K ASTEN L ONG COMMERCIAL GROUP RE/MAX Commercial Investment Specializing in Apartments since 1998...

KASTEN LONG COMMERCIAL GROUP

RE/MAX Commercial Investment

Specializing in Apartments since 1998

March 23, 2009


Group’s Sales History

Sales Volume:$291,697,200

Apartments: 351Units: 5,400

2004 - 2007 Ranked in Top Four Commercial Teams

for RE/MAX in the U.S.


Why Buy Apartments?

• Tenants Pay Mortgage (“Principle Reduction”)

• Cash Flow

• Depreciation (Helps with Taxes)

• Appreciation

• Many Tenants Reduce Risk (vs single tenant, etc)

• Similar to Owning Many Houses


With these signs everywhere, is it a good time to buy?


Will we get back

here?


Concerns (near term) • Rising Unemployment• Increasing vacancies• Increasing concessions• Employer Sanctions Law• Slowed population growth• Single-family houses being turned into rentals• Failed condo projects being rented• Tight credit markets


Greater Phoenix

Apartment Market - 2009


100 to 300 units (Price / Unit)


$0.00

$20,000.00

$40,000.00

$60,000.00

$80,000.00

$100,000.00

$120,000.00

$140,000.00

$160,000.00

2000 2001 2002 2003 2004 2005 2006 2007 2008

Pe

r U

nit

Newer (1993 to 2008)

Older (pre 1993)

Number of Apartment Sales


0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

3 0 0

3 5 0

4 0 0

4 5 0

Num

ber o

f Sale

s

Y e a r

R e p o r t e d b y C o S t a r & A R M L S ( 1 0 + U n i t s )


Permits Issued for New Apartments

Vacancy Rate

Reported Vacancy vs Economic Vacancy

Reported Vacancy (by ASU) – end of 4th qtr. (10.6%)• Actual Vacant Units (as reported by mgmt.)

Economic Vacancy (10% - 20+%)• “Reported Vacancy” plus loss of Rent due to:

- Move-In Specials

- Free Rent

- Discounted Deposits, use of apt. finder agencies, more advertising, give-aways, etc.



As of end 4th Quarter 2008:

23 Complexes Under Construction

• 7,579 Units

New Apartment Construction (100+ Units)

Greater Phoenix Population Growth


0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

5,500,000

Year

Po

pu

lati

on

69.2%

9.4%

21.4%

Single FamilyTH/Condo

Multifamily

Total Residential Units

1,061,173

143,671

328,763


Arizona Attracts Business (JOBS = Increased Population)• Low cost housing• Affordable work force• “Right to work” state• Climate• 365 day airport – 8th busiest in country• Business friendly• No natural disasters• Good infrastructure• Proximity to Mexico



Employment Change 1975-2009

-40

-20

0

20

40

60

80

100

120

Year

Job

Gro

wth

(th

ousa

nds)

2,000

4,000

6,000

8,000

10,000

Sal

esARMLS Reported Sales

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50,000-80,000

Buyer’s Market for HousesOver Supply of Single Family Houses “For Sale”

The reality of today’s market is that supply is at a RECORD HIGH level:

Quantity Date

Resale Listings 56,227 56,750 30,046 Feb 2003New Home Specs 2,601 3,987 2,400 May 2003

Supply of Homes

End of

November

2008

End of

November

2007

Previous Record


Positives (going forward)

• Almost no new apartments being started• AZ will recover faster than most states• AZ Fundamentals strong• JOB growth will occur and drive population

growth• Arizona Cardinals in SUPER BOWL


The Future

Demand for Apartments will INCREASE(Due to NO New Supply and Increased Population)

• Rental Rates will INCREASE• Concessions will DECREASE• CASH FLOW will INCREASE• Apartment Values will INCREASE



• Lifestyle• Location (Sky Harbor Airport)• Pro-growth Attitude• + 75% of State’s Total Economy• Competitive Tax Structure• Focused Business Incentives• Cost of Living• Education Centers: ASU, University of Phoenix, others• Infrastructure (Highways, Transit Systems)

Why Buy Apartments In Phoenix?vs Other Cities in Arizona

Top Employers in Greater PhoenixTop Employers in Greater Phoenix(non government & education)

Employer #

Wal-Mart Stores Inc. 31,785

Banner Health 22,152

Apollo Group Inc. (2) 14,783

Wells Fargo & Co. 14,000

Honeywell International Inc. (3) 12,700

Raytheon Co. 11,695

Kroger Co. (4) 11,281

Home Depot Inc. 11,000

Bashas' Supermarkets 10,753

Safeway Inc. 10,073

US Airways 10,021

Intel Corp. 10,000

JPMorgan Chase & Co. 9,200


Employer #

McDonald's Corp. 9,050

Freeport-McMoRan Copper & Gold Inc. (5)

8,066

American Express Co. 7,500

Target Corp. 7,373

Pinnacle West Capital Corp. 7,200

Bank of America Corp. 7,000

Scottsdale Healthcare 6,700

Walgreen Co. 6,663

Catholic Healthcare West 6,191

Circle K (6) 5,375

CVS Caremark Corp. (7) 5,170

Major Fortune 500/1000 Major Fortune 500/1000 Employers in Greater PhoenixEmployers in Greater Phoenix

Allied Waste*Amkor Technology*AT&T Inc.Avnet*Bank of AmericaBoeingFreeport-McMoRan Copper & Gold, Inc.*General DynamicsGiant Industries*Honeywell InternationalInsight Enterprises*Intel


J.P. Morgan/Chase Meritage Homes*Morgan Stanley MotorolaPetSmart*Pinnacle West Capital*Pulte HomesQwest CommunicationsSwift Transportation*US Airways*Verizon CommunicationsWells Fargo

*Company HQ in Greater Phoenix. Source: Fortune 1000, April 2007.

What others said about Phx in 2008What others said about Phx in 2008Top 10 Best States for Business July 2008Arizona claimed a spot in the top 10 in a study of the nation’s best states for

doing business by marketing company Development Counsellors International.

#3 State for Cost of Labor July 2008Business Facilities ranked Arizona 3rd in terms of cost of labor based on

unionization rates, unemployment insurance tax rates, worker’s compensation premium rates, average hourly pay in manufacturing, average annual pay in the private sector, and the annual cost of health coverage.

A Hot Spot for Young Professionals April 2008Greater Phoenix ranks 5th in a Bizjournals’ study that identifies which

metros have the strongest opportunities for young adults.


What others said about Phx in 2008 - Part 2What others said about Phx in 2008 - Part 2Going Green July 2008Arizona was ranked the 8th Greenest State in Business Facilities’ 2008 Ranking

Report. The ranking is based on nine eco-related criteria including incentives for renewable energy and energy efficiency, and pounds of pollution released.

Best Places to Live July 2008Four of Greater Phoenix’s communities ranked among CNN Money’s best small

cities to live. The communities ranked are Chandler, Scottsdale, Peoria and Gilbert.

Secure Water Future July 2008The Sun Corridor, especially the Phoenix area has the most secure water supply

among the five Megapolitans in the Intermountain West according to A Brookings study.

Top 10 Megapolitans January 2006Greater Phoenix is part of the Sun Corridor Megapolitan, one of 10 megapolitans

named by CNN Money expected to see the bulk of an estimated $25 trillion investment in the US by 2030.


How we help

Identify Possible Properties for Acquisition• Location• Financials• Physical Condition


Property AnalysisLocation

– Submarket vacancy rate– Employment engines– Transportation Routes

Bus, Light Rail, FreewaysFinancials

– Rents– P & L’s– Upside potential


Respresentation During Negotiations & Escrow

Negotiate Contract– Obtain good Price and Provide buyer with “free look” before any money “at risk”

Due Diligence– Physical Condition– Use professional inspectors – “no surprises”

– Take apart all aspects of the property– Help select management company


Support after Acquisition

Provide review of on-going operation



RE/MAX Commercial Investment

www.KLCommercialGroup.com


K ASTEN L ONG COMMERCIAL GROUP RE/MAX Commercial Investment Specializing in Apartments since 1998...

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