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What Do the Capital Markets Tell Us About Prospects for Lending and Investing? Brian Ward, President, Capital Markets |

Dorothy Jackman, Managing Director, Student Housing Group | September 30, 2014

Confidential – Colliers International 2014

U.S. Economic Landscape

U.S. GDP grew by 4.2% during the second quarter

GDP

-2.1 %

4.2 %

3.00 %* 2.95 %*

3.00

2.00

1.00

0.00

1.00

2.00

3.00

4.00

5.00U.S. Gross Domestic Product Growth Rate & Forecast

Source: IHS Global, Bloomberg2



The inflation rate is expected to increase 0.19 basis points from 2014-2018 to 2.57%

Inflation Rate vs. Wage Growth

Source: IHS Global

2.38 %2.57 %

1.20 %1.34 %

0.00

0.50

1.00

1.50

2.00

2.50

3.00

2008 2009 2010 2011 2012 2013 2014 2015* 2016* 2017* 2018*

Core Consumer Price Index (Excludes Food & Energy) vs. Employment Cost Index

Core Consumer Price Index (Excludes Food & Energy) Employment Cost Index - Private-Sector Wages & Salaries

3


U.S. Economic LandscapeDavid McWilliams’ Thesis: Blue = Wage Growth; Red = Inflation

Source: Federal Reserve Bank St Louis4



2.5 million jobs are projected to be added this year with an additional 2.7 million in 2015

Job Growth

Source: IHS Global

1Q09 -753,444

2Q14 255,111

-1,000

-800

-600

-400

-200

0

200

400

Average Change in Total Nonfarm Payrolls (Forecast) (in thousands)

5


U.S. Economic LandscapeJob Growth

Source: US BLS6



Unemployment for those ages 25 to 34 is 8.7% for High School Graduates compared to 3.9% for College Graduates

Unemployment Rate – Ages 25 to 34

Source: Bureau of Labor Statistics

8.7 %

3.9 %

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Unemployment Rate Age 25 to 34 High School Graduate vs. College Graduate

(Not Seasonally Adjusted)

High School Graduate 25-34

College Graduate (Bachelor's) 25-34

7


College Landscape

Student loan debt accounts for 10% of

all consumer debt and 10.9% of

aggregate student loan debt is 90+

days delinquent or in default.

Compared to mortgage delinquency

accounting for 3.4% during 2Q14.

Student Loan vs. Consumer Debt

8


College LandscapeAffordability

9


College Landscape

In 2012, the median of earnings for young adults with a bachelor's degree was $46,900, while the median was $22,900 for those without a high school credential and $30,000 for those with a high school credential. In other words, young adults with a bachelor's degree earned more than twice as much as those without a high school credential (105 percent more) and 57 percent more than young adult high school completers. *National Center for Education Statistics

Educational Attainment & Income Potential

Educational Attainment & Unemployment RateThose who earned a Bachelor’s degree have median weekly earnings of $1,108 and an unemployment rate of 4.0% compared to those that only attained a high school diploma who have a median weekly earnings of $651 and an unemployment rate of 7.5% *Bureau of Labor Statistics

10


Capital Markets

Student housing has a cap rate long term average of 6.93% while the 10-Year Treasury long term average is 2.82%

Student Housing Cap Rate Trends

Source: Real Capital Analytics & IHS Global

2008 2009 2010 2011 2012 2013 2014SH Cap Rates 7.13% 7.43% 7.09% 7.02% 6.57% 6.69% 6.58%MH Cap Rates 6.39% 6.81% 6.66% 6.34% 6.19% 6.23% 6.40%10-yr Treasury 3.67% 3.26% 3.21% 2.79% 1.80% 2.35% 2.68%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

Average Cap Rate vs. 10-Year Treasury

11


Capital Markets

From Q2-13 to Q2-14 SH & MF interest rates have had a difference of ±15 bps

Multi Family Interest Rates vs. Student Housing Interest Rates

Source: Real Capital Analytics

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

6.50%

7.00%

7.50%

8.00%01

Q1

01Q

302

Q1

02Q

303

Q1

03Q

304

Q1

04Q

305

Q1

05Q

306

Q1

06Q

307

Q1

07Q

308

Q1

08Q

309

Q1

09Q

310

Q1

10Q

311

Q1

11Q

312

Q1

12Q

313

Q1

13Q

314

Q1

Student HousingMulti-Family

12


Student Housing – Buyer Profiles

Private buyers represent 67% of 09/2014 YTD reported sales

Who is buying?


OT 0%

PR 26%

REIT 53%

CB 2% IN 19%

2012

OT 2%

PR 51%

REIT 11%

CB 6%

IN 30%

2013

OT 7%

PR 67%

REIT 6%

CB 0%IN 20%

2014 (09/2014 YTD)

Private (PR) Cross-Border (CB) Institutional (IN) Public Listed/REIT (REIT) Other (OT)

13


Student Housing – Sales Profile

YTD the Southeast Region has seen the greatest amount of reported sales volume at $549.3M

Where is the capital flowing?


$252.4 $490.6$957.1

$97.0 $326.8 $236.2

$504.6

$1,120.9

$1,066.2

$195.5

$875.0

$146.7

$276.0

$629.5

$754.2

$329.2

$658.6

$215.0

$136.6

$134.7

$549.3

$276.3

$171.5

$200.3

West Southwest Southeast Northeast Midwest Mid-Atlantic

Total Regional Sales Volume $ (mil)2011 2012 2013 2014 (09/2014 YTD)

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Student Housing – Sales AnalysisYoY Transaction Comparison

Total Transactions 200

Total Beds 64,729

Total Units 27,774

Average $/Bed $61,175

Average $/Unit $145,429


Total Beds 29,581

Total Units 12,413




Total Beds 57,486

Total Units 24,183



2012-$3,908.9 B 2013-$2,862.6 B 2014 YTD-$1,468.7B

Source: Real Capital Analytics15


Student Housing – Regional Sales Analysis2014 YTD Transactions

Total Transactions - 94

Source: Real Capital Analytics16


Student Housing - Development Map 2014 YTD Developments

Source: Dodge Report17


Student Housing – Development Analysis

11,845

9,721

7,492

13,564

2,7633,501

4,274

2,2542,763 2,396

1,926

4,149

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2011 2012 2013 2014

PRE-PLANNING/PLANNING

UNDERWAY

COMPLETED

YoY National Development

Source: Dodge Report18


Student Housing – Population & EnrollmentPopulation & Enrollment Comparison

Sources: Axiometrics Inc., Census, NCES

US Dept. of Education projects higher institution enrollment will increase to 24,075,000 by 2020.

-

5.0

10.0

15.0

20.0

25.0

30.0

(Mill

ions

)

Total Enrollment US Population (ages 14-17)

19


Student Housing – University Snapshot

Rank Institution City, State Enrollment Fall 2002

Enrollment Fall 2012

Increase

1. City U. of NY Graduate Center New York, NY 3,874 6,812 75.8%

2. Texas Woman’s U. Houston, TX 8,694 15,168 74.5%

3. Texas A&M U. at Kingsville Kingsville, TX 6,556 11,350 73.1%

4. U. Of Alabama Tuscaloosa, AL 19,584 33,503 71.1%

5. Arizona State U. Tempe, AZ 47,359 73,378 54.9%

6. U. of Central Florida Orlando, FL 38,501 59,601 54.8%

7. U. of Arkansas at Fayetteville Fayetteville, AR 15,995 24,537 53.4%

8. Colorado School of Mines Golden, CO 3,787 5,721 51.1%

9. U. of Texas at Dallas Dallas, TX 13,229 19,727 49.1%

10. Missouri U. of Science and Tech Rolla, MO 5,240 7,645 45.9%



Increase

1. California State U. Long Beach, CA 630 4,920 681.0%

2. Florida Gulf Coast U. Fort Myers, FL 5,109 13,445 163.2%

3. U. of Washington at Bothell Bothell, WA 1,636 4,172 155.0%

4. U. of West Alabama Livingston, AL 2,002 4,943 146.9%

5. Thomas Edison State College Trenton, NJ 9,225 20,606 123.4%

6. Fort Hays State U. Hays, KS 6,392 13,310 108.2%

7. U. of Houston - Victoria Victoria, TX 2,183 4,335 98.6%

8. Texas A&M International U. Laredo, TX 3,723 7,213 93.7%

9. Arkansas Tech U. Russellville, AR 4,744 10950 87.0%

10. U. of Washington at Tacoma Tacoma, WA 2,111 3,919 85.7%

Public Doctoral Institutions Public Masters Institutions

Top 10 Fastest Growing Colleges

Source: Chronicles of Higher Education20




Increase

1. River Parishes Community College Sorrento, LA 585 3566 509.6%

2. Northwest Louisiana Tech. College

Shreveport, LA 593 2633 344.0%

3. Bluegrass Community and Tech.College

Lexington, KY 3055 13218 322.7%

4. Northshore Tech. College SullivanCampus

Bogalusa, LA 766 3111 306.1%

5. Minnesota State Community and Tech. College

Fergus Falls, MN 1739 6786 290.2%

6. Treasure Valley Community College

Ontario, OR 701 2688 283.5%

7. Acadiana Technical College Lafayette, LA 928 3548 282.3%

8. South Louisiana Community College

Lafayette, LA 1073 4015 274.2%

9. Saint Louis Community College at Forest Park

St. Louis, MO 7610 26603 249.6%

10. Metropolitan Community College Omaha, NE 5802 20141 247.1%

Public 2-Year Institutions

Student Housing – University SnapshotTop 10 Fastest Growing Colleges

Source: Chronicles of Higher Education21


“Red Flag” Markers• Loan defaults could accelerate• Increase in tuition and fees• Potentially rapidly rising interest

rates• Significant development pipeline yet

to be delivered

Student Housing – Key Markers

Positive Markers• Increase in GDP• Increase in job growth• Percentage of college grads lower

unemployment rate• College grads demonstrate higher earning

power/motivation• SH & MF cap rate spread narrowing• SH & MF interest rates nearing parity• Population growth ages 14-24• More HS grads electing to pursue degrees

22


485 offices in63 countries on6 continents

United States: 146 Canada: 44Latin America: 25Asia Pacific: 186EMEA: 84

$2.1billion in

annual revenue

1.46billion square feet

under management

15,800professionals

and staff

23

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