1

MarylandCommunity Development Fund

Assessing the Market

2

Maryland Fund Targeted Goals

Affordable housing for workforce populations, closer to jobs

Mixed-use, mixed-income transit-oriented development

Inclusionary and balanced community policies Regeneration of low-mod and urban communities

Housing Job places Commercial services

3

Address Market Imperfections

Risk bias in markets Geographic areas Price points Transaction size Land use/development types

High transaction costs for return and volume Lack of market knowledge Redevelopment Brownfields/greyfields Tenant/buyer financial sophistication Inexperienced, undercapitalized developers

4

What Are Investors’ Financial Goals?

Rate of return hurdles Exit strategy for capital Double-bottom line returns Sufficient deal flow

5

Market Fundamentals

Economic base and growing industry clusters Job generation by location and wage

“Economic shed” Household formation by income, type & tenure Commercial buying power Development trends & performance Quality of existing stock

6

Market Analysis Framework: Start with Region

Jobs

Supportable Households by Type

Employment Land Demand

Buying Power

Commercial Demand

Housing Demand

Migration

Changing Demographics

7

Target Area Capture

Regional Demand

Capture

Aggregate Value

Equity Demand

8

Maryland Economies

Baltimore City Anne Arundel County Baltimore County Howard County Montgomery County Prince George’s County Balance of State

9

Capture Rate Factors

Regional growth patterns Product segmentation Existing share of total demand vs. share of recent

growth Competition & their future capacity Comparables performance Infrastructure, services, and amenities Location, location, location

10

Opportunities in

Low/Mod Markets

11

Lower Average Incomes

Economics Research Associates

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

Neighborhood Community Region

2000

12

But Comparable Middle-Incomes

Economics Research Associates

0%

10%

20%

30%

40%

50%

60%

70%

Low Middle High

Target AreaRegion

13

Translates Into Sizeable Buying Power

Economics Research Associates

$0

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

Neighborhood Community Total

14

Low, Mod, Mid Tracts in Baltimore Metro

15

Low, Mod, Mid Tract in Maryland’s DC Metro

16

Low, Mod, Mid Tracts in MD

17

Market Influences –Policy Environment

Does planning policy direct growth to core areas? Are regional transportation plans linking jobs to

workforce? Is government investment supportive? Does land use policy support desired

development? Are communities supportive?

18

Market Influences –Development Capacity

Are there capable developers? Are there other equity and debt financing

sources to leverage? Is land available and at a feasible cost? Is fund’s cost of capital competitive?

19

Tale of Two Markets

Growth Region Job growth Strong household

formation Regional supply shortage Growing aggregate

buying power Public capital for

facilities and services

Stable or Declining Region Limited or negative job

growth Few net new households Regional supply surplus Stable or declining buying

power Lack of public capital for

facilities and services

20

Tale of Two Markets

Growth Region Direct growth Serve emerging niches Add & improve stock

Re-cycled housing supported

Demand supports new supply absorption and appreciation

Stable or Declining Region Abate dis-investment Serve unmet preferences Replace & improve stock

Limits to re-cycling housing New supply redirects

demand winners and losers

21

Potential Equity Demand

$0

$300

$600

$900

$1,200

$1,500

$1,800

$2,100

0-80% AMI 80-120%AMI

0-120%AMI

2004-2014

millions

Housing

Comm/Ind.

Total