4Q 2018 UNITED STATES MULTIFAMILY CAPITAL MARKETS REPORT

4Q 2018 UNITED STATES MULTIFAMILY CAPITAL MARKETS REPORT

TABLE OF CONTENTS 3 Key Takeaways 4 Sales Volume 5 Sales Volume by Market 6 NCREIF Total Returns 7 Yield Spread 8 Cap Rates 9 Price Per Unit 10 Top Buyers and Sellers 11 International Capital Buyers 12 International Capital Destinations 13 Specialty Assets 14 Single-Family Housing 15 Market Fundamentals 16 Effective Rent Growth 17 New Supply and Inventory Growth 18 New Supply Matrix 19 Absorption 20 Absorption Matrix 21 Mortgage Debt Outstanding 22 Lender Composition 23 Mortgage Maturities 2

KEY TAKEAWAYS SALES VOLUME Investment sales volume for 2018 totaled $172.6 billion (12.1% year-over-year growth), the highest annual total on record. Volume in major markets surged 24.8% year-over-year, led by increases of more than 40% in New York and San Francisco. CAP RATES Nationally, cap rates decreased 5 basis points year-over-year to 5.4%. Yields between major markets and non-major markets continued to compress to near cyclical lows of 92 basis points, with capital flow increasingly seeking out value-add and higher yielding assets in non-major markets. RENT GROWTH Annual effective rent growth increased 2.8% year-over-year, led by Las Vegas, Phoenix, Sacramento, Orlando and Tampa have experienced the strongest rental growth in the nation over the past 12 months. SUPPLY AND DEMAND 287,007 units were delivered in 2018, while inventory growth decreased 20 basis points year-over-year. The wave of new supply is projected to continue in 2019, with more than 318,000 units expected to be delivered nationally. INTERNATIONAL CAPITAL Direct acquisitions by international capital sources rose to $15.3 billion, representing a 10.9% year-over-year increase. Non-major markets attracted 53.2% of total transaction volume in 2018. DEBT MARKETS Mortgage debt outstanding for multifamily grew to $1.3 trillion, a 2.0% quarter-over-quarter growth. Nearly $550 billion of additional mortgages are set to mature between 2019 and 2022, which is expected to support strong levels of refinancing activity. 3

$28.0 $35.7 $37.0 $36.6 $42.3 $49.4 $46.6 $50.9 SALES VOLUME UNITED STATES; DOLLARS IN BILLIONS Investment sales volume reached a record $172.6 billion in 2018, representing a 12.1% increase year-over-year. Fourth-quarter transaction volume totaled $50.9 billion, the second-highest quarterly sum on record. Portfolio activity remained in line with prior years at 20.0% in 2018, even as many large portfolios hit the market. $200 $160 $120 $80 $40 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1Q 2Q 3Q 4Q Source: NKF Research, Real Capital Analytics 4

SALES VOLUME BY MARKET 12-MONTH TOTALS; DOLLARS IN BILLIONS While many investors sought higher-yielding assets in non-major markets, volume in major markets surged 24.8% year-over-year, led by increases of more than 40% in New York and San Francisco. Several non-major markets also saw strong gains, with Houston up 62.1%, Raleigh-Durham up 60.2%, Charlotte up 44.2% and Philadelphia up 40.6%. SEA $4.8 POR $2.1 SF $6.3 SAC $1.7 101.2% Year-over-Year Growth DEN 30.6% Year-over-Year Growth $5.1 MSP $1.9 CHI $5.1 DC $7.6 NYC $17.9 PHI $2.7 BOS $2.2 LA $13.0 SD $2.0 LV $2.2 PHX $6.4 Record High First Half Volume ($2.9 Billion) DFW $9.3 NSH $1.8 CHA $2.8 ATL $7.5 RD $3.2 $5.0+ $2.6-4.9 $1.5- $2.5 SA $2.5 AUS $3.8 HOU $7.7 48.5% Year-over-Year Growth TAM $2.9 ORL $3.2 SFL $4.3 *Major Markets: Boston, Chicago, Los Angeles Metro, New York City Metro, San Francisco Metro, Washington DC Metro *Non-Major Markets: All other markets Source: NKF Research, Real Capital Analytics 5

NCREIF TOTAL RETURNS UNITED STATES Total returns decreased 9 basis points year-over-year to 6.1%. Total returns were strongest in the West region with 7.3% annual returns due to above-average rental growth, followed by the South at 6.8%. The East and Midwest regions experienced more tepid growth with total returns of 4.9% and 3.6%, respectively. 25% 21.2% 18.2% 15% 13.0% 14.6% 11.4% 15.5% 11.2% 10.4% 10.3% 12.0% 7.3% 6.2% 6.1% 5% -5% -7.3% Long-Term Total Return Average = 8.8% -15% -17.5% -25% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Appreciation Income Total Return Source: NKF Research, NCREIF 6

YIELD SPREAD UNITED STATES After a run-up earlier in the year, the 10-year Treasury rate fell 36 basis points quarter-over-quarter to 2.69% at the end of fourth-quarter 2018. Despite volatility in the Treasury market throughout the year, multifamily yields largely remained unchanged and ended 2018 with at a 272 basis point premium to the 10-year Treasury note. 10% 500 8% 400 6% 300 4% 200 2% 100 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0 Yield Spread US Multifamily Average Cap Rate 10-Year Treasury Rate Source: NKF Research, Real Capital Analytics (Transactions $10 million and greater) 7

7.9% 7.1% 6.6% 6.1% 5.9% 6.0% 6.3% 6.9% 6.5% 6.2% 6.0% 6.1% 5.9% 5.8% 5.6% 5.5% 5.4% CAP RATES 12 MONTH AVERAGE Yields continued to compress in the fourth quarter, falling 5 basis points year-over-year. The gap between cap rates in major markets and non-major markets stands near the cyclical low of 92 basis points, with capital flow increasingly seeking out value-add and higher-yielding assets in non-major markets. 10% 8% 6% 5.6% 4.7% 4% 2% 0% 4Q02 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 *Major Markets: Boston, Chicago, Los Angeles Metro, New York City Metro, San Francisco Metro, Washington DC Metro *Non-Major Markets: All other markets United States Major Markets Non-Major Markets Source: NKF Research, Real Capital Analytics (Transactions $10 million and greater) 8

$75 $79 $94 $105 $109 $109 $105 $104 $112 $112 $118 $119 $129 $140 $148 $163 $166 PRICE PER UNIT 12 MONTH AVERAGE; DOLLARS IN THOUSANDS The average price per unit nationally increased to $166,080, representing 2.2% annual growth. The average price per unit in major markets declined 1.4%, while non-major markets saw strong growth of 5.5%. $375 $300 $296 $225 $150 $138 $75 $0 4Q02 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 *Major Markets: Boston, Chicago, Los Angeles Metro, New York City Metro, San Francisco Metro, Washington DC Metro *Non-Major Markets: All other markets United States Major Markets Non-Major Markets Source: NKF Research, Real Capital Analytics (Transactions $10 million and greater) 9

TOP BUYERS AND SELLERS 12-MONTH TOTALS; UNITED STATES; DOLLARS IN MILLIONS The top two buyers in 2018 were Brookfield, which acquired Forest City REIT, and Greystar, which purchased EdR. Starwood Capital and Lone Star, which are primarily focusing on large-scale workforce housing portfolio dispositions, were among the largest sellers. $7,500 Top Buyers $6,000 $4,500 $3,000 $1,500 $0 Brookfield Greystar Blackstone RE Income Trust FPA Multifamily Nuveen Real Estate Goldman Sachs Carroll Organization Cortland Partners PGIM Real Estate Nexpoint Residential Trust Waterton Associates Harbor Group Int'l Bridge Investment Group American Landmark Blackstone Top Sellers $6,250 $5,000 $3,750 $2,500 $1,250 $0 Forest City REIT EdR Starwood Capital Greystar Fairfield Residential Blackstone Ivanhoe Cambridge Lone Star Goldman Sachs Carmel Partners Wood Partners AvalonBay Crow Holdings Disque Deane Trump Org Individual Portfolio & Entity Source: NKF Research, Real Capital Analytics 10

INTERNATIONAL CAPITAL BUYERS 12-MONTH TOTALS Direct acquisitions by international capital sources rose to $15.3 billion, representing a 10.9% year-over-year increase. Canadian firms remained the U.S. multifamily market s dominant source of international capital, as nine the top 20 foreign buyers are headquartered in Canada. BY COUNTRY UK 2.5% Bahrain 4.1% Germany 4.1% Netherlands 6.7% Singapore 9.2% Other 14.9% Canada 58.5% TOP 20 BUYERS (DOLLARS IN MILLIONS) Brookfield $6,217.0 GIC $5,194.8 Ivanhoe Cambridge $3,194.3 APG Group $3,194.3 CPP Investment Board $2,000.6 Mapletree Investments $1,372.5 Investcorp $1,146.3 Starlight Investments $1,008.0 CapitaLand $835.0 PGGM $804.1 H&R REIT $666.8 Akelius Residential AB $633.3 Western Wealth Capital $583.8 Hasta Capital $445.0 Profimex $419.3 OMERS $400.8 Varia US Properties $396.4 Morguard NA Residential REIT $394.5 Emma Capital $379.5 Allianz $373.1 Source: NKF Research, Real Capital Analytics 11

INTERNATIONAL CAPITAL DESTINATIONS 12-MONTH TOTALS The highest level of direct sales to international capital, was the New York City metro area, with $3.0 billion in multifamily deals. Despite this, non-major markets attracted 53.2% of transaction volume in 2018, as investors continue to focus on chasing yield into non-major markets. POR $180M SEA $547M BY MARKET TIER As a % of Cross-Border Capital MAJOR MARKETS 46.8% BOS $592M NON-MAJOR MARKETS 53.2% SF $598M LA $1.6B SD $145M LV $200M PHX $475M DEN $571M DFW $601M CHI $420M CLE $440M ATL $446M DC $1.2B CHA $143M RD $324M NYC $3.0B BY REGION As a % of Cross-Border Capital MID-ATLANTIC 13.2% MIDWEST 8.6% NORTHEAST 24.7% SOUTHEAST 13.7% HI $288M AUS $492M HOU $415 TAM $496M ORL $137M SFL $73M SOUTHWEST 17.8% WEST 22.0% *Major Markets: Boston, Chicago, Los Angeles Metro, New York City Metro, San Francisco Metro, Washington DC Metro *Non-Major Markets: All other markets Source: NKF Research, Real Capital Analytics 12

2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018 $1.7 $2.7 $6.2 $3.5 $3.3 $4.0 $12.0 $6.0 $14.3 $14.7 $14.1 $16.4 $7.9 $18.9 $22.1 $10.1 $10.9 $27.7 SPECIALTY ASSETS UNITED STATES; DOLLARS IN BILLIONS With yields of conventional multifamily compressing for several years, investors have grown increasingly interested in specialty multifamily product that offers strong riskadjusted returns. This shift has been particularly beneficial to student housing and senior housing. In 2018, student housing investment sales volume increased by 39.0%. STUDENT HOUSING $12 SENIOR HOUSING & CARE $30 $10 $25 $8 $20 $6 $15 $4 $10 $2 $5 $0 $0 *Senior housing and care volume not included in overall multifamily investment sales volume Source: NKF Research, Real Capital Analytics 13

SINGLE-FAMILY HOUSING DRIVING MULTIFAMILY DEMAND 250 200 150 100 50 0 2000 2003 2006 2009 2012 2015 2018 S&P/Case-Shiller U.S. National Price Index Housing values have soared since 2000, with the Case-Shiller index rising 89.2%. Consequently, homeownership is out of reach for many, especially first-time buyers seeking entry-level homes contributing to multifamily demand. 2,000 1,500 1,000 500 0 2000 2003 2006 2009 2012 2015 2018 Privately Owned Single-Family Housing Starts Single-family starts have declined 52.9% since the peak of 1.7 million homes in 2004, to just 807,000 in 2018. This is partly due to a lack of skilled labor and increased materials cost. 70% 68% 66% 64% 62% 60% 2000 2003 2006 2009 2012 2015 2018 Homeownership Rate Homeownership has declined to 64.4% from the peak of 69.2% nationally in 2004. Additionally, renting has become more attractive because of recent changes to the tax code that eliminated some incentives for homeowners. Source: NKF Research, Federal Reserve Bank of St. Louis 14

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* MARKET FUNDAMENTALS UNITED STATES Annual effective rent growth increased 2.8% nationally, in-line with growth the prior year. Strong absorption contributed to a decrease in vacancy of 30 basis points yearover-year to 4.6%. Despite high levels of new supply anticipated in the year ahead, rent growth is projected to rise to 3.0% in 2019. $1,500 $1,200 $1,282 $1,336 $1,419 12% 8% 4.9% 4.6% 4.8% $900 4% 2.8% 2.8% 3.0% $600 0% $300-4% $0-8% Effective Rent Effective Rental Growth Vacancy Rate Source: NKF Research, Axiometrics 15

Las Vegas Orlando Phoenix Sacramento Tampa San Diego Atlanta Columbus Los Angeles Memphis Houston Miami Minneapolis San Francisco Charlotte Denver Raleigh-Durham Orange County Boston Philadelphia Oklahoma City Austin New York City Seattle San Antonio Nashville Washington DC Portland Dallas Chicago 1.2% 1.8% 1.8% 1.8% 1.8% 1.7% 1.6% 1.6% 1.5% 2.1% 3.7% 3.6% 3.4% 3.3% 3.2% 3.2% 3.1% 3.0% 2.9% 2.7% 2.6% 2.6% 2.5% 2.4% 4.5% 4.3% 4.2% 5.7% 6.0% 6.6% EFFECTIVE RENT GROWTH 12-MONTH TOTALS; SELECT MARKETS Over the past 12 months, rental growth was strongest in Western markets, including Las Vegas, Phoenix and Sacramento, and in Florida markets with high rates of employment growth, such as Orlando and Tampa. 7% 6% 5% 4% Growth in emerging markets such as Austin and Nashville has moderated recently. However, over the next 12 months, rents are projected to increase by 170 basis points in Nashville and 100 basis points in Austin. 3% 2% 1% 0% Source: NKF Research, XXXX 16

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* 78,581 127,405 148,423 174,253 176,919 160,368 158,908 171,596 168,714 240,445 223,751 206,850 190,483 201,076 252,470 273,557 298,388 287,007 311,187 318,840 NEW SUPPLY AND INVENTORY GROWTH UNITED STATES Over the past 12 months, 287,007 new units were delivered, representing a decrease in inventory growth of 20 basis points year-over-year. The wave of new supply is projected to continue in 2019, when more than 318,000 units are expected to be delivered nationally. 350,000 5% 280,000 4% 210,000 3% 140,000 2% 70,000 1% 0 0% New Supply Inventory Growth Source: NKF Research, Axiometrics 17

NEW SUPPLY NEW SUPPLY MATRIX 12-MONTH TOTALS; SELECT MARKETS Dallas led the nation in new supply with 21,355 units delivered over the past 12 months, followed by New York City with 14,309 units. The top 10 markets by deliveries over the past 12 month comprise 38.3% of national new supply. 25,000 20,000 DAL 15,000 NYC DC DEN 10,000 CHI ATL SEA LA PHX AUS HOU MIA BOS CHA ORL NSH SA 5,000 TAM MSP RD PHI SD OC POR COL LV SF SAC MEM OKC 0 0% 1% 2% 3% 4% 5% INVENTORY GROWTH Source: NKF Research, Axiometrics 18

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018-137,418 90,958 110,080 84,736 43,945 23,341 3,374 106,176 70,302 188,616 217,602 190,723 268,061 237,143 313,316 304,796 323,290 364,771 407,131 ABSORPTION UNITED STATES Since 2000, annual absorption has averaged 168,997 units. Nearly twice that amount, 323,290 units, was absorbed in 2018. Absorption outpaced supply by 36,283 units, pushing the vacancy rate down by 30 basis points year-over-year. 475,000 350,000 225,000 100,000-25,000-150,000 Source: NKF Research, Axiometrics 19

ABSORPTION ABSORPTION MATRIX 12-MONTH TOTALS; SELECT MARKETS Several markets saw robust absorption, with demand in New York and Dallas leading the nation with 25,468 and 21,270 units, respectively. Additionally, Boston, Raleigh- Durham and Oklahoma City all saw absorption exceed new deliveries by 200% or more over the past 12 months. 30,000 25,000 NYC 20,000 DAL 15,000 ATL CHI DEN LA DC PHX 10,000 BOS AUS CHA SEA SA NSH TAM 5,000 PHI RD ORL POR MSP SD OC LV MIA OKC HOU SF SAC MEM 0 0% 50% 100% 150% 200% 250% 300% 350% 400% ABSORPTION AS A PERCENTAGE OF 12-MONTH NEW SUPPLY Source: NKF Research, Axiometrics 20

$43.3 $29.1 $101.2 $78.2 $425.9 $648.1 MORTGAGE DEBT OUTSTANDING UNITED STATES Mortgage debt outstanding for multifamily grew $26.1 billion to $1.3 trillion, a 2.0% quarter-over-quarter increase. GSE s saw the largest gain in dollar terms at $16.7 billion versus the prior quarter. DEBT OUTSTANDING BY GROUP AS A PERCENTAGE DEBT OUTSTANDING BY GROUP IN BILLIONS Securitized 3.3% Other 2.2% $700 $600 Government 7.6% Insurance Companies 5.9% $500 $400 GSEs 48.9% $300 Banks & Thrifts 32.1% $200 $100 $0 GSEs Banks & Thrifts Government Insurance Companies Securitized Other Source: NKF Research, Mortgage Bankers Association, Federal Reserve, Trepp 21

LENDER COMPOSITION 12-MONTH TOTALS Throughout the U.S., there was a surge in lending by regional and local banks, which accounted for 18% of the market in 2018 compared with 12% in 2017. Regionally, GSE lending remains the preferred choice everywhere except in the Northeast. UNITED STATES BY REGION 100% 90% 80% 70% 60% 11% 9% 5% 8% 1% 1% 1% 1% 13% 15% 12% 18% 8% 10% 12% 3% 9% 4% 7% 3% 7% 4% 7% 8% 100% 90% 80% 70% 60% 1% 1% 1% 1% 1% 5% 5% 9% 10% 7% 8% 15% 7% 9% 2% 2% 2% 8% 7% 8% 4% 45% 14% 10% 4% 9% 50% 40% 30% 52% 52% 54% 61% 50% 50% 40% 30% 67% 53% 8% 8% 7% 67% 64% 49% 20% 20% 20% 10% 0% 5% 6% 10% 5% 4% 6% 7% 3% 4% 4% 2014 2015 2016 2017 2018 10% 0% 6% 7% 8% 2% 7% 5% 4% 7% 5% 3% 5% 3% Mid-Atlantic Midwest Northeast Southeast Southwest West CMBS Financial GSE Life Co Int'l Nat'l Bank Reg/Local Bank Private/Other CMBS Financial GSE Life Co Int'l Nat'l Bank Reg/Local Bank Private/Other Source: NKF Research, Trepp, Federal Reserve, Real Capital Analytics 22

MORTGAGE MATURITIES UNITED STATES; DOLLARS IN BILLIONS $123.4 billion of U.S. multifamily mortgages are set to mature in 2019. Nearly $550 billion of additional mortgages are set to mature from 2019 to 2022. These mortgages should support strong levels of refinancing activity, as debt capital remains plentiful for high-quality assets and sponsors. $150 $547.6 Billion $125 $100 $76 $80 $81 $75 $50 $25 $36 $3 $10 $25 $63 $68 $50 $54 $56 $56 $59 $45 $41 $39 $5 $3 $4 $4 $4 $4 $4 $3 $4 $4 $8 $9 $10 $10 $21 $9 $13 $6 $15 $16 $29 $32 $33 $33 $32 $34 $29 $27 $24 $27 $71 $4 $5 $43 $5 $3 $51 $5 $6 $2 $3 $55 $57 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Banks CMBS Insurance Companies Other Source: NKF Research, Federal Reserve, Trepp 23

NEW YORK CITY HEADQUARTERS 125 Park Avenue New York, NY 10017 212.372.2000 Jeff Day President Head of Multifamily Capital Markets jeff.day@ngkf.com Blake Okland Vice Chairman Head of Multifamily Investment Sales bokland@ngkf.com Mike May Vice Chairman Head of Multifamily Debt & Structured Finance mike.may@ngkf.com Sharon Karaffa Senior Managing Director Head of Multifamily Strategy sharon.karaffa@ngkf.com Jonathan Mazur Senior Managing Director National Research jmazur@ngkf.com Mike Wolfson Director Capital Markets Research mwolfson@ngkf.com Newmark Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents. Newmark Knight Frank Research Reports are also available at www.ngkf.com/research All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Knight Frank (NKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.