TRANSWESTERN Q1.2012 The Apartment Report

Q1.2012 RENTS OCCUPANCY ABSORPTION SALES DEVELOPMENT SNAPSHOT Average effective rental Q1 occupancy rose to A total of 6,458 units 40 properties (10,872 31 communities (5,767 rates have increased 88.4% from 87.6% in Q4 absorbed in the first units) sold in the first units) have opened in 6.0% over the past three 2011. The market has quarter, the highest in quarter. The largest the past 12 months, with months and 3.1% over the posted an annualized the past nine quarters percentage of the 35 (8,396 units) under past twelve months (on an 2.8% increase in and 41% above the same properties sold (49% of construction and 52 annualized basis). occupancy in the past period last year. the total) were 1970s built proposed construction three months. or older. (16,134 units).

RENTAL RATES

• 1Q 2012 marked the ninth consecutive period of effective rental rate increases since 4Q 2009. • Average effective rents ended the quarter at $761 per unit ($0.875 per square foot) compared to $750 per unit ($0.875 per square foot) in the previous quarter. • Rental rates, on an annualized basis, have increased 6.0% over the past three months, 3.6% over the past six months and 3.1% over the past twelve months. ED CUMMINS • The submarkets registering the highest annualized rental rate growth, during Q1, are Heights (20.0%), Conroe/ Senior Vice President Montgomery (13.2%), Westchase (12.9%), Friendswood/Pearland (12.7%) and Inner Loop West/Greenway Plaza 713.272.1288 | direct (11.4%). [email protected] • Concessions were reported in 54% of the market with the average special offered at 6.6%.

CLINT DUNCAN Vice President EFFECTIVE RENTS / UNIT - QUARTERLY 713.270.3316 | direct Rental rates shown are effective: net of concessions and electric utility adjustments [email protected] $770 $761 $760 LUPE OLIVARES $748 $750 $750 Senior Analyst $742 713.272.1290 | direct $740 $735 [email protected] $730 $723 $723

$720 $713 $715 $709 SUNJAY ARYA $710 Transaction Manager 713.272.1276 | direct $700 [email protected] $690 $680 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 We hope you find this report both useful and insightful. Please feel EFFECTIVE RENTS / SF - QUARTERLY free to contact us if we can assist with your property valuation, rent $0.880 $0.875 $0.870 or sales comparables analysis or $0.860 $0.862 any current market trends and $0.860 $0.853 information. $0.850 $0.845

$0.840 $0.832 $0.832 We look forward to working with $0.830 $0.823 you in the near future. $0.820 $0.820 $0.816 $0.810 $0.800 TRANSWESTERN $0.790 HOUSTON MULTIFAMILY GROUP $0.780 1900 West Loop South, Suite 1300 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 Houston, 77027 713.270.7700 | telephone 713.271.8172 | facsimile transwestern.net The Apartment Report Q1.2012 Houston

OCCUPANCY

• Houston’s multifamily market averaged occupancy of 88.4% in the first quarter, extending the occupancy gains made during 2011. • During the past three months, the largest occupancy increases occurred in the following submarkets (figures shown are on an annualized basis): 1) FM 1960 East/ IAH Airport (13.8%) 3) Northshore/ Woodforest (10.3%) 2) Gulfgate/ (10.7%) 4) Far East (9.8%) • Class “A” properties posted the highest occupancies, averaging 93.1%, followed by class “B” properties averaging 91.3%. • The top occupied submarkets during Q1 were Montrose/ Museum District (94.8%), Inner Loop West/ Greenway Plaza (94.5%), Medical Center/ Bellaire (94.3%), FM 1960 West/ Steeplechase (94.3%) and Fort Bend (94.1%).

APARTMENT OCCUPANCY - QUARTERLY

89.0% 88.4%

88.0% 87.5% 87.6% 87.0% 87.0% 86.4% 86.1% 85.9% 86.0% 85.5%

85.0% 84.6% 83.9% 84.0%

83.0%

82.0%

81.0% 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012

ABSORPTION

• 2011 posted a combined 13,286 units of absorption. Q1 results posted an impressive 6,458 units, almost half of last year’s total in a single quarter. • The submarkets posting the highest absorption levels were: 1) Gulfgate/ Almeda Mall (520) 3) Alief (462) 2) FM 1960 West/ Champions (473) 4) Clear Lake (372) • Strong apartment demand fueled positive absorption in a majority (38) of Houston’s 41 submarkets. • The 6,458 units absorbed in the first quarter are an increase of 41% over the same period in 2010 and mark the highest quarterly absorption total in the past nine quarters.

APARTMENT ABSORPTION - QUARTERLY

8,000 6,444 6,458 6,000 4,784 4,580 4,691 3,725 4,000 3,374

2,000 641 0 (478) (2,000)

(4,000) (3,789) (6,000) 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012

THE APARTMENT REPORT • HOUSTON • Q1.2012 2 The Apartment Report Q1.2012 Houston

APARTMENT SALES

• First quarter sales continued the positive trend exhibited in the second half of 2011 with a total of 40 properties (10,872 units) trading. • Q1 property trades represented all asset classes, as well as stabilized and distressed sales.

• 28% of the units traded (10 deals, 3,068 units) were built in 2000 or newer, 10% (4 deals, 1,079 units) were 90s built, 13% (5 deals, 1,408 units) were 80s built and 49% (21 deals, 5,317 units) were built in the 70s or older.

Property Submarket Units Built Sale Date Carrington at Green Trails Katy/ Far West 302 2009 Mar-12 The Marquis at Sugar Land (fka West End Ranch) Fort Bend 312 2009 Mar-12 Oaks of Cypress Station FM 1960 West/ Champions 292 1978 Mar-12 Westchase Creek (fka Camden Creek) Westchase 456 1984 Mar-12 Woodcreek Village Baytown 301 1974 Mar-12 Windswept Gardens Galleria 145 1970 Mar-12 The Club at Tranquility Lake Hwy 288/ South 212 2001 Mar-12 Villas at West Oaks Alief 342 2002 Mar-12 Marquis at the Woodlands (fka Alexan Woods) Woodlands/ Far North 280 2007 Mar-12 Villages of Briar Forest West Memorial/Briar Forest 240 1999 Mar-12 Briar Meadows Apartments West Memorial/Briar Forest 256 1992 Mar-12 Creekside Baytown 250 1979 Mar-12 Bristol, The Gulfgate/ Almeda Mall 856 1979 Mar-12 Bay House Clear Lake 190 1967 Mar-12 Windfern Pointe Inwood/ Northwest 200 1978 Mar-12 Ashford Park Alief 180 1982 Mar-12 Northpointe Village FM 1960 West/Champions 300 1980 Mar-12 Crescent Park Braeswood/ Fondren SW 436 1978 Mar-12 Arcadian Kirby Medical Center/ Bellaire 263 1999 Mar-12 St Andrews Hwy 288/ South 472 1999/2000 Mar-12 Shadowtree Sharpstown/ Westwood 428 1979 Feb-12 Summerfield Apartments Sharpstown/ Westwood 110 1976 Feb-12 Carroll at (fka Carrington Place at SCR) Hwy 288/ South 360 2010 Feb-12 Cedar Glen Gulfton/ Bissonnet 211 1972 Feb-12 Cedars at Ellington (fka Windjammer) Clear Lake 200 1980 Feb-12 Tiffany Oaks Northline/Aldine 61 1968 Feb-12 Greenbriar Chateau Inner Loop West/ Greenway 145 1968 Feb-12 Fair Oaks Inner Loop East 122 1975 Feb-12 Breakers at Windmill Lakes Gulfgate/ Almeda Mall 174 2000 Feb-12 Mandalay at Shadowlake Alief 294 2005 Feb-12 Meyergrove Medical Center/ Bellaire 227 1969 Feb-12 Bennington Square (fka Oasis Village) Braeswood/ Fondren SW 313 1975 Feb-12 Pecan Park Richmond/ Rosenberg 272 1978 Feb-12 Buena Villa (fka Keegan's Mill) Braeswood/ Fondren SW 318 1979 Feb-12 Cypress Parc (fka Northwoods) FM 1960 West/ Champions 200 1979 Jan-12 The Villas Gulfgate/ Almeda Mall 196 1972 Jan-12 Memorial Springs Spring Branch 44 1964 Jan-12 Kenwood Club at the Park Katy/ Far West 320 1999 Jan-12 Woods of Inverness FM 1960 East/ IAH Airport 272 1981 Jan-12 Tiburon FM 1960 West/ Steeplechase 320 2008 Jan-12

THE APARTMENT REPORT • HOUSTON • Q1.2012 3 The Apartment Report Q1.2012 Houston

CONSTRUCTION • 5,767 units, in 31 communities, have been delivered to the market in the past twelve months, of which 57% are conventional, 27% are senior housing developments and 16% are affordable. • 8,396 units (35 communities) are currently under construction, 88% of these units are conventional, the remainder - 6% are affordable and 6% are senior housing. • Proposed construction is currently at 16,134 units (52 communities) of which 61% is concentrated in the following four submarkets: 1) Montrose/ Museum District (3,525 infill units) 3) Katy/ Far West (2,377 suburban units) 2) Inner Loop West/ Greenway Plaza (2,670 infill units) 4) Galleria (1,299 infill units) Now Leasing Submarket Property Units Type Submarket Property Units Type Katy/ Far West Verona at the Reserve 356 Conventional Montrose/ Museum District Midtown Grove 51 Affordable Woodlake/ Westheimer The Ava 321 Conventional Pasadena/ Deer Park Hampshire Court 159 Conventional Inwood/ Northwest Chelsea 150 Senior Housing Lake Houston/ Kingwood Discovery Kingwood 324 Senior Housing Northline/ Aldine Northline 172 Affordable Katy/ Far West Green House Village 140 Senior Housing Hwy 288/ South Pearland Senior Village 124 Senior Housing Hwy 288/ South Residences II 172 Senior Housing Galveston/ Brazoria Jackson Village 96 Senior Housing Braeswood/ Fondren SW Floral Gardens 100 Senior Housing FM 1960 East/ IAH Airport Deerbrook Place 159 Senior Housing Katy/ Far West Park at Cinco Terrace 316 Affordable Katy/ Far West Palms at Cinco Ranch 200 Conventional Pasadena/ Deer Park Providence at Town Square 188 Conventional Friendswood/ Pearland Villas at El Dorado 159 Senior Housing Woodlands/ Far North Woodlands Lodge 300 Affordable Gulfgate/ Almeda Mall Villa del Prado 118 Affordable Lake Houston/ Kingwood Carrington at Park Lakes 252 Conventional Inner Loop East CityView Lofts 57 Conventional FM 1960 West/ Champions Waterstone 276 Senior Housing Lake Houston/ Kingwood Sierra Meadows 90 Senior Housing Woodlands/ Far North Retreat at the Woodlands 240 Conventional FM 1960 West/ Champions Cypresswood Estates 88 Senior Housing Woodlands/ Far North Mansions Woodland 405 Senior Housing FM 1960 West/ Champions Mariposa at Ella 182 Senior Housing Katy/ Far West Mason Senior 120 Conventional Gulfgate/ Almeda Mall Stirling Court 140 Senior Housing 5,767 Conroe/ Montgomery Skytop 192 Affordable FM 1960 West/ Steeplechase Golden Bamboo Village II 120 Affordable

Currently Under Construction

Submarket Property Units Type Submarket Property Units Type Montrose/ Museum District Post Midtown III 124 Conventional Woodlake/ Westheimer Alta Woodlake 256 Conventional Montrose/ Museum District Camden City Centre II 263 Conventional West Memorial/ Briar Forest Domain at Eldridge 320 Conventional Montrose/ Museum District Broadstone W Dallas 246 Conventional Westchase Camden Royal Oaks II 104 Senior Housing Montrose/ Museum District West Gray & Waugh 278 Conventional Westchase Orchard at Westchase 153 Affordable Montrose/ Museum District Richmond at Spur 527 242 Conventional Fort Bend Watermark Sienna Plantation 240 Conventional Inner Loop W/ Grnway Plaza Gables Post Oak 316 Conventional Richmond/ Rosenberg Waterford Park 196 Conventional Inner Loop W/ Grnway Plaza Ashton 381 Conventional Richmond/ Rosenberg Dolce Living Rosenberg 300 Conventional Inner Loop W/ Grnway Plaza The Pearl 341 Conventional Inwood/ Northwest Parkway Ranch II 45 Affordable Inner Loop W/ Grnway Plaza Millenium Highstreet 379 Conventional FM 1960 West/ Champions San Antigua I 277 Conventional Heights 2411 Washington at Sawyer 222 Conventional Katy/ Far West Watermark at Katy Ranch 260 Conventional Medical Center/ Bellaire Archstone Poscano W. Univ. 474 Conventional Katy/ Far West Lakeside at Cinco Ranch 160 Conventional Medical Center/ Bellaire Connection at Buffalo Pointe 352 Conventional Conroe/ Montgomery The Retreat 210 Conventional Medical Center/ Bellaire Lakeside 319 Conventional Northshore/ Wood Forest Cypress Gardens 100 Senior Housing Galleria Gables Tanglewood 327 Conventional Hwy 288/ South South Acres Ranch II 58 Affordable Galleria Millenium Uptown 238 Conventional Hwy 288/ South Magnolia Place 144 Senior Housing Galleria Sage at Westheimer 300 Conventional Hwy 288/ South Cypress Creek at Fayridge 148 Affordable Galleria Avenue R 394 Conventional Pasadena/ Deer Park Providence at Town Square 76 Affordable Clear Lake Tarrington Court 153 Senior Housing

8,396

THE APARTMENT REPORT • HOUSTON • Q1.2012 4 The Apartment Report Q1.2012 Houston

Construction by Submarket

Proposed Construction Units Under Construction Units Now Leasing Units (Total = 16,134) (Total = 8,396) (Total = 5,767)

Graph values (# of units):

Montrose/ Museum District 3,525 1,153 51

Inner Loop West/ Greenway Plaza 2,670 1,417

Medical Center/ Bellaire 1,036 1,145

Heights 240 222

Inner Loop East 360 57

Northshore/ Wood Forest 100

Northline/ Aldine 172

FM 1960 East/ IAH Airport 159

Lake Houston/ Kingwood 264 666

Spring Branch 450

Inwood/ Northwest 45 150

FM 1960 West/ Champions 580 277 546

FM 1960 West/ Steeplechase 120

Katy/ Far West 2,377 1,132

Woodlands/ Far North 350 945

Conroe/ Montgomery 288 210 192

Hwy 288/ South 300 350 296

Gulfgate/ Almeda Mall 258

Pasadena/ Deer Park 76 347

Friendswood/ Pearland 126 159

Clear Lake 740 153

Galveston/ Brazoria 60 96

Galleria 1,299 1,259

Woodlake/ Westheimer 256 321

West Memorial/ Briar Forest 752 320

Westchase 257

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

(# of Units)

THE APARTMENT REPORT • HOUSTON • Q1.2012 5 The Apartment Report Q1.2012 Houston

Houston Apartment Submarkets

Units Units # of Apt. # of Apt. Average Average Avg. Effective Avg. Effective Under Absorbed Submarket Communities Units Occupancy Unit SF Rent / Month Rent / SF Constr. (Q1 2012) 1 Montrose/ Museum District 135 13,162 94.80% 893 $1,231 $1.38 1,153 117 2 Inner Loop West/ Greenway Plaza 85 14,469 94.50% 930 $1,252 $1.35 1,417 33 3 Medical Center/ Bellaire 97 20,256 94.30% 868 $1,037 $1.20 1,145 170 4 Heights 37 3,280 93.90% 817 $1,016 $1.24 222 20 5 Inner Loop East 93 10,245 87.20% 826 $795 $0.96 0 0 6 Northshore/ Wood Forest 44 8,801 80.40% 815 $613 $0.75 100 176 7 Eastex Frwy/ Near Northeast 49 6,919 88.30% 910 $647 $0.71 0 37 8 Northline/ Aldine 76 10,838 90.20% 844 $589 $0.70 0 38 9 Greenspoint 40 9,679 85.40% 771 $543 $0.70 0 52 10 FM 1960 East/ IAH Airport 45 8,456 90.00% 854 $663 $0.78 0 258 11 Lake Houston/ Kingwood 44 11,181 89.40% 933 $882 $0.95 0 228 12 Far East 34 4,610 86.70% 922 $694 $0.75 0 85 13 Brookhollow 98 20,569 82.50% 829 $640 $0.77 0 323 14 Spring Branch 120 19,070 88.30% 909 $656 $0.72 0 88 15 Inwood/ Northwest 41 7,387 84.80% 891 $654 $0.73 45 96 16 FM 1960 West/ Champions 154 36,946 86.20% 878 $721 $0.82 277 473 17 FM 1960 West/ Steeplechase 68 18,282 94.30% 916 $841 $0.92 0 245 18 Bear Creek/ Copperfield 49 12,889 93.50% 882 $817 $0.93 0 68 19 Katy/Far West 58 14,578 91.20% 943 $940 $1.00 420 261 20 Tomball/ Far Northwest 23 2,837 92.10% 879 $803 $0.91 0 14 21 Woodlands/ Far North 44 12,648 87.50% 936 $971 $1.04 0 108 22 Conroe/ Montgomery 44 7,272 92.40% 895 $740 $0.83 210 141 23 Hwy 288/ South 77 13,544 85.00% 938 $791 $0.84 350 -2 24 Gulfgate/ Almeda Mall 139 23,996 87.90% 817 $587 $0.72 0 520 25 Galena Park/ Jacinto City 13 871 85.80% 749 $467 $0.62 0 5 26 Pasadena/ Deer Park 139 23,559 84.30% 849 $620 $0.73 76 331 27 Friendswood/ Pearland 30 5,549 92.10% 866 $813 $0.94 0 10 28 Clear Lake 104 24,549 92.20% 876 $802 $0.92 153 372 29 Baytown 57 9,037 82.80% 846 $635 $0.75 0 78 30 Galveston/ Brazoria 129 19,605 81.90% 827 $646 $0.78 0 -17 31 Galleria 101 22,049 91.80% 886 $1,029 $1.16 1,259 0 32 Woodlake/ Westheimer 39 12,003 92.00% 890 $828 $0.93 256 204 33 West Memorial/ Briar Forest 78 23,487 90.30% 948 $889 $0.94 320 158 34 Westchase 49 13,937 91.90% 833 $777 $0.93 257 132 35 Alief 115 27,265 87.00% 870 $662 $0.76 0 462 36 Sharpstown/ Westwood 115 26,029 84.80% 792 $525 $0.66 0 327 37 Gulfton/ Bissonnet 70 18,132 85.70% 813 $578 $0.71 0 187 38 Braeswood/ Fondren SW 90 22,680 81.70% 838 $575 $0.69 0 355 39 Almeda/ South Main 29 5,134 90.90% 855 $627 $0.73 0 94 40 Fort Bend 45 12,022 94.10% 941 $934 $0.99 240 38 41 Richmond/ Rosenberg 24 3,372 90.20% 844 $697 $0.83 496 4 TOTALS/AVERAGES 2,921 581,194 88.40% 870 $761 $0.88 8,396 865

THE APARTMENT REPORT • HOUSTON • Q1.2012 6 The Apartment Report Q1.2012 Houston

22 N

Harris County Line 21

11 11

20

10 45 17 16 9

15 7

18

19 14 13 8 12

10 10 4 6 29 CBD 33 32 31 2 11 5 25 34

34 35 3636 37 3 24

38 39 23 26 Galveston 28 45 Bay 40

27 41

41 3029

Houston Apartment Submarkets

1 Montrose/ Museum District 11 Lake Houston/ Kingwood 21 Woodlands/ Far North 31 Galleria 2 Inner Loop West/ Greenway Plaza 12 Far East 22 Conroe/ Montgomery 32 Woodlake/ Westheimer 3 Medical Center/ Bellaire 13 Brookhollow 23 Hwy 288/ South 33 West Memorial/ Briar Forest 4 Heights 14 Spring Branch 24 Gulfgate/ Almeda Mall 34 Westchase 5 Inner Loop East 15 Inwood/ Northwest 25 Galena Park/ Jacinto City 35 Alief 6 Northshore/ Wood Forest 16 FM 1960 West/ Champions 26 Pasadena/ Deer Park 36 Sharpstown/ Westwood 7 Eastex Frwy/ Near Northeast 17 FM 1960 West/ Steeplechase 27 Friendswood/ Pearland 37 Gulfton/ Bissonnet 8 Northline/ Aldine 18 Bear Creek/ Copperfield 28 Clear Lake 38 Braeswood/ Fondren SW 9 Greenspoint 19 Katy/ Far West 29 Baytown 39 Almeda/ South Main 10 FM 1960 East/ IAH Airport 20 Tomball/ Far Northwest 30 Galveston/ Brazoria 40 Fort Bend 41 Richmond/ Rosenberg

THE APARTMENT REPORT • HOUSTON • Q1.2012 7 The Apartment Report Q1.2012 Houston

Current Listings and Recent Transactions

Chestnut Hill Mirabella Galleria Units: 460 Built: 1982 Units: 160 Built: 1971 Location: Houston, TX Location: Houston, TX Status: Currently marketing Status: Under Contract

Somerset Braeburn Colony Units: 516 Built: 1978 Units: 275 Built: 1970 Location: Houston, TX Location: Houston, TX Status: Currently marketing Status: Sold

Burnham Woods Sterling Point Units: 120 Built: 1965 Units: 921 Built: 1978 Location: Houston, TX Location: Houston, TX Status: Currently marketing Status: Under Contract

f Hunters Chase Vanderbilt Units: 328 Built: 1969 Units: 106 Built: 1985 Location: Houston, TX Location: Houston, TX Status: Currently marketing Status: Currently marketing

Clarke Springs Delta One Units: 148 Built: 2004 Units: 68 Built: 1965 Location: Houston, TX Location: Houston, TX Status: Currently marketing Status: Currently marketing

Canfield Lakes The Cranbrook Portfolio

Units: 442 Built: 1984 Units: 1,038 Built: ‘82-84 Location: Houston, TX Location: Houston, TX Status: Currently marketing Status: Under Contract

Kirkwood Vista TH Savannah Club: 180 units Status: Under Contract

Units: 43 Built: 1986 Gulf Royale: 90 units Status: Sold

Location: Houston, TX Westbury Village: 75 units Status: Sold

Status: Currently marketing The Park at Lakeside: 592 units & Evergreen Pointe: 197 units Status: Sold

Cambury Place Tanglewood Court: 633 units Status: Sold

Units: 160 Built: 1984 Clear Lake Falls: 90 units Status: Sold

Location: Houston, TX Indigo Falls: 1,062 units & Woodscape: 544 units Status: Sold Status: Under Contract Brazos: 160 units Status: Sold

The information in this report is the result of a compilation of information on the Houston MSA multifamily market. Transwestern obtained the information from a variety of primary and secondary sources, including Apartment Data Services, Inc., O’Connor & Associates and Real Capital Analytics, Inc..

TRANSWESTERN HOUSTON MULTIFAMILY GROUP 1900 West Loop South, Suite 1300 Houston, Texas 77027 713.270.7700 | telephone 713.271.8172 | facsimile www.transwestern.net

THE APARTMENT REPORT • HOUSTON • Q1.2012 8