8 Units Built 2018 Queen Anne Seattle, WA OFFERING MEMORANDUM

Transcription

1 8 Units Built 2018 Queen Anne Seattle, WA OFFERING MEMORANDUM

2 BERTONA STEPS th Avenue West Seattle, Investment Contacts Matt Kemper Vice President Don Flanigan Vice President Jordan Louie Vice President Financing Contacts Seth Heikkila Senior Vice President Drew Heitstuman Associate

3 CONTENTS Executive summary 04 Property description 08 Submarket overview 14 Market overview 18 Rent & sales comparables 22 Financial analysis 28 Transaction guidelines 32

4 EXECUTIVE SUMMARY

5 EXECUTIVE SUMMARY 5 The Offering JLL is pleased to present Bertona Steps to the investment community. Completed in 2018, the condo-quality asset offers eight spacious units with Scandinavian designer finishes and high energy efficiency. Bertona Steps sits on the western side of Queen Anne, providing easy access to the amenities and employment opportunities of Greater Seattle. The property is less than a five-minute walk to the RapidRide D line, as well as the future Interbay Light Rail Station. The upcoming Expedia campus is also nearby, less than 10 minutes by car. Property Details Name Bertona Steps Address th Avenue West, Seattle, Washington Parcel Number Built 2018 Construction Type Number of Units Average Unit Size Residential Space Floorplans Parking Wood frame Eight apartment homes 905 square feet 7,238 net rentable square feet Live-work (1x1.5) and two bedroom / one bath options Five parking stalls OFFERING MEMORANDUM

6 6 EXECUTIVE SUMMARY Investment Highlights RESIDENTIAL DESTINATION Queen Anne is among the most coveted and trendy neighborhoods for the young city-dwelling professionals of Seattle. It offers a quintessential residential environment and is filled with clusters of activity desired by the urbanites of the Millennial generation. An influx of this demographic toward Queen Anne has bolstered its residential base and solidified its status as an in-demand community of Seattle. COMPELLING LOCATION Bertona Steps is within close proximity of restaurants, shopping and entertainment such as QFC and Whole Foods, the Interbay Golf Center and Athletic Complex, as well as Seattle Pacific University and the University of Washington. The asset is conveniently located near key regional employment hubs, offering quick commuting options to notables in high-tech and bio-tech including Amazon, Google, Facebook and Microsoft, among others. Bus routes currently run within a block of the property and future light rail will open just steps away in Meanwhile, Expedia s nearby 40-acre campus will host a staff of 4,500 and sits within a direct route of Bertona Steps. The new Expedia campus/world headquarters opens in EXCEPTIONAL PRODUCT Recently opened in summer 2018, Bertona Steps exemplifies modern, high-end design with elements such as stainless steel appliances, quartz countertops, oversized windows, plank flooring, in-unit washer/dryers and air conditioning. Luxury is blended with technology with a state-of-the-art security monitoring system, while the incorporation of energy saving appliances, light fixtures and heating/cooling keeps each unit s energy consumption optimally low. CHALLENGING FOR-SALE HOUSING MARKET Within the immediate proximity of Bertona Steps, household incomes are $82,108, yet homeownership remains elusive with average home values of $828,500. In comparison, new construction rents average $2,308 per month and rent growth (all vintages) has averaged 5.2%. Overall home prices in Greater Seattle have climbed 85% since 2012 and sale price appreciation is number one in the country. LEADING METRO Even with surging home prices, Seattle offers 31% more disposable income over the Bay Area. As a result, Seattle is the top ranked city for career-oriented professionals and the nation s top relocation destination. 110,000 new jobs are listed on LinkedIn and more than 100 out-of-state tech companies have planted a flag in the Seattle region in the past three years. Of the 35 Fortune 500 companies headquartered in the Bay Area, 10 now offer a significant presence in Seattle the Urban Land Institute s top real estate investment market for LISTED EXCLUSIVELY BY JLL

7 EXECUTIVE SUMMARY 7 Woodland Park Zoo University District Fremont Google Lake Union RapidRide D Line & Future Light Rail 5 Queen Anne South Lake Union Amazon Google Facebook Microsoft Central Business District Seattle Center Elliott Bay Ballard Interbay Magnolia Discovery Park N OFFERING MEMORANDUM

8 PROPERTY DESCRIPTION

9 PROPERTY DESCRIPTION 9 The Asset Bertona Steps is a four-story multifamily asset built upon a 5,550-square foot site. With a location along 15th Avenue West, it has a sought-after Queen Anne address, yet enjoys the close-in amenities of Interbay. The single structure includes four live-work units and four two bedroom / one bath units ranging in size from 790 to 1,020 square feet. Total net rentable space equals 7,238 square feet. The property includes five parking stalls and private decks for the upper-level apartments. Expansive windows provide views out towards the west. UNIT MIX Floorplan Number of Units Avg. Unit Size (SF) % of Unit Mix Live-Work (1x1.5) % Two Bedroom / One Bath 4 1,020 50% Total / Average 8 7,238 / % OFFERING MEMORANDUM

10 10 PROPERTY DESCRIPTION LOFT DN DN LOFT UP UP LIVE-WORK LOFT 1 Bd / 1.5 Ba 808 SF LIVE-WORK LOFT 1 Bd / 1.5 Ba 771 SF LISTED EXCLUSIVELY BY JLL

11 PROPERTY DESCRIPTION 11 BEDROOM BEDROOM BEDROOM DINING LIVING DINING BEDROOM LIVING TWO BEDROOM 2 Bd / 1 Ba 1,020 SF TWO BEDROOM 2 Bd / 1 Ba 1,020 SF OFFERING MEMORANDUM

12 12 PROPERTY DESCRIPTION Property Details CONSTRUCTION DETAIL Exterior Finish Roof Framing Ceiling Height Windows Sound Insulation MECHANICAL DETAIL Plumbing Water Heater Air Conditioning Smooth HardyPanel, HardyPlank, natural wood Thermoplastic polyolefin (TPO), three solar panels on roof Conventional framing Live/work units: x1 units: 11 4 Ply Gem Floor joist bays are insulated PEX plumbing with low-flow, high-efficiency shower heads Electric 36 gallon hot water tank 2x1 units with Daiken FTX12NMVJV ductless mini split A/C CONSTRUCTION DETAIL Cabinets Counter Surfaces Backsplash Appliances Sinks Interior Doors Flooring Decks Electricity and Gas Water and Sewer Laundry Lighting Oak veneer with contemporary hardware package Quartz Subway tile kitchen backsplash, full tile surround on tub and shower Frigidaire stainless appliances, smooth top range Undermount Single panel contemporary Vinyl plank All 2x1 units All electric $60 bill back per person In-unit Whirlpool stackable LED lighting package Sprinkler System Heating All units sprinklered and alarmed Stiebel Eltron convection heating units COMMUNICATION DETAIL/UTILITIES Comcast, cable in all bedrooms and living rooms, control Notes panel in master bedrooms LISTED EXCLUSIVELY BY JLL

13 PROPERTY DESCRIPTION 13 OFFERING MEMORANDUM

14 SUBMARKET OVERVIEW

15 SUBMARKET OVERVIEW 15 Queen Anne / Interbay QUEEN ANNE Queen Anne is largely residential with historic mansions, Victorian homes and craftsman style houses. It is the architectural style of the area that gave Queen Anne its name. The main business district of this urban village runs atop the hill, along Queen Anne Avenue North. Sidewalks are filled with residents and visitors enjoying the shopping and dining of this pedestrian friendly corridor. Lower Queen Anne also features a strong business sector, with an eclectic mix of shops, bars, restaurants and cinemas, as well as period inns. Several chains are located in Lower Queen Anne including traditional banks, grocers and drug stores. On the cusp of Lower Queen Anne is the headquarters for the Bill & Melinda Gates Foundation, as well the Seattle Center, site of the 1962 World s Fair. The fairgrounds are now home to the Space Needle, Pacific Science Center, Museum of Pop Culture, KeyArena, Chihuly Glass and Garden Center and the north terminal of the Seattle Center monorail. Numerous festivals including Folklife, Bite of Seattle and Bumbershoot take place here every year. Queen Anne s access to the Seattle waterfront was solidified in 2012 with the completion of the West Thomas Street Pedestrian and Bicycle Overpass Project. This new structure now provides pedestrians and bicyclists with direct access from the lower Queen Anne community to Myrtle Edwards Waterfront Park and Olympic Sculpture Park. INTERBAY Traditionally, Interbay has been characterized by industrial use and the BNSF rail yard. However, as industrial tenants moved south to the Kent Valley, it has taken on a new residential focus for Seattle s booming multifamily market. The Interbay area is quickly emerging as a vibrant place to live for Millennials seeking an active lifestyle. In 2007, Interbay was rezoned to 85 feet to help promote growth in the area. As Whole Foods and other popular restaurants moved into the neighborhood, so did new residents. In the past several years, Interbay has taken on a new identity as a lively Seattle neighborhood. Flat bike paths link Interbay with the Downtown Waterfront. The residents of Interbay are afforded access to several retail options in the immediate area including a popular Whole Foods. People are also drawn to Interbay to golf at the city-owned nine-hole course, or to watch college soccer matches at the Interbay Athletic Complex. Light rail is coming to Interbay as part of the Ballard Link Extension with a station to be built at West Dravus Street and 15th Avenue West. Currently in the planning phase, the start of service is expected to begin in The Ballard Link will travel from Ballard s Market Street area through Interbay to Downtown Seattle. Futher connections will transport riders to Capitol Hill, University District, West Seattle, Bellevue, Redmond and Seattle-Tacoma International Airport, among other regional destinations. OFFERING MEMORANDUM

16 16 SUBMARKET OVERVIEW Queen Anne / Interbay $2,128 Average market rent $2,308 Average new construction rent 5.2% 3-year average rent growth 5.1% Market vacancy Q2 RENT ($ PER UNIT) RENT VS. OWN $1,621 $1,725 $1,830 $1,939 $2,055 $2,128 $3,667 $3,981 $1,470 $2,128 $2,281 $2, Rent Rent 1/3 Median Income New Construction Rent 1/3 Median Tech Income Average Mortgage Payment Queen Anne / Interbay has one of the highest densities of Millennial concentrations because of its proximity to core employers and curated retail. Based on the median household income of $82,108, the typical resident can afford up to $2,281 in monthly rent. Software engineers earn on average $132,000, yielding up to $3,667 in monthly rent. New construction rent sits at $2,308, which leaves runway for rental growth. The high demand for renting comes from the difficulty to own in a close-in neighborhood. The average home value in the area is $828,500. This results in a mortgage payment of $3,981 (with a 20% down payment). LISTED EXCLUSIVELY BY JLL

17 15th Ave W 20th Ave W SUBMARKET OVERVIEW W Dravus St 4 Salmon Bay Thorndyke Ave W 10 Ballard Interbay 14 RapidRide Bus - D Line NW Ballard Way Ship Canal Trail W Nickerson St Future light rail station on Ballard Link Extension - opens Leary Way NW North Queen Anne W Bertona St Restaurants Bars Grocery 1. La Palma Family Mexican Restaurant 2. Java Jazz 3. QFC 4. Pagliacci Pizza 5. Tuk Tuk Thai Kitchen 6. Red Mill Burgers 7. The Cheese Wizards 8. Yasuko s Teriyaki 9. Boxcare Ale House 10. Mulleady s Irish Pub 11. Hub Coffee Shopping Services Schools 1. Point S Affordable Tire & Service 2. Third & Wall Art Group 3. Sound Animals 4. French Mornings Preschool 5. Metro Dog 6. Helena s Cleaners 7. Seattle Film Institute 8. Princess Nails 9. Interbay Veterinary Care Center 10. Cassandra McClure Parks Fitness Recreation 1. Interbay Athletic Complex 2. Interbay Golf Center 3. Yogafrica 4. Bayview Playground 5. The Little Gym 6. Northwest Crossfit & Holistic Health 12. New China Express 13. Time 4 Pho 14. Americano 15. Whole Foods Market 16. Malena s Taco Shop 17. Macrina Bakery & Cafe 18. S & L Cafe 19. Targy s Tavern 20. Einstein Bros. Bagels 21. Rooftop Brewing Co. 22. Highliner Public House 23. Fishermen s Green Market 11. Magnolia Montessori 12. Sprocketts Recycled Bicycle 13. Lullaby Nail Salon 14. Magnolia Salon 15. Tigerlily Salon 16. Alpine Hut 17. Total Wine & More 18. Broken Time Records 19. Elliott Bay Animal Hospital 20. Petco Animal Supplies 21. Idunn Salon & Spa 22. Rhinestone Rosie 7. Tulina Yoga 8. Sync Fitness 9. Crossfit Interbay 10. Vertical World 11. Ballard Jiu Jitsu 12. LA Fitness 13. CorePower Yoga 24. Chinook s at Salmon Bay 25. Pono Ranch 26. Staple & Fancy 27. The Walrus & the Carpenter 28. Peddler Brewing Co. 29. Mean Sandwich 30. Trader Joe s 31. New Seasons Market 32. Giddy Up Burgers 33. Fred Meyer 34. Bad Jimmy s Brewing Co. 35. Hale s Brewery 23. Wink Hair Studio 24. Salon Joseph 25. Coe Elementary School 26. Seattle Pacific University 27. Adventure Ready 28. Fisherman s Terminal 29. Western Pioneer Inc 30. Ballard Blocks 31. Sherwin-Williams 32. Salty Dog Pottery 33. OfficeMax 34. Big 5 Sporting Goods 14. Crossfit Twenty Pound Hammer 15. Jordan Pilates 16. Mind Body Sanctuary OFFERING MEMORANDUM

18 MARKET OVERVIEW

19 MARKET OVERVIEW 19 Puget Sound Region The Puget Sound Region is one of the most economically vibrant metropolitan areas in the world and boasts a diversified economy with strong office employment drivers. Known as the Silicon Valley of the Northwest, the metro area s strategic location and thriving economy have made it the commercial, cultural and advanced technology hub of the Pacific Northwest and a major port city for trans-pacific trade. Nestled between bodies of water and mountain ranges, the Puget Sound Region offers an urban city environment surrounded by breathtaking scenery with the Cascade Range to the east and the Olympic Mountains to the west. On top of its unmatched natural beauty, the region is also home to an impressive list of companies including Amazon, Microsoft, Boeing, Nordstrom, Starbucks, Costco, T-Mobile, Expedia, Tableau, F5 Networks, the Bill & Melinda Gates Foundation, Fred Hutchinson Cancer Research Center, Weyerhaeuser and many more. In addition, many Bay Area companies are expanding in the region including Google, Facebook, Apple, Twitter and Salesforce. Of the 35 Fortune 500 companies headquartered in the Bay Area, 10 now offer a significant presence in Seattle. RANKINGS Bloomberg s 2016 U.S. Innovation Index ranked Seattle as the 8th most innovative city among top U.S. metro areas. Seattle s rich tech sector continues to anchor the economy and Seattle is three times more high-tech concentrated than the U.S. average, ranking it #2 in the nation. Tech employment has grown by 77.7% since 2001, the fourth highest growth rate in the country. Seattle has been a top-ten favorite in ULI and PWC s Emerging Trends in Real Estate and this year is no different. Seattle was ranked the #1 overall market in the U.S. for This is the first time the city has captured the top ranking since Seattle ranked #1 in the country for real estate investment in 2018 Population & Housing The Seattle-Tacoma-Bellevue MSA is the 15th largest in the nation, with 3.8 million people calling the area home. Seattle s growth represents the largest concentration of population north of San Francisco and west of Chicago. By 2040, the population is expected to increase by 38%. In 2017, Washington State saw the largest net migration of Millennials, adding 39,590 more Millennials than were lost. Of all cities in the state, Seattle saw the largest share of net Millennial migration. Historically, for every nine jobs added in the Seattle metro area, one apartment unit was absorbed. After the recession, this number decreased to only seven new jobs needed to absorb one unit. Currently, there is impressively high demand with only five new jobs needed to absorb one apartment unit. As a result, annual absorption has increased by 75% since the post-recession time period. This is due in part to a high number of new jobs, surging population and changing living preferences of renters. Home prices have also been surging for the past six years. According to the Seattle Times, single-family home prices have grown faster here than anywhere else in the country and surpassed the housing bubble of the last decade. The Case-Shiller Home Price Index shows Seattle home prices climbing by 85% since 2012, resulting in sale price appreciation that is number one in the country. Year-over-year, Seattle home values have grown by 12.7%. OFFERING MEMORANDUM

20 20 MARKET OVERVIEW Employment Seattle ranked #1 on the Robert Half Career City Index, due to its attractive career opportunities and relatively low cost of living. Seattle s tech sector continues to anchor the economy as home-grown companies like Expedia and Tableau, as well as Bay Area tech giants like Google and Facebook expand and attract more talent to the area. The Seattle metro area experienced 12% and 7.6% growth over the last two years in tech and STEM jobs. LIFE SCIENCE / TECHNOLOGY Known as one of the nation s premier life sciences markets, Seattle has some of the world s largest philanthropic organizations, including the Bill & Melinda Gates Foundation. The Seattle metro continually ranks in the top ten nationally in VC and NIH funding, as well as patents issued. AEROSPACE According to the Seattle Trade Alliance, the Greater Seattle area is home to over 1,350 aerospace-related companies, which are responsible for 95% of the nation s commercial airplane production. Washington state ranked #1 as the best location in the U.S. for aerospace manufacturing, according to an Aerospace Competitive Economics Study that was conducted by the Teal Group. Transportation Total passenger traffic at Seattle-Tacoma International Airport increased 2.6% in 2017 to 46.9 million passengers, making Sea-Tac the 9th busiest airport in the U.S. By 2034, the Port of Seattle projects Sea-Tac will reach 66 million annual passengers and 540,000 annual aircraft operations of landings and departures (up from 416,000 in 2017). Sound Transit 3 is a $54 billion master plan, adopted in 2016, that will add light rail as well as bus and heavy rail in the tri-county metro area. This supplements the voter-approved Sound Transit 2 ballot measure, passed in 2008, that allocated funds for North, East and South Corridor projects. Aside from increasing connectivity, the master plan initiatives of Sound Transit will serve as catalysts, spurring further employment and population growth throughout the Puget Sound Region. Fastest growing major U.S. city and top national relocation destination INTERNATIONAL TRADE Long a leader in international trade, Seattle s naturally deep water port is one shipping day closer to major Asian Pacific Rim ports and handles over 25% of all Pacific Rim imports into the United States. Nearly 75% of Washington s trade traffic passes through the Ports of Seattle and Tacoma. Washington s exports to FTA markets have grown by 24% since 2007 to $18.5 billion in LISTED EXCLUSIVELY BY JLL

21 Kirkland REDMOND Microsoft KIRKLAND FREMONT Redmond Google U DISTRICT Google CORRIDOR Fremont Microsoft Queen Anne South Lake Union Puget Sound Sahalee Country Club Bellevue Capitol Hill DOWNTOWN BELLEVUE Microsoft Amazon Central District Seattle 405 Lake Washington Facebook DOWNTOWN SEATTLE/SOUTH LAKE UNION Amazon Facebook 90 Microsoft Facebook Apple Eastgate Mercer Island Google 90 I-90 CORRIDOR Lake Sammamish State Park T-Mobile ISSAQUAH Fauntleroy 405 Boeing Field Rainier Golf and Country Club Cougar Mountain Regional Wildland Park Rainier Beach 5 RENTON Seatac Seattle-Tacoma International Airport Renton 167 Issaquah

22 RENT & SALES COMPARABLES

23 RENT & SALES COMPARABLES 23 Rent Comparables BERTONA STEPS th Avenue West Seattle, WA, Built # of Units... 8 Avg. SF AIRE APARTMENTS 2572 Gilman Drive West Seattle, WA Built & 1991 # of Units Avg. SF HENRY 22 Etruria Street Seattle, WA Built # of Units Avg. SF ELAN UPTOWN FLATS 300 1st Avenue West Seattle, WA Built # of Units Avg. SF THE FLATS AT INTERBAY th Avenue West Seattle, WA Built # of Units Avg. SF INTERBAY th Avenue West Seattle, WA Built # of Units Avg. SF VIBE FREMONT 3601 Greenwood Avenue North Seattle, WA Built # of Units Avg. SF QUEEN ANNE FLATS 521 2nd Avenue West Seattle, WA Built # of Units Avg. SF OFFERING MEMORANDUM

24 15TH AVE W 24 RENT & SALES COMPARABLES INTERBAY 99 VIBE FREMONT 5 THE FLATS AT INTERBAY North Queen Anne Interbay AIRE APARTMENTS W MCGRAW ST HENRY LAKE UNION Queen Anne QUEEN ANNE FLATS ELAN UPTOWN FLATS 99 ELLIOTT AVE W MERCER ST South Lake Union 5 LISTED EXCLUSIVELY BY JLL

25 RENT & SALES COMPARABLES 25 Live-Work Comparables NAME Avg. SF Avg. Rent Rent / SF Elan Uptown Flats 924 $3,215 $3.48 Henry 927 $3,000 $3.24 Vibe Fremont 857 $2,750 $3.21 Queen Anne Flats 611 $2,195 $3.59 Interbay (One Bedroom) 750 $2,150 $2.87 Bertona Steps (Pro Forma) 790 $1,850 $2.34 Flats at Interbay 633 $1,700 $2.69 Aire (One Bedroom) 665 $1,700 $2.56 Rent LIVE-WORK Live-Work COMPARABLES Comparables $3,200 $3,000 $2,800 Elan Uptwon Flats Henry Vibe Fremont $2,600 $2,400 $2,200 $2,000 Queen Anne Flats Interbay (One Bedroom) $1,800 $1,600 Flats at Interbay Aire (One Bedroom) Bertona Steps (Pro Forma) Square Feet Two Bedroom Comparables NAME Avg. SF Avg. Rent Rent / SF Elan Uptown Flats 962 $3,295 $3.43 Bertona Steps (Pro Forma) 1,020 $2,900 $2.84 $3,200 TWO BEDROOM Two Bedroom COMPARABLES Comparables Elan Uptwon Flats Interbay (2x2) 1,066 $2,785 $2.61 Aire 810 $2,300 $2.84 Vibe Fremont 671 $2,295 $3.42 Queen Anne Flats 734 $2,295 $3.13 Rent $3,000 $2,800 $2,600 Bertona Steps (Pro Forma) Interbay (2x2) $2,400 Vibe Fremont Queen Anne Flats $2,200 Aire ,000 1,050 1,100 Square Feet OFFERING MEMORANDUM

26 26 RENT & SALES COMPARABLES Sales Comparables th Ave NE Seattle, WA Built # of Units...24 Avg SF Sale Date... Dec-17 Sale Price... $8,800,000 Price / Unit... $366,667 Price / SF... $764 Jupiter th Ave Seattle, WA Built # of Units Avg SF Sale Date... Sep-17 Sale Price...$3,843,000 Price / Unit... $192,150 Price / SF... $763 Gallaway Apartments 1126 N 90th St Seattle, WA Built # of Units...8 Avg SF Sale Date... Jun-17 Sale Price... $2,500,000 Price / Unit...$312,500 Price / SF... $531 Mod E Denny Way Seattle, WA Built # of Units...8 Avg SF Sale Date...Sep-16 Sale Price...$2,949,200 Price / Unit...$368,650 Price / SF... $729 Solo Lofts 2018 NW 57th St Seattle, WA Built # of Units Avg SF Sale Date...Aug-16 Sale Price...$9,950,000 Price / Unit... $497,500 Price / SF...$623 LISTED EXCLUSIVELY BY JLL

27 RENT & SALES COMPARABLES 27 GALLAWAY APARTMENTS SOLO LOFTS Green Lake Way 4850 Green Lake Way N Seattle, WA Ballard Built # of Units... 7 Avg SF...1,474 Sale Date...Apr-16 Sale Price...$3,980,000 Price / Unit... $568,571 Price / SF...$ Interbay LAKE UNION 520 Queen Anne 99 South Lake Union Capitol Hill MOD 19 LAKE WASHINGTON ELLIOTT BAY 5 JUPITER 90 OFFERING MEMORANDUM

28 FINANCIAL ANALYSIS

29 FINANCIAL ANALYSIS 29 PRO FORMA RENTS MARKET RATE TYPE UNITS AVG. UNIT SF TOTAL SF AVG. RENT RENT/SF ANNUAL INCOME Live-Work (1x1.5) ,158 $1,850 $2.34 $88,800 Two Bedroom / One Bath 4 1,020 4,080 $2,900 $2.84 $139,200 Total / Average ,238 $2,375 $2.63 $228,000 CURRENT OCCUPANCY, IN-PLACE RENTS MARKET RATE TYPE UNITS AVG. UNIT SF TOTAL SF AVG. RENT RENT/SF ANNUAL INCOME Live-Work (1x1.5) ,158 $1,836 $2.33 $88,140 Two Bedroom / One Bath 2 1,020 2,040 $2,850 $2.79 $68,400 Total / Average ,198 $2,174 $2.51 $156,540 PRO FORMA YEAR 1 PER UNIT PERCENT OPERATING REVENUE Potential Market Rate Rent $228,000 $28,500 Gross Potential Rent $228,000 $28,500 Loss to Lease $0 $0 0.00% Vacancy -$6,840 -$ % Concessions $0 $0 0.00% Collection Loss / Bad Debt -$570 -$ % Total Economic Loss -$7,410 -$ % Net Rental Income $220,590 $27,574 Parking Income $4,500 $563 Pet Rent $1,080 $135 Utility Reimbursement $10,080 $1,260 Miscellaneous Income $3,200 $400 Total Other Income $18,860 $2,358 PRO FORMA YEAR 1 PER UNIT PERCENT OPERATING EXPENSES Utilities $11,608 $1,451 Repairs & Maintenance $4,000 $500 Turnover $1,600 $200 Marketing & Leasing $1,600 $200 Landscaping / Contract Services $1,600 $200 Administrative $1,200 $150 Management Fee $11,973 $1, % Insurance $3,000 $375 Real Estate Taxes $32,956 $3,662 Total Operating Expenses $69,536 $8,234 Replacement Reserves $2,000 $250 Net Operating Income $167,914 Expenses and Reserves Per Unit $8,942 Expense Ratio 29.04% Total Operating Income $239,450 $29,931 OFFERING MEMORANDUM

30 30 FINANCIAL ANALYSIS FINANCIAL ANALYSIS Notes to Pro Forma APARTMENT INCOME Pro Forma Rents: The Pro Forma assumes average rents of $2,375 ($2.63 per square foot) across the 8 units at Bertona Steps. Our Pro Forma rents are assumed to grow by 4.0% in year 2, 3.5% in years 3 and 4, and by 3.0% in year 5, and annually throughout the remainder of the holding period. See below for further details: Live-Work: The Pro Forma assumes average rents at live-work units of $1,850 per unit ($2.34 per square foot). Two Bedroom / One Bath: The Pro Forma assumes average rents at two bedroom / one bath units of $2,900 per unit ($2.84 per square foot). Loss / Gain to Lease: The Pro Forma assumes no loss to lease. Vacancy: The Pro Forma assumes vacancy losses equal to 3.0% of gross potential rent, which is in line with comparable properties of this size and income level in the market. Concessions: The Pro Forma assumes no concessions, which is in line with comparable properties of this size and income level in the market. Collection Loss / Bad Debt: The Pro Forma assumes bad debt losses equal to 0.25% of gross potential rent, which is in-line with comparable properties in the market. ADDITIONAL INCOME Parking: The property contains 5 parking stalls. We assume 100% occupancy and that management charges $75 per stall, per month. This equates to parking income of $4,500 ($563 per unit). Pet Rent: The Pro Forma assumes that 25.0% of units at the building have at least one pet at rate of $45 per pet, per month. Overall, this equates to total pet rent income of $1,080 ($135 per unit). Utility Reimbursement: The Pro Forma assumes utility reimbursement of $10,080 ($1,260 per unit). This assumes that management bills back tenants approximately $60 per occupant, per month, for utilities. The Pro Forma assumes six units have two occupants, and two units have one occupant. Miscellaneous Income: The Pro Forma assumes miscellaneous income of $3,200 ($400 per unit), which is in line with comparable properties of this size and income level in the market. OPERATING EXPENSES Utilities: The Pro Forma assumes utility expense of $11,608 ($1,451 per unit), which is in line with comparable properties in the market. Repairs & Maintenance: The Pro Forma assumes repairs and maintenance expense of $4,000 ($500 per unit), which is in line with comparable properties in the market. Turnover: The Pro Forma assumes turnover expense of $1,600 ($200 per unit), which is in line with comparable properties in the market. Marketing & Leasing: The Pro Forma assumes marketing and leasing expense of $1,600 ($200 per unit), which is in line with comparable properties in the market. Landscaping / Contract Services: The Pro Forma assumes landscaping and contract services expense of $1,600 ($200 per unit), which is in line with comparable properties in the market. Administrative: The Pro Forma assumes administrative expense of $1,200 ($150 per unit), which is in line with comparable properties in the market. Management Fee: The Pro Forma assumes a management fee equal to 5.0% of total operating income. This level is in line with what a competitive third-party manager would charge to manage a property of this size and income level. Insurance: The Pro Forma assumes insurance expense of $3,000 ($375 per unit), which is in line with comparable properties in the market. Real Estate Taxes: The Pro Forma assumes real estate taxes of $32,956 ($3,662 per unit or $5.56 per square foot). Our Pro Forma tax value is based on the current millage rate and fees, and a post trade step-up of approximately 90%. The Pro Forma assumes that taxes will increase by 5.50% in year 2, 5.21% in year 3, and 3.0% in year 4, and throughout the remainder of the holding period. Replacement Reserves: The Pro Forma assumes replacement reserves of $2,000 ($250 per unit), which is in line with comparable, new construction properties of this size and income level. Debt: Please contact Seth Heikkila or Drew Heitstuman with the JLL Seattle Finance Team to discuss potential financing options. LISTED EXCLUSIVELY BY JLL

31 FINANCIAL ANALYSIS 31 OFFERING MEMORANDUM

32 TRANSACTION GUIDELINES

33 TRANSACTION GUIDELINES 33 Offering Procedure The offering of Bertona Steps is being conducted exclusively by JLL. All questions and inquiries should be addressed to the JLL representatives listed herein. The JLL team will be available to assist prospective investors with their review of the offering. This includes on-site inspections of the property and tours of the market area. Investors will receive advanced notification of the bid deadline via . Offers should include, at a minimum, the following: The purchase price and closing date The source of capital, both equity and debt, for the transaction The amount of earnest money deposit A detailed schedule of the due diligence and requisite approval process A description of assumptions utilized for the offer Terms & Conditions Copyright Jones Lang LaSalle IP, Inc This publication is the sole property of Jones Lang LaSalle (JLL) and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of JLL. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. JLL does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication. Jones Lang LaSalle Americas, Inc. License # OFFERING MEMORANDUM

34 Investment Contacts Matt Kemper Vice President Don Flanigan Vice President Jordan Louie Vice President Financing Contacts Seth Heikkila Senior Vice President Drew Heitstuman Associate