South Florida Multifamily 2020 Forecast

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WEAVE

SOUTH FLORIDA MULTIFAMILY 2020 FORECAST

CUSHMAN & WAKEFIELD MULTIFAMILY INVESTMENT SOUTH FLORIDA TEAM A trusted advisor, with over $25 BILLION in apartment sales in South Florida.

APARTMENT SALES IN SOUTH FLORIDA # 1

MULTIFAMILY FORECAST 2020 SOUTH FLORIDA

MULTIFAMILY MARKET UPDATE SOUTH FLORIDA

THE BEST DECADE IN SOUTH FLORIDA REAL ESTATE?

For more information, contact: CALUM WEAVER EXECUTIVE MANAGING DIRECTOR +1 954 377 0517 direct +1 786 443 3105 mobile calum.weaver@cushwake.com

At the beginning of the last decade, the headline for the Weaver Report was “Begin Again in 2010.” Even the most optimistic sentiment would have been hard pressed to envision such a strong decade of multifamily performance in South Florida. Ten years ago, the average sale values for apartments in Miami-Dade, Broward and Palm Beach counties were $84,400, $61,500, and $50,200 per unit, respectively. By the end of 2019, those values rose to $180,000, $214,400 and $167,700 per unit. A new decade provides fresh perspective. Encouragingly, the South Florida multifamily market provides excellent fundamentals that ideally position the region for long-term growth. Last year there were 250 multifamily sales totaling $3.4 billion – the fifth highest ever recorded in South Florida. Overall sales decreased for the third year in a row from the record of 2016. There are fewer deals available in the market which has slowed sale volume. The biggest challenge is finding viable acquisition opportunities with more buyers than sellers in the market. In 2019, Broward County witnessed $1.65 billion in sales – almost 50% of the total for multifamily sales in South Florida. The average price per unit sale in Broward was a record $214,000. Palm Beach and Miami-Dade each had total sales around $850 million. We anticipate sales volume to remain at similar levels in 2020. For the second consecutive year, 77% of total dollar sale activity ($2.6 billion) was in product built 1980 or newer. Sale activity began shifting to newer product as many of the newly constructed multifamily buildings stabilized and sold to investors. With over 27,000 units under construction, we expect this shift to continue with strong newly constructed apartment sales in 2020 and beyond. Additionally, we are starting to see more new construction completions for small multifamily projects (100 units and under) being developed by local, private developers. There are currently almost 1,100 units under construction in the tri-county area within sub-100-unit projects. Over the next two years, we anticipate more new properties with under 100 units to be delivered. There is pent-up private capital demand for these types of properties, so we anticipate strong sale activity for newly constructed projects of this scale. Sale activity for older properties (for this report we are using pre- 1980 stock) decreased in 2019, but this was not an indication of a slowing market. Quite the contrary, there was huge investor appetite for these types of properties, but there were limited acquisition opportunities. This was a natural market progression, as many of these pre-1980 deals traded multiple times this real estate cycle and were significantly improved. Moreover, certain value-add properties were exceeding $200,000 per unit in value. The diminishing delta in price between new construction and value-add properties, coupled with limited value-add options, prompted some investors to seek newer suburban multifamily properties, which predominantly trade at a higher price per unit but have similar cap rates to older value-add opportunities.

www.cushwakesouthfl.com/multifamily

RENTAL DEMAND FUELED BY POPULATION GROWTH Rental demand continued to be strong in 2019, and with good reason. South Florida remained a great place to live and work. The region’s population grew by 362,800 over the past five years, with 75% of the increase attributable to people moving here. In the next three years, South Florida will see a positive net migration of 5.7% or 355,572 people. Another way to consider demand is looking at the amount of new household formations - the number of new households created each year. Household formations in South Florida are expected to increase to over 45,000 each year in the next five years. Assuming, this projection materializes, at 60% enter homeownership and 40% as renters (consistent with current homeownership rates) that represents over 18,000 new renters per year in South Florida. In 2019, South Florida witnessed a net absorption of +5,584 units. There were 7,359 units completed in 2019, which resulted in marginally higher vacancies in Miami Dade and Palm Beach. Broward vacancies decreased by 50 basis points as net absorption outpaced new supply. While net absorption was below previous years, we anticipate continued robust net absorption forecasts for the next two to three years, similar to the five-year average of 7,100 units per year. HOMEOWNERSHIP RATES INCREASED FOR FIRST TIME IN 10 YEARS A growing population and lower homeownership rate were the two biggest drivers of rental demand in the past 10 years. In 2019, for the first time in a decade, the homeownership rate in South Florida increased from 57.9% to 59.9%, year over year. This is still significantly below the 2005 homeownership rate of 69.2%. If homeownership rates continue with an upward trend, it could negatively affect rental demand in South Florida. However, we do not currently foresee a paradigm shift in the homeownership rates. Some renters with higher incomes may transition into homeownership, but for most renters the economics are not viable. In the last decade, median single-family home prices increased 82.5%, from $200,000 to $360,000. Average home values are increasing at greater rate than rents, making ownership even tougher and rental demand even stronger. The median home price in South Florida in 2019 was $358,806. With 10% down, the mortgage would be around $2,200 at that price, which is $700+ more than the average rent in the market. ABSORPTION LEVELS ARE STRONG BUT LAGGED COMPLETIONS IN 2019

MULTIFAMILY INVESTMENT SALES ANALYSIS | SOUTH FLORIDA GRAPH 1 :: SOUTH FLORIDA HISTORICAL PRICE/UNIT VERSUS PRICE/SF SO TH FLO IDA HISTORICAL PRICE/UNIT VERSUS PRICE /SF

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM

$250,000

$240

Miami-Dade

$220

$225,000

Broward

$200

$200,000

$180

Palm Beach

$175,000

$160

$150,000

$140

$125,000

$120

$100

Price Per SF

$100,000 Price per Unit

$80

$75,000

$60

$50,000

$40

$25,000

$20

$0

$0

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Average per Unit

Average Per SF

* $1MM+ multifamily sales

Source: Cushman & Wakefield

SOUTH FLORIDA HISTORICAL TRANSACTION VOLUME VERSUS NUMBER OF TRANSACTIONS

GRAPH 2 :: SOUTH FLORIDA HISTORICAL TRANSACTION VOLUME VERSUS NUMBER OF TRANSACTIONS

$6.0

375

Miami-Dade

$5.5

Broward

$2.5 Dollar Volume Billions $3.0 $3.5 $4.0 $4.5 $5.0

300

Palm Beach

225

150

$2.0

Number of Transactions

$1.5

75

$1.0

$0.5

$0.0

0

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Dollar Volume

Number of Transactions

* $1MM+ multifamily sales

Source: Cushman & Wakefield

RECORD NUMBER OF UNITS UNDER CONSTRUCTION There are 26,999 units under construction in South Florida, as of end of 2019 which is a record amount for the region and represents 7.5% of the current apartment inventory. As these units come online, some submarkets will experience slower lease-ups, higher concessions and downward rental pressures as several new buildings will be delivered in a short duration. Vacancies marginally increased in 2019 as new supply outpaced absorption. Will the market experience decreasing rents and higher vacancies as the under-construction units get delivered? The short answer is no. There are several reasons for this: 1) New rental supply is quickly absorbed. In the last five years, there were 42,582 units built in South Florida. During this time, we have experienced record rents and near record low vacancies. The new supply thus far has not adversely affected the market even though 71% of the new supply has already been delivered in the current cycle. 2) The market is playing catch up. In the 90’s and 2000’s there was very little multifamily development. Developers focused on condo development during this period and the market was starved of new multifamily supply. New multifamily

construction is needed to fill the void in the market place. 3) Condo conversions. Condo conversions in the mid 2000’s eliminated over 20,000 net rental units in South Florida 4) Population growth . In the past five years South Florida’s population increased by 362,800. During the same period, 42,582 new apartment units were built. This means one unit has been built for every 8.5 net new people to the region. Over the next five years, South Florida is expected to see a positive net migration of 356,200 people. Using the same ratio, the region would need over 41,807 new rentals to keep pace with the population growth for the next five years. See previous page in rental demand for more info. While the amount of under construction units is causing concern to some investors, we believe the number of units being built is not enough. More construction is needed to meet the demands of a growing population with a diminished homeownership rate. What needs addressing is how to find the right balance between what is being built and what is needed in the market place. Land and construction costs mean that almost all new construction is Class A product with rents from $2.00 to $3.00 per square foot. Workforce housing remains drastically underserved.

3

ASKING RENT VS VACANCY RATE

GRAPH 3 :: SOUTH FLORIDA ASKING RENT VS VACANCY RATE

$1,800

10.00%

Miami-Dade

Broward

Palm Beach

$1,600

$1,400

7.50%

$1,200

$1,000

5.00%

$800

$600

2.50%

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM 4 $0 $200 $400 2010 2011

0.00%

2012

2013

2014

2015

2016

2017

2018

2019

Asking Rent

Vacancy Rate

RENTS CONTINUE TO INCREASE Rents were at record levels for the tenth year in a row in all three counties. In the past decade, asking rents increased by 49%, 43%, and 53% in Miami-Dade, Broward, and Palm Beach counties respectively. 2015 was the high point for rent growth in South Florida – at 8.5%. In 2019, overall rent growth for South Florida was at 2.7%, which was lower than the 3.1% growth in 2018. We anticipate rent growth between 2%-4% in 2020. New product coming to market is being absorbed in short duration which is fueling rental growth. Fears of a rent compression remain unfounded. Class B and C rents continued to have the biggest percentage

CAP RATES/INTEREST RATES TRENDING DOWN In late 2018 and early 2019, many investors were fearful of higher interest rates and the knock-on effect on cap rates. Three interest rate cuts in 2019 eliminated the single biggest concern in the marketplace. At the time of writing, the 10-year treasury was around 1.8% down 100 basis points from a year ago. Cap rates decreased in 2019 by +/- 40 basis points Cap rates today range between 4.1%-4.5% for Class A properties. Class B and C cap rates are ranging between 4.5% to 5.50%. Some value-add properties that have a clear path to higher returns, are trading with in-place cap rates of sub-4% provided the value-add strategy can provide a future return of 5.5%. This has caused some value add buyers to switch to newer product which has comparable in-place cap rates.

increases in 2019, due to strong demand and limited availability. Class A rents faced more competition from new supply. The headroom between B/C properties versus Class A remains significant and could be over $800 per month in certain submarkets. Value-add buyers were improving many B/C properties and increasing rents to fill the gap in pricing within certain submarkets.

CAP RATES Class A: 4.10% - 4.50% Class B: 4.50% - 5.25% Class C: 5.25% - 5.50%

On agency small balance loans with a 70% LTV, overall interest rates ranged between 3.6% and 4.1%. In previous years, interest rate hikes were offset by spread compressions. Conversely, with interest rates decreasing in 2019

VACANCY RATES STILL LOW BUT EDGED UP The South Florida vacancy rate increased year-over-year from 4.9% to 5.2% at the end of 2019. The higher vacancy was attributable to 7,359 new units delivered to market. For the most part net absorption levels offset new supply, however, certain submarkets will witness increased short-term vacancies as several new buildings come online in a short duration. Class B and C properties hovered at less than 4.0%, which was the lowest vacancy ever recorded in South Florida for that property class. With virtually all the new supply slated for completion being Class A there is a lack of market rate workforce housing in the market. EMPLOYMENT & INCOME IS VERY STRONG The strong employment market supportedmultifamily rent growth in 2019. 271,000 jobs were added to South Florida in the past five years, reducing the unemployment rate to 3.3%, the lowest level in over 13 years. In the past year, the median salary increased by 5.8% in Miami-Dade, 5.5% in Broward and 6.2% in Palm Beach County. For only the third time in 10 years, income levels grew at a higher percentage rate than rental rates. Stronger employment and income levels will help with affordability and bodes well for multifamily fundamentals.

spreads widened which resulted in lower cap rates but not proportionally to the lower interest rates. Currently, spreads on 10-year, were 170 bps to 205 bps. By comparison, during the previous real estate cycle, credit spreads on 10-year CMBS loans were as low as 90bps to 100bps. The strength of the multifamily market in the past decade was fueled by cheap debt. Investors have questioned how long the low interest rate environment will continue. With negative interest rates in many parts of the world and limited concerns about inflation, it is more likely we see interest rates go lower than higher in 2020. Low interests rates are the new norm. THE SIXTH BOROUGH At the beginning of the last decade the most active private capital multifamily investors in South Florida derived from Latin America. Now it’s New Yorkers. New York investors were always prominent in South Florida, but we are seeing an unprecedented amount of private capital looking to invest in multifamily. Recent rent control regulations coupled with the elimination of State and Local Tax (SALT) deductions in New York contributed to investors increasingly looking at South Florida for new investment opportunities. We expect this trend to continue throughout 2020.

OUTH LO I A HISTORICAL & FUTURE DELIVERIES

GRAPH 4 ::SOUTH FLORIDA HISTORICAL & FUTURE DELIVERIES

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM

12,000

10,000

8,000

6,000

# of Units

4,000

2,000

0

2,113

2,433

4,152

6,760

9,325

7,653

9,896

6,897

7,359

8,536

7,109

10,777

11,354

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

*Forecasted construction deliveries are as of Jan-2020. Actual deliveries may vary

LOOKING AHEAD The title of this year’s Weaver Report is “The Best Decade in South Florida Real Estate?” and there is strong evidence to support the claim.Will the good times continue or arewe setting ourselves up for another crash? The good news is the market is ideally positioned for continued long-term growth. Florida has a history of boom- bust real estate markets but excellent market fundamentals coupled with realistic underwriting and financing analysis will keep the market in equilibrium. The South Florida multifamily fundamentals are, and will continue to be, the single biggest driver of performance in the market. Population/household growth, low homeownership rates, higher home prices, demographic preferences to rent versus buy, low unemployment rate, higher wage growth, Hipsturbia: Suburban locations with interesting town centers, walkability and access to good schools. Millennials will start having families and will look at interesting suburban locations. Townhome rentals also stand to benefit from the demographic shifts. Build Market Rate Workforce Housing: Find relatively cheap land, build low cost market rate rentals with rents from $1,200-$1,600 per unit. Value-Add Class B and C Properties: Look for real value-add opportunities. Easier said then done. Submarkets with Upside: This involves going against the grain and looking for value before everyone talks about it. For example, Miami Beach lost its groove in recent years but will come back strong. Growing Cash Flow: Attractive debt and strong fundamentals provide attractive investor returns and cashflows. There remains a big runway. Value Creation: Little value-add then do value creation. Look for under performing assets that can be reprogrammed with better leasing and management. New Product: The cap rate spread between new and value add is narrow. Newer suburban product is attractive. OPPORTUNITIES

limited land and a wonderful lifestyle all contribute towards an extremely healthy market and we see no signs of that changing. Appreciation of values will continue, although many investors are looking at 5-to-10 year holds versus the quick “in-and-out” buys of previous years. Investors with a longer-term investment perspective of 7-to-10 years are securing debt accordingly. Investors are seeking cash-on-cash returns in the 6% to 8% range with IRR’s from 9% to 15% depending on asset quality. The forecast remains strong and simply leveling off from its steep upward trajectory. That’s not to say we are without challenges. The incredible growthof themarket has slowed. There are always opportunities and threats in any business. In no particularly order here are some I would consider: New Supply There is a record amount of multifamily construction being built, almost 10% of the existing rental inventory. Certain submarkets will see concessions and downward rental pressures. Potential Rent Controls New rent control legislation in New York, California and Oregon savaged the multifamily investment markets in these states. Florida remains a business-friendly place. I do not see similar regulations in Florida, but any serious discussion of rent control in the state could be an industry threat. Rent Burdens According to the U.S. Census American Community Survey, Miami has the highest proportion of cost-burdened renters in the nation with 53% of renters spending 35% or more of their household income on rent. Unless incomes increase how much more juice can be squeezed from the rents? THREATS

5

MIAMI-DADE MULTIFAMILY MARKET SUMMARY

$846M 2019 Sales

$6,900,000 2019 Average Sale Price

$187

$179,987

2019 Average Sale PSF

2019 Average Sale per Unit

$1,489

95.3%

2,491

162,825

Average Rent Per Unit

Occupancy Rate

Annual Unit Net Absorption Inventory of Rentable Units

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM 6 YEAR $ SALES VOLUME 2019 2018 2017 2016 2015 $921,876,118 2014 2013 2012 2011 2010 0 1,000 2,000 3,000 4,000 5,000 6,000 2010 2011

EFFECTIVE RENT GROWTH

ASKING RENT GROWTH

ASKING RENT PSF

NET ABSORP

NEW UNITS

EFFECTIVE RENT

EFFECTIVE RENT PSF

# OF SALES

TOTAL # OF UNITS

ASKING RENT

VACANCY

$845,740,868 123 162,825 $1,489 $1.74 2.1% $1,474

$1.72

2.9% 4.7% 2,491

4,197

$988,757,264 125 158,701 $1,459 $1.70 3.2% $1,432

$1.67

3.0% 4.0% 3,594 2,410

$1,580,578,067 134 156,462 $1,414 $1.65 5.2% $1,390 $1.62

5.0% 5.0% 2,695 3,787

$1,463,507,034 146 153,022 $1,344 $1.58 4.9% $1,324

$1.55

4.3% 4.6% 3,857 5,061

151

148,100 $1,281 $1.51 7.8% $1,269

$1.49

7.8% 4.2% 3,102 3,423

$572,590,718 178 145,171

$1,188 $1.41 6.6% $1,177

$1.40

6.3% 4.4% 2,490 3,350

$456,497,246 103 142,281 $1,114 $1.33 5.7% $1,107

$1.33

5.7% 4.2% 2,497 2,531

$493,114,465 88 139,987 $1,054 $1.27 3.6% $1,047

$1.26

3.5% 4.4% 951

1,695

$200,764,282 66 138,840 $1,017 $1.23 1.9% $1,012

$1.22

1.9% 4.3% 447 1,564

$215,761,340 49 138,078 $998

$1.21 1.6% $993

$1.20

1.7% 4.3% 1,668 868

Miami-Dade Apartments Under Construction 70 apartment buildings totaling 16,119 units under construction in Miami-Dade BUILDING Luma Lanai Landings Zoi House Avalon Doral

# OF UNITS

EXPECTED COMPLETION

CITY

Miami

434

2022

Princeton

54

2020

Coconut Grove

130

2020

Doral

350

2021

Pine Groves

Homestead

204

2021

Miami-Dade Deliveries Versus Absorption

2012

2013

2014

2015

2016

2017

2018

2019

Net Absorption (Units)

Deliveries (Units)

MIAMI-DADE MULTIFAMILY MARKET SUMMARY* CONTINUED

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM

NET ABSORPTION

DELIVERED UNITS

UNDER CONSTRUCTION

ASKING RENT PSF

ASKING RENT GROWTH

VACANCY

SUBMARKET

UNITS

ASKING RENT

2,778

$1,789

$1.78

4.6%

6.2%

30

-

108

Aventura

Bal Harbor/ Miami Beach

9,431

$1,344

$2.00

1.5%

4.8%

-36

42

0

13,830

$1,438

$1.88

1.3%

4.0%

5

-

7,228

Brickell/Downtown

2,240

$1,625

$2.06

0.7%

5.5%

14

10

130

Coconut Grove

6,771

$1,991

$2.30

0.8%

9.0%

272

338

1,394

Coral Gables

22,366

$1,354

$1.55

2.1%

2.6%

298

400

371

Hialeah/Miami Lakes

Homestead/ South Dade

19,125

$1,089

$1.24

2.4%

4.4%

654

929

1,282

13,870

$1,710

$1.91

2.6%

8.1%

-165

294

439

Kendall

Miami Gardens/ Opa Locka

31,135

$1,148

$1.39

3.6%

4.3%

175

468

1,407

18,864

$1,797

$1.92

3.6%

7.5%

619

1,297

2,618

Miami Springs/Doral

North Miami/ North Miami Beach Outlying Miami-Dade County

18,219

$1,273

$1.57

1.0%

4.6%

586

419

897

853

$1,488

$1.25

3.0%

4.2%

5

-

245

3,343

$1,313

$1.73

0.3%

2.1%

34

-

0

Westchester/Tamiami

TOTAL/AVERAGE 162,825

$1,489

$1.74

2.1%

4.7%

2,491

4,197

16,119

• In 2019, there were 123 apartment sales totaling $846 million with an average price of $179,987 per unit or $187 per square foot. • Sales volume was down by 14% from 2018 and 46% from the record high of 2017.

• For 11th year in a row, average asking and effective rents were at record levels. • In 2019, average asking rents grew by 2.1%. Class B and C properties are experiencing higher rent growth. • Highest rents are in Coral Gables and lowest in Homestead/South Dade.

• In 2019 vacancies increased to 4.7% from the record lows of 4.0% in 2018. Vacancies will likely increase in short-term with new supply. • Highest vacancy rate is in Coral Gables. Lowest vacancy rate is in Westchester.

• There are 16,119 units under construction. This represents 9.9% of the current inventory in the market. • In the past five years, 18,878 units were delivered to the market.

• In 2019 net absorption was 2,491 units. Newly completed units totaled 4,197 units resulting in marginal vacancy vacancies. • Vacancies in certain submarkets will increase in 2020 as new supply enters lease-up.

• In 2019 median salary income increased 5.8%. • The population grew by 130,061 in the past five years, and 1.0% in 2019.

*Data as of Jan-2020, apartment sales of 10 units or more, in excess of $1MM in pricing, excluding all condo sales Source: CoStar

7

BROWARD MULTIFAMILY MARKET SUMMARY

$1.65B 2019 Sales

$20,100,000 2019 Average Sale Price

$208

$214,441

2019 Average Sale PSF

2019 Average Sale per Unit

$1,531

94.8%

2,166

125,518

Average Rent Per Unit

Occupancy Rate

Annual Unit Net Absorption Inventory of Rentable Units

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM 8 YEAR $ SALES VOLUME 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2010 2011

EFFECTIVE RENT GROWTH

ASKING RENT GROWTH

ASKING RENT PSF

NET ABSORP

NEW UNITS

EFFECTIVE RENT

EFFECTIVE RENT PSF

# OF SALES

TOTAL # OF UNITS

ASKING RENT

VACANCY

$1,647,550,639 82 125,518 $1,531 $1.58 2.5% $1,519

$1.57

3.4% 5.2% 2,166 1,635

$1,502,332,701 87 123,965 $1,494 $1.55 2.8% $1,469

$1.52

2.9% 5.7% 3,471 2,503

$1,650,021,446 73 121,472 $1,453 $1.50 4.4% $1,428

$1.48

3.9% 6.7% 3,077 4,241

$2,586,936,457 101

117,481

$1,392 $1.44 2.7% $1,374

$1.42

2.2% 6.1% 1,461

3,529

$1,626,961,862 96 113,987 $1,355 $1.41 7.9% $1,344

$1.39

8.1% 4.7% 2,685 2,608

$740,716,698 76 111,419 $1,256 $1.30 5.5% $1,243

$1.29

5.2% 4.9% 3,720 4,282

$690,827,533 61

107,220 $1,191 $1.24 4.6% $1,182

$1.23

4.7% 4.7% 2,451 1,698

$792,260,814 55 105,620 $1,139 $1.18 4.1% $1,129

$1.17

3.9% 5.6% 1,668 1,632

$482,034,400 32 104,280 $1,094 $1.14 2.1% $1,087

$1.13

2.1% 6.0% 792 725

$515,896,800 20 103,696 $1,072 $1.12 1.9% $1,065

$1.11

2.0% 6.2% 1,918 997

Broward Apartments Under Construction 29 apartment buildings totaling 8,440 units under construction in Broward BUILDING X Las Olas SIX13

# OF UNITS

EXPECTED COMPLETION

CITY

Fort Lauderdale

700

2021

Modera Cornerstone

Plantation

330

2021

Fort Lauderdale

142

2020

Suede Downtown Davie Davie

209

2021

Sol Van Buren

Hollywood

62

2021

Broward Deliveries Versus Absorption

2012

2013

2014

2015

2016

2017

2018

2019

Net Absorption (Units)

Deliveries (Units)

BROWARD MULTIFAMILY MARKET SUMMARY* CONTINUED

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM

NET ABSORPTION

DELIVERED UNITS

UNDER CONSTRUCTION

ASKING RENT PSF

ASKING RENT GROWTH

VACANCY

SUBMARKET

UNITS

ASKING RENT

21,582

$1,581

$1.52

2.7%

5.1%

88

-

211

Coral Springs

17,804

$1,766

$2.00

2.7%

6.8%

1,083

556

4,823

Fort Lauderdale

Hollywood/ Dania Beach

11,892

$1,344

$1.56

2.3%

5.6%

-4

-

506

Miramar/ Hallandale Beach Oakland Park/ Lauderhill Pembroke Pines/ West Miramar

5,666

$1,298

$1.46

3.5%

4.2%

95

-

0

13,940

$1,244

$1.41

3.1%

4.6%

-104

-

209

10,915

$1,803

$1.66

0.0%

7.0%

577

497

300

17,899

$1,559

$1.52

2.3%

5.0%

-30

-

1,805

Plantation/Sunrise

Pompano Beach/ Deerfield Beach

15,920

$1,356

$1.48

4.6%

5.1%

411

582

541

9,900

$1,626

$1.62

1.3%

5.0%

50

-

45

Weston/Davie

TOTAL/AVERAGE 125,518

$1,531

$1.58

2.5%

5.2%

2,166

1,635

8,440

• Broward witnessed the most multifamily sales in South Florida with 82 apartment sales totaling $1.64 billion with an average price of $214,441 per unit or $208 per square foot. • Sales volume increased by 9.7% from 2018.

• For 11th year in a row, average asking and effective rents were at record levels. • In 2019, average asking rents increased by 2.5%. • Highest rents are in Pembroke Pines/Miramar and lowest in Oakland Park/Lauderhill.

• Vacancies decreased in 2019 to 5.2% from 5.7%. • There were over 1,000 net units absorbed in Ft. Lauderdale which resulted in vacancies decreasing from 10.6% to 6.8%.

• There are 8,440 units under construction This represents 6.7% of the current inventory in the market. • In the past five years, 14,516 units were delivered to the market.

• For the second year in a row net absorption outpaced new supply. • In 2019, there were 2,166 net units absorbed and 1,635 units delivered in Broward.

• In 2019, median salary income increased by 5.5%. • The population grew by 115,599 in the past five years, and 1.3% in 2019.

*Data as of Jan-2020, apartment sales of 10 units or more, in excess of $1MM in pricing, excluding all condo sales Source: CoStar

9

PALM BEACH MULTIFAMILY MARKET SUMMARY

$870M 2019 Sales

$19,350,000 2019 Average Sale Price

$180

$167,660

2019 Average Sale PSF 2019 Average Sale per Unit

$1,612

93.7%

927

70,465

Average Rent Per Unit

Occupancy Rate

Annual Unit Net Absorption Inventory of Rentable Units

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM 10 YEAR $ SALES VOLUME 2015 $888,583,151 2012 $397,162,417 2011 0 500 1,000 1,500 2,000 2,500 3,000 3,500 2010 2011

EFFECTIVE RENT GROWTH

ASKING RENT GROWTH

ASKING RENT PSF

NET ABSORP

NEW UNITS

EFFECTIVE RENT

EFFECTIVE RENT PSF

# OF SALES

TOTAL # OF UNITS

ASKING RENT

VACANCY

2019 $869,821,410 45 70,465 $1,612 $1.59

4.3% $1,602

$1.58

5.5% 6.3% 927 1,527

2018 $1,497,216,822 61

68,938 $1,545 $1.52

3.2% $1,519

$1.49

3.8% 5.6% 2,924 1,984

2017 $1,188,544,719 37 66,954 $1,497 $1.47

3.4% $1,463

$1.44

2.4% 7.3% 1,130 2,749

2016 $1,535,027,318 52 64,898 $1,448 $1.43

4.2% $1,429

$1.41

3.9% 6.6% 1,113 1,306

50 63,772 $1,390 $1.37

9.7% $1,375

$1.35

9.6% 6.7% 1,043 1,622

2014 $577,918,189 39 62,166 $1,267 $1.25

6.0% $1,255

$1.24

6.0% 6.0% 1,444 1,693

2013 $408,905,378 24 60,632 $1,195 $1.18

4.4% $1,184

$1.17

4.5% 6.0% 2,929 2,531

21

58,111

$1,145 $1.13

5.3% $1,133

$1.12

5.0% 7.0% 1,119 825

$271,650,706 13 57,299 $1,087 $1.08

2.8% $1,079

$1.07

2.9% 7.7% 143 144

2010 $304,605,358 15 57,188 $1,057 $1.05

1.6% $1,049

$1.05

1.6% 7.7% 850 248

Palm Beach Apartments Under Construction 9 apartment buildings totaling BUILDING

# OF UNITS

EXPECTED COMPLETION

CITY

Atlantic Crossings

Delray Beach

261

2022

2,440 units under construction in Palm Beach

Georgia Gardens

West Palm Beach

87

2020

Uptown Boca

Boca Raton

456

2021

Cortina III

Boynton Beach

433

2022

Aura Boca

Boca Raton

322

2022

Palm Beach Deliveries Versus Absorption

2012

2013

2014

2015

2016

2017

2018

2019

Net Absorption (Units)

Deliveries (Units)

PALM BEACH MULTIFAMILY MARKET SUMMARY* CONTINUED

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM

NET ABSORPTION

DELIVERED UNITS

UNDER CONSTRUCTION

ASKING RENT PSF

ASKING RENT GROWTH

VACANCY

SUBMARKET

UNITS

ASKING RENT

2,208

$717

$0.91

2.2%

4.3%

2

-

0

Belle Glade

11,143

$1,915

$1.85

6.6%

5.0%

144

-

778

Boca Raton

12,187

$1,544

$1.48

3.3%

8.9%

257

490

663

Boynton Beach

5,470

$1,702

$1.55

6.0%

4.2%

46

-

261

Delray Beach

6,563

$1,173

$1.27

5.4%

5.2%

-96

-

0

Greenacres

Outlying Palm Beach County Palm Beach Gardens/ Jupiter Royal Palm Beach/ Wellington

193

$753

-

1.0%

3.3%

0

-

0

8,383

$1,699

$1.54

2.1%

6.0%

58

-

136

7,675

$1,598

$1.47

4.0%

9.8%

244

571

0

16,643

$1,361

$1.44

3.8%

6.1%

272

466

602

West Palm Beach

TOTAL/AVERAGE 70,465

$1,612

$1.59

4.3%

6.3%

927

1,527

2,440

• In 2019, there were 45 apartment sales totaling $870 million with an average price of $167,660 per unit or $180 per square foot. • Sales volume decreased by 42% from 2018.

• For 11th year in a row, average asking and effective rents were at record levels. • In 2019, average asking rents increased by 4.3%. • Boca Raton had the highest rents and the highest percentage rent increases in 2019.

• Vacancies increased in 2019 to 6.3% from 5.6% in 2018. • Royal Palm/Wellington and Boynton Beach have the highest vacancy rates. This is largely attributable to new supply.

• There are 2,440 units under construction This represents 3.5% of the current inventory in the market. • In the past five years, 9,188 units were delivered to the market.

• In 2019 net absorption was 927 units. Newly completed units totaled 1,527 units resulting in higher vacancy vacancies.

• In 2019, median salary income increased by 6.2%. • The population grew by 117,179 in the past five years, and 2.0% in 2019.

*Data as of Jan-2020, apartment sales of 10 units or more, in excess of $1MM in pricing, excluding all condo sales Source: CoStar

11

MARKET FUNDAMENTALS SNAPSHOT

Miami-Dade

12 MONTH POPULATION GROWTH

12 MONTH MEDIAN SALARY INCREASE

12-MONTH MEDIAN HOME GROWTH RATE

UNEMPLOYMENT RATE

MEDIAN INCOME

MEDIAN HOME VALUE

YEAR POPULATION

2019 2,790,450

1.0%

3.36% 3.84% 4.58% 5.15% 5.82%

$55,782 $52,746 $49,930 $46,889 $44,803

5.8% 5.6% 6.5% 4.7% 2.5%

$380,420 $370,071 $348,388 $314,740

2.8% 6.2% 10.7% 5.5% 6.4%

2018 2017 2016

2,761,581

0.6% 0.8% 1.3% 1.0%

2,744,878

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM 12 2,722,574 2015 2,688,156 Broward Palm Beach Growth in 2019. YEAR POPULATION 2019 1,977,201 2018 1,951,260 2017 1,934,471 2016 1,912,977 2015 1,885,443 YEAR POPULATION 2019 1,516,218 2018 1,485,941 2017 1,470,338 2016 1,451,384 2015 1,424,685

$298,271

12 MONTH POPULATION GROWTH

12 MONTH MEDIAN SALARY INCREASE

12-MONTH MEDIAN HOME GROWTH RATE

UNEMPLOYMENT RATE

MEDIAN INCOME

MEDIAN HOME VALUE

1.3%

3.20% 3.38%

$62,584 $59,313

5.5% 4.3%

$333,844 $325,467

2.6% 4.8%

0.9%

1.1%

3.97%

$56,842

3.3%

$310,564

8.0%

1.5% 1.3%

4.48%

$55,024 $53,370

3.1%

$287,475 $260,692

10.3%

5.13%

2.2%

3.1%

12 MONTH POPULATION GROWTH

12 MONTH MEDIAN SALARY INCREASE

12-MONTH MEDIAN HOME GROWTH RATE

UNEMPLOYMENT RATE

MEDIAN INCOME

MEDIAN HOME VALUE

2.0%

3.42% 3.56%

$66,697 $62,818 $60,057 $58,422 $56,105

6.2% 4.6% 2.8% 4.1% 3.1%

$353,401 $343,532 $328,323 $307,562 $280,300

2.9% 4.6% 6.8% 9.7% 10.0%

1.1%

1.3% 1.9% 1.8%

4.17%

4.69%

5.12%

*Data reported by BLS, Moodys and Alteryx Demographics

SOUTH FLORIDA: POPULATION | HOUSEHOLDS

SOUTH FLORIDA CONSTRUCTION

1.4% 2.1% |

31,637 apartment units are currently under construction in SoFla. This is 8.8% of the current apartment inventory.

|

371,803 142,625 355,572 232,341 |

Growth in past 5 years.

Increase over next 5 yrs.

SOUTH FLORIDA EMPLOYMENT 271,107

SOUTH FLORIDA HOUSING 69.2% | 59.9% home ownership rate in 2005 and 2019 respectively. 30.1% | 30.0% | 29.8% median single-family home price increase in Miami-Dade, Broward, and Palm Beach Counties respectively since 2015. $358,806 median home value in So Fla. $700 difference in average monthly rent and a mortgage on the median home value in South Florida.

New jobs added in past 5 years.

3.4% Miami-Dade unemployment. 3.2% Broward unemployment. 3.4% Palm Beach unemployment. 8.6 Jobs for every apartment unit in SoFla. SOUTH FLORIDA INCOMES 5.8% Median salary income increase in 2019. 2.7% Rent growth in 2019.

RECENT SOUTH FLORIDA CUSHMAN & WAKEFIELD MULTIFAMILY SALES

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM

#1 in Multifamily Sales :: Over $25 billion Sold in South Florida

FOR SALE

FOR SALE

FOR SALE

FOR SALE

828 PENN

MAVEN PORTFOLIO

THE WHITTIER

OCEAN HOUSE

For Sale | 12 Units Miami Beach, Florida

For Sale | 144 Units Fort Lauderdale, Florida

For Sale | 19 Units Miami Beach, Florida

For Sale | 186 Units Miami Beach, Florida

942 LENOX AVE

6484 INDIAN CREEK

VILLAGE AT CRYSTAL LAKE

THE MILE

Sold 2019 | 18 Units Miami Beach, Florida

Sold 2019 | 1.22 Acres Miami Beach, Florida

Sold 2019 | 125 Units Deerfield Beach, Florida

Sold 2019 | 120 Units Coral Gables, Florida

925-965 MARSEILLE

1100 10TH STR

1521 MICHIGAN AVE

ALTIS BONTERRA

Sold 2019 | 27 Units Miami Beach, Florida

Sold 2019 | 20 Units Miami Beach, Florida

Sold 2019 | 6 Units Miami Beach, Florida

Sold 2019 | 314 Units Miami, Florida

CARIBBEAN ISLE VILLAS

REALM

PLACE AT DANIA BEACH

BELLA

Sold 2018 | 144 Units Dania Beach, Florida

Sold 2019 | 53 Units Homestead, Florida

Sold 2018 | 102 Units Boca Raton, Florida

Sold 2019 | 17 Units Sunny Isles Beach, Florida

PALM ISLANDS

BOUTIQUE

ROYAL OAKS

RIVIERA HILLS

Sold 2018 | 402 Units Pompano Beach, Florida

Sold 2018 | 43 Units Miami, Florida

Sold 2018 | 69 Units Hollywood, Florida

Sold 2018 | 84 Units Lauderhill, Florida

LITTLE TORCH COTTAGES

250 COLLINS

VIZCAYA LAKES

RUE VENDOME

Sold 2017 | 48 Units Little Torch Key, Florida

Sold 2018 | 27 Units Miami Beach, Florida

Sold 2018 | 125 Units Boynton Beach, Florida

Sold 2018 | 30 Units Miami Beach, Florida

13

Miami Beach, FL 925-965 MARSEILLE DRIVE, 33141

DEBT OPTIONS IN TODAY’S MARKET

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM 14 The availability of all forms of debt financing continued to be as plentiful as ever in recent years , with lenders specifically favoring multifamily over most other asset classes. Agency financing spreads tightened but remained volatile in 2019, with agencies offering rates slightly wide of life companies for Class A, well-located deals. Fannie Mae, Freddie Mac, and HUD remain the de-facto lenders for stable Class B and C properties as well as those located in secondary and tertiary markets, WITH RATES IN THE MID 3% TO LOW 4% RANGE. As transaction cap rates on core properties continued to decline, life companies stayed moderate in their outlook, reducing maximum available proceeds to 55-65% of purchase price from the 60-70% maximum Loan-to-Value (LTV) available in early 2019. Agencies continue to offer FINANCING UP TO 80% OF PURCHASE PRICE where they were not cash flow constrained. The most active area of the debt market continued to be transitional bridge financing, with additional new entrants who will lend up to 85% of the total project capitalization (LTC = purchase price, capex & closing costs) for value add deals. Competition in the transitional/value-add space drove spreads lower, with bank lenders pricing floaters as low as L+165 at full leverage (60- 65% LTC, ~7-8% Debt Yield constrained). For tighter cap rate deals, bridge lenders and debt funds were able to fund as low as a 5.5% initial debt yield. Such bridge lenders offer pricing of L+225 for 65% LTC, L+250 for 70%, L+275 for 75%, and L+310-360 for 80- 85% where available. Such transitional deals were structured with two-to-five year terms and were generally interest only with limited to no prepayment penalties. Interest Rate Outlook. Fed reiterated their intention to maintain the status quo and issue no further rate cuts in 2020, but many market participants expect global economic headwinds to potentially give cause for as many as three additional rate cuts over the course of the year. The spread between the 2-year and 10-year treasury yields is 27 BASIS POINTS , resulting in a relatively flat yield curve. It is expected that Treasury yields will remain low or further moderate over the course of 2020, with geopolitical risk possibly driving yields lower in a flight to quality. General Notes: Life Company, GSE, and bank loans (in that order) are generally strongly preferred over CMBS by most borrowers. FOR MORE INFORMATION PLEASE CONTACT: ROBERT KAPLAN EXECUTIVE MANAGING DIRECTOR +1 305 533 2860 robert.kaplan@cushwake.com CHRIS LENTZ SENIOR DIRECTOR +1 305 533 2865 chris.lentz@cushwake.com DEBT, EQUITY & STRUCTURED FINANCE ± 0.65 ACRES Surfside, FL 8800 COLLINS AVENUE, 33154 ± 28,369 TOTAL LAND SF PROPERTY DETAIL APPROVED PROJECT 28 Units 65 Res. Units | 75 Hotel Rooms ALLOWED DENSITY Multifamily, Townhouse, Hotel ALLOWABLE USES 11 UNITS 1940 YEAR BUILT 550 AVG UNIT SF 6,052 RENTABLE SF $1,150 AVG MKT RENT iami Beach, FL 7130 RUE VERSAILLES, 33141 $2,100,000 LISTING PRICE LENDER TYPE LIFE COMPANY GSE (FANNIE/FREDDIE) BANK Recourse Non-Recourse Non-Recourse Non-Recourse Leverage Up to 70% LTV Up to 80% LTV (DSCR loan constraint currently limits to 62%- 65%) Up to 65% LTV (recourse above 65%) Loan Type Fixed or Floating rate Fixed or Floating rate Fixed or Floating rate Term 5, 7, 10 or more years 5, 7 or 10+ years 5, 7 or 10 years Prepayment Yield Maintenance Yield maintenance / Defeasance Flexible Lender Fees Par Par 0.50% origination, no exit Interest Only Up to Half term, can use DY test Half to Full term, depending on leverage 1-2 years Amortization 30 Years 30 years 25 to 30 years Index Treasuries or Libor Treasuries or Libor Swaps Spread 1.15% to 1.50%, depending on leverage 1.70% to 2.00%, depending on leverage 1.50% to 1.90% Rate 3.00% To 3.45% 3.40% to 3.68% 3.10% to 3.56% Comments (i) Can rate lock at application. Generally lowest cost of capital for new construction assets. (i) Supplemental loan available after 12 months with improvement in NOI. (ii) Floating rate available, but generally not preferred due to increasing interest rates. (i) May consider additional loan proceeds after improvement in operations. (ii) Floating rate available, but generally not preferred due to increasing interest rates.

$2.09 G MKT RENT/SF

TEAM CREDENTIALS

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM

250,000+ APARTMENT UNITS SOLD IN SOUTH FLORIDA

#1 IN APARTMENT SALES IN SOUTH FLORIDA

$25B+ SOUTH FLORIDA MULTIFAMILY SALES

AWARD WINNING MARKETING

MORE OFFERS HIGHER PRICING

GLOBAL CAPITAL REACH

CONTACT INFORMATION

CALUM WEAVER Executive Managing Director T 954 377 0517 M 786 443 3105 calum.weaver@cushwake.com

MULTIFAMILY INVESTMENT TEAM CONTACTS

ZACHARY SACKLEY Exec. Managing Director

ROBERT GIVEN Vice Chairman

NEAL VICTOR Director

PERRY SYNANIDIS Sr. Financial Analyst

JAMES QUINN Sr. Financial Analyst

TROY BALLARD Exec. Managing Director

CASSANDRA SKEVIS Sr. Graphic Designer

ELIZABETH ROGERIO Sr. Brokerage Coordinator

ANN-MAKIR MAGLOIRE Brokerage Coordinator

BRAD CAPAS Executive Director

CATHERINE DEARING Sr. Graphic Designer

AMY CRANE Financial Analyst

ROBERT KAPLAN Executive Managing Director Equity, Debt & Structured Finance

CHRIS LENTZ Senior Director Equity, Debt & Structured Finance

MARK RUTHERFORD Analyst Equity, Debt & Structured Finance

©2019 Cushman & Wakefield, Inc. NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IS MADE TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED HEREIN, AND SAME IS SUBMITTED SUBJECT TO ERRORS, OMISSIONS, CHANGE OF PRICE, RENTAL OR OTHER CONDITIONS, WITHDRAWAL WITHOUT NOTICE, AND TO ANY SPECIAL LISTING CONDITIONS IMPOSED BY THE PROPERTY OWNER(S). AS APPLICABLE, WE MAKE NO REPRESENTATION AS TO THE CONDITION OF THE PROPERTY (OR PROPERTIES) IN QUESTION.

15

PEOPLE FIRST PHILOSOPHY INDIVIDUALIZED ATTENTION DETAILED CLIENT FOCUS

100

2,000 Team Members 20,000 Multifamily Units 90,000 Condo Units YearsCombinedExperience Years Combined Experience YearsCombinedExperience YearsCombinedExperience YearsCombinedExperience

RKWResidential is an award-winning third-party multifamily property management firm with corporate offices in Miami and Charlotte and regional offices in Orlando, Atlanta, Columbia and Raleigh. With 20,000 multifamily units undermanagement and a growing footprint spanning six states, RKWdelivers expertise inmultifamilymanagement throughitstechnology,marketingandcustomerexperienceplatforms.Thefirm’sprincipalshaveextensiveexperience in multifamily investments and property management including acquisitions/dispositions, developments, lease-ups, stabilized and value-add assets. RKW is built on the foundation of its People First Philosophy, which prioritizes client relationships, employee satisfaction, and top-tier customer service for its residents. Through this, the firmdelivers on its brand promise of “Expert People. Exceptional Places” to enhance property values and achieve success. RKWwas formed out of the partnership of Rivergate Companies, a private real estate investment firm, and KW PROPERTY MANAGEMENT, one of the largest condo management companies in Florida representing more than 90,000 condo units. RKWwas ranked #17 on the Multi-housing News List of Top 20Management Firms in the US in 2019 and has also received numerous regional awards. Your Premier Multifamily Property Management

JOHN ZALKIN

Sr. Vice President of Client Services jzalkin@rkwresidential.com C: 305.969.8001 rkwresidential.com