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2014 Real ESTATE ECONOMIC FORECAST J anuary 30, 2014

2014 Real ESTATE ECONOMIC FORECAST J anuary 30, 2014. Steve LaMotte Jr., Senior Vice President Dave Lockard , Senior Vice President Dane Wilson, Senior Associate. Agenda. 1. Louisville Fundamentals. 2. Transactions. 3. New Supply. 4. Capital Markets Overview.

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2014 Real ESTATE ECONOMIC FORECAST J anuary 30, 2014

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  1. 2014 Real ESTATE ECONOMIC FORECASTJanuary 30, 2014 • Steve LaMotte Jr., Senior Vice President • Dave Lockard, Senior Vice PresidentDane Wilson, Senior Associate

  2. Agenda • 1. Louisville Fundamentals • 2. Transactions • 3. New Supply • 4. Capital Markets Overview • 5. Strategies & Opportunities for 2014

  3. Capital Markets Overview

  4. Hold-Sell Dilemmas dominate seller thinking

  5. RISK PREMIUMS • Louisville MSA Cap Rates to 10-Year UST at Time of Sale

  6. Market response to rise in interest rates • Class A • Tracking $7 Billion / 135 Multi-Housing deals • 88 Class A • 20 out of 135 Requested Price Adjustment • 9 out of 20: Price Adjustment Requested, Seller Declined; Still Transacted • 8 out of 20: < 2% Price Adjustment • 2 out of 20: 2% - 4% Price Adjustment • 1 out of 20: > 4% Price Adjustment

  7. Debt strategies in a rising interest market • Move Down the Yield Curve • 10 Year Rate: 5.33% • 7 Year Rate: 4.78% • 5 Year Rate: 4.21% • Floating Rate (Capped ARM): 3.52% • 7 Year Float to Fixed: 4.20%

  8. Louisville fundamentals

  9. employment Current Unemployment Rate Total Number of Jobs U.S. 6.7% Louisville 7.3% Kentucky 8.2% National & State Unemployment as of Dec. 2013 Local Unemployment as of Nov. 2013 *November 2013(P) Source: Bureau of Labor Statistics

  10. Population growth • Louisville MSA 2.9% 1.9% 10.5% Source: CBRE

  11. household growth • Louisville MSA 3.2% 2.1% 11.2% Source: CBRE

  12. Owner-occupied housing trends • Louisville MSA Source: CBRE

  13. Market-wide Rents & Occupancy • Louisville MSA

  14. Top-20 Properties Rents & Occupancy • Louisville MSA

  15. transactions

  16. “A” Grade yield expectations

  17. “A” Grade transactions, 2013 Orchard Hills 373 Units Seller: Icon Properties Buyer: Bluestone Southgate 256 Units Seller: Inland Group Buyer: Paladin Realty Partners

  18. “B” Grade transactions, 2013

  19. Louisville sales volume * *2010 includes the partial interest sale of The Province

  20. “A” & “B” CAP RATES * *No “A” grade sales in 2008

  21. new supply

  22. New supply

  23. New supply • Louisville MSA

  24. Building permits • Louisville MSA

  25. New supply

  26. New supply

  27. New supply

  28. New supply

  29. New supply

  30. New supply

  31. New supply

  32. New supply

  33. Strategies & Opportunities for 2014

  34. Strategies & opportunities • Loan assumptions en vogue • High demand for well-located value-add andbest-of-class • Secondary/tertiary markets looking more attractive • Emergence of the pre-sale • Highly amenitized, high rent supply continues • We’ve hit maximum sustainable occupancies • The window is open but…

  35. For more information regarding this presentation please contact: CBRE Indianapolis-Cincinnati Multi-Housing Group • www.cbre.com/mhgindianapolis icmhg@cbre.com

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