 2008: 0.4% 2010*: 2.7% Jan-09 Jan-10 Jobs in Thousands Annualized Growth Jan-06 Jan-07 Jan-08 * GDP through 2Q 2010, Employment through September Note: Technical recession defined as two consecutive quarters of GDP contraction. Sources: Marcus & Millichap Research Services, BLS, Economy.com

  4. Corporate Investment Stalled Despite Healthy Balance Sheets, Unemployment Rising Rate * Through September Sources: Marcus & Millichap Research Services, BLS, Federal Reserve

  5. 2010* Job Growth NH-FC: 4,600 U.S.: 1,000,000 Total Nonfarm Employment ChangeNew Haven-Fairfield County vs. United States Year-over-Year Change * Forecast Sources: Marcus & Millichap Research Services, Economy.com

  6. Total EmploymentNew Haven-Fairfield County Monthly Change (thousands) *Through August Sources: Marcus & Millichap Research Services, BLS, Economy.com

  7. New Haven-Fairfield County Sector EmploymentYear-over-Year Absolute Growth Thousands Sources: Marcus & Millichap Research Services, BLS, Economy.com

  8. Unemployment RateNew Haven-Fairfield County vs. United States Unemployment Rate * Forecast Sources: Marcus & Millichap Research Services, BLS, Economy.com

  9. Job Growth is Critical to Renter Household Formation and Apartment Occupancies Apartment Vacancy Rate Unemployment Rate * Preliminary Estimate Sources: Marcus & Millichap Research Services, BLS, Reis

  10. “Shadow” Market a Significant Factor in Rising Vacancies – More in Select Metros Total Vacant Units (in 000s) 1-Unit Structure as % of Total Sources: Marcus & Millichap Research Services, U.S. Census Bureau

  11. CAPITAL MARKETS OVERVIEW and OUTLOOK

  12. Commercial Mortgage Delinquency Rates by Lender Type CMBS Banks Delinquency Rates Delinquency rates at the end of each period Sources: Marcus & Millichap Research Services, Mortgage Bankers Association

  13. Total Multifamily Mortgage Debt Outstanding: $911.7 billion By Lender Types ($Bil): GSEs and Ginnie Mae $359.6 Commercial Banks $216.8 CMBS, CDO, and Other ABS $110.3 State & Local Governments $66.1 Savings Institutions $64.0 Life Insurance Companies $50.4 Other $44.4 Sources: Marcus & Millichap Research Services, MBA

  14. Total CMBS Outstanding: $751.7 billion By Property Types ($Bil.): Office $233.8 Retail $224.0 Multifamily $114.3 Hotel $70.7 Industrial $38.3 Self-Storage $13.5 Healthcare $4.5 Other $52.6 Sources: Marcus & Millichap Research Services, MBA

  15. Estimated Multifamily Debt Maturities by Lender Type Billions $ Sources: Marcus & Millichap Research Services, Foresight Analytics

  16. Total Multifamily Debt Maturities by Vintage Maturing Balance (Billions $) Sources: Marcus & Millichap Research Services, Foresight Analytics

  17. Renter Demographics New Haven-Fairfield County Change in Population * Forecast Sources: Marcus & Millichap Research Services, U.S. Census Bureau

  18. New Housing PermitsNew Haven-Fairfield County New Housing Permits * Forecast Sources: Marcus & Millichap Research Services, Economy.com

  19. Supply and DemandApartment New Haven-Fairfield County United States Vacancy Rate Units (000s) Vacancy Rate Units (000s) * Forecast Sources: Marcus & Millichap Research Services, Reis

  20. Apartment Metro Vacancy Ranking2Q 2010 Sources: Marcus & Millichap Research Services, Reis

  21. Apartment Vacancy by ClassNew Haven-Fairfield County Average Vacancy Rate * Through 2Q Sources: Marcus & Millichap Research Services, Reis

  22. Apartment Vacancy Ranking by SubmarketNew Haven-Fairfield County Sources: Marcus & Millichap Research Services, Reis

  23. Apartment Asking Rent TrendsNew Haven-Fairfield County $1,544 $1,036 Asking Rent Annual Change 2% to 3% annual growth * Forecast Sources: Marcus & Millichap Research Services, Reis

  24. Apartment Metro Effective Rent Growth Ranking2Q 2010 Sources: Marcus & Millichap Research Services, Reis

  25. Investment TrendsApartment New Haven-Fairfield County United States Average Cap Rate Average Cap Rate Median Price per Unit (000s) Median Price per Unit (000s) * Through 1H 2010 Sales $500,000 and greater Sources: Marcus & Millichap Research Services, Reis

  26. Apartment Sales Trends New Haven-Fairfield County Total Transactions Total Dollar Volume Total Transactions (000s) Total Dollar Volume (Bil.) Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics

  27. U.S. Apartment Buyer Composition Percent of Sales Volume * YTD through September Sales $5 Million and greater Sources: Marcus & Millichap Research Services, Real Capital Analytics

  28. National Apartment Price and Cap Rates Average Cap Rate Average Price per Unit (000s) * Estimate Includes sales $1Million and Greater Sources: Marcus & Millichap Research Services, Costar Group, Inc.

  29. 24 – Month Cap Rate Adjustment Matrix * Class “A” Class “B” Class “C” 1.00 1.25 1.75 Primary Secondary 1.25 1.75 2.25 2.75 2.00 2.25 Tertiary * Change in cap rates last 24 months

  30. 24 – Month Pricing Adjustment Matrix Class “A” Class “B” Class “C” -20% -23% -32% Primary Secondary -24% -30% -36% -33% -35% -41% Tertiary * Change in property value last 24 months

  31. Why the Long-Term Outlook for U.S. Apartments is Extremely Favorable U.S. will experience a fundamental change in housing dynamics favoring the density, efficiency, flexibility and affordability of apartment living: Population growth Changing demographics Environmental concerns Budget / expense factors Sharp decrease in new supply Affordability Rent vs. own

  32. Population Dynamics U.S. population is expected to increase 33% by 2030 to 376 million. To accommodate this growth, the nation needs 60 million new housing units. 94 Million Millions

  33. Demographic Dynamics Married couples with children are projected to decline to under 1 in 5 households by 2025 Singles and un-related individuals living together will comprise 1 in 3 households by 2020 78 million echo boomers are getting ready to enter their prime renting years 10 million legal immigrants will enter the country in next ten years

  34. U.S. Household Growth Projection2010 - 2015* 4.1 MillionNew Owner Households 3.2 MillionNew Renter Households 7.4 Million Net New Households * Forecast Sources: Marcus & Millichap Research Services, Economy.com, Harvard University

  35. Budget / Fiscal Dynamics Urban / suburban sprawl is expensive Compact development reduces infrastructure costs and saves money The U.S. can save over $100 billion in infrastructure costs over 25 years by growing compactly

  36. State of Connecticut Apartment Sales 2000 - 2010 2010 (as of 10/1): 1,131 units traded for $94,399,000 2009: 2,251 units traded for $188,532,880 2008: 5,532 units traded for $758,785,000 2007: 6,247 units traded for $891,958,998

  37. 2010 Connecticut Commercial Real Estate Conference Steve Witten, Senior Director 265 Church Street, Suite 210 New Haven, CT 06510 203.672.3320 Steve.witten@marcusmillichap.com

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