Multi-Family Market Summary & Activity Update Fall 2013

Columbia, SC

Columbia 1

IntroductIon

USC Williams-Brice Stadium

Capstone Apartment Partners prides itself on the continual value contributions we are able to offer our industry; thus, we produce periodic Multifamily Market Summaries to further inform the clients and industry we serve. Capstone believes that this market snapshot will be beneficial to current owners, operators, investors, and other industry professionals who are active in the Columbia MSA, as well as others who are looking to break into this market.

Hub at Columbia

contents

Introduction 1

Market Commentary 2

Economic Overview 3

Sales Transactions 4

Development Pipeline 5

Why Choose Capstone? 6

Richland County Public Library

Market coMMentary

Modern Lifestyle with Historical Charm

Formed in 1786, Columbia is the largest city in South Carolina, and serves as the state capital. Columbia is centrally located within the state in Richland County, and is home to the University of South Carolina’s main campus. The Army’s largest and most active training base, Fort Jackson, is also located in Columbia, and completes basic training for 36,000 soldiers and advanced individual training for 8,000 troops each year. This MSA’s diverse economy, institutions of higher education, and tax incentives make it the ideal location for business.

Thanks to its year-round mild climate and a cost of living index well below the national average at 0.89 (U.S.=1.0), residents can enjoy area attractions that include: the Riverfront Park and Canal, Congaree National Park, Edventure Children’s Museum, Hampton Preston Mansion, Riverbanks Zoo and Garden, or golf at any one of six public and private golf courses. Leisure activities aren’t the only benefit of living in a city with such a low cost of living. In fact, Forbes placed Columbia in the top 100 U.S. cities with the lowest cost of doing business.

Strong Infrastructure

Richland County has twelve interchanges on I-26, sixteen on I-77 and eleven on I-20. Charlotte, NC is approximately 90 miles north on I-77, and the Port of Charleston is less than a 60-minute drive down I-26. Two airports serve the residents and businesses of this market. Columbia Metropolitan Airport is a 15 minute drive from Columbia’s CBD, and the smaller Jim Hamilton – L.B. Owens Downtown Airport is also easily accessible. The county is further served by both Norfolk Southern and CSX rail lines. Columbia’s location and far-reaching infrastructure have made it the ideal place for transporting military and manufacturing goods. Moreover, the health and

insurance industries here have blossomed as many people are readily able to travel to these highly sophisticated medical facilities.

Multi-Family Fundamentals

The vacancy rate for the Columbia area remained unchanged over the past six months at its current rate of 8.2% despite 479 new units coming online during the same timeframe. 294 units of positive absorption were achieved market-wide in the last six months, and the Northwest submarket experienced the highest absorption rate with a net gain of 287 renters. Same-store rents increased by 1.4% over the past six months, and current annual rent growth in the MSA is at 3.6%. Capstone projects rental rates will increase 3.0-4.0% annually over the next year as the number of employment opportunities grow and new deliveries remain relatively low.

Under Construction and Proposed Development

There are currently 1,758 units proposed and 677 units under construction market-wide. The desirable Northeast and Central submarkets continue to be of the greatest interest for future development. Capstone expects demand to outpace supply even as construction growth is likely to increase in 2014; thus allowing the vacancy rates to improve to the level experienced in other Southeast markets. The market demand is expected to remain strong in the next eighteen months, and new development is certainly a viable option for investors looking to enter this region.

Apartment Comparison by Class

Class Units Vacancy Rate Avg. Sq. Ft. Avg. Rent Avg. Rent/Sq. Ft.

Lease-up 1,440 32.5% 1,032 $1,067 $1.03

A (1-5 Years in Age) 3,570 3.1% 1,147 $1,145 $1.00

B (6-15 Years in Age) 8,725 5.0% 1,125 $994 $0.88

C (16-30 Years in Age) 8,876 5.5% 925 $798 $0.86

C- (30+ Years in Age) 11,729 11.3% 942 $629 $0.67

Stabilized Averages 32,900 7.2% 1,008 $828 $0.82

Totals/Averages 34,340 8.2% 1,009 $838 $0.83

Employment Announcements

Dayton Rogers Manufacturing Company will establish an operations facility in Richland County creating 134 new jobs.

2AM Group, supplier of logistics, manufacturing and quality services to the automotive, aerospace and marine industries, announced plans to establish a new production facility in Richland County creating 100 new jobs.

Constantia Hueck Foils LLC, an Austria-based manufacturer of foil- and film-based packaging, will expand its current production facility in Richland County. The $12 million investment is expected to generate 15 new jobs.

AT&T announced that it is looking to fill more than 120 openings in South Carolina this year, including more than 70 new jobs.

econoMIc overvIew

Unemployment Rate and Trend

Columbia’s unemployment rate in October was 6.5%, and the state’s seasonally adjusted unemployment rate declined significantly in October to 7.5% from 7.9% percent in September. Columbia’s percentage is well below the national unemployment rate of 7.3%. Since October 2012, the state’s overall unemployment rate has decreased by 1.3% and includes a decline of 26,950 in the number of unemployed.

10 Largest Employers in Richland CountyRank Company Industry Employment

1 State of South Carolina Government 24,791

2 Palmetto Health Healthcare 9,000

3 Blue Cross Blue Shield of SC Insurance 6,459

4 University of South Carolina Education 5,997

5 S.C. Department of Transportation Government 4,418

6 Richland County School District 1 Education 4,036

7 S.C. Department of Mental Health Healthcare 3,798

8 Richland County School District 2 Education 3,300

9 S.C. Department of Health and Environmental Control Government 3,09610 AT&T Communications 2,400

Employment Wages

There are 339,600 employees in the MSA who earn a mean hourly wage of $19.50 and average annual income of $40,560. In comparison, the state and national annual income averages are $38,700 and $45,790, respectively.

Historical Population2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Columbia 123,257 126,529 123,856 123,511 125,963 127,849 129,333 130,040 130,799 131,686

Richland County 335,370 343,136 345,398 351,707 360,159 366,432 372,023 385,737 389,377 393,830

Columbia MSA 673,209 685,098 691,990 705,320 719,622 732,558 744,730 769,819 776,793 784,745

South Carolina 4,146,474 4,201,306 4,256,199 4,339,399 4,424,232 4,503,280 4,561,242 4,635,835 4,673,348 4,723,723

Source: U.S. Census Bureau

3Columbia

sales transactIons

214

248261

250

0

50

100

150

200

250

300

Class A Class B Class C AVERAGE

Average # of Units Per Transaction

Class A

Class B

Class C

AVERAGE

2006

1989

1974

1983

195519601965197019751980198519901995200020052010

Class A Class B Class C AVERAGE

Average Year of Construction

Class A

Class B

Class C

AVERAGE

$15,737,500$16,412,500

$5,771,719

$9,893,032

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

Class A Class B Class C AVERAGE

Average Transaction Sales Price

Class A

Class B

Class C

AVERAGE

$72,401$66,383

$24,349

$42,366

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

Class A Class B Class C AVERAGE

Average Price Per Door

Class A

Class B

Class C

AVERAGE

Sales Transactions: 2012 and 2013Community YOC City Sale Date Units Sale Price Price Per Unit

Wellesley Place 1975 Columbia 9/12/2013 100 $3,025,000 $30,250

Crossroads 1979 Columbia 6/5/2013 622 $9,000,000 $14,469

Preserve at Spears Creek 2008 Elgin 6/3/2013 240 $19,625,000 $81,771

St. Andrews 1973 Columbia 5/30/2013 224 $3,000,000 $13,393

Hampton Courts 1986 Columbia 5/30/2013 276 $17,825,000 $64,583

Harbour Landing 1974 Columbia 5/2/2013 200 $7,325,000 $36,625

Reserve at Riverwalk 1992 Columbia 4/1/2013 220 $15,000,000 $68,182

Ravenwood Hills 1969 Columbia 3/7/2013 112 $2,428,583 $21,684

Peachtree Place 1978 Columbia 3/1/2013 240 N/A N/A *

Reserve at Lake Carolina 2003 Columbia 2/27/2013 188 $11,850,000 $63,032

Quail Run 1973 Columbia 2/22/2013 332 $9,851,733 $29,674

*Pricing information not disclosed.

Class A represents properties built from 2013-2000, Class B includes properties constructed from 1999-1985, and Class C signifies properties constructed in 1984 or earlier.

Columbia 5

developMent pIpelIne

1

Communities Proposed (100 Units and Above) Communities Under Construction (100 Units and Above)Developer Community Units Road/Intersection Developer Community Units Road/Intersection

1 Woda Group 520 Place 122 520 Pendleton St. 1 Core Campus Hub at Columbia 258 1426 Main St.

2 Park7 Group Monarch at USC 199 Huger/Blossom St. 2 Edward Rose Dev. Killian Lakes 12 9559 Farrow Rd. *

3 PMC Property Group Olympia 172 Whaley/Wayne St. 3 Inspired Comm. Town Center at Lake Carolina 260 L. Carolina Way/Hard Scrabble Rd.

4 Berry & Company Arbors at Sunset Village 234 Sunset Blvd. 4 Certus Partners Ballentine Crossing 315 114 Ballentine Crossing Ln. *

5 McCall Capital Enclave at Blythewood Crossing 156 2051 Blythewood Crossing Ln. *

6 Estates Properties Forest Drive 125 Gregg Pkwy.

7 Blue Ridge Co. Palms at Premier Park 240 Clemson Frontage Rd.

8 Middle St. Partners Atlantic at Parkridge 294 356 Lake Murray Blvd.

9 Inspired Comm. Greenlawn Apartments 216 500 Greenlawn Dr.

*Second phase of construction. *Second phase of construction.

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Market Covering Investment Sales Team

Alex McDermottInvestment Advisor704.533.4865alex@capstoneapts.com

Austin GreenInvestment Advisor

704.746.9333austin@capstoneapts.com

Beau McIntoshManaging Partner704.877.5681beau@capstoneapts.com

Brian FordManaging Partner

704.962.9462brian@capstoneapts.com

why choose capstone?

North Carolina South Carolina Georgia Virginia Tennessee KentuckyThe People Sell the DealCapstone’s Southeast & Mid-Atlantic Investment Sales Team is among the market leaders within our industry sector and respective region. We place client service above all else, and can guarantee that no one else will work smarter and harder in achieving the highest level of results for our clients. We don’t rely on a logo to sell the deal, but rather utilize the industry expertise and investment acumen, tremendous drive and work ethic, and unbeatable salesmanship of the team members assigned to each project. At the end of the day, it’s the individuals that drive value and sell the deal, and we know the capabilities of our individual team members are second to none.

Market Expertise & Product NicheCapstone sits atop the private capital sector of multi-family investment sales for multiple reasons. Our deliberate and concentrated focus and expertise in not just the primary markets of the Southeast & Mid-Atlantic, but also the secondary and tertiary markets within our region identifies us as the ideal candidate for these assignments. Capstone’s investment sales team has completed a multitude of transactions across the secondary & tertiary markets of the Southeast & Mid-Atlantic, and our track record of success can be attributed to our comprehensive coverage and expertise among these markets, as well as our relationships with the owners and investors who remain active in this environment.

National Exposure via Cutting Edge TechnologyCapstone has developed and maintains industry leading national databases, expansive information delivery methodologies, and various proprietary activity tracking systems. These tools are utilized daily by the investment sales team, analysts, and back-office support staff allowing for optimal operational efficiency. This enables Capstone’s investment brokerage team to spend nearly all of its time servicing clients, interacting with industry players and active asset traders, and promoting transactions.

Reputation and ResultsCapstone prides itself on its impeccable industry reputation and the core values and behaviors of the firm that drive daily operations. The firm possesses an unblemished reputation and track record industry-wide, and, as such, the firm’s trusted relationships among the apartment investment community continue to facilitate seamless, fluid, and successful sales transactions.

Charlotte Office:1600 Camden Road | Suite 100

Charlotte, NC 28203** Information in this report has been provided by the following resources: The Columbia Real Data Report November 2013, Columbia Chamber of Commerce, CentralSC.org, South Carolina Department of Employment and Workforce,

REIS Report, Costar, The Business Journal, U.S. Census, Bureau of Labor Statistics, county tax records, and various multi-family industry contacts.