State of Atlanta Market

Joshua Goldfarb, Managing Director

• Class A & B+: 1990 to Newer Construction

Defining the Two Cities

• Class B- & C: 1989 to Older Construction

• Class A & B+

1) Movement toward renting and away from purchasing a home

2) Availability of Fannie Mae and Freddie Mac financing

3) Lack of financing for other property types (office & retail)

4) Low interest rates

5) Leverage to low cap rates

CONCLUSION: Leads to Low Cap Rates and Strong

Values

History of Why Values Are as They Are Today

• Class B- & C1) Lack of attractive financing

- No Fannie Mae or Freddie Mac

2) Asset operations must be stable for agency financing- Local balance sheet lenders offer financing, but very conservatively

3) Tenants are struggling to maintain consistent income thus

rental rates are low and delinquencies are high

4) Notable high level of foreclosures has thrown supply and

demand out of balance, creating an over-supply

CONCLUSION: Leads to Weak, Stale Values

History of Why Values Are as They Are Today

• Class A & B+

1) Pension Funds

2) REITS

3) Wall Street

4) Sophisticated Syndicators

Who is Investing in Atlanta

• Class B- & C

1) Some local operators

2) Mostly foreign investors taking advantage of currency

exchange rates and Atlanta’s recent depressed state

• Class A & B+o Cap Rates:

• Class A ranges from 5% to 6%

• Class B+ ranges from 5.5% to 6.5%o IRR:

• Class A ranges from 8% to 12%

• Class B+ ranges from 10% to 15%

Values

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

5%6%

6%7%

8%

12%

10%

15%

Cap Rate

IRR

Class A Class B+

• Class B- & Co Cap Rates:

• Class B- ranges from 7% to 8%

• Class C ranges from 8% to 9%o IRR:

• Class B- ranges from 15% to 20%

• Class C ranges from 20% to 25%

Values

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

5%

6%6%

7% 7%

8% 8%9%

8%

12%

10%

15% 15%

20% 20%

25%

Cap Rate

IRR

Class A Class B+ Class B- Class C

• Atlanta Multifamily market has seen development activity over the past 12 months and is expected to continue through 2013

• Strongest activity has been in the in-town markets (Buckhead & Midtown)o Why?

1) Increased Generation “Y” presence in the job market is driving demand for in-town apartments

2) Buckhead is encouraging walkability of its streets with special zoning that lends itself to a friendly pedestrian and retail environment

3) In-town market has strong average rental rates and low vacancy rates compared to suburban markets

4) Availability of debt for in-town markets has accumulated into an impressive pipeline- 5 projects have broken ground and another 15 are up for proposal

Development

A rendering of JLB Partners' Village at Buckhead on Pharr Road, the first of a slew of new Buckhead multifamily developments to be delivered starting next year. Image courtesy of JLB Partners.