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APARTMENT MARKET DATA, LLC

20475 Hwy. 46 West, Suite 180 - PMB 416 Spring Branch, Texas 78070 (210) 530-0040 (210) 340-5830 Fax

Market Analysis of the

Dallas-Plano-Irving Metropolitan Division

APARTMENT MARKETDATA REPORT

FUNDED BY:

Texas Dept. of Housing & Community Affairs 221 East 11th Street Austin, Texas 78701

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Market Study Certification Apartment MarketData, LLC, (AMD) certifies that the staff made personal inquiries and/or inspections of the markets studied and reported herein. This includes surveying existing rental developments for rent and occupancy information. Information presented in this report is true and accurate as of November 1, 2008. AMD presents this report as a disinterested third party without any current or future financial interest in any project under consideration in the study areas. AMD is under contract for this specific assignment and has no side deals, agreements, or financial considerations in connection with this assignment. Certified: Darrell G Jack President Staff members with contributions to this report include: Rick Proffer Kirt Shell Sue Harris Penny Anders Nichole Murray

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Table of Contents Certification Introduction page 4 Submarket C1 page 21

2.1 North of the Central Business District of the City of Dallas Submarket C2 page 102

3.1 North of the Central Business District of the City of Dallas Submarket C3 page 207 4.1 Southern portion of the City of Dallas Submarket E1 page 274

5.1 Eastern portion of the City of Dallas Submarket E2 page 357

6.1 Eastern boundary of the City of Dallas and includes portions of the cities of Mesquite and Balch Springs, a very small portion of Garland, and most of the Town of Sunnyvale Submarket NE page 424

7.1 Eastern portion of the City of Dallas Submarket NW1 page 498

8.1 Western portion of the City of Dallas Submarket NW2 page 567

9.1 Northwest portion of the City of Dallas Submarket W1 page 664

10.1 City of Irving Submarket W2 page 750

11.1 Western portion of the City of Dallas Submarket S page 832 12.1 Southern portion of the City of Dallas Submarket SE page 898 13.1 Southern portion of the City of Dallas Submarket SW page 962 14.1 Southern portion of the City of Dallas Submarket Frisco page 1032 Submarket Plano page 1109 Submarket 17.1 Collin County (Less Frisco & Plano Submarkets) page 1195 Submarket 18.1 Delta County page 1262 Submarket 19.1 Denton County page 1320 Submarket 20.1 Ellis County page 1419 Submarket 21.1 Hunt County page 1499 Submarket 22.1 Kaufman County page 1576 Submarket 23.1 Rockwall County page 1649 Summary Rent Analysis page 1714

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INTRODUCTION The purpose of this report was to evaluate the current rental housing inventory and assess the need for additional supply in the Dallas-Plano-Irving Metropolitan Division. This assessment is based upon the identification and analysis of submarkets within Dallas, Collin, Delta, Denton, Ellis, Kaufman, Hunt, and Rockwall counties. Mr. Michael Gerber of the Texas Department of Housing and Community Affairs initiated this study. SUBMARKETS The submarkets studied by this report were agreed upon by the staff at TDHCA and Apartment MarketData, LLC (AMD). The boundaries of a submarket may or may not reflect the demand draw applicable to a specific site. This is better left to a project specific market study. Where able, submarkets followed or combined already established boundaries reported by AMD. Originally, the submarkets reported by AMD were taken from the local apartments associations. PROPERTY SURVEYS To provide a statistical overview of the rental submarkets, AMD actively surveys and maintains a database of rent and occupancy information specific to individual apartment communities. The participation in our survey is done on a voluntary basis. If a property continually refuses to participate, it is removed from our active list. For urban areas, only properties with 99 units or more are surveyed. In rural areas, properties with 50+ units are included. Where possible, rents and occupancy levels are databased specific to individual floorplans. Only when a property is unable to provide detailed information are more general occupancy rates used. For the purpose of this report, some ZZZ apartment communities were surveyed. This accounts for more than ZZZ rental units within the larger study area. Our survey includes both Market Rate and Affordable communities actively leasing. These Affordable communities include both 9% and 4% LIHTC properties as well as those owned by local housing authorities. Throughout the report, the reader can identify Affordable communities by their designation as (LIHTC), (Bond) or (PHA). Summary information by submarket can be found within the body of this report. The submarkets are identified on the following map.

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FORMS OF CITY GOVERNMENT In Texas, there are three predominant forms of city government. Throughout the report, cities located within each submarket will be listed and the local form of government described. Additionally, any overlapping or shared responsibilities as they relate to housing issues with be discussed. Commission Form - The commission form of city government, also known as the Galveston Plan, was devised in Galveston in 1901 and became one of the three basic forms of municipal government in the United States. Under the commission plan, voters elect a small governing commission, typically five or seven members, on an at-large basis. As a group the commissioners constitute the legislative body of the city responsible for taxation, appropriations, ordinances, and other general functions. Individually, each commissioner is in charge of a specific aspect of municipal affairs, e.g., public works, finance, or public safety. One of the commissioners is designated chairman or mayor, but his function is principally one of presiding at meetings and serving in ceremonial capacities. Thus the commission plan blends legislative and executive functions in the same body. To a significant extent the commission plan served as a precursor to the popular council-manager form of city government. Mayor-Council Form - A mayor-council city government in Texas consists of a mayor and a number of council members or aldermen. The mayor is elected at large, and the aldermen may be elected at large but generally are chosen from wards or aldermanic districts. The mayor presides at council meetings and is the chief executive officer of the city. He is properly the head of the police force and the budgetary officer of the city. The council is the legislative agent; the proposals and appointments of the mayor are or may be subject to its approval. This form of city government has assumed two types in Texas. Both the weak mayor-council and the strong mayor-council are characterized by a mayor elected at large and a council elected either by wards, at large, or by a combination of the two. In the weak mayor-council type, the mayor is not a chief executive in the true sense. His powers are limited in appointments and removals, as well as veto, and there are a large number of elected officials and boards. Many legal powers of the council prevent him from effectively supervising city administration. None of the ten largest cities of Texas has this form. In the strong mayor-council form, the mayor has the power to appoint and remove most department heads, and only a few officials are elected. In addition, he prepares the budget for the council's consideration and has an effective veto power. In the early 1990s only Houston and El Paso had strong mayor-council governments. As of May 1991 most of the 1,175 incorporated Texas cities, towns, and villages used one of the two types of mayor-council government. In the 1990s this form of government continued to be the most popular in general-law cities and towns but steadily declined in

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favor among home-rule cities. Of the 286 home-rule cities in 1991, only thirty-one had the mayor-council form of city government. Council-Manager Form - The newest of the three major forms of city government, the council-manager form quickly gained acceptance among cities of all sizes and continued in 1994 to be the most popular form in American cities of more than 10,000 population. In Texas this form is even more dominant: 251 of the 290 home-rule cities in Texas operate with a city council as a policy body and a city manager as the chief executive-administrative officer of city government. The plan's original features included a mayor elected from among the city council members after all of them assumed office. The council was nearly always elected at large, received no pay, and spent little time at city hall. Today, in most council-manager cities, mayors are elected at large. Other council members may be elected at large, at large by place, or by district. In larger cities they spend a considerable amount of time on their city duties. The plan continues to be adopted yearly by a number of cities and dropped by few. Amarillo, the first city in Texas to adopt the council-manager form of government, abandoned its commission government for the new plan in 1913. In 1914 Taylor and Denton adopted the council-manager plan. By 1947 there were fifty-eight council-manager cities in Texas. Austin is the largest city in Texas that elects its city council at large by place. Austin also pays its mayor and council members a great deal more than, for instance, Dallas. The norm for Texas cities is token pay, consistent with the original concept of the council-manager plan, which placed policy responsibility in a part-time elected body, and management of the city's business in a professional city manager. Today, most city managers have graduate degrees in public or business administration and may be paid as much as $150,000 a year. The salary is partially in recognition of the stress under which managers operate, particularly in large cities. Managers serve at the pleasure of their city councils and sometimes must bear the brunt of attacks that sometimes should be levied against the governing body. Because of this, contracts and severance agreements are becoming more prevalent. Under these, if a manager is involuntarily dismissed, he receives a specified amount of termination pay. SOURCES Apartment MarketData, LLC used a variety of outside sources to gather and confirm data used in our analysis. These sources included the following.

MapInfo Demographics Ribbon Demographics HISTA Data (Demographics) North Central Texas Council of Governments Property on-site Staff Local planning and building official Local Housing Authority representatives

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U.S. Department of Housing and Urban Development (HUD) U.S. Department of Labor

LIMITING CONDITIONS Apartment MarketData, LLC (AMD) has relied on a variety of outside sources to create this report. While considerable effort has been made to insure the accuracy of this information, 100% accuracy can not be assured. AMD is not responsible for errors or omissions in data provided by outside sources. WORK MADE FOR HIRE Apartment MarketData, LLC was contracted by the Texas Department of Housing and Community Affairs (TDHCA) to perform this assignment. All work developed herein is the exclusive property of the State of Texas. METHODOLOGIES The forecasting methodologies used within the body of the report are explained in detail here, in order to save time and space within the report. The calculations and conclusions will be summarized by submarket in table format. Housing Demand Methodologies In forecasting housing demand, the unit of measure is the number of households. Thus, each household occupies or needs one housing unit, the basic unit of supply. Once we arrive at the number of households within a submarket, we then look to demographic data to indentify subgroups within that population. These subgroups include home owners, renters, seniors, etc.. For the purposes of this report, three different methodologies were employed to forecast the growth of households. These methodologies are as follows:

Household Growth Demographic Data Household Growth HISTA Data Employment Growth Methodology

As you will see from the following examples, the three methodologies sometimes have very different results. The overall objective of having three forecast methodologies is to determine which best represents what we know to be occurring in the submarket. The three results, as well as the analysis of historical absorption, are used to draw a conclusion of the submarket.

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Household Growth Methodology Demographic Data The Household Growth Methodology uses changes in the population and household formation to project future housing demand. Using base line census data (2000 census), we compare the number of households forecasted to historical census data. The change between these numbers determines the extent to which additional housing units are needed. To this end, we use the following calculations to determine the future demand for housing. Forecast Population = Forecast Number = Forecast Units of Forecast average of Households Demand household size

Forecast Units of Demand x Percentage of Tenure Owner

= Owner Housing

Forecast Units of Demand x Percentage of Tenure Renter

= Renter Housing Household Growth Methodology HISTA Data For this report, we utilized a second source of demographic data from Ribbon Demographics. You will see this set of demographic information referred to as HISTA Data. HISTA Data comes from a custom four-way cross tabulation of household data designed specifically for affordable housing analysis that has been built by Claritas. It contains actual Census cross tabulations not extrapolations of SF3 data. The key to this data is that it gives us the number of households by household size by income by age grouping (i.e.

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Example Household Growth Demand Again, for space savings the following chapters will report these calculations in summary fashion. The following example is provided so that the reader may understand and independently verify the conclusions contained within this report. The following tables represent the household growth forecast for renters.

RENTER HOUSEHOLDS BY INCOME BY HOUSEHOLD SIZE

RENTER TENURE - ALL HOUSEHOLDS

2007 1 Person 2 Person 3 Person 4 Person 5+ Person Total

Households < $10K 1,275 326 250 173 182 2,206$10K-20K 1,283 473 421 412 299 2,889$20K-30K 1,445 833 646 449 507 3,879$30K-40K 1,470 1,008 743 534 589 4,344$40K-50K 964 821 594 578 516 3,473$50K-60K 465 655 668 480 402 2,671$60K+ 922 1,989 1,726 1,455 1,381 7,472TOTAL 7,824 6,106 5,049 4,080 3,876 26,935

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RENTER HOUSEHOLDS BY INCOME BY HOUSEHOLD SIZE

RENTER TENURE - ALL HOUSEHOLDS

2012 1 Person 2 Person 3 Person 4 Person 5+ Person Total

Households < $10K 1,324 295 206 156 155 2,135$10K-20K 1,312 392 368 374 246 2,692$20K-30K 1,417 729 551 376 432 3,504$30K-40K 1,469 887 662 470 532 4,019$40K-50K 1,103 805 586 561 497 3,553$50K-60K 534 670 696 498 424 2,822$60K+ 1,233 2,329 2,103 1,744 1,623 9,031TOTAL 8,392 6,107 5,172 4,177 3,909 27,757

RENTER HOUSEHOLDS BY INCOME BY HOUSEHOLD SIZE

RENTER TENURE - ALL HOUSEHOLDS Change 2007 - 2012 1 Person 2 Person 3 Person 4 Person 5+ Person TOTAL < $10K 49 -31 -44 -18 -27 -71$10K-20K 29 -81 -53 -38 -53 -196$20K-30K -28 -104 -95 -73 -75 -375$30K-40K -1 -121 -81 -64 -57 -325$40K-50K 139 -16 -8 -17 -18 80$50K-60K 70 15 27 17 21 150$60K+ 311 340 377 289 242 1,559TOTAL 568 1 122 97 33 822 HISTA Data provides similar forecasts by income by age group. The following data tables represent the forecast growth of owner households for the same NE submarket.

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HISTA DATA OWNER HOUSHOLDS - 2007

RENTER HH TOTAL 2007 Age

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OWNER HOUSHOLD GROWTH 2008 to 2012

RENTER HH TOTAL 2008 2012 Age

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Dallas - Plano - Irving MDEmployment Growth

1.50%1.64%

1.91%1.45%

1.36%

0.1%1.3%

2.8%3.5%

3.0%3.5%

4.5%2.6%

3.1%0.6%0.7%

-0.7%-0.3%

1.8%2.2%

2.3%1.3%

-1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00%

This ReportYTD

3 Year5 Year

10 Year

19911992199319941995199619971998199920002001200220032004200520062007

Next, we delineate a communitys commercial employment sectors into two categories basic and non-basic employment. Basic activities are those that sell (export) a large portion of their products and services to non-local customers, thereby bringing new dollars into the local economy. Non-basic firms sell primarily to local customers and the money generated is kept within the local economy. The non-basic sector re-circulates dollars which are already within the community. The theory we use within our analysis holds that increases in demand for the products and services of the basic sector cause the basic industries to employ more people. When this happens, the non-basic sector must expand to meet the needs of the expanded labor force in the basic industries. Thus occurs an increase in demand for housing units, retail, and office space, resulting from the increase in the number of employed persons. The resultant is an increase of the general population, employment and economic wealth of the macro-market area. Therefore, local buying power increases. Here we will use the economic base to determine population growth and therefore demand for housing. The objectives of the economic base analysis are:

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To identify businesses that bring new dollars into the local economy and measure employment in these businesses.

To forecast growth of employment in the basic industries. To forecast growth of total employment.

To forecast growth of the population and households within in the submarket.

Our methodology utilized to identify the economic base of the market area is to use a indirect analysis of identifying base employment through calculating the location quotient. This is a quick method for judging which industries are basic locally when compared to the state economy. The quotient represents the ratio of local employment percentage in certain industries to the state percentage in the same industries. If the local percentage is greater than the state percentage, that portion of the industrys employment that exceeds the state percentage is likely to be basic in the local economy. A basic employment industry in a community will create population growth which will then create a need for housing units. Historical employment growth is a leading indicator of population and household growth, and housing demand increases. This indicator is more reliable than others in areas that are experiencing significant growth. This is because other projections typically utilize straight-line estimates, based on prior historical data, rather than current employment information. The formulation used to determine the demand for housing using this technique is as follows:

(A) Forecast Of Basic Employment x Total Employment x Total Population = Forecast 1 Basic Employment Total Employment Pop.

(B)

Forecast Population = Forecast Households Forecast Household Size

(C) Forecast Household x Forecast Percent Tenure Renter = Forecast Rental Unit Demand

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Determining the Location Quotient The following represents the employment base of the submarket by category, and is used to analyze the non-basic and basic employment of the sub-market in comparison to the Texas averages. It represents the profile in relation to the type of employment. The table identifies the employment industries that represent basic employment to the primary market area. Further analysis of the relative concentration in each industry will in turn help identify future growth and the requirements for additional housing.

Employment by Primary Market Texas Industry 2007 # of # of Location Trade Area - NE Employees Percent Employees Percent Quotient

Agri./Forestry/Fishing 801 0.9% 86,312 0.9% 1.06Mining 33 0.0% 139,985 1.4% 0.03Construction 6,607 7.6% 498,195 5.0% 1.51Manufacturing 13,874 16.0% 791,894 8.0% 2.00Trans./Comm./Pub. Util. 2,350 2.7% 465,247 4.7% 0.58Wholesale Trade 5,902 6.8% 539,849 5.4% 1.25Retail Trade 19,185 22.1% 2,176,577 22.0% 1.01Fin./Ins./Real Estate 3,871 4.5% 688,254 6.9% 0.64Services 27,761 32.0% 3,909,183 39.5% 0.81Government 5,444 6.3% 557,590 5.6% 1.12Unclassified 895 1.0% 53,088 0.5% 1.93 The industries which are basic to the economy are those that have a location quotient greater than 1.0. If the location quotient of the industry is 1.0 or less, it is assumed that 1) the production of goods or services from that industry is sufficient to meet the needs of the area, and 2) the number of employees that are employed is also adequate to meet the demand for the goods and services. These are, by definition, non-basic employees and employers. In that the location quotient helps identify the basic industries in the local economy, the above table reflects the following in regard to basic employment within the sub-market area: There is a positive Location Quotient in Agriculture/Forestry/Fishing, Construction, Manufacturing, Wholesale and Retail Trade, Government, and Unclassified. All of these categories have a location quotient greater than 1.0, indicating these industries are basic to this submarket, and that these industries, and their size, relative to state averages, will drive the population growth of the submarket.

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Determining the Number of Basic Employees The portion of the location quotient that exceeds 1.0 represents the proportion of employees who are engaged in producing that excess. These are considered the basic employees; the employees that serve as a base for future tenancy. The following formula calculates the number of basic employees:

Location Quotient 1.0 = Percent of Basic Employees in Industry Location Quotient

Total Employees in Industry x Percent of Basic Employees = Number of Basic Employees

Utilizing the above formula, we can calculate the total number of basic employees in the area.

Basic Industries # of Basic Employees Agri./Forestry/Fishing 45 Construction 2,246 Manufacturing 6,941 Wholesale Trade 1,176 Retail Trade 130 Government 563 Unclassified 430 Total 11,531

Determining the Economic Base Multiplier

It is estimated that an increase in basic employment will cause an increase in total employment, with attending growth in population and disposable income. Therefore, we can forecast growth in basic employment to forecast the changes in population and the changes in household demand using a technique known as the economic base multiplier. The Economic Base Multiplier is the ratio of total employment to basic employment. Thus, we calculate the Economic Base Multiplier to forecast future employment growth and the resulting demand for housing.

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Economic Base Multiplier Total Population in the Market Area 291,919 Total Employment in the Market Area 86,723 Total Basic Employment 11,531 5 Year Adjusted Forecast of Basic Employment 12,396 The EB Multiplier 7.521 Forecasting Total Employment

Utilizing the economic base multiplier, we are able to calculate the total future employment for the target market area. Forecast of Basic Employment x EB multiplier = Forecast of Total Employment 12,396 x 7.521 = 93,227

Forecasting Housing Demand 2012 Population Projection - 2007 Population Estimate = Change In Population 313,813 - 291,919 = 21,894

Average household size = 3.10

Change in # of Households 2008 to 2012 = 7,060

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Change in HH's 7,060 % of Owners 74.2% Additional Home Ownership Demanded 5,240 Change in HH's 7,060 % of Renters 25.8% Additional Rental Units Demanded 1,820

Applying the Employment Growth Methodology to the employment and demographic information, it can be assessed that the NE submarket will require an additional 5,240 owner occupied homes and 1,820 additional rental units over the five year period studied.

FORECAST APARTMENT HOUSEHOLD DEMAND TABLE

YEAR 2008 2009 2010 2011 2012 Owner Demand 1,048 1,048 1,048 1,048 1,048 Renter Demand 364 364 364 364 364

Comparison of Results We see that the three methodologies can have very differing results. From the table below, the results for home ownership are fairly consistent, while the results for rental units vary greatly. In an example as this, we would look to see how many rental units have been absorbed historically before we would draw any conclusions.

HH Growth - Demographics

HH Growth - HISTA Data

Employment Growth

Historical Absorption

Owner Demand 1,088 900 1,048 Renter Demand -19 164 364 130

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Based on the historical absorption of rental units (to be discuss later), we would assess that the Household Growth taken from the HISTA Data is likely to be the most accurate in estimating the demand for additional rental units. Other Considerations in Forecasting Housing Demand Often there are additional considerations the market analyst must evaluate before drawing any conclusion. These can include job announcements or lay-offs, mortgage interest rates, housing stock, or others. One demographic trend across the state has been an increasing percentage of home ownership. However, the recent sub-prime lending crisis is causing economists and demographers to reevaluate this trend. Across the state we have seen a greater percentage of home foreclosures. This has led to an increasing number of households turning to rental housing. The short-term result is an increasing occupancy among rental units. The long-term result is still unknown, and will depend upon whether the foreclosed homes are purchased by investors or home owners.

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2.1 - SUBMARKET DESCRIPTION 2.1.1 - Submarket C1 2.1.2 - Local Government 2.1.3 - Area School Districts

2.1.4 - Development Patterns and Trends 2.1.5 - Community Services and Infrastructure (Map) 2.1.6 Population Density Map

2.2 - DEMOGRAPHIC CHANGES FORECASTING GROWTH

2.2.1 - Population and Household Trends - MapInfo 2.2.2 - Population and Household Trends HISTA Data

2.2.3 - Population and Household Trends Employment Growth 2.2.4 - Comparison of Results 2.2.5 Senior Household Data 2.2.5.1 - Population and Household Trends - MapInfo

2.2.5.2 - Population and Household Trends HISTA Data

2.3 - EMPLOYMENT DATA 2.3.1 - Employment Statistics of the Dallas Area 2.3.2 - Major Employers 2.3.3 Employment by Industry

2.4 - DEMOGRAPHIC PROFILE 2.4.1 Age and Tenure 2.4.2 - Household Size 2.4.3 - Income 2.4.4 Renter Tenure by Income 2.4.5 Population Distribution by Race

2.4.6 Educational Attainment 2.4.7 Demographics Summary

2.5 HOUSING SUPPLY ANALYSIS 2.5.1 Cost of Home Ownership 2.5.2 Overview of the Rental Market 2.5.3 Turnover of Rental Units 2.5.4 Age and Condition of Existing Rental Communities 2.5.5 Project Amenities 2.5.6 Inventory of Existing Low Income Housing Tax Credit Properties

2.6 HOUSING CHOICE VOUCHERS

2.6.1 Waiting Lists for Affordable Housing 2.6.2 Condition and Redevelopment Plans for PHA Housing 2.6.3 Rental Housing with Significant Code Violations

2.7 HISTORICAL ABSORPTION 2.7.1 Recent Absorption

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2.8 NEW CONSTRUCTION

2.9 ANAYLSIS OF RENTAL RATES 2.9.1 Comparison of Market Rents to Max. Program Rents 2.9.2 Housing Supply by Population Served and Target Population 2.9.3 Summary of Findings

2.9.3.1 Summary (0 30% AMI) 2.9.3.2 Summary (31 40% AMI) 2.9.3.3 Summary (41 50% AMI) 2.9.3.4 Summary (51 60% AMI) 2.9.3.5 Summary (61 80% AMI) 2.9.3.6 Summary (81 100% AMI)

2.10 SUMMARY HOUSING SUPPLY ANALYSIS 2.11 ANALYSIS OF DEMAND METHODOLOGIES

2.11.1 - Detailed Analysis of Demand by Income Group 2.11.1.1 - Overburdened Household Demand

2.11.1.2 - Overcrowded Household Demand 2.11.1.3 - Substandard Housing Demand

2.11.2 - Household Growth Demand 2.11.3 - Strict Need Methodology Total Demand 2.11.4 - Turnover Demand 2.11.5 - Traditional Demand Methodology Total Demand

2.12 SENIOR HOUSING DEMAND 2.12.1 - Detailed Analysis of Senior Demand by Income Group

2.12.1.1 - Overburdened Senior Household Demand 2.12.1.2 - Overcrowded Senior Household Demand 2.12.1.3 - Substandard Housing Senior Demand

2.12.2 - Household Growth Demand 2.12.3 - Strict Need Methodology Total Demand 2.12.4 - Turnover Demand 2.12.5 - Traditional Demand Methodology Total Demand

2.13 SPECIAL NEEDS HOUSING

2.14 CAPTURE RATE ANALYSIS TOOL FOR DEVELOPERS

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2.1 - SUBMARKET DESCRIPTION

2.1.1 - Submarket C1 The C1 submarket exists within the Central Business District of the City of Dallas. The area of the submarket is 36.3 square miles. The boundaries were based upon boundaries previously established by the local apartment association. These boundaries approximately follow as such:

North: Northwest Parkway East: White Rock Creek South: Trinity River / CF Hawn Fwy. West: Roland Ave / Dallas North Tollway / IH 35

2.1.2 - Local Government A largest portion of the C1 submarket lies within the city limits of the City of Dallas. Dallas is a Home Rule City that employs the council-manager form of government, with City Council members elected by single-member districts. The submarket also falls within the County of Dallas. The county is governed by a Commissioners Court. The county is divided into four districts, and the voters of each district elect a commissioner to serve a four-year term. All the voters of the county elect the county judge to a four-year term.

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Other smaller portions of the submarket lie within the following cities. The cities conduct their business through the following forms of government.

Dallas Council - Manager Highland Park Mayor - Council University Park Council - Manager

2.1.3 - Area School Districts The majority of the submarket is located within the Dallas Independent School District (DISD). Other smaller portions lie within the Highland Park ISD.

Dallas ISD Highland Park ISD

The map on the following page illustrates the locations of all public schools within the submarket.

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2.1.4 - Development Patterns and Trends In addition to a revitalization of the Dallas Central Business District, a significant portion of Dallas employment growth has been and is occurring in the northern quadrant of the city along U.S-75, the Dallas North Tollway, and I.H.-35. There is also growth occurring on the east side of the city along I.H. 30 and I.H. Loop 635. The C1 Submarket is one of the fastest growing multi-family construction areas in the Dallas area. There are presently eleven new projects under construction totaling more than 3,400 units. Many of these projects are being built in place of older apartments that have been demolished in recent years. As a result, this submarket is going through a substantial revitalization as older projects are replaced with luxury single-family, townhomes, and rental units. This submarket includes downtown Dallas, the Victory Park area, Uptown, Oak Lawn, and West Village. The residential growth is also being complemented by significant new retail construction, including several mixed-use apartment & retail developments. 2.1.5 - Community Services and Infrastructure Maps illustrating the locations of transportation linkages and community services are on the following pages.

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DALLAS AREA RAPID TRANSIT (DART) MAP

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C1 SUBMARKET AMENITIES

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2.2 - DEMOGRAPHIC CHANGES FORECASTING GROWTH 2.2.1 - Population and Household Trends - MapInfo Since the 2000 census, the C1 submarket has seen an increase in the population of 5.7%. At the same time, the number of households increased by 1.3%. This is a direct result of the increasing population and an increase in the number of available housing units.

Population Households Owners Renters Renter Tenure

2012 Projection 220,211 90,201 40,109 50,092 55.5%2007 Estimate 211,028 88,658 36,772 51,886 58.5%2000 Census 199,673 87,556 31,952 55,604 63.5%1990 Census 186,872 80,704 28,772 51,932 64.3%1980 Census 195,412 85,566 32,124 53,442 62.5%

The MapInfo demographic trend suggests that the number of renter households will decrease by 1,794 (2008-2012), or 359 annually. At the same time, the number of home owners is expected to increase by 3,337 (2008-2012), or 667 annually. 2.2.2 - Population and Household Trends HISTA Data

Households Owners Renters Renter Tenure

2012 Projection 88,697 31,465 57,233 64.5% 2007 Estimate 87,699 31,653 56,046 63.9% 2000 Census 87,683 32,038 55,645 63.5%

The HISTA Data demographic trend suggests that the number of renter households will increase by 1,187, or 237 households annually. At the same time, the number of home owners is expected to decrease by 189 (2008-2012), or 38 annually.

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2.2.3 - Population and Household Trends Employment Growth

Population Households Owners Renters Renter Tenure

2012 Projection 226,855 95,307 39,729 55,579 55.5%2007 Estimate 211,028 88,658 36,772 51,886 58.5%

Applying the Employment Growth Methodology to the employment and demographic information, it can be assessed that the C1 submarket will require an additional 2,957 owner occupied homes and 3,693 additional rental units (2008-2012), or 739 rental units annually.

2.2.4 - Comparison of Results We see that the three methodologies can have very differing results. In an example such as this, we would look to see how many rental units have been absorbed historically before we would draw any conclusions.

C1 SUBMARKET ANNUAL FORECASTED GROWTH

HH Growth -

MapInfo HH Growth - HISTA Data

HH Growth - Employment

Historical Absorption

Owner Demand 667 -38 591 Renter Demand -359 237 739 628

Observations in the market hold that the number of renter households has increased since December 2004. Since this time, we estimate the submarket has absorbed at least 628 apartments units annually. With quantifiable data from the AMD database, we do not believe that the MapInfo or HISTA Data demographic models accurately reflect trends seen in the marketplace. This is because these models are based on the results of the 2000 Census. During the 1990s, this submarket saw numerous renters and homeowners leave for newer housing further north in Dallas, Richardson, and Plano. Relatively few new housing units were constructed during this time. Since 2000, numerous older units have been demolished and newer housing has been constructed in their place. As a result of the availability of new, high quality housing, and the closer proximity to downtown employment centers, thousands of households have moved back into the C1 submarket area.

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We believe that a reasonable number of new rental units could be absorbed by the increasing number of renter households. 2.2.5 Senior Household Data The same analysis can be done segregating senior households (age 55+) from the demographic mix.

2.2.5.1 - Population and Household Trends - MapInfo

Population Households Owners Renters Renter Tenure

2012 Projection 45,570 29,192 18,081 11,111 38.1%2007 Estimate 38,612 24,735 15,321 9,414 38.1%2000 Census 30,789 20,123 12,464 7,659 38.1%

The MapInfo demographic trend suggests that the number of senior renter households will increase by 1,696 (2008-2012), or 339 households annually. At the same time, the number of home owners is expected to increase by 2,761 (2008-2012), or 552 annually.

2.2.5.2 - Population and Household Trends HISTA Data

Households Owners Renters Renter Tenure

2012 Projection 26,003 14,952 11,051 42.5% 2007 Estimate 22,706 13,469 9,237 40.7% 2000 Census 22,293 13,331 8,962 40.2%

The HISTA Data demographic trend suggests that the number of renter households will increase by 1,814, or 363 households annually. At the same time, the number of home owners is expected to increase by 1,483 (2008-2012), or 297 annually.

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2.3 - EMPLOYMENT DATA 2.3.1 - Employment Statistics of the Dallas Area1 The current unemployment rate of 5.7% for Dallas County is slightly higher than the state average of 5.2%, but lower than the national average of 6.1%. Dallas economic activity picked up somewhat in April 2008. The metros business-cycle index rose 2.4 percent in April, following a 1.3 percent increase in March. Dallas employers added 2,600 jobs in total. For the first time in recent months, the goods-producing sector grew faster than the service-providing sector. The goods sector expanded by 4.5 percent, over four times the rate of services. Much of this growth was in construction employment, which expanded by 1,100 jobs (10.6 percent). Anecdotal reports suggest the increase in construction jobs is rooted in the nonresidential and multifamily sectors.2 2.3.2 - Major Employers3

Residents of the Dallas area work for a variety of employers. The following table lists some of the larger employers within the C1 submarket, followed by a chart representative of the employment by industry. EMPLOYEES NAME ADDRESS

5,225 BAYLOR UNIVERSITY MEDICAL CENTER 3500 GASTON AVE 3,225 SOUTHERN METHODIST UNIVERSITY 6425 BOAZ ST 2,400 SOUTHWESTERN BELL 208 S AKARD ST

2,000 CITY OF DALLAS - SANITATION SERVICES 3112 CANTON ST

1,900 CITY OF DALLAS 1500 MARILLA ST 1,900 DALLAS MORNING NEWS LP 508 YOUNG ST 1,800 LUMINANT ELECTRIC (FORMERLY TXU) 1601 BRYAN ST STE 37-142 1,800 PILGRIM'S PRIDE CORP 2411 FERRIS ST 1,559 AMERICAN AIRLINES CENTER 2500 VICTORY AVE 1,500 CITY OF DALLAS 5000 DOLPHIN RD 1,491 AFFILIATED COMPUTER SERVICES INC 3988 N CENTRAL EXPY 1,420 INTERNAL REVENUE SERVICE 1100 COMMERCE ST STE 1102 1,415 AFFILIATED COMPUTER SERVICES 2828 N HASKELL 1,370 ERNST & YOUNG LLP 2100 ROSS AVE STE 1500

1 U.S. Department of Labor (Sept. 2008) 2 Dallas Federal Reserve Hot Stats (June 2008) 3 North Central Texas Council of Governments (NCTCOG)

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EMPLOYEES NAME ADDRESS 1,312 CENTEX CORPORATION 2728 N HARWOOD ST 1,200 KPMG LLP 717 N HARWOOD ST 1,003 ENVIRONMENTAL PROTECTION AGENCY 1445 ROSS AVE #1200 1,000 7-11 (HEADQUARTERS) 1722 ROUTH ST STE 1000 1,000 BANK OF AMERICA 1201 MAIN ST STE 900 1,000 FED RESERVE BANK OF DALLAS 2200 N PEARL ST 1,000 OMNICOM 1999 BRYAN ST 992 BLANCH BENFIELD HOLDINGS INC 500 N AKARD ST STE 4500 929 DELOITTE & TOUCHE LLP 2200 ROSS AVE STE 1600 900 ADAMS MARK HOTEL 400 OLIVE ST 900 DALLAS POLICE HEADQUARTERS 1400 S LAMAR

900 FIRST AMERICAN (TRANSAMERICA REAL ESTATE) 1201 ELM STR

850 BUILDERS FIRSTSOURCE INC 2001 BRYAN ST 850 NEIMAN MARCUS 1618 MAIN ST 825 BAYLOR HEALTH CARE SYSTEM 2001 BRYAN ST STE 2200 800 PRICE WATERHOUSE COOPERS 2001 ROSS AVE STE 1800 788 GREYHOUND LINES INC 350 N ST PAUL ST 770 HYATT REGENCY DALLAS 300 REUNION BLVD 700 EL CENTRO COLLEGE 801 MAIN ST 700 TEXAS SCOTTISH RITE HOSPITAL 2222 WELBORN ST 663 TEXAS A&M UNIVERSITY SYSTEM 3302 GASTON AVE 650 FRESH DEL MONTE PRODUCE INC 1400 PARKER ST 612 SWS SECURITIES, INC 1201 ELM ST #3500 600 BLOCKBUSTER INC 1201 ELM ST 600 SBC 308 S AKARD 600 SFG MANAGEMENT LTD LIABILITY CO 3114 S HASKELL AVE

550 CITY OF DALLAS - OLD POLICE DEPT (STATION) 334 S HALL ST

550 FIRST USA FEDERAL SAVINGS BANK 1601 ELM ST 515 DALLAS CENTRAL PUBLIC LIBRARY 1515 YOUNG ST 500 GUARANTY BANK 8333 DOULGLAS AVE 500 HOMECOMINGS FINANCIAL NETWORK 2711 N HASKELL AVE 500 HUNT OIL CO 1445 ROSS AVE 500 ROSEWOOD PROPERTY CO 400 CRESCENT CT 500 U.S. DEPARTMENT OF LABOR 525 S GRIFFIN ST ROOM 707 482 GREAT SOUTHERN LIFE INSURANCE 500 N AKARD ST STE 1100 470 HKS INC 1919 MCKINNEY AVE 469 GABLES RESIDENTIAL SERVICES 3500 MAPLE AVE STE 1400 463 ALLEN, GEORGE C.COURTS 600 COMMERCE ST 450 BAYLOR INSTITUTE FOR

REHABILITATION 3505 GASTON AVE

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EMPLOYEES NAME ADDRESS 450 DALLAS AREA RAPID TRANSIT 1401 PACIFIC AVE 450 TRAMMELL CROW DFW, INC 2200 ROSS AVE STE 3700 430 BANK ONE 1717 MAIN ST STE LL1 427 TXU CORP 1717 MAIN ST STE 2000 425 CENTEX CONSTRUCTION COMPANY 3100 MCKINNON ST 418 HUITT-ZOLLARS INC 3131 MCKINNEY AVE 415 TRACY LOCKE PARTNERSHIP 1999 BRYAN STREET 2800

411 DALLAS COUNTY RECORDS BUILDING COMPLEX 509 MAIN ST FL 6

410 FEDERAL DEPOSIT INSURANCE CORP 1910 PACIFIC AVE STE 1700 410 GARDERE WYNNE SEWELL LLP 1601 ELM ST STE 3000 402 JONES 3 2727 N HARWOOD ST 400 BONNET RESOURCES CORPORATION 1717 MAIN ST STE 4300 400 CHASE PAYMENTECH SOLUTIONS 1601 ELM ST STE 700 400 NEIMAN MARCUS-SALES SUPPORT 1201 ELM ST STE 2800 400 RITZ-CARLTON HOTEL 2121 MCKINNEY AVE

396 GUIDESTONE FINANCIAL RESOURCES OF THE SOUTHERN BAPTIST CONVENTION 2401 CEDAR SPRINGS RD

390 WINSTEAD SECHREST & MINICK PC 1201 ELM ST 389 JP MORGAN CHASE BANK 2200 ROSS AVE 6TH FLOOR 375 BANK OF AMERICA 411 N AKARD ST 366 GLASFLOSS INDUSTRIES, LP 400 S HALL ST 360 ADOLPHUS HOTEL 1321 COMMERCE 350 COWBOY CAB COMPANY INC 1306 WALL ST 350 DEAN FOODS CO 2515 MCKINNEY AVE SUITE 1200 350 ERNST & YOUNG LLP 1201 MAIN ST STE 2000 350 WEBLINK WIRELESS INC 3333 LEE PKWY 331 BARON AND BUDD, P.C. 3102 OAK LAWN #1100 329 DISD DISTRICT OFFICE 3700 ROSS AVE 325 CC YOUNG MEMORIAL HOME 4829 W LAWTHER DR 325 TXU ELECTRIC DELIVERY 500 N AKARD ST STE 13-121 315 SEARS 4849 GREENVILLE AVE STE 1000 313 FIRST SOUTHWEST COMPANY 1700 PACIFIC AVE STE 500 310 GIRLING HEALTH CARE INC 4849 GREENVILLE AVE STE 1560 308 RESIDENTIAL FUNDING CORP 2711 N HASKELL AVE 307 HEALTHTEXAS PROVIDER NETWORK 8080 N CENTRAL EXPY 305 BUCKNER RETIREMENT SERVICES 600 N PEARL ST STE 2000 300 BAYLOR HEALTH CARE SYSTEM 3535 WORTH ST 300 CENTRAL PARKING CORPORATION 1700 COMMERCE ST STE 690 300 CONTINENTAL ASSURANCE CO 600 N PEARL ST 300 DALLAS AREA RAPID TRANSIT 3021 OAK LN 300 EI STREAM INC 2911 TURTLE CREEK BLVD

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EMPLOYEES NAME ADDRESS 300 FIREMANS FUND INSURANCE CO 500 N AKARD ST 300 H&K DALLAS 1343 S HENDERSON AVE 300 HC BECK LTD 1807 ROSS AVE STE 500 300 SPA AT THE CRESCENT INC 400 CRESCENT CT 295 CROW HOLDINGS 2100 MCKINNEY AVE STE 700 295 NATIONAL LAND TITLE COMPANY 8080 N CENTRAL EXPY 284 AKIN GUMP STRAUSS HAUER & FELD 1700 PACIFIC AVE STE 4100 280 BELO CORP 400 S RECORD ST 278 ADVANCED PROTECTION SYSTEMS 6500 GREENVILLE 278 VINSON & ELKINS LLP 2001 ROSS AVE STE 3700 275 BRIERLEY & PARTNERS INC 8401 N CENTRAL EXPY 275 C C YOUNG MEMORIAL HOME 4847 W LAWTHER DR STE 100 275 FAUBION ASSOCIATES INC 1000 FOREST AVE 273 WFAA-TV INC 606 YOUNG ST 270 FOX TELEVISION STATIONS INC 400 N GRIFFIN ST 265 CORGAN ASSOCIATES INC 401 N HOUSTON ST 262 SUNRISE BEHAVIORAL HEALTH LTD 2200 ROSS AVE STE 3838 260 BELO INTERACTIVE INC 900 JACKSON ST STE 400 255 ROSEWOOD PROPERTY CO 2821 TURTLE CREEK BLVD 254 FIRST SOUTHWEST COMPANY 325 N SAINT PAUL ST STE 800 250 AIG LIFE INSURANCE COMPANY 1999 BRYAN ST 250 BAPTIST GEN CONVENTION TEXAS 333 N WASHINGTON AVE 250 BAYLOR HEALTH CARE SYSTEM 621 N HALL ST 250 COMMERCE LAND TITLE INC 2728 N HARWOOD ST 250 DALLAS MUSEUM OF ART 1717 N HARWOOD ST 250 FIDELITY DISTRIBUTORS CORP 7001 PRESTON RD 250 NW COMMUNICATION TEXAS INC 400 N GRIFFIN ST 250 SOUTHWESTERN FIN. SERVICES CORP 717 N HARWOOD ST STE 2100 234 STRASBURGER & PRICE LLP 901 MAIN ST STE 4400 232 AT&T 4100 BRYAN ST 232 GODWIN GRUBER LLP 1201 ELM ST 230 BAYLOR SPECIALTY HOSPITAL 3504 SWISS AVE 230 TOM THUMB 6333 E MOCKINGBIRD LN 230 WATSON WYATT & COMPANY 2001 ROSS AVE STE 4200 225 PUBLICIS INC 3500 MAPLE AVE STE 500 220 JILL-EST INC 2905 GREENVILLE AVE 219 THOMPSON & KNIGHT LLP 1700 PACIFIC AVE STE 3300 216 CITY OF DALLAS 2014 MAIN ST 216 TYLER TECHNOLOGIES INC 5949 SHERRY LANE, STE 1400 212 PACIFIC LIFE & ACCIDENT INS. CO 717 N HARWOOD ST 210 STEVENS HOLTZE CORP 1401 COMMERCE ST

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EMPLOYEES NAME ADDRESS 207 THOMPSON COE COUSINS IRONS LLP 700 N PEARL ST FL 25 206 PEGASUS SOLUTIONS INC 8350 N CENTRAL EXPY STE 1900 204 DALLAS PRODUCERS SERVICE INC 2805 CANTON ST

202 WESTIN CITY CENTER (FORMERLY MERIDIEN HOTELS INC) 650 N PEARL ST

200 ANDREWS KURTH LLP 1717 MAIN ST SUITE 3700 200 ARMSTRONG, JOHN S. ELEMENTARY 3600 CORNELL AVE

200 CENTERS FOR MEDICARE MEDICAID SERVICES 1301 YOUNG ST RM 714

200 CHEESECAKE FACTORY INC 7700 W NORTHWEST HWY 200 DALLAS COUNTRY CLUB 4100 BEVERLY DR 200 DALLAS THEOLOGICAL SEMINARY 3909 SWISS AVE

200 DEFENSE CONTRACT MANAGEMENT AGENCY 1200 MAIN ST STE 260

200 EMCARE INC 1717 MAIN ST STE 200 200 FAIRMONT HOTEL 1717 N AKARD ST 200 FEDERAL INSURANCE COMPANY 2001 BRYAN ST STE 3400 200 SOURCECORP INCORPORATED 3232 MCKINNEY AVE STE 1000 200 SUSQUEHANNA RADIO CORP 3500 MAPLE AVE STE 1600 200 TOM THUMB FOOD & PHARMACY 5809 E LOVERS LAN 200 WHOLE FOODS 4100 LOMO ALTO 197 DOUBLETREE CORPORATION 8250 N CENTRAL EXPY 197 HAYNES AND BOONE LLP 901 MAIN ST STE 3100 195 JONES DAY 2727 N. HARWOOD ST 193 MUNSCH HARDT KOPF & HARR PC 1445 ROSS AVE STE 4000 190 PENSON FINANCIAL SERVICES INC 1700 PACIFIC AVE STE 1400 185 CROSSTEX PIPELINE COMPANY 2501 CEDAR SPRINGS RD 185 FIESTA MART INC 5334 ROSS AVE 185 LOCKE LIDDELL & SAPP LLP 2200 ROSS AVE STE 2200 185 THE COURTS OF JUDICIARY 600 COMMERCE ST STE G106 184 NORTH DALLAS HIGH SCHOOL 3120 N HASKELL AVE

183 JACKSON LIVING CENTER OF JULIETTE FOWLER HOMES 1234 ABRAMS RD

180 BRINKER INTL PAYROLL CORP 3403 OAK LAWN AVE FL 1

180 CARRINGTON COLEMAN SLOMAN & BLUMENTHAL, LLP 901 MAIN ST STE 5500

180 D D B DALLAS INC 1999 BRYAN ST 180 KOHLS 5750 SKILLMAN ST 180 TXU 300 S ST PAUL ST

179 TRAMMELL CROW COMPANY DELAWARE 2001 ROSS AVE

175 AMERICAN PERMANENT WARE CO 729 3RD AVE 175 BANK ONE NATIONAL ASSN CHICAGO 8111 PRESTON RD STE 250

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EMPLOYEES NAME ADDRESS 175 HOUSTONS RESTAURANTS (DEL) 8300 PRESTON RD A 175 JACK BOLES SERVICES INC 100 CRESCENT COURT STE 220 175 JULIETTE FOWLER HOMES INC 1234 ABRAMS RD 175 MARSH USA INC 3811 TURTLE CREEK BLVD 175 MORGAN STANLEY DW INC 500 N AKARD ST STE 2300 175 TOMPSON COE COUSINS & IRON LLP 200 CRESCENT COURT STE 1100 175 YAHOO/BROADCAST 301 N CROWDUS 173 CAFE BRAZIL MANAGEMENT CO 5646 MILTON ST STE 314 170 BAKER BOTTS LLP 2001 ROSS AVE STE 700

170 MERCER HUMAN RESOURCE CONSULTING INC 1717 MAIN ST STE 4400

170 ONE HEALTH PLAN OF TEXAS INC 8350 N CNTRL EXPY

166 GOVERNMENT ACCOUNTABILITY OFFICE 1999 BRYAN ST STE 2200

166 NBC UNIVERSAL 3100 MCKINNON STE 800 165 UNITED STATES POSTAL SERVICE 400 N ERVAY ST 162 HARD ROCK CAFE INTL TX 2601 MCKINNEY AVE 161 RTKL ASSOCIATES INC 1717 PACIFIC AVE 160 AT HOME CARE SERVICES INC 8111 PRESTON RD STE 415 160 COMPUTER SCIENCES CORPORATION 3811 TURTLE CREEK BLVD 160 GRAND ACQUISITION INC 8350 N CENTRAL EXPY 160 SEARS 1300 CORINTH ST 160 UNIVERSITY PARK CITY OF 3800 UNIVERSITY BLVD 157 HUNTON & WILLIAMS L L P 1601 BRYAN ST FL 30 150 ALLEN-BURCH INC 5030 GREENVILLE AVE 150 AMRESCO INC 700 N PEARL ST STE 1900 150 AON RISK SERVICES COMPANIES 2711 N HASKELL AVE FL 8 150 ART BAR CAFE 2803 MAIN ST 150 BAYLOR HEALTH CARE SYSTEM 3510 CRUTCHER ST STE 100 150 BEAR STEARNS & CO INC 300 CRESCENT COURT STE 200 150 DALLAS AREA RAPID TRANSIT 1700 ELM ST 150 DALLAS SYMPHONY ASSOCIATION 2301 FLORA ST STE 300 150 EMPLOYMENT STANDARDS ADM 525 S GRIFFIN ST 150 ENTERTINMENT COLLABORATIVE INC 2546 ELM ST STE 200 150 ERIC LILJENWALL 8150 N CENTRAL EXPY 150 GREYHOUND LINES INC 802 COMMERCE ST 150 HANSON BUILDING MTL AMERCN 3500 MAPLE AVE STE 1180 150 HERITAGE GALLERIES AUCTIONEERS 100 HIGHLAND PARK VLG 150 HUNT PETROLEUM CORPORATION 5000 THANKSGIVING TOWER 150 IBM CORP 1000 BELLEVIEW ST 150 MARSH USA INC 2200 ROSS AVE STE 3300 150 MATCH.COM INC 8300 DOUGLAS AVE

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EMPLOYEES NAME ADDRESS

150 MERRILL LYNCH 2121 SAN JACINTO ST 150 MOROCH & ASSOCIATES INC 3625 N HALL ST STE 1100 150 SISLEY COSMETICS USA INC 3131 TURTLE CREEK BLVD 150 TRANSTEXAS GAS CORPORATION 4925 GREENVILLE AVE STE 1400 150 TURTLE CREEK RESTAURANTS L L C 5641 DYER ST 150 WEIL GOTSHAL & MANGES LLP 200 CRESCENT COURT STE 1300 150 WILSON, WOODROW HIGH SCHOOL 100 S GLASGOW DR 142 LLP PATTON BOGGS 2001 ROSS AVE STE 3000 140 LINCOLN PROPERTY COMPANY 500 N AKARD ST STE 3300 140 MEDPROVIDER 3434 SWISS AVE STE 201 140 TEXAS CAPITAL BANK 2100 MCKINNEY AVE STE 900 137 ANDERSON, PEARL C. LEARNING CE 3400 GARDEN LN 137 D & M HOLDING INC 4925 GREENVILLE AVE 135 GRANT THORTON LLP 1717 MAIN ST STE 500 135 SILBER PEARLMAN LLP 2711 N HASKELL AVE FL 5 133 CLARK/BARDES INC 2121 SAN JACINTO ST 131 FULBRIGHT & JAWORSKI LLP 2200 ROSS AVE STE 2800 130 1ST GLOBAL CAPITAL CORP 8150 N CENTRAL EXPY 130 BILLMATRIX CORP 8401 N CENTRAL EXPY 130 BROCKWAY STANDARD INC 3301 S LAMAR ST 130 BROWN MCCARROLL LLP 2001 ROSS AVE STE 2000 130 HALLWOOD REALTY LLC 3710 RAWLINS ST STE 1500 130 HARWOOD INTERNATIONAL CORP 2828 N HARWOOD ST 130 NORTH TEXAS PUBLIC BRDCSTG 3000 HARRY HINES BLVD 130 VIAL HAMILTON KOCH & KNOX LLP 1700 PACIFIC AVE STE 2800 130 VICKERY TOWERS 5619 BELMONT AVE 127 HIGHLAND PARK MIDDLE 3555 GRANADA 126 HUGHES & LUCE LLP 1717 MAIN ST STE 2800 125 ANIMATO TECHNOLOGIES CORP 325 N SAINT PAUL ST 125 EMPLOYERS NAT RISK MGT SVCS 1601 ELM ST STE 1600 125 FIRST EXTENDED SERVICE 2001 BRYAN ST STE 200 125 INFINITY BROADCASTING CORP DEL 5956 SHERRY LN 125 ROLEX WATCH U S A INC 2651 N HARWOOD ST STE 600 125 SUPERIOR FAMILY CARE INC 2323 N FIELD ST APT 1714 125 TEXAS CABLE NEWS INC 570 YOUNG ST 125 UBS FINANCIAL SERVICES INC 5950 SHERRY LN STE 600 125 UNITED STATES DEPT EDUCATION 1999 BRYAN ST 125 WAL-MART STORES 2305 N CENTRAL EXPY 125 XL INSURANCE AMERICA INC 2727 TURTLE CREEK BLVD

123 DALLAS COUNTY COMM. COLLEGE - ADMINISTRATION 701 ELM ST

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EMPLOYEES NAME ADDRESS

123 PERKINS & WILL - CRA LP 6200 N CENTRAL EXPY 122 DEHAY AND ELLISTON LLP 901 MAIN ST STE 3500 120 AUSTIN COMMERCIAL LP 3535 TRAVIS ST STE 300 120 BAYLOR HEALTH ENTERPRISES INC 411 N WASHINGTON AVE 120 C H S SERVICES INC 609 N HARWOOD ST 120 DALLAS LGHTHOUSE FOR THE BLIND 4245 OFFICE PKWY 120 MALENA INC 3211 OAK LAWN AVE 120 OHIO STATE LIFE INSURANCE CO 500 N AKARD ST STE 600 120 TOUCHSTONE BERNAYS JOHNSTON 4700 RENAISSANCE TOWER 115 BAKER & MC KENZIE 2001 ROSS AVE STE 2300 115 COWLES & THOMPSON A PROF CORP 901 MAIN ST STE 4000 115 HEADWAY CORPORATE RESOURCES 3838 OAK LAWN AVE STE 300 115 REED ELSEVIER INC 500 N AKARD ST STE 1950 114 HUDSON ADVISORS LLC 717 N HARWOOD ST STE 2100 114 LINEBARGER GOGGAN BLAIR 2323 BRYAN ST STE 1720 112 COOPER & SCULLY PC 900 JACKSON ST STE 100 112 HIGHLAND PARK TOWN OF 4700 DREXEL DR 112 JACKSON WALKER LLP 901 MAIN ST STE 6000 110 AMERICAN ELECTRIC POWER 1616 WOODALL RODGERS FWY 110 BROCKETTE DAVIS DRAKE INC 4144 N CENTRAL EXPY 110 FOOD & DRUG ADMINISTRATION 4040 N CENTRAL EXPY 110 HOTEL INDIGO DALLAS 1933 MAIN ST 110 KYNG 1053 FM 4131 N CENTRAL EXPY 110 MOCKINGBIRD PARTNERS LP 3300 W MOCKINGBIRD LN 109 CAPITAL INSTITUTIONAL SERVICES 750 N SAINT PAUL ST 109 HOK GROUP INC 6688 N CENTRAL EXPY 108 LONG, J. L. MIDDLE SCHOOL 6116 REIGER AVE 106 PAGE SOUTHERLAND PAGE 3500 MAPLE AVE STE 600 105 4511 RESTAURANT GROUP 4511 MCKINNEY AVE 105 JULIO & SONS COMPANY 4125 LEMMON AVE 105 KANE RUSSELL COLEMAN LOGAN PC 1601 ELM ST STE 3700 101 COMMERCIAL METALS COMPANY 2215 S GOOD LATIMER EXPY 100 ADDISON SECURITIES 8201 PRESTON RD STE 440 100 ALBERTSONS 6464 E MOCKINGBIRD LN 100 ALLEGRO DEVELOPMENT CORP 1445 ROSS AVE STE 2200 100 ARC OF CADDO-BOSSIER 1100 COMMERCE ST 100 BANK OF TEXAS, N.A. 5956 SHERRY LN STE 1100 100 BAYLOR HEALTH ENTERPRISES INC 2625 ELM STREET 100 BERWIND HOTEL GROUP INC 3015 OAK LAWN AVE 100 BUREAU OF PRISONS 4211 CEDAR SPRINGS RD 100 CENTRAL PRKG SYS KANS CY INC 777 SPORTS ST

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2.3.3 Employment by Industry

Employment by Industry

1%1% 3% 3%5%

2%

17%

15%

49%

3%

1%

Agri./Forestry/Fishing

Mining

Construction

Manufacturing

Trans./Comm./Pub. Util.

Wholesale Trade

Retail Trade

Fin./Ins./Real Estate

Services

Government

Unclassified

MapInfo MapInfo estimated the number of job for Dallas County at 1,388,375. At the same time, the number of jobs within the submarket as estimated at 226,891, reflecting 16.3% of the jobs within the county. 2.4 - DEMOGRAPHIC PROFILE The following tables and charts explain the demographic profile of the submarket. They provide detailed information related to household tenure, income, household size, and age of the head of household. This information is used to analyze trends and make predictions as to the demand for the different types of housing. 2.4.1 Age and Tenure The following charts shows the profile of households and the age distribution of the submarket.

42

Household Profile2007

Renters

43

Households by tenure and age grouping for the 2000 census and estimates for 2007 and 2012 are as follows:

Tenure 2000 1 Person 2 Person 3 Person 4 Person 5+

Person TOTAL Renter -

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From the tables above, we see that the market is dominated by renter-occupied households (63.9%). The renter population is highest in households less than 55 years of age. The chart below further details the distribution of home owners and renters by age. We see the largest renter population in the Under 45 age categories. After age 45, the number of home owners is greater than the number of renter households. For Seniors (55+), the percentage living in their own home is above 60%.

Renter Tenure by Age (2000)

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

HH

45

Persons per Household 2000 Census 2007 Estimate 2012 Forecast HH % HH % HH % 1 Person 40,261 45.9% 41,047 46.8% 42,984 48.5%2 Person 24,262 27.7% 23,983 27.3% 23,678 26.7%3 Person 8,865 10.1% 8,699 9.9% 8,476 9.6%4 Person 6,700 7.6% 6,575 7.5% 6,352 7.2%5+ Person 7,595 8.7% 7,396 8.4% 7,208 8.1%TOTAL 87,683 87,699 88,697

HISTA Data 2.4.3 - Income The table below reflects the income levels of all household types within the sub-market.

CHANGES IN INCOME GROUPS 2000 2012

2000 2007 2000 - 07 2012 2007 - 12 Under $ 10,000 10,177 9,361 -8.0% 9,048 -3.3%$ 10,000 - $ 14,999 4,890 3,702 -24.3% 3,256 -12.0%$ 15,000 - $ 19,999 4,933 4,031 -18.3% 3,837 -4.8%$ 20,000 - $ 24,999 5,647 4,510 -20.1% 4,028 -10.7%$ 25,000 - $ 29,999 5,341 4,813 -9.9% 3,696 -23.2%$ 30,000 - $ 34,999 5,504 4,286 -22.1% 4,191 -2.2%$ 35,000 - $ 39,999 4,850 4,232 -12.7% 4,200 -0.8%$ 40,000 - $ 44,999 4,531 4,332 -4.4% 3,693 -14.8%$ 45,000 - $ 49,999 3,793 3,735 -1.5% 3,886 4.0%$ 50,000 - $ 59,999 6,439 7,166 11.3% 7,154 -0.2%$ 60,000 - $ 74,999 7,520 7,515 -0.1% 7,980 6.2%$ 75,000 - $ 99,999 7,490 9,045 20.8% 9,398 3.9%$100,000 - $124,999 4,734 5,574 17.7% 5,685 2.0%$125,000 - $149,999 2,376 3,742 57.5% 4,997 33.5%$150,000 - $199,999 2,848 3,606 26.6% 4,619 28.1%$200,000+ 6,482 9,008 39.0% 10,533 16.9% Median HH Income $42,687 $51,670 21.0% $57,514 11.3%Average HH Income $77,388 $88,853 14.8% $93,285 5.0%Per Capita Income $33,983 $39,041 14.9% $40,025 2.5%MapInfo

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According to the census data gathered for the sub-market area, the estimated 2007 income per capita is $39,041. The per household median is $51,670, and the average household income is $88,853. The U.S. Department of HUD reports the Dallas MSA median income to be $64,800 (2008).

The table below reflects the age and income levels of all household types within the sub-market.

HOUSEHOLDS BY AGE AND INCOME (2007)

Household Income HH

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Renter Tenure by Income (2007)

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

< $10K $10K-20K $20K-30K $30K-40K $40K-50K $50K-60K $60K+ TOTAL

HH Age

48

Population Distribution by Race

66%

16%

1%

3%

0%

12%2%

Anglo (incl. Hispanic)Black Amer Indian/Alaska NativeAsian Alone Native Hawaiian/Other Pacific Islander Some Other RaceTwo or More Races

Population Percentage Population Hispanic 79,895 37.9% Population Non-Hispanic 131,134 62.1%

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2.4.6 Educational Attainment

The following chart shows the level of educational attainment within the submarket. The demographics of the area show that 14% of the population has obtained at least a high school education; with 48% obtaining some type of higher degree. Only 14% of the population has less than a 9th grade education.

Educational Attainment

14%

10%

14%

14%4%

27%

17%

Less than Grade 9 Grades 9-12 High School Some College Assoc Degree Bach Degree Grad Degree

2.4.7 Demographics Summary The demographics of the submarket reflect a typical urban CBD. The demographic models suggest an increasing population and number of households. The largest part of the employment sector is related to service type jobs (49%). As compared to other parts of Dallas County, a relatively large number of jobs exist within the submarket (16.3%). As the demographics relate to housing, better than 76% of the households under age 45 rent. The median income of the submarket ($51,670) is 80% that of the Dallas MSA ($64,800).

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2.5 HOUSING SUPPLY ANALYSIS The table below details the number of housing units, those units occupied and vacant, and finally the tenure of the occupied units. The demographics estimate that 10,213 new housing units have been added since the 2000 Census. At the same time, the Apartment MarketData database accounts for 6,583 new apartment units. 2000 2007 2012

Housing Units 96,268 106,481 113,878

Occupied Units 87,567 91.0% 88,667 83.3% 90,210 79.2%Vacant 8,701 9.0% 17,814 16.7% 23,668 20.8%

Owner Occupied 31,956 36.5% 36,776 41.5% 40,113 44.5%Renter Occupied 55,611 63.5% 51,892 58.5% 50,097 55.5%

MapInfo 2.5.1 Cost of Home Ownership The demographics of the submarket give us information on the owner occupied homes within the submarket. From the data analyzed from the 2000 census, we see a comparatively limited number of homes built since 1990. This data substantiates the conclusions of the analyst in that a limited number of newer homes are available within the submarket. The vast majority of homes in the area are 40+ years old. National Decisions Systems reports on the 2000 home values within the sub-market. If we grow these values by 3% per year, we come to an approximate home value in 2008 dollars. Using this methodology, we estimate the median home value to be $250,362, and the average home value to be $386,167.

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Homes Built by Decade

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

1939 orearlier

1940-1949 1950-1959 1960-1969 1970-1979 1980-1989 1990-1994 1995-1998 1999-2000

MapInfo

Home Values (2000)

0

500

1,000

1,500

2,000

2,500

3,000

Less

than $

10,00

0

$ 10,0

00 - $

14,99

9

$ 15,0

00 - $

19,99

9

$ 20,0

00 - $

24,99

9

$ 25,0

00 - $

29,99

9

$ 30,0

00 - $

34,99

9

$ 35,0

00 - $

39,99

9

$ 40,0

00 - $

49,99

9

$ 50,0

00 - $

59,99

9

$ 60,0

00 - $

69,99

9

$ 70,0

00 - $

79,99

9

$ 80,0

00 - $

89,99

9

$ 90,0

00 - $

99,99

9

$100

,000 -

$124

,999

$125

,000 -

$149

,999

$150

,000 -

$174

,999

$175

,000 -

$199

,999

$200

,000 -

$249

,999

$250

,000 -

$299

,999

$300

,000 -

$399

,999

$400

,000 -

$499

,999

$500

,000 -

$749

,999

$750

,000 -

$999

,999

$1,00

0,000

+

National Decision Systems

52

Using our estimated median home value of $250,362, and an average home value of $386,167, we are able to estimate the cost to own a home within the submarket. Based on the assumptions in the table below, we estimate that a typical home owner will spend $1,803 to $2,619 per month to own and maintain a home.

HOME PURCHASE Median Value

Average Value

2000 Home Price $197,001 $303,860 2008 Estimated Home Price $250,362 $386,167Down Payment (5%) $12,518 $19,308Interest Rate 6.5% 6.5%Period (Years) 30 30Monthly Payment $1,503 $2,319 Taxes/Insurance/Maint. (Monthly) $300 $300 Total Housing Cost $1,803 $2,619

For Dallas, the Texas Real Estate Center reports the median price of a home sold to be $160,900. The average price was $218,9004. Given this source of comparison, we find that the average price of a home within the submarket is 176% the price found in Dallas as a whole.

4 August 2008

53

Price Distribution of Homes Sold Dallas, Texas

Texas Real Estate Center 2.5.2 Overview of the Rental Market To provide a statistical overview of the rental submarkets, Apartment MarketData, LLC (AMD) actively surveys and maintains a database of rent and occupancy information specific to individual apartment communities. Within the greater Dallas area, AMD is tracking 1,686 apartment communities totaling approximately 393,000 units. The demographics estimate the number of occupied rental units within the submarket at 51,892. Within the submarket, we have accounted for 97 apartment communities totaling 26,602 units, or 51% of the total rental market. From this large sample of information, we are able to draw conclusions on the market as a whole. From our analysis of the projects surveyed, we find that 30% of the rental units were built in the 1970s or prior. Since 2000, the area has seen substantial growth, as 1/4th of the rental supply was built this decade.

54

Apartment Construction by Decade

10%

20%

13%

31%

26%

< 1970's

1970's

1980's

1990's

2000's

Apartment MarketData The overall occupancy reported in the market is 93.8%. The following tables report the market first as a whole, and then detail market rate and affordable apartment communities throughout the submarket.

CURRENT INVENTORY OF SURVEYED PROPERTIES

UNIT TYPE

# OF UNITS

OCCUPIEDUNITS

AVG. RENT

AVG. SIZE

AVG. $ PSF

OCCUPANCY%

1 BR 16,407 15,391 $ 870.62 699 $ 1.246 93.8%2 BR 8,845 8,316 $1,218.36 1,081 $ 1.127 94.0%3 BR 1,301 1,212 $1,226.10 1,285 $ 0.954 93.2%

4+ BR 49 40 $1,053.27 1,356 $ 0.777 81.6%

OVERALL 26,602 24,959 $1,003.96 856 $ 1.173 93.8%

55

CURRENT INVENTORY OF SURVEYED PROPERTIES

UNIT TYPE DESCR.

# OF UNITS

OCCUPIEDUNITS

AVG. RENT

AVG. SIZE

AVG. $ PSF

OCCUPANCY%

1 BR Market 14,483 14,747 $ 885.59 702 $ 1.262 101.8%1 BR 30% 93 92 $ 717.71 691 $ 1.039 98.9%1 BR 40% 0 1 BR 50% 252 246 $ 543.99 654 $ 0.832 97.6%1 BR 60% 244 232 $ 551.70 644 $ 0.857 95.1%1 BR M-A 63 61 $ 708.19 690 $ 1.026 96.8%1 BR PHA 16 16 $ 600.00 500 $ 1.200 100.0%

2 BR Market 7,956 7,473 $ 1,278.17 1,102 $ 1.160 93.9%2 BR 30% 15 14 $ 841.60 878 $ 0.959 93.3%2 BR 40% 2 2 $ 700.00 1,060 $ 0.660 100.0%2 BR 50% 386 375 $ 699.81 997 $ 0.702 97.2%2 BR 60% 344 317 $ 646.55 817 $ 0.791 92.2%2 BR M-A 82 75 $ 881.49 997 $ 0.884 91.5%2 BR PHA 60 60 $ 675.00 650 $ 1.038 100.0%

3 BR Market 767 733 $ 1,481.34 1,357 $ 1.092 95.6%3 BR 30% 0 3 BR 40% 0 3 BR 50% 293 274 $ 812.36 1,187 $ 0.684 93.5%3 BR 60% 174 143 $ 846.14 1,169 $ 0.724 82.2%3 BR M-A 41 36 $ 904.88 1,269 $ 0.713 87.8%3 BR PHA 26 26 $ 775.00 800 $ 0.969 100.0%

4+ BR Market 18 18 $ 1,050.17 1,302 $ 0.807 100.0%4+ BR 30% 0 4+ BR 40% 0 4+ BR 50% 10 10 $ 988.00 1,379 $ 0.716 100.0%4+ BR 60% 0 4+ BR M-A 21 21 $ 1,087.00 1,391 $ 0.781 100.0%4+ BR PHA 0

M-A is a market rate unit located within an otherwise affordable community.

56

CURRENT INVENTORY OF SURVEYED PROPERTIES

UNIT TYPE DESCR.

# OF UNITS

OCCUPIEDUNITS

AVG. RENT

AVG. SIZE

AVG. $ PSF

OCCUPANCY%

Overall Market 24,480 22,968 $ 1,032.37 853 $ 1.210 93.8%Overall 30% 108 106 $ 734.92 717 $ 1.025 98.1%Overall 40% 2 2 $ 700.00 1,060 $ 0.660 100.0%Overall 50% 941 905 $ 696.19 968 $ 0.719 96.2%Overall 60% 762 692 $ 661.75 842 $ 0.786 90.8%Overall M-A 207 184 $ 854.23 997 $ 0.857 88.9%Overall PHA 102 102 $ 688.73 665 $ 1.036 100.0%

M-A is a market rate unit located within an otherwise affordable community. 2.5.3 Turnover of Rental Units There are several sources for the rate at which renter households turnover, or move out of an existing rental unit. The 2000 U.S. Census reports the annual turnover rate for renters in Dallas County to be 46.9% per year. Senior renters were reported to turnover at a rate of 24.6% annually. Another source of turnover data is the Institute of Real Estate Management (IREM). For 2007, IREM publishes a turnover rate of 60.8%. A third source of turnover data for affordable projects is the Texas Department of Housing and Community Affairs (TDHCA). TDHCA reports the following turnover rates for Dallas County by category of project.

Seniors 26.5% Non-Seniors 42.4%

AHDP 50.1% 2.5.4 Age and Condition of Existing Rental Communities From our survey of the market, some will be older and in poor condition. To estimate the number of rental units in poor or substandard condition, we make some assumptions based on the management experience of the analysts. To this end, we assume that 50% of the units built prior to 1970 would fit this category of unit. Likewise, 40% of the units built in the 1970s, and 30% of those built in the 1980s. At the same time, these are only assumptions. Unlike other areas, a CBD usually sees more in the way of renovations and change of use. Thus, many of the older buildings within C1 may have already undergone substantial renovations of adaptive reuse.

57

Using the assumptions described above, we would estimate that 21,112 of all rental units are in poor or substandard condition. Given the age of the units, we would estimate that 18% of the units AMD surveyed are likely to be in need of substantial renovation or outright replacement.

Built MapInfo

Units AMD

Database Age %

Substand.MapInfo

Substandard AMD

Substandard < 1970's 29,291 2,568 40+ Years 50.0% 14,646 1,284 1970's 10,495 6,466 30-40 Years 40.0% 4,198 2,586 1980's 7,560 3,216 20-30 Years 30.0% 2,268 965 1990's 8,259 7,701 2000's 6,583 TOTAL 55,605 26,534 21,112 4,835 38.0% 18.2%

MapInfo and AMD

Map of Existing Market Rate Properties

Market Rate Pre 1980 1980s 1990s 2000s (Year Built)

58

2.5.5 Project Amenities The following table lists the type of interior and exterior amenities databased by Apartment MarketData. For each amenity, we list the number of apartment communities surveyed that have the amenity listed.

Interior Amenities # of

Projects

Exterior Amenities # of

Projects 9 Foot Ceilings 37 Access Gate 62 Alarm System 50 Aerobics Room 7 Bookshelves 42 Attached Garage 19 Ceiling Fan 89 Balcony 69 Computer Desk 13 Barbecue Grill 28 Crown Molding 34 Billiards Rooms 1 Dishwasher 89 Business Center 32 Dry Bar 16 Clubhouse 48 Fireplace 49 Concierge Services 11 Garden Tub 33 Covered Parking 56 High-Speed Internet 18 Detached Garage 8 Ice Maker 55 Fitness Center 64 Indoor Storage 50 Hot Tub 29 Linen Closet 67 Indoor Pool 0 Microwave 57 Jogging Trail 6 Mini-Blinds 93 Laundry Facilities 65 Pantry 75 Movie Theater 2 Raised Panel Doors 8 Outdoor Pool 77 Self-Cleaning Oven 34 Playground 13 Separate Dining Area 57

Private Cable 8 Vaulted Ceilings 24 Private Phone 5 Washer/Dryer 37 Putting Green 4 Washer/Dryer Connection 65

Sport Court 6 Wet Bar 6 Tennis Court 12 Trash Pickup 7 Volleyball Court 5

59

2.5.6 Inventory of Existing Low Income Housing Tax Credit Properties The current inventory of existing LIHTC properties consists of 22 existing projects.

NAME AWARDED UNITS OCCUPANCY

POP. SERVED

1 Lake Wood Gardens 1991 46 100.0% Family 2 Royal Palm 1991 23 NA Family 3 Southdale 1992 188 74.5% Family 4 Bryan Place 1993 22 NA Family 5 Prairie Hill 1993 18 NA Family 6 Trinity Works Comm. Living Center 1993 61 NA Family 7 Eban Village I 1995 110 94.5% Family 8 Treymore at City Place North 1995 180 98.3% Family 9 Birchwood 1996 284 97.2% Family 10 Eban Village II 1999 220 95.0% Family 11 Edgewood Manor Seniors 1999 30 96.7% Family 12 Roseland Townhomes 1999 152 94.7% Family 13 Carroll Townhomes 2000 71 94.4% Family 14 Monarch Townhomes 2000 65 100.0% Family 15 Roseland Gardens 2001 101 98.0% Senior 16 Roseland Estates 2002 144 94.4% Family 17 Frazier Fellowship 2004 76 96.1% Family 18 Wahoo Fraizier Townhomes 2005 118 NA Family 19 Mill City Parc 2006 116 NA Family 20 City Walk at Akard 2007 209 NA Family 21 Carpenter's Point 2008 150 NA Seniors 22 Rosemont at Meadow Lane ? 264 91.7% Family

60

Map of Existing Low Income Housing Tax Credit Properties

2.6 HOUSING CHOICE VOUCHERS Housing Choice Vouchers (a.k.a. Section 8) have long been a way for many low income families to pay for rental housing. In the following tables (Section 2.10), those projects identified by (Sec. 8) in the name of the property, receive government funds directly to the apartment owners5. Owners in turn lower the rent they charge low-income tenants. Most of these Housing Choice Vouchers are administered by the Dallas Housing Authority (DHA) or other local public housing authority. The DHA has provided the number of housing vouchers by zip code. The following map shows the distribution of the vouchers within central Dallas and the C1 submarket.

5 www.hud.gov - Low-Rent Apartment Search (database)

Family - Pre 2004 2004 2005 2006 2007 2008

Senior - Pre 2004 2004 2005 2006 2007 2008

61

Housing Choice Vouchers by Zip Code

According to the map above, there are approximately 1,191 housing vouchers being used within the C1 submarket. This accounts for 7.2% of the 16,382 vouchers administered by the Dallas Housing Authority. Comparing the number of vouchers to the estimated number of renter households (51,892), we would expect 2.3% of the renters within the submarket pay their rent, in whole or in part, with a Housing Choice Voucher. 2.6.1 Waiting Lists for Affordable Housing According to the Dallas Housing Authority, there are approximately 10,000 households on the public housing waiting list, and more than 18,000 on the housing choice voucher program waiting list. Historically, there is a two-year wait. However, DHA anticipates a three to five-year wait. All programs are open except the Housing Choice Voucher program, which has been closed to new applicants since June 2004.

0-10 10-50 50-100 100-150 150-300 300-500 500+

62

The DHA does not account for waiting list households by zip code area, so we have assumed that the preferred housing location of households on the waiting list is comparable to the existing usage of vouchers (2.3%). We then applied this percentage to the total households on the Dallas Housing Authority Housing Choice Voucher program waiting list. Based on these assumptions and computations, we estimate that there are approximately 414 households that reside in the C1 submarket, waiting to receive a Housing Choice Voucher. 2.6.2 Condition and Redevelopment Plans for PHA Housing We identified only one PHA project within the C1 submarket. Park Manor Seniors is a 92 unit development (1970), and reports an overall occupancy of 95.8%. 2.6.3 Rental Housing with Significant Code Violations According to the Vice-President of Development Bill Manning (DHA), there are no code violations at this time. The majority of DHA sites have been demolished and rebuilt or modernized within the past ten years. DHA uses capital funds to maintain the properties. 2.7 HISTORICAL ABSORPTION Absorption from 1990 to 2000 for all rental unit types is estimated to be 367 units per year. The 2000 Census data showed a net loss of 2,329 rental units within the submarket. Absorption over the previous eight years (2000 2008) for all unit types has averaged 715 units per year. Absorption number have increased as additional rental units have come online. We would expect absorption to increase as the number of new household continues to grow, and as additional rental units become available.

1990 Census For Rent Units 61,116 1990 Census Occupancy Households 85.0%

1990 Census Occupied Rent Household Units 51,942

1990 2000 New Supply (all rental units) -2,329

2000 Census For Rent Units 58,786 2000 Census Occupancy Households 94.6%

2000 Census Occupied Rent Household Units 55,611

2000 2008 New Supply (apt. rental units) 6,583

63

2008 For Rent Units 65,369 2008 Surveyed Occupancy 93.8%

2008 Surveyed Occupied Units 61,332

Change in occupied units 1990-2000 3,669

Avg. Annual Absorption Rate 1990-2000 367

Change in occupied units 2000-2008 5,721

Avg. Annual Absorption Rate 2000-2008 715

2.7.1 Recent Absorption Since 2006, we found six apartment projects have been constructed. The table below details the name of project, number of units, the reported occupancy, and the annual average absorption. Project Built Units Occupancy Notes 2929 Wycliff 2007 264 90.2% Alexan Fitzhugh 2009 452 0.0% Ambrose Broadstone 2008 325 0.0% Dakota in the Village 2008 496 99.6% Frazier Fellowship 2006 76 96.1% LIHTC Trianon by Windsor 2006 331 95.8% ANNUAL AVG. ABSORPTION 374

64

2.8 NEW CONSTRUCTION Currently, there are seventeen projects known to be planned or under construction. The timeline on the following pages represents the new construction for the C1 submarket. The shaded bands indicate the estimated time period for the various phases of the project and for the submarket as a whole: Construction, Leasing, and Occupied Units by calendar quarter. The numbers within each of the shaded bands represent the estimated number of units that will be delivered out of Construction, Leased, or Occupied during that particular calendar quarter. Net Exposure represents the estimated number of units that are completed but that remain un-leased during the quarter. Net Vacant represents the estimated number of completed units that have not been occupied during the quarter.

This Space Intentionally Left Blank

65

CONSTRUCTION & LEASING TIMELINE

Project Phase

1Q20

08

2Q20

08

3Q20

08

4Q20

08

1Q20

09

2Q20

09

3Q20

09

4Q20

09

1Q20

10

2Q20

10

3Q20

10

4Q20

10

1Q20

11

2Q20

11

3Q20

11

4Q20

11

Tot

al U

nits

Construction 100 130 230 Leasing 20 40 40 60 54 Occupied 30 30 50 40 40 24 Net Exposure -20 170 130 70 16 16 16 16 16 16 16 16 16 16

1900 McKinney Avenue

Net Vacant 100 100 170 120 80 40 16 16 16 16 16 16 16 16 Construction 50 85 85 220 Leasing 30 40 70 65 Occupied 30 60 50 30 35 Net Exposure 20 65 80 15 15 15 15 15 15 15 15 15 15

AMLI at the Quadrangle

Net Vacant 50 105 130 80 50 15 15 15 15 15 15 15 15 Construction 116 116 116 117 465 Leasing 86 86 86 86 88 Occupied 86 86 86 86 88 Net Exposure 30 60 90 121 33 33 33 33 33 33

Belmont Apartments

Net Vacant 116 146 176 207 121 33 33 33 33 33 Construction 45 45 45 45 44 224 Leasing 42 42 42 42 40 Occupied 42 42 42 42 40 Net Exposure 3 6 9 12 16 16 16 16 16 16 16

Cityville at Carlisle

Net Vacant 45 48 51 54 56 16 16 16 16 16 16 Construction 102 102 102 102 102 100 610 Leasing 81 81 81 81 81 81 81 Occupied 81 81 81 81 81 81 81 Net Exposure 21 42 63 84 105 124 43 43 43 43 43

Cityville at Haskell

Net Vacant 102 123 144 165 186 205 124 43 43 43 43 Construction 70 70 69 209 Leasing 50 50 50 44 Occupied 50 50 50 44 Net Exposure 20 40 59 15 15 15 15 15 15 15 15 15 15

Citywalk at Akard

Net Vacant 70 90 109 59 15 15 15 15 15 15 15 15 15 Construction 127 127 126 380 Leasing 88 88 88 89 Occupied 50 60 60 60 60 63 Net Exposure 39 78 116 27 27 27 27

Gables at Fairmount

Net Vacant 77 144 210 150 90 27 27

66

CONSTRUCTION & LEASING TIMELINE

Construction 100 125 150 375 Leasing 50 70 80 80 69 Occupied 30 50 75 70 50 30 44 Net Exposure 50 105 175 95 26 26 26 26 26 26 26 26 26

Glass House

Net Vacant 70 145 220 150 100 70 26 26 26 26 26 26 26 Construction 63 63 63 63 64 316 Leasing 20 35 35 35 35 35 35 35 29 Occupied 30 35 35 30 30 30 30 30 30 14 Net Exposure -20 8 36 64 92 121 86 51 22 22 22

Ilume

Net Vacant 0 33 61 89 122 156 126 96 66 36 22 Construction 57 57 57 57 228 Leasing 30 42 47 47 46 Occupied 30 40 40 40 40 22 Net Exposure -30 -15 -5 5 16 16 16 16 16

Jefferson at the Arts District

Net Vacant 0 27 44 61 78 38 16 16 16 Construction 70 76 146 Leasing 20 20 40 56 Occupied 10 20 30 50 26 Net Exposure -20 106 66 10 10 10 10 10 10 10 10 10 10 10

Jefferson at West End Station

Net Vacant 60 56 86 36 10 10 10 10 10 10 10 10 10 10 Construction 100 113 213 Leasing 50 40 50 58 Occupied 35 30 40 50 30 13 Net Exposure -50 123 73 15 15 15 15 15 15 15 15 15 15 15

Mercantile Place - The Element

Net Vacant 65 83 108 58 28 15 15 15 15 15 15 15 15 15 Construction 75 81 156 Leasing 30 35 45 35 Occupied 35 25 25 35 15 10 Net Exposure 0 0 -30 91 46 11 11 11 11 11 11 11 11 11 11 11

Mercantile Place - The Merc

Net Vacant 0 0 40 56 71 36 21 11 11 11 11 11 11 11 11 11 Construction 30 43 43 116 Leasing 54 54 Occupied 20 25 30 33 Net Exposure 0 30 -54 8 8 8 8 8 8 8 8 8 8 8 8 8

Mill City Parc Apartments

Net Vacant 0 30 23 18 41 8 8 8 8 8 8 8 8 8 8 8 Construction 42 42 84 Leasing 26 26 26 Occupied 18 20 20 20 Net Exposure -26 32 -26 6 6 6 6 6 6 6 6 6 6 6

Third Rail Lofts

Net Vacant 24 22 -20 6 6 6 6 6 6 6 6 6 6 6

67

CONSTRUCTION & LEASING TIMELINE

Construction 120 126 125 371 Leasing 70 70 70 70 65 Occupied 50 60 60 60 60 55 Net Exposure 50 106 161 91 26 26 26 26 26 26 26 26

The Monterey

Net Vacant 70 136 201 141 81 26 26 26 26 26 26 26 Construction 140 140 142 422 Leasing 98 98 98 98 Occupied 50 70 70 70 70 62 Net Exposure 42 84 128 30 30 30 30 30

ZOM Apartments

Net Vacant 90 160 232 162 92 30 30 30

Construction 0 30 430 705 400 577 451 326 523 650 490 183 0 0 0 0 4,765 Leasing 0 0 200 345 431 622 557.5 413 449 475 437 348 124 29 0 0 Occupied 0 0 118 180 355 483 494 491 473 498 407 369 281 174 93 14 Net Exposure 0 30 -200 620 557 544 437.5 350.5 424.5 599.5 652.5 487.5 364 335 335 335

Submarket Totals

Net Vacant 0 30 47 110 181 406 594 572 711 907 990 804 523 349 256 242

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2.9 ANALYSIS OF RENTAL RATES In order to study the submarkets rents in terms of incomes served, Apartment MarketData (AMD) and the staff at TDHCA collaborated to develop the following rent tables. The tables establish the rent ranges (net rent) by income group. Rent Ranges (Net Rents) 0% - 30% 31% - 40% 41% - 50% 1 Bdrm $ 0 - $289 $290 - $414 $415 - $538 2 Bdrm $ 0 - $349 $350 - $499 $500 - $648 3 Bdrm $ 0 - $403 $404 - $576 $577 - $749 4 Bdrm $ 0 - $448 $449 - $641 $642 - $833 5 Bdrm $ 0 - $493 $494 - $706 $707 - $919

Rent Ranges (Net Rents) 51% - 60% 61% - 80% 81% - 100% 1 Bdrm $539 - $ 663 $ 664 - $ 913 $ 914 - $1,163 2 Bdrm $649 - $ 798 $ 799 - $1,098 $1,099 - $1,398 3 Bdrm $750 - $ 922 $ 923 - $1,268 $1,269 - $1,614 4 Bdrm $834 - $1,026 $1,027 - $1,412 $1,413 - $1,798 5 Bdrm $920 - $1,132 $1,133 - $1,558 $1,559 - $1,984

With the rent ranges established, we then searched the AMD database for apartment communities that had individual unit types with rents that fell within the ranges listed above. The tables following Section 2.10 study each income group separately. The submarket and income group is shown in the top left corner of the table. On each page the name of the projects included in the analysis are listed by year built. Going across the page, the number of units that fall into the rent range is listed, the number occupied, and the occupancy percentage. Totals are provided at the top of the page, along with the total number of vacant units by bedroom type. (See Tables following Section 2.10) 2.9.1 Comparison of Market Rents to Max. Program Rents The following table shows the average market rent for project(s) built within the decade (2000s) compared to the maximum program (net) rent. Within the C1 submarket, we found the max. program rent to be substantially lower than a comparable market rent.

69

Unit Type Market

Rent 60% Max. Program Variance

1 Bdrm $1,070.05 $663.00 -$407.05 2 Bdrm $1,612.22 $798.00 -$814.22 3 Bdrm $2,541.31 $922.00 -$1,619.31 4 Bdrm $1,026.00 $1,026.00

2.9.2 Housing Supply by Population Served and Target Population The following table categorizes the apartment units surveyed by Population Served and Targeted Population. It also distinguishes between market rate, affordable (a.k.a. low income), and units receiving project-based assistance.

30% 40% 50% 60% 80% 100% MARKET RATE Family 0 0 1,134 1,754 8,037 5,806 Senior 0 0 0 0 0 0 Special Needs 0 0 0 0 0 0 AFFORDABLE Family 0 41 208 1,197 181 2 Senior 0 0 30 0 101 0 Special Needs 0 0 0 0 0 0 PROJECT BASED ASSIST. Family 0 0 0 102 0 0 Senior 0 0 92 0 0 0 Special Needs 0 0 0 0 0 0 TOTAL 0 41 1,464 3,053 8,319 5,808

2.9.3 Summary of Findings The preceding tables provide an analysis of the rents within the submarket by which we can arrive at numerous conclusions.

70

Percentage of Units Surveyed by Income Group

0%

0%

6%

12%

34%23%

25%

0 - 30% AMI

31 - 40% AMI

41 - 50% AMI

51 - 60% AMI

61 - 80% AMI

81 - 100% AMI

>100% AMI

# Units Vacant % Vacant 0 - 30% AMI 0.0% 0 31 - 40% AMI 0.2% 41 2 4.9% 41 - 50% AMI 5.9% 1,464 76 5.2% 51 - 60% AMI 12.3% 3,053 98 3.2% 61 - 80% AMI 33.5% 8,319 284 3.4% 81 - 100% AMI 23.4% 5,808 532 9.2% >100% AMI 24.7% 6,122

2.9.3.1 Summary (0 30% AMI)

The following tables and the chart above indicate that we did not find any units at the serving residents at this income level. At the same time, even the oldest units in the submarket charged higher rents.

2.9.3.2 Summary (31 40% AMI) At the 31% to 40% income level, we found that only Eban Village I (LIHTC) had any rents serving income group.

71

2.9.3.3 Summary (41 50% AMI) A small portion of units (6%) fell within this income range. The age of the projects ranged from 1961 to 2001, with the majority of units built in the 1960s and 70s. Occupancy levels by unit type tended to be 91% or higher. One project, Bluffs at Lakewood lowered the overall occupancy of the one bedroom units to 92.6% overall. Some other projects reported an occupancy of 100%.

2.9.3.4 Summary (51 60% AMI) A small portion of units (12%) fell within this income range. The age of the projects ranged from 1942 to 2006. Occupancy levels by unit type were all 94% or higher. In total, we accounted for 98 vacant units or 3.2% of the units serving this income group.

2.9.3.5 Summary (61 80% AMI) Units serving this income band accounted for 1/3rd of the market. Occupancy rate by unit type were in excess of 95% for one, two and three bedroom units.

2.9.3.6 Summary (81 100% AMI) The C1 submarket is one of the few areas within the City of Dallas that had rents at this income level. Properties generally report occupancy levels in excess of 95%. A few localized properties had occupancy rates below 90%. 2.10 SUMMARY HOUSING SUPPLY ANALYSIS From the data studied, it is apparent that rental apartment housing within the C1 submarket is very healthy. Rents trend to be spread across the income levels at or above 50% AMI. While availability may be a problem, the market provides a variety of housing options for all but the poorest income levels (below 50% AMI). Given the higher occupancy