Edison Loft Apartments: Raleigh, NC

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1 Edison Loft Apartments: Raleigh, NC Ari Abramson: Vice President, Acquisitions Continental Realty Corporation

2 Headquartered in Baltimore, MD Vertically-integrated owner/operator Dating back 58 years to 1960 Currently own/operate 85 properties comprised of approximately 10,000 apartment units and 4 million square feet of commercial Total valuation of $2.5 billion Continental Realty Corporation Continental Realty Corporation Fund V Targeting commitments of $250 million to acquire a portfolio of multifamily and shopping centers Investing in the high growth Mid-Atlantic and Southeast regions of the U.S. Fund Multifamily Investment Criteria Institutional quality multifamily apartment communities Value-add garden and mid-rise communities in growth submarkets Favorable demographic trends, and are proximate to employment centers, transportation corridors, and amenities

3 Investment Profile: What Differentiates a Core Investment? What are the Red Flags? Attributes for a Long-Term Hold Irreplaceable real estate High quality construction, design and finishes Main & Main location Strong demand drivers, fundamentals and demographics Steady cashflow Underwriting Risks of Acquiring New Construction Rent roll Project s absorption pace through lease-up Growth of effective rents Decline of up-front concession Construction related issues New supply

4 Project Summary: Edison Loft Apartments Property 2016 vintage Six-story mid-rise Class A community 223 apartment units Developed by Cleveland-based NRP Group Heart of downtown Raleigh, North Carolina Timeline and Terms Executed unsolicited LOI at 72% occupancy Purchase price of $61.0M or $273,543 per unit 25 day study period / 25 day period to close CRC closed transaction per PSA terms and at contract price

5 Common Area Amenities and Apartment Features: Edison Loft Apartments

6 Main and Main Location in Raleigh Central Business District Edison Lofts

7 Main and Main Location: Edison Loft Apartments Duke Energy (3,700 employees) Red Hat (1,230 employees) Wake Co. Gov t (3,692 employees) Edison Office (300,000 sf) City-Owned Parking Garage Edison Lofts and Retail SkyHouse Raleigh Apartments Historical City Market / Artspace Condos / Restaurants / Retail Moore Square Park

8 Downtown Submarket: Live, Work & Play

9 Investment Thesis Top Ranked Market Demographic Trends Population growth ranked 2 nd in the nation with a 12.7% increase over last 5 years Job growth ranked 6 th in nation with an average 2.5% annually growth 1.9%) Well Performing Apartment Submarket Premier live, work, play environment Ranked 11 th in the nation for annual rent growth in 2016 Rent growth of 4.6% and 4.1% in 2015 and 2016, respectively Solid Rent Roll and Tenant Profile; Ability to Increase Rents New lease absorption has been steady Average resident household income at the property is $190,000 Five residents earn more than $1 million annually Managing the First Turn of Lease and Concession Burn-Off Developer offered up-front concessions (one-month free), as lease-up strategy Renewals will burn-off concessions

10 Proactive Risk Management Focused on Downside Protection Risk Rent Roll Validation / Construction New Supply: 1,773 units add in Central Raleigh submarket since 2014; Avg. occupancy of 96% 1 project with 265 units under construction 3 proposed projects consisting of 880 units Mitigation Full lease, file audit and engineer review Top performing apartment market in country since 2015 Limited new supply Underwrite rent growth based on expected new deliveries Parking and Ground Floor Retail: Attached parking garage is owned by the City Retail tenant unconfirmed at LOI Direct access to reserved parking for residents 99 year lease structure 100% occupied (national and local tenants) Real Estate Tax Increase at Acquisition 5 year Brownfield property tax abatement Pre-Stabilized Long-Term Financing: Debt service constrained Secured long-term Fannie Mae loan at 65% LTV

11 Return Analysis and Capitalization Financial Metrics and Returns Capitalization Purchase Price: $61,000,000 $273,543 per unit Closing Costs: 600,000 1% of PP Working Capital and Cap Ex: 650,000 $2,915 per unit All-In Purchase Price: $62,250,000 $279,148 per unit Key Year 1 Assumptions Rent Growth: Organic/mark-to-mark effective rent growth; Lease-up concession will burn-off on 2 nd generation leases Management: Continental Realty will self-manage property Proforma Cap Rate (Year 2): Cap Rate Analysis 5.2% Brownfield Tax Abatement: % discount the assessed value of building Equity Breakdown All-In Purchase Price: $62,250, % Less Debt: 39,715, % Equity to Close: $22,535, % Leveraged Returns Analysis Leveraged Equity IRR: 10.3% Gross Multiple: 2.3x Year 1 Leveraged Cash-On-Cash: 5.0% Average Cash-On-Cash (Years 1-5): 5.4% Average Cash-On-Cash (Years 1-10): 6.1% Note: 10-year exit cap assumes a 75 bps spread over all-in purchase price cap OpEx Ratio as a $ of EGI: Adjusted for parking expenses and full real estate tax burden; Ratio for Year 1 is 41% Fannie Mae Debt: 15-year term 10-year of interest-only Fixed rate of 4.3% (lower risk for core investment) Ability for future earn-out/supplemental Average 10-Year Cash-On-Cash Yield of 6.1%

12 Final Takeaways: Core Investment for Steady Growth and Long-Term Hold Period Off-Market In-Fill Urban Location Pre Stabilized Asset with Compelling Lease-up Organic and Market Growth in Rental Rates Strong Submarket Fundamentals and Trends Employment and Government Demand Drivers NOI Growth, Brownfields Tax Credit and Agency Financing

13 Downtown Skyline Around Edison Loft Apartments Edison Lofts Apartments