GREYSTAR Rocky Mountain Commercial Real Estate Expo & DU Fall Forecast November 12, 2004
Dec 17, 2015
GREYSTAR
Rocky Mountain Commercial Real Estate Expo & DU Fall Forecast
November 12, 2004
Regional Offices
Regional in PracticeNational in Presence
Greystar Offices
Regional Offices
Greystar Presence (Management, Construction or Investment)
Charleston, SC (Headquarters)
Jacksonville, FL
Tampa, FLFt. Lauderdale, FLHouston, TX
Dallas, TX
Austin, TX
Phoenix, AZ
Denver, CO
Four Lines of BusinessFour Lines of Business
GreystarGreystar
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Development
Investment
Construction
Property Management
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DEVELOPMENTDEVELOPMENTDevelop with a national perspective and local expertise
Over $800 million of real estate developed over the last ten years
Product types include multifamily housing, office, industrial, retail and hotels
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INVESTMENTINVESTMENTGreystar sponsored investments approaching $2 Billion
One-stop shopping for investors, bypassing traditional investment advisors
Opportunistic. Create value at all stages of investment cycle and execute with in-house capabilities
Investment partners include Crow Holdings, JMI, Oregon Pension Fund, Goldman Sachs, Prudential, Recap, FNMA and Morgan Stanley
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PROPERTY PROPERTY MANAGEMENTMANAGEMENT
Manage over 60,000 units
12th largest property manager in nation (Source: NMHC)
3rd largest third-party multifamily manager
1,850 team members in 30 markets
5 largest clients: Sendera, Invesco, Fannie Mae, Investment Associates, and Merrill Lynch
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CONSTRUCTIONCONSTRUCTIONConstruction Volume: $150M
90% 3rd party business
10 % construction services for Greystar projects
Diverse product types: multifamily, senior living, hotels, and retail
$100 million in Bonding Capacity
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Growth of the Real Estate Investment Market
•Amount of Money in the Market
•Stability of the Market
•Historical Real Estate Returns
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Cap Rate and Interest Rate Relationship
•National
•Denver
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Investment Analysis Case Study
•Yesterday’s Investment
•Today’s Reality
•Tomorrow’s Bet
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The Future
•The Rising Tide
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Growth of the Real Estate Investment Market
•Amount of Money in the Market
•Stability of the Market
•Historical Real Estate Returns
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May 17, 1993 June 7, 2004
NAREIT Equity Total Return Index
1,493 5,030
Morgan Stanley Index Not yet invented; would have been 178
601
REIT Industry Total Equity Market Cap
$16 Billion $240 Billion
Largest Equity REIT (Market Cap)
New Plan Realty Trust - $1.1 Billion
SimonPropertyGroup - $14.0 Billion
Dedicated REIT Securities Managers
Cohen & Steers - $500 MillionFidelity RE - $417 Million
Cohen & Steers - $15 BillionFidelity RE - $3 Billion
Standard & Poor’s Indices REITs not included 22 RE Companies Included
REITS – 1993 Vs. 2004
Source: ULI’s Real Estate Capital Markets Update
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3,5004,0004,5005,0005,5006,0006,500
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
+63.2%
Since January 97, the money supply has risen from $3.8 to $6.2 Trillion.
Billions
Capital Chasing Deals
Source: Federal Reserve Board – M2
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Public Securities And Real Estate PerformancePublic Securities And Real Estate Performance
S&P S&P 500 500
Stock Stock IndexIndex
NASDAQ NASDAQ Comp. Comp. IndexIndex
NAREIT NAREIT REIT REIT IndexIndex
NCREIF NCREIF Property Property
IndexIndex
1994 1% -3% 3% 6%
1995 38% 40% 15% 8%
1996 23% 23% 35% 10%
1997 33% 22% 20% 14%
1998 29% 40% -18% 16%
1999 21% 86% -5% 11%
Source: ULI’s Real Estate Capital Markets Update
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Public Securities And Real Estate PerformancePublic Securities And Real Estate Performance
S&P S&P 500 500
Stock Stock IndexIndex
NASDAQ NASDAQ Comp. Comp. IndexIndex
NAREIT NAREIT REIT REIT IndexIndex
NCREIF NCREIF Property Property
IndexIndex
2000 -9% -39% 26% 11%
2001 -13% -21% 14% 10%
2002 -21% -28% 5% 7%
2003 26% 50% 39% 9%
2004 -1% -2% 13% 10%
Source: ULI’s Real Estate Capital Markets Update
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$100
$200
$300
$400
$500
$600
93 94 95 96 97 98 99 00 01 02 03 04
S&P 500 NASDAQ NAREIT NCREIF
Source: ULI’s Real Estate Capital Markets Update
$100 Investment Performance - 1994 - 2004
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0123456789
94 95 96 97 98 99 00 01 02 03 04
10 - Year Treasury
10 – Year Treasury Yield
Source: Federal Reserve
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$20
$32
$14
$23
$41
$12
$29
$46
$15
$34
$53
$15
$0
$10
$20
$30
$40
$50
$60
2001 2002 2003 2004
Apartment Office Industrial
Total U.S Sales Volume By Property Type
(Billions)
Source: Real Capital Analytics
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$0$200$400$600$800
$1,000$1,200$1,400
94 95 96 97 98 99 00 01 02 03 04
Multifamily Office Industrial
Source: CoStar Group and Apartment Appraisers
Metro Denver Historical Real Estate Investment
(millions)
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$0
$20
$40
$60
$80
$100
$120
$140
94 95 96 97 98 99 00 01 02 03 04
Multifamily Office Industrial
Source: CoStar Group and Apartment Appraisers
Metro Denver Historical Price per Square Foot
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$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
94 95 96 97 98 99 00 01 02 03
Source: Federal Reserve
Historical Commercial Mortgage Flow
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Cap Rate and Interest Rate Relationship
•National
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7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
Multifamily Office - CBD Office - Suburban Industrial - Warehouse
National Cap Rates By Property Type
Source: ULI’s Real Estate Capital Markets Update
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3.03.54.04.55.05.56.06.57.07.58.08.59.09.5
10.010.5
Industrial - Warehouse 10-Year Treasury Yield
National Multifamily Cap Rate Vs. 10-Year Treasury Yield
Source: ULI’s Real Estate Capital Markets Update and Federal Reserve
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3.03.54.04.55.05.56.06.57.07.58.08.59.09.5
10.010.5
2Q98
4Q98
2Q99
4Q99
2Q00
4Q00
2Q01
4Q01
2Q02
4Q02
2Q03
4Q03
2Q04
Multifamily 10-Year Treasury Yield
National Multifamily Cap Rate Vs. 10-Year Treasury Yield
Source: ULI’s Real Estate Capital Markets Update and Federal Reserve
Spread 3.0 2.9 2.8 3.2 3.64.5
2.6
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3.03.54.04.55.05.56.06.57.07.58.08.59.09.5
10.010.5
Office - CBD 10-Year Treasury Yield
National Office - CBD Cap Rate Vs. 10-Year Treasury Yield
Source: ULI’s Real Estate Capital Markets Update and Federal Reserve
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3.03.54.04.55.05.56.06.57.07.58.08.59.09.5
10.010.5
Office - CBD 10-Year Treasury Yield
National Office - CBD Cap Rate Vs. 10-Year Treasury Yield
Source: ULI’s Real Estate Capital Markets Update and Federal Reserve
Spread 3.0 2.9 2.64.4
5.4 3.5
2.8
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3.03.54.04.55.05.56.06.57.07.58.08.59.09.5
10.010.5
Industrial - Warehouse 10-Year Treasury Yield
National Industrial Cap Rate Vs. 10-Year Treasury Yield
Source: ULI’s Real Estate Capital Markets Update and Federal Reserve
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3.03.54.04.55.05.56.06.57.07.58.08.59.09.5
10.010.5
Industrial - Warehouse 10-Year Treasury Yield
National Industrial Cap Rate Vs. 10-Year Treasury Yield
Source: ULI’s Real Estate Capital Markets Update and Federal Reserve
Spread3.2 3.1 2.9 3.5
4.1 5.2 3.4
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Cap Rate and Interest Rate Relationship
•National
•Denver
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5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
94 95 96 97 98 99 00 01 02 03 04
Multifamily Office Industrial
Source: CoStar Group and Apartment Appraisers
Metro Denver Historical Cap Rates
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Investment Analysis Case Study
•Yesterday’s Investment
•Today’s Reality
•Tomorrow’s Bet
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The Summit at Flatirons
Total Projected Costs:
$61,500,000
Debt at 75%: $46,125,000
Equity: $15,375,000
•500 Units
•481,569 Total Square Feet
•Average Unit: 963 Sq.Ft.
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2000 Proforma
Gross Potential Rent $8,032,571 $1.39 PSF
Vacancy ($401,629) 5.0%
Effective Gross Rent $7,630,942
Expenses ($2,056,500) $4,113
NOI $5,574,442
Debt Service (8.25%) ($3,805,313)
Net Cash flow $1,769,130
Yield 9.06%
IRR 26.35%
Yield to Equity 11.51%
Reversion Cap Rate 8.0%
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Today’s Reality
Gross Potential Rent $6,934,594 $1.20 PSF
Vacancy ($1,386,919) 20%
Effective Gross Rent $5,547,675
Expenses ($2,095,500) $4,191
NOI $3,452,175
Debt Service (4.25%) ($1,960,313)
Net Cash flow $1,491,862
Yield 5.61%
IRR 6.68%
Yield to Equity 9.7%
Reversion Cap Rate 5.75%
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Tomorrow’s projection
Gross Potential Rent $6,934,594 $1.20 PSF
Vacancy ($693,459) 10%
Effective Gross Rent $6,241,134
Expenses ($2,158,365) $4,317
NOI $4,082,769
Debt Service (6.00%) ($2,767,500)
Net Cash flow $1,315,269
Yield 6.64%
IRR 14.2%
Yield to Equity 8.55%
Reversion Cap Rate 6.25%
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Rising Tide
•Interest Rates
•Delinquency Rates
•Cap Rates
•Employment
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Rising Tide
•Interest Rates
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One Month LIBOR Forecast
0
1
2
3
4
5
6
05 06 07 08 09 10 11
1-Month LIBOR Projection
Source: Morgan Stanley
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Rising Tide
•Interest Rates
•Delinquency Rates
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0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
94 95 96 97 98 99 00 01 02 03 04
Single Family Multifamily
Mortgage Delinquency Rates
Source: Freddie Mac
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Rising Tide
•Interest Rates
•Delinquency Rates
•Cap Rates
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Rising Tide
•Interest Rates
•Delinquency Rates
•Cap Rates
•Employment
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-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
94 95 96 97 98 99 00 01 02 03
Metro Denver Employment Growth 1994 - 2003
Source: Metro Denver EDC
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Rocky Mountain Commercial Real Estate Expo & DU Fall Forecast
November 12, 2004