DE LUZ APARTMENT HOMES

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1 DE LUZ APARTMENT HOMES Investment Properties Multifamily Group Capital Markets OFFERING MEMORANDUM 26 Apartment Units 420 North Pico Avenue, Fallbrook, CA

..10 JIM NEIL Senior Vice President Lic. 01352736 + 1 858 646 4785 jim.neil@cbre.com MERRICK MATRICARDI Senior Associate Lic.

2 TABLE OF CONTENTS Property Analysis...1 Investment Opportunity Investment Details Rent Restrictions Floor Plans EXCLUSIVE ADVISORS Financials...8 Sale Comparables...10 JIM NEIL Senior Vice President Lic jim.neil@cbre.com MERRICK MATRICARDI Senior Associate Lic merrick.matricardi@cbre.com ERIC COMER Senior Vice President Lic eric.comer@cbre.com Rent Comparables...12 Market Overview

3 INVESTMENT OPPORTUNITY DE LUZ APARTMENT HOMES 420 North Pico Avenue, Fallbrook, CA apartment units CBRE is pleased to present a unique opportunity to acquire a 26-unit, senior housing investment, De Luz Apartment Homes in Fallbrook, California. De Luz's attributes are ideal for capturing the changing economic and demographic trends, with over 7 million Californians over the age of 55. With baby boomers entering retirement age, this age group is forecasted to double in size over the next decade. Over 50% of seniors earn less than $50,000 per year, making rentals such as De Luz an affordable option that is in high demand. We invite you to review learn more about this investment opportunity by reviewing this Offering Memorandum and then touring the Property with us. Please contact Jim Neil or Merrick Matricardi, to arrange a site visit or for answers to your questions. PRICE: $2,400,000 UNITS: 26 $/UNIT: $92,308 $/SF $ GRM 9.6 MARKET CAP 6.44% DE LUZ APARTMENT HOMES 1

INVESTMENT DETAILS PROPERTY ADDRESS:: 420 North Pico Avenue Fallbrook, CA 92028 APARTMENT HOMES: 26 RENTABLE SQUARE FEET: 14,953 (per assessor records) YEAR BUILT: 1988 APN: 103-131-06-00.

4 INVESTMENT DETAILS PROPERTY ADDRESS:: 420 North Pico Avenue Fallbrook, CA APARTMENT HOMES: 26 RENTABLE SQUARE FEET: 14,953 (per assessor records) YEAR BUILT: 1988 APN: , LAND AREA: 0.56 acres RESIDENTIAL DENSITY: PARKING: BUILDING CONFIGURATION: ZONING: RENT RESTRICTIONS: units/acre Parking is located off of North Pico Avenue. There are a total of 26 parking spaces with a ratio of 1.00 spaces/unit. 16 surface parking spaces and 10 are garage spaces. The property consists of 2 garden style twostory buildings. The property is zoned RU with a General Plan land use designation of VR-30, which is a multi-residential zone and allows 30 dwelling unit per acre of lot area. By right, the site would accommodate 17 dwelling units. The property is restricted to senior low-income residents. A more detailed discussion is on the following page. EXTERIOR FINISHES: ROOF COVERING: FOUNDATION: WINDOWS: Wood frame, stucco exterior Pitched roof with composition shingle mansards Concrete slab MECHANICAL/ELECTRIC/PLUMBING HVAC: METERING: HOT WATER: Single pane aluminum sliders with vertical blinds Central heat and wall A/C unit Each unit is separately metered for electric One central boiler for each building (two total) 2 INVESTMENT DETAILS

5 MAJOR USE PERMIT RESTRICTIONS DATE: November 4, 1986 REGULATORY AGREEMENT RESTRICTIONS AGE RESTRICTIONS: TERM FOR AGE RESTRICTIONS: RENT RESTRICTIONS: All units, except one unit reserved for on-site manager shall be elderly households (defined by the US Department of Housing and Urban Development)* Useful life of property 10 units shall be restricted to 55% of the SD Regional County median income for elderly households. DATE: July 18, 2000 RENT RESTRICTIONS: TERM FOR RENT RESTRICTIONS: 14 units shall be restricted to 50% of area median income (AMI) 11 units shall be restricted to 80% AMI 55 years TERM FOR RENT RESTRICTIONS: 30 years from occupancy (2018) *Senior Housing definition (HUD): It is occupied solely by persons who are 62 or older or it houses at least one person who is 55 or older in at least 80 percent of the occupied units. SAN DIEGO REGIONAL COUNTY MEDIAN INCOME AMI RESTRICTION HOUSEHOLD SIZE ANNUAL INCOME MONTHLY INCOME MAX RENT** (30% monthly income) UTILITY ALLOWANCE NET MAXIMUM ALLOWED RENTS 50% 2 $32,400 $2,700 $810 $31 $779 80% 2 $51,850 $4,321 $1,296 $31 $1,265 **Rent Charged: The maximum rent shall be not greater than 30% of the adjusted income of a family. Source: This information is calculated from the US Department of Housing and Urban Development (HUD) income figures for FY2015. DE LUZ APARTMENT HOMES 3

6 4 PROPERTY PHOTO

Air conditioning Garbage disposal Ceiling fans

7 PROJECT DESCRIPTION PROPERTY AMENITIES: Leasing office Common laundry Perimeter security fence UNIT FEATURES: Air conditioning Garbage disposal Ceiling fans Sprinkling system for landscaping Patio courtyard 5 PROJECT DESCRIPTION

8 DE LUZ APARTMENT HOMES 6

9 FINANCIALS INCOME SUMMARY Affordable Total Market Total # Units Status Unit Type Sq. Ft. Total Sq.Ft. $ Rent $/Sq.Ft. In Place Rent Market $/Sq.Ft. 1 Exempt 1BD/ 1BA $1,236 $1.89 $1,236 $900 $900 $ % AMI 1BD/ 1BA 572 8,008 $758 $1.33 $10,612 $779 $10,906 $ % AMI 1BD/ 1BA 572 6,292 $818 $1.43 $8,998 $900 $9,900 $ Total/Avg ,953 $802 $1.39 $20,846 $835 $21,706 $1.45 ANNUALIZED GROSS INCOME $250,152 $260,472 Vacancy 3.00% ($7,505) ($7,814) ADJUSTED GROSS INCOME $242,647 $252,658 Laundry $1,207 $1,207 Garage Income (10 Garages) $2,880 $3,600 TRAILING 12 EGI EFFECTIVE GROSS INCOME $249,394 $246,734 $257,465 Actual 2014 Proforma Less Estimated Expenses: $/UNIT $/YEAR $/YEAR Property Taxes $0 $0 $5,000 *NOTE Fixed Assessment $9 $233 $233 Insurance $197 $5,126 $5,287 Controllable Expenses Utilities $1,058 $27,509 $27,864 Payroll $2,810 $73,053 $20,000 Professional Management Fee (4.0%) $471 $12,254 $9,706 Repairs & Maintenance $271 $7,036 $20,000 Contracted Services $231 $5,996 $4,681 Administrative $781 $20,306 $5,000 Replacement Reserves $200 $19,316 $5,200 $170,829 $102,971 Exp./unit: $6,570 $3,960 ($102,971) ($102,971) Exp/psf: $11.42 $6.89 Exp. % of SGI: 68.3% 39.5% NET OPERATING INCOME $143,764 $154,494 Amortization 30 Rate 3.50% Debt Service $83,522 $83,522 CASH FLOW $60,241 $70,972 * Note: property may qualify for full property tax abatement, call broker for details Cash on Cash Return 7.09% 8.35% DSCR Principal Loan Reduction $29, Total Return $89,514 $100,244 Return on Equity 10.53% 11.79% Price $2,400,000 $/Unit $92,308 $/SF $ Down Payment $850,000 Market Cap Rate 6.44% Actual GRM FINANCIALS

SALE COMPARABLES DE LUZ 5 1 2 4 3 De Luz

10 SALE COMPARABLES DE LUZ De Luz Apartment Homes Old Stage Road Running Springs Sunglen Vista Las Casitas Apartments Kalmia Courtyard Apts 8 Sales Comparables

11 SALE COMPARABLES DE LUZ APARTMENTS 1133 OLD STAGE RUNNING SPRINGS SUNGLEN VISTA LAS CASITAS APARTMENTS KALMIA COURTYARDS SENIOR APTS Address 420 N. Pico Ave 1133 Old Stage Road 1119 Old Stage Rd 1550 S. Santa Fe Ave 948 N. Santa Fe Ave 234 W. Kalmia City Fallbrook, CA Fallbrook, CA Fallbrook, CA Vista, CA Vista, CA Fallbrook, CA # of Units Year Built Sales Price $2,400,000 $2,090,000 $950,000 $4,500,000 $2,249,000 $2,799,000 Close of Escrow TBD 1/23/2015 8/20/ /8/ /25/2014 FOR SALE (active) Sale $/Unit $92,308 $116,111 $95,000 $132,353 $93,708 $99,964 Sale $/Bldg SF $ $154 $139 $162 $179 $140 Unit Mix (1) Studio 400 SF (24) Studios 408 SF (25) 1bd/1ba 572 SF (5) 1br/1ba 600 SF (10) 1br/1ba 683 SF (24) 1br/1ba 750 SF (24) 1br/1ba 677 SF (1) 1bd/1ba 653 SF (12) 2br/1ba 850 SF (10) 2br/1ba 970 SF (4) 2br/1ba 903 SF NOI/Unit $5,708 $5,875 $5,192 $5,274 $5,471 $5,771 Cap Rate (In Place) 5.99% 4.81% 5.46% 3.99% unknown 5.13% Cap Rate (Proforma) 6.44% 5.52% 6.17% 4.79% 5.84% 7.08% GRM (In Place) unknown 9.79 GRM (Proforma) DE LUZ APARTMENT HOMES SC9

RENT COMPARABLES DE LUZ 4 2 De Luz Apartment Homes 1 1 2 3 1133 Old Stage Road Autumn

12 RENT COMPARABLES DE LUZ 4 2 De Luz Apartment Homes Old Stage Road Autumn Haze Westside Apartments Ironwood Apartments Clemmens Lane 10 Rent Comparables

13 RENT COMPARABLES PROPERTY DE LUZ APTS 1133 OLD STAGE ROAD AUTUMN HAZE WESTSIDE APARTMENTS IRONWOOD APARTMENTS CLEMMENS LANE Address 420 N. Pico Ave 1133 Old Stage Road 745 Alturas Lane 145 W Clemmens Lane 747 W Fallbrook St 401 W. Clemmens Lane City Fallbrook Fallbrook Fallbrook Fallbrook Fallbrook Fallbrook # of Units Built Not Known (+/- Late 80's) Bedroom No. of Each Avg Rent $758 (50% AMI) $818 (80%AMI) $858 $935 $895 $875 $800 Avg SF Rent/SF $1.32 (50% AMI) $1.43 (80% AMI) $1.43 $1.34 $1.12 $1.40 $ Bedroom (type) 2bd/1ba 2bd/2ba 2bd/2ba 2bd/1ba No. of Each Avg Rent $1,018 $1,075 $950 $1,000 Avg SF Rent/SF $1.20 $1.19 $1.12 $1.18 # of Buildings Amenities Common Laundry Facility, Outside Storage Secured Site, Laundry Room, BBQ Area, Wall A/C Swimming Pool, Laundry Room, Central Air Conditioning Common Laundry Facility Swimming Pool, Spa, Common Laundry Facility Swimming Pool, Common Laundry Facility Parking Surface (16) & Garage (10) Spaces; Parking Ratio of 1.0/unit Surface and Carport Surface Parking Surface Parking; Ratio of 1.6/unit Covered & Surface Parking; Ratio of 2.2/unit Surface Parking; Ratio of 1.4/unit DE LUZ APARTMENT HOMES 11

14 FALLBROOK MARKET OVERVIEW For 1Q2015, rents in the Fallbrook market averaged $1,031 and occupancy exceeded 99%. The submarket posted a positive year over year rent change of 7%, one of the highest in the County. FALLBROOK RENTS Average Market Rent $1,031/$1.26 sf Studio $826 1 Bedroom $951 2 Bedroom $1,065 3 Bedroom $1,345 Average Occupancy 99% Number of Units Surveyed 1,185 Source: MarketPointe Realty Advisors March2015 FALLBROOK DEMOGRAPHICS POPULATION 2015 Estimated Population 31, Projected Population 33,047 Growth % HOUSEHOLDS 2015 Estimated Households 10, Projected Households 10,893 Growth % 2015 Est. Average Household Income $72,925 HOUSING 2015 Estimated Housing Units 11, Est. Owner Occupied Units 55% 2015 Est. Renter Occupied Units 37% 2015 Est. Median Housing Value $453, Est. Average Housing Value $530,506 CBRE Fast Report 12 Market Overview

FALLBROOK MARKET OVERVIEW Fallbrook California is a peaceful rural community of approximately 30,534 people located six miles west of Interstate 15, five miles north of Route 76 and is

This charming community, which once housed a stagecoach stop along the route from Temecula to San Diego, currently holds the title of Avocado Capital of the Universe and is home to the

The exhibitions in the Art Center s Janice Griffith s Gallery change monthly and include national level shows in painting, sculpture, ceramics, and glass.

15 FALLBROOK MARKET OVERVIEW Fallbrook California is a peaceful rural community of approximately 30,534 people located six miles west of Interstate 15, five miles north of Route 76 and is immediately east of US Marine Corps Camp Pendleton. Only 12 miles southwest of Temecula, residents have access to the all the conveniences and resources of a larger city. This charming community, which once housed a stagecoach stop along the route from Temecula to San Diego, currently holds the title of Avocado Capital of the Universe and is home to the annual spring Avocado Festival. Recently, focus in Fallbrook has shifted to the art community, with the Art Center at Fallbrook taking center stage. The exhibitions in the Art Center s Janice Griffith s Gallery change monthly and include national level shows in painting, sculpture, ceramics, and glass. Fallbrook has also gained attention recently from some of the Hollywood celebrity set looking for a quiet escape. Home owners include Jason Mraz, Sarah Michelle Gellar and Freddie Prince Jr., Tori Spelling, Dean McDermott and Weird Al Yankovic. DE LUZ APARTMENT HOMES 13

16 EXCLUSIVE ADVISORS JIM NEIL Senior Vice President Lic MERRICK MATRICARDI Senior Associate Lic ERIC COMER Senior Vice President Lic eric.comer@cbre.com Disclaimer 2015 CBRE, Inc. This letter/proposal is intended solely as a preliminary expression of general intentions and is to be used for discussion purposes only. The parties intend that neither shall have any contractual obligations to the other with respect to the matters referred herein unless and until a definitive agreement has been fully executed and delivered by the parties. The parties agree that this letter/a negotiations, including without limitation any obligation to negotiate in good faith or in any way other than at arm s length. Prior to delivery of a definitive executed agreement, and without any liability to the other party, either party may (1) propose different terms from those summarized herein, (2) enter into negotiations with other parties and/or (3) unilaterally terminate all negotiations with the other party hereto. N:\Team-ComerNeil\AA Properties\_NORTH COUNTY EAST (San Marcos, Escondido, Fallbrook)\De Luz\De Luz_OM Folder\De Luz_OM.indd

Di Fiore Fourplex. 859 Di Fiore Dr San Jose, CA Offering Price: $1,550,000

Di Fiore Fourplex. 859 Di Fiore Dr San Jose, CA Offering Price: $1,550,000 For more information contact: Commercial Investment Broker michael@svmultifamily.com BRE 01327546 Offering Price: $1,550,000 Unit Mix: (1) 3BR / 2BA, (1) 2BR / 1BA, (2) 1BR / 1BA 2 Parking Spaces per unit