Apartment Investment Contents

A Primer for Apartment Investment Contents

Demand Overview ...... 3 Supply Overview ...... 7 Rental & Occupancy Rate Trends ...... 10 Bluerock Target Markets ...... 12 Apartment Sector Resiliency ...... 13

1 An estimated 4.6 million new apartment units will be needed by 2030. Current supply trends will fall well short of this.

Projected U.S. Apartment Supply and Demand through 2030

5.0

4.0

3.0

Millions 2.0

1.0

0.0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Projected Cumulative Demand Projected Cumulative Supply

Source: National Multifamily Housing Council, A Forward Look, May 2017

2 Demand Overview

3 Young Adults Living with Parents

24 34% The historically large percentage of young adults living with their 22 32% parents is starting to decline due Percent 20 30% to economic expansion.

18 28% Population (millions) Population Note: Unmarried college students living in 16 26% 85 89 93 97 01 05 09 13 17 dormitories are counted as living in their parents’ home. 18 to 34 Year Olds % Living with Parents Source: Marcus and Millichap, The Apartment Outlook, Midyear 2018

Percentage Decline in Home Ownership Rate from Peak Quarter: 2000 - 2Q‘18 (by age group) Under 35 35-44 45-54 55-64 65+ Years Years Years Years Years 0.0% The largest declines in homeownership are among the

(5.0%) youngest cohorts exhibiting their (4.6%) high propensity to rent.

(10.0%) (8.8%) (8.9%)

(15.0%) (14.4%) (16.3%) Source: BTIG Equity Research, October 4, 2018 (20.0%)

Largest Declines in Youngest Cohorts 4 Demand continued... Homeownership Rate 1998-2018 70.0% 69.0% The nation’s homeownership rate 68.0% 67.0% is historically low producing record 66.0% numbers of renter households. 65.0% 64.0% 63.0% 62.0% 61.0% 60.0%

Source: Federal Reserve Bank of St. Louis,

Q1 1998 Q3 1998 Q3 1999 Q2 2000 Q1 2001 Q4 2001 Q3 2002 Q2 2003 Q1 2004 Q4 2004 Q3 2005 Q2 2006 Q1 2007 Q4 2007 Q3 2008 Q2 2009 Q1 2010 Q4 2010 Q3 2011 Q2 2012 Q1 2013 Q4 2013 Q3 2014 Q2 2015 Q1 2016 Q4 2016 Q3 2017 Q1 2018 Economic Research Division, as of April 2018.

Projected U.S. Homeownership Rate (2019-2030)

65.00% Projections call for a decline in 63.00% the homewonership rate through 2030. 61.00%

59.00%

57.00%

55.00%

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Source: NMHC, A Forward Look, May 2017. 5 Ownership Cost Premium Jan 2000 = 100 100 120 140 160 180 200 220 $1,000 - $200 *Monthly payment on median-priced house minus median apartment rent. *Monthly paymentonmedian-priced houseminusmedianapartment $200 $400 $600 $800 $0 2011-01-01 1993 19951997 199920012003200520072009 2011201320152017 2011-05-01 2011-09-01 2012-01-01

2012-05-01 Case SchillerNationalHomePriceIndex 2012-09-01 Cost ofOwningvs. Renting* 2013-01-01 2013-05-01 2013-09-01 2014-01-01 2014-05-01 2014-09-01 2015-01-01 2015-05-01 2015-09-01 2016-01-01 2016-05-01 2016-09-01 2017-01-01 2017-05-01 2017-09-01 2018-01-01 2018-05-01 Source: NMHC, A Forward Look, May2017. renting. owning lessaffordablethan Rising homepriceshave made Division,Economic Research asofJuly2018. BankofSt. Louis,Source: FederalReserve increases inhomeownership. Rising homepriceschallenge any 6 Supply Overview

7 Shortage of Total Housing Completions 2,500 Recent apartment construction 2,000 was back lling well below average 1,500 single-family completions.

1,000

500 Housing Units (thousands)

0 1968 1969 1971 1972 1974 1975 1977 1978 1980 1981 1983 1984 1986 1987 1989 1990 1992 1993 1995 1996 1998 1999 2001 2002 2004 2004 2005 2007 2008 2010 2010 2011 2013 2014 2015 2016 2017 Source: Freddie Mac 2018 Mid-year Outlook. Single-Family Completions Historic Average (1968-2007 = 1.5 million completions) Multifamily (2+) Completions

Housing Construction Falls Short of Demand

2.0 2.0 Household Growth (millions) Overall housing construction has 1.5 1.5 been under-supplied relative

1.0 1.0 to household growth during the economic recovery.

0.5 0.5 Unit Completions (millions)

0 0 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018* SF Completions MF Completions HH Growth Undersupply Source: Marcus & Millichap

*Forecast **2Q 2018 8 Supply continued...

U.S. Multifamily Permits, Completions and Starts (in 000s)

600 Multifamily permits are declining 500 indicating completions likely 400 peaked.

300

200

100

0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: U.S. Census Bureau.

Completions Starts Permits

Inputs to Residential Construction (January 2017 - present)

230 Rapidly rising construction costs could limit future supply. 225

220

215 1986 = 100, NSA 1986 = 100,

210 PPI: Inputs to Residential Construction, Goods PPI: Inputs to Residential Construction, Source: National Association of Home Builders. JAN 2017 JAN JAN 2018 JAN MAY 2017 MAY NOV 2017 NOV JULY 2017 JULY MAR 2017 MAR 2018 SEPT 2017

9 Rental & Occupancy Rate Trends

10 11 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 100,000 150,000 200,000 250,000 300,000 350,000 400,000 $800 $900 50,000 0 Q1 2010 Current PeriodCurrent Effective Period RentCurrent Occupancy

Q4 2010 Annual MovingAbsorptions 4Quarter Average Absorptions Q1 2010 Q3 2011 Q3 2010

Q2 2012 Market Trends National Apartment Q1 2011 Q1 2013

Q3 2011 Multifamily Absorptions Annual Q4 2013 Q1 2012 Q3 2014 Q2 2015 Q3 2012 Q1 2016 Q1 2013 Q4 2016 Q3 2013 Q3 2017 Q1 2014 Q2 2018 Q3 2014 Q1 2019 Q1 2015 Q4 2019 Q3 2020 Q3 2015 Q2 2021 Q1 2016 Q1 2022 Q3 2016 Q4 2022 Q1 2017 Q3 2023 Q3 2017 90.0% 91.0% 92.0% 93.0% 95.0% 96.0% 97.0% Q1 2018 Rental &Occupancy Source: Axiometrics, Q32018. occupancy through2023. 95%averagerents andnearly projections of16%gain ineffective Strong fundamentalsleadto Source: RealPage, Freddie Mac annual new supply. annually, consistantwithrecent of approximately300,000units Absorptions demonstratedemand continued... Bluerock targets knowledge-economy markets which comprise growing populations, have above average employment growth rates, and above average household income growth.

Estimated Population Distribution in 2040

Expected to Comprise 50% of U.S. Population Bluerock Target Market Above Average Employment Growth Rate Above Average Median Household Income Growth

Source: 2016 analysis by Demographics Research Group, Weldon Cooper Center for Public Service, University of Virginia

12 Apartment Sector Resiliency

13 Timeline of Rent Change Trends During & After 2008-2009 Recession Number of Quarters in Each Phase

MULTIFAMILY 5 7 29 INDUSTRIAL 13 21 7 OFFICE 9 24 8 RETAIL 21 22* Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018

Source: CBRE Research, CBRE Econometric Negative Growth to Return Growth Past Prior Peak End of Advisors, Q4 2018. Data through Q4. Growth Trend to Prior Peak (to next downturn) Recession * Retail rents have still not achieved pre-recession peak levels.

Cumulative Effects on Rent During and After 2008-2009 Recession

25.7 The Multifamily sector proved to 20% be the most resilient real estate 7.8 5.0 sector during and after the Great 0 Recession exhibiting the lowest -4.5 rent decline, fastest rebound, and -7.9 -20% -14.1 sharpest increase. -17.5 -17.7

Cumulative Rent Decline Rent Growth Past Prior from Recession Peak (to Q4 2018) Source: CBRE Research, CBRE Econometric Advisors, U.S. Census Bureau, Q4 2018.

Multifamily Industrial Of ce Retail 14 About Bluerock Real Estate, LLC Bluerock is a leading institutional alternative asset manager based in New York with regional offices across the United States. Bluerock principals have a collective 100+ years of investing experience, have been involved with acquiring over 50 million square feet of real estate with approximately $13 billion in value, and have helped launch leading real estate private and public company platforms. Today, Bluerock has more than $6 billion in sponsored AUM comprised of more than 29 million square feet of commercial and residential real estate.

Risk Factors and Disclosures An investment in real estate securities involve substantial and speculative risks, including risks generally associated with investing in real estate and development such as leasing and tenant, interest rate, development, building risks, lack of liquidity, market risks, financing risks, the use of leverage, non-controlling interest in joint ventures, lack of control, and significant tax risks and tax issues.

All real estate investments have the potential for value loss during the life of the investment and the sponsor can make no assurances that any investment will achieve its objectives, goals, generate positive returns, or avoid losses.

The properties pictured herein were acquired, operated and/or developed by Bluerock and its development partners, and are included as examples of the types of properties to be acquired and/or developed by Bluerock in the future. A Primer for

For more information, contact Bluerock Capital Markets, LLC at 877.826.BLUE (2583) Apartment Investment

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