Slide Title=44 points Sub-Title=32 points

1
2008
APARTMENT TRENDS
A National Multifamily Market Overview
Hessam Nadji Managing Director Research Services
Linwood C. Thompson Managing Director NMHG
2
U.S. Housing Market Remains in Transition Months
Supply of Inventory Rising
38
Y-o-Y Change
27.7
Number of Months
Through August Sources Marcus Millichap
Research Services, National Association of
Realtors
3
Housing Slow Down Impacting Overall Economy -
Existing Home Sales
Year-Over-Year Percent Change
Through AugustSources Marcus Millichap
Research Services, Economy.com, National
Association of Realtors
4
Home Mortgage Originations by Loan TypeShare of
Total Volume
2001 11

2006 34
Share of Total Volume
Sources Marcus Millichap Research Services,
Joint Center for Housing Studies (Harvard)
5
Home Prices Yet to Reflect CorrectionMedian
Existing Home Prices
Data points growth from 2001-2007
58
63
Median Home Price (000s)
39
27
28
Through August Sources Marcus Millichap
Research Services, Economy.com, National
Association of Realtors
6
Cash From Home Refinancing No Longer Shielding
Retail Sales From High Energy Prices
Y-o-Y Percent Change in Retail Sales
Crude Oil (price per barrel)
Retail Sales Forecast, Oil Prices as of
September 25th
Sources Marcus Millichap Research Services,
Economy.com
7
Strong Corporate Sector, Full Employment Helping
to Offsetting Housing, Consumer Weakness
Fixed Nonresidential Investment (Annual Percent
Change)
Annual Unemployment Rate
Forecast
Sources Marcus Millichap Research Services,
Economy.com
8
Easing Inflation Giving the Fed More Flexibility
For Lowering Rates
Core InflationY-o-Y Percent Change
Fed Funds Rate
Fed Funds Through August, Core Inflation Through
July Sources Marcus Millichap Research
Services, BLS, Economy.com, Federal Reserve
9
Housing Has Not Bottomed Growth Expected to
Moderate and Avoid Recession
Monthly Job Growth
Gross Domestic Product
2005 3.1
2007 2.3
2006 2.9
2008 2.5
Annualized Growth
Avg. 07
Jobs in Thousands
Avg. 08
-4,000
Jan-06
Jan-07
Aug-07
YE Forecast Sources Marcus Millichap Research
Services, Economy.com
10
Percent Change in EmploymentTop and Bottom 15
U.S. Markets YOY August 2007
Bottom 15 Y-o-Y Change
Boston 1.2
Philadelphia 1.2
Oakland 1.0
Nashville 1.0
Minneapolis 0.9
Chicago 0.9
Los Angeles 0.8
San Diego 0.7
Columbus 0.6
Pittsburg 0.4
Baltimore 0.4
Orange County 0.1
Cleveland 0.1
Cincinnati 0.0
Detroit -1.1
U.S. 1.2
Top 15 Y-o-Y Change
Salt Lake City 4.5
Austin 4.1
New Orleans 3.6
Inland Empire 3.6
Seattle 3.4
Tucson 3.0
Dallas-Fort Worth 2.7
Phoenix 2.7
Houston 2.6
Charlotte 2.6
Orlando 2.6
Fort Lauderdale 2.5
Raleigh-Durham 2.3
Atlanta 2.2
Jacksonville 2.0
U.S. 1.2
Sources Marcus Millichap Research Services,
Economy.com
11
Home Ownership Decreasing in All CohortsIn the
Past Year
Sources Marcus Millichap Research Services,
Economy.com
12
Vacancies Short-Term Challenge in Select Markets
Long-Term Outlook Strong Due to Rebounding
Demand, Balanced New Supply
Market Rate Apartment Completions (Thousands of
Units)
Vacancy
Forecast
Sources Marcus Millichap Research Services,
Reis
13
Apartment Rent Growth Strong Likely to
Moderate but Remain Healthy
Y-o-Y Percent Change
Forecast
Sources Marcus Millichap Research Services,
Reis
14
Effective Rent Growth Variations ShowingTop and
Bottom 15 U.S. Markets YOY
Bottom 15 2Q 06 2Q 07 Change
Kansas City 610 630 3.3
Indianapolis 593 612 3.2
Inland Empire 978 1,009 3.2
Orlando 794 819 3.1
Fort Lauderdale 1,023 1,055 3.1
Houston 652 672 3.1
Columbus 588 606 3.1
Minneapolis 840 865 3.0
Milwaukee 762 783 2.8
Cleveland 660 677 2.6
Cincinnati 625 641 2.6
Atlanta 733 749 2.2
Denver 749 762 1.7
Palm Beach 1,036 1,049 1.3
Detroit 749 758 1.2
U.S. Average 909 951 4.6
Top 15 2Q 06 2Q 07 Change
San Jose 1,339 1,470 9.8
Seattle 851 919 8.0
San Francisco 1,541 1,620 7.9
Salt Lake City 624 668 7.1
Portland 677 719 6.2
Los Angeles 1,270 1,348 6.1
Washington, DC 1,160 1,227 5.7
Oakland 1,172 1,236 5.5
Tucson 566 597 5.5
Orange County 1,374 1,449 5.5
Austin 694 731 5.3
Phoenix 672 706 5.1
Chicago 915 957 4.6
Philadelphia 907 947 4.4
San Antonio 609 635 4.3
U.S. Average 909 951 4.6
Sources Marcus Millichap Research Services,
Reis
15
Top and Bottom 15 U.S. Markets 2008 Vacancy
Rate
Top 15 2008
New York 2.3
San Jose 3.2
N. New Jersey 3.2
Los Angeles 3.7
Orange County 4.0
San Diego 4.2
San Francisco 4.3
Philadelphia 4.4
Oakland 4.5
Fort Lauderdale 4.6
Miami 4.6
Washington, D.C. 4.7
Milwaukee 4.8
Minneapolis 4.8
Chicago 4.9
U.S. Average 5.7
Bottom 15 2008
Columbus 7.0
Detroit 7.3
Phoenix 7.4
Kansas City 7.4
St. Louis 7.6
Charlotte 7.8
Atlanta 8.4
Denver 8.4
Austin 8.5
Raleigh-Durham 8.5
Cincinnati 8.6
Dallas-Fort Worth 8.6
Oklahoma City 8.8
Indianapolis 9.2
Houston 10.1
U.S. Average 5.7
Forecast
Sources Marcus Millichap Research Services,
Reis
16
National Economic and Apartment Fundamentals
Summary

• Economy Strong Enough to Avoid Recession - Risk
  Levels Will Remain Elevated through First Half of
  2008 Due to Housing, Capital Markets
• Expect a Slower Economy and Job Market Through
  Mid-Year 2008
• Apartment Demand Expected to Rise Because of
  Housing Correction and Natural Drivers Rent
  Growth Slower, but Healthy
• Economic, Apartment Demand Outlook Variations By
  Market Widening
• Over-Hang of Excess Homes and Condos Concentrated
  in Select Markets
• Long-Term Apartment Supply/Demand Outlook Very
  Strong
• Major Risk Factors Credit/Housing, High Energy
  Costs, Corporate/Consumer Psychology

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Top U.S. Markets 5-year Population and Job
Growth Forecast
Top 15
Austin
Las Vegas
Riverside-San Bernardino
San Antonio
West Palm Beach
Orlando
Dallas-Fort Worth
Atlanta
Phoenix
Houston
Charlotte
Tucson
Fort Lauderdale
Sacramento
Seattle
Sources Marcus Millichap Research Services,
Economy.com
18
Linwood C. ThompsonManaging Director National
Multi-Housing Group
National Apartment Investment Overview and
Outlook
19
Historic PerspectiveMFEEC Consensus 2002-2005

• Panelists / Speakers Consensus
• Pricing bubble in the market
• Cap rates would increase
• Marcus Millichap Consensus
• No systemic pricing bubble
• Investor demand would overshadow operational
  weakness
• Pricing would remain strong
• Cap rates would continue to decrease

20
Marcus Millichap Consensus 2006

• Operations offset minimal rate increase
• No systemic pricing bubble
• Investor demand would remain strong
• Velocity would increase through 1st half
• Cap rates would be relatively flat

21
Key Observations for 2007

• Investor demand for apartments will remain strong
  (no erosion)
• No systemic pricing bubble
• Operations continue to strengthen and rekindle
  buyer aggressiveness
• Velocity remains static for 3 6 months then
  accelerates
• Cap rates remain relatively flat
• No sustainable pressure for the FED to raise
  interest rates

22
Commercial Mortgage-Backed Securities
(CMBS)Spreads Have Risen Dramatically
Sources Marcus Millichap Research Services,
Wachovia
23
The Special Debt Deli Sandwich
Avg. Cost .90
MYSTERY MEAT - .60/lb
HAM - .90/lb
Avg. Cost 1.00
TURKEY - 1.00/lb
Avg. Cost 1.05
Avg. Cost 1.10
STEAK - 1.10/lb

• Reasons to buythe Special
• More diversified sandwich
• Lower average cost (Better yield)

24
The Special Debt Deli Sandwich
MYSTERY MEAT - .60/lb
Avg. Cost .90
HAM - .90/lb
Avg. Cost 1.00
TURKEY - 1.00/lb
Avg. Cost 1.05
Avg. Cost 1.10
STEAK - 1.10/lb

• The mystery meat didnt digest very well
• Investors who ate the sandwich got sick
• The value of the sandwich plunged

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What Went Wrong?

• Is something wrong with delicatessens?
• Is something wrong with sandwiches?
• Is something wrong with diversification?
• Is something wrong with steak, turkey or ham?
• No the problem was with one very specific part
  of the sandwich
• The filler, the marginal cost reducer, the yield
  enhancer turned out to be ..

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What Happens Next?

• The CMBS deli guys are watching the agency guys
  make a lot of money
• The CMBS deli will invent a new sandwich as soon
  as possible and re-open their doors
• Investors will return to buy CMBS deli sandwiches
  with steak, turkey and ham
• Next time around investors will simply say
  This time, skip the mystery meat!
• Pricing will return to being set by the market

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Commercial Mortgage Delinquency Rate Remains
Near Historic Lows
THEN CRE Supply/Demand Imbalance Credit Crunch
Due to Rising Delinquencies
NOW Credit Concerns Rooted in Subprime
Residential CRE Market Fundamentals
Healthy Commercial Delinquencies lt .5
Sources Marcus Millichap Research Services,
ACLI
28
All-In Rate Down From Recent Peak2
10-Yr. Treasury and All-In Rate
Average Conduit Spread (Large Loan)
10-Year Treasury Yield Plus Average Conduit
Spread Sources Marcus Millichap Research
Services, Marcus Millichap Capital Corp.
29
Core Inflation and Interest RatesStill Below
Long-Term Trend
10-Year Treasury
Core InflationY-o-Y Percent Change
Average
Average
Through August 2007 Sources Marcus Millichap
Research Services, Economy.com, Federal Reserve
30
Apartment Investments TrendsTransactions by
Price Category
10,406
9,216
8,354
4,919
3,992
Estimate
Sources Marcus Millichap Research Services,
CoStar Group, Inc., Real Capital Analytics
31
Apartment Investment Trends Dollar Volume by
Price Category
101 Billion
102 Billion
63 Billion
50 Billion
43 Billion
Estimate
Sources Marcus Millichap Research Services,
CoStar Group, Inc., Real Capital Analytics
32
Apartment Buyer Composition, Past 12 Months vs.
Previous 12 Months
Sources Marcus Millichap Research Services,
Real Capital Analytics
Sales 5 million and above
33
Top Condo Conversion MarketsFrom 2Q 2003 - 2Q
2007
Market of Inventory Converted to Condos Total Units Converted 2Q2003-2Q2006 Vacancy Bps Change 2Q2006-2Q2007 Vacancy Bps Change 2Q 2007 Vacancy
Fort Lauderdale 30.3 28,800 (270) 110 4.0
Orlando 24.2 32,370 (390) 140 6.2
Palm Beach 23.7 14,875 (480) 280 7.0
Miami 20.7 28,296 (300) 50 3.7
Tampa 15.6 24,459 (390) 130 6.1
Charleston 15.3 3,973 (190) 80 8.4
Jacksonville 11.6 8,009 (150) 170 6.1
Las Vegas 11.6 15,394 (350) 80 4.8
Phoenix 9.6 23,825 (370) 150 7.4
San Diego 7.8 14,048 (50) 50 4.3
Sources Marcus Millichap Research Services,
Reis
34
Apartment Sales Trends Median Price per Unit vs.
Average Cap Rate
2Q
Apartment Sales 1M for 40 Major Markets
Sources Marcus Millichap Research Services,
CoStar Group, Inc.
35
U.S. Apartment Investment Market Still
Outperforming 10-Year Treasury
2000 240 Bps
Average Annual Rate
120 Bps
2Q07
Sources Marcus Millichap Research Services,
NREI
36
National Apartment Median Price Per Unitby Price
Category
2000 2006 Avg. Annual Increase
5.6
10
5.7
Sources Marcus Millichap Research Services,
CoStar Group, Inc., Real Capital Analytics
37
U.S. Apartment Price and Rent Trends
Estimate Based on Q2-2007
Apartment Sales 1M
Sources Marcus Millichap Research Services,
RCA, Reis
38
National ApartmentAsking and Effective Rent
Growth
Rent Growth 2000-2008
25
19
Average Rent per Unit
Forecast Sources Marcus Millichap Research
Services, Reis
39
National ApartmentAsking Rents by Class
Average Asking Rent per Unit
2Q 2007 Estimate Sources Marcus Millichap
Research Services, CoStar Group, Inc., Real
Capital Analytics
40
U.S. Apartment Average Cap Rates by Market Type
Sales 5 million and above
Sources Marcus Millichap Research Services,
Real Capital Analytics
41
National Apartment Cap RatesPrimary vs. Tertiary
Markets by Region
Average Cap Rate
Sales 5 million and above
Sources Marcus Millichap Research Services,
Real Capital Analytics
42
Real Estate Returns Outperforming Stocks In
Recent Years
Total Return ()
As of 2Q 2007
Returns represent total compounded returns over
each time period Total returns include both
income and capital return
Sources Marcus Millichap Research Services,
NCREIF, Standard Poors
43
Apartment REIT Index vs. SP 500
Total Return Index (1993100)

Through September
Indexed to 100 Dec. 1993
Sources Marcus Millichap Research Services,
NAREIT, Standard and Poors
44
Key Observations for 2008

• Investor demand for apartments will remain strong
• No systemic pricing bubble
• Operations will remain healthy and support
  current level of investor demand and pricing
• Investors will increase differentiation for
  quality
• Product Class (Class A, B and C)
• Market Size (Primary, secondary and
  tertiary)
• Cap rates for quality will remain relatively
  flat
• Cap rates on the margin will trend higher (50
  bps)
• No sustainable pressure for the FED to raise
  rates
• Velocity begins to increase in 1st Qtr (10 in
  2008)

45
Multi-family InvestmentThe Continued Case for
Optimism

• Reasons Why U.S. Investors Should Be Acquiring
  Multi-family Assets

46
Echo Boomer Demand Supports Appreciation
5.5 million Increase
Change in Population
Forecast
Sources Marcus Millichap Research Services,
Economy.com
47
Demand From ImmigrationSupports Appreciation
12 Million Increase
Thousands
1980
1985
1990
1995
2000
2005
2010
2015
Sources Marcus Millichap Research Services,
Economy.com
48
U.S. Household Growth2005 - 2015
4.3m new renter households
9.1m new owner households
13.4 million net new households
Sources Marcus Millichap Research Services,
Economy.com, Harvard University
49
U.S. Apartment DemandRobust for Next 10 Years
Projected demand for new U.S. apartments
averages 430,000 units per year for next 10
years!
Completions (Thousands of Units)
Forecast
Sources Marcus Millichap Research Services,
Reis, U.S. Census Bureau
50
New Supply Has Become More Constrained, Less
Volatile - Construction as a Percentage of Stock
Forecast
Sources Marcus Millichap Research Services,
Reis
51
Can / Will The US Apartment Industry Meet
Projected Demand?

• Land is more scarce and more expensive
• Construction costs more expensive
• Development nimby-ism more common
• Impact fees more expensive
• Urban development (where demand is more reliable)
  is inherently more expensive
• Mid-rise or high-rise vs. traditional garden
• Cost of land preparation (scraping)
• Parking (subterranean or decks)

52
Marcus Millichaps NMHGRemains Bullish on US
Apartment Market

• High levels of future demand
• Supply more difficult and expensive to deliver
• Unlikely the industry will meet demand
• Current rents in most markets do not justify
  development
• Significant future pressure on rents
• US apartments will be dramatically more valuable
  in 2012 than 2007

53
2008
APARTMENT TRENDS
A National Multifamily Market Overview
Hessam Nadji Managing Director Research Services
Linwood C. Thompson Managing Director NMHG