Marcus & Millichap / IPA Multifamily Forum: New England Speaker Slide Compilation

9:30 AM – General SessionThe Urban

Boom: Rentals, Condos and Mixed-Use

Developments in Downtown Boston

Development in the Boston Area

Source: Axiometrics Market Performance Summary, Boston-Cambridge-Newton MSA 3Q16

Bulfinch Crossing

Author: Thomas N. O’Brien, HYM

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Progress: Mayor’s 2030 Housing Goal

Author: Boston Planning & Development Agency, Brian Golden

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10,000

20,000

30,000

40,000

50,000

60,00053,000

20,00018,786

5,270

9Confidential

Luxury New Construction (or Newer) Apartment Rentals – by BuildingThe below highlights the last full year of rents (Sept 2015 through Aug 2-16) for some of the newest/newer luxury apartment buildings in Boston and neighborhoods just outside. The below represents asking and effective rents and excludes units believed to be affordable. Units highlighted in orange are currently in lease-up stages. Occupancy is based on the most recent month of available data – August 2016.

Building Area Year Built Occupancy (Aug-2016) Avg Size Avg Ask Rent Avg EFF Rent Avg Ask PPSF Avg EFF PPSFZinc East Cambridge 2015 43% 915 $3,489 $3,164 $3.90 $3.54The Victor at North Station West End/North End 2013 92% 889 $3,381 $3,136 $3.93 $3.64Avalon North Station West End/North End 2017 NA 875 $3,527 $3,527 $4.09 $4.09Olmsted Place Jamaica Plain 2015 75% 850 $3,475 $3,227 $4.17 $3.85Continuum Allston 2015 80% 776 $3,155 $3,088 $4.23 $4.14315 on A Seaport 2013 95% 856 $3,491 $3,488 $4.27 $4.27Watermark Kendall East East Cambridge 2013 95% 756 $3,248 $3,002 $4.51 $4.19AVA Theater District Midtown 2015 90% 826 $3,749 $3,516 $4.59 $4.32Ink Block South End South End 2014 96% 878 $3,943 $3,797 $4.60 $4.42The Tower at One Greenway Midtown/Chinatown 2015 86% 915 $4,135 $3,693 $4.63 $4.13Radian Boston Midtown/Chinatown 2014 94% 896 $4,216 $4,173 $4.71 $4.65Twenty/20 East Cambridge 2015 61% 791 $3,702 $3,353 $4.77 $4.33Kensington Midtown 2013 93% 848 $4,177 $4,115 $5.00 $4.92Avalon North Point Lofts East Cambridge 2014 86% 489 $2,380 $2,380 $5.01 $5.01One Canal West End/North End 2016 50% 946 $4,805 $4,582 $5.10 $4.86100 Pier 4 Seaport 2015 95% 822 $4,123 $4,107 $5.11 $5.09Van Ness Fenway 2015 92% 715 $3,558 $3,332 $5.12 $4.77Troy Boston South End 2015 92% 645 $3,266 $3,145 $5.13 $4.95The Arlington Back Bay 2014 97% 1,050 $5,522 $5,378 $5.25 $5.11Watermark Seaport Seaport 2016 78% 625 $3,474 $3,218 $5.76 $5.33Avalon Exeter Back Bay 2014 93% 1,126 $6,684 $6,682 $5.88 $5.8830 Dalton Back Bay 2016 NA 1,322 $8,739 $8,739 $6.26 $6.26

PortfolioPrime sites in urban mixed use walkable communities at transit nodes from Boston to NYC

Property Watermark Kendall West

Watermark Kendall East

440w42 Watermark Seaport

Watermark Court Square

Watermark Central

Pratt Landing

Status Completed 2007

Completed 2013

Completed 2007 Sold

Completed 2016

Under Construction

In Development

In Development

Walk Score 90 90 98 78 96 97 88

Transit Score 81 81 100 92 100 71 51

LEED Score GOLD SILVER SILVER GOLD SILVER GOLD GOLD ND

Size 24 floors375,000 sf321 units15,000 sf retail

17 floors135,000 sf144 units10,000 sf retail

60 floors1 M sf800 units600 rooms50,000 sf retail

17 & 6 floors300,000 sf346 units25,000 sf retail



6 floors600,000 sf500 units200 rooms80,000 sf retail

Capital Principal Insurance

Principal Insurance

CalPERS Skanska + Prudential

CBD + Principal Insurance

Pension Fund Northwood Investors

10:45 AM – Track AGoing for Gold: The

Rapidly Changing Debt and Equity Landscape


Recent Financings

Author: Dan Botwinik

Refinance - Stabilized Multifamily in Worcester MA• Amount: $2,282,000• Term: 10 years• Rate: 4.28% fixed rate• Non-recourse through Freddie Mac small balance programAcquisition - Portfolio of 21 Multifamily Buildings in North Central MA• Amount: $5,040,000• Term: 7 years• Rate: 4.625% fixed rate• Recourse through a regional bankConstruction - Historic Tax Credit Renovation of Rectory in Salem MA• Term: 18 months I/O followed by 5 years• Rate: 4.25% fixed rateConstruction - 143 Unit Single Family 55+ Development in Northeast CT• Term: 3 years• Rate: 4.5% fixed rate

T


Metrics that Guide our Industry• The Q2 2016 national Homeownership Rate dipped below 63%. It

peaked at just over 69% in 2005- its been in a decline ever since ‘05.

• On a national level, every 1% drop in the homeownership rate translates to an additional 1.2M Renters.

• Homeownership rates for the Northeast hit 59.2% Q2 from 60.4% Q1.

• In the Boston MSA the homeownership rate fell from 66.2% in ‘08 down to 59.3% in ‘15.

• In the time period between ‘08 and ‘15 the number of renter households increased by 148,518.

• ALL of this has provided the huge tail winds in the multifamily industry. I don’t see this changing but rental affordability has me concerned. We’ve just recently witnessed some Metro Class A rends softening.

• Notable Financing Trends that Debt is Excited about: Green buildings/sustainability. Small Balance Loans. Affordable communities/workforce housing. Manufactured Housing.

Author: Brian Salyards

(Census Bureau, 2016)

THIS SPACE RESERVED / DO NOT COVERTHIS SPACE RESERVED / DO NOT COVER Author: John R. Connelly, Jr.

Commercial real estate investable universe• Measured capitalization by property typeProperty type Billion

square feetValue

(billion USD)

Apartment 11.6 1,651

Industrial 12.4 587

Office 4.9 1,174

Retail 6.5 1,388

Total 35.4 4,800

Apartment31%

Indus-trial

10%Office 22%

Retail 27%

Other 10%

• Source: NCREIF, Axiometrics. Moody's Analytics, CoStar Group, Inc., and CBRE Econometric Advisors as of December 2015 Market allocations by property type are derived from a measured inventory of commercial real estate space and estimates of price per square foot. Data may not sum due to rounding.

Updated: April 12, 2016


Refi, Construction Take-out Multifamily Rental in Cambridge• Loan Amount: $25,000,000• Term: 7 years• Rate: 3.85% fixed rate• DSCR: 1.25x• LTV: 70%Acquisition, Value Add Multifamily Rental in Philadelphia• Loan Amount: $48,000,000• Term: 9.5 years(2.5 years construction; 7 year Floater w/ 24 months I/O)• Renovation Budget: $30,000 / unit• LTC: 80%• Future Funding: $12,000,000Freddie Mac Green UP Program• For assets 20 years and older• Save 15% (or more) on water/sewer or utilities• Cost of Study (one-time visit) reimbursed, up to $3,500• Save on interest rate versus standard quote

Author: Freddie Mac

RECENT FINANCINGS

10:45 AM – Track BLiving the Dream: An Inside

Look at How Today’s Property Managers are Competing for Residents & Managing the

Bottom-Line

Key Performance Indicators: AVBWhat is the customer telling us?Net Promoter Score

How are we doing v. the market?Net Outperformance Score

Author: Sarah Mathewson

How is it calculated? % of favorable - % unfavorable


Importance of Review Sites in the Rental Cycle

Stephanie Williams | Bozzuto Management

At what point did you utilize online ratings and reviews to gather information about the apartment communities you were interested in?

“

”Source: J Turner Research: Marketing to Different Generations: Emerging Online, Language, and Lifestyle Trends—Courting the Baby Boomers, September 2015


Completed Lease Up – Greystar Case Study

Author: Kevin Sheehan, Greystar

•Accessible ‘Big Data’ •The ‘Truth’ in comp market rents•Daily forecasting and pricing review•Increased revenue I.Q.•Dynamic lease expiration mgmt.•Tested market metrics that balance bedroom level expiration with demand expectations in submarket

•Increase weekly rate review frequency •System expertise from GRM•We control the amount of supply the market sees•24/7 portfolio rental revenue access•Improved asset utilization•Hard code floor or floor-plan to monitor rent values to proforma

Asset Details: Austin Market, 3rd Party Owner, 60-Day Construction Delay


Retaining Top-Level TalentMaking Corporate Social Responsivity Work for You

Author: Andrew Chaban, CEOPrinceton Properties Management

Utilize CSR to evaluate, build, & manage programs that establish & encourage socially responsible business practices; all while measuring:

Resident Retention Corporate responsibility (environmental

stewardship, philanthropy) Employee retention & engagement

CSR is a ‘Must-Do’ – Reaching the Millennials and Top-Level Talent

CSR programs aid in attracting & retaining employees and residents

11:35 AM – Track ABeyond Boston: Outer Urban Edge, Suburban and into New England

© 2008 Boston Property Development, LLC© 2013 Boston Property Holdings

Select Outer Urban MarketsLast Six Month Market Statistics (MLS)

• Development Site Availability• Permitting Cycle / Time to Market• City Infra-Structure Investment• Neighborhood Relationships

Other Key Factors:

Condo Average Direct Commute City / Neighborhood Sales PSF Rent Train Watefront TimeSouth Boston $621 $2,927 Y Y 10 Somerville $537 $2,681 Y Y 25 Jamaica Plain $459 $2,630 Y N 25 Newton $415 $3,019 Y N 25 Quincy $337 $1,748 Y Y 25

THIS SPACE RESERVED / DO NOT COVERTHIS SPACE RESERVED / DO NOT COVER Author: Andrew Montelli

Market 2013 2014 2015 T-12 Aug 2016 AVG

-0.30% 3.69% 5.11% 2.73% 2.81% 2.42%-0.41% 3.56% 3.95% 2.58% 2.42% -0.39%

6.78% -0.35% 4.87% -1.40% 2.48% 0.83%7.04% -0.37% 4.84% -8.18% 0.83% -1.64%3.42% 3.36% 3.62% 4.28% 3.67% 3.54%3.16% 3.14% 3.41% 4.45% 3.54% -0.13%

5.16% 2.79% 3.00% 6.06% 4.25% 3.54%3.16% 3.14% 3.41% 4.45% 3.54% -0.71%

12.88% 3.45% 9.60% 4.57% 5.88% 5.22%11.30% 4.43% 9.23% 2.00% 5.22% -0.65%-2.78% 1.45% 8.14% 12.42% 4.81% 1.48%-4.09% 0.19% 7.65% 2.17% 1.48% -3.33%

Average Rental Growth 2.46% 2.88% 6.87% 5.73% -1.14%

[* ] 2012 the property had 24 units down due to a fire in 2010

Net Affect of Property Taxes

Net Property Tax Affect

Middletown, RI

South Kingstown, RI

Franklin, MA

Fall River, MA

Groton, CT [* ]

New London, CT

# of Units Per Unit % of Revenue

268 1,136.04$ 6.37%89 1,127.63$ 7.11%

171 1,592.91$ 11.96%156 1,373.55$ 11.50%240 1,103.83$ 8.36%132 1,357.45$ 9.87%260 5,514.24$ 25.97%195 918.72$ 6.57%Jacksonville, FL

Landings Real Estate Group Portfolio - Property Taxes 2016/ 2017

Property

Middletown RIFranklin , MANew London, CTGroton, CTFall River, MASouth Kingstown, RITown of Newburgh, NY

Market 2012 2013 2014 2015 2016Avg

Annual % Change

Middletown, RI 11% 2% 2% 21% 2% 8%South Kingstown, RI 0% -3% 0% 0% 28% 5%Franklin, MA 3% 3% 3% 3% -2% 2%Fall River, MA 13% 6% 4% 13% 12% 10%Groton, CT 7% 14% -9% 4% 27% 9%New London, CT 5% 13% 11% 4% 2% 7%Average Change in % 7% 6% 2% 8% 12%

Property Tax Difference History

Market 2011 2012 2013 2014 2015 T-12 Aug 2016 AVG

Middletown, RI 4% 2% 0% 4% 5% 3% 2.97%South Kingstown, RI n\a n\a 7% 0% 5% -1% 2.48%Franklin, MA 2% 5% 3% 3% 4% 4% 3.59%Fall River, MA n\a -2% 5% 3% 3% 6% 2.97%Groton, CT [* ] -8% 2% 13% 3% 10% 5% 4.00%New London, CT 2% 0% -3% 1% 8% 12% 3.65%Average Rental Growth 2% 1% 2% 3% 7% 6% 3.28%

Rental Growth

Christopher C. Bicho, President


WESTERN MA MARKET OVERVIEWCURRENT MARKET STATUS:

• VERY MATURE•LITTLE OR NO NEW CONSTRUCTION•UNREASONABLE SELLER EXPECTATIONS•CAP RATE COMPRESSIONACQUISITION UNDERWRITING CONSIDERATIONS:•MOST PROPERTIES BROUGHT TO MARKET TIRED•MAJOR UPGRADING REQUIRED•DOES CAP RATE REFLECT TRUE RETURN?•LOW INTEREST RATES = ARTIFICIALLY HIGH VALUES

WHEN THE MUSIC STOPS, WHO WILL STILL HAVE A CHAIR? ♫ ♫

Author: Eric Suher, Suher Properties

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In Construction

ProjectChase II – Malden, MA 292The MERC – Waltham, MA 269Northwest Park Phase II – Burlington, MA 117City Square – Worcester, MA 368

Recently Completed

Units

Author:

The Tremont – Burlington, MA 180Element One – Stamford, CT 175Summer House – Stamford, CT 226

MANCHESTER | CONCORD | PORTSMOUTH | BOSTON

Text here.

Mixed-usedevelopmentsdraw Millennials.

Karen S. McGinley, EsquireChair, Real Estate Practice [email protected] 603-695-8569

Devine Millimet111 Amherst StreetManchester, NH 03101DevineMillimet.com

11:35 AM – Track BThe Value-Add

Renaissance: Strategies that Pay Off

XYZ Apartments ∙ Back Bay - Boston ∙ 120 UnitsNOI on Acquisition (Jan -16): $1.27 million (3% Cap rate)

Projected NOI upon Completion: $4.5 million (9% Cap Rate)

Before ∙ 2 Bedroom ∙ $2,350/month After ∙ 2 Bedroom Split ∙ $4,200

Acquisition Cost: $45 million Cost to Renovate: $7.5 million – Less $2.5 million cash flowTotal Cost: $50 million

THIS SPACE RESERVED / DO NOT COVERTHIS SPACE RESERVED / DO NOT COVER Author: Marc Rivard, PE, SE Text In Questions: (469) 828-6469

Marcus & Millichap / IPA Multifamily Forum: New England Speaker Slide Compilation

Real Estate

Transcript of Marcus & Millichap / IPA Multifamily Forum: New England Speaker Slide Compilation