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Real Estate Analysis and Investor Presentation

Real Estate Analysis and Investor Presentation. Table of Contents. Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals. Executive Summary.

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Real Estate Analysis and Investor Presentation

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  1. Real Estate Analysis and Investor Presentation

  2. Table of Contents • Executive Summary • Basic Fundamentals • Apartment Fundamentals • Office Fundamentals • Retail Fundamentals

  3. Executive Summary • The objective of this presentation is to analyze the various cities in terms of their attractiveness to real estate investment. • The 3 main real estate product types analyzed are rental apartments, office and retail. • First the cities are classified based on basic real estate fundamentals like migration, cost of living, employment growth and population growth. • Then the cities are classified based on specific fundamentals for each of the 3 product types. • A cross analysis of various factors are used to achieve efficient analysis. Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  4. Basic Fundamentals • Migration & Cost of Living • Employment & Population growth

  5. Basic Fundamentals1) Migration & Cost of Living • Migration of people in to a city/metro can have stellar impact on the economy of that area. In particular it has a deep impact on real estate. • Therefore, migration trends of a city/area can be considered as a very important factor in determining the demand trends for various types of real estate space. • Another factor which is worthy of being included in the analysis is the cost of living, which is one of the major factors influencing people to migrate in to a particular city. Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  6. Cities with high incoming migration Phoenix has the highest incoming migration with an average of 93400 for the last 5 years. Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  7. Cities with low cost of living The living cost index for these 5 cities are almost the same, with Cleveland topping the list with 87. Note that US is taken as the base 100. Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  8. Explanation Strong Strong Solid 1) Both incoming migration number and cost of living index favorable 1) Though incoming migration is high, cost of living index is not favorable 2) Attractive markets for real estate investment based on these 2 factors 2) Solid markets because, it is able to attract large number of people, though cost of living is high Weak Weak Disaster 1) Incoming migration is low, but cost of living index favorable 1) Both incoming migration number and cost of living index unfavorable 2) Markets weak, because these cities are not able to attract people 2) Unattractive markets because both factors are not in favour

  9. Migration & Cost of Living 93400 1 2 1 3 4 5 Migration 2 2600 3 1 2 4 2 3 1 4 5 -88200 5 87 117 147 Living cost index Strong 1.Phoenix 2.Atlanta 3.Dallas 4.Orleans 5.Houston Solid 1.Inland Empire 2. San Jose Weak 1.Pittsburg 2.Chicago 3.Cleveland 4.Detroit 5.New York Disaster 1.San Diego 2.Long Island 3. San Francisco 4.Orange County 5.Los Angeles

  10. Attractiveness matrix Based on incoming migration and cost of living the attractiveness of cities are plotted. City Score Factors Phoenix Attracts the highest incoming migration Low High Atlanta Attracts high incoming migration & cost of living lower than phoenix Low High Attracts people in to the city due to low living cost Dallas Low High Attracts people due to low living cost New Orleans Low High Houston Both factors quiet favorable Low High

  11. 2) Employment & Population growth • Employment growth in a particular city is a crucial factor in determining the demand for real estate in that city. • It is crucial for demand creation in all types of real estate products like single family homes, apartments, office & retail. • Similarly population growth, in a city is also considered as a crucial factor in determining the demand trends for real estate. • Increase in population leads to increase in demand for housing, and increase in public utilities and it also leads to increase in consumer businesses. Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  12. Cities with higher employment growth Average deviation=[(avg employment growth last 5 years- national avg)+ (avg projected growth next 5 years-national avg)]/2 Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  13. Cities with higher population growth Average deviation=[(avg population growth last 5 years- national avg)+ (avg projected growth next 5 years-national avg)]/2 Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  14. Explanation Solid Strong 1) Though employment growth is high, population growth is low 1) Both employment growth and population growth is high 2) Solid markets as they are able to generate high employment growth leading to higher per capita income 2) Attractive markets for real estate investment Disaster Weak 1) Both employment growth and population growth is low 1) Employment growth is low, but population growth is high 2) Unattractive markets as these cities are neither able to generate employment growth nor population growth 2) Markets weak as lack of employment growth leads to lack of increase in per capita income

  15. Employment & Population growth 2.15% 1 3 2 1 4 5 2 -0.05% Employment growth 1 2 3 4 1 2 5 3 4 -2.25% 5 -3.00% -0.28% 2.45% Population growth Strong 1.Las Vegas 2.Austin 3.Orlando 4.Raleigh 5. Phoenix Solid 1.Ft Lauderdale 2.Honolulu Weak 1.Columbus 2.Memphis 3. Chicago 4.San Jose 5.East Bay Disaster 1.Boston 2.Pittsburgh 3.Cleveland 4.Detroit 5.New Orleans

  16. Attractiveness matrix Based on employment growth and population growth the attractiveness of cities are plotted. City Score Factors Las Vegas Generates the highest employment and population growth Low High Austin Generates 2nd highest employment & population growth Low High Orlando Employment growth & population growth favorable Low High Raleigh Population growth second highest and 4th highest employment growth Low High Phoenix 5th highest in both factors Low High

  17. Apartment Fundamentals

  18. Apartment fundamentals • For the creation of new demand for apartments for rent, a very important factor is the percentage of population in the age group (20-34), who are most likely to rent apartments for living, than buy/own a house. • Also in addition to this factor, another factor that shall be considered is forecasted vacancy rate for the next 5 years (2008-2012). • Using a cross analysis we can classify cities in to different categories. Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  19. Cities with high % of population in 20-34 age group Austin has the highest % of population in the apartment dwelling age group of 20-34 Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  20. Cities with low forecasted vacancy rates-apartment San Francisco has the lowest average forecasted vacancy rate for apartments over next 5 years Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  21. Explanation Strong Weak 1) Population %in 20-34 age group is high and avg forecasted vacancy rate for apartments for next 5 years is low 1) Both population % in 20-34 and forecasted vacancy rate is high 2) Markets considered weak, because, though the population % in apartment dwelling age group is high, high vacancy rates implies oversupply situation 2) Attractive markets for investment in rental apartments as people in 20-34 are most likely to rent apartments and vacancy rate is also favorable Solid Disaster 1) Population % in 20-34 age group is low, but forecasted vacancy rate is low 1) Population % in 20-34 age group is low and forecasted vacancy rate is also low 2) Solid markets as low vacancy rate forecasted means there is no oversupply 2) Unattractive markets, because both the factors are unfavorable

  22. Population in 20-34 age group & forecasted apartment vacancy rate Strong Weak 25.8 1 1 2 3 4 2 5 3 4 5 Population % (20-34) 21 Solid Disaster 1 1 2 3 2 4 3 5 4 5 16.1 3.56% 7.59% 11.62% Avg forecasted vacancy rate Strong 1.Salt Lake City 2.Inland Empire 3.San Diego 4.Columbus 5.Sacramento Solid 1.Boston 2.San Jose 3.Orange County 4.San Francisco 5.New Jersey Weak 1.Austin 2. Raleigh 3. Atlanta 4. Houston 5. San Antonio Disaster 1.Charlotte 2.Jacksonville 3.Hartford 4.Tampa 5.Stamford

  23. Attractiveness matrix Based on population in age group 20-34 and growth and forecasted vacancy rate for apartments the attractiveness of cities are plotted. City Score Factors Salt Lake City Has very high % of population in 20-34 and vacancy forecast also favorable Low High Inland Empire Has a high % of population in 20-34 and vacancy rate slightly above Salt Lake City Low High San Diego Though % of population is low compared to top 2 cities vacancy rate is lower Low High Columbus Population % in 20-34 almost similar to San Diego but vacancy slightly high Low High Sacramento Both factors favorable Low High

  24. Office Fundamentals

  25. Office fundamentals • Two of the most important factors determining the space for office demand in a particular market is the percentage of office using employment in that market and the forecasted annual growth. • While the existing share of office using employment determines the base for new demand, the growth in office using employment is the factor which determines the growth in demand or new demand. Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  26. Office using employment Washington has the highest office using employment % at 43.7%, followed by San Francisco and New York. Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  27. Office using employment growth San Antonio is projected to generate the highest growth in office using employment, followed by Phoenix & Austin both at 2.5% Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  28. Explanation Opportunity Strong 1) Though existing share of office using employment is low, projected growth in this metric is high 1) Both existing share of office using employment and it’s growth is high 2) These markets present an opportunity, because the projected growth in office using employment is high 2) Attractive markets for investment in Office real estate space Disaster Doubtful 1) Both existing share and growth is low 1) Existing share of office using employment is high, but growth is low 2) Unattractive markets as these cities neither have a substantial office using employment base nor seeing growth in this metric 2) Doubtful because though there is an existing base of office using employment, it is not seeing much growth

  29. Office using employment % and growth 2.6% 1 3 2 Growth 4 5 2 1 1.2% 3 1 2 1 2 3 -0.2% 4 5 17.5 30.6 43.7 Existing Share Strong 1.San Francisco 2. Denver 2.Austin Opportunity 1.San Antonio 3.Phoenix 4.Baltimore 5.Atlanta Weak 1.Tampa 2.New York 3. Washington Disaster 1.Detroit 2.Miami 3.Jacksonville 4.New Orleans 5.Kansas City

  30. Attractiveness matrix Based on office using employment % and projected annual growth rate in this aspect the attractiveness of cities are plotted. City Score Factors Has very high % of office using employment at 34% providing a substantial base for demand San Francisco Low High Though the existing share is not as high as San Francisco, but substantial, the growth rate is higher Denver Low High

  31. Retail Fundamentals

  32. Retail fundamentals • Two of the most important factors determining the space for demand is the percentage of population falling in the age category of 35-54, who are usually the prime spending age group. • In addition to the above factor, the per capita real retail sales figure is also another adjoining factor that plays critical role in determining the demand. • Therefore, it is useful to do a cross analysis of these 2 factors in determining the attractive markets for retail real estate investment. Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  33. Cities with high % of prime spenders San Francisco has the highest % of population in the prime spenders age group of 35-54 with 32.7%, whereas the national average stands at 28.5% Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  34. Cities with high per capita retail sales The real retail sales per capita is the highest in Palm beach county, standing at $7470, while :as Vegas is a close second Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

  35. Explanation Opportunity Strong 1) Though population % of prime spenders is high, retail sales per capita is low 1) Both population age group in 35-54 and retail sales per capita is high 2) These markets present an opportunity, as there is a substantial share of population in prime spenders category 2) Attractive markets for investment in Retail real estate space as both factors are favorable Disaster Doubtful 1) Both population % in prime spenders and retail sales per capita is low 1) Population % in prime spending age group is low, but retail sales per capita is high 2) Unattractive markets as these cities neither have a substantial prime spending population nor higher per capita retail sales 2) Doubtful because though per capita retail sales is high, there is no high % of population in prime spending age category

  36. Population % in prime spenders (35-54) and retail sales per capita 32.7 1 1 2 2 3 3 4 5 4 5 Prime Spenders 29.2 1 1 2 2 3 3 4 4 5 5 25.7 4537 6003.5 7470 Retail Sales per Capita Strong 1.San Francisco 2.Seattle 3.Minneapolis 4.Long Island 5.Boston 1.San Jose 2.Atlanta 3.East Bay 4.Detroit 5.Raleigh Opportunity Doubtful 1.Orange County 2.Austin 3. Orlando 4. Las Vegas 5. Palm Beach Disaster 1.Oklahoma City 2.San Antonio 3.Phoenix 4.Inland Empire 5.Salt Lake City

  37. Attractiveness matrix Based on population in age group 20-34 and growth and forecasted vacancy rate for apartments the attractiveness of cities are plotted. City Score Factors San Francisco Has the highest % of population in prime spending age group of 35-54 Low High Seattle Has 31.7 % of population in 35-54 next only to San Francisco Low High Minneapolis Has more than 30% of population in prime spending age category Low High Long Island Retail sale per capita more than $7000 Low High Boston Both factors quiet favorable Low High

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