2018...Class A Rent 4Q 2017 Class B Rent Rent Gap Phoenix $1,170 $981 $189 Las Vegas $1,162 $962 $200 San Antonio $1,152 $900 $252 Orlando $1,472 $1,201 …

National Apartment Market Overview and Outlook

2018

Largest SpreadMarkets

4Q 2017Class A Rent

4Q 2017Class B Rent Rent Gap

Boston $3,227 $2,064 $1,163

New York $3,895 $2,913 $982

Los Angeles $2,960 $2,057 $903

Chicago $2,171 $1,288 $883

Northern New Jersey $2,683 $1,880 $802

San Francisco $3,870 $3,090 $780

Philadelphia $1,888 $1,231 $657

San Jose $3,258 $2,615 $643

Washington, D.C. $2,312 $1,688 $624

Miami $2,106 $1,509 $597

U.S. Average $1,734 $1,254 $480

Largest Spread MarketsBased on Class A and Class B Apartment Rent Gap

Effective rentsSources: Marcus & Millichap Research Services, MPF Research, CoStar Group, Inc.

Smallest SpreadMarkets

4Q 2017Class A Rent

4Q 2017Class B Rent Rent Gap

Phoenix $1,170 $981 $189

Las Vegas $1,162 $962 $200

San Antonio $1,152 $900 $252

Orlando $1,472 $1,201 $271

Jacksonville $1,245 $965 $280

Salt Lake City $1,343 $1,043 $300

Portland $1,633 $1,318 $315

Kansas City $1,222 $895 $327

Sacramento $1,657 $1,323 $334

Denver $1,748 $1,398 $350

U.S. Average $1,734 $1,254 $480

Smallest Spread MarketsBased on Class A and Class B Apartment Rent Gap

Effective rentsSources: Marcus & Millichap Research Services, MPF Research, CoStar Group, Inc.

4.0%

5.5%

7.0%

8.5%

10.0%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Class A Class B Class C

Vaca

ncy

Rat

e

U.S. Apartment Vacancy Trends by Class

Trailing 12-month averageSources: Marcus & Millichap Research Services, RealPage, Inc.

-8%

-4%

0%

4%

8%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Class A Class B Class C

Y-O

-Y P

erce

nt C

hang

e

U.S. Apartment Rent Growth Trends by Class

Sources: Marcus & Millichap Research Services, RealPage, Inc.

Class Change Since 2009Class A +41.3%

Class B +39.2%

Class C +33.2%

+4.5%+3.8%

+6.1%

Market 2017 Completions 2018* Completions 2017 Absorption 2018* Absorption

Chicago 10,500 10,500 5,000 7,700

Columbus 3,900 5,700 4,100 4,600

Minneapolis-St. Paul 4,200 5,100 4,000 3,800

Kansas City 4,600 4,300 3,700 2,900

Milwaukee 3,600 3,900 3,000 2,800

Indianapolis 2,400 2,700 2,600 2,700

Detroit 1,600 1,500 1,800 2,000

Cincinnati 2,100 2,100 2,000 1,700

St. Louis 2,200 1,100 1,400 1,500

Cleveland 1,000 1,600 500 1,300

U.S. Total 364,700 335,000 343,800 265,000

Midwest Completions and Absorption Trends

* ForecastSources: Marcus & Millichap Research Services, RealPage, Inc.

Market 2017 Vacancy 2018* Vacancy 2017 Rent Growth 2018* Rent Growth

Columbus 4.3% 4.8% 5.4% 4.8%

Detroit 3.8% 3.6% 3.2% 4.6%

Minneapolis-St. Paul 3.0% 3.4% 5.9% 4.6%

Kansas City 5.5% 6.2% 2.9% 4.2%

Indianapolis 6.3% 6.2% 5.2% 3.7%

Cincinnati 4.8% 5.0% 3.8% 3.4%

Milwaukee 4.5% 5.1% 3.2% 3.4%

Chicago 6.0% 6.3% 5.3% 3.0%

Cleveland 5.6% 5.7% 3.0% 2.3%

St. Louis 6.9% 6.6% 2.3% 2.3%

U.S. Total 5.0% 5.3% 4.5% 3.1%

Midwest Vacancy and Rent Growth Trends

* ForecastSources: Marcus & Millichap Research Services, RealPage, Inc.

National Apartment Market Overview and Outlook

2018

@ApartmentWire#NMHCresearch


NMHC RESEARCH FORUMMARKETS PANEL


CONSTRUCTION DELAYS

Deliveries Are A Moving Target


LABOR CONSTRAINTS REMAIN TIGHTRatio Of Commercial SF Under Construction To Total Construction Workers

Source: Moody's, CoStar Portfolio Strategy As of 18Q1*Office, Multifamily, Retail, Industrial

0

50

100

150

200

250

300

(60%)

(40%)

(20%)

0%

20%

40%

60%

80%

10 11 12 13 14 15 16 17

YoY Growth, Construction*, Construction Employment

YoY Construction Employment GrowthYoY Commercial SF Under Construction GrowthRatio Of SF UC To Construction Workers

UC SF/Workers


DELAYS STILL SLIGHTLY EXPANDING

Average Months Multifamily Projects Expand Past Initial Construction Estimates

Source: CoStar Portfolio Strategy As of March '18

(2)

(1)

0

1

2

3

4

5

6

January14

July14

January15

July15

January16

July16

January17

July17

January18

Average Months Delayed - 3M Rolling Average


MONTHS TAKEN TO COMPLETE SIMILAR PROJECTS RISINGAverage Completion Times For Mid-Rise 50-300 Unit Buildings

Source: CoStar Portfolio Strategy As of March '18* Mid-Rise, 50-300 Unit Buildings

14

15

16

17

18

19

20

21

January14

July14

January15

July15

January16

July16

January17

July17

January18

Average Months To Completion* - 3M Trailing Average


RENT DECILE ANALYSIS

Getting A “B” Is Good Here


SUPPLY IMPACTING TOP OF MARKET RENT GROWTHTop 10% Rent Growth Versus Cumulative Supply

Source: CoStar Portfolio Strategy As of 18Q1

Los Angeles

New York

Seattle

San Francisco

Washington, D.C.

0%

5%

10%

15%

20%

25%

30%

(4%) (2%) 0% 2% 4% 6%

Tier 1 Other Major Metros

Cumulative Supply Growth (2015-19)

Rent Growth


B+ TO A RENT GROWTH REMAINS STRONG80%-90% Rent Growth Versus Cumulative Supply


Los Angeles

New York

Seattle

San Francisco

Washington, D.C.

0%

5%

10%

15%

20%

25%

30%

(2%) 0% 2% 4% 6% 8%



Rent Growth


WORKFORCE HOUSING CONTINUES TO OUTPERFORM50% -60% Rent Growth Versus Cumulative Supply


Los Angeles

New York

Seattle

San Francisco

Washington, D.C.

0%

5%

10%

15%

20%

25%

30%

(2%) 0% 2% 4% 6% 8%



Rent Growth


SUBURBS TIME TO SHINE?

Suburb Fundamentals And Demand Drivers


LEASING MOMENTUM STRONG IN URBAN SUBMARKETS18Q1 vs. 17Q1 Absorption Comparison

Source: CoStar Portfolio Strategy As of 18Q1*Analysis limited to 54 major U.S. metros

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Urban CBD Secondary Core Prime Suburban Suburban

Current Quarter Four Quarters Prior

Four-Quarter Absorption

53.9%

30.8% 28.3%17.1%

11.6%


PRESSURE ON THE CORE IS MOUNTINGVacancy Rate & Under Construction % Of Inventory By District Type


0%

2%

4%

6%

8%

10%

12%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

CBD Secondary Core Prime Suburban Suburban Urban

% UC of Inventory Vacancy % Historical Avg. Vacancy Since 2001

Vacancy % UC of Inventory


SUBURBS ACCELERATE IN 18Q118Q1 vs. 17Q4 Absorption Comparison


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Urban Prime Suburban Suburban Secondary Core CBD

Current Quarter Prior Quarter

Quarter-Over-Quarter Absorption

101%

82%

32%14%

10%


RENT SLOWDOWN HIT CONSTRUCTION HEAVY, EXPENSIVE SUBMARKETS HARDEST

12-Month Rent Growth By Submarket District Type


3.2%

2.5% 2.4%

1.0% 0.9%

3.6%

2.7% 2.6%

1.4%

0.8%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Suburban Prime Suburban Urban Secondary Core CBD

Y/Y Same-Store Rent Growth

18Q1 17Q1


RENTER PREFERENCES

Shifting Demographics May Favor Suburbs


TWO LARGEST GENERATIONS ARE GETTING OLDERChange In Population By Age Cohort

Sources: Center For Disease Control; Moody's Analytics; U.S. Census; CoStar Portfolio Strategy As of 17Q4

(0.3)

(0.9)(0.1)

1.6 1.5 1.5

(1.0) (0.8)(0.4)

1.9 1.8

3.9

2.2

(2)

(1)

0

1

2

3

4

5

15 to

19

20 to

24

25 to

29

30 to

34

35 to

39

40 to

44

45 to

49

50 to

54

55 to

59

60 to

64

65 to

69

70 to

74

75 to

79

2016 Population Aged Forward To 2021 Immigration Total

Population Change (Millions, 2017-2021)

"Millennials" Aging&

Majority of Immigration

Five-Year Age Cohort

Aging Boomers


AGE & MARKET DICTATE OPTIMAL MODEL TYPETwo Bedroom-Plus Search Results By Metro

Sources: Apartments.com; CoStar Portfolio Strategy As of 17Q3

50%

54%

59%

53%

47% 47%

44%

49%

54%

47%

42% 42%

44% 44%

48%

45%

40% 40%

37% 37%

43%

39%

37%36%

30%

35%

40%

45%

50%

55%

60%

18-24 25-34 35-44 45-54 55-64 65+

Atlanta Dallas Los Angeles Boston

Proportion Of Searches That Are For 2-BR+


ARE WE BUILDING ENOUGH 2 BR UNITS?Unit Composition By Year Built In Tier I, II, & III Metros


66.0% 63.3% 59.1% 56.8% 63.1% 63.7% 66.7% 66.9%

34.0% 36.7% 40.9% 43.2% 36.9% 36.3% 33.3% 33.1%

0%

20%

40%

60%

80%

100%

1980-84 1985-89 1990-94 1995-99 2000-04 2005-09 2010-14 2015-17Studio/1 Bedroom 2 Bedroom+

Baby Boomers Start Having Children

Millennials Start Having Children

Unit Composition


These Costar Portfolio Strategy Materials Contain Financial And Other Information From A Variety of public and proprietary sources. CoStar Group, Inc. and its affiliates (collectively, “CoStar”) have assumed and relied upon, without independent verification, the accuracy and completeness of such third party information in preparing these materials.

The modeling, calculations, forecasts, projections, evaluations, analyses, simulations, or other forward-looking information prepared by CoStar and presented herein (the “Materials”) are based on various assumptions concerning future events and circumstances, which are speculative, uncertain and subject to change without notice. You should not rely upon the Materials as predictions of future results or events, as actual results and events may differ materially. All Materials speak only as of the date referenced with respect to such data and may have materially changed since such date. CoStar has no obligation to update any of the Materials included in this document. You should not construe any of the data provided herein as investment, tax, accounting or legal advice.

CoStar does not represent, warrant or guaranty the accuracy or completeness of the information provided herein and shall not be held responsible for any errors in such information. Any user of the information provided herein accepts the information “AS IS” without any warranties whatsoever. To the maximum extent permitted by law, CoStar disclaims any and all liability in the event any information provided herein proves to be inaccurate, incomplete or unreliable.

© 2018 CoStar Realty Information, Inc. No reproduction or distribution without permission.



NMHC RESEARCH FORUM MARKETS PANEL

Greg Willett

April 17, 2018


THERE’S COMPRESSION IN THE RANGE OF PERFORMANCES ACROSS METROS

U.S. average = 2.5%

Source: RealPage, Inc.

U.S. average = 5.0%

Rank Metro Annual Rent Growth

1 Sacramento, CA 6.5%

2 Las Vegas, NV 5.7%

3 Jacksonville, FL 5.4%

4 Orlando, FL 5.3%

5 Richmond, VA 5.1%

6 Riverside-San Bernardino, CA 4.7%

7 Phoenix, AZ 4.3%

8 Minneapolis-St. Paul, MN 4.0%

9 (tie) Fort Worth, TX 3.9%

9 (tie) Salt Lake City, UT 3.9%

Rank Metro Annual Rent Growth

1 Oakland, CA 13.0%

2 Portland, OR 12.9%

3 San Jose, CA 9.8%

4 San Francisco, CA 9.7%

5 Denver, CO 9.6%

6 Sacramento, CA 9.5%

7 Seattle, WA 7.8%

8 San Diego, CA 7.6%

9 Orlando, FL 7.2%

10 Phoenix, AZ 7.1%

2017 Rent Growth Leaderboard 2015 Rent Growth Leaderboard


As premiums for the right market selection become smaller …

• Individual property stories become increasingly important when making investment and development decisions

• Operational expertise gains significance in achieving total return


IS RENT GROWTH IN LINE WITH THE LONG-TERM NORM SURPRISING WHEN COMPLETIONS ARE SO HIGH?

2.6%

-6%

-4%

-2%

0%

2%

4%

6%

1Q04

3Q04

1Q05

3Q05

1Q06

3Q06

1Q07

3Q07

1Q08

3Q08

1Q09

3Q09

1Q10

3Q10

1Q11

3Q11

1Q12

3Q12

1Q13

3Q13

1Q14

3Q14

1Q15

3Q15

1Q16

3Q16

1Q17

3Q17

1Q18

year-over-year change in same-store effective rents for new leases in top 150 metros

19 quarters averaging 2.8% 31 quarters averaging 3.7%



WE HAVEN’T YET LOST MOMENTUM TO A MEANINGFUL DEGREE IN RENEWAL-LEASE PRICING

4.3%

0%

1%

2%

3%

4%

5%

6%

1Q10

3Q10

1Q11

3Q11

1Q12

3Q12

1Q13

3Q13

1Q14

3Q14

1Q15

3Q15

1Q16

3Q16

1Q17

3Q17

1Q18

renewal-lease rent growth in top 50 metros



NEW SUPPLY VOLUMES LOOK LIKELY TO CONTINUE AT AN ANNUAL PACE ABOVE 300K UNITS THROUGH MID-2019

320k as of 1Q 2018

0k

100k

200k

300k

400k

1Q05

3Q05

1Q06

3Q06

1Q07

3Q07

1Q08

3Q08

1Q09

3Q09

1Q10

3Q10

1Q11

3Q11

1Q12

3Q12

1Q13

3Q13

1Q14

3Q14

1Q15

3Q15

1Q16

3Q16

1Q17

3Q17

1Q18

3Q18

1Q19

annual completions in top 150 metros



THE SLOWDOWN IN STARTS EXPECTED NATIONALLY MIGHT NOT OCCUR IN METROS WITH CONSISTENTLY HEFTY DEMAND


Select spots appear vulnerable to D.C.-like outlooks, with strong

demand capacity prompting inventory growth

a little too aggressive for rent growth to sustain

much momentum.

0k

5k

10k

15k

20kmaximum target starts in 2018


WORKFORCE/BLUE-COLLAR NEIGHBORHOODS MAY DESERVE A CLOSER LOOK


Neighborhood Type

Metro Dallas Neighborhood

Current Monthly

Rent

Current Annual Rent

Growth

Urban Core Intown DallasOak Lawn

$1,678$1,528

-0.1%-1.6%

Upscale Suburb

FriscoLas ColinasRichardson

Allen/McKinney

$1,275$1,270$1,256$1,171

+0.9%+1.6%-1.8%-0.2%

Workforce/Blue-Collar

Area

MesquiteNortheast Dallas

South IrvingNorthwest Dallas

$940$924$921$885

+2.7%+5.8%+4.5%+4.5%

Neighborhood Type

Metro Atlanta Neighborhood

Current Monthly

Rent

Current Annual Rent

Growth

Urban Core MidtownBuckhead

$1,746$1,587

+1.2%-2.1%

Upscale Suburb

DunwoodyVinings

AlpharettaSandy Springs

$1,393$1,313$1,309$1,251

+1.7%+6.8%-0.4%-3.8%

Workforce/Blue-Collar

Area

DoravilleDouglasville

West MariettaStone Mountain

$975$941$908$846

+4.5%+4.9%+2.9%+4.2%


What are your expectations for apartment demand in 2018’s prime leasing season?

Stronger than in 2017 – 50%About the same as in 2017 – 33%

Weaker than in 2017 – 17%

Source: April 12 poll of RealPage webcast participants

Documents

2018...Class A Rent 4Q 2017 Class B Rent Rent Gap Phoenix $1,170 $981 $189 Las Vegas $1,162 $962 $200 San Antonio $1,152 $900 $252 Orlando $1,472 $1,201 …