Ares US Real Estate Opportunity Fund III
Multifamily Sector Remains Resilient
Asset class durability due to declining home affordability, comparatively stable rent collections and
relative undersupply
House Prices, Wages (Jan'14 = 100)
140
●
130
Housing Price Growth Continues to Outpace Wage Growth
105
120
110
100
U.S. Multifamily Collection Rates
2014
Source: Case Shiller, BLS
100%
95%
90%
2015
85%
80%
2016
House Prices
97.7%
94.6%
April
2017
Home price appreciation has outpaced income growth impacting
affordability and therefore renter demand
96.6%
U.S. 2019-2020 Multifamily Collection Rates
Rates Have Been Stable
95.1%
May
2018
Wages
96.0%
T
2019
95.9%
June
2019 2020
Affordability
2020
96.6%
95.7%
July
94.0%
100
95
90
85
Affordable)
Affordability (Lower = Less
92.1%
August
Source: NMHC as of August 2020
Collections have remained relatively stable through pandemic,
creating relatively durable cash flows
Cum. MF Units Built (mil.)
Net Absorption as % of Stock
U.S. Renter HH Formation vs. Cumulative Units Delivered
14
-11990
4.0%
3.0%
Despite uptick in supply, renter household formations have
outpaced new additions to the sector
Growth Metros Absorption Stable During Pandemic
2.0%
1.0%
Estimated 4.1 million more
renter households formed since
1990 than rental units completed
0.0%
1994
2002
1998
Renter HH Formed (millions)
Source: Census Bureau as of Q1 2020
2006
2014
2018
2010
■MF Units Constructed (millions)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
National
18-Hour
Source: Costar as of Q2 2020
18-Hour Metros Absorption Rate 50% higher on average than
U.S. since 2015
Durability of renter demand and cash flow profile has sustained investor appetite post-COVID, with increased interest in suburban/garden product
Ares is responding to investor demand by continuing its focus on the sector, with an emphasis on lower-density product in undersupplied
geographies with strong demographic tailwinds
For illustrative purposes only. There is no assurance the above trends will continue.
14
Cum. Renter HHs formed (mil.)View entire presentation