THE NATIONAL ECONOMY

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1

2 THE NATIONAL ECONOMY

3 THE NATIONAL ECONOMY Source: National Association of Realtors, Delta Associates; October 2015.

4 THE REGIONAL ECONOMY

5 PAYROLL JOB GROWTH Selected Large Metro Areas 12 Months Ending July 2015 T H O U S A N D S O F N E W PAY R O L L J O B S LA Basin NY SF Bay DFW Atl Was S Fla Chi Phx Hou Bos Den Source: Bureau of Labor Statistics, Delta Associates; October 2015.

6 UNEMPLOYMENT RATE Selected Large Metro Areas July 2014 vs. July 2015 U N E M P L O Y M E N T R AT E * 9% July 2014 July % 7% 6% 5% National Rate* 6.5% 5.6% 4% 3% 2% 1% 0% YoY Basis Point Change Den DFW SF Bay Bos Was Hou NY Phx S Fla Chi Atl LA Basin Source: Bureau of Labor Statistics, Delta Associates; October *Not seasonally adjusted.

7 PROJECTED JOB GROWTH Washington Metro Area T H O U S A N D S O F N E W PAY R O L L J O B S Year Annual Average = 41,700/Year 5-Year Projected Average = 47,300/Year District of Columbia Suburban Maryland Northern Virginia Source: Bureau of Labor Statistics, Dr. Stephen Fuller, Delta Associates; October 2015.

8 PROJECTED JOB GROWTH Washington Metro Area T H O U S A N D S O F N E W PAY R O L L J O B S More office jobs, higher wages Lower wages, more renters District of Columbia Suburban Maryland Northern Virginia Source: Bureau of Labor Statistics, Dr. Stephen Fuller, Delta Associates; October 2015.

9 PAYROLL JOB CHANGE BY WAGE Washington Metro Area Higher-Wage Mid-Wage Lower-Wage (60) (40) (20) Thousands J O B C H A N G E I N T H O U S A N D S Source: Dr. Stephen Fuller, Delta Associates; October 2015

10 PAYROLL JOB GROWTH Washington Metro Area 12 Months Ending July 2015 Education/Health Professional/Business Services State and Local Government Leisure/Hospitality Retail Trade Other Services 76,700 Transportation/Utilities Construction/Mining Federal Government Information Wholesale Trade Manufacturing -2,900 Financial Activities -5,000 1,000 7,000 13,000 19,000 25,000 J O B C H A N G E Source: Bureau of Labor Statistics, Delta Associates; October 2015.

11 JOBS THAT SUPPORT CLASS A APARTMENTS AND CONDOMINIUMS Washington Metro Area 12 Months Ending July 2015 Education/Health Professional/Business Services State and Local Government Leisure/Hospitality Retail Trade Other Services Transportation/Utilities Construction/Mining Federal Government Information Wholesale Trade Manufacturing Financial Activities -5,000 1,000 7,000 13,000 19,000 25,000 J O B C H A N G E Source: Bureau of Labor Statistics, Delta Associates; October 2015.

12 JOBS THAT SUPPORT CLASS B APARTMENTS Washington Metro Area 12 Months Ending July 2015 Education/Health Professional/Business Services State and Local Government Leisure/Hospitality Retail Trade Other Services Transportation/Utilities Construction/Mining Federal Government Information Wholesale Trade Manufacturing Financial Activities -5,000 1,000 7,000 13,000 19,000 25,000 J O B C H A N G E Source: Bureau of Labor Statistics, Delta Associates; October 2015.

13 DEMOGRAPHIC SHIFTS AND TENANT & BUYER PROFILE

14 RENTER PREFERENCE Renter Households Washington Metro vs. United States R E N T E R S A S A P E R C E N TA G E O F T O TA L H O U S E H O L D S 37% 36% 35% 34% 33% 32% 31% 30% 29% 28% U.S. WASHINGTON METRO Y E A R Source: U.S. Census Bureau, Delta Associates; October 2015.

15 OWN vs. RENT RESIDENCE United States P E R C E N T O F G E N E R AT I O N Own Rent 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 54% Millennials 20% Baby Boomer Source: 2013 ULI/BRS National Survey, Delta Associates; October 2015.

16 SHARE OF POPULATION BETWEEN YEARS OLD Largest Metro Areas P E R C E N T O F P O P U L AT I O N Y E A R S O L D 16% 15% 15.7% Arlington County: 28% City of Alexandria: 24% The District: 23% 14% 13% 12% 11% Source: U.S. Census Bureau, Delta Associates; October 2015.

17 CLASS A TENANT PROFILE Washington Metro Area Source: The Bozzuto Group, Delta Associates; October 2015.

18 NEW TENANT PROFILE District of Columbia Source: The Bozzuto Group, Delta Associates; October 2015.

19 CHANGING DEMAND PATTERNS Residents Without Cars in Apartments S H A R E O F R E S I D E N T S W I T H O U T C A R S 60% 51% 40% 36% 27% 26% 20% 10% 0% District RB Corridor Bethesda Pentagon City Reston Source: Kettler, The Bozzuto Group, Delta Associates; October 2015.

20 AVERAGE UNIT SIZE Newly Delivered Class A High-Rise Apartments Selected Submarkets AV E R A G E U N I T S I Z E ( S Q U A R E F E E T ) 900 RB Corridor District

21 APARTMENTS Changing Nature of Space

22 CLASS B TENANT PROFILE Washington Metro Area Source: ROSS Companies, Delta Associates; October 2015.

23 CONDO BUYER PROFILE National Source: National Association of Realtors, Delta Associates; October 2015.

24 THE WASHINGTON METRO AREA APARTMENT MARKET

25 LONG TERM ANNUAL APARTMENT ABSORPTION National Market Leaders L O N G T E R M A N N U A L A B S O R P T I O N O F A L L C L A S S E S O F U N I T S 10,000 9,000 8,000 7,000 6,000 5,907 Past 12 Months: 14,775 Class A Only Past 12 Months: 14,137 Class B Only Past 12 Months: 638 5,000 4,000 3,000 2,000 1,000 0 DFW Hou Was Atl LA Phx Balt Phil Chi Pgh Source: REIS, Delta Associates; October Note: Excludes NY metro to conserve scale.

26 CLASS B APARTMENT ABSORPTION Washington Metro Area C L A S S B A PA R M E N T U N I T S Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q ,000 4,000 2, ,000-4,000-6,000 Note: Each quarter shows absorption over the past 12 months.

27 CLASS A APARTMENT ABSORPTION Washington Metro Area C L A S S A A PA R M E N T U N I T S Average Since 2008 = 7,920 Annual Average ~ 10,300 16,000 Long-Term Average = 6,595 14,000 12,000 10,000 8,000 6,000 4,000 2, * *12 months ending September 2015.

28 ABSORPTION PACE PER PROJECT PER MONTH Class A Projects in Initial Lease-Up Washington Metro Area M O N T H LY A B S O R P T I O N PA C E P E R P R O J E C T S I N C E M A R K E T I N G B E G A N N U M B E R O F P R O J E C T S I N A C T I V E L E A S E U P /09 9/10 9/11 9/12 9/13 9/14 9/15 15

29 STABILIZED APARTMENT VACANCY RATES Major Apartment Markets at Third Quarter 2015 VA C A N C Y R AT E ( A L L C L A S S E S ) 7.0% 6.0% Class B Only: 2.8% National Rate 4.2% 5.0% Class A Only: 3.6% 4.0% 3.0% 3.3% 2.0% 1.0% 0.0% NY Wash LA Phi Chi Balt Phx DFW Hou Atl Source: REIS, Delta Associates; October 2015.

30 ANNUAL EFFECTIVE RENT GROWTH Class A Apartments Washington Metro Area E F F E C T I V E R E N T G R O W T H 10% 8% 6% Long Term Average Rent Growth = 4.2% Combined Class A & B Rent Growth = 1.0% 4% 3.6% 2% 0% 0.5% -2% -4% * Q W A S H I N G T O N M E T R O U. S. *12 months ending September 2015.

31 EFFECTIVE RENT AND VACANCY RATE Class B Apartments Washington Metro Area VA C A N C Y R AT E AV E R A G E E F F E C T I V E B A S E R E N T 5.5% Average Effective Base Rent 5.0% Vacancy $1,700 $1, % 4.0% 3.5% 3.0% 2.5% 2.0% $1,500 $1,400 $1,300 $1,200 $1, % * $1,000 * As of Third Quarter.

32 CLASS A APARTMENT UNIT STARTS Washington Metro Area N U M B E R O F C L A S S A M A R K E T R AT E U N I T S 7,000 District Sub MD No VA 6,000 5,000 Class A Projected Quarterly Absorption ~ 2,600 4,000 3,000 2,000 1,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q

33 PROJECTS CURRENTLY UNDER CONSTRUCTION District of Columbia Projects Under Construction In Lease-up Not Yet Leasing

34 PROJECTED DELIVERIES 36-Month Development Pipeline Washington Metro Area N U M B E R O F C L A S S A M A R K E T R AT E U N I T S 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, District Sub MD No VA Class A Projected Quarterly Absorption ~ 2,600 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q

35 APARTMENT PROPERTIES UNDERGOING RENOVATION Washington Metro Area N U M B E R O F U N I T S 40,000 35,000 30,000 25,000 20,000 15,000 15,285 10,000 5,000 0 * As of Third Quarter.

36 CURRENT RENOVATION ACTIVITY Low-Rise Class B Apartment Submarkets # of Units Under Major Renovation < ,000 1,499 1,500+

37 CURRENT RENOVATION ACTIVITY High-Rise Class B Apartment Submarkets # of Units Under Major Renovation < ,000 1,499 1,500+

38 36-MONTH APARTMENT DEVELOPMENT PIPELINE Washington Metro Area M A R K E T R AT E U N I T S P L A N N E D A N D U N D E R C O N S T R U C T I O N 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, * * As of Third Quarter.

39 MARKET RATE UNITS IN THOUSANDS DEMAND AND SUPPLY PROJECTIONS Washington Metro Area Class A Apartments 36 Months Ending September No VA Sub MD The District 3.6% 3.4% 4.1% Projected Stabilized Vacancy % at September 2018 Projected Stabilized Vacancy Rate at Sept. 2018: 3.6% Metro-Wide DEMAND Net Absorption: 10,333/Year = 31,000 SUPPLY Planned and may deliver by 9/18: 5,579 units 1 Under construction: 29,044 units 2 Total = 34,623 units 1 Probable supply after projected attrition. 2 Includes unleased units at projects in lease-up.

40 ANNUAL CLASS A APARTMENT RENT GROWTH Washington Metro Area P E R C E N T E F F E C T I V E R E N T G R O W T H 10% 8% Long-Term Average = 4.2% 6% 4% 2% 0% -2% -4% * * Annual rent change at Third Quarter 2015 is 0.5%.

41 THE BALTIMORE METRO AREA APARTMENT MARKET

42 CLASS A APARTMENT ABSORPTION Baltimore Metro Area C L A S S A A PA R T M E N T U N I T S 2,000 Annual Average = 975 1,500 Long Term Average = 812 1, * *12 Months Ending September 2015

43 EFFECTIVE RENT AND VACANCY RATE Class A Apartments Baltimore Metro Area S T A B I L I Z E D V A C A N C Y R A T E A V E R A G E E F F E C T I V E BASE R E N T 7% $1,700 6% Average Effective Base Rent Stabilized Vacancy $1,600 $1,500 5% $1,400 4% $1,300 $1,200 3% $1,100 2% $1,000 1% $900 $800 0% $ % / Y E A R L O N G - T E R M R E N T G R O W T H * As of Third Quarter.

44 36-MONTH APARTMENT DEVELOPMENT PIPELINE Baltimore Metro Area M A R K E T R AT E U N I T S P L A N N E D A N D U N D E R C O N S T R U C T I O N 6,000 5,000 4,000 3,000 2,000 1, * * As of Third Quarter.

45 DEMAND AND SUPPLY PROJECTIONS Baltimore Metro Area Class A Apartments 36 Months Ending September 2018 M A R K E T R AT E U N I T S 6,000 5,000 4,000 3,000 2,000 1,000 0 Baltimore Metro Area Projected Stabilized Vacancy Rate at Sept. 2018: 4.0% Metro-Wide D E M A N D Net Absorption: 975/Year = 2,925 S U P P LY Planned and may deliver by 9/18: 1,768 units 1 Under construction: 3,196 units 2 Total = 4,964 units 1 Probable supply after projected attrition. 2 Includes unleased units at projects in lease-up.

46 ANNUAL CLASS A APARTMENT RENT GROWTH Baltimore Metro Area P E R C E N T E F F E C T I V E R E N T G R O W T H 12% 10% 8% Long-Term Average = 4.3% 6% 4% 2% 0% * Annual rent growth at Third Quarter 2015 is 2.2%

47 THE WASHINGTON/BALTIMORE AREA CAPITAL MARKETS

48 APARTMENT INVESTMENT SALES Washington Metro Area Class A and Class B I N B I L L I O N S O F D O L L A R S $3.0 Class A Class B $2.0 $1.0 $ * *Sales through September annualized.

49 APARTMENT INVESTMENT SALES Baltimore Metro Area Class A I N M I L L I O N S O F D O L L A R S $350 $300 $250 $200 $150 $100 $50 $ * *Sales through September annualized.

50 AVERAGE SALES PRICE PER UNIT Washington and Baltimore Metro Areas Class A and Class B P R I C E P E R U N I T ( I N T H O U S A N D S ) Thousands $400 $350 Wash Class A Balt Class A Wash Class B $300 $250 $200 $150 $100 $50 $ * *Sales through September

51 THE WASHINGTON/BALTIMORE AREA APARTMENT MARKET OPPORTUNITIES

52 YEARS OF SUPPLY Low-Rise Class A Submarkets Washington Metro Area Years of Supply Less than 1

53 YEARS OF SUPPLY High-Rise Class A Submarkets Washington Metro Area Years of Supply Less than 1

54 OPPORTUNITIES DURING THIS CYCLE Washington/Baltimore Area Apartment Market UPGRADE WELL - LOCATED CLASS B ASSETS

55 OPPORTUNITIES DURING THIS CYCLE Washington/Baltimore Area Apartment Market REPURPOSE O R BUILD NEW ASSETS THAT APPEAL TO M I LLENNIAL PREFERENCES

56 OPPORTUNITIES DURING THIS CYCLE Washington/Baltimore Area Apartment Market ACCOMMODATE WORK-AT- HOME TENANTS

57 OPPORTUNITIES DURING THIS CYCLE Washington/Baltimore Area Apartment Market BUILD NEW UNITS THAT APPEAL TO EMPTY- NESTERS/ BABY BOOMERS

58 RECOMMENDED DEVELOPMENT TIMING Washington and Baltimore Metro Areas A PA R T M E N T S = Site Assembly = Construction = Delivery

59 THE WASHINGTON METRO AREA CONDOMINIUM MARKET

60 LARGEST CONDOMINIUM MARKETS Select Metro Areas T H O U S A N D S O F U N I T S NY S Fla Chi LA Basin Was Bos SF Bay TB Source: U.S. Census Bureau, Delta Associates; October 2015.

61 ANNUAL NEW CONDOMINIUM SALES Washington Metro Area N U M B E R O F U N I T S 4,500 4,000 Suburbs District 3,500 3,000 2,500 2,000 1,500 1, ,384 1, Note: Sales are 12 months ending September of each year.

62 ANNUAL CONDOMINIUM RESALES TREND Washington Metro Area N U M B E R O F U N I T S S O L D Average Since 2013 = 14,362 16,000 Average From = 11,280 14,753 14,000 12,000 10,000 8, * *Sales through August annualized.

63 % CHANGE EFFECTIVE NEW CONDO SALES PRICE CHANGE Washington Metro Area % 8% 6% 5.0% 4% 2% 1.8% 0% -2% -4% -6% * 2016 * 12 months ending September.

64 NEW CONDOMINIUM PRICES PER SF Washington Metro Area Third Quarter 2015 AVERAGE PRICE PER SF $1,400 $1,290 $1,200 $1,000 $800 $600 $835 $680 $600 $485 $475 $400 $290 $285 $200 $170 $0 Upper NW DC Central DC Mideast DC Mont Cap East DC Arl/Alex Ffx/FC Pr. George's Lou/PrWm

65 NEW CONDOMINIUM PRICES PER SF Selected Downtown Areas in the U.S. Third Quarter 2015 AVERAGE PRICE PER SF* $1,800 $1,781 $1,500 $1,200 $1,340 $1,290 $900 $835 $772 $749 $600 $644 $425 $300 $0 Manhattan San Francisco Upper NW DC Central DC L.A. Seattle San Diego Baltimore City Source: The Mark Company, StreetEasy, Delta Associates, October * Third Quarter 2015 except for Manhattan, which is as of Second Quarter

66 RESALE CONDO SALES PRICE CHANGE Washington Metro Area % CHANGE 25% 20% 15% 10% 5% 4.9% 0% -5% -10% * * 12 months ending August.

67 NEW CONDOS ACTIVELY MARKETING OR UNDER CONSTRUCTION Washington Metro Area # O F U N I T S 10,000 8,000 6,000 4,000 3,834 2, Note: Number of units are for September of each year.

68 MONTHS OF NEW CONDOMINIUM SUPPLY Washington Metro Area MONTHS OF SUPPLY *

69 MONTHS OF INVENTORY BY SUBMARKET Washington Metro Area

70 DEMAND AND SUPPLY PROJECTIONS Washington Metro Area Condominiums 36 Months Ending September 2018 M A R K E T R AT E U N I T S 4,000 3,500 D E M A N D Net Sales: 2,200/Year = 6,600 units 3,000 2,500 2,000 1,500 1, The District No VA Sub MD SUPPLY Planned and May Begin Marketing by 9/18: 2,436 units 1 Under Construction and/or Marketing: 3,834 units 2 Total = 6,270 units 1 Probable supply after projected attrition. 2 Includes unleased units at projects in lease-up.

71 THE BALTIMORE METRO AREA CONDO MARKET

72 ANNUAL NEW CONDOMINIUM SALES Baltimore Metro Area N U M B E R O F U N I T S Note: Sales are 12 months ending September of each year.

73 EFFECTIVE NEW CONDO SALES PRICE CHANGE Baltimore Metro Area % CHANGE 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% * * 12 months ending September.

74 36-MONTH CONDO DEVELOPMENT PIPELINE Baltimore Metro Area C O N D O U N I T S P L A N N E D A N D U N D E R C O N S T R U C T I O N 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, *As of September each year

75 MONTHS OF INVENTORY BY SUBMARKET Baltimore Metro Area

76 THE WASHINGTON/BALTIMORE AREA CONDO MARKET OPPORTUNITIES

77 OPPORTUNITIES DURING THIS CYCLE Washington/Baltimore Area Condo Market M AT C H N E W D E S I G N A N D P R I C I N G T O T H E P O T E N T I A L P O O L O F F I R S T - T I M E B U Y E R S

78 OPPORTUNITIES DURING THIS CYCLE Washington/Baltimore Area Condo Market S U P E R I O R L O C AT I O N S W I T H S T R O N G F U N D A M E N TA L S A N D D E S I G N W I T H L A R G E R R O O M S C A N A P P E A L T O E M P T Y N E S T E R S

79 OPPORTUNITIES DURING THIS CYCLE Washington/Baltimore Area Condo Market C R E AT E P L A C E - M A K I N G P R O J E C T S I N A P P E A L I N G M I X E D - U S E S E T T I N G S

80 OPPORTUNITIES DURING THIS CYCLE Washington/Baltimore Area Condo Market S W E E T S P O T: U N I T S / P R O J E C T

81 RECOMMENDED DEVELOPMENT TIMING Washington and Baltimore Metro Areas C O N D O S = Site Assembly = Construction = Delivery

82