©2015 CoreLogic, Inc. All rights reserved. Proprietary and Confidential. Wednesday, May 6, 2015
©2015 CoreLogic, Inc. All rights reserved. Proprietary and Confidential.
Wednesday, May 6, 2015
©2015 CoreLogic, Inc. All rights reserved. Proprietary and Confidential. ©2015 CoreLogic, Inc. All rights reserved. Proprietary and Confidential.
Velocity of Change in Multifamily:
Demographics / Acquisitions
John Wilhoit, Jr.
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If our universe started 14 billion years ago…
And if 14 billion years were converted to 14 years
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Then man has been on earth for 6 minutes
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Speed of Due Diligence and Risk for Investors
“As the number of potential buyers increases, so does the market
demand for fast "go hard" decisions…. we are seeing timelines as
short as five to seven days for a buyer to either complete their due
diligence or waive contingencies. ”
-Richard West CBRE (NREI Online)
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Every Property Has “Personality”
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…some more than others
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…some built to look back at you.
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Focusing on the Speed of Change…
Technology - Smart Phones / Body wear (Fitbit, Apple watch)
Advertising mediums – Craigslist (staying on page 1)
Demographics – neighborhoods can change in 2-years
Acquisitions Due Diligence
M-R Turn times
…and how this impacts the way you run your business. Many
aspects of business have shorter and shorter cycles. For example:
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Pedro and Vinny’s – Arlington, VA (Penrose)
•$1,433 average Rents
•$94,180 average HH Income
•13,664 persons per square mile
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LETS TALK DEMOGRAPHICS!
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Correlating Office Rents to Multifamily Rent Growth
Highest Priced Markets for office Space Rent Growth YOY
Office - CBD Office - Suburban Multifamily-CBD Multifamily -Suburban
NYC - Manhattan San Francisco Oakland Denver
NYC - Midtown San Jose San Jose Oakland San Francisco Los Angeles Denver San Francisco
Washington DC San Diego San Francisco San Jose
NYC - Upper Midtown Fairfield, CT Atlanta Portland Boston Seattle Portland Atlanta
Houston Miami Miami - Palm Beach Miami-Palm Beach Miami Oakland Sacramento Sacramento Chicago Washington DC Seattle Fort Worth
Los Angeles Houston Los Angeles Los Angeles
Colliers International Whitten Advisors NREI Online MPF Q4 2015 Q4 2015
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Correlating Office Rents to Multifamily Rent
Highest Priced Markets for office Space Rent Growth YOY
Office - CBD Office - Suburban Multifamily Multifamily
San Francisco Miami Los Angeles
San Francisco Miami Los Angeles
San Francisco Miami Los Angeles
San Francisco Miami Los Angeles
Colliers International Whitten Advisors NREI Online MPF
Q4 2015 Q4 2015
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Demographic Changes in 2030
Your Resident Today Your Resident Tomorrow
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socyberty.com
Jon Furness Invision AP
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From the Center for Joint Housing Studies”
“Strong Growth in Minority Renters Has
Offset the Dramatic Decline in Younger
Renters”
*Change in Renter Households, 1995–2005 (Thousands)
Center for Joint Housing Studies –Harvard University
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Wealth by Race, Educational Attainment
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Renters for Life?
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Which Quartile does your product type serve?
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In a study using 50 metropolitan-area markets:
…between 40% and 50% of a property’s overall
performance is explained by sub-market factors
while only 10% is explained by metropolitan factors (Submarkets Matter! Applying Market Information to Asset-Specific Decisions- Real Estate Finance Fall 2000).
DEMOGRAPHICS DETERMINES THE
OUTCOMES. BUT WHERE?????
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Submarkets Sub-markets are the boundaries
that define where a property must
compete and where property
comparisons begin.
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Can You Answer these Questions
What is the average Age of the Resident Base?
What is their average income?
What is the average household size?
What is the primary cultural norm?
Total number of units?
Unit mix?
With respect to YOUR portfolio:
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Can You Answer these Demographic Questions
What is the average Age of your Resident Base?
What is their average income as compared to the submarket?
What is the average household size? Is this changing?
What is the primary cultural norm for the submarket?
Is the cultural norm shifting?
Total number of units in the submarket?
Unit mix for the submarket?
With respect to YOUR portfolio:
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Annual Apartment Rents with 3.5% Rent Growth
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13,572
14,047
14,538
15,047
15,573
2014 2015 2016 2017 2018
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Rent as a Percentage of Median HH Income
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2015, 25.59%
2015, 25.96%
2016, 26.34%
2017, 26.73%
2018, 27.66%
2013 2014 2015 2016 2017 2018 2019
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Let’s Talk Acquisitions!
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…between 40% and 50% of a property’s overall
performance is explained by sub-market factors
while only 10% is explained by metropolitan factors (Submarkets Matter! Applying Market Information to Asset-Specific Decisions- Real Estate Finance Fall 2000).
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Sub-Markets
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Creating quality data…layer by layer
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Sub-markets are the boundaries that define where a
property must compete and where property
comparisons begin.
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Highland Park, Texas - drive-time analysis
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2015
12,389
40.4
$98,735
47.4%
40.1%
$845,592
*55.8% (2010)
*38.9% (2010)
38.4% (2015)
34.5% (2015)
2019
13,252
40.2
$121,239
47.5%
40.6%
$917,616
Highland Park, Texas (Sub-Market)
2.37 Miles, 88.8% White Collar (Management, Business, Financial)
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Population
Median Age
HH Income
Own
Rent
Home Value
1-Person HH
2-Person HH
Bachelor Degree
Masters Degree
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Household growth
Units in pipeline
Vacancy rates
Substandard housing
conditions
Unit replacement
Absorption levels
Market balance
Market segmentation
Source: Vogt Santer
Number of potential income
qualified households
Unit distribution
AMI distribution
Turnover
Affordability
Housing Choice Vouchers
Market saturation
Location
Proposed rents
Selecting Submarket Layers
Factor to Consider in Analyzing Demand
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Five Submarket Yield Determinants
Own versus rent Percentage
Unit counts- yours
Vacancy
Housing Absorption levels
Unit distribution
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Acquisitions: How to Stay Out of the Weeds
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Los Angeles – Non-actionable Data
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Los Angeles: Actionable Data
-458 Square miles -114 Neighborhoods
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Takeaways…Velocity of Change in Multifamily for
Acquisitions
How do you prepare your acquisition strategy for economic shifts in
neighborhoods? Submarket pre-selection with quality and detailed
demographic profiling focused on shifts in population and income.
What is the key demographic component to forecasting rent growth?
Educational attainment.
Where do you find performance that converts to Funds From
Operations (FFO)? Submarkets.
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Wilhoit Investment Network, LLC
3610 Buttonwood Drive Suite 200
Columbia, MO 65201
573-886-8992
http://www.multifamilyinsight.com
http://www.multifamilyinsight.net
http://www.win-rei.com
http://www.powerhourleadershipacademy.com/pm
John Wilhoit, Presenter
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