Dallas On Track For Banner Year Multifamily Report Spring 2018

Rapid Population Growth Boosts Demand

Deliveries Set to Hit Cycle High

Investors Remain Bullish DALLAS MULTIFAMILY

Market Analysis Economic, Supply Growth Remains High Spring 2018 Fueled by one of the country’s best-performing economies and rapid Contacts population growth, the Dallas–Fort Worth multifamily market has stayed Paul Fiorilla in high gear. While many large coastal metros are reaching saturation, both Associate Director of Research development and investment in DFW remain relatively unfazed. [email protected] The metro added 91,700 jobs in 2017, and its demographic expansion was (800) 866-1124 x5764 nearly three times the U.S. average. Continuing to be a business-friendly Jack Kern area and a magnet for talent and corporate relocations, North Texas is Director of Research and Publications rapidly generating positions across employment sectors, pushing up housing [email protected] demand. An ongoing labor shortage, deepened by an influx of residents (800) 866-1124 x2444 in the wake of Hurricane Harvey, is impacting DFW’s construction sector, which added just 800 jobs in 2017. Although some projects faced delays, the Author area has no shortage of large-scale developments across all asset classes, Bogdan Odagescu with developers gearing up for a wave of new construction. Senior Associate Editor Roughly 16,800 units came online across the metro in 2017. In 2018, around 22,000 new apartments are expected to come online for a new cycle high. Meanwhile, investors remain bullish, with $5.4 billion in multifamily assets trading in 2017. Although Dallas is expected to lead the nation this year in deliveries, the metro’s rapid expansion is bound to keep multifamily demand steady, leading to projected rent growth of 4.4% in 2018.

Recent Dallas Transactions

The Berkeley Mercer Crossing

City: Fort Worth, Texas City: Farmers Branch, Texas Buyer: Crest Asset Management Buyer: MLG Purchase Price: $116 MM Purchase Price: $86 MM Price per Unit: $161,312 Price per Unit: $168,369

Suite 2801 Pure Farmers Market

City: Euless, Texas City: Dallas Buyer: Cortland Partners Buyer: Pure Multi Purchase Price: $73 MM Purchase Price: $66 MM Price per Unit: $174,958 Price per Unit: $195,147

On the cover: Photo by Ultima Gaina/iStockphoto.com 2 Transactions: Price Per Unit (Dallas)

$160,000

$140,000 Transactions: Price Per Unit (Dallas) $120,000 $160,000 $100,000 $140,000 $80,000 $120,000 $60,000 $100,000 $40,000 0 1 2 3 4 5 6 7 8 $80,000 1 1 1 1 01 01 01 20 20 2 201 20 2 2 201 20 $60,000

$40,000 Dallas National 0 1 2 3 4 5 6 7 8 1 1 1 1 01 01 01 20 20 2 201 20 2 2 201 20

1 3 5 7 1 12 1 1 1 010 0 0 0 014 0 016 0 2 2 2 2 2 2 2 2 Dallas National

1 3 5 7 1 12 1 1 1 010 0 0 0 014 0 016 0 Employment Growth: YoY 6mo-avg (Dallas) 2 2 2 2 2 2 2 2

4.0% Employment Growth: YoY 6mo-avg (Dallas) 3.5% 4.0%

3.0% 3.5%

2.5% 3.0%

2.0% 2.5%

1.5% 2.0% 4 6 6 7 7 -15 -15 -15 16 -16 -1 1 -17 -17 p c r- p c- r-1 un e e a un e a un-1 1.5% Dec-1 Mar-15 J S D M J S De M J Sep Dec 4 6 6 7 7 -15 -15 -15 16 -16 -1 1 -17 -17 p c r- p c- r-1 un e e Dallasa unNational e a un-1 Dec-1 Mar-15 J S D M J S De M J Sep Dec

Supply: Percentage of Stock (Dallas) Dallas National

3.0% Supply: Percentage of Stock (Dallas) 2.5% 3.0% 2.0% 2.5% 1.5% 2.0% 1.0% 1.5% 0.5% 1.0% 0.0% 0.5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

0.0% National Dallas 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

Supply: Development Pipeline as of Feb 2018 (Dallas) National Dallas

Supply: Development Pipeline as of Feb 2018 (Dallas)

36,563 Units 43,426 Units

36,563 Units 43,426 Units

50,335 Units Rent Trends

50,335 Units „„ Dallas–Fort Worth rents were up 2.4% in the 12 months ending in February, 30 basis points below the U.S. average. While the metro’sPlanned performanceProspective outpacedUnder Construction the national rate for the better part of the past three years, supply slowly caught up with demand in 2017 due to the ongoing construction boom. At

$1,126Transactions: as of Total February, Volume (Dallas) thePlanned average ProspectiveDFW rent wasUnder Constructionalmost $250 below the U.S. rate.

$6,000 400 „„ The working-class Renter-by-Necessity segment continued to lead growth, up 4.4% to $926. Meanwhile, Transactions: Total Volume (Dallas) Lifestyle rents appreciated by only 0.9%, to $1,331. The wide spread between the two is due to a nationwide$6,000 trend: While many major metros add jobs across the board, boosting demand across300400 asset classes,$4,000 developers continue to focus almost exclusively on more cost-effective upscale projects. 200300 „„ With $4,000the spate of new stock diluting upscale demand, rents dipped in many expensive core submarkets, including$2,000 Dallas’ South Oak Lawn (-2.9%) and Cityscape/Downtown (-1.4%), as well as Fort Worth’s 200 Medical District (-2.4%) and Downtown (-2.4%). Meanwhile, much more affordable fringe submarkets100 led growth:$2,000 Cleburne/Alvarado (13.8%), Lake Worth (10.3%) and Tanglewood/Westcliff (9.0%). $0 0100 „„ Although Dallas has2009 the largest 2010 pipeline 2011 2012among 2013 U.S. metros, 2014 North 2015 Texas’ 2016 strong 2017 economy 2018 is bound to continue creating robust housing demand. We expect rents to grow 4.4% in 2018. $0 Volume in Millions Number of Properties 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Dallas vs. National Rent Growth (Sequential 3-Month, Year-Over-Year) Rent: YoY vs National (Dallas) Volume in Millions Number of Properties

8.0%

Rent: YoY vs National (Dallas)

8.0%6.0%

6.0%4.0%

4.0%2.0%

2.0%0.0%

0.0%

Dallas National

Source: YardiMatrix Rent: Lifestyle vs RBN (Dallas) Dallas National 10.0% Dallas Rent Growth by Asset Class (Sequential 3-Month, Year-Over-Year) Rent: Lifestyle vs RBN (Dallas) 8.0% 10.0% 6.0% 8.0% 4.0% 6.0% 2.0% 4.0% 0.0% 2.0%

0.0%

Lifestyle Renter-by-Necessity

Lifestyle Renter-by-Necessity

Source: YardiMatrix

Dallas Multifamily | Spring 2018 3 Economic Snapshot

„„ Having added 91,700 jobs in 2017 for a 2.7% expansion, Dallas–Fort Worth remains the fastest- growing economy among major U.S. metros, with the area’s business-friendly environment and deep talent pool attracting corporate players and developers alike.

„„ Generating 25,500 positions, professional and business services led growth, followed by leisure and hospitality (19,500) and education and health services (12,400). The metro’s rapid addition of high- paying jobs is boosting housing demand, while also creating more service positions. Transactions: Price Per Unit (Dallas)

„„ A labor shortage is affecting some North$160,000 Texas projects, and the construction sector added only 800 $140,000

positions. Still, the metro’s pipeline remains$120,000 solid. The $1.1 billion Texas Rangers ballpark in Arlington is set to open in 2020, Allen City Council$100,000 approved Hines’ 3.5 million-square-foot The Strand this January and Cyrus One broke ground late last $80,000year on a $600 million data center campus. Meanwhile, Bandera $60,000

Ventures landed a construction loan for$40,000 a 1.4 million-square-foot industrial facility within Passport 0 1 2 3 4 5 6 7 8 1 1 1 1 01 01 01 Park, and developer Mehrdad Moayedi is moving20 20 2forward201 20 2 with2 201 a 1,000-home20 community in Mesquite.

Dallas National „„ The thriving economy is driving office development to new heights. Roughly 5.9 million square feet of

1 3 5 7 1 12 1 1 1 Class A010 office0 0 space0 014 came0 016 online0 in 2017, and the metro is set to have another banner year in 2018. 2 2 2 2 2 2 2 2 Dallas vs. National Employment Growth (Year-Over-Year) Employment Growth: YoY 6mo-avg (Dallas)

4.0%

3.5%

3.0%

2.5%

2.0%

1.5% 4 6 6 7 7 -15 -15 -15 16 -16 -1 1 -17 -17 p c r- p c- r-1 un e e a un e a un-1 Dec-1 Mar-15 J S D M J S De M J Sep Dec

Dallas National

Sources: YardiMatrix, Bureau of Labor Statistics (not seasonally adjusted) Supply: Percentage of Stock (Dallas)

3.0% Dallas Employment Growth by Sector (Year-Over-Year) 2.5% Current Employment Year Change Code2.0% Employment Sector (000) % Share Employment %

601.5%Professional and Business Services 624 16.9% 25,500 4.3% 70 Leisure and Hospitality 390 10.6% 19,500 5.3% 1.0% 65 Education and Health Services 448 12.2% 12,400 2.8% 300.5%Manufacturing 275 7.5% 8,800 3.3% 900.0%Government 446 12.1% 8,300 1.9% 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD 40 Trade, Transportation and Utilities 790 21.4% 6,700 0.9% 80 Other Services National 128 Dallas 3.5% 5,400 4.4% 55 Financial Activities 294 8.0% 5,000 1.7% Supply:15 DevelopmentMining, Pipeline Logging as of Feb 2018and (Dallas) Construction 209 5.7% 800 0.4% 50 Information 82 2.2% -700 -0.8%

Sources: YardiMatrix, Bureau of Labor Statistics

36,563 Units 43,426 Units Dallas Multifamily | Spring 2018 4

50,335 Units

Planned Prospective Under Construction

Transactions: Total Volume (Dallas)

$6,000 400

300 $4,000

200

$2,000 100

$0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Volume in Millions Number of Properties

Rent: YoY vs National (Dallas)

8.0%

6.0%

4.0%

2.0%

0.0%

Dallas National

Rent: Lifestyle vs RBN (Dallas)

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Lifestyle Renter-by-Necessity Demographics Affordability

„„ The median DFW home price is surging, having reached $231,396 in 2017. That marks a 6% uptick from 2016 and a nearly 60% increase since 2009. Although the metro remains relatively affordable and the average mortgage payment accounts for only 16% of the area’s median income, rising values are putting additional pressure on first-time buyers, favoring the formation of rental households. The metro’s average rent of $1,126 takes up about 21% of incomes.

„„ The residential building surge continues, but the metro’s rapid demographic expansion is bound to push prices further, as Dallas-Fort Worth is unlikely to become more affordable in the foreseeable future.

Dallas Rent vs. Own Affordability as a Percentage of Income 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

2008 2009 2010 2011Mort/Income2012 2013Rent/Income2014 2015 2016 2017 Mort/Income Rent/Income

Sources: YardiMatrix, Moody’s Analytics

Dallas Median Home Price $250,000 $250,000 $200,000 $200,000 $150,000 $150,000 $100,000 $100,000 $50,000 $50,000 $0 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Moody’s Analytics2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Population Dallas vs. National Population

„„ The metro added roughly 2012 2013 2014 2015 2016 780,000 residents between 2010 and 2016 for a 12.1% National 313,998,379 316,204,908 318,563,456 320,896,618 323,127,513 expansion, almost triple the U.S. average. Dallas 6,704,080 6,813,055 6,945,274 7,089,888 7,233,323 „„ Dallas–Fort Worth added Metro nearly 145,000 people in 2016 alone. Sources: U.S. Census, Moody’s Analytics

Dallas Multifamily | Spring 2018 5 Transactions: Price Per Unit (Dallas) Transactions: Price Per Unit (Dallas) $160,000 $160,000 $140,000 $140,000 $120,000 $120,000 $100,000 $100,000 $80,000 $80,000 $60,000 $60,000

$40,000 $40,000 0 1 2 3 4 5 0 6 1 7 2 8 3 4 5 6 7 8 1 1 1 1 1 1 1 1 01 01 01 01 01 01 20 20 2 201 20 2 20 2 20 2012 20201 20 2 2 201 20

Supply Dallas National Dallas National

1 3 5 1 7 3 5 7 1„„ 12 1 1 1 1 12 1 1 1 010 0 0 0Some014 16,8000 010 016 0 0units0 0 came014 0 online016 0 in DFW last year, accounting for 2.5% of total stock. With rapid 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 population growth pushing up demand, the building surge continues, as almost 68,000 units were

Employment Growth: YoY 6mo-avg (Dallas) delivered in the metro sinceEmployment the Growth: beginning YoY 6mo-avg of (Dallas)2014, the vast majority of which are in Class A/B+ communities.4.0% As of February, nearly 4,000 units had already been added to DFW’s housing stock. 4.0%

„„ There 3.5%were roughly 43,000 units under construction in the metro as of February and an additional 3.5% 87,000 units in the planning and permitting stages. With 360,000 apartments slated for delivery nationwide,3.0% 2018 is expected to mark a new cycle high for multifamily development—with Dallas–Fort 3.0% Worth leading the way. With 22,158 units projected to come online this year, DFW’s pipeline tops the 2.5% 2.5% list of U.S. metros, closely followed by Manhattan’s 21,768 units. 2.0% 2.0% „„ Though developments are widespread, Far North and core Dallas submarkets continued their lead in new construction.1.5% Neighboring North Frisco/West McKinney, North Carrollton/The Colony and South Frisco/ 4 6 6 7 7 1.5% Parker have almost 10,000 units-15 underway,-15 while-15 Cityscape/Downtown16 -16 -1 1 and Uptown add as-17 many -as17 p c r- p c- r-1 4 un e e a 6 un 6 e 7 7 a un-1 Dec-1 Mar-15 J S D M J S De M J Sep Dec 5,514 units. Together,-15 -15 these -top15 five16 submarkets-16 account-1 for1 more than a third -of17 the metro’s-17 pipeline. p c r- p c- r-1 un e e a un e a un-1 Dec-1 Mar-15 J S D M J S De M J Sep Dec Dallas National

Dallas vs. National CompletionsDallas as aNational Percentage of Total Stock (as of February 2018) Supply: Percentage of Stock (Dallas)

Supply: Percentage of Stock (Dallas)3.0%

3.0% 2.5%

2.5% 2.0%

2.0% 1.5%

1.5% 1.0%

1.0% 0.5%

0.0% 0.5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

0.0% National Dallas 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD Source: YardiMatrix Supply: Development Pipeline as of Feb 2018 (Dallas)National Dallas

Supply: Development PipelineDevelopment as of Feb 2018 (Dallas) Pipeline (as of February 2018) Dallas Completions (as of February 2018) Transactions: Price Per Unit (Dallas)

$160,000

36,563 Units $140,000 43,426 Units $120,000

$100,000 36,563 Units 43,426 Units $80,000

50,335 Units $60,000

$40,000 0 1 2 3 4 5 6 7 8 1 1 1 1 01 01 01 20 20 2 201 20 2 2 201 20 50,335 Units Planned Prospective Under Construction Dallas National

Transactions: Total Volume (Dallas) 1 3 5 7 1 12 1 1 1 010 0 0 0 014 0 016 0 2 2 2 2 2 2 2 2 $6,000Planned Prospective Under Construction 400

Source: YardiMatrix Source: YardiMatrix Transactions: Total Volume (Dallas) 300 Employment Growth: YoY 6mo-avg (Dallas) $4,000 $6,000 400 4.0% 200 Dallas Multifamily | Spring 2018 6 $2,000 300 $4,000 3.5% 100

200 $0 3.0% 0 $2,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 100 Volume in Millions Number2.5% of Properties

$0 0 Rent: YoY vs National (Dallas) 2009 2010 2011 2012 2013 2014 2015 20162.0% 2017 2018 8.0% Volume in Millions Number of Properties 1.5% 6.0% 4 6 6 7 7 -15 -15 -15 16 -16 -1 1 -17 -17 Rent: YoY vs National (Dallas) p c r- p c- r-1 un e e a un e a un-1 4.0% Dec-1 Mar-15 J S D M J S De M J Sep Dec 8.0%

2.0% 6.0% Dallas National 0.0% 4.0% Supply: Percentage of Stock (Dallas)

2.0% 3.0% Dallas National

0.0% Rent: Lifestyle vs RBN (Dallas) 2.5%

10.0% 2.0% 8.0% Dallas National 6.0% 1.5%

Rent: Lifestyle vs RBN (Dallas) 4.0% 10.0% 1.0% 2.0% 8.0% 0.0% 0.5% 6.0% 0.0% 4.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD Lifestyle Renter-by-Necessity 2.0% National Dallas 0.0%

Supply: Development Pipeline as of Feb 2018 (Dallas)

Lifestyle Renter-by-Necessity

36,563 Units 43,426 Units

50,335 Units

Planned Prospective Under Construction

Transactions: Total Volume (Dallas)

$6,000 400

300 $4,000

200

$2,000 100

$0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Volume in Millions Number of Properties

Rent: YoY vs National (Dallas)

8.0%

6.0%

4.0%

2.0%

0.0%

Dallas National

Rent: Lifestyle vs RBN (Dallas)

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Lifestyle Renter-by-Necessity Transactions: Price Per Unit (Dallas)

$160,000

$140,000

$120,000

$100,000

$80,000

$60,000

$40,000 0 1 2 3 4 5 6 7 8 1 1 1 1 01 01 01 20 20 2 201 20 2 2 201 20

Dallas National

1 3 5 7 1 12 1 1 1 010 0 0 0 014 0 016 0 2 2 2 2 2 2 2 2

Employment Growth: YoY 6mo-avg (Dallas)

4.0%

3.5%

3.0%

2.5%

2.0%

1.5% 4 6 6 7 7 -15 -15 -15 16 -16 -1 1 -17 -17 p c r- p c- r-1 un e e a un e a un-1 Dec-1 Mar-15 J S D M J S De M J Sep Dec

Dallas National

Supply: Percentage of Stock (Dallas)

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

National Dallas

TransactionsSupply: Development Pipeline as of Feb 2018 (Dallas)

„„ Some $5.4 billion in multifamily assets traded in DFW last year, almost on par with 2016’s $5.6 billion cycle high. With investors starting to worry about paying top dollar for assets in coastal gateway metros, Dallas remains attractive to institutional buyers, due to its strong long-term fundamentals, 36,563 Units relatively low prices and thriving43,426 economy. Units

„„ Per-unit prices remained flat last year, the roughly $100,000 average being on par with 2016 values and still well below the $139,228 U.S. average. Investor appetite was high across the map and throughout the quality spectrum, with acquisition yields ranging from roughly 4.5% for Class A communities to 50,335 Units about 6.0%-7.0% for value-add assets.

„„ Far North and core Dallas areas with high construction activity drove investor interest in the 12 months ending in February, led by Cityscape/Downtown ($225 million) and South Frisco/Parker ($205 million). Planned Prospective Under Construction

Dallas Sales Volume and Number of Properties Sold (as of February 2018) Transactions: Total Volume (Dallas)

$6,000 400

300 $4,000

200

$2,000 100

$0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Volume in Millions Number of Properties

Source: YardiMatrix Rent: YoY vs National (Dallas)

8.0% Top Submarkets for Transaction Volume1 DallasTransactions: vs. National Price Per SalesUnit (Dallas) Price per Unit 6.0% Submarket Volume $160,000 ($MM) 4.0% $140,000 Cityscape/Downtown 225 $120,000 2.0% South Frisco/Parker 205 $100,000 N. Frisco/West McKinney 180 $80,000 0.0% Valley Ranch 164 $60,000 Lamar 140 $40,000 0 1 2 3 4 5 6 7 8 1 1 1 1 01 01 01 Gastonwood/Junius 20 20 2 201 20 2 2 201 20 128 Dallas National Heights/Lake Park Estates Dallas National

SouthRent: Lifestyle Lake vs HighlandsRBN (Dallas) 126 Source: YardiMatrix North Oak1 Lawn 3 5 126 7 10.0%1 12 1 1 1 010 0 0 0 014 0 016 0 2 2 2 2 2 2 2 2 Source:8.0% YardiMatrix 1 From March 2017 to February 2018 6.0% Employment Growth: YoY 6mo-avg (Dallas)

4.0% 4.0% 2.0%

3.5% 0.0% Dallas Multifamily | Spring 2018 7

3.0%

Lifestyle Renter-by-Necessity 2.5%

2.0%

1.5% 4 6 6 7 7 -15 -15 -15 16 -16 -1 1 -17 -17 p c r- p c- r-1 un e e a un e a un-1 Dec-1 Mar-15 J S D M J S De M J Sep Dec

Dallas National

Supply: Percentage of Stock (Dallas)

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

National Dallas

Supply: Development Pipeline as of Feb 2018 (Dallas)

36,563 Units 43,426 Units

50,335 Units

Planned Prospective Under Construction

Transactions: Total Volume (Dallas)

$6,000 400

300 $4,000

200

$2,000 100

$0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Volume in Millions Number of Properties

Rent: YoY vs National (Dallas)

8.0%

6.0%

4.0%

2.0%

0.0%

Dallas National

Rent: Lifestyle vs RBN (Dallas)

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Lifestyle Renter-by-Necessity Read All About It!

TX Portfolio Sells for $317M

MSD Grabs Dallas Mixed-Use Property

Silverstone Healthcare To Open Dallas Assisted Living

Leon Capital Offloads DFW Retail Asset

Get the latest Dallas real estate news at

Photo by typhoonski/iStockphoto.com Dallas Submarkets Area # Submarket 1 South Downtown 2 Pleasant Grove 3 Fair Park 4 South Oak Cliff 5 North Oak Cliff/Irving 6 Lake Village/South Irving/West Dallas 7 North Grand Prairie 8 Kiest 9 Duncanville/South Grand Prairie 10 Lancaster/Red Bird 11 Southeast Dallas County 12 Northwest Mesquite 13 Northeast Mesquite 14 Desoto 15 North Cedar Hill 16 Midlothian/South Cedar Hill 17 Ennis/Waxahachie 18 Kaufman/Terrell 19 Barton Estates/Garden Oaks/Hospital District 20 Irving 21 Las Colinas 22 Espanita/Timberlake 23 Oaks 24 Valley Ranch 25 Coppell/South Lewisville 26 Central Lewisville 27 North Lewisville/Trophy Club 28 East Denton 29 Downtown Denton

Area # Submarket Area # Submarket Area # Submarket 1 Downtown 31 Handley 1 Cityscape/Downtown 2 Fairmount/Morningside/Worth Heights 32 Randol Mill 2 Uptown 3 Medical District 33 Hurst 3 South Oak Lawn 4 Westover Hills 34 Bedford 4 North Oak Lawn 5 Crestwood/River Oaks/Sansom Park 35 Colleyville 5 Bachman Lake/West Northwest Highway 6 Far North/Stockyards 37 Keller/Westlake 6 Northwest Dallas 7 Haltom City 38 Southlake 7 Carrollton/Farmers’ Branch 9 Stop Six 39 Grapevine 8 Park Cities/Preston Hollow/West Oak Lawn 10 Meadowbrook 40 Euless 9 Telecom Corridor 11 Richland Hills 41 Tarrant 10 West Vickery Park 12 Watauga 42 Riverside 11 Greenville Corridor/Ridgewood Park 13 Blue Mound 43 Lamar 12 Gastonwood/Junius Heights/ 14 Saginaw 44 Green Oaks Lake Park Estates 15 Lake Worth 45 North Arlington 13 Forest Hills 17 White Settlement 46 Downtown Arlington 14 Dixon Branch 18 Ridgelea 47 South Davis/Turtlerock 15 South Garland 19 Western Hills 48 East Arlington 16 Central Garland 20 Benbrook 49 Great Southwest 17 South Lake Highlands 22 Colonial/TCU 50 Florence Hill 18 Casa Linda Estates/Cloisters/Lakewood 23 Hemphill 51 Fitzgerald 19 East Vickery Park 24 Wedgewood 52 Mansfield 20 North Vickery Park 25 Edgecliff Village 53 Cleburne/Alvarado 21 North Lake Highlands 26 Sycamore 55 Granbury 22 North Garland/Rowlett/Sachse 27 Burleson/Joshua 57 Weatherford 23 Richardson 29 Kennedale 59 Azle 24 Northwood Hills/Valley View 30 Dalworthington Gardens/Pantego 25 Prestonwood/Galleria 26 Addison 27 North Carrollton/The Colony 28 Rosemeade 29 North Preston Corridor 30 West Plano 31 East Plano/Allen 32 South Frisco/Parker 33 North Frisco/West McKinney 34 East McKinney/Wylie/Princeton 35 North Hunt County/Greenville/Commerce

Dallas Multifamily | Spring 2018 9 Definitions

Lifestyle households (renters by choice) have wealth sufficient to own but have chosen to rent. Discretionary households, most typically a retired couple or single professional, have chosen the flexibility associated with renting over the obligations of ownership.

Renter-by-Necessity households span a range. In descending order, household types can be:

„„ A young-professional, double-income-no-kids household with substantial income but without wealth needed to acquire a home or condominium;

„„ Students, who also may span a range of income capability, extending from affluent to barely getting by;

„„ Lower-middle-income (“gray-collar”) households, composed of office workers, policemen, firemen, technical workers, teachers, etc.;

„„ Blue-collar households, which may barely meet rent demands each month and likely pay a disproportionate share of their income toward rent;

„„ Subsidized households, which pay a percentage of household income in rent, with the balance of rent paid through a governmental agency subsidy. Subsidized households, while typically low income, may extend to middle-income households in some high-cost markets, such as New York City;

„„ Military households, subject to frequency of relocation.

These differences can weigh heavily in determining a property’s ability to attract specific renter market segments. The five-star resort serves a very different market than the down-and-outer motel. Apartments are distinguished similarly, but distinctions are often not clearly definitive without investigation. TheYardi® Matrix Context rating eliminates that requirement, designating property market positions as:

Market Position Improvements Ratings Discretionary A+ / A High Mid-Range A- / B+ Low Mid-Range B / B- Workforce C+ / C / C- / D

The value in application of the Yardi® Matrix Context rating is that standardized data provides consistency; information is more meaningful because there is less uncertainty. The user can move faster and more efficiently, with more accurate end results.

The Yardi® Matrix Context rating is not intended as a final word concerning a property’s status—either improvements or location. Rather, the result provides reasonable consistency for comparing one property with another through reference to a consistently applied standard.

To learn more about Yardi® Matrix and subscribing, please visit www.yardimatrix.com or call Ron Brock, Jr., at 480-663-1149 x2404.

Dallas Multifamily | Spring 2018 10 In 30 minutes we’ll show you how you can: » Leverage the power of multifamily, office & self storage market data » Reveal a property’s true ownership and contacts behind the LLC » Deliver sales, rent and occupancy comps » Aggregate comp set level revenue and expense comps—only available with Yardi Matrix » Show in-place loans, maturity dates and originators » Update new supply pipelines continuously » Create presentation-ready reports

800.866.1144 Yardi.com/Matrix The Data and Analytics Service for Real Estate Professionals

Energized for Tomorrow DISCLAIMER

Although every effort is made to ensure the accuracy, timeliness and completeness of the information provided in this publication, the information is provided “AS IS” and Yardi Matrix does not guarantee, warrant, represent or undertake that the information provided is correct, accurate, current or complete. Yardi Matrix is not liable for any loss, claim, or demand arising directly or indirectly from any use or reliance upon the information contained herein.

COPYRIGHT NOTICE

This document, publication and/or presentation (collectively, “document”) is protected by copyright, trademark and other intellectual property laws. Use of this document is subject to the terms and conditions of Yardi Systems, Inc. dba Yardi Matrix’s Terms of Use (http://www.yardimatrix.com/Terms) or other agreement including, but not limited to, restrictions on its use, copying, disclosure, distribution and decompilation. No part of this document may be disclosed or reproduced in any form by any means without the prior written authorization of Yardi Systems, Inc. This document may contain proprietary information about software and service processes, algorithms, and data models which is confidential and constitutes trade secrets. This document is intended for utilization solely in connection with Yardi Matrix publications and for no other purpose.

Yardi®, Yardi Systems, Inc., the Yardi Logo, Yardi Matrix, and the names of Yardi products and services are trademarks or registered trademarks of Yardi Systems, Inc. in the United States and may be protected as trademarks in other countries. All other product, service, or company names mentioned in this document are claimed as trademarks and trade names by their respective companies.

© 2018 Yardi Systems, Inc. All Rights Reserved.

Dallas Multifamily | Spring 2018 12 Dominating Dallas Multifamily Winter Report 2017

Strong Job Market Fuels Demand

Pipeline Tops Nationwide Standings

Investment Hits Cyclical High DALLAS MULTIFAMILY

Market Analysis North Texas Thrives on Solid Fundamentals Winter 2017 Hitting new cyclical peaks across most metrics, Dallas-Fort Worth continues to be Contacts one of the strongest multifamily markets in the United States. Following national Paul Fiorilla trends, rent growth slowed down during the last two quarters of 2016. However, Associate Director of Research at 5.7% as of January, the metro’s growth rate topped the national average by 110 [email protected] basis points, fueled by strong fundamentals across the board. With 114,000 new (800) 866-1124 x5764 jobs in the year ending in November and ranked as the top U.S. metro in units under construction, DFW is perceived by developers and investors as a safe haven. Jack Kern Director of Research and Publications Dallas remains a regional economic anchor, and the city’s healthy business climate [email protected] continues to draw large projects and corporate employers. Kent Donahue is (800) 866-1124 x2444 moving forward with Bayside, its $1 billion, 262-acre mixed-use development in Rowland. Facebook recently announced that it will significantly expand its Fort Author Worth data center, bringing the final project to roughly 2.5 million square feet. Bogdan Odagescu In Plano, Toyota’s new headquarters is generating thousands of jobs and the $2 Associate Editor billion Legacy West project is nearing completion.

With roughly $5 billion worth of assets trading and some 15,000 units coming online in 2016, the metro hit new records for the current cycle. Considering North Texas’ strong level of demand, growth is here to stay. As the metro is gaining residents at a fast pace and is steadily adding jobs across most sectors, we expect healthy absorption levels, with rents in DFW increasing by 6.3% in 2017.

Recent Dallas Transactions

Elan Lakeside Avenue on Fairmount

City: Flower Mound, Texas City: Dallas Buyer: Azure Partners Buyer: Pure Multi Purchase Price: $84 MM Purchase Price: $71 MM Price per Unit: $196,721 Price per Unit: $192,935

Santa Rosa Sixteen 50 @ Lake Ray Hubbard

To Subscribe Hollie Zepke City: Irving, Texas City: Rockwall, Texas Audience Development Specialist Buyer: Resource Real Estate Buyer: Steadfast Cos. [email protected] Purchase Price: $71 MM Purchase Price: $66 MM (800) 866-1124 x5389 Price per Unit: $149,160 Price per Unit: $197,904

On the cover: Photo by f11photo/iStockphoto.com 2 Transactions: Price Per Unit (Dallas)

$140,000

$120,000 Transactions: Price Per Unit (Dallas) $100,000 $140,000 $80,000 $120,000 $60,000 $100,000 $40,000 $80,000 2009 2010 2011 2012 2013 2014 2015 2016

$60,000 Dallas National

$40,000 2009 2010 2011 2012 2013 2014 2015 2016 9 0 3 4 5 6 0 1 0 0 01 01 01 01 2 2 2011 2012 2 2 2 2 Dallas National

Employment Growth: YoY 6mo-avg (Dallas) 9 0 3 4 5 6 0 1 0 0 01 01 01 01 4%2 2 2011 2012 2 2 2 2

Employment Growth: YoY 6mo-avg (Dallas) 2% 4% 0% 2% -2% 0% -4% -2% -6% -4%

-6%

Dallas National

Supply: Percentage of Stock (Dallas) Dallas National 3.0%

Supply: Percentage of Stock (Dallas) 2.5% 3.0% 2.0% 2.5% 1.5% 2.0% 1.0% 1.5% 0.5% 1.0% 0.0% 0.5% 2009 2010 2011 2012 2013 2014 2015 2016

National Dallas 0.0% 2009 2010 2011 2012 2013 2014 2015 2016

Supply: Development Pipeline as of Jan 2017 (Dallas) National Dallas

Supply: Development Pipeline as of Jan 2017 (Dallas)

35,025 Units 43,584 Units

35,025 Units 43,584 Units

34,468 Units Rent Trends 34,468 Units

„„ Dallas-Fort Worth rents werePlanned up 5.7% lastProspective year, 110Under basis Construction points above the U.S. average. However, their $1,084 price point as of January remained below the $1,315 national average. Following nationwide trends, the metro’s

growthTransactions: rate Total peaked Volume (Dallas) at 8.0% in mid-2016, recording a slight deceleration during the year’s last two quarters. Planned Prospective Under Construction $5,000 400 „„ The working-class Renter-by-Necessity segment led rent growth, recording a 6.9% year-over-year increase, whileTransactions: Lifestyle Total Volume rents (Dallas) grew by 4.2%. This difference results, in part, from the fact that developers heavily focused $4,000 on Class$5,000 A projects, which generate higher returns, while demand remained strong for all asset classes.400300

„ $3,000 „ The rise$4,000 of rents is consistent across the map, with 14 submarkets surpassing the 10% mark. The list was topped by North Arlington (14.1%), North Vickery Park (13.1%), Meadowbrook (12.8%) and North Oak Cliff/Irving300200 $2,000 (11.5%).$3,000 The rent surge in these areas is partially due to low levels of recent completions, as opposed to core areas—such as Uptown (2.6%) and Cityscape/Downtown (4.8%)—that are seeing a construction boom.200100 $1,000 $2,000 „„ Dallas is the U.S. metro recording the largest number of units under construction, but demand is likely to remain strong due$0 to the area’s accelerated population gains. As the metro continues to be relatively affordable,1000 while $1,000 2009 2010 2011 2012 2013 2014 2015 2016 also adding both blue- and white-collar jobs at a fast pace, Yardi Matrix forecasts a 6.3% rent growth for 2017. Volume in Millions Number of Properties $0 0 Dallas vs. National2009 Rent Growth 2010 (Sequential 2011 2012 3 Month, 2013 Year-Over-Year) 2014 2015 2016 Rent: YoY vs National (Dallas) Volume in Millions Number of Properties 10.0%

Rent: YoY vs National (Dallas) 8.0% 10.0% 6.0% 8.0% 4.0% 6.0% 2.0% 4.0% 0.0% 2.0%

0.0%

Dallas National Source: YardiMatrix Rent: Lifestyle vs RBN (Dallas) Dallas National 10.0% Dallas Rent Growth by Asset Class (Sequential 3 Month, Year-Over-Year) Rent: Lifestyle vs RBN (Dallas) 8.0% 10.0% 6.0% 8.0% 4.0% 6.0% 2.0% 4.0% 0.0% 2.0%

0.0%

Lifestyle Renter-by-Necessity

Lifestyle Renter-by-Necessity

Source: YardiMatrix

Dallas Multifamily | Winter 2017 3 Economic Snapshot

„„ Dallas-Fort Worth added 114,000 jobs in the year ending in November, up 3.4% year-over-year, 120 basis points above the national average. Unaffected by the collapse of oil prices, North Texas remains an economic powerhouse, displaying a healthy combination of business-friendly laws, solid levels of domestic and international capital, relative affordability of living and efficient infrastructure.

„„ Job gains were led by the trade, transportation and utilities sector (34,000). The professional and business services, financial activities, and education and health services sectors added a total of 51,900 new positions, consolidating the metro’s white-collar populationTransactions: Price Per and Unit (Dallas) contributing to an already diversified economy. $140,000

„„ With more than 10 million square feet of$120,000 space under construction—most of it Class A—the metro’s office

development pipeline is concentrated in$100,000 the same submarkets where multifamily supply is on the rise: Plano,

Frisco, The Colony and other Far North locations,$80,000 as well as core Dallas submarkets.

$60,000 „„ Dallas has no shortage of large developments:$40,000 Construction on the $1 billion Bayside is slated to begin this spring; Hillwood and The Howard Hughes Corp.2009 have 2010 unveiled 2011 2012 2013 plans 2014 2015 for 2016 a 130-acre Westlake campus; Facebook recently announced that it will expand its Fort Worth Dallasdata centerNational to 2.5 million square feet. In addition, Toyota’s 100-acre campus and the $2 billion Legacy West, both in Plano, are scheduled for completion in 2017. 9 0 3 4 5 6 0 1 0 0 01 01 01 01 2 2 2011 2012 2 2 2 2 Dallas vs. National Employment Growth (Year-Over-Year) Employment Growth: YoY 6mo-avg (Dallas)

4%

2%

0%

-2%

-4%

-6%

Dallas National

Sources: YardiMatrix, Bureau of Labor Statistics (not seasonally adjusted) Supply: Percentage of Stock (Dallas)

Dallas3.0% Employment Growth by Sector (Year-Over-Year)

2.5% Current Employment Year Change

Code2.0% Employment Sector (000) % Share Employment % 40 Trade, Transportation and Utilities 784 21.8% 34,000 4.5% 1.5% 60 Professional and Business Services 598 16.7% 25,000 4.4% 551.0%Financial Activities 295 8.2% 13,600 4.8%

650.5%Education and Health Services 441 12.3% 13,300 3.1% 90 Government 431 12.0% 11,500 2.7% 0.0% 70 Leisure and2009 Hospitality 2010 2011 2012371 201310.3% 2014 201510,200 2016 2.8% 15 Mining, Logging and Construction 205 5.7% 3,700 1.8% National Dallas 80 Other Services 122 3.4% 3,700 3.1%

Supply:50 DevelopmentInformation Pipeline as of Jan 2017 (Dallas) 82 2.3% 800 1.0% 30 Manufacturing 261 7.3% -1,000 -0.4%

Sources: YardiMatrix, Bureau of Labor Statistics

35,025 Units 43,584 Units Dallas Multifamily | Winter 2017 4

34,468 Units

Planned Prospective Under Construction

Transactions: Total Volume (Dallas)

$5,000 400

$4,000 300

$3,000 200 $2,000

100 $1,000

$0 0 2009 2010 2011 2012 2013 2014 2015 2016

Volume in Millions Number of Properties

Rent: YoY vs National (Dallas)

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Dallas National

Rent: Lifestyle vs RBN (Dallas)

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Lifestyle Renter-by-Necessity Demographics Affordability

„„ The median home price reached $217,000 in 2016, marking another peak for the current cycle. However, homes in Dallas remain less expensive than those in other major Texas metros, such as Austin and Houston.

„„ Owning in Dallas remains more affordable than renting. The average mortgage payment comprises 15% of the metro’s median income, while the average rent of $1,084 accounts for 19%. As the metro is adding residents at a much faster rate than the nation while the percentage of new stock matches the national average, Dallas is not likely to become more affordable in the near future.

Dallas Rent vs. Own Affordability as a Percentage of Income

20%20%

15%15%

10%10%

5%5%

0%0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2008 2009 2010 2011 2012 2013 2014 2015 2016 Mort/Income Rent/Income Mort/Income Rent/Income Sources: YardiMatrix, Moody’s Analytics

Dallas Median Home Price

$250,000 $250,000

$200,000 $200,000 $150,000 $150,000 $100,000 $100,000 $50,000 $50,000 $0 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Moody’s Analytics

Population Dallas vs. National Population

„„ Between 2011 and 2015, the 2011 2012 2013 2014 2015 population of the Metroplex grew by 8.0%, more than National 311,718,857 314,102,623 316,427,395 318,907,401 321,418,820 double the national average. Dallas-Fort „„ The MSA added144,000 Worth-Arlington 6,574,298 6,709,559 6,822,353 6,958,092 7,102,796 residents in 2015 alone. This Metropolitan marks a 2.0% increase, while Statistical Area the U.S. average was 0.8%. Sources: U.S. Census, Moody’s Analytics

Dallas Multifamily | Winter 2017 5 Transactions: Price Per Unit (Dallas) Transactions: Price Per Unit (Dallas) $140,000 $140,000 $120,000 $120,000 $100,000 $100,000 $80,000 $80,000

$60,000 $60,000

$40,000 $40,000 2009 2010 2011 2012 20132009 2014 2010 2015 2011 2016 2012 2013 2014 2015 2016

Supply Dallas National Dallas National

„ 9 0 3 4 5 6 9 „0 Some3 15,0004 0 51 units6 came online in Dallas-Fort Worth last year, increasing the stock by 2.4%, almost on par 0 1 0 0 01 01 01 01 0 0 01 012 012 012011 2012 2 2 2 2 2 2 2011 2012with2 the2 national2 2 average.

Employment Growth: YoY 6mo-avgEmployment (Dallas) Growth: YoY 6mo-avg (Dallas) „„ Dallas’ strong economic performance and relatively easy regulatory environment continue to fuel an 4% 4% overgrown pipeline. The Metroplex has some 113,000 units in different stages of development, 43,584 of which2% are already under construction. This puts it at the top of the list of U.S. metros with upcoming supply, 2% ahead of Washington, D.C., Houston, Denver and Los Angeles. 0% 0% „„ Construction is mainly concentrated in core Dallas areas and rapidly growing suburban centers north of -2% -2% the city. The top five submarkets—North Frisco/West McKinney, North Carrollton/The Colony, Uptown, Cityscape/Downtown-4% and South Frisco/Parker—add up to a collective 16,890 units under construction, or -4% almost 40% of the metro’s total. None of the top 15 submarkets—each having more than 900 units under construction—are-6% located in or near Fort Worth. -6% „„ The largest developments slated for completion in 2017 are Trammell Crow’s 705-unit Alexan Central in Richardson and The Grand at Legacy West, a 621-unit community in Plano owned by KDC. Dallas National Dallas vs. National CompletionsDallas as aNational Percentage of Total Stock (as of January 2017) Supply: Percentage of Stock (Dallas)

Supply: Percentage of Stock (Dallas) 3.0%

3.0% 2.5%

2.5% 2.0%

2.0% 1.5%

1.5% 1.0%

1.0% 0.5%

0.5% 0.0% 2009 2010 2011 2012 2013 2014 2015 2016

0.0% National Dallas 2009 2010 2011 2012 2013 2014 2015 2016 Source: YardiMatrix Supply: Development Pipeline as of Jan 2017 (Dallas) National Dallas

Development Pipeline (as of January 2017) Dallas Completions (as of January 2017) Supply: Development Pipeline as of Jan 2017 (Dallas) Transactions: Price Per Unit (Dallas)

$140,000

35,025 Units $120,000 43,584 Units $100,000

35,025 Units $80,000 43,584 Units

34,468 Units $60,000

$40,000 2009 2010 2011 2012 2013 2014 2015 2016 34,468 Units Dallas National Planned Prospective Under Construction

Transactions: Total Volume (Dallas) 9 0 3 4 5 6 0 1 0 0 01 01 01 01 2 2 2011 2012 2 2 2 2 $5,000 Planned Prospective Under Construction 400

Source:$4,000 YardiMatrix Source: YardiMatrix Employment Growth: YoY 6mo-avg (Dallas) Transactions: Total Volume (Dallas) 300 $5,000 4% 400 $3,000 200 $4,000 2% Dallas Multifamily | Winter 2017 6 $2,000 300

100 $3,000 $1,000 0% 200 $2,000 $0 0 2009 2010 2011 2012 2013-2% 2014 2015 2016 100 $1,000 Volume in Millions Number of Properties -4%

$0 Rent: YoY vs National (Dallas) 0 2009 2010 2011 2012 2013 2014 2015 2016 10.0% -6% Volume in Millions Number of Properties 8.0%

Rent: YoY vs National (Dallas) 6.0%

10.0% 4.0% Dallas National

8.0% 2.0% Supply: Percentage of Stock (Dallas) 6.0% 0.0% 3.0% 4.0%

2.5% 2.0% Dallas National

0.0% Rent: Lifestyle vs RBN (Dallas) 2.0% 10.0% 1.5% 8.0% Dallas National 6.0% 1.0% Rent: Lifestyle vs RBN (Dallas) 4.0% 10.0% 0.5% 2.0% 8.0% 0.0% 0.0% 6.0% 2009 2010 2011 2012 2013 2014 2015 2016

4.0% National Dallas Lifestyle Renter-by-Necessity 2.0%

Supply: Development Pipeline as of Jan 2017 (Dallas) 0.0%

Lifestyle Renter-by-Necessity

35,025 Units 43,584 Units

34,468 Units

Planned Prospective Under Construction

Transactions: Total Volume (Dallas)

$5,000 400

$4,000 300

$3,000 200 $2,000

100 $1,000

$0 0 2009 2010 2011 2012 2013 2014 2015 2016

Volume in Millions Number of Properties

Rent: YoY vs National (Dallas)

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Dallas National

Rent: Lifestyle vs RBN (Dallas)

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Lifestyle Renter-by-Necessity Transactions: Price Per Unit (Dallas)

$140,000

$120,000

$100,000

$80,000

$60,000

$40,000 2009 2010 2011 2012 2013 2014 2015 2016

Dallas National

9 0 3 4 5 6 0 1 0 0 01 01 01 01 2 2 2011 2012 2 2 2 2

Employment Growth: YoY 6mo-avg (Dallas)

4%

2%

0%

-2%

-4%

-6%

Dallas National

Supply: Percentage of Stock (Dallas)

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0% 2009 2010 2011 2012 2013 2014 2015 2016

National Dallas

TransactionsSupply: Development Pipeline as of Jan 2017 (Dallas)

„„ Demand for properties continues to be strong in Dallas, as roughly $5 billion worth of multifamily assets changed hands in 2016. This marks another cycle record—the seventh consecutive one—and a 22% increase in investment volume over the previous year. 35,025 Units 43,584 Units „„ Investor activity is driven by core submarkets and by amenity-rich, master-planned areas north of Dallas, with a focus on assets around The Colony, Las Colinas, Plano and Frisco. Confidence in value-add plans is also on the rise, considering that two-thirds of the multifamily properties changing hands in 2016 were Class B and C assets. This tendency is apparent across the map, from submarkets in west Fort Worth to northeastern Dallas. 34,468 Units

„„ Multifamily appetite is fueling price hikes, with the average unit selling for roughly $98,000. Although well below the national average of $132,755, unit prices are still surging, having recorded a 20% rise in 2016.

Planned Prospective Under Construction Dallas Sales Volume and Number of Properties Sold (as of January 2017) Transactions: Total Volume (Dallas)

$5,000 400

$4,000 300

$3,000 200 $2,000

100 $1,000

$0 0 2009 2010 2011 2012 2013 2014 2015 2016

Volume in Millions Number of Properties

Source: YardiMatrix Rent: YoY vs National (Dallas)

10.0% Top Submarkets for Transaction Volume1 Dallas vs. National Sales Price per Unit 8.0% Transactions: Price Per Unit (Dallas)

Submarket Volume ($MM) $140,000 6.0% North Carrollton/ 210 $120,000 The 4.0%Colony

Las Colinas 208 $100,000 2.0% West Plano 182 $80,000 N. Frisco/W.0.0% McKinney 181 $60,000 Prestonwood/Galleria 150 South Lake Highlands 148 $40,000 Dallas National2009 2010 2011 2012 2013 2014 2015 2016 Coppell/South Lewisville 144 Dallas National Cityscape/DowntownRent: Lifestyle vs RBN (Dallas) 138

Source:10.0% YardiMatrix Source: YardiMatrix 1 9 0 3 4 5 6 0From February1 2016 to January 2017 0 0 01 01 01 01 2 28.0% 2011 2012 2 2 2 2

6.0% Employment Growth: YoY 6mo-avg (Dallas) 4.0% 4% 2.0% Dallas Multifamily | Winter 2017 7 0.0% 2%

0% Lifestyle Renter-by-Necessity

-2%

-4%

-6%

Dallas National

Supply: Percentage of Stock (Dallas)

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0% 2009 2010 2011 2012 2013 2014 2015 2016

National Dallas

Supply: Development Pipeline as of Jan 2017 (Dallas)

35,025 Units 43,584 Units

34,468 Units

Planned Prospective Under Construction

Transactions: Total Volume (Dallas)

$5,000 400

$4,000 300

$3,000 200 $2,000

100 $1,000

$0 0 2009 2010 2011 2012 2013 2014 2015 2016

Volume in Millions Number of Properties

Rent: YoY vs National (Dallas)

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Dallas National

Rent: Lifestyle vs RBN (Dallas)

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Lifestyle Renter-by-Necessity Read All About It!

Apple Hospitality REIT Snaps Up DFW Marriott

Greystone Adds New Dallas Director

JCPenney HQ Trades In Sale-Leaseback Deal

Affordable Assisted Living Property Opens in Dallas

Get the latest Dallas real estate news at

Photo by hstiver/iStockphoto.com Area # Submarket Dallas Submarkets 1 Cityscape/Downtown 2 Uptown 3 South Oak Lawn 4 North Oak Lawn 5 Bachman Lake/West Northwest Highway 6 Northwest Dallas 7 Carrollton/Farmers’ Branch 8 Park Cities/Preston Hollow/West Oak Lawn 9 Telecom Corridor 10 West Vickery Park 11 Greenville Corridor/Ridgewood Park 12 Gastonwood/Junius Heights/ Lake Park Estates 13 Forest Hills 14 Dixon Branch 15 South Garland 16 Central Garland 17 South Lake Highlands 18 Casa Linda Estates/Cloisters/Lakewood 19 East Vickery Park 20 North Vickery Park 21 North Lake Highlands 22 North Garland/Rowlett/Sachse 23 Richardson 24 Northwood Hills/Valley View 25 Prestonwood/Galleria 26 Addison 27 North Carrollton/The Colony 28 Rosemeade 29 North Preston Corridor 30 West Plano 31 East Plano/Allen 32 South Frisco/Parker 33 North Frisco/West McKinney 34 East McKinney/Wylie/Princeton 35 North Hunt County/Greenville/Commerce

Area # Submarket Area # Submarket Area # Submarket 1 Downtown 31 Handley 1 South Downtown 2 Fairmount/Morningside/Worth Heights 32 Randol Mill 2 Pleasant Grove 3 Medical District 33 Hurst 3 Fair Park 4 Westover Hills 34 Bedford 4 South Oak Cliff 5 Crestwood/River Oaks/Sansom Park 35 Colleyville 5 North Oak Cliff/Irving 6 Far North/Stockyards 37 Keller/Westlake 6 Lake Village/South Irving/West Dallas 7 Haltom City 38 Southlake 7 North Grand Prairie 9 Stop Six 39 Grapevine 8 Kiest 10 Meadowbrook 40 Euless 9 Duncanville/South Grand Prairie 11 Richland Hills 41 Tarrant 10 Lancaster/Red Bird 12 Watauga 42 Riverside 11 Southeast Dallas County 13 Blue Mound 43 Lamar 12 Northwest Mesquite 14 Saginaw 44 Green Oaks 13 Northeast Mesquite 15 Lake Worth 45 North Arlington 14 Desoto 17 White Settlement 46 Downtown Arlington 15 North Cedar Hill 18 Ridgelea 47 South Davis/Turtlerock 16 Midlothian/South Cedar Hill 19 Western Hills 48 East Arlington 17 Ennis/Waxahachie 20 Benbrook 49 Great Southwest 18 Kaufman/Terrell 22 Colonial/TCU 50 Florence Hill 19 Barton Estates/Garden Oaks/Hospital District 23 Hemphill 51 Fitzgerald 20 Irving 24 Wedgewood 52 Mansfield 21 Las Colinas 25 Edgecliff Village 53 Cleburne/Alvarado 22 Espanita/Timberlake 26 Sycamore 55 Granbury 23 Oaks 27 Burleson/Joshua 57 Weatherford 24 Valley Ranch 29 Kennedale 59 Azle 25 Coppell/South Lewisville 30 Dalworthington Gardens/Pantego 26 Central Lewisville 27 North Lewisville/Trophy Club 28 East Denton 29 Downtown Denton

Dallas Multifamily | Winter 2017 9 Definitions

Lifestyle households (renters by choice) have wealth sufficient to own but have chosen to rent. Discretionary households, most typically a retired couple or single professional, have chosen the flexibility associated with renting over the obligations of ownership.

Renter-by-Necessity households span a range. In descending order, household types can be:

„„ A young-professional, double-income-no-kids household with substantial income but without wealth needed to acquire a home or condominium;

„„ Students, who also may span a range of income capability, extending from affluent to barely getting by;

„„ Lower-middle-income (“gray-collar”) households, composed of office workers, policemen, firemen, technical workers, teachers, etc.;

„„ Blue-collar households, which may barely meet rent demands each month and likely pay a disproportionate share of their income toward rent;

„„ Subsidized households, which pay a percentage of household income in rent, with the balance of rent paid through a governmental agency subsidy. Subsidized households, while typically low income, may extend to middle-income households in some high-cost markets, such as New York City;

„„ Military households, subject to frequency of relocation.

These differences can weigh heavily in determining a property’s ability to attract specific renter market segments. The five-star resort serves a very different market than the down-and-outer motel. Apartments are distinguished similarly, but distinctions are often not clearly definitive without investigation. TheYardi® Matrix Context rating eliminates that requirement, designating property market positions as:

Market Position Improvements Ratings Discretionary A+ / A High Mid-Range A- / B+ Low Mid-Range B / B- Workforce C+ / C / C- / D

The value in application of the Yardi® Matrix Context rating is that standardized data provides consistency; information is more meaningful because there is less uncertainty. The user can move faster and more efficiently, with more accurate end results.

The Yardi® Matrix Context rating is not intended as a final word concerning a property’s status—either improvements or location. Rather, the result provides reasonable consistency for comparing one property with another through reference to a consistently applied standard.

To learn more about Yardi® Matrix and subscribing, please visit www.yardimatrix.com or call Ron Brock, Jr., at 480-663-1149 x2404.

Dallas Multifamily | Winter 2017 10 What’s the best choice for CRE news & views?

With so much information out there, selecting the best source can be daunting. Keep it simple. Commercial Property Executive and Multi-Housing News will keep you up-to-date on real estate news, data, trends and analysis—daily, weekly or monthly. Trust cpexecutive.com multi-housingnews.com the leading integrated industry information resource to help you make informed decisions and achieve your business goals. Visit our websites and sign up for our free emailed newsletters at cpexecutive.com/subscribe and multi-housingnews.com/subscribe. DISCLAIMER

ALTHOUGH EVERY EFFORT IS MADE TO ENSURE THE ACCURACY, TIMELINESS AND COMPLETENESS OF THE INFORMATION PROVIDED IN THIS PUBLICATION, THE INFORMATION IS PROVIDED “AS IS” AND YARDI MATRIX DOES NOT GUARANTEE, WARRANT, REPRESENT OR UNDERTAKE THAT THE INFORMATION PROVIDED IS CORRECT, ACCURATE, CURRENT OR COMPLETE. YARDI MATRIX IS NOT LIABLE FOR ANY LOSS, CLAIM, OR DEMAND ARISING DIRECTLY OR INDIRECTLY FROM ANY USE OR RELIANCE UPON THE INFORMATION CONTAINED HEREIN.

COPYRIGHT NOTICE

This document, publication and/or presentation (collectively, “document”) is protected by copyright, trademark and other intellectual property laws. Use of this document is subject to the terms and conditions of Yardi Systems, Inc. dba Yardi Matrix’s Terms of Use (http:// www.yardimatrix.com/Terms) or other agreement including, but not limited to, restrictions on its use, copying, disclosure, distribution and decompilation. No part of this document may be disclosed or reproduced in any form by any means without the prior written authorization of Yardi Systems, Inc. This document may contain proprietary information about software and service processes, algorithms, and data models which is confidential and constitutes trade secrets. This document is intended for utilization solely in connection with Yardi Matrix publications and for no other purpose.

Yardi®, Yardi Systems, Inc., the Yardi Logo, Yardi Matrix, and the names of Yardi products and services are trademarks or registered trademarks of Yardi Systems, Inc. in the United States and may be protected as trademarks in other countries. All other product, service, or company names mentioned in this document are claimed as trademarks and trade names by their respective companies.

© 2017 Yardi Systems, Inc. All Rights Reserved.

Dallas Multifamily | Winter 2017 12