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Research & Forecast Report

MEMPHISQ3 2017 | Multifamily

Source: AXIOMetrics. RCA, CoStar

Market Survey Results and ForecastsSequential Month Annual

4Q16 1Q17 2Q17 3Q17 Sep-17 2015 2016 2017F 2018F 2019F 2020F 2021F

Effective Rent Per Unit $804 $802 $819 $828 $828 $766 $797 $818 $841 $867 $898 $922

Per Sq. Ft $0.84 $0.84 $0.86 $0.87 $0.86 $0.80 $0.83 $0.85 $0.88 $0.91 $0.94 $0.96

Effective Rent Growth - Annually 4.9% 3.0% 2.6% 2.6% 2.1% 1.5% 4.0% 2.6% 2.8% 3.1% 3.5% 2.7%

Effective Rent Growth - Quarterly -0.4% -0.2% 2.1% 1.2%

Occupancy Rate 93.2% 93.3% 94.2% 94.0% 93.8% 92.9% 93.4% 93.8% 93.9% 94.4% 94.9% 94.7%

Occupancy Change - Annually 0.3% 0.5% 0.0% 0.5% 0.6% 0.3% 0.5% 0.4% 0.1% 0.6% 0.5% -0.2%

Occupancy Change - Quarterly -0.3% 0.1% 0.9% -0.2%

Economic Concessions Concession Value $-14.09 $-12.17 $-12.01 $-3.84 $-3.74 $-14.39 $-10.94

As a % of Asking Rent -1.7% -1.5% -1.5% -0.5% -0.4% -1.8% -1.3%

RECENT SALESDate Property Name Address City Units Year Built Price in $ $/Units

Oct-17 Waterview 6860 Quince Rd Memphis 1,002 1985 47,800,000 47,705

Sep-17 Stonebrook Apartments 6371 Winchester Rd Memphis 244 1976 9,700,000 39,754

Sep-17 Preserve at Forest Creek 9230 Thornbury Blvd Memphis 414 2008 56,600,000 136,715

Aug-17 Gardenwood 4787 Garden Grove Cv Memphis 152 1983 5,388,000 35,447

Aug-17 Airways Villas 2305 Pendleton St Memphis 182 1965 2,750,000 15,110

Jun-17 Legacy Crossing Apartments 7560 Chesteridge Ave Southaven 430 1995 20,150,000 46,860

Jun-17 Village Green 3450 Fescue Ln Memphis 314 1975 5,400,000 17,197

May-17 Barron Court 3015 Barron Ave Memphis 85 1973 932,154 10,967

May-17 El Dorado Apartments 2743 Ketchum Rd Memphis 188 1971 2,061,710 10,967

COLLIERS INTERNATIONAL MULTIFAMILY ADVISORY GROUP P. 2www.ColliersMultifamilyEast.com

SUPPLY AND DEMANDAccording to the Bureau of Labor Statistics, job growth in Memphis, TN-MS-AR Metro Area was 1.5% in August 2017, reflecting 9,500 jobs added during a 12-month period. The metro job growth figure was at the national number.

Axiometrics forecasts Memphis, TN-MS-AR Metro Area’s job growth to be 0.7% in 2018, with 4,475 jobs added. Job growth is expected to average 0.7% from 2019 to 2021, with an average of 4,701 jobs added each year.

On the supply side, permits for 584 multifamily units were issued in the 12 months ending in August 2017, down -732 units from the prior year’s sum. In terms of total residential housing, 3,747 units were permitted in the 12 months ending August 2017, a decrease of -608 units from the prior year’s total.

Multifamily Absorption and Supply

Annual 3Q17 Annual Forecast

2014 2015 2016 Market National 2017F 2018F 2019F 2020F 2021F

Total Units Absorbed 716 1,214 1,258 1,747 350,478 1,566 654 1,485 988 185

New Supply 919 680 1,095 1,355 387,002 1,157 801 655 530 711

Inventory Growth 1.0% 0.7% 1.2% 1.4% 1.5% 1.2% 0.8% 0.7% 0.5% 0.7%

Market Employment and Permitting

Annual August-17 Annual Forecast

2014 2015 2016 Market National 2017F 2018F 2019F 2020F 2021F

Employment (000s) 616.5 628.1 638.2 646.7 146,541.0 646.2 650.7 655.3 660.5 664.8

Job Gain (000s) 7.7 11.7 10.1 9.5 2,100.0 7.9 4.5 4.6 5.2 4.3

Job Growth (%) 1.3% 1.9% 1.6% 1.5% 1.5% 1.2% 0.7% 0.7% 0.8% 0.7%

Total Residential Permitting 3,171 3,959 4,355 3,380 1,120,198 4,120 8,069 7,568 6,058 7,365

Relative Change -13.6% 24.9% 10.0% -1.0% 6.1% -5.4% 95.8% -6.2% -20.0% 21.6%

Single Family Units Permitted 2,554 2,581 3,003 2,792 723,217

Relative Change 2.7% 1.1% 16.4% 9.0% 9.8%

Multifamily Units Permitted 607 1,370 1,316 578 364,705

Relative Change -40.7% 125.7% -3.9% -29.1% -1.0%

Multifamily as a % of Total 19.1% 34.6% 30.2% 17.1% 32.6%

Demand/Supply Ratio Job Gain / Total Residential Units Permitted 2.1 3.7 2.6 2.8 2.0 1.8 1.1 0.6 0.7 0.7

Job Gain / Single Family Units Permitted 3.1 4.6 3.9 3.7 3.2

Job Gain / Multifamily Units Permitted 7.6 19.2 7.4 11.7 5.7

COLLIERS INTERNATIONAL MULTIFAMILY ADVISORY GROUP P. 3www.ColliersMultifamilyEast.com

IDENTIFIED SUPPLYAs of October 15, 2017, Axiometrics has identified 1,078 apartment units scheduled for delivery in 2017, of which, 921 have been delivered. As a comparison, there were 974 apartment units delivered in 2016. Properties delivered to the market in the last 12 months have achieved an average asking rent of $1,254 per unit, or $1.24 per square foot. Effective rent has averaged $1,223, or $1.21 per square foot, resulting in an average concession value of $-31.15. As a comparison, existing properties in the market had an average asking rent of $832 per unit ($0.87 per square foot) and an average effective rent of $828 per unit, or $0.87 per square foot, in 3Q17. Concessions for existing properties averaged $-3.84.

Submarket Delivery Schedule

Pipeline Delivery Schedule Pipeline Lease Up Trend

Units Absorbed Asking Rent Effective Rent

Top Submarkets 2015 2016 2017 Total Totals PPM Per Unit PSF Per Unit PSF Downtown/Midtown 267 96 650 1,013 362 22 $1,326 $1.45 $1,319 $1.44

East Memphis/University 147 207 354 31 2 $1,398 $1.49 $1,376 $1.47

Poplar Pike/Germantown/Cordova 245 529 186 960 327 7 $1,215 $1.13 $1,169 $1.09

Southeast Shelby County/Ridgeway 143 35 178 145 16 $1,103 $1.04 $1,074 $1.02

Other 105 59 164 865 10 $1,257 $1.24 $1,224 $1.21

Memphis, TN-MS-AR 617 974 1,078 2,669

*Based on 2017 deliveries *Trend based on a trailing 12 month period

COLLIERS INTERNATIONAL MULTIFAMILY ADVISORY GROUP P. 4www.ColliersMultifamilyEast.com

PIPELINE# Name Status Owner Address Market Units1 266 Lofts Building 1 Lease Up Vince D Smith 266 S Front St Downtown Memphis MF 772 Highland Row Lease Up Milhaus 395 S Highland St East Memphis MF 2393 1544 Madison Ave Proposed 1544 Madison Partners 1544 Madison Ave Midtown Memphis MF 2174 Madison & McLean Proposed Makowsky Ringel Greenberg LLC 1819 Madison Ave Midtown Memphis MF 1085 Mason Village Proposed Church Of God In Christ Inc 884 Mason St South Memphis MF 776 400 Monroe Ave Proposed Worthington Hyde Partners 400 Monroe Ave Midtown Memphis MF 2867 Overton Gateway Proposed Makowsky Ringel Greenberg LLC 502 E Parkway N Binghampton MF 1768 Germantown Town Center

MultifamilyProposed Carter USA 7450 Poplar Ave Germantown MF 302

9 Midtown Market Proposed Belz Enterprises 1837 Union Ave Midtown Memphis MF 17510 One Beale Proposed Carlisle Corporation 245 Wagner Pl Downtown Memphis MF 28011 Springs at Shelby County Proposed Continental Properties Company, Inc. 9000 Winchester Rd Germantown MF 29612 Viridian Proposed Boyle Investment Company 9512 Winchester Rd Germantown MF 37513 259 E Butler Ave Under Construction Laycook James B 259 E Butler Ave Downtown Memphis MF 17714 272 S Danny Thomas Blvd Under Construction Progressive Baptist Ch 272 S Danny Thomas Blvd Downtown Memphis MF 20015 Meridian Park Apartment - Phase

II UCUnder Construction Grant & Co. 1700 Elkstone Dr S Collierville MF 147

16 Thornwood Under Construction McNeill Commercial Real Estate 1660 S Germantown Rd Germantown MF 25817 Highland Row - Phase II Under Construction Milhaus 395 S Highland St East Memphis MF 11518 Uptown Flats Under Construction PIRHL 627 N Main St Uptown Memphis MF 15519 Irene Woods Apartments- Phase II Under Construction Edward Rose & Sons 9199 Mayfield Rd N Southern Shelby

County MF384

20 Tennessee Brewery Apartments Under Construction Tower Ventures, LLC 495 Tennessee St Downtown Memphis MF 148Total Units 4,192

Source: CoStar

Key

Lease-Up

Under Construction

Proposed

2

13

2 miles

3

5

67

8

94

101

11 12

14

15

16

17

18

19

20

COLLIERS INTERNATIONAL MULTIFAMILY ADVISORY GROUP P. 5www.ColliersMultifamilyEast.com

WHO WE AREOne of the largest and most

experienced teams of multifamily

specialists in the industry

Units sold since 2011

33,500MORE THAN

Group gross transaction value in since 2011

$2.3B

Dedicated Multifamily Professionals & Advisors

50MORE THAN

Expansive geographic footprint

20COVERING OVER

STATES

OUR PROVEN TRACK RECORD

RENAISSANCE AT PEACHER’S MILL | Clarksville, TN

CHALLENGE: This was a difficult and cumbersome transaction as the debt execution consisted of an assumable HUD loan which dramatically narrows the pool of buyers and extends the process. Additionally, the East Region team reviewed the seller’s proforma and found they were charging too high an administrative fee to each renter. STRATEGY & RESULTS: After reducing the fee, ownership was able to achieve an $80,000 annual NOI increase, which resulted in an increased sale price. To sell the property the team, broadly marketed to work with an active HUD buyer comfortable with the process.

Selling this property resulted in the highest price per unit in the history of Clarksville.

CLIENT: JA Murphy Group UNITS: 216

Overlook at Allensville SquarePhase IIKnoxville, TNUnits: 288

Overlook at Allensville SquarePhase IKnoxville, TNUnits: 288

Renaissance at Peacher’s MillClarksville, TNUnits: 216

Shelby HeightsBristol, TNUnits: 100

Trails at Mount MoriahMemphis, TNUnits: 630

Stacks on MainNashville, TNUnits: 268

COLLIERS INTERNATIONAL MULTIFAMILY ADVISORY GROUP P. 6www.ColliersMultifamilyEast.com

WE CAN HELPAs an investor in multifamily properties, you need a firm that provides experience, broad reach and the ability to market an asset no matter how challenging the economic environment. You need a team that specializes in your market, you need The East Region Multifamily Advisory Group.

Colliers International has one of the largest and most experienced teams in the industry, strategically located in key markets throughout North America. Our combination of market dominance, expertise, and singular focus, make us uniquely successful in helping our clients achieve their disposition objectives.

How are we able to bring together the skills and tools necessary to complete challenging assignments? Our East Region Multifamily Advisory Group is connected by purpose and focus. Our team is dedicated to sharing information on market opportunities, capital sources and buyers/sellers to achieve the best results for our clients.

COLLIERS INTERNATIONAL MULTIFAMILY ADVISORY GROUP P. 7www.ColliersMultifamilyEast.com

John AshleyASSOCIATE | EAST REGION

john.ashley@colliers.comDIR +1 615 850 2715

www.ColliersMultifamilyEast.com

To learn more, scan this with a QR code reader or visit:

Will MathewsPRINCIPAL | EAST REGION

INSTITUTIONAL CLIENT GROUP

will.mathews@colliers.comDIR +1 404 877 9285

AT YOUR SERVICE

Payton HerschbergerASSOCIATE | EAST REGION

payton.herschberger@colliers.comDIR +1 404 574 1061