Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Investor Presentation (April 2011)
36 slides from Marcus & Millichap's investor presentation, Apr 26, 2011
Slide 1: U.S. and Dallas/Fort Worth Economic and Real Estate Market Outlook
U.S. and Dallas/Fort Worth Economic and Real Estate Market Outlook April 26, 2011 1
Slide 2: 2011 Economic Tug-of-War
2011 Economic Tug-of-War Positives Headwinds Retail Sales excl. auto & gas well above Unemployment Rate at 8.8% compared pre-recession levels to 5% in 2007 U.S. GDP higher than 2006 levels Underemployment Rate at 15.7% The Private Sector added 1.7 million Consumer Confidence remains 30%
Slide 3: U.S. Retail Sales Have Recovered From Dramatic Drop
U.S. Retail Sales Have Recovered From Dramatic Drop – Further Growth Hindered Long-Term Total Retail Sales Monthly Retail Sales Excl. Auto and Gas 20% $280 15% $260 Retail Sales (Bil.) 10% Y-o-Y Change 5% $240 0% $220 -5% Recessions $200 -10% -15% $180 01 03 05 07 09 11* 71 75 79 83 87 91 95 99 03 0
Slide 4: Capital Spending by Corporate America Key to Sustainable Recovery
Capital Spending by Corporate America Key to Sustainable Recovery – Profit Trend Positive Indicator Corporate Profits Fixed Investment in Equipment and Software 30% $2,000 YOY Change in Investment Corporate Profits (Billions) 15% $1,500 0% $1,000 -15% $500 -30% $0 4 4 4 4 4 4 4 4 4 4 4 Q Q Q Q Q Q Q
Slide 5: Companies Still Hesitant to Add Permanent Jobs
Companies Still Hesitant to Add Permanent Jobs Temporary Employment Non-farm Employment 30% 6% Non-farm Employment (Y-o-Y Change) Temporary Employment (Y-o-Y Change) Temporary Non-Farm 2008-2009: -652,800 -8.7M 2010: +310,300 +0.9M 15% Ann.2011*: +201,600 +1.9M 3% 0% 0% -15% -3% -30% -6% 19 1 * 19 2
Slide 6: Employment Growth Is Expected to Gain Momentum in 2011 and 2012
Employment Growth Is Expected to Gain Momentum in 2011 and 2012 – Even If Just Catching up to Long-Term Average Total Job Losses Annual Emp Growth-1st Year Following Annual Emp Growth-2nd Year Following Annual Emp Growth-3rd Year Following 6% Historical Avg. Emp Growth 3% 2.6M Change 2.0M 0.9M 0% -3
Slide 7: U.S. Employment by Sector
U.S. Employment by Sector YOY Change Through March 2011 U.S. Employment Sectors Absolute Change % Change Prof. & Business Services 529,000 3.2% Education & Health Services 420,000 2.2% Trade, Transport & Utilities 238,000 1.0% Manufacturing 196,000 1.7% Leisure & Hospitality 193,000 1.5% Other Servi
Slide 8: Crude Oil Prices vs. 10-Year Treasury Rate
Crude Oil Prices vs. 10-Year Treasury Rate Crude Oil (WTI) 10-Year Treasury Rate $150 15% Crude Oil (price per barrel) $120 12% 10-Year Treasury Rate $90 9% $60 6% Recessions $30 3% $0 0% 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 * 11 * Through April 5 8 Sources: Marcus & Millichap
Slide 9: Limited Pricing Power, Weak Housing, Stagnant Wages Keeping Inflation at Bay
Limited Pricing Power, Weak Housing, Stagnant Wages Keeping Short-Term Inflation at Bay, Giving the Fed Time Unemployment Rate Core CPI Capacity Utilization 15% 90% Unemployment Rate and Core CPI 12% 85% Capacity Utilization 9% 80% 6% 75% 3% 70% 0% 65% 71 75 79 83 87 91 95 99 03 07 11* 9 * Unemploym
Slide 10: Commercial Real Estate Vacancies Stabilizing
Commercial Real Estate Vacancies Stabilizing – Apartment Sector Already in Full Scale Recovery 25% 90's Peak 2001-2008 2009 2010 2011* Average Vacancy Rate 20% 15% 10% 5% 0% Apartment Retail Office Industrial 10 * Forecast Source: Marcus & Millichap Research Services, REIS, CoStar Group, Inc.
Slide 11: U.S. Commercial Real Estate Investment Trends
U.S. Commercial Real Estate Investment Trends Total Transactions Total Dollar Volume Apartment Industrial Office Retail Apartment Industrial Office Retail 60 $600 Total Transactions (000s) Total Dollar Volume (Bil.) 45 $450 30 $300 15 $150 0 $0 02 03 04 05 06 07 08 09 10 02 03 04 05 06 07 08 09 10 1
Slide 12: Commercial Mortgage Delinquency Rates by Lender Type
Commercial Mortgage Delinquency Rates by Lender Type CMBS (30+ days and REO) Life Companies (60+ days) Fannie Mae (60+ days) Freddie Mac (60+ days) 10% Banks & Thrifts (90+ days) 8% Delinquency Rates 6% 4% 2% 0% 20 9 20 8 20 9 20 9 20 9 20 0 20 0 20 0 10 20 7 20 8 20 8 20 8 20 1 20 9 20 0 20 2 20 3
Slide 13: Sources of Acquisition Financing by Dollar Volume
Sources of Acquisition Financing by Dollar Volume 100% 14% Bank -nat'l, int'l, inv bnk 25% 29% 33% Assumed Debt 75% Regional/Local Bank 31% 16% 30% Government Agency 20% Percent 50% 6% CMBS 1% 16% 12% Insurance 16% 13% 34% 11% 25% 7% Financial 1% 5% 7% 5% 9% Seller Financed 6% 8% 7% 12% 6% 10% 4% 0%
Slide 14: U.S. Commercial Property Price Trends
U.S. Commercial Property Price Trends $300 2002-2008 2009 2010 $120 -27% Avg. Price per Unit (000s) $225 Avg. Price per Sq. Ft. $90 -32% -22% $60 $150 $30 $75 -29% $0 $0 Apartment Office Retail Industrial Includes sales $1M+ 14 Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
Slide 15: Change in U.S. Commercial Real Estate Sales Activity
Change in U.S. Commercial Real Estate Sales Activity Change in Number of Transactions Change in Dollar Volume 100% 2002-2008 2009 2010 2002-2008 2009 2010 160% 50% 80% Y-o-Y Change Y-o-Y Change 0% 0% -50% -80% -100% -160% $1M-$9.99M $10M-$19.99M $20M+ $1M-$9.99M $10M-$19.99M $20M+ Includes sales of
Slide 16: Cap Rate Trends by Market Type
Flight to Quality, Re-Pricing of Risk Reflected in Cap Rate Trends by Market Type Primary Secondary Tertiary 10% Average Cap Rate 9% 8% 7% 6% 2Q 04 3Q 04 4Q 04 1Q 04 2Q 05 3Q 05 4Q 05 1Q 05 2Q 06 3Q 06 4Q 06 1Q 06 2Q 07 3Q 07 4Q 07 1Q 07 2Q 08 3Q 08 4Q 08 1Q 08 2Q 09 3Q 09 4Q 09 1Q 09 2Q 10 3Q 10 4Q
Slide 17: U.S. Public REIT Valuation Indices
U.S. Public REIT Valuation Indices vs. S&P 500 S&P 500 All REITs Peak-Trough Trough-Current Apartment REITs S&P 500: -51% +88% All REITs: -68% +158% 800 Apt. REITs: -68% +223% Index (Dec. 1993 = 100) 600 400 200 0 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11* * Through March 17 Index: Decem
Slide 18: Commercial Property Cap Rate Trends
Commercial Property Cap Rate Trends Average Cap Rates vs. 10-Year Treasury Commercial Property Cap Rate 10-Year Treasury Rate 12% Cap Rate Long- Term Avg. 10% 400 bps Average Rate 8% 450 bps 440 bps 440 bps 6% 220 bps 440 bps 4% 10-Yr Treasury Long-Term Avg. 2% 0% * 09 20 0 20 7 20 8 20 3 20 4 05 20
Slide 19: Employment Trends: Texas Markets
Employment Trends Texas Markets 2005-2008 2009 2010 2011* 2012* 6% Y-o-Y Percent Change 3% 0% -3% -6% Austin Dallas-Fort Houston San Antonio United States Worth 2008-09 : -12,300 -138,700 -87,400 -11,900 -8,663,000 2010 : +14,400 +55,800 +45,900 +7,200 +940,000 2011*: +21,000 +77,000 +65,000 +20,000
Slide 20: Total Employment Growth
Total Employment Growth 1970s 1980s 1990s 2000s 2010-2015* 8% 6% Average Annual Change 4% 3.5% 3.1% 3.0% 2.7% 2% 1.5% 0% -2% Austin Dallas-Fort Houston San Antonio United States Worth 2010-2015*: 183,800 571,800 518,500 150,700 6,100,000 * Forecast 20 Sources: Marcus & Millichap Research Services, B
Slide 21: Total Population Growth
Total Population Growth 1970s 1980s 1990s 2000s 2010-2015* 4.0% Average Annual Change 3.0% 2.7% 2.1% 2.1% 2.0% 2.0% 1.0% 1.0% 0.0% Austin Dallas-Fort Houston San Antonio United States Worth 2010-2015* 301,000 864,000 744,000 273,000 15,300,000 * Forecast 21 Sources: Marcus & Millichap Research Servi
Slide 22: Texas Apartment Construction
Texas Apartment Construction 2005-2008 2009 2010 2011* 2012* 20 Number of Units (000s) 15 10 5 0 Austin Dallas-Fort Worth Houston San Antonio 22 * Forecast Sources: Marcus & Millichap Research Services, Reis
Slide 23: Texas Apartment Vacancy Rates
Texas Apartment Vacancy Rates 2005-2008 2009 2010 2011* 2012* 12% Average Vacancy Rate 9% 6% 3% 0% tin es n io th to on or at us s St W nt ou A A rt d H te Fo n Sa ni s- U la al D 23 * Forecast Source: Marcus & Millichap Research Services, Reis
Slide 24: Texas Apartment Effective Rent Trends
Texas Apartment Effective Rent Trends 2005-2008 2009 2010 2011* 2012* 8% Y-o-Y Change 4% 0% -4% -8% tin n es io th to on or at us s St W ou nt A A d rt H te Fo n Sa ni s- U la al D 24 * Forecast Source: Marcus & Millichap Research Services, Reis
Slide 25: Apartment Cap Rate Trends
Apartment Cap Rate Trends 2000-2008 2009 2010 10% Average Cap Rate 8% 6% 4% 2% es C ia s xa /D rn at YC Te ifo St N al d te C ni U 25 Includes sales $1M+ Source: Marcus & Millichap Research Services, CoStar Group, Inc.
Slide 26: Vacancy Ranking by Submarket
Vacancy Ranking by Submarket Apartment 4Q Top 5 Submarkets 2010 Far North Dallas 5.0% Richardson 5.4% Southern Dallas 5.4% Garland 5.7% North Dallas 5.7% Dallas/Fort Worth 7.0% 4Q Bottom 5 Submarkets 2010 North White Rock 8.9% South White Rock/I-30 9.8% Far Northeast Dallas 10.6% South Dallas 12.1%
Slide 27: Texas Retail Construction
Texas Retail Construction 2005-2008 2009 2010 2011* 2012* 8 Square Feet Completed (Mil.) 6 4 2 0 Austin Dallas-Fort Worth Houston San Antonio 27 * Forecast Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
Slide 28: Texas Retail Vacancy Rates
Texas Retail Vacancy Rates 2005-2008 2009 2010 2011* 2012* 15% Average Vacancy Rate 12% 9% 6% 3% tin es n io th to on or at us s St W nt ou A A rt d H te Fo n Sa ni s- U la al D 28 * Forecast Source: Marcus & Millichap Research Services, CoStar Group, Inc.
Slide 29: Texas Retail Effective Rent Trends
Texas Retail Effective Rent Trends 2005-2008 2009 2010 2011* 2012* 6% 3% Y-o-Y Change 0% -3% -6% -9% tin es n th io to on or at us s St W nt ou A A rt d H te Fo n Sa ni s- U la al D 29 * Forecast Source: Marcus & Millichap Research Services, Reis
Slide 30: Dallas-Fort Worth Retail Price and Cap Rates
Dallas-Fort Worth Retail Price and Cap Rates Single-Tenant Multi-Tenant Average Price Cap Rate Average Price Cap Rate $300 10% $250 10% Average Price Per Square Foot Average Price Per Square Foot $250 9% $200 9% Average Cap Rate Average Cap Rate $200 8% $150 8% $150 7% $100 7% $100 6% $50 6% 04 05 0
Slide 31: Retail Cap Rate Trends
Retail Cap Rate Trends 2000-2008 2009 2010 10% 8% Average Cap Rate 6% 4% 2% 0% es C ia s xa /D rn at YC Te ifo St N al d te C ni U 31 Includes sales $1M+ Source: Marcus & Millichap Research Services, CoStar Group, Inc.
Slide 32: Texas Office Construction
Texas Office Construction 2005-2008 2009 2010 2011* 2012* 6.0 Square Feet Completed (Mil.) 4.5 3.0 1.5 0.0 Austin Dallas-Fort Worth Houston San Antonio 32 * Forecast Sources: Marcus & Millichap Research Services, Reis
Slide 33: Texas Office Vacancy Rates
Texas Office Vacancy Rates 2005-2008 2009 2010 2011* 2012* 25% Average Vacancy Rate 20% 15% 10% 5% 0% tin es n io th to on or at us s St W nt ou A A rt d H te Fo n Sa ni s- U la al D 33 * Forecast Source: Marcus & Millichap Research Services, Reis
Slide 34: Office Cap Rate Trends
Office Cap Rate Trends 2000-2008 2009 2010 10% 8% Average Cap Rate 6% 4% 2% 0% es C ia s xa /D rn at YC Te ifo St N al d te C ni U 34 Includes sales $1M+ Source: Marcus & Millichap Research Services, CoStar Group, Inc.
Slide 35: 20-34 Year-Old Population Growth
20-34 Year-Old Population Growth 1970s 1980s 1990s 2000s 2010-2015* 8% 6% Average Annual Change 4% 1.9% 1.8% 1.7% 1.7% 2% 1.0% 0% -2% Austin Dallas-Fort Houston San Antonio United States Worth 2010-2015* 54,000 169,000 140,000 48,000 3,200,000 * Forecast 35 Sources: Marcus & Millichap Research Servi
Slide 36: U.S. and Dallas/Fort Worth Economic and Real Estate Market Outlook
U.S. and Dallas/Fort Worth Economic and Real Estate Market Outlook April 26, 2011 36
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