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Real Estate Analysis and Investor Presentation

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Table of Contents Executive Summary Basic Fundamentals Apartment Fundamentals Office Fundamentals Retail Fundamentals

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Executive Summary The objective of this presentation is to analyze the various cities in terms

of their attractiveness to real estate investment. The 3 main real estate product types analyzed are rental apartments,

office and retail. First the cities are classified based on basic real estate fundamentals like

migration, cost of living, employment growth and population growth. Then the cities are classified based on specific fundamentals for each of

the 3 product types. A cross analysis of various factors are used to achieve efficient analysis.

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

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Basic Fundamentals1)Migration & Cost of

Living2)Employment &

Population growth

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Basic Fundamentals

1) Migration & Cost of Living Migration of people in to a city/metro can have stellar impact on

the economy of that area. In particular it has a deep impact on real estate.

Therefore, migration trends of a city/area can be considered as a very important factor in determining the demand trends for various types of real estate space.

Another factor which is worthy of being included in the analysis is the cost of living, which is one of the major factors influencing people to migrate in to a particular city.

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

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Cities with high incoming migration

City Average migration (2003-07) (in 000)

Phoenix 93.4Atlanta 86.8Inland Empire 67.1Dallas- Fortworth 61.5New Orleans 60.9

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

Phoenix has the highest incoming migration with an average of 93400 for the last 5 years.

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Cities with low cost of living

City Living Cost Index (US=100)

Cleveland 87Pittsburgh 87Oklahoma city 88Indianapolis 88Cincinnati 88

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

The living cost index for these 5 cities are almost the same, with Cleveland topping the list with 87. Note that US is taken as the base 100.

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Strong

Weak

1) Both incoming migration number and cost of living index favorable2) Attractive markets for real estate investment based on these 2 factors

1) Incoming migration is low, but cost of living index favorable

2) Markets weak, because these cities are not able to attract people

1) Though incoming migration is high, cost of living index is not favorable2) Solid markets because, it is able to attract large number of people, though cost of living is high

1) Both incoming migration number and cost of living index unfavorable

2) Unattractive markets because both factors are not in favour

Explanation Strong Solid

Weak Disaster

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Solid

Migration & Cost of Living

87 147

2600

93400

-88200

Living cost index

Mig

ratio

n

1234

5

12

34 5

1

2

Strong 1.Phoenix 2.Atlanta 3.Dallas 4.Orleans 5.Houston

1.Inland Empire

2. San Jose

1.Pittsburg 2.Chicago 3.Cleveland 4.Detroit 5.New York

1.San Diego 2.Long Island 3. San Francisco

4.Orange County

5.Los Angeles

5

4

3

21

WeakDisaster

117

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Phoenix

Attractiveness matrix

Based on incoming migration and cost of living the attractiveness of cities are plotted.

Attracts the highest incoming migration

Attracts high incoming migration & cost of living lower than phoenixAttracts people in to the city due to low living cost

Attracts people due to low living cost

Both factors quiet favorable

City Score Factors

Low High

Low High

Low High

Low High

Low High

Atlanta

Dallas

New Orleans

Houston

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2) Employment & Population growth Employment growth in a particular city is a crucial factor in

determining the demand for real estate in that city. It is crucial for demand creation in all types of real estate products

like single family homes, apartments, office & retail. Similarly population growth, in a city is also considered as a

crucial factor in determining the demand trends for real estate. Increase in population leads to increase in demand for housing,

and increase in public utilities and it also leads to increase in consumer businesses.

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

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Cities with higher employment growth City Average deviationLas Vegas 2.15%Orlando 1.85%Austin 1.85%Raleigh 1.55%Phoenix 1.45%

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

Average deviation=[(avg employment growth last 5 years- national avg)+ (avg projected growth next 5 years-national avg)]/2

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Cities with higher population growth City Average deviationLas Vegas 2.45%Raleigh 2.20%Austin 2.15%Charlotte 1.95%Phoenix 1.90%

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

Average deviation=[(avg population growth last 5 years- national avg)+ (avg projected growth next 5 years-national avg)]/2

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1) Though employment growth is high, population growth is low 2) Solid markets as they are able to generate high employment growth leading to higher per capita income

1) Both employment growth and population growth is low2) Unattractive markets as these cities are neither able to generate employment growth nor population growth

1) Both employment growth and population growth is high2) Attractive markets for real estate investment

1) Employment growth is low, but population growth is high2) Markets weak as lack of employment growth leads to lack of increase in per capita income

Explanation Solid Strong

Disaster Weak

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Disaster

Weak

Solid

Strong

Employment & Population growth

-3.00%

2.45%

-0.28%

-0.05%

2.15%

-2.25%

Population growth

Empl

oym

ent

grow

th

123

4 5

1.Ft Lauderdale 2.Honolulu

1.Boston 2.Pittsburgh 3.Cleveland 4.Detroit 5.New Orleans

1.Columbus 2.Memphis 3. Chicago 4.San Jose 5.East Bay

1.Las Vegas 2.Austin 3.Orlando 4.Raleigh 5. Phoenix

1

2

12345

123 4

5

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Las Vegas

Attractiveness matrix

Based on employment growth and population growth the attractiveness of cities are plotted.

Generates the highest employment and population growthGenerates 2nd highest employment & population growth

Employment growth & population growth favorable

Population growth second highest and 4th highest employment growth5th highest in both factors

City Score Factors

Low High

Low High

Low High

Low High

Low High

Austin

Orlando

Raleigh

Phoenix

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Apartment Fundamentals

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Apartment fundamentals For the creation of new demand for apartments for rent, a very important

factor is the percentage of population in the age group (20-34), who are

most likely to rent apartments for living, than buy/own a house.

Also in addition to this factor, another factor that shall be considered is

forecasted vacancy rate for the next 5 years (2008-2012).

Using a cross analysis we can classify cities in to different categories.

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

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Cities with high % of population in 20-34 age group

City % of population in (20-34)

Austin 25.8%Salt Lake City 25.2%Inland empire 23.8%Raleigh 22.9%Dallas-Fortworth 22.6%

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

Austin has the highest % of population in the apartment dwelling age group of 20-34

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Cities with low forecasted vacancy rates-apartment

City Vacancy rate

San Francisco 3.56%San Jose 3.84%San Diego 4.02%Seattle 4.30%Minneapolis 4.32%

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

San Francisco has the lowest average forecasted vacancy rate for apartments over next 5 years

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1) Population %in 20-34 age group is high and avg forecasted vacancy rate for apartments for next 5 years is low 2) Attractive markets for investment in rental apartments as people in 20-34 are most likely to rent apartments and vacancy rate is also favorable

1) Population % in 20-34 age group is low, but forecasted vacancy rate is low2) Solid markets as low vacancy rate forecasted means there is no oversupply

1) Both population % in 20-34 and forecasted vacancy rate is high2) Markets considered weak, because, though the population % in apartment dwelling age group is high, high vacancy rates implies oversupply situation

1) Population % in 20-34 age group is low and forecasted vacancy rate is also low

2) Unattractive markets, because both the factors are unfavorable

Explanation Strong Weak

Solid Disaster

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Solid

Strong

Population in 20-34 age group & forecasted apartment vacancy rate

3.56% 11.62%

7.59%

21

25.8

16.1

Avg forecasted vacancy rate

Popu

latio

n %

(20-

34)

Strong Weak

Solid Disaster

123 4

5

1.Salt Lake City

2.Inland Empire

1.Austin 2. Raleigh

1.Boston 2.San Jose 3.Orange County 4.San Francisco 5.New Jersey

1.Charlotte 2.Jacksonville 3.Hartford 4.Tampa 5.Stamford

3. Atlanta 4. Houston 5. San Antonio

3.San Diego 4.Columbus 5.Sacramento

1

243

5

12 34

5

12

345

Weak

Disaster

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Salt Lake City

Attractiveness matrix

Based on population in age group 20-34 and growth and forecasted vacancy rate for apartments the attractiveness of cities are plotted.

Has very high % of population in 20-34 and vacancy forecast also favorableHas a high % of population in 20-34 and vacancy rate slightly above Salt Lake CityThough % of population is low compared to top 2 cities vacancy rate is lowerPopulation % in 20-34 almost similar to San Diego but vacancy slightly highBoth factors favorable

City Score Factors

Low High

Low High

Low High

Low High

Low High

Inland Empire

San Diego

Columbus

Sacramento

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Office Fundamentals

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Office fundamentals Two of the most important factors determining the space for office

demand in a particular market is the percentage of office using

employment in that market and the forecasted annual growth.

While the existing share of office using employment determines the

base for new demand, the growth in office using employment is the

factor which determines the growth in demand or new demand.

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

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Office using employmentCity Office using employment %

Washington-Nova-MD 43.7%

San Francisco 34.0%

New York 31.8%

Tampa 30.0%

Denver 29.5%

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

Washington has the highest office using employment % at 43.7%, followed by San Francisco and New York.

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Office using employment growthCity Projected growth

San Antonio 2.6%

Phoenix 2.5%

Austin 2.5%

Baltimore 2.3%

Atlanta 2.1%

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

San Antonio is projected to generate the highest growth in office using employment, followed by Phoenix & Austin both at 2.5%

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1) Though existing share of office using employment is low, projected growth in this metric is high2) These markets present an opportunity, because the projected growth in office using employment is high

1) Both existing share and growth is low

2) Unattractive markets as these cities neither have a substantial office using employment base nor seeing growth in this metric

1) Both existing share of office using employment and it’s growth is high

2) Attractive markets for investment in Office real estate space

1) Existing share of office using employment is high, but growth is low2) Doubtful because though there is an existing base of office using employment, it is not seeing much growth

Explanation Opportunity Strong

Disaster Doubtful

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Strong

Office using employment % and growth

17.5 43.730.6

1.2%

2.6%

-0.2%

Existing Share

Grow

th

12 3

4 5

1.San Antonio 2.Austin

1.San Francisco

2. Denver

1.Detroit 2.Miami 3.Jacksonville

4.New Orleans

5.Kansas City

1.Tampa 2.New York 3. Washington

3.Phoenix 4.Baltimore 5.Atlanta

2 1

12 3

4 5

1 2 3

Opportunity

Weak

Disaster

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San Francisco

Attractiveness matrix

Based on office using employment % and projected annual growth rate in this aspect the attractiveness of cities are plotted.

Has very high % of office using employment at 34% providing a substantial base for demand

Though the existing share is not as high as San Francisco, but substantial, the growth rate is higher

City Score Factors

Low High

Low HighDenver

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Retail Fundamentals

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Retail fundamentals Two of the most important factors determining the space for demand is the

percentage of population falling in the age category of 35-54, who are

usually the prime spending age group.

In addition to the above factor, the per capita real retail sales figure is also

another adjoining factor that plays critical role in determining the demand.

Therefore, it is useful to do a cross analysis of these 2 factors in

determining the attractive markets for retail real estate investment.

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

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Cities with high % of prime spendersCity Prime

Spenders (35-54) %

National average

San Francisco 32.7% 28.5%Seattle 31.7% 28.5%Atlanta 31.1% 28.5%San Jose 31.1% 28.5%Minneapolis 30.9% 28.5%

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

San Francisco has the highest % of population in the prime spenders age group of 35-54 with 32.7%, whereas the national average stands at 28.5%

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Cities with high per capita retail salesCity Real retail sales

per capitaPalm beach county $7470Las Vegas $7210Long Island $7072Fort Lauderdale $6894Orlando $6880

Executive Summary

Basic Fundamentals

Apartment Fundamentals

Office Fundamentals

Retail Fundamentals

The real retail sales per capita is the highest in Palm beach county, standing at $7470, while :as Vegas is a close second

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1) Though population % of prime spenders is high, retail sales per capita is low

2) These markets present an opportunity, as there is a substantial share of population in prime spenders category

1) Both population % in prime spenders and retail sales per capita is low2) Unattractive markets as these cities neither have a substantial prime spending population nor higher per capita retail sales

1) Both population age group in 35-54 and retail sales per capita is high

2) Attractive markets for investment in Retail real estate space as both factors are favorable

1) Population % in prime spending age group is low, but retail sales per capita is high2) Doubtful because though per capita retail sales is high, there is no high % of population in prime spending age category

Explanation Opportunity Strong

Disaster Doubtful

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Population % in prime spenders (35-54) and retail sales per capita

4537 74706003.5

29.2

32.7

25.7

Retail Sales per Capita

Prim

e Sp

ende

rs 12345

1.San Jose 2.Atlanta

1.San Francisco

1.Oklahoma City

2.San Antonio 3.Phoenix 4.Inland Empire 5.Salt Lake City

1.Orange County

2.Austin 3. Orlando

3.East Bay 4.Detroit 5.Raleigh

12

345

123 45

12

34

5

5.Boston4.Long Island3.Minneapolis2.Seattle

4. Las Vegas 5. Palm Beach

Strong

Opportunity

Doubtful

Disaster

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San Francisco

Attractiveness matrix

Based on population in age group 20-34 and growth and forecasted vacancy rate for apartments the attractiveness of cities are plotted.

Has the highest % of population in prime spending age group of 35-54Has 31.7 % of population in 35-54 next only to San Francisco

Has more than 30% of population in prime spending age category

Retail sale per capita more than $7000

Both factors quiet favorable

City Score Factors

Low High

Low High

Low High

Low High

Low High

Seattle

Minneapolis

Long Island

Boston