SUMMER 2013

INVESTOR IQ - LAS VEGAS RESIDENTIAL REAL ESTATE INVESTMENT

Features
Vacancy and time on market trends Rental rates Capitalization rates Factors that influence investments - Lender owned homes - Loan default activity - Geographic variables - Age of inventory - Seasonal patterns

Produced by John McClelland - Vice President, Research Market IQ Contact Coldwell Banker Premier Realty-Market IQ Strategic Services

Phone: 702-938-1375 Email: info@cbprds.com Web. www.lasvegashomes.com 8290 W. Sahara Ave, Suite 200 Las Vegas, NV 89117

Real estate investment terms and concepts Where the funds are buying

Coldwell Banker Premier Realty

Real estate investors demand up-to-date market intelligence in order to make informed decisions. Coldwell Banker Premier Realty Market IQ, along with our Strategic Services division is specially equipped to assist investors in navigating and profiting in this dynamic investment environment. Market IQ provides custom market studies for the residential, land and commercial asset classes as well as geographic information system (GIS) and related spatial research.

As a client of a Coldwell Banker Premier Realty agent, resources available to you include:
Monthly Residential Luxury Single Family Las Vegas High-Rise Year-End Review Commercial Trends Class A Multifamily

Summarizing the Las Vegas residential real estate market.

Summarizing the Las Vegas luxury residential market.

Summarizing the Las Vegas residential high-rise market.

Notes market trends for condominiums and single family homes. Separate breakouts for bank owned, short sales and traditional sales. Examines factors influencing the market in a short synopsis.

Illustrates trends in the luxury real estate market. Notes key areas of concern or interest.

Illustrates trends in the highrise market at both the aggregate and building levels. Notes key areas of concern or interest. Contains street level knowledge from those working close to the market. Includes charts on sales velocities and pricing, as well as current inventory.

Reflects on the prior years residential market and examines legislative and economic factors that may influence the market in the coming year.

Examines the commercial property market.

Examines the Class A apartment market in Las Vegas.

Illustrates trends in office, retail and industrial Discusses key influencers such as employment, gaming revenue and visitor volume as well as retail sales Notes selected deals that took place during the study period.

Illustrates trends in sale prices, occupancy rates and capitalization rates. Investigates points of interest in the market and the likely causes of shifts in the market. Emphasizes ground level intelligence and depicts recent transactions in a simple to read format that details sale price, unit count and capitalization rates when obtainable.

Illustrates trends in the new home, resale and luxury sectors. Notes key areas of concern or interest. Provides an in-depth view of how homes are sold and purchased in todays market.

Las Vegas continues to be a target area for both the single family rental model in the burgeoning SFR REIT space and remains a popular area SINGLE FAMILY KEY METRICS for private and individual investors. Most investors we interact with remain yield driven, however capitalization rates have compressed substantially since we first added coverage to this segment of the property market back in 2009. A majority of this cap rate compression has Year-over-Year change in Single Family $/Sq.ft come from asset price increases. In observing these price increases, as well as zooming out and noticing that prices remain below trend values, investors have given more thought to the potential for appreciation.

31.7%

Available Listings

-26.9%

Median Days on Market

Motivating factors for entering the space are manifold; some investors characterize their purchase as a buy below trend play and expect to use the exit from the trough as a way to capture returns. Others look at the difference between current prices and replacement costs as a key signal that homes remain undervalued. We believe that a major component of buyer interest is the low interest rate environment in which there is a broad search for yield. Rental homes become more like bonds, albeit with more maintenance. Comparable financial instruments continue to be low yielding. 5 year CD rates are about 1.2%. 10 Year U.S treasuries are about 2.12%. These low yielding instruments have likely pushed investors into either higher risk products or towards alternative investments. A key question for the housing market is; will the Fed begin the so-called tapering or will other factors lead to an increase in interest rates?

16
The story of Las Vegas is compelling. The region experienced one of the largest bubbles in its housing market and one of the largest declines when that bubble deflated. In the trough, Las Vegas home prices fell far below long-run, pre-bubble trends. In nominal terms, the typical home value fell to early 1990s levels. Prices rose substantially since 2012, much of which is related to severe supply restrictions, combined with investor demand, second home use and an owner-occupant class that is reemerging. This has moved pricing to the levels of the early 2000s in nominal terms. Since cap rates have compressed so much, the challenge for investors is in determining if potential appreciation merits both the operational and the economic risks.

Las Vegas S&P/Case-Shiller Home Price Index and Futures Contracts

Index Value Jan 1993 to Mar 2013 Futures contracts as of 5-31-2013
250

200

index Value (year 2000=100)

150

The adjacent exhibit reveals the magnitude of the housing bubble, the depth of the trough and the recent trend of increasing prices. In addition, the Case-Shiller futures contracts are plotted. While noting the thin trading of these contracts, the forward curve does provide some picture of investor expectations, which is positive but not nearly as vibrant as the increases as we have observed since mid-2012. While this appears to be a plausible trajectory, state level legislation may alter this path substantially, possibly even magnifying the supply problems we have had. Further, it is unclear as to how investors will perceive risks going forward and how adequately those risks have been priced recently.

100

50

Apr-16

Jul-94

Jul-97

Jul-00

Jul-03

Jul-06

Jul-09

Jul-12

Apr-95

Apr-98

Apr-01

Apr-04

Apr-07

Apr-10

Apr-13

Jan-93

Oct-93

Oct-96

Jan-99

Oct-99

Oct-02

Oct-05

Oct-08

Oct-11

Oct-14

Jul-15

Source: Standard & Poors. Note: LAV Case-Shiller futures contracts are thinly traded.

Oct-17

Jan-96

Jan-02

Jan-05

Jan-08

Jan-11

Jan-14

Jan-17

CHARACTERISTICS OF THE HOUSING STOCK

4
Copyright 2013 Coldwell Banker Premier Realty.

VACANCY AND HOMEOWNERSHIP

HOMEOWNERSHIP AND VACANCY RATES

Source: U.S Census. Note: There are some noteworthy definitional issues when looking at these time series. Las Vegas is well known as a second home/vacation home market and hence, some units may appear to be vacant when they should be classified separately. Time-share and fractional deliveries in the recent five years may also be biasing measurement.

5
Copyright 2013 Coldwell Banker Premier Realty.

THE RENTAL MARKET

18

LAS VEGAS RENTAL VACANCY RATE

16.7 16 15.2

16 15.2 14

15 12.9 12.8 13

15.1 13.6 13.5 13.2 12.3 13.7

14.9

12.9 12 11.8 10.3 9 8 8.3 8.4 7.8 8.3 10.8 9.5 9.9 12.1 11.9

11.5 11.2

11 10.8

11.0

Vacancy %

10

0
1Q 2005 3Q 2005 4Q 2005 1Q 2006 2Q 2006 3Q 2006 4Q 2006 1Q 2007 3Q 2007 4Q 2007 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013

2Q 2005

Source: U.S Census. Note: Includes attached and detached homes.

2Q 2007

6
Copyright 2013 Coldwell Banker Premier Realty.

THE RENTAL MARKET

MULTIPLE LISTING SERVICE NEW FOR LEASE LISTINGS AND LEASED HOMES
4,000

3,500
3,000 2,500

# of Homes

2,000 1,500 1,000 500 0

New Listings
Source: Mlxchange, Coldwell Banker Premier Realty. Note: Includes attached and detached homes.

Leased

7
Copyright 2013 Coldwell Banker Premier Realty.

THE RENTAL MARKET

SINGLE FAMILY DAYS ON MARKET - Monthly Series

60

50

40

Days on Market

30

Note that strong seasonality is present in single family rental property marketing times. We suggest investors should factor this into their pro-forma analysis.

20

10

Oct-08

Feb-11

Apr-12

Feb-09

Feb-10

Feb-12

Feb-13

Oct-09

Oct-10

Oct-11

Apr-09

Apr-10

Apr-11

Oct-12

Dec-09

Dec-08

Dec-10

Dec-11

Aug-08

Aug-09

Aug-10

Aug-11

Source: Mlxchange, Coldwell Banker Premier Realty

Median DOM

Average DOM

ATTACHED HOME DAYS ON MARKET - Monthly Series

80

70

60

Aug-12

Dec-12

Apr-13

Jun-09

Jun-10

Jun-11

Jun-12

Days on Market

50

40

Seasonality in condominiums does appear to be present, however it is not exhibited as strongly as we observe in single family rentals. Condos do have a higher overall average marketing time.

30

20

10

Apr-10

Apr-09

Apr-11

Apr-12

Dec-08

Dec-09

Dec-10

Dec-11

Aug-08

Aug-09

Aug-10

Aug-11

Source: Mlxchange, Coldwell Banker Premier Realty

Median DOM

Average DOM

Aug-12

Dec-12

Apr-13

Feb-12

Feb-09

Feb-10

Feb-11

Feb-13

Jun-09

Jun-10

Jun-11

Oct-08

Oct-09

Oct-10

Oct-11

Jun-12

Oct-12

8
Copyright 2013 Coldwell Banker Premier Realty.

THE RENTAL MARKET

TREND IN SINGLE FAMILY LEASE RATES - $/Sq.ft - Las Vegas Valley

$1.20 4.0%

TREND IN CONDOMINIUM/TOWNHOME LEASE RATES - $/Sq.ft - Las Vegas Valley

$1.20 15.0%

$1.00

2.0%

$1.00

10.0%

0.0%
$0.80 5.0%

-2.0%
$/Sq.ft
$0.60 -4.0% $0.40 -6.0% $0.20

$0.60

0.0%

$0.40

-5.0%

-8.0%

$0.20

-10.0%

$0.00

-10.0%

$0.00

-15.0%

Feb-09

Feb-10

Feb-11

Oct-11

Jun-10

Feb-12

Feb-13

Oct-08

Oct-09

Oct-10

Apr-09

Apr-10

Apr-11

Apr-12

Oct-12

Dec-08

Dec-09

Dec-10

Dec-11

Aug-08

Aug-09

Aug-10

Aug-11

Dec-08

Dec-09

Dec-10

Dec-11

Aug-08

Aug-09

Aug-10

Aug-11

Aug-12

Dec-12

Source: Mlxchange, Coldwell Banker Premier Realty

Y-O-Y Change in Average PPSF

Median $/Sq.ft

Avg. $/Sqft

Y-O-Y Change in Average PPSF

Median $/Sq.ft

Avg. $/Sqft

Aug-12

Feb-09

Feb-10

Feb-11

Feb-12

Feb-13

Apr-09

Apr-10

Apr-11

Apr-12

Apr-13

Dec-12

Oct-11

Oct-08

Oct-09

Oct-10

Oct-12

Apr-13

Jun-09

Jun-11

Jun-10

Jun-09

Jun-11

Jun-12

Jun-12

9
Copyright 2013 Coldwell Banker Premier Realty.

% Change Year-Over-Year

$0.80

% Change Year-Over-Year

$/Sq.ft

THE RENTAL MARKET

Average Rental Rates Per Square-foot - Q1 2013

Average All Types

$0.73

High-Rise

$1.57

Condo

$0.76

SFR

$0.69

$0.00

$0.25

$0.50

$0.75

$1.00 $/Sq.Ft

$1.25

$1.50

$1.75

$2.00

$2.25

10
Copyright 2013 Coldwell Banker Premier Realty.

THE RENTAL MARKET

ZIP CODE LEVEL RENTAL $/Sq.ft Trends - Selected Zip Codes - Aug 2008 to Apr 2013
89002 89103 89134

Las Vegas Valley Zip Codes

89011

89107

89135

89012

89108

89139

89014

89109

89141

89015

89113

89144

89030

89115

89145

89031

89117

89147

89032

89118

89148

89044

89119

89149

NOTE: WE OBSERVE THAT MANY ZIP CODES HAVE EXPERIENCED FLAT RENTAL PRICE PER SQUAREE -FOOT TRENDS. SEVERAL MORE EXHIBIT A MILD DOWNWARD BIAS. FEW HAVE RISING TRENDS.

89052

89121

89178

89074

89122

89183

89081

89123

89166
Source: Mlxchange, Coldwell Banker Premier Realty.

89084

89128

11
89102 89129
Copyright 2013 Coldwell Banker Premier Realty.

THE RENTAL MARKET

CAPITALIZATION RATE AND SALE PRICE RELATIONSHIP

Source: GLVAR,Coldwell Banker Premier Realty. Rehab is estimated and is based on our own observations.

12
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THE RENTAL MARKET

CAPITALIZATION RATES (Estimated), RENTS AND SALE PRICES (indexed)
10% 2.50

9%

8%

2.00

7%

6%

1.50

5%

4%

1.00

3%

2%

0.50

1%

0%

0.00

Oct-02

Jun-05

Feb-08

Feb-02

Feb-03

Feb-04

Feb-05

Feb-06

Feb-07

Feb-09

Feb-10

Oct-10

Feb-11

Feb-12

Source: GLVAR, U.S Census, Coldwell Banker Premier Realty. Note: Not seasonally adjusted.

Cap Rate

Rent Index

Sale Index

CAP RATE SPREAD OVER 10-YEAR TREASURIES (Bp)

Feb-13

Jun-02

Jun-03

Jun-04

Jun-06

Jun-07

Jun-08

Jun-09

Jun-10

Jun-11

Oct-01

Oct-03

Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09

Oct-11

Jun-12

Oct-12

Rent & Sale Price Index

Cap Rate

13
Source: GLVAR, U.S Census, FRED II, Coldwell Banker Premier Realty.
Copyright 2013 Coldwell Banker Premier Realty.

THE RENTAL MARKET

RENTAL PRICE PER-SQUARE FOOT

Source: GLVAR, U.S Census, Coldwell Banker Premier Realty.

Source: Mlxchange, Coldwell Banker Premier Realty.

14
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THE RENTAL MARKET

ESTIMATED GROSS RENTAL YIELD

Source: Mlxchange, Coldwell Banker Premier Realty.

15
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THE RENTAL MARKET

ESTIMATED CAPITALIZATION RATES

Source: Mlxchange, Coldwell Banker Premier Realty.

16
Copyright 2013 Coldwell Banker Premier Realty.

MEASURES OF FUNDAMENTAL VALUE

PRICE/INCOME RATIO
7.0

HOUSING AFFORDABILITY INDEXFINANCED BUYERS

250

6.0

225

200
5.0

Housing Affordability Index (Jan-02=100)

175

4.0

Ratio

150

3.0

125

2.0

100

1.0

75

Median Home PriceMedian Household Income

-

Source: GLVAR, Census.gov, Coldwell Banker Premier Realty.

Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13

50

While fundamental values of property are unobservable, we can get a sense of values based on price -torent and price to income ratios. Further, cap rates also provide us with information about values. Price -torent and price-to-income ratios can shift over time as expectations of future returns from the asset changes (Krainer and Wei, 2004)1. That makes it difficult to assess the meaning of the volatility in the series. However, examination of the series relative to the pre -bubble period does add some color regarding fundamental values. While the ratio has increased markedly in the past year, it hasnt reached the level of the early 2000s

25

The Affordability Index is formulated as the monthly income required to purchase the median home with a conventional mortgage, by a median income family. Monthly Payment=(median home price, mortgage payment, insurance, taxes, household income)

CASE-SHILLER HOME PRICE INDEX - LAS VEGAS

250 60%
50% 200 40% 30%

After a level of what we would consider extreme affordability by households employing financing, recent home price increases has diminished affordability. Despite diminished affordability, the typical monthly cost burden is still in a moderate range. Mortgage rates remain extremely low, however there are a great number of households that cannot effectively access the mortgage market and some financeable buyers must compete with cash buyers. So, while affordability remains, many buyers may face challenges in purchasing a home.

Index Value (Jan 2000=100)

150

20% 10%

Year-over-Year Change

100

0%

-10%
50 -20% -30% 0 -40%

The Case-Shiller home price index provides us with a longer -term view of prices for the Las Vegas MSA. The trajectory of prices in the past year have been alarming and to a large extent reflects supply problems as well as demand from investors and owner -occupants. Prior to the bubble, prices rose quite consistently with an average increase of about 3% per year, essentially matching the inflation rate and therefore, effectively flat in real terms. Interest by investors has not been surprising since values fell substantially below long-run, pre-bubble trends. Even with recent price increases, prices have not intercepted the trend line (shown as the nave trend line in orange). Certainly, following a long period of weak employment and diminished household formation, below -trend growth in home prices has some intuitive appeal. The challenge for investors is in determining if the rental market can support greater inventories and if the labor market and household formation can ultimately catch up to the strength of home price increases.

Feb-1987 Oct-1987 Jun-1988 Feb-1989 Oct-1989 Jun-1990 Feb-1991 Oct-1991 Jun-1992 Feb-1993 Oct-1993 Jun-1994 Feb-1995 Oct-1995 Jun-1996 Feb-1997 Oct-1997 Jun-1998 Feb-1999 Oct-1999 Jun-2000 Feb-2001 Oct-2001 Jun-2002 Feb-2003 Oct-2003 Jun-2004 Feb-2005 Oct-2005 Jun-2006 Feb-2007 Oct-2007 Jun-2008 Feb-2009 Oct-2009 Jun-2010 Feb-2011 Oct-2011 Jun-2012 Feb-2013

Source: S & P Dow Jones.

1. John Krainer & Chishen Wei, 2004.House prices and fundamental value. FRBSF Economic Letter Federal Reserve Bank of San Francisco, issue Oct 1. Copyright 2013 Coldwell Banker Premier Realty.

Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13

Source: GLVAR, Bankrate.com, Clark County, Coldwell Banker Premier Realty.

17

LOAN DEFAULT ACTIVITY

The level of foreclosure activity in Nevada and Clark County has declined significantly from its highs. Following AB 284 in 2011, a law that added stricter requirements to the foreclosure process, as well as the National Foreclosure Settlement, which appeared to slow foreclosure activity nationwide, notices of default fell significantly. Recently, notice of default issuance has been on an uptrend, however it is far from what was registered in prior time periods. In the recent legislative session, AB 3001 was adopted and this session and it is intended to clarify language regarding personal knowledge. Personal knowledge refers to the knowledge the signatory on an affidavit of authority has regarding the proper documents to foreclose. SB 321 is also now Nevada law. Referred to as a Homeowner Bill of Rights, the bill is intended to eliminate dual tracking (pursuance of a loan modification while simultaneously processing a foreclosure). The bill also has previsions for dissemination of foreclosure prevention alternatives by servicers as well as requiring a single-point of contact in servicing, mediation and other measures. While the new laws influence on foreclosure activity is uncertain, similar laws in California and other States points towards continued slow foreclosure activity.

NEVADA NUMBER OF SERVICED LOANS IN FORECLOSURE - STARTED

25,000

# of Serviced Loans in Foreclosure

20,000

15,000

10,000

5,000

Source: Mortgage Bankers Association, Economy.com.

CLARK COUNTY NVNOTICES OF DEFAULT AND NOTICES OF SALE

7,000

6,000

5,000

# of Homes

4,000

3,000

2,000

1972Q4 1973Q4 1974Q4 1975Q4 1976Q4 1977Q4 1978Q4 1979Q4 1980Q4 1981Q4 1982Q4 1983Q4 1984Q4 1985Q4 1986Q4 1987Q4 1988Q4 1989Q4 1990Q4 1991Q4 1992Q4 1993Q4 1994Q4 1995Q4 1996Q4 1997Q4 1998Q4 1999Q4 2000Q4 2001Q4 2002Q4 2003Q4 2004Q4 2005Q4 2006Q4 2007Q4 2008Q4 2009Q4 2010Q4 2011Q4 2012Q4

1,000

1.http://openstates.org/nv/bills/77/AB300/documents/NVD00011139/ 2. http://www.housingwire.com/fastnews/2013/05/29/nevada-homeowner-bill-rights-inches-closerbecoming-law http://www.leg.state.nv.us/Session/77th2013/Bills/SB/SB321.pdf

Oct-11

Jul-11

Apr-11

Apr-12

Jul-12

Feb-11

Feb-12

Sep-11

Sep-12

Nov-11

May-11

May-12

Nov-12

Feb-13

Apr-13

Jun-11

Jun-12

Oct-12

May-13

Dec-11

Dec-12

Jan-11

Jan-12

Mar-11

Mar-12

Aug-12

Jan-13

Mar-13

Aug-11

Notice of Sale Source: Foreclosureradar.com,Ticor Title,Clark County NV.

Notice of Default

18
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TRENDS IN BANK OWNED HOMES

BANK OWNED ACQUISITIONS, DISPOSITIONS, NOTICE OF DEFAULT ACTIVITY AND INVENTORY HELD BY FINANCIAL INSTITUTIONS
18,000 17,000 16,000 15,000 14,000 13,000 12,000 11,000

# of Homes

10,000 9,000

8,000
7,000 6,000

5,000
4,000 3,000 2,000 1,000 0

Jul-08

Jul-07

Jul-09

Jul-10

Jul-11

Nov-07

Nov-08

Nov-09

Nov-10

Nov-11

Jul-12

Nov-12

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

Acquisitions
Source: Clark County,foreclosureradar.com,salestraq, Coldwell Banker Premier Realty.

Dispositions

REO inventory

Notices of Default

May-13

May-07

May-08

May-09

May-10

May-11

May-12

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Mar-07

Mar-08

Mar-09

Mar-10

Mar-11

Mar-12

Jan-13

Mar-13

19
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MIGRATION AND HOUSEHOLD GROWTH

In surveys of household moves, United Van Lines found that inbound moves to Nevada exceeded outbound moves. Atlas found that Nevada was a balanced state where inbound traffic nearly matched outbound traffic.
CLARK COUNTY NVSURRENDERED DRIVERS LICENSES
10,000
9,000 8,000

Moderate uptrends in surrendered drivers licenses (although we cant measure how many individuals are leaving) and the level of electric meter hookups, point towards a return to household growth in the region.

CLARK COUNTY NVRESIDENTIAL ELECTRIC METER HOOKUPS

800,000 12%

120%
100% 80%

700,000

10%

# of Surrendered Drivers Licenses

7,000 6,000

600,000
Year-over-Year Change

# of Electric Meter Hookups

60% 40%

8%
500,000 6% 400,000 4% 300,000

5,000 20% 4,000 3,000 2,000 1,000 0 0% -20% -40%

2%
200,000 0%

100,000
-60%

Apr-95

Jun-93 May-94

Oct-89 Sep-90

Sep-01

Apr-06

Mar-96 Feb-97

Mar-07 Feb-08

Nov-99 Oct-00

May-05

Nov-10 Oct-11

Nov-88

Dec-87

Dec-98

Aug-91

Aug-02

Dec-09

Sep-12

Jul-92

Jul-03 Jun-04

Jan-87

Jan-98

Jan-09

-2%

Year-over-Year Change

Jul-92

Feb-97

Jul-03

Oct-00 Sep-01

Feb-08 Jan-09

Oct-89

May-94 Apr-95

Nov-88

Nov-99

Jun-04 May-05

Mar-96

Year-over-Year Change
Source: Mlxchange, Coldwell Banker Premier Realty.

Surrendered Drivers Licenses

12 per. Mov. Avg. (Surrendered Drivers Licenses)

Source: Mlxchange, Coldwell Banker Premier Realty.

Mar-07

Nov-10

Sep-90 Aug-91

Jan-98 Dec-98

Jan-87 Dec-87

Aug-02

Dec-09

Oct-11 Sep-12

Apr-06

Jun-93

20

INVENTORY

SINGLE FAMILY INVENTORY BY TYPE (NOT UNDER CONTRACT)

Source: GLVAR.

21
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ECONOMIC DRIVERS

TOTAL NONFARM EMPLOYMENT AND LEISURE AND HOSPITALITY EMPLOYMENT

YEAR-OVER-YEAR CHANGE IN TOTAL EMPLOYMENT

YEAR-OVER-YEAR CHANGE IN LEISURE AND HOSPITALITY

Source: Nevadaworkforce.com.

TAXABLE SALES

GROSS GAMING REVENUE

VISITOR VOLUME

22
Source: Nevada Department of Taxation,Las Vegas Convention and Visitors Authority. Copyright 2013 Coldwell Banker Premier Realty.

NOTES ON THE SFR-RENTAL MODEL

The trough established following the collapse of residential real estate values opened the door to many opportunities. One of these opportunities centered around purchasing single family homes and renting them out on a very large scale. Common to mom and pop investors, the recent portion of the real estate cycle is the only one that has seen institutional investors entering the space. In prior periods, the model did not make economic sense since managing disparate assets of different qualities, locations and tenants is not simple. Yields generally did not justify the efforts and there were difficulties in achieving the scale necessary from an operational standpoint. However, with low interest rates and hence, a low cost of capital for qualified investors, combined with home values adjusted a decade or more back in real (inflation adjusted) terms, and a global search for yield, the model has become attractive. Coastal markets like Los Angeles and San Francisco had seen early institutional buying. Florida cities like Miami and Tampa Bay and sunbelt cities like Phoenix and Las Vegas have also been extremely sought after. Several of the Georgia markets are popular as well. Several large firms are in the single family rental business including early entrants, now publically traded, Silver Bay Realty Trust and American Residential Properties. Additionally, Colony Capital entered the business with its Colony American Homes and Blackstone Group has a large position with its Invitation Homes. American Homes 4 Rent, Waypoint Homes, Beazer Pre-owned, Haven Realty Partners and many others have entered the business and each have a sizeable book. The lenders have also responded to the increased depth of the business with the creation of several lending facilities to buy-to-rent strategy firms. Deutsche Bank has extended significant credit of $2.1 Billion to Blackstone in 2012 and arranged another credit line of $1.5 billion for Blackstone this year. Deutcsche Bank has also provided loans to Apollo Global Management LLC and Tricon Capital Group Inc. Wells Fargo and bank of America have also been large lenders with customers employing this business model.1
Closing Price

SILVER BAY REALTY TRUST CLOSING PRICES

25

20

15

Closing Price

$18.4/Share Dec-17-2012
10

$16.53/Share Jun-21-2013

Source: Yahoo Finance.

AMERICAN RESIDENTIAL PROPERTIES CLOSING PRICES

25

20

15

Initially, players in the space were very yield centric, however, given the position of home prices relative to trend values, many buyers have been encouraged to add appreciation in their pro-formas. See page 13 for an examination of cap rates and the recent directions of asset prices. The exhibits to the right reveal the stock prices for the two publically trade SFR -Rental firms, Silver Bay Realty Trust and American Residential Properties. These share prices will be closely monitored by other firms seeking an IPO.

$21/Share May-9-2013
10

$17.66/Share Jun-21-2013

Source: Yahoo Finance.

1.http://www.bloomberg.com/news/2013-06-17/deutsche-bank-leading-wall-street-rental-loans-

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Copyright 2013 Coldwell Banker Premier Realty.

PURCHASES BY LARGE INVESTORS

January through April 2013 Closings

AMERICAN HOMES 4 RENT AMERICAN RESIDENTIAL PROPERTIES APPLETON PROPERTIES

BEAZER PRE-OWNED

BLACKSTONE

COLONY AMERICAN HOMES

GTIS PARTNERS

HAVEN REALTY CAPITAL

SILVER BAY

Source: Clark County Assessor, Coldwell Banker Premier Realty.

Copyright 2013 Coldwell Banker Premier Realty.

Includes arms-length transactions and auction purchases.

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Glossary of Terms

Adjusted cost basis: The investors cost of the property for tax purposes.

Depreciation: An expense deducted from income for tax purposes which allows the owner to recapture the investment in an asset over its economic life by a periodic deduction from the income generated by the asset on a before tax basis.

Feasibility study: An analysis based upon estimates to determine if the investment makes sense and whether or not to proceed with it.

Net operating income: Gross scheduled income less vacancy allowance and annual operating expenses.

Capitalization rate: An indicator of value and the rate at which investors are willing to invest their capital. Dividing net operating income by the desired rate equals the purchase price the investor is willing to pay. This is a measure of real estate yield.

Rate of return on equity: The rate which equates the present value of the net cash flow inflows to the initial equity investment.

Cap rate spread: In the case we referenced, this is the difference between the capitalization rate and the 10-year U.S treasury. In some cases, cap rate spreads have been referenced as the difference between the cap rates on either different asset classes or geographies.
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COLDWELL BANKER PREMIER REALTY

AUTHOR

John McClelland, Vice President, Research

CONTACT

Coldwell Banker Premier Realty Strategic Services-Market IQ

Phone: 702-938-1375 Email: info@cbprds.com Web. www.lasvegashomes.com

8290 W. Sahara Ave, Suite 200 Las Vegas, NV 89117

The information and opinions in this report are believed to be reliable and has been obtained from sources believed to be reliable. Coldwell Banker Premier Realty makes no representation as to the accuracy or completeness of such information. The opinions expressed in the report constitute the judgment of the authors only and may not reflect the opinion of Coldwell Banker Premier Realty. This report is provided for informational purposes only and does not constitute investment advice. This report may not be circulated or copied without our prior written consent. Copyright 2013 Coldwell Banker Premier Realty.
Coldwell Banker Premier has facilitated a multitude of residential investment transactions in Las Vegas. We draw on this experience and information obtained from local government, U.S Census, third party data purveyors and the Greater Las Vegas multiple listing service. The information is deemed reliable but is not guaranteed. This material does not constitute investment advise.

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