2012 Multi-family Market Survey Southern Maine Presented by Brit Vitalius Principle, Designated Broker President, Southern Maine Landlord Association

Vitalius Real Estate Group 306 Congress Street, Suite 3 Portland, ME 04101

207.541.3755 [email protected] www.vitalius.com

Summary of 2011 Regional Markets • Portland market holds or improves in all metrics. Year ends with low inventory levels. • Saco/Bidd and Lewiston/Aurburn prices decrease slightly; total sales volume down 20% and absorption rate increases substantially. Buyers • In the second half of the year the multi-family buyer market was dominated by nonprofessional/newbie investors. • These investors have 25%-100% cash to put into deals • Motivated to diversify their portfolio into real estate • Asset/appreciation/quality driven rather than cash flow – they want the nicest properties • Very few young owner occupant investors Lending • Continued low interest rates attract investors to residential financing (2-4 units) • Tight guidelines on residential financing restrict owner occupant buyer pool • Commercial financing is reasonably accessible for qualified investors Short Sales/Foreclosures • 20%+ of MLS mutli-family sales in Southern Maine are short sales or bank owned* • 13%+ short sales or bank owned in Portland**; this appears to be down from 2010. National reporting blames the decrease on the “robo-signing” scandal and predicts an increase in 2012.*** *58 out of 278 properties sold in 2011 contain “”approval,” “bank,”“short”,”look”,or “subject” in the internal remarks. **14 sales out of 108 meet above listed criteria ***CNN Money, Jan 12, 2012

Sales Volume – 6 Year Trend $80,000,000 $70,000,000 $60,000,000

Portland

$50,000,000

South Portland

$40,000,000

Westbrook

$30,000,000

Saco/Biddeford

$20,000,000

L/A

$10,000,000 $0 2005

2006

2007

2008

2009

2010

2011

Portland

South Portland

Westbrook

Saco/Biddeford

Lewiston/Auburn

2005

$67,088,172

$7,283,800

$12,128,750

$18,746,296

$36,656,894

2006

$46,968,962

$5,974,247

$9,531,950

$16,695,275

$28,370,188

2009

$22,010,530

$2,704,694

$4,714,672

$6,484,718

$7,893,912

2010

$23,562,249

$3,940,660

$4,296,127

$7,632,062

$10,022,584

2011

$31,080,913

$2,722,185

$4,664,661

$6,197,911

$7,475,623

*Based on MLS data 12/31/04 – 12/15/11

Properties Sold – 6 Year Trend 250 200

Portland 150

South Portland Westbrook

100

Saco/Biddeford L/A

50 0 2005

2006

2007

2008

2009

2010

2011

Portland

South Portland

Westbrook

Saco Biddeford

L/A

2005

158

19

43

105

215

2006

114

22

37

92

156

2007

101

24

24

48

111

2008

79

16

21

44

82

2009

79

11

24

45

93

2010

81

16

27

55

100

2011

106

14

28

44

79

*Based on MLS data 12/31/04 – 12/15/11

Absorption Rate 30 25

Absorption Rate

20

Month

Amount of time it will take to sell the current inventory at the present rate of sales.

15 10 5 0 Portland

S. Portland 08

Portland

On the Market Monthly Sales Absorption Rate (months)

Westbrook 09

10

S Port

Saco/Biddo

*Based on MLS data 12/31/07 – 12/15/11

L/A

11

Westbrook

Saco/Bidd

L/A

08

09

10

11

08

09

10

11

08

09

10

11

08

09

10

11

08

09

10

11

83

68

65

56

14

12

7

5

36

26

22

23

81

71

60

52

200

159

114

133

7.4

7.5

6.8

8.8

1.4

1.1

1.3

1.2

1.7

2.2

2.3

2.3

3.5

4.1

4.6

3.7

6.8

8.8

8.3

6.6

11

9

10

6

10

11

5

4

21

12

10

10

23

17

13

14

29

18

14

20

Median Price $350,000 $300,000 $250,000 $200,000

2005 $150,000

2008 2009

$100,000

2010 2011

$50,000 $0

Portland

2011 Price vs. 2005

79%

South Portland

67%

Westbrook

66%

Saco/Biddo

60%

L/A

55% *Based on MLS data between 12/31/04 – 12/15/11

Sales/Month – 2011 vs. 3 Year Average • • •

Monthly sales trend was consistent with previous years April – August is the peak sales time, which means that buyer activity begins slowing in early July and slowly builds to the end of the year. December is always a busy time for closings but the Holidays stall new contracts leading to a slower January and February.

Average ‘08 – ‘10

2011 Sales

35

35

30

30

25

25

20

20

15

15

10

10

5

5

0

0

*Based on MLS data between 1/1/08 – 12/15/11

Commercial Multi Market – Portland • • • •

Cap Rate: 8 -9% Vacancy: < 5% Non-professional/Newbie Investors in the game Median Price/Unit = $59,583 Portland Address Units 68 Walton Street 5 469 Cumberland Avenue 6 10 Adelaide Street 6 278 Park Avenue 6 251-255 Danforth Street 6 385 Cumberland Avenue 8 23 Bramhall Street 8 196-200 Park Avenue 8 260-262 Brackett Street 8 54 West Street 9 149 Brackett Street 6 255 Oxford Street 15 65 St Lawrence Street 6 133 Grant Street 19 6 May Street 6 121 & 150 Congress Street 14

Sold Price $330,000 $355,000 $429,000 $350,000 $360,000 $440,000 $305,000 $399,000 $655,000 $630,000 $450,000 $375000 $325,000 $675,000 $360,000 $980,000

Sq Ft Price/Unit Price/Sq Ft 3449 $66,000 $96 5414 $59,167 $66 5405 $71,500 $79 7424 $58,333 $47 11800 $60,000 $31 5216 $55,000 $84 5722 $38,125 $53 9469 $49,875 $42 6099 $81,875 $107 7731 $70,000 $81 5401 $54,167 $60 10350 $25,000 $36 7040 $75,000 $64 17168 $35,526 $39 10528 $60,000 $34 21126 $70,000 $46 Median $59,583 $57

Notes

Mixed Use

Auction Off Market

Off Market *Based on MLS data between 12/31/10 – 12/1/511 and/or personal knowledge of the deals.

Commercial Multi Market – Portland • •

Sales Price range evenly distributed over a wide range High quality properties command a surprisingly high price while low quality properties drop even further. Range: $25,000/unit - $80,000/unit

•

Price/Unit $90,000 $80,000 $70,000 $60,000

$50,000 $40,000 $30,000 $20,000 $10,000 $0

Price/SqFt $120 $100 $80 $60 $40 $20 $0

*Based on MLS data between 12/31/10 – 12/1/511 and/or personal knowledge of the deals.

Commercial Multi Market - Biddeford • • •

The lack of activity is the story Estimated Cap Rate: 11 – 13% Estimated Vacancy rates: 10 - 15%

Address

44 337

53-55 44

Units Sold Price

Biddeford Bradbury Street Main Street

5 5

Saco Beach Street School Street

5 6

Sq Ft Price/Unit Price/Sq Ft

$169,000 3450 $115,000 4160 Avg $316,500 $250,000

5666 3734 Avg

$31,812 $36,300 $34,056

$28 $42 $35

$63,300 $41,667 $52,498

$56 $67 $61

Notes

*Based on MLS data between 12/31/10 – 1/1/11

Commercial Multi Market – L/A • • • •

Cap Rate: 14 - 15+% Estimate Vacancy rates: 10-15% Many purchases are distressed sales Median Price/Unit - $18,417 St # 73 100 101-103 518 61 98-100 128 255 163 343 73 297

St Name Walnut Street Blake Street Walnut Street Main Street WEBSTER STREET Pierce Street Pine Street Lisbon Street Pine Street Pine Street College Street Bates Street

Units 5 6 6 6 6 6 6 7 8 9 10 22

Sold Price $92,500 $154,900 $167,000 $132,000 $122,500 $110,000 $90,000 $90,000 $115,000 $80,000 $165,000 $430,000

SqFt 3657 6936 6633 4491 3974 7154 4740 5688 4574 3797 6860 24706 Median

Price/Unit $18,500 $25,817 $27,833 $22,000 $20,417 $18,333 $15,000 $12,857 $14,375 $8,889 $16,500 $19,545 $18,417

Price/SqFt $25 $22 $25 $29 $31 $15 $19 $16 $25 $21 $24 $17 $23

*Based on MLS data between 12/31/10 – 1/1/11

2-4 Units Portland Average Sale Price 2 and 3 units are steady 4 units up dramatically due to several high-end sale

Properties Sold Sales up 30% from previous year 2010 = 74 sold 2011 = 96 sold

$450,000

90

$400,000

80

$350,000

70

$300,000

60

$250,000

50

$200,000

40

$150,000

30

$100,000

20

$50,000

10

$0

0

2 Unit 2005

3 Unit 2006

4 Unit 2007

2008

2 Unit 2005

2006

3 Unit 2007

2008

4 Unit 2009

2010

2011

*Based on MLS data between 12/31/04– 1/1/11

Rental Market National Trends

Portland The rental market tightened dramatically in 2011, with some tenants even outbidding each other for rentals. Most landlords report increased rents and leases secured within 24-48 hours of listing. Vacancy Rate < 5% Portland Rental Averages* Heated

Unheated

$650

$595

1 Bedroom

$795- $850

$700

2 Bedroom

$1,100

$900

3 Bedroom

$1,400

$1,100

Studio/Efficiency

Sample 10 Unit in Downtown Portland Gross Income Feb ‘11 - $88,400 Jan ‘12 - $95,760 = 8.3% increase *Estimates based on a survey of samples properties

By all reports, the local trend of increasing rents and lower vacancy rates is occurring nationally and is predicted to continue in 2012. “Rents are rising, vacancies are falling, household formations are growing and rental supply is limited,” the Morgan Stanley report stated. “We believe the demand for rental properties will continue to grow.” --Reuters News, Dec. 27th, 2011

“…12-month rent increases will move even higher in the upcoming months. Steady declines in apartment vacancy rates imply additional pressure for higher rents in the near future in many markets”. --Lawrence Yun, in Economist Commentaries, Dec. 16, 2011

“More Americans have been opting to rent in recent years as the allure of owning a home has diminished, due in part to tight lending restrictions, falling prices and rising foreclosures. These forces are driving up apartment building values—to levels unseen since 2007, in some cases.” --Wall Street Journal, Dec. 21, 2011

Rental Market Portland Housing Association (Section 8) Summary Payment standards are down 4.5% from last year, even though they are at 107.5% of “Fair Market Rent.” The challenge is that HUD requirements on determining rents causes a year+ lag in their rental analysis. Since actual market rents have risen dramatically since the summer, Section 8 has had a hard time meeting the stronger market demands with their lower payment standards. This is a change from just a couple years ago when landlords could get more from Sec 8 than on the open market.

PHA/Section 8 Payment Standards, November 2011

Bd 1 2 3 4 5

Rent $817 $1,059 $1,334 $1,463 $1,681

PHA Payment Schedule (1 Bedroom) 900 800 700 600 500 400 300 200 100 0 2003 2004 2005 2006 2007 2008 2009 2010 2011

Rate of Increase 2003 – 2011 = + 31% Average/Year = + 4%

Includes all utilities; rents cover most of Cumberland County

2012 Multi Family Forecast •

• • • • • •

Portland Commercial sales activity and pricing hold steady or increase slightly with declining inventory levels and solid demand; premium properties continue to command premium pricing; cap rates may push below 9%. Saco/Biddeford and Lewiston/Auburn continue to struggle with excessive inventory and a shortage of buyers; cap rates stay at 12% or higher. 2-4 unit sales in Portland will continue to be strong. Loosening of lending standards will increase first-time buyer activity. The low inventory levels may put slight upward pressure on values. If residential interest rates hit 5% or commercial rates 6%+, sales will slow. Short Sales, Foreclosures and REO’s will continue at a similar pace. National forecasts predict a slight increase in 2012. Portland rents continue to increase slightly given the low vacancy rate. Rents and vacancies stabilize in Saco/Biddeford and Lewiston/Auburn with improvement in the economy.

Brit Vitalius founded Vitalius Real Estate Group at the beginning of 2011 so that he could continue to focus on the multi-unit market while assembling a group of professional brokers to provide a full complement of brokerage services to clients. Brit has made his career representing buyer and seller clients of multi-unit investments. For six years he was a partner at Sullivan Multi Family Realty and he co-founded Sullivan Management. Brit is in his second term as President of the Southern Maine Landlord Association. He personally owns and manages multi unit investments in Portland and Yarmouth. Brit is also serving as President of the Yarmouth Alumni Association. Brit grew up in Yarmouth, Maine before he graduated from Harvard University in 1995. He worked in technology as a programmer and team manager at BBN, the company that developed the forerunner of the internet. Brit currently lives in Yarmouth with his wife and 2 year old son, Coltrane.

Vitalius Real Estate Group 306 Congress Street, Suite 3 Portland, ME 04101

207.541.3755 [email protected] www.vitalius.com