TRANSWESTERN Q3.2012 Houston The Apartment Report

Q3.2012 RENTS OCCUPANCY ABSORPTION SALES DEVELOPMENT SNAPSHOT Average effective rental Q3 occupancy rose to A total of 3,195 units 46 properties (12,328 26 communities (5,725 rates have increased 89.6% from 89.4% in Q2 absorbed in Q3, resulting units) sold in the third units) have opened in 5.1% over the past three 2012. The market has in YTD 2012 absorption of quarter. The largest the past 12 months, with months and 5.9% over the posted an annualized 15,921 units (23% above percentage of the 47 (12,049 units) under past twelve months (on an 3.0% increase in the 12,966 units absorbed properties sold (73% of construction and 60 new annualized basis). occupancy in the past during the same period the total) were 1980s built projects (18,731 units). twelve months. last year . or older.

RENTAL RATES

• 3Q 2012 marked the 11th consecutive period of effective rental rate increases since 4Q 2009. • Average effective rents ended the quarter at $788 per unit ($0.905 per square foot) compared to $779 per unit ($0.894 per square foot) in the previous quarter. • Rental rates, on an annualized basis, have increased 5.1% over the past three months, 6.7% over the past six months and 5.9% over the past twelve months. ED CUMMINS • The submarkets registering the highest annualized rental rate growth, during Q3, are Medical Center/Bellaire Senior Vice President (14.9%), Far East (12.5%), Katy/Far West (10.7%), West Memorial/Briar Forest (9.2%) and Tomball/Far Northwest 713.272.1288 | direct (9.1%). [email protected] • Concessions were reported in 45% of the market with the average special offered at 6.0%.

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] $800 $788 $779 LUPE OLIVARES $780 Senior Analyst $762 $760 713.272.1290 | direct $749 $751 [email protected] $743 $740 $736 $723 $724 SUNJAY ARYA $720 $716 Transaction Manager 713.272.1276 | direct $700 [email protected] $680 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 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 $0.920 with your property valuation, rent $0.905 or sales comparables analysis or $0.900 $0.894 any current market trends and $0.876 information. $0.880 $0.861 $0.863 $0.860 $0.854 We look forward to working with $0.846 you in the near future. $0.840 $0.832 $0.833 $0.824 $0.820

TRANSWESTERN $0.800 HOUSTON MULTIFAMILY GROUP $0.780 1900 West Loop South, Suite 1300 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012 Houston, Texas 77027 713.270.7700 | telephone 713.271.8172 | facsimile transwestern.net The Apartment Report Q3.2012 Houston

OCCUPANCY

• Houston’s multifamily market averaged occupancy of 89.6% in 2012’s third quarter, compared to 87.5% in the same period last year. • During the past three months, the largest occupancy increases occurred in the following submarkets (figures shown are on an annualized basis): 1) Baytown (13.2%) 3) Gulfton/ Bissonnet (10.3%) 2) Richmond/ Rosenberg (10.5%) 4) Tomball (10.2%) • Class “A” and “B” properties posted the highest occupancies, both groups averaging 92.9%, followed by class “C” properties averaging 86.6%. • The top occupied submarkets during Q3 were Montrose/ Museum District (95.3%), Katy/ Far West (95.3%), Fort Bend (95.3%), Tomball/ Far Northwest (95.1%) and FM 1960 West/ Steeplechase (94.9%).

APARTMENT OCCUPANCY - QUARTERLY 90.0% 89.4% 89.6%

89.0% 88.5%

88.0% 87.5% 87.5% 87.0% 87.0% 86.5% 86.1% 85.9% 86.0% 85.5%

85.0%

84.0%

83.0% 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012

ABSORPTION

• 2011 posted a combined 13,605 units of absorption. Q3 2012 results posted an impressive 3,195 units, bringing the 2012 YTD total to 15,921 units. • The submarkets posting the highest absorption levels were: 1) Medical Center/ Bellaire (551) 3) Katy/ Far West (288) 2) Gulfton/ Bissonnet (396) 4) Woodlands/ Far North (288) • Strong apartment demand fueled positive absorption in a majority (29) of Houston’s 41 submarkets. • The 15,921 units absorbed YTD in 2012 are an increase of 23% over the same period in 2011 when absorption reached 12,966 units.

APARTMENT ABSORPTION - QUARTERLY

7,000 6,427 6,439 6,287 6,000 5,227

5,000 4,351 4,000 3,609 3,388 3,195 3,000

2,000

1,000 639

0

(1,000) (476) 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012

THE APARTMENT REPORT • HOUSTON • Q3.2012 2 The Apartment Report Q3.2012 Houston

APARTMENT SALES

• Third quarter sales continued the positive trend exhibited during the first half of 2012 with a total of 46 properties (12,328 units) trading.

Property Submarket Units Built Sale Date Canfield Lakes FM 1960 West/Champions 442 1983 Sep-12 Pebble Creek FM 1960 West/Steeplechase 136 1982 Sep-12 Greystar Cypress Village FM 1960 West/Steeplechase 273 2008 Sep-12 Fannin Street Station (fka Archstone Medical Center) Medical Center/Bellaire 678 1995/1998 Sep-12 Amherst at Cityview Greenspoint 310 1979 Sep-12 Augusta at Cityview Greenspoint 268 1985 Sep-12 Biscayne at Cityview Greenspoint 560 1977 Sep-12 Breckenridge at Cityview Greenspoint 509 1978 Sep-12 Cityview West Greenspoint 286 1978 Sep-12 Crescent at Cityview Greenspoint 282 1981 Sep-12 Durham at Cityview Greenspoint 179 1984 Sep-12 Salado at Cityview Greenspoint 318 1979 Sep-12 Beacon Hill Braeswood/Fondren SW 121 1983 Sep-12 Capital Estates Clear Lake 181 1965/1967 Sep-12 Harbortree Clear Lake 151 1973 Sep-12 Blue Stone (fka Brookstone) Alief 224 1982 Sep-12 Gardens at Challenger Park Clear Lake 354 2009 Aug-12 Windwater at Windmill Lakes Gulfgate/Almeda Mall 150 1999 Aug-12 Chestnut Hill Sharpstown/Westwood 458 1982 Aug-12 Carrington Park Katy/Far West 390 2004 Aug-12 Broadstone Memorial West Memorial/ Briar Forest 401 2007 Aug-12 Ridgestone (fka Villa Cordoba) Braeswood/Fondren SW 104 1970 Aug-12 Delta One Brookhollow 68 1965 Aug-12 La Tour Fontaine Galleria 162 1994 Aug-12 Timberstone FM 1960 West/Champions 240 1999 Aug-12 Silver Leaf Sharpstown/Westwood 224 1977 Aug-12 Bissonnet In The Village Inner Loop West/Greenway Plaza 196 1973 Aug-12 Maryland Manor Montrose/Museum District 67 1984 Aug-12 Hunters Chase Spring Branch 328 1969 Aug-12 Ashford Pointe Alief 224 1983 Aug-12 The Lakes Gulfgate/Almeda Mall 162 1983 Aug-12 Bellaire Gardens Gulfton/Bissonnet 206 1965 Aug-12 Burnham Woods Brookhollow 120 1965 Jul-12 The Mansions of Shadowbriar West Memorial/ Briar Forest 259 1983 Jul-12 Vanderbilt Alief 106 1985 Jul-12 Creekside Baytown 250 1978 Jul-12 Reserve at Autumn Creek Friendswood/Pearland 212 2001 Jul-12 Forest Pointe FM 1960 West/Champions 270 1983 Jul-12 Marquis at Katy Katy/Far West 258 2009 Jul-12 Sterling Point Gulfton/Bissonnet 921 1978 Jul-12 Willowridge Braeswood/Fondren SW 262 1979 Jul-12 Glenwood Sharpstown/Westwood 60 1981 Jul-12 Palms at Cypress Station FM 1960 West/Champions 336 1978 Jul-12 Stonehaven Galleria 338 1967 Jul-12 Bay Park Clear Lake 124 1980 Jul-12 Parc Towne Plaza Northshore/Wood Forest 160 1969 Jul-12

THE APARTMENT REPORT • HOUSTON • Q3.2012 3 The Apartment Report Q3.2012 Houston

CONSTRUCTION • 5,725 units, in 26 communities, have been delivered to the market in the past twelve months, of which 81% are conventional, 12% are senior housing developments and 7% are affordable. • 12,049 units (47 communities) are currently under construction, 97% of these units are conventional, the remainder - 2% are affordable and 1% are senior housing. • Proposed construction is currently at 18,731 units (60 communities) of which 50% is concentrated in the following four submarkets: 1) Katy/ Far West (2,949 suburban units) 3) West Memorial/ Briar Forest (1,980 suburban units) 2) Montrose/ Museum District (2,680 infill units) 4) Woodlands/ Far North (1,815 suburban units)

Now Leasing

Submarket Property Units Type Submarket Property Units Type

Hwy 288/ South Residences Pearland Town Center II 172 Conventional West Memorial/ Briar Forest Domain at Eldridge 320 Conventional

Braeswood/ Fondren SW Floral Gardens 100 Senior Housing Heights 2411 Washington 222 Conventional

Katy/ Far West Park at Cinco Terrace 316 Conventional Hwy 288/ South Cypress Creek Fayridge 148 Affordable

Pasadena/ Deer Park Providence at Town Square 188 Affordable Far East Liberty Hills 228 Conventional

Woodlands/ Far North Woodlands Lodge 300 Conventional Katy/ Far West Grand Villas II 108 Conventional

Lake Houston/ Kingwood Carrington at Park Lakes 252 Conventional Inner Loop West/ Greenway Plaza Gables Post Oak 316 Conventional

FM 1960 West/ Champions Waterstone 276 Conventional Medical Center/ Bellaire Archstone Toscano West University 474 Conventional

Woodlands/ Far North Retreat at the Woodlands 240 Conventional Inwood/ Northwest Parkway Ranch II 44 Affordable

Woodlands/ Far North Mansions Woodland 405 Conventional Clear Lake Tarrington Court 153 Senior Housing

Katy/ Far West Mason Senior 120 Senior Housing Northshore/ Wood Forest Cypress Gardens 100 Senior Housing

Westchase Camden Royal Oaks II 104 Senior Housing Hwy 288/ South Magnolia Place 144 Senior Housing

Medical Center/ Bellaire Connection at Buffalo Pointe 352 Conventional Conroe/ Montgomery The Retreat 210 Conventional

Richmond/ Rosenberg Dolce Living Rosenberg 156 Conventional FM 1960 West/ Champions San Antigua I 277 Conventional

5,725 Currently Under Construction

Submarket Property Units Type Submarket Property Units Type

Montrose/ Museum District Post Midtown III 124 Conventional Galleria Sage at Westheimer 300 Conventional

Montrose/ Museum District Camden City Centre II 263 Conventional Galleria Avenue R 392 Conventional

Montrose/ Museum District Broadstone W Dallas 246 Conventional Galleria Broadstone Lakes at Post Oak 272 Conventional

Montrose/ Museum District Hanover West Gray 278 Conventional Galleria Waterwall Place 322 Conventional

Montrose/ Museum District Post Richmond 242 Conventional Galleria 2001 S. Voss Site 150 Conventional

Montrose/ Museum District West Dallas & Waugh 431 Conventional Woodlake/ Westheimer Alta Woodlake 256 Conventional

Montrose/ Museum District Le Palais 278 Conventional West Memorial/ Briar Forest Domain at CityCentre II 152 Conventional

Montrose/ Museum District The Sovereign 290 Conventional Westchase Orchard at Westchase 153 Affordable

Montrose/ Museum District 3101 Smith Site 147 Conventional Alief Golden Bamboo III 130 Senior Housing

Montrose/ Museum District City Place Midtown II 96 Conventional Fort Bend Watermark Sienna Plantation 240 Conventional

Inner Loop West/ Greenway Plaza Ashton Rice Village 381 Conventional Richmond/ Rosenberg Waterford Park 196 Conventional

Inner Loop West/ Greenway Plaza The Pearl 341 Conventional FM 1960 West/ Steeplechase Reserve at Jones Rd 114 Conventional

Inner Loop West/ Greenway Plaza Millenium Highstreet 379 Conventional Bear Creek/ Copperfield Queenston Manor 250 Conventional

Inner Loop West/ Greenway Plaza District at Greenbriar 319 Conventional Katy/ Far West Watermark at Katy Ranch 260 Conventional

Inner Loop West/ Greenway Plaza Gables West Ave II 308 Conventional Katy/ Far West Lakeside Villas Cinco Ranch 160 Conventional

Inner Loop West/ Greenway Plaza Allusion West Univ 231 Conventional Katy/ Far West Waterstone at Cinco Ranch 300 Conventional

Inner Loop West/ Greenway Plaza Detering & Memorial Site 250 Conventional Katy/ Far West Dolce Living Grand Harbor I 162 Conventional

Inner Loop West/ Greenway Plaza Uptown River Oaks 317 Conventional Woodlands/ Far North Millennium Six Pines 314 Conventional

Heights Alta Heights 256 Conventional Woodlands/ Far North Landmark Magnolia I 264 Conventional

Heights District at Washington 396 Conventional Lake Houston/ Kingwood Villages at Sunset Ridge 257 Conventional

Medical Center/ Bellaire CityLake 319 Conventional Hwy 288/ South Avenues at Shadow Creek Ranch 300 Conventional

Medical Center/ Bellaire Elan Med Center 272 Conventional Hwy 288/ South Retreat at Shadow Creek Ranch 300 Conventional

Galleria Gables Tanglewood 327 Conventional Pasadena/ Deer Park Providence at Town Square 76 Affordable

Galleria Millenium Uptown 238 Conventional 12,049

THE APARTMENT REPORT • HOUSTON • Q3.2012 4 The Apartment Report Q3.2012 Houston

Construction by Submarket

Proposed Construction Units Under Construction Units Now Leasing Units (Total = 18,731) (Total = 12,049) (Total = 5,725)

Graph values (# of units):

Montrose/ Museum District 2,680 2,395

Inner Loop West/ Greenway Plaza 1,719 2,526 316

Medical Center/ Bellaire 1,096 591 826

Heights 662 652 222

Inner Loop East 724

Northshore/ Wood Forest 100

Lake Houston/ Kingwood 514 257 252

Far East 228

Spring Branch 450

Inwood/ Northwest 44

FM 1960 West/ Champions 539 553

FM 1960 West/ Steeplechase 114

Bear Creek/ Copperfield 250

Katy/ Far West 2,949 882 544

Tomball/ Far Northwest 246

Woodlands/ Far North 1,815 578 945

Conroe/ Montgomery 210

Hwy 288/ South 600 464

Pasadena/ Deer Park 76 188

Friendswood/ Pearland 126

Clear Lake 350 153

Galveston/ Brazoria 60

Galleria 1,103 2,001

Woodlake/ Westheimer 312 256

West Memorial/ Briar Forest 1,980 152 320

Westchase 153 104

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

(# of Units)

THE APARTMENT REPORT • HOUSTON • Q3.2012 5 The Apartment Report Q3.2012 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. (Q3 2012) 1 Montrose/ Museum District 130 12,858 95.30% 894 $1,313 $1.47 2,395 -53 2 Inner Loop West/ Greenway Plaza 85 14,660 92.60% 933 $1,314 $1.41 2,526 -43 3 Medical Center/ Bellaire 99 21,078 93.10% 870 $1,108 $1.27 591 551 4 Heights 38 3,502 88.50% 824 $1,094 $1.33 652 11 5 Inner Loop East 94 10,389 88.00% 828 $811 $0.98 0 -17 6 Northshore/ Wood Forest 45 8,903 83.10% 815 $609 $0.75 0 164 7 Eastex Frwy/ Near Northeast 49 6,919 88.60% 910 $653 $0.72 0 -1 8 Northline/ Aldine 77 11,004 89.20% 843 $590 $0.70 0 -49 9 Greenspoint 40 9,643 84.20% 771 $542 $0.70 0 -5 10 FM 1960 East/ IAH Airport 45 8,456 92.70% 853 $689 $0.81 0 97 11 Lake Houston/ Kingwood 44 11,181 93.20% 933 $913 $0.98 257 108 12 Far East 36 4,948 82.10% 920 $724 $0.79 0 -48 13 Brookhollow 97 20,405 84.00% 828 $656 $0.79 0 49 14 Spring Branch 118 19,023 90.80% 909 $670 $0.74 0 158 15 Inwood/ Northwest 41 7,431 87.30% 894 $678 $0.76 0 9 16 FM 1960 West/ Champions 155 37,199 87.20% 878 $741 $0.84 0 8 17 FM 1960 West/ Steeplechase 68 18,282 94.90% 917 $865 $0.94 114 -51 18 Bear Creek/ Copperfield 49 12,889 94.20% 882 $839 $0.95 250 24 19 Katy/Far West 59 14,686 95.30% 945 $991 $1.05 882 288 20 Tomball/ Far Northwest 23 2,837 95.10% 879 $821 $0.93 0 63 21 Woodlands/ Far North 44 12,648 92.10% 937 $1,024 $1.09 578 288 22 Conroe/ Montgomery 45 7,482 91.90% 896 $767 $0.86 0 25 23 Hwy 288/ South 79 13,887 85.70% 941 $809 $0.86 600 170 24 Gulfgate/ Almeda Mall 139 23,998 88.20% 817 $604 $0.74 0 -71 25 Galena Park/ Jacinto City 13 871 86.20% 749 $470 $0.63 0 5 26 Pasadena/ Deer Park 138 23,372 86.70% 848 $627 $0.74 76 85 27 Friendswood/ Pearland 30 5,549 94.10% 866 $830 $0.96 0 55 28 Clear Lake 105 24,666 92.20% 876 $834 $0.95 0 34 29 Baytown 58 9,195 86.10% 847 $647 $0.76 0 250 30 Galveston/ Brazoria 129 19,605 85.50% 828 $652 $0.79 0 180 31 Galleria 101 22,049 93.50% 886 $1,065 $1.20 2,001 108 32 Woodlake/ Westheimer 38 11,759 93.80% 891 $856 $0.96 256 67 33 West Memorial/ Briar Forest 79 23,807 89.90% 948 $940 $0.99 152 26 34 Westchase 49 14,041 91.70% 835 $805 $0.96 153 -78 35 Alief 115 27,265 88.70% 870 $675 $0.78 130 92 36 Sharpstown/ Westwood 115 25,975 85.60% 792 $531 $0.67 0 -57 37 Gulfton/ Bissonnet 70 17,922 88.20% 812 $596 $0.73 0 396 38 Braeswood/ Fondren SW 90 22,668 84.20% 837 $584 $0.70 0 244 39 Almeda/ South Main 28 4,950 91.10% 850 $660 $0.78 0 -34 40 Fort Bend 45 12,022 95.30% 941 $995 $1.06 240 65 41 Richmond/ Rosenberg 25 3,528 90.90% 850 $733 $0.86 196 82 TOTALS/AVERAGES 2,927 583,552 89.60% 871 $788 $0.90 12,049 3,195

THE APARTMENT REPORT • HOUSTON • Q3.2012 6 The Apartment Report Q3.2012 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 • Q3.2012 7 The Apartment Report Q3.2012 Houston

Current Listings and Recent Transactions

Deer Creek Canfield Lakes Units: 304 Built: 1978 Units: 442 Built: 1984 Location: Houston, TX Location: Houston, TX Status: Currently marketing Status: Sold

The Mills The Cityview Portfolio

Units: 708 Built: 1977 Units: 2,712 Built: Various Location: Houston, TX Location: Houston, TX Status: Currently marketing Status: Sold

Portofino Landing Chestnut Hill Units: 464 Built: 1979 Units: 460 Built: 1982 Location: Houston, TX Location: Houston, TX Status: Under Contract Status: Sold

f Arbor Ridge Hunters Chase Units: 378 Built: 1983 Units: 328 Built: 1969 Location: Houston, TX Location: Houston, TX Status: Under LOI Status: Sold

Williamstown Delta One 68 units Sold Units: 272 Built: 1977 Burnham Woods 120 units Sold Location: Houston, TX Vanderbilt 106 units Sold Status: Currently marketing Savannah Club 180 units Sold

Summerwood Sterling Point 921 units Sold Units: 204 Built: 2009 Mirabella Galleria 160 units Sold Location: Tyler, TX Cambury Place 160 units Sold Status: Currently marketing The Cranbrook Portfolio 1,038 units Sold

Clarke Springs Braeburn Colony 275 units Sold Units: 148 Built: 2004 Gulf Royale 90 units Sold Location: Houston, TX Westbury Village 75 units Sold Status: Currently marketing The Lakeside Portfolio 789 units Sold

Somerset Tanglewood Court 633 units Sold Units: 516 Built: 1978 Clear Lake Falls 90 units Sold Location: Houston, TX Texas REO Portfolio 2,241 units Sold Status: Under Contract Brazos 160 units 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 • Q3.2012 8