1. 1 Real Estate Analysis and Investor Presentation

2. 2 Table of Contents  Executive Summary Executive Summary  Basic Fundamentals Basic Fundamentals  Apartment Fundamentals Apartment Fundamentals  Office Fundamentals Office Fundamentals  Retail Fundamentals Retail Fundamentals

3. 3 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

4. 4 Basic Fundamentals 1)Migration & Cost of Living 2)Employment & Population growth

5. 5 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

6. 6 Cities with high incoming migration CityAverage migration (2003-07) (in 000) Phoenix93.4 Atlanta86.8 Inland Empire67.1 Dallas- Fortworth61.5 New Orleans60.9 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.

7. 7 Cities with low cost of living CityLiving Cost Index (US=100) Cleveland87 Pittsburgh87 Oklahoma city88 Indianapolis88 Cincinnati88 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.

8. 8 Strong Weak 1) Both incoming migration number and cost of living index favorable 2) 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 favorable 2) 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

9. 9 Solid Migration & Cost of Living 87147 2600 93400 -88200 Living cost index Migration 1 2 3 4 5 1 2 3 4 5 1 2 Strong 1.Phoenix2.Atlanta3.Dallas4.Orleans5.Houston 1.Inland Empire2. San Jose 1.Pittsburg2.Chicago3.Cleveland4.Detroit5.New York 1.San Diego2.Long Island3. San Francisco 4.Orange County 5.Los Angeles 5 4 3 2 1 Weak Disaster 117

10. 10 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 phoenix Attracts people in to the city due to low living cost Attracts people due to low living cost Both factors quiet favorable CityScoreFactors LowHigh LowHigh LowHigh LowHigh LowHigh Atlanta Dallas New Orleans Houston

11. 11 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

12. 12 Cities with higher employment growth CityAverage deviation Las Vegas2.15% Orlando1.85% Austin1.85% Raleigh1.55% Phoenix1.45% 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

13. 13 Cities with higher population growth CityAverage deviation Las Vegas2.45% Raleigh2.20% Austin2.15% Charlotte1.95% Phoenix1.90% 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

14. 14 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 low 2) Unattractive markets as these cities are neither able to generate employment growth nor population growth 1) Both employment growth and population growth is high 2) Attractive markets for real estate investment 1) Employment growth is low, but population growth is high 2) Markets weak as lack of employment growth leads to lack of increase in per capita income Explanation SolidStrong Disaster Weak

15. 15 Disaster Weak Solid Strong Employment & Population growth -3.00%2.45%-0.28% -0.05% 2.15% -2.25% Population growth Employment growth 1 2 3 45 1.Ft Lauderdale 2.Honolulu 1.Boston2.Pittsburgh3.Cleveland4.Detroit5.New Orleans 1.Columbus2.Memphis3. Chicago4.San Jose5.East Bay 1.Las Vegas2.Austin3.Orlando4.Raleigh5. Phoenix 1 2 1 2 3 4 5 1 2 3 4 5

16. 16 Las Vegas Attractiveness matrix Based on employment growth and population growth the attractiveness of cities are plotted. Generates the highest employment and population growth Generates 2 nd highest employment & population growth Employment growth & population growth favorable Population growth second highest and 4th highest employment growth 5 th highest in both factors CityScoreFactors LowHigh LowHigh LowHigh LowHigh LowHigh Austin Orlando Raleigh Phoenix

17. 17 Apartment Fundamentals

18. 18 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

19. 19 Cities with high % of population in 20-34 age group City% of population in (20-34) Austin25.8% Salt Lake City25.2% Inland empire23.8% Raleigh22.9% Dallas-Fortworth22.6% 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

20. 20 Cities with low forecasted vacancy rates- apartment CityVacancy rate San Francisco3.56% San Jose3.84% San Diego4.02% Seattle4.30% Minneapolis4.32% 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

21. 21 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 low 2) Solid markets as low vacancy rate forecasted means there is no oversupply 1) Both population % in 20-34 and forecasted vacancy rate is high 2) 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 StrongWeak SolidDisaster

22. 22 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 Population % (20-34) StrongWeak SolidDisaster 1 2 3 4 5 1.Salt Lake City2.Inland Empire 1.Austin2. Raleigh 1.Boston2.San Jose3.Orange County4.San Francisco5.New Jersey 1.Charlotte2.Jacksonville3.Hartford4.Tampa5.Stamford 3. Atlanta4. Houston5. San Antonio 3.San Diego4.Columbus5.Sacramento 1 2 4 3 5 1 2 3 4 5 1 2 3 4 5 Weak Disaster

23. 23 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 favorable Has a high % of population in 20-34 and vacancy rate slightly above Salt Lake City Though % of population is low compared to top 2 cities vacancy rate is lower Population % in 20-34 almost similar to San Diego but vacancy slightly high Both factors favorable CityScoreFactors LowHigh LowHigh LowHigh LowHigh LowHigh Inland Empire San Diego Columbus Sacramento

24. 24 Office Fundamentals

25. 25 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

26. 26 Office using employment CityOffice using employment % Washington-Nova-MD43.7% San Francisco34.0% New York31.8% Tampa30.0% Denver29.5% 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.

27. 27 Office using employment growth CityProjected growth San Antonio2.6% Phoenix2.5% Austin2.5% Baltimore2.3% Atlanta2.1% 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%

28. 28 1) Though existing share of office using employment is low, projected growth in this metric is high 2) 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 low 2) Doubtful because though there is an existing base of office using employment, it is not seeing much growth Explanation OpportunityStrong DisasterDoubtful

29. 29 Strong Office using employment % and growth 17.543.730.6 1.2% 2.6% -0.2% Existing Share Growth 1 2 3 4 5 1.San Antonio 2.Austin 1.San Francisco2. Denver 1.Detroit2.Miami3.Jacksonville4.New Orleans5.Kansas City 1.Tampa2.New York3. Washington 3.Phoenix4.Baltimore5.Atlanta 2 1 1 2 3 45 1 2 3 Opportunity Weak Disaster

30. 30 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 CityScoreFactors LowHigh LowHigh Denver

31. 31 Retail Fundamentals

32. 32 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

33. 33 Cities with high % of prime spenders CityPrime Spenders (35-54) % National average San Francisco32.7%28.5% Seattle31.7%28.5% Atlanta31.1%28.5% San Jose31.1%28.5% Minneapolis30.9%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%

34. 34 Cities with high per capita retail sales CityReal retail sales per capita Palm beach county$7470 Las Vegas$7210 Long Island$7072 Fort Lauderdale$6894 Orlando$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

35. 35 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 low 2) 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 high 2) Doubtful because though per capita retail sales is high, there is no high % of population in prime spending age category Explanation OpportunityStrong DisasterDoubtful

36. 36 Population % in prime spenders (35-54) and retail sales per capita 453774706003.5 29.2 32.7 25.7 Retail Sales per Capita Prime Spenders 1 2 3 4 5 1.San Jose2.Atlanta 1.San Francisco 1.Oklahoma City2.San Antonio3.Phoenix4.Inland Empire5.Salt Lake City 1.Orange County2.Austin3. Orlando 3.East Bay4.Detroit5.Raleigh 1 2 3 4 5 1 2 3 45 1 2 3 4 5 5.Boston4.Long Island3.Minneapolis2.Seattle 4. Las Vegas5. Palm Beach Strong Opportunity Doubtful Disaster

37. 37 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 35-54 Has 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 CityScoreFactors LowHigh LowHigh LowHigh LowHigh LowHigh Seattle Minneapolis Long Island Boston