Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — IMN (January 2006)
15 slides from Marcus & Millichap's conference presentation, January 2006
Slide 1: Economic and Real Estate Outlook
Economic and Real Estate Outlook Alan Pontius Senior Vice President, National Director
Slide 2: U.S. Economic Conditions Favorable
U.S. Economic Conditions Favorable Employment Above Prior Peak 135 Non-Farm Employment (millions) 130 5/03 –12/05 2/01 – 5/03 4.6 Million -2.7 Million 125 120 115 6 5 7 8 9 1 0 2 5 3 4 -9 -9 -9 -9 -9 -0 -0 -0 -0 -0 -0 ec ec ec ec ec ec ec ec ec ec ec D D D D D D D D D D D Sources: Marcus & Millichap
Slide 3: Corporate Balance Sheets Stronger
3 Corporate Balance Sheets Stronger S&P 500 Operating Earnings 200 S&P 500 Operating Earnings ($ Bil.) 150 Long-Term Trend 100 Line 50 Recession Recession 0 89 91 93 95 97 99 01 03 05* *As of 3rd Quarter Sources: Marcus & Millichap Research Services, Standard & Poors
Slide 4: Falling Inflation Has Allowed for Low Interest Rates
Falling Inflation Has Allowed for Low Interest Rates A Major Driver of Real Estate Capital Flows 10-Year Treasury Core Inflation 16% 12% 8% Average 4% Average 0% 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06* *Forecast Sources: Marcus & Millichap Research Services, Economy.com, Fede
Slide 5: U.S. Home Prices Continue to Set Records
U.S. Home Prices Continue to Set Records Existing Single-Family Homes 1990-2001 2002-2004 2005 $400,000 Data points = % growth from 2000-2005 Median Home Price 72% $300,000 69% 49% $200,000 37% 38% $100,000 $0 U.S. Northeast Midwest South West Sources: Marcus & Millichap Research Services, Economy.c
Slide 6: Condo Supply/Demand Becoming More Volatile
Condo Supply/Demand Becoming More Volatile As Result of Cooling in Select Markets (Based On Months of Inventory) - Not Necessarily A Concern at Macro Level Single Family Condo 22.9% 5.5 YOY Change 5.0 13.9% No. of months 4.5 4.0 3.5 2004 04 04 05 05 05 05 '05 '05 Sept. Nov. Jan. March May July Sept.
Slide 7: Change in U.S. Population
Change in U.S. Population 2005 – 2015 Forecast Change in Population in Thousands 12,000 “Boomer Babies” 9,000 6,000 “Echo Boomers” “Baby Bust” 3,000 Trough in 1973 0 -3,000 15-24 25-34 35-44 45-64 65+ Sources: Marcus & Millichap Research Services, Economy.com
Slide 8: U.S. Economic Outlook
8 U.S. Economic Outlook 2003 2004 2005 2006* Real GDP(AA) 2.7% 4.2% 3.8% 3.6% Job Growth (%)(DD) -0.1% 1.6% 1.5% 2.0% Job Growth (#)(DD) -94,000 2,134,000 1,992,667 2,666,550 Unemployment (%)(AA) 6.0% 5.5% 5.1% 4.9% 10-yr Treasury (%)(AA) 4.0% 4.3% 4.3% 5.0% CPI, Urban (%)(AA) 2.3% 2.7% 3.4% 2.5% *F
Slide 9: Increased Capital Flows Compressing Real Estate Cap Rates
Despite Weak Operations, Increased Capital Flows Compressing Real Estate Cap Rates 1990 - 2000 Avg. YTD 2005 10% 9.5% 9.3% 9.3% Average Cap Rate 8.5% 7.7% 7.8% 8% 7.3% 5.9% 6% 4% Apartment Retail Office Industrial Sources: Marcus & Millichap Research Services, National Real Estate Index (NREI)
Slide 10: Value Support for Real Estate
Value Support for Real Estate ¾ Capital Flows ¾ Interest Rate Environment ¾ Recovering Operating Performance ¾ Construction Costs
Slide 11: Real Estate Returns Outperforming Stocks
11 Real Estate Returns Outperforming Stocks In Recent Years 1-year 5-year 10-year 150% 127% 125% 122% 119% 117% Total Return (%) 100% 76% 59% 55% 50% 45% 19% 18% 19% 22% 12% 0% -6% -50% S&P 500 Apartment Office Industrial Retail * As of 3Q 2005 Sources: Marcus & Millichap Research Services, NCREIF,
Slide 12: U.S. Property Fundamentals Improving
U.S. Property Fundamentals Improving Change in Vacancy by Sector 20% 2000 2004 2005* 2006* 15% Average Vacancy 10% 5% 0% Apartment Retail Office Industrial *Forecast Sources: Marcus & Millichap Research Services, Property & Portfolio Research (PPR), Reis
Slide 13: 2005 U.S. Real Estate Buyer Profile by Dollar Volume
2005* U.S. Real Estate Buyer Profile by Dollar Volume Foreign Institutional Private-Local Investor Type % Share % Share Private Nat'l REIT/Public User/Other 2004* 2005* Private Local 31% 27% REIT/Public 25% 21% Private National 17% 18% Institutional 10% 16% Other 9% 12% Foreign 8% 6% $ Volume $112.0
Slide 14: Apartment, Retail, Office Markets
Marcus & Millichap Real Estate 2006 Supply/Demand Index Apartment, Retail, Office Markets Strong Recovery Strong Lagging Improvement Gaining Steam Fort Lauderdale Austin Atlanta Boston Inland Empire Jacksonville Chicago Cincinnati Las Vegas Oakland Charlotte Cleveland Los Angeles Orlando Dallas-Fort
Slide 15: Economic and Real Estate Outlook
Economic and Real Estate Outlook Alan Pontius Senior Vice President, National Director