IT IS GREAT TO BE IN COMMERCIAL REAL ESTATE

U.S. REAL ESTATE

STOCKS

BONDS

S&P 500

NCREIF Property Index

Barclays Capital Government Bond

0%

2%

4%

6%

8%

10%

10 Years 5 Years

Source: Delta Associates; April 2013.

TO

TA

L R

ET

UR

N/

YE

AR

INVESTMENT ALTERNATIVES Commercial Real Estate vs. Stocks vs. Bonds | Year-End 2012

-$180

-$160

-$140

-$120

-$100

-$80

-$60

-$40

-$20

$0

2009 2010 2011 2012

BIL

LIO

NS

OF

DO

LL

AR

S

FUND FLOWS U.S. Stock Mutual Fund Flows

Source: Morningstar, Lipper, Wall Street Journal, Delta Associates; April 2013.

$413 Billion

0%

1%

2%

3%

4%

5%

6%

7%

8%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

FIX

ED

-R

AT

E C

ON

TR

AC

T I

NT

ER

ES

T R

AT

ES

Source: ACLI, Delta Associates; April 2013.

LEVERAGE IS CHEAP Commercial Fixed-Rate Contract Interest Rates

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Philadelphia U.S. Column1 Column3 Column2

PE

RC

EN

T R

ET

UR

N

= Appreciation

= Income

Source: NCREIF, Delta Associates; April 2013.

ANNUAL INVESTMENT RETURNS ON APARTMENTS Philadelphia Compared to the United States

Philadelphia U.S.

2011 2012

PHILADELPHIA INVESTMENT SALES MARKET

INVESTMENT SALES VOLUME Apartment Buildings | 2005 Through 2012

Source: Real Capital Analytics, Delta Associates; April 2013.

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

2005 2006 2007 2008 2009 2010 2011 2012

Pgh Phil Balt Boston

SA

LE

S V

OL

UM

E (

$ B

ILL

ION

S)

$70,000

$75,000

$80,000

$85,000

$90,000

$95,000

$100,000

2010 2011 2012

AVERAGE APARTMENT SALE PRICE Philadelphia Metro Area | 2005 – 2012

Source: Real Capital Analytics, Delta Associates; April 2013.

AV

ER

AG

E S

AL

E P

RIC

E P

ER

UN

IT

$90,660

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

2005 2006 2007 2008 2009 2010 2011 2012

Source: Real Capital Analytics, Delta Associates; April 2013.

Philadelphia Metro

US

6.1% 6.2%

CAP RATES FOR APARTMENT SALES 2005 – 2012

THE NATIONAL ECONOMY

NATIONAL ECONOMY Recovery Patterns of GDP Following the Past Three Recessions

Source: US Bureau of Economic Analysis, GMU Center for Regional Analysis, Delta Associates; April 2013.

0%

2%

4%

6%

8%

10%

12%

14%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

1991-Q1

2001-Q4

2009-Q2

CU

MU

LA

TIV

E %

CH

AN

GE

IN

GD

P

Q U A R T E R S A F T E R T R O U G H / Y E A R R E C O V E R Y S T A R T E D

CONTRIBUTORS TO THE NATIONAL ECONOMY

Sales

Consumers 70%

Business

Source: Delta Associates; April 2013.

U.S. MEDIAN HOUSEHOLD INCOME

Dropped $777 in 2011

Source: US Census Bureau, Delta Associates; April 2013.

$50,054

$50,831

U.S. CONSUMER SENTIMENT

50

60

70

80

90

100

110

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

IND

EX

Source: University of Michigan, Delta Associates; April 2013.

20-Year Average = 87.9

0%

1%

2%

3%

4%

5%

6%

0%

1%

2%

3%

4%

5%

6%

7%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

PE

RS

ON

AL

SA

VIN

GS

RA

TE

2006 2007 2008 2009 2010

Source: US Bureau of Economic Analysis, Delta Associates; April 2013.

2011 2012 2013

CD

IN

TE

RE

ST

RA

TE

S

Compared to CD Interest Rates U.S. PERSONAL SAVINGS RATE

58% 68%

57%

37% 29%

38%

4% 2% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012

Optimistic

ModeratelyOptimistic

Pessimistic

Source: PNC Bank, Delta Associates; April 2013.

U.S. BUSINESS OWNERS’ OUTLOOK ON THE ECONOMY

Note: Totals might not add to 100% due to rounding. Survey data from October of each year shown.

% O

F B

US

INE

SS

OW

NE

RS

$1.2

$1.3

$1.4

$1.5

$1.6

$1.7

$1.8

2008 2009 2010 2011 2012

U.S. CORPORATIONS CASH ON BALANCE SHEET 2008 - 2012

TO

TA

L L

IQU

ID A

SS

ET

S I

N T

RIL

LIO

NS

OF

$

Source: Federal Reserve, Delta Associates; April 2013.

U.S. DURABLE GOODS PURCHASES Month-to-Month Change

Source: US Census Bureau, Delta Associates; April 2013.

-15%

-10%

-5%

0%

5%

10%

15%

% C

HA

NG

E I

N N

EW

OR

DE

RS

F

RO

M P

RE

VIO

US

MO

NT

H

2007 2008 2009 2010 2011 2012 2013

-0.9%

-0.8%

-0.7%

-0.6%

-0.5%

-0.4%

-0.3%

-0.2%

-0.1%

0.0%

Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Series 1

REAL GDP GROWTH IMPACT OF FULL SEQUESTER

Source: Moody’s Analytics, Delta Associates; April 2013.

2012 2013 2014

PE

RC

EN

T C

HA

NG

E

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

Debt service

U.S. HOUSEHOLDS RAPIDLY DELEVERAGE

% O

F D

ISP

OS

AB

LE

IN

CO

ME

Sources: Federal Reserve, US Bureau of Economic Analysis, Moody’s Analytics, Delta Associates; April 2013.

Y E A R

Debt Service

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Housing wealth effect

Residential investment

Total

Source: Moody’s Analytics, Delta Associates; April 2013.

HOUSING CONTRIBUTION TO GDP GROWTH

Y E A R

CH

AN

GE

IN

GD

P F

RO

M

HO

US

ING

SE

CT

OR

PHILADELPHIA ECONOMY AND DEMOGRAPHIC TRENDS

0

20

40

60

80

100

120

140

160

LA Hou NY DFW SF Atl Chi Bos Was Balt Phil Clev Pgh

TH

OU

SA

ND

S O

F N

EW

PA

YR

OL

L J

OB

S

26.3

PAYROLL JOB GROWTH 12 Months Ending February 2013

Source: US Bureau of Labor Statistics, Delta Associates; April 2013.

27

-400 -300 -200 -100 0 100 200 300 400 500 600

Detroit

SF Bay Area

Chicago

Boston

Baltimore

Atlanta

New York

Washington

Houston

T H O U S A N D S O F P A Y R O L L J O B S

PHILADELPHIA

JOB CHANGE 2000-2013 Metro Areas

Source: US Bureau of Labor Statistics, Delta Associates; April 2013. Note: As of February 2013

CORE INDUSTRIES 2012 | Philadelphia Metropolitan Area

Source: GMU Center for Regional Analysis, Delta Associates; April 2013.

Total GRP: 100%

Professional/Technical Services 10%

Federal & State Government 5%

Education and Health Services 5%

Manufacturing 5%

Hospitality Services 3%

Transportation & Warehousing 2%

Financial Services 2%

C O R E I N D U S T R I E S % G R P

Other Smaller Core Sectors & Local- Serving Economic Activities 68%

GRP = Gross Regional Product

-100

-80

-60

-40

-20

0

20

40

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Philadelphia City PA Suburbs S New Jersey Wilmington

PAYROLL JOB GROWTH TRENDS 2003 Through 2012 | Philadelphia Metro Area

Source: US Bureau of Labor Statistics, NPA, Delta Associates; April 2013.

PA

YR

OL

L J

OB

S (

00

0’S

)

Note: 2012 data through September.

-25

-5

15

35

2010 2011 2012 2013 2014 2015

PAYROLL JOB GROWTH 2010 Through 2015 | Philadelphia Metro Area

Source: US Bureau of Labor Statistics, NPA, Delta Associates; April 2013.

PA

YR

OL

L J

OB

S (

00

0’S

)

-15%

-10%

-5%

0%

5%

10%

15%

20%

Source: US Census Bureau, Delta Associates; April 2013.

Under 20

20-34 35-44 45-54 Over

54

% C

HA

NG

E I

N P

OP

UL

AT

ION

A G E R A N G E

POPULATION CHANGE BY AGE GROUP 2005-2011 | Philadelphia Metro Area

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Source: US Census Bureau, Delta Associates; April 2013.

WHO ARE THE NEW URBANITES? Change in Population By Age: 2000-2011 | Philadelphia City

Under 20

20-34 35-44 45-54 Over

54

% C

HA

NG

E I

N P

OP

UL

AT

ION

A G E R A N G E

WHO ARE THE NEW URBANITES? Single Person Households | U.S. Cities | 2011

Source: American Community Survey, Delta Associates, April 2013.

Philadelphia 40%

* Manhattan: 47%

RE

NT

ER

S A

S %

OF

TO

TA

L

HO

US

EH

OL

DS

20%

22%

24%

26%

28%

30%

32%

34%

36%

2005 2006 2007 2008 2009 2010 2011 2012

Philadelphia Metro

U.S.

Source: US Census Bureau, Delta Associates, April 2013.

RENTER HOUSEHOLDS Philadelphia Metro vs. U.S. | 2005—2012

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

20-24 25-29

CHANGING DEMAND PATTERNS People in the U.S. Without Driver’s Licenses | 1983 vs. 2007

Source: The Wall Street Journal, Michael Sivak and Brandon Schoettle, University of Michigan, Delta Associates; April 2013.

2007 2007 1983 1983

PE

RC

EN

T W

ITH

OU

T

DR

IVE

R’S

LIC

EN

SE

S

A G E R A N G E

PENT-UP DEMAND 25-34 Year Olds Living With Parents | U.S.

3.5

4.0

4.5

5.0

5.5

6.0

10.0%

10.5%

11.0%

11.5%

12.0%

12.5%

13.0%

13.5%

14.0%

14.5%

15.0%

Percentage Millions

PE

RC

EN

TA

GE

MIL

LIO

NS

Source: US Census Bureau, John Burns Real Estate Consulting, Delta Associates, April 2013.

THE PHILADELPHIA APARTMENT MARKET

LARGEST APARTMENT MARKETS 2012

0

100

200

300

400

500

600

700

800

900

1,000

1,100

LA Chi DFW Was Hou Atl Phil Phx

Sources: MPF Research; Delta Associates; April 2013.

UN

ITS

(0

00

S)

327

Note: Excludes New York at 2.1 million units.

STABILIZED APARTMENT VACANCY RATE Major Apartment Markets

Source: MPF Research, Delta Associates; April 2013.

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

NY LA Chi Was Phil Balt DFW Hou Phx Atl

VA

CA

NC

Y R

AT

E (

AL

L C

LA

SS

ES

)

National Rate:

5.1%

4.9%

946

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

DFW Hou Atl Was L.A. Phx Balt Phil Chi Pgh

AN

NU

AL

NE

T A

BS

OR

PT

ION

OF

UN

ITS

Source: REIS, MPF Research, Delta Associates; April 2013.

ANNUAL ABSORPTION OF APARTMENTS Major Apartment Markets | Long-Term Average

-4%

-2%

0%

2%

4%

6%

8%

10%

2009 2010 2011 2012 2013 2013

U.S.

EF

FE

CT

IVE

RE

NT

GR

OW

TH

PHILADELPHIA AREA APARTMENT MARKET Annual Class A Rent Growth

Source: MPF Research, Delta Associates; April 2013.

1.4%

1 2 M O N T H S E N D I N G F I R S T Q U A R T E R

Long-Term Average = 3.0 %

$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

$2.20

$2.40

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Center City

Sub. PA

So. NJ

Phil Metro

CLASS A APARTMENT RENT PER SF Philadelphia Metro Area | 2002-2013

Source: Delta Associates; April 2013.

$2.17

$1.60

Note: Data for 2013 is as of 1st quarter.

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600

$1,700

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%Average Effective Base Rent Stabilized Vacancy

EFFECTIVE RENT AND VACANCY RATE Class A Apartments | Philadelphia Metro Area

AV

ER

AG

E E

FF

EC

TIV

E B

AS

E R

EN

T

L O N G - T E R M R E N T G R O W T H : 3 . 0 % / Y E A R ( 1 9 9 9 - 2 0 1 2 )

ST

AB

ILIZ

ED

VA

CA

NC

Y R

AT

E

Source: Delta Associates; April 2013. Note: 2013 data is as of 1st quarter.

0

5

10

15

20

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

ABSORPTION PACE PER PROJECT PER MONTH Philadelphia Metro Area | Projects in Initial Lease-Up

AB

SO

RP

TIO

N P

AC

E P

ER

PR

OJ

EC

T S

INC

E

MA

RK

ET

ING

BE

GA

N (

UN

ITS

/M

ON

TH

LY

)

Source: Delta Associates; April 2013.

Philadelphia Metro Average

Note: Data is as of 1st quarter each year.

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2005 2006 2007 2008 2009 2010 2011 2012 2013

CONCESSIONS FOR CLASS A APARTMENTS Philadelphia Metro Area

CO

NC

ES

SIO

N A

S A

%

OF

FA

CE

RE

NT

Source: Delta Associates; April 2013.

DEMAND AND SUPPLY PROJECTIONS Philadelphia Metro Class A Apartments | Mar. 2013—Mar. 2016

Source: Delta Associates; April 2013.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

P H I L A D E L P H I A M E T R O

Net Absorption: 1,500/Year = 4,500 units

Demand

Supply

Under construction and planned and may deliver by 3/16: 4,080 units

MA

RK

ET

RA

TE

UN

ITS

IN

T

HO

US

AN

DS

ANNUAL CLASS A APARTMENT RENT GROWTH Philadelphia Metro | 2001 - 2016

-10%

-5%

0%

5%

10%

15%

Long-Term Average = 3.0 %

Source: Delta Associates; April 2013.

% E

FF

EC

TIV

E R

EN

T G

RO

WT

H

* Annual rent growth as of Q1

FOCUS ON CENTER CITY

CENTER CITY BOUNDARIES

Source: ESRI, Delta Associates; April 2013.

50%

19%

10%

21%

RENTAL HOUSING BY PROPERTY TYPE Center City Philadelphia | 2012

Source: Dr. Kevin Gillen, Delta Associates; April 2013.

Total Units: 40,676 Apartments

Condos

Other

Singles and Towns

0

100

200

300

400

500

600

700

800

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

CLASS A APARTMENT UNIT STARTS Center City | Q2 2011 - Q1 2013

Source: Delta Associates; April 2013.

# O

F C

LA

SS

A M

AR

KE

T R

AT

E U

NIT

S

Annual Average = 1,057

2011 2012 2013

APARTMENT DEVELOPMENT PIPELINE Center City Philadelphia

Source: Delta Associates; April 2013.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Historic Average Q4 2012 Q1 2013

Planned

Under Construction

UN

ITS

IN

36

MO

NT

H P

IPE

LIN

E

PROJECTED DELIVERIES Projects Currently Under Construction in Center City

Source: Delta Associates, April 2013.

0

100

200

300

400

500

600

700

800

900

Q2 Q3 Q4 Q1 Q2 Q3 Q4

2013 2014

NU

MB

ER

OF

CL

AS

S A

M

AR

KE

T

RA

TE

UN

ITS

DEMAND AND SUPPLY PROJECTIONS Center City Class A Apartment Market | Mar. 2013—Mar. 2016

Source: Delta Associates, April 2013.

0

500

1000

1500

2000

2500

3000

C E N T E R C I T Y

Net Absorption: 900/Year = 2,700

D E M A N D

S U P P LY

Under construction: 1,749 units

Total: 2,830 units

MA

RK

ET

RA

TE

UN

ITS

IN

T

HO

US

AN

DS

Planned and may deliver by 3/16: 1,081 units

COMPETE WITH SUPERIOR MANAGEMENT, MARKETING, AND DESIGN

• Pet-centric amenities: pet care center, dog-walking area

• Interactive media station in club room and electronic concierge notification system

• Built-in audio system

• Flexible furniture, movable islands, to max small unit size

• Bike storage, bike/car sharing infrastructure

• Outdoor living space to extend summer season: movie screen, screened-in porch, firepit, etc.

Source: Delta Associates, April 2013.

S U C H A S :

FEATURED PROJECTS

EDGEWATER

Source: Realen, Bozzuto Management, Delta Associates; April 2013.

Source: PMC Property Group, Delta Associates; April 2013.

2040 MARKET

Source: The John Buck Company, Delta Associates; April 2013.

2116 CHESTNUT