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www.chandan.com www.samchandan.com
@chandanomics
@samchandan
7 World Trade Center 46th Floor 250 Greenwich Street New York NY USA 10007
CHANDANECONOMICS
DISCLAIMER
CHANDANECONOMICS
P3
$500
$450
+363%!
$400
$350
$300
$250
$200
$150
82%!
$100
$50
$0
2005
2006
2007
2008
2009
2010
2011
2012
Source: Chandan Economics; Model Estimate Includes Property Sales Backed by Secured Mortgages
2013
2014
CHANDANECONOMICS
P4
200
Value-Weighted!
Index!
+11%!
175
150
125
Equal-Weighted!
Index!
100
75
50
25
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
CHANDANECONOMICS
P5
Prime Metros!
275
250
38%!
225
200
175
All Metros!
150
125
100
35%!
75
50
25
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
CHANDANECONOMICS
P6
Prime Metros!
275
+28%!
250
225
200
175
All Metros!
150
125
100
75
50
25
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
CHANDANECONOMICS
P7
12%
10%
8%
National Average
Apartment Cap Rates
6%
4%
Yield on
10-Year Treasuries
2%
Source: Chandan Economics, Federal Reserve, NCREIF
0%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
CHANDANECONOMICS
P8
CANADA!
Hotel
Industrial
CHINA!
Dev Site
Apartment
Dev Site
Apartment
Hotel
Retail
Retail
Office
Office
P9
CHANDANECONOMICS
P10
Baccarat Hotel!
New York City!
!
Purchased Q2 2015 by Sunshine
Insurance!
Sale Price of $230 million !
At $2 million per room, the highest price
ever paid on a unit basis for a hotel.
Image: Baccarat Hotel and Residences
CHANDANECONOMICS
P11
GM Building!
New York City!
!
Partial Interest Purchase in Q2 2013!
Family of Zhang Xin (Soho China) and!
the Safra Family !
Sale Price of Approximately $1.4 Billon!
The most valuable office building in the United
States, home to the iconic Apple flagship
store and valued at roughly $3.4 billion.
Image: Macklowe Properties, Wikicommons
GM Building
New York City
Purchased Q4 2013 by
Sale Price of $
Image: Wikicommons
CHANDANECONOMICS
P12
INTEREST RATES
15%!
18%
16%
14%
12%
10%
8%
6%
2%!
4%
2%
0%
1962
1966
1970
1974
1978
1982
1986
1990
1994
1998
2002
2006
2010
2014
CHANDANECONOMICS
P13
12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76
1%
1990/1991
Recession
0%
-1%
2001 Recession
-2%
-3%
-4%
-5%
2008/2009
Recession
-6%
-7%
CHANDANECONOMICS
P14
PROPERTY FUNDAMENTALS
20%
18%
Office!
Industrial!
16%
14%
12%
Retail!
10%
8%
Apartment!
6%
4%
2%
0%
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
2005
2006
2007
2008
2009
2010
2011
2012
Source: Chandan Economics; Model Estimate Includes Property Sales Backed by Secured Mortgages
2013
2014
CHANDANECONOMICS
P15
60%
50%
40%
30%
20%
10%
0%
Food,
Beverage
Furniture,
Home
Furnishings
Apparel,
Books, Music,
Accessories
Hobby
Electronics
CHANDANECONOMICS
P16
CHANDANECONOMICS
P17
CHANDANECONOMICS
P18
Earnings
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
CHANDANECONOMICS
P19
APARTMENT DEMAND
38%
45
37%
36%
Rentership Rate!
(Left Axis)
40
35
35%
34%
30
33%
32%
Renter Households
(Right Axis)
31%
25
20
30%
29%
15
28%
10
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
2013
CHANDANECONOMICS
P20
APARTMENT SUPPLY
160
100%
120
75%
80
50%
40
25%
0
1974
0%
1978
1982
1986
1990
1994
1998
2002
2006
2010
2014
CHANDANECONOMICS
P21
APARTMENT SUPPLY
Multifamily Units Under Construction and Ratio of Completions to Under Construction
1.4
1.2
500
Ratio of Completions to
Units Under Construction
(Left Axis)
450
400
1.0
0.8
350
Units Under
Construction
(Right Axis;
Thousands)
300
250
0.6
200
150
0.4
100
0.2
50
0.0
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
CHANDANECONOMICS
P22
4.5%
4.0%
3.5%
Commercial!
Multifamily!
Commercial!
Multifamily!
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
2007
2008
2009
2010
2011
2012
2013
2014
CHANDANECONOMICS
P23
$14
$12
Commercial!
Multifamily!
$10
$8
$6
$4
$2
$0
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
2007
2008
2009
2010
2011
2012
2013
14
CHANDANECONOMICS
P24
APARTMENT LENDING
Market Share by Lender Class!
100%
90%
80%
70%
Banks
60%
Life Companies
50%
CMBS
Freddie Mac
40%
Fannie Mae
30%
20%
10%
0%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
CHANDANECONOMICS
P25
APARTMENT LENDING
$50
$40
$30
$20
$10
$0
-$10
-$20
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
Q
2
3
4
2007
2008
2009
2010
2011
2012
2013
2014
CHANDANECONOMICS
P26
APARTMENT LENDING
Apartment Sales Volume / Asset Price!
Mortgage-Financed Properties $1.5M+
> $25M
27%
< $5M
16%
$10 - $25
22%
$5 - $10M
19%
$10 - $25
38%
< $5M
47%
$5 - $10M
24%
CHANDANECONOMICS
P27
Financing Spread!
Debt Yield!
In Basis Points
Q3 & Q4
2013
Q3 & Q4!
2014!
Q3 & Q4
2013
Q3 & Q4!
2014!
$1 $5
6.5%
6.3%!
9.5%
9.3%!
$5 $10
6.2%
6.0%!
9.2%
8.8%!
-11
-9!
$10 $25
6.0%
5.9%!
8.7%
8.0%!
-25
-19!
$25 $50
5.6%
5.5%!
8.6%
7.7%!
-30
-28!
$50 +
5.3%
5.0%!
8.0%
7.2%!
-41
-58!
Balance!
Source: Chandan Economics; Note: Financing spread includes fixed-rate non-recourse financing only
Q3 & Q4
2013
Q3 & Q4!
2014!
Baseline
CHANDANECONOMICS
P28
APARTMENT LENDING
Net Share of Lenders Expecting Increase in
Lending Volume, by Property Type!
0%
10%
20%
30%
40%
0%
Multifamily
Multifamily
Office
Office
Retail
Retail
Industrial
Industrial
Hotel
Hotel
10%
20%
30%
40%
50%
Fall 2013!
Fall 2014!
CHANDANECONOMICS
P29
APARTMENT LENDING
35%
30%
25%
20%
15%
2013 2014!
10%
5%
0%
< 70%
75% - 79% 80% - 84% 85% - 89% 90% - 94% 95% - 99% 100% 104%
105% 109%
110% +
CHANDANECONOMICS
P30
APARTMENT LENDING
New Apartment Mortgage Volume by Amortization Type!
Q4 2014!
All 2014
Q4 2013
Amortizing!
59%!
Amortizing!
40%!
Partial IO!
34%!
IO!
7%!
Amortizing!
32%!
Partial IO!
39%!
Partial IO!
40%!
IO!
20%!
IO!
29%!
CHANDANECONOMICS
P31
CAUTIONARY NOTES
Regulatory and Policy Environment Impact of ongoing
regulatory changes and tax policy debate on lending and
real estate tax structures
Capital Markets Erroneous characterization of a
Borrowers Market and cap rate independence from
interest rate environment
Investment Time Horizon Inadequate stress testing
against the business cycle, new supply, and changing
patterns of space use
CHANDANECONOMICS
P32
Probability of Recession!
45%
t 2 Years
Business Cycle Clock
Expansion Phase!
40%
35%
30%
NOW 5.7!
25%
20%
15%
3%!
10%
5%
0%
1998
2000
2002
2004
2006
2008
Source: Federal Reserve Bank of New York, Chandan Economics (Cycle Clock)
2010
2012
2014
CHANDANECONOMICS
www.chandan.com www.samchandan.com
@chandanomics
@samchandan
7 World Trade Center 46th Floor 250 Greenwich Street New York NY USA 10007
CHANDANECONOMICS