STRIVE 2020 Symposium

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2020 SYMPOSIUM

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Company Stats LAST 3 YEARS STNL

Multi-Tenant

Totals

Year

# of Trans

Total Value

# of Trans

Total Value

# of Trans

Value

2017

42

$112,651,327

21

$184,605,892

63

$297,257,219

2018

41

$101,240,201

21

$74,439,500

62

$175,679,701

2019

48

$136,757,996

31

$106,672,000

79

$243,429,996

25

$97,008,899

Under Contract/In Negotiation

16 More Transactions, $50 Million Less More Transactions, Smaller Dollar Amount

2020 SYMPOSIUM

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STNL Transactions - 2019 IN TEXAS

498 Criteria: • Single-Tenant Retail in Texas • Sale Date: 1/1/2019-12/31/2019 • Investment Properties • In 2018 there were 522 trades

2020 SYMPOSIUM

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Transactions Per Region STNL

DFW 194 (38.96%)

WEST TEXAS 38 (7.63%)

CENTRAL 27 (5.42%)

EAST TEXAS 27 (5.42%)

AUSTIN 2018

2019

DFW

166

194

Houston

138

100

Austin

41

32

San Antonio

54

46

VALLEY

East

31

27

34 (6.83%)

West

48

38

Central

19

27

Valley

25

34

32 (6.43%)

SA 46 (9.24%)

HOUSTON 100 (20.08%)

2020 SYMPOSIUM

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Buyers’ Location STNL WA 9 (1.78%)

NY 12 (2.37%)

PA

IL

NV 9 (1.78%)

CA 129 (26.04%)

CO

MO

3 (0.59%)

NM 3 (0.59%)

9 (1.78%)

3 (0.59%)

OK

3 (0.59%)

OH 3 (0.59%)

NJ 6 (1.18%)

MD 3 (0.59%)

TN 6 (1.18%)

6 (1.18%)

TX 267 (53.85%)

IN

3 (0.59%)

LA 3 (0.59%)

FL 21 (4.14%)

2020 SYMPOSIUM

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MT Transactions - 2019 IN TEXAS

312 Criteria: • Multi-Tenant Retail in Texas • Sale Date: 1/1/2019-12/31/2019 • Size: 5,000+ sq ft • Sale Price: $400,000+ • Exclude Bulk Portfolio Sales • In 2018 there were 298 trades

2020 SYMPOSIUM

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Transactions Per Region MULTI-TENANT

DFW 111 (35.58%)

WEST TEXAS 18 (5.77%)

CENTRAL 9 (2.88%)

EAST TEXAS EAST TEXAS 19 (5.19%) 9 (2.88%)

AUSTIN 33 (10.58%)

SA 28 (8.97%)

VALLEY 18 (5.77%)

HOUSTON 86 (27.56%)

2018

2019

DFW

105

111

Houston

92

86

Austin

22

33

San Antonio

19

28

East

12

9

West

21

18

Central

12

9

Valley

15

18

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Buyers’ Location MULTI-TENANT WA 1 (0.32%)

MT ID

1 (0.32%)

NY

MI

1 (0.32%)

2 (0.64%)

2 (0.64%)

MO

CA

IL

OH

7 (2.24%)

2 (0.64%)

2 (0.64%)

MD 3 (0.96%)

2 (0.64%)

30 (9.62%)

RI

AZ 2 (0.64%)

TX 248 (79.49%)

AL

GA

7 (2.24%)

2 (0.64%)

2020 SYMPOSIUM

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2020 SYMPOSIUM

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Multi-Tenant Type TRANSACTIONS IN HOUSTON

2018

2019

DELTA

92

86

(6)

$5,553,571

$6,732,432

$1,178,861

Ave Cap Rate

7.62%

7.61%

(0.01%)

Ave Cap Rate at List

7.16%

6.82%

(0.34%)

Delta (List to Sell)

0.46%

0.79%

Ave PSF

$221.40

$231.81

$10.41

Ave Rent PSF

$18.81

$21.23

$2.42

Occupancy

89.07%

92.15%

3.08%

No. of Transactions Ave Price

2020 SYMPOSIUM

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STNL Type TRANSACTIONS IN HOUSTON

2018

2019

DELTA

138

100

(37)

$2,961,502

$3,508,209

$546,707

Ave Cap Rate

6.27%

6.32%

(0.05%)

Ave Cap Rate at List

5.90%

6.01%

0.11%

Delta (List to Sell)

0.37%

0.31%

Ave PSF

$488.82

$479.80

($9.02)

Ave Rent PSF

$30.32

$31.31

$0.99

No. of Transactions Ave Price

2020 SYMPOSIUM

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Multi-Tenant Type TRANSACTIONS IN AUSTIN/SAN ANTONIO

2018

2019

DELTA

41

61

20

$5,675,573

$8,211,432

$2,535,859

Ave Cap Rate

6.82%

7.04%

0.22%

Ave Cap Rate at List

6.56%

6.58%

0.02%

Delta (List to Sell)

0.26%

0.46%

Ave PSF

$278.85

$263.43

($15.42)

Ave Rent PSF

$24.41

$23.43

($0.98)

Occupancy

93.45%

95.86%

2.41%

No. of Transactions Ave Price

2020 SYMPOSIUM

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STNL Type TRANSACTIONS IN AUSTIN/SAN ANTONIO

2018

2019

DELTA

95

78

(17)

$2,756,202

$3,109,763

$353,561

Ave Cap Rate

6.50%

6.46%

0.04%

Ave Cap Rate at List

6.04%

6.01%

(0.03%)

Delta (List to Sell)

0.46%

0.45%

Ave PSF

$499.43

$478.55

($20.88)

Ave Rent PSF

$29.30

$30.22

$0.92

No. of Transactions Ave Price

2020 SYMPOSIUM

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Multi-Tenant Type TRANSACTIONS IN DFW

2018

2019

DELTA

105

111

6

$6,903,393

$8,226,248

$1,322,855

Ave Cap Rate

7.48%

7.24%

(0.24%)

Ave Cap Rate at List

6.93%

6.84%

(0.09%)

Delta (List to Sell)

0.55%

0.40%

Ave PSF

$262.17

$309.18

$47.01

Ave Rent PSF

$18.46

$22.67

$4.21

Occupancy

93.54%

94.00%

0.46%

No. of Transactions Ave Price

2020 SYMPOSIUM

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STNL Type TRANSACTIONS IN DFW

2018

2019

DELTA

166

194

28

$3,173,413

$3,610,840

$437,427

Ave Cap Rate

6.09%

6.12%

0.03%

Ave Cap Rate at List

5.86%

5.87%

0.01%

Delta (List to Sell)

0.23%

0.25%

Ave PSF

$558.61

$582.43

$23.82

Ave Rent PSF

$32.12

$32.93

$0.81

No. of Transactions Ave Price

2020 SYMPOSIUM

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• • • •

STNL Type TRANSACTIONS IN TEXAS STNL Type Auto Parts

Banks

Dollar Stores

Drug Stores

Fast Food

Restaurants

Year

Location Term Guarantor Fundamentals CAP

2017

6.15%

2018

6.50%

2019

6.19%

2017

5.58%

2018

5.57%

2019

6.08%

2017

6.95%

2018

7.07%

2019

7.21%

2017

6.60%

2018

5.76%

2019

6.36%

2017

5.74%

2018

5.95%

2019

5.81%

2017

6.33%

2018

6.50%

2019

6.42%

2020 SYMPOSIUM

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2020 SYMPOSIUM

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US High Rental Rates RENT PER SQUARE FOOT $3,000

$1,200 $700 $550 $300

$289

$250

$240 $125

2020 SYMPOSIUM

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US Average Rental Rates RENT PER SQUARE FOOT

$42.35

$41.98 $36.92 $33.32 $28.86 $24.25 $20.02

$19.88

$18.93

2020 SYMPOSIUM

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MSA Population 20,320,876

13,291,486 9,472,676 7,539,711 6,249,950

6,198,782

6,096,372

4,875,390

4,729,484

2020 SYMPOSIUM

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Square Miles in MSA 10,856 9,286

6,137 5,564 5,118

4,850

4,585

4,500 2,474

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MSA Population PER SQUARE MILE

4,432

2,741 1,912 1,191

1,123

1,083

1,010

873

812

2020 SYMPOSIUM

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DFW Population Per Square Mile 10,000,000 PEOPLE (2030) 4,432

2,741

1,912 1,191

1,123

1,083

1,077

1,010 873

2020 SYMPOSIUM

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Primary City AVERAGE RENTAL RATES

4,432

$42.35 2,741

$33.32

1,912 1,191

$41.98 $19.88

1,123

$28.86

1,083

$24.25

1,077

$20.02

1,010 873

$36.92

$18.93

2020 SYMPOSIUM

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Disposable Income MEDIAN HOUSEHOLD INCOME

$120,470

$85,203 $78,478 $71,834

$69,445

$69,300 $57,238 $46,116 $41,818

2020 SYMPOSIUM

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Tourism NUMBER OF TOURISTS PER YEAR (2018)

65,200,000 57,600,000 50,000,000 49,000,000 43,300,000

25,800,000 23,800,000 23,000,000

22,000,000

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Rental Rate Growth FROM 2006-TODAY

$36.92

$41.98

$42.35

$33.10

$25.25

$34.49 $20.02

$33.32 $28.86 $27.21 $24.43

$16.06

$24.25 $20.93

$19.88

$18.13 Miami (46.22%)

San Francisco (26.83%)

Dallas (24.66%)

New York (22.79%)

Los Angeles (22.45%)

Washington D.C. (18.13%)

Boston (15.86%)

Philadelphia (9.65%)

$18.93 $19.71

Chicago (-3.96%)

2020 SYMPOSIUM

Not to be a success, but to be of Value — Albert Einstein

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2020 SYMPOSIUM

Mark Dotzour

2020 SYMPOSIUM

Good Fishing Ahead, but Keep an Eye on the Clouds Dr. Mark G. Dotzour

Longest U.S. Economic Expansions Current expansion began in June 2009 • Mar 1991 to Mar 2001 • Feb 1961 to Dec 1969 • Nov 1982 to Jul 1990 • Jun 1938 to Feb 1945 • Nov 2001 to Dec 2007

120 months 106 months 92 months 80 months 73 months

Current expansion as of January 2020 is 128 months

HOW LONG CAN IT LAST?

First Focus: The Good Fishing

Why 2020 Will Be Slower • Auto industry appears to have peaked • Trucking and shipping industry has peaked • Low oil and gas prices will pressure energy sector • Trade negotiations with China cause uncertainty • Businesses not using tax benefits to expand • Congress won’t be interested in growth • Federal budget deficits can’t get too much higher • Presidential election uncertainty

Monthly Increase in Jobs 2005 to present

300K

266,000 in November

Source: Bureau of Labor Statistics

Rate of Wage Growth 1960 to present

4%

Source: Federal Reserve Bank of St. Louis

Job Openings in America Looking for Workers

Source: Bureau of Labor Statistics

Texas Employment Since 1940

13.6 million in Nov 19

Source: Bureau of Labor Statistics

Household Net Worth since 1952

Now exceeds $113 trillion

Source: Federal Reserve Bank of St. Louis

Household Owners Equity in Real Estate $18 trillion

Source: Federal Reserve Bank of St. Louis

150 140 130 120 110 100 90 80 70 60 50 40 30 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19

Consumer Confidence Index 2006 to present

Source: The Conference Board

Household Debt Service Payments as a Percent of Disposable Personal Income

Lots of fuel left!

1980

Source: Federal Reserve Bank of St. Louis

40 35 30 25 20 15 10 5 0

Source: National Federation of Independent Business Nov-19

Aug-19

May-19

Feb-19

Nov-18

Aug-18

May-18

Feb-18

Nov-17

Aug-17

May-17

Feb-17

Nov-16

Aug-16

May-16

Feb-16

Nov-15

Aug-15

May-15

Feb-15

Nov-14

Aug-14

May-14

Feb-14

Nov-13

Aug-13

May-13

Feb-13

Small Business Confidence: “Now is a Good Time to Expand” Percent of Respondents

0

Source: National Federation of Independent Business Nov-19

Aug-19

May-19

Feb-19

Nov-18

Aug-18

May-18

Feb-18

Nov-17

Aug-17

May-17

Feb-17

Nov-16

Aug-16

May-16

Feb-16

Nov-15

Aug-15

May-15

Feb-15

Nov-14

Aug-14

May-14

Feb-14

Nov-13

Aug-13

May-13

Feb-13

Small Business Confidence:

“Hiring Plans in the Next Three Months” Net Percent of Respondents

30

25

20

15

10

5

New Single-Family Houses Sold Since 1963

Source: Federal Reserve Bank of St. Louis

New Single-Family Housing Starts Since 1959

1 million units

1965 Population: 194 million

Source: Federal Reserve Bank of St. Louis

Leading Index of Economic Indicators 1982 to present

Source: Federal Reserve Bank of St. Louis

Texas Leading Index

Source: Federal Reserve Bank of Dallas

Houston Business-Cycle Index

Source: Federal Reserve Bank of Dallas

Looking For Signals of Change

Corporate Profits

After Tax

Before Tax

Source: Federal Reserve Bank of St. Louis

Large Corporate Hiring Plans: Next 6 Months

Q3-19 Q2-19 Q1-19 Q4-18 More Jobs

43%

41%

48%

56%

Less Jobs

20%

16%

16%

14%

Source: Business Roundtable

Corporate Bond Spread BB Corporate – 10 Year Treasury

Source: Federal Reserve Bank of St. Louis

The Future of Interest Rates

Inflation Moves the 10-Yr Treasury Rate (unless the Fed intervenes)

10-Year Treasury rate

Inflation rate

Source: Federal Reserve Bank of St. Louis

Inflation Rate since 2000

2%

Source: Federal Reserve Bank of St. Louis

Economists Have Overestimated Inflation Since 2007 Predicted Inflation

Actual Inflation

Source: University of Michigan and Federal Reserve Bank of St. Louis

Effective Fed Funds Rate 1954 to Present

19.00

13.00 9.25

10.00 6.50 5.25 2.50

Source: Federal Reserve Bank of St. Louis

10-Year Government Bond Rates January 9, 2020

United States 1.851% Canada 1.593% UK 0.812% Germany - 0.225% France 0.062% Italy 1.393% Japan

- 0.005% Source: CNBC.com

Treasury has Refinanced the Federal Debt Average Interest Rate on:

March 1, 2000

Total Debt 6.555%

T-Bonds 8.505%

March 1, 2007

5.055%

7.551%

March 1, 2018

2.347%

4.162%

Source: U.S. Treasury

If rates went up 2%, interest expense would Increase by $440 billion.

2018

Just the increase of 2% would consume 13% of all federal income.

Source: Congressional Budge Office

If rates went up 2%, interest expense would increase by $440 billion.

2018

Source: Congressional Budge Office

Just the increase of 2% would consume 75% of all Medicare payments, or 45% of Soc Sec payments.

CRE Trajectories: Sales Volume CoStar reported sales volume in 12 months ended November 2019 was 3.7% higher than a year earlier.

CoStar reported that sales that include secondary and tertiary markets were up 5.7% in the same period.

Sources: CoStar release 12/26/2019; NREI Online; Green Street Advisors Release 1/7/2020

Earliest Warning Sign: Big Decline in Transaction Volume

Source: CNBC.com 1/3/2020

CRE Trajectories: Absorption CoStar reported aggregate absorption of CRE space in 3Q2019 was much lower than previous years: Million square feet

2016 3Q

575.7

2017 3Q

261.1

2018 3Q

270.9

2019 3Q

55.9

Sources: CoStar release 12/26/2019; NREI Online; Green Street Advisors Release 1/7/2020

CRE Prices Continue to Escalate

CRE Trajectories: Prices RCA reported Nov prices 8.7% higher YOY. Green Street Advisors Index up 2.5% YOY.

Industrial up 13.6% Apartments up 9.3% CBD Office up 5% Retail up 3.4%

Sources: CoStar release 12/26/2019; NREI Online; Green Street Advisors Release 1/7/2020

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Thank you!