Ginkgo REIT Inc. Flip Book 20.05 REIT Inc. Flip Book 20.05.01.… · The REIT will continue a...

A tax-efficient, income driven investment for investors seeking low volatility exposure to rental housing communities that cater to the work force population in high growth markets.

May 1, 2020 The information herein relating to the Ginkgo REIT Inc. (the “REIT”) has been provided or derived from information furnished by Ginkgo Investment Company LLC and its affiliates (collectively or singularly “Ginkgo”). While information has been prepared by Ginkgo for the REIT, the accuracy or completeness of the information set forth in this document has not been independently verified. All figures presented throughout this material is for the date on the cover page, unless otherwise noted.

REIT Objective

Private Placement Materials. Confidential Information for Qualified Investors Only; Distribution or Reproduction to Any Other Audience Prohibited

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The REIT seeks to produce long-term, stable returns by creating a portfolio of multifamily communities that adhere to the following criteria:

• Invest in existing multifamily communities, generally constructed prior to 2000, that are well maintained, and do not require significant rehabilitation or renovation.

• Enhance cash flows with modest interior, exterior and

infrastructure improvements to the communities, the results of which are expected to contribute to:

o decreasing operating costs, o lowering costs directly paid by the residents, o extending the economic life of the community and o improving the community in a manner that is

evidenced by resident retention and rent growth.

• Pursue a responsible investing mandate by focusing on improvements that aim to lower energy and resource consumption and improve the habitability and safety of the communities.

• Expect to own each community for more than 10 years, enabling the REIT to enjoy the value of the upgrades and maintenance programs through increased cash flows and ultimately long-term capital appreciation.

• Improve operational efficiency at each community by

seeking to acquire adjacent and/or proximate properties of similarly situated communities such that labor, contractors and other resources can be optimized.

• Maintain debt leverage of less than 70% of the fair market

value of the REIT’s assets, a level intended to provide enhanced dividend benefits for the shareholders without unduly burdening the operations of the REIT in adverse operating conditions.

Strategy and Theory – Southeast



The REIT will continue a strategy that Ginkgo and its legacy firms have been following for more than 25 years. It will pursue the purchase of well-located and maintained multifamily communities that are affordable to the median household income levels in targeted growth markets.

Focused on Southeastern Growth Markets: Historically, population growth is highly correlated with residential rent growth. North Carolina and South Carolina are routinely top 10 states for population growth (both percentage and absolute levels) with Charlotte, Raleigh, Charleston, Wilmington and Myrtle Beach consistently in the top 25 fastest growing cities in the U.S. These dynamics have existed nearly continuously for the past 75 years.

North Carolina and South Carolina rely on a variety of factors to achieve this growth:

• The Carolinas have moderate weather, enjoy diverse topography and have broad coastlines that provide for tourism and magnets for relocation.

• Both states remain business friendly as right-to-work states, leading to continuous top 10 state rankings in corporate relocations (Site Selection’s Governor’s Cup Awards).

• North Carolina supports the needs of employers and its citizens by consistently earning a top 10 higher education ranking from US News and World Report.

• North Carolina improved take home pay and corporate earnings by recently capping the maximum state income tax rate at 7% (current tax is 5.49%).

• South Carolina is the 3rd most likely state to relocate to at retirement (US News and World Report.)

13.9% Nashville - Davidson - Murfreesboro - Franklin, TN (source: US Census

13.9% Charlotte - Concord - Gastonia, NC-SC

14.6% North Port - Sarasota - Bradenton, FL

15.2% Dallas - Fort Worth - Arlington, TX

15.5% San Antonio - New Braunfels, TX

16.4% Houston - The Woodlands - Sugar Land, TX

16.7% Charleston - North Charleston, SC

17.6% Orlando - Kissimmee-Sanford, FL

18.1% Raleigh, NC

Top 10 Fastest Growing Metropolitan Areas in the US from 2010 to 2017 (Ginkgo Markets in Green)

Austin - Round Rock, TX 23.3%



Strategy and Theory – Home Ownership and Income

Trends in Home Ownership Rates Appear to Remain Range Bound and Steady: Long-term, the US home ownership rate has been range bound from 63%-65%. After a misguided, government push toward higher rates of homeownership from 1994 – 2004, ownership rates have reverted to the mean after having troughed in 2016 at 63%, pent up demand for housing accelerated modestly to restore ownership levels to more than 64% at the end of 2018. While data is yet to be released, new home sales appear to be flat in 2019, which indicates that a flattened trend in home ownership growth rates is occurring.

Median household income has grown from $43,000 to $61,000 since 2000, a 1.9% rate. The Census Bureau, made changes in methodology relative to questions, inclusion and weighting which were adopted for the year 2013 and published in the years 2015 (2015 showed the largest one-year increase ever recorded.) The Census Bureau cautioned that without the methodology changes, real median household income was 2.4% lower thru 1999.

Strategy and Theory – Home Prices



While the median household income has grown at almost 2% per annum since 1980, the Case-Shiller National Home Price Index has risen at an annual pace of 4%, twice the pace of median household income.

We believe that home ownership rates will remain within the historic range of 63% to 65% for an extended period. Structural

unaffordability of home purchasing, changes in desire for home ownership and the continued erosion of entry level wage growth as a result of job displacement from technology will work to ensure this. This is believed to be positive for owning working class rental housing.

Increased Number of Renters at Every Age: While many theories exist as to the why, since 1994 all age groups under 64, other than those under 25 years of age, have seen reduced home ownership rates. Since 2004, all age cohorts have lower rates of ownership. Interestingly, the 35-44 age cohort used to lead to robust jumps in ownership in the 45-54 group 10 years later. However, for the periods ending in 2004 versus 2014, a 7% reduction in ownership occurred when comparing the 45-54 age cohorts. In prior decades, aging from the 30-54 cohorts to the 35-65 cohorts lead to ownership jumps of 10% or more. From 2004-2014 this jump in ownership was less than 2%, reflecting increased renting status.

Strategy and Theory – Long Term Interest Rates & Debt



Long-Term Interest Rates Should Remain Low: Ginkgo believes that technology will continue to improve efficiency and hold down wage pressure. Enormous levels of global central bank debt issuance which tries to stimulate inflation will actually prevent sovereigns from being able to control monetary policy through interest rate setting going forward. Effectively, the nations of the world can no longer afford to increase their cost of funds.

Sovereign Debt to GDP ratio: Japan’s sovereign debt is more than 200% of their GDP and interest rates have been at or near zero since the sovereign debt eclipsed GDP. They have lost the ability to stimulate the economy through monetary easing. As a result, the economy is virtually the same size today as it was in 1996.

The U.S. Federal Debt to GDP ratio is now above 100% and climbing. Quantitative Easing and other stimulus measures are moving the US and other G20 nations toward zero/negative interest rates.

Strategy and Theory – Leverage and Dividends



Low Interest Rates Allows the Use of Higher Levels of Debt: Multifamily purchase price capitalization rates tend to be range bound between 5% and 7% over long periods of time. Interest rates tend to trend 2% or more below these capitalization rates. Given government support of the financing of housing and multifamily housing (Fannie, Freddie and FHA are substantially the largest providers of financing to the apartment industry) and an abundance of non-government sponsored financing, borrowing costs are considerably lower when compared to other commercial property types.

The REIT intends to utilize 60%-70% leverage. This level of debt is somewhat higher than the public REIT multifamily companies (10%-25% more leverage). Ginkgo feels this modest increase in leverage is justified given the stability of the expected cash flows from the portfolio, the historic consistency of work force housing cash flows, the positive borrowing rates versus underlying asset cash flows and the relative ease to replace loans when they come due. This policy will translate into higher rates of dividends for the investors.

The REIT Intends to Maintain Higher Dividend Rates When Compared to Public Residential REITs: The National Association of Real Estate Investment Trusts (NAREIT) reports 23 residential real estate investment trusts as of February 28, 2019. This definition includes single family home for rent companies, student housing communities, non-medical senior housing communities and manufactured housing communities. These companies have a total market capitalization of $162 billion dollars. On a combined basis, these REITs pay a dividend of only 2.88% (as of 6/30/19).

The REIT intends to have a starting monthly dividend of 6% from its adjusted funds from operations coverage. This higher distribution results through a combination of factors and policies, including but not limited to:

i) The reduced cost of private ownership versus the regulatory burden of public accounting and public oversight needed for publicly traded companies,

ii) Higher levels of positive financial leverage, iii) Purchasing an older stock of housing than public company real

estate investment trusts which tend to produce higher current returns than newer housing,

iv) Purchasing assets in alternative markets to public real estate investment trusts which tend to disproportionally aggregate assets in the same “gateway cities” and

v) By maintaining a higher distribution rate percentage than public real estate investment trusts which tend to hoard cash given the dilutive impact of public equity raising.

Strategy and Theory – Rent Growth & Inflation



Residential rent growth mirrors inflation; net cash flow after debt service reliably outpaces inflation as a result. Historically, the relationship of residential rent growth and consumer price index growth is highly correlated. Over long periods of time, residential rents and CPI remain within a narrow band, but have shown annual differences that can vary widely.

Operating expenses of multifamily communities also tend to have high correlations to CPI in the Ginkgo portfolio, with same

property operating expense changes averaging approximately 2% since 2010, in line with CPI. The REIT intends to rely heavily on fixed rate, term debt structures. As such, assuming a $100 rent increases by 2% to $102, expenses increase by 2% to $51, net operating income will increase by 2% to $51 also. If debt service is held constant at $30, net cash flow after debt service goes from $100-$50-$30=$20 to $102-$51-$30=$21. This is a 5% increase in net cash flow or a 2% improvement in operational efficiency.

Provide Income Tax Efficiency to Shareholders: As a pass-through legal entity, real estate investment trusts are taxed only at the investor level. The dividend the shareholders will receive is not only treated to a lower federal income tax rate akin to long term capital gains as a result of the 2017 tax reform act, but a significant portion of the dividend is depreciation sheltered. As much as 80% of the first year’s dividend could be treated as a return of capital and in subsequent years, we anticipate that the shelter will remain above 50% for a significant period of time.

Manager’s History and Performance



Our management team has a goal and track record of providing a comfortable, safe and affordable housing option for its residents while rewarding its investors. Through Ginkgo’s predecessors, the public company BNP Residential Properties, Inc. (AMEX: BNP) and the private enterprise Babcock & Brown Residential, we grew to manage 106 communities comprising nearly 30,000 residential units in 13 states. As a public company, BNP was the second-best performing public multifamily company during its final 10 years of being publicly listed. Our management team elected to sell this company at the peak of the market in 2007, creating a capstone event for our time as a public enterprise.

400.0%

350.0%

300.0%

250.0%

200.0%

150.0%

100.0%

50.0%

0.0%

March 1, 1997 – February 28, 2007

CPT BRE HME UDR MAA EQR AIV CLP PPS AEC BNP RMS S&P

An investment in BNP made during its IPO and held throughout its 13-year history as a public company generated a 19.5% compounded annual return. For the 10 years that ended with the sale of BNP in February 2007 (shown in bright green), BNP’s shares beat both the S&P 500 (by 286%) and the total return of the multifamily REITs (by 84%, NAREIT 2009 data).

Subsequent to the sale of the public company and the disposition of the Babcock & Brown Multifamily division, the management team focused on the acquisition and re-development of a growing portfolio of assets starting in December 2010. Investments are concentrated in the middle Atlantic southern states, with a primary focus on the vibrant markets of Charlotte, the Research Triangle and the Piedmont Triad areas of North Carolina.

372.0%

347.7% 319.7%

301.0% 294.0% 287.70%

150.6%

86.3%



Manager’s History and Performance (cont’d) During the period from December 2010 through and including March 2019, Ginkgo has sponsored the acquisition of multifamily communities containing more than 6,500 residential apartment units. In aggregate, these communities have a total investment (purchase price and capital upgrades) of more than $625MM, which was funded with investor equity and debt. Ginkgo has sold five (5) investments and recapitalized two (2) others and has now contributed three (3) to the REIT, with the following results:

Ginkgo’s current portfolio of units is trending to produce similar or even superior results to the returns and multiples shown in table below. Ginkgo anticipates targeting many of these portfolio assets for contribution to the REIT once their rehabilitation schedules are stabilized.

Realized Investments

Property

Location

Number Of Units

Purchase Price + Closing Costs

Capex

Aggregate Cost

Sale Price

Initial

Contribution

Distributions During Hold

Cash Gain Realized at

Liquidation (2)

Total Realized

Proceeds (3)

Investor

IRR (1)

Investor

Multiple(1)

Yorktown Durham, NC 236 $ 5,500,000 $ 9,100,000 $ 14,600,000 $ 23,600,000 $ 6,000,000 $ 415,000 $ 8,849,470 $15,264,470 32.6% 3.60x Central Pointe (4) Charlotte, NC 336 9,149,500 6,790,951 15,940,451 22,500,000 2,100,000 4,498,600 6,256,156 12,854,756 49.0% 3.67x Salem Crest Winston-Salem, NC 144 4,361,045 598,153 4,959,198 6,200,000 1,200,000 335,000 1,462,995 2,997,995 28.7% 2.15x Reserves at Arboretum (5) Newport News, VA 143 21,500,000 82,971 21,582,971 21,900,000 9,126,994 4,470,000 (3,284,694) 10,312,300 6.3% 1.13x Forest at Chasewood (4) Charlotte, NC 220 13,000,000 1,340,058 14,340,058 17,800,000 4,200,000 3,749,733 287,972 8,237,705 29.6% 1.91x Bridgewater on the Lakes (5) Hampton Roads, VA 216 24,125,000 1,379,271 25,504,271 28,250,000 5,283,385 1,117,146 4,780,993 11,181,524 16.2% 2.00x Lake Ridge (5,6) Hampton Roads, VA 283 40,625,000 1,536,189 42,161,189 45,250,000 6,750,000 (1,623,250) 7,940,053 13,066,803 13.0% 1.89x Brookford Place (7, 8) Winston-Salem, NC 108 7,851,622 734,926 8,586,548 9,848,906 1,657,108 323,000 803,201 2,783,308 20.4% 1.61x Glendare Park (8) Winston-Salem, NC 600 28,047,200 4,613,891 32,661,091 39,486,437 3,600,000 3,228,105 6,744,938 13,573,043 28.9% 2.52x Salem Ridge (7, 8) Winston-Salem, NC 120 4,347,309 1,182,971 5,530,280 9,150,126 900,000 3,570,228 2,563,685 7,033,913 29.6% 5.86x Total or Weighted Average 2,406 $158,506,676 $27,359,381 $185,866,057 $223,985,469 $ 40,817,487 $20,083,562 $36,404,768 $97,305,818 20.7% 2.22x Per Unit $65,880 $11,371 $77,251 $93,095 Dist. Rate 12.8%

This table is compiled by the Advisor and has not been independently audited (1) All Investor returns are the returns received by the non-managing class of investors or the LP investor as the case may be and are net of all fees paid to all managers and property managers (2) Cash gain realized at liquidation can be negative in the cases where a cash out refinance occurred during the term or when an actual loss did occur. (3) Total realized proceeds equals the return of the Initial Contribution, Distributions During Hold and Cash Gain Realized at Liquidation. (4) Recapitalizations: Central Pointe had a 75% recapitalization in September of 2016 to allow for an expansion of a renovation program, at which time the entity was reconstituted. Forest at Chasewood had a 50% recapitalization to allow for an expansion of a renovation program in August of 2018, at which time the entity was reconstituted. The values and calculations in each reflect the buy-in price for the new capital members and the actual proceeds realized for those members who sought to redeem their interest at those times, for those respective prices. (5) Bridgewater, Lake Ridge and 10% of the Reserves were owned through a single partnership, Hampton Roads Portfolio LLC. The returns for the investors in this portfolio were a 13.3% IRR and a 1.77X multiple. Post closing cost settlement may modify some of these reported results before they are finalized with the filing of 2019 taxes. (6) A $4MM preferred equity investment was also part of the capitalization of Lake Ridge. This was subsequently redeemed by the common equity investors via cash flow and a capital call, which resulted in the Distributions being negative. (7) Brookford Place and Salem Ridge were owned in the same partnership with the members using the proceeds of a refinancing of Salem Ridge to purchase Brookford Place. Both these assets were contributed to the Ginkgo REIT at its formation. On a combined basis, the investors in this portfolio earned a 29.5% IRR and a multiple of 7.15X since the equity used for the purchase of Brookford came from refinancing (8) REIT Contributions: These represent transactions where selling members were given the option of a cash sale or contribution of membership unit to the Ginkgo REIT.



Portfolio – 2019 Financials and Dividend Distributions The assets of the company include three communities in Winston-Salem, NC, contributed by Ginkgo affiliated or sponsored entities and one community in Durham, NC purchased by the REIT in October 2019. These assets demonstrate a consistent trend of superior revenue growth when compared to the market overall. The 2019 year end financials for these assets and the REIT is depicted below:

Actual Actual Actual Forecast September 2019 December 2019 March 2020 June 2020ASSETS

Investments in real estate assets 58,714,962 96,832,909 110,665,144 120,858,273Accumulated Depreciation (229,747) (1,065,504) (1,892,897) (2,414,584)

Investment in real estate assets, net 58,485,215 95,767,405 108,772,247 118,443,689 Current AssetsCash and cash equivalents 3,727,558 3,783,703 863,943 2,472,863Rental accounts receivable 48,510 46,251 37,267 37,267Prepaid & other current assets 56,350 415,344 533,324 474,144Tax and insurance escrow 428,609 86,462 304,639 609,915Lender reserves 465,902 537,445 559,481 559,481Security deposit trust cash 81,232 126,309 166,907 166,907Total current assets 4,808,160 4,995,515 2,465,560 4,320,578 Other assets net 1,025,127 30,500 2,176,923 2,895,044 Total Assets 64,318,502 100,793,420 113,414,730 125,659,310 LIABLITIES AND EQUITY

LiabilitiesLong term debt, net 41,692,658 69,805,843 77,438,757 85,992,319

Total current liabilities 1,523,639 831,520 1,602,524 1,848,621 Total other liabilities 326,092 4,909,029 3,658,633 1,469,317 Total Liabilities 43,542,388 75,546,392 82,699,915 89,310,257 Ginkgo REIT Inc. Stockholders Equity Common stock, $.01 par value; 900,000,000 shares authorized 507 999 1,065 1,189Additional paid-in capital 5,059,494 9,925,407 10,520,351 11,724,236Additonal paid-in capital - dividend reinvestment 11,762 62,693 159,662 258,386Preferred Shares 0Dividends (23,513) (111,968) (254,881) (423,527)Preferred Dividends 0Cumulative earnings (30,239) (213,428) (372,493) (448,686)Net equity gains after tax from mark to marketTotal Shareholder Equity 5,018,011 9,663,702 10,053,704 11,111,597

Noncontrolling InterestsNoncontrolling Interests 15,758,104 15,583,325 20,661,111 25,237,456Total Noncontrolling Interests 15,758,104 15,583,325 20,661,111 25,237,456

Total Equity 20,776,114 25,247,027 30,714,815 36,349,053

Total Liabilities and Equity 64,318,502 100,793,420 113,414,730 125,659,310

GINKGO REIT INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEET (UNAUDITED)

Actual Actual Actual ForecastQ3 2019 Q4 2019 Q1 2020 Q2 2020

Funds From Operations (FFO):Net Income Including Noncontrolling Interest (157,610) (462,899) (469,118) (248,188) Depreciation and amortization 229,747 835,757 827,394 521,687 Preferred Dividends -

FFO 72,137 372,858 358,275 273,498

Adjusted Funds From Operations (AFFO):Recurring Capital Expenditures (65,383) (87,604) (61,408) (100,316)

AFFO 25,097 285,254 296,867 173,182

Cash Available for Distributions (CAD):Acquisition Costs (580,560) (370,000) (136,000) (96,000) Loan Amortization - (416,667) (1,270,957) (2,600,755) Non-Recurring Capital Expenditures (271,313) (342,162) (542,064) (592,812) Stock Compensation Expense -

CAD (845,119) (843,575) (1,652,154) (3,116,385)

Weighted Average Shares Outstanding 124,379 230,956 283,335 376,910

FFO Per Unit 0.58 1.61 1.26 0.73 AFFO per Unit 0.20 1.24 1.05 0.46 CAD per Unit (6.79) (3.65) (5.83) (8.27)

Distribution Per Share 1.50 1.50 1.575 1.575

Distribution as a Percentage of FFO 258.6% 92.9% 124.6% 217.1%Distribution as a Percentage of AFFO 743.4% 121.4% 150.3% 342.8%Distribution as a Percentage of CAD -22.1% -41.1% -27.0% -19.0%

GINKGO REIT INC. AND SUBSIDIARIESFUNDS FROM OPERATIONS, ADJUSTED FUNDS FROM OPERATIONS AND CASH ADJUSTED FUNDS FROM OPERATIONS (UNAUDITED)

FFO is a common financial measure used by REITs. It is a non-GAAP financial measure which public REITs reconcile to GAAP

net income. Pursuant to the updated guidance for FFO provided by the Board of Governors of the National Association of

Real Estate Investment Trusts (“NAREIT”), FFO is defined as net income (computed in accordance with GAAP) excluding

gains or losses from sales of property, impairment write-downs of depreciable real estate, noncontrolling interest,

extraordinary items and cumulative effects of changes in accounting principles, plus depreciation from real property,

including adjustments for unconsolidated partnerships and joint ventures, less dividends from non-convertible preferred

AFFO is calculated as FFO plus interest expense attributable to the amortization of debt acquisition costs, minus recurring

capital expenditures, direct financing lease adjustments, amortized rental revenue from above/(below) market rents, and

U.S. GAAP straight-line rent adjustments.

CAD is calculated as AFFO plus acquisition costs, loan amortization and stock compensation expense (as it relates to option

vesting).



Ginkgo REIT, Inc. Structure

REIT Structure and Supervision

Common Stock Shares/

Dividends Paid ($) Equity Invested ($)

OP Units can be exchanged for shares 1:1. Exchange creates taxable event

Membership GP Units/ Distributions ($)

Capital Contribution/ Equity from Contributed Entity

Membership GP Units/

Distributions ($)

Equity Received/ Rental Income ($)

Capital Contribution from Equity Invested ($)

Capital Contribution from Operating Company ($) (And UP REIT Seller Assets)

The REIT is structured as an umbrella partnership with Ginkgo Multifamily OP LP established as the operating subsidiary of the REIT (“UPREIT”.) This provides the REIT and certain investors with flexibility regarding how to invest. The REIT primarily seeks cash investors via share sales.

The REIT can also raise capital via contribution of properties to the operating partnership in exchange for operating partnership units issued to the sellers in lieu of cash. This defers the tax gain to the sellers while providing all the economic benefits received by direct shareholders. This is the structure used for the initial 3 investments of the REIT.

Various Special Purpose Vehicles (SPVs) created to Own Assets

Ginkgo Multifamily OP LP (the “Operating Company”)

Ginkgo REIT, Inc. (the “REIT”)

REIT Structure and Supervision (Cont’d)


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Externally Managed: The REIT will be managed externally by Ginkgo Residential LLC, which will serve as the Advisor of the REIT and, under separate contracts, will serve as the property manager of each of the communities owned by the REIT. It is common for small, private or startup investment companies to be externally managed. The reasoning is multifaceted, including the following factors:

o Lowers Cost: Small companies typically can’t afford the personnel needed to affect the desired business model. By contracting with Ginkgo, Ginkgo can allocate resources to adequately run the business model without providing excess cost burden to the REIT. Ginkgo has other forms of revenue which allows it to fully utilize personnel between the REIT and the other activities of Ginkgo.

o Scales Cost Proportional to the Business Model: The fee structure of the REIT is tied to a traditional asset under management structure and property management structure. The ratio of expenses paid by the REIT to the Advisor and Property Manager remains constant as a percentage of revenue, profits and/or costs.

o Eases Projection Modeling: It is easier to model, project and budget estimated performance with contractually defined cost structures when compared to a company with internal hiring needs. Incremental hiring can become distorting and misleading depending on timing in small companies.

Fees to Advisor and Property Manager: o Asset Management: 1.5% of the NAV, paid quarterly in advance. This reduces as the REIT scales. o Acquisition and Disposition Fee: 1% of the gross price of the community, paid at sale or purchase. o Property Management Fee: 4.5% of the gross revenue, paid monthly in arrears o Corporate Allocations or Pass throughs: 0% o Construction Management: 6% of the cost of a construction project, paid at project completion o Annual Performance Allocation: 20% of the positive performance above an annually re-set hurdle rate equal to the 10-year

treasury rate plus 3%. Shortfall performance will get added to the subsequent year hurdle.

REIT Structure and Supervision (Cont’d)


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Operating Partnership: Ginkgo Multifamily OP LP is the operating partnership through which the REIT will conduct its business. The REIT will control the Operating Partnership as the sole general partner. Each dollar raised by the sale of common stock in the REIT will be contributed by the REIT to the Operating Partnership in exchange for general partnership units in the Operating Partnership. In addition to the REIT, individuals may also become direct holders of limited partnership units in the Operating Partnership when they sell eligible assets to the REIT in exchange for Units in lieu of cash.

Board of Directors: The REIT will be governed by its Board of Directors. The initial Board is comprised of Philip Payne, Chairman, Eric Rohm and Bill Green. Robert Sullivan has joined the Board as an Independent Director and the Board anticipates adding one additional independent director to the Board during the first year. The primary duties of the Board are to:

• Hire and supervise the Advisor; • Hire and supervise the auditor to the company; • Ensure that the REIT qualifies and remains qualified as a real estate investment trust; • Determine the NAV of the REIT, when required, but not less frequently than annually; and • Disclose and manage conflicts of interest that may arise.

Main Conflict of Interest: As an externally advised company, there is a need to define the business model of the REIT to ensure that the Board can properly monitor possible conflicts that might arise with the Advisor’s other activities. The REIT is designed to provide consistent and stable income derived from an expanding portfolio of multifamily assets. The REIT has defined its target assets similarly to Ginkgo’s model, with one large demarcation point: the REIT does not currently intend to pursue transactions with significant capital expenditure plans. Since re-development strategies are conceivably more likely to experience disrupted cash flow and more volatile returns, the REIT will have the exclusive right to pursue any transaction with a $10,000 or less per apartment initial capital plan is contemplated and when more, has the option to invest.

Non-Traded REIT versus a Publicly Traded REIT



Private Non-Traded REIT

Publicly Traded REIT

Board of Directors: Appointed

Independent Directors: Ginkgo REIT Inc. will replicate much of the functionality of the independent director requirements of public companies.

Oversight Board of Directors: Elected and appointed

Independent Directors: Requirement for certain functions that the majority of directors satisfy independent director requirements.

Annual with quarterly reviews. Audit Per reporting period.

Mechanism: The Board is charged with establishing the value of the company and the company’s assets not less than annually. Net asset valuations are less volatile than public market share prices.

Stock Price Mechanism: The shares of the REIT trade freely in the market. The result of the market leads to much greater volatility in valuation.

Audit, compliance and board requirements are much lower in a private non-traded REIT than a public entity. The cost of audit and compliance can lead to costs that are $500,000-$1,000,000 higher for even a small public REIT.

Cost of Operations The largest public REITs enjoy cost advantages to the smaller companies since certain costs such as audit and compliance do not increase proportional to asset size. When comparing public REITs in the multifamily space, larger REITs typically have cost advantages in SG&A when compared to smaller listed companies.

Non-traded REITs typically have continuously offered securities for capital raising, with closings each month. There are no assurances that liquidity will materialize or be plentiful when investors seek to sell their shares.

Liquidity Public REITs access the public markets for capital raising on an infrequent basis, often times in large issuance which might lead to dilution. Liquidity is much more abundant than non-traded REITs, but the price of liquidity is less certain.

Investment Opportunity in the REIT



Eligibility: Accredited Investors only

Minimum Initial Investment: $50,000, however the REIT will accept subscriptions as low as $25,000 if investing through an RIA

Net Asset Value per Share: $105.00

Subscription Period: Monthly closings on the 1st of each month beginning July 1, 2019. This is a perpetual offering

Reinvestment: Investors may elect to dividend reinvest all or some of their dividend; For investors whose holdings are less than $50,000, mandatory reinvestments of 100% of the dividend is required until the investor’s holdings exceed $50,000. For investors with less than $100,000, mandatory reinvestments of 50% of the dividend is required until the investor’s holdings exceed $100,000.

Annual Dividend: Estimated at $6.30 per share, paid monthly at $0.525 per month. The dividend for the 1st quarter of 2020 has been declared by the board of directors at $0.525 per month.

Expected Tax Treatment: For 2019, a significant portion of the dividend will likely be treated as return of capital for the shareholders. With a growing portfolio, it is likely that significant tax shelter will occur during this growth phase.

Redemption: Redemption will occur quarterly, subject to availability of funds and quarterly maximum redemptions equal to 1.25% of the NAV of the REIT at that time. Investors may not redeem within 12 months of investing, but thereafter may redeem using a 5/4/3/2 declining redemption price discount to the NAV (e.g. NAV of $100, sale in year 3, price is $96 per share)

Placement Fees: None. (The REIT may, in its sole discretion, choose to pay a placement fee to approved and accepted third party equity providers.)

Formation Expense: Reimbursement for up to 0.75% of NAV or $300,000, whichever is less

Key Bios



William C. Green • Principal, Ginkgo

Residential • Ginkgo REIT Officer and

Board Member

Bill joined Ginkgo in 2012. Before joining Ginkgo, Bill worked in banking and real estate ownership. He was a fund partner and fund manager at Starwood Capital from 2007 to 2009, global head of real estate capital markets for Wachovia Bank from 1999 to 2007 and head of the commercial mortgage securitization at Bank of America from 1990 to 1999.

He is the lead independent board member at Arbor Realty Trust since 2012 and a nominee director at Royal Oak Realty Trust since 2018. He served on the board of trustees at his alma mater, the colleges of Hobart and William Smith, where he earned a BA in economics. He holds an MBA from the Stern School of Business at New York University.

Eric S. Rohm

• Principal, Ginkgo Residential

• Ginkgo REIT Officer and Board Member

Eric joined Ginkgo’s predecessor, BNP, in 2002 as general counsel. Before joining Ginkgo, he was a partner at Kennedy Covington Lobdell & Hickman, L.L.P. from 1994 to 2002, where he worked in the real estate practice. Among other duties, he served as the principal outside legal counsel to BNP. Eric earned a BA in government, magna cum laude, from Georgetown University and earned his JD from The Ohio State University College of Law where he graduated summa cum laude and Order of the Coif.

Eric is licensed to practice law in the State of North Carolina and a member of the North Carolina State Bar, the North Carolina Bar Association and the Association of Corporate Counsel. He serves on the Board of Trustees at the Penland School of Crafts in Penland, North Carolina

D. Scott Wilkerson

• Chief Investment Officer, Ginkgo Residential

Scott joined Ginkgo’s predecessor, BNP, in 1987 and has served in a variety of roles, including president of BNP Residential. Before joining BNP, he was with Arthur Andersen LLP, serving as tax manager. He holds a BS in accounting from the University of North Carolina at Charlotte. Scott is a licensed real estate broker and the principal broker for Ginkgo.

He serves on the board of directors of the National Apartment Association and has served as president of the Apartment Association of North Carolina and the Greater Charlotte Apartment Association.

Jennifer Higbee

• Controller, Ginkgo Residential

• Ginkgo REIT, Officer

Jenny joined Ginkgo in 2012 as Controller, responsible for all accounting functions and financial reporting. She has over 10 years of experience with financial business planning, budgeting and forecasting. Previously, Jenny was with Grant Thornton LLP, serving as an auditor in the real estate and construction group and afterwards at Lend Lease serving as their Finance Manager in charge of financial reporting.

She obtained her MS and BS in Accounting from Appalachian State University. She is a Certified Public Accountant in North Carolina and a member of the American Institute of Certified Public Accountants.

Key Bios (continued)



Sam Solie

• Director of Investor Relations, Ginkgo Residential

• Ginkgo REIT Officer

Sam joined Ginkgo Residential, LLC in 2019 as Director of Investor Relations. Prior to joining Ginkgo, Sam was an Executive Vice President and COO for a large group of businesses in Wells Fargo’s Wholesale Bank that included Real Estate Capital Markets, Asset Backed Finance, Equipment Finance, Capital Finance, and Corporate Trust. Prior of joining Wells Fargo, he was a Director at Tannery Brook Partners and was the Chief Operating Officer for Wachovia Bank’s Commercial Real Estate division. Sam’s work history also includes Lehman Brothers, Royal Bank of Canada, and CapitalThinking.

He earned a Bachelor of Arts degree from the University of Wisconsin – Madison. He serves on the Board of Directors for McCracken Financial Solutions, and is a former Board Member of Wachovia Holdings International (Wachovia Bank Ireland), and Wachovia Finance Ireland, Ltd.

Josie Nasife

• Director of Property Management, Ginkgo Residential, Ginkgo Residential

Josie oversees Ginkgo Residential’s multi-family property management portfolio. She rejoined Ginkgo in 2015 after serving as a Regional Manager at Fairfield Residential for 3 years. Prior to Fairfield, Josie worked in several capacities at Ginkgo and its predecessors for over 11 years.

Josie holds various designations within the National Apartment Association including NALP, CAM, CPO and CAPS, is a member of the Institute of Real Estate Management and is a current CPM Candidate.

Phillip S. Foley

• Director of Construction Management and Services

Phillip joined Ginkgo’s predecessor in 1991 and oversees training and standardization for capital projects and preventative maintenance. Phillip is a certified apartment maintenance technician and is an instructor for the Charlotte Apartment Association, where he teaches certified apartment manager courses.

Board Members



Philip S. Payne

• Ginkgo REIT Board Member; Chair

Phillip joined Ginkgo’s predecessor, BNP, in 1990 and has served in a variety of roles, including CFO of BNP Residential, chairman of BNP Residential and CEO of Babcock & Brown Residential. He has been a member of the board of directors of Ashford Hospitality Trust since its formation in 2003 and serves on the board of advisory for the Urban Land Institute’s Center for Sustainability. Philip holds a bachelor’s degree and law degree, both from The College of William and Mary.

Philip recently established a foundation, the Lotus Campaign, which is focused on increasing the availability of homes for people experiencing homelessness by engaging the private, for-profit real estate community. Concurrently with the formation of the REIT, Philip has divested his economic interest in the Advisor so that he can contribute his time to Ginkgo in a board oversight role, while having time to pursue the growth and evolution of Lotus.

Philip brings a history of public company oversight at the audit and governance level that will make him well suited to be the non-executive Chairman of the REIT.

Robert J. Sullivan

• Ginkgo REIT Board Member; Independent

Robert was appointed to an independent director role to the Ginkgo REIT in September of 2019. Robert has been a practicing attorney since 1988 and a partner at Alston & Bird LLP for the past 15 years. In his capacity as partner at Alston & Bird he managed and supervised a significant commercial real estate loan group as well as a master and special mortgage servicing group representing significant financial institutions. He is a noted authority on commercial mortgage servicing and has had substantial experience in restructuring numerous commercial real estate transactions with complicated structures.

He earned his Bachelor of Science from New York University and his Juris Doctor from Brooklyn Law School and is currently licensed to practice in the States of New York, North Carolina and Connecticut.

Lawrence Brown

• Ginkgo REIT Board Member; Independent

Lawrence serves as Chairman of Starwood Mortgage Capital (SMC), one of the leading commercial real estate lenders in the US. Prior to forming SMC in 2011, Mr. Brown was a co-founder, Managing Director and Chief Operating Officer of AllBridge Investments, an investor in the commercial real estate capital markets, from mid-2005 to 2010. Before co-founding AllBridge, Mr. Brown started Deutsche Bank Mortgage Capital, L.L.C., a wholly owned subsidiary of Deutsche Bank, in May 1999 and served as President and Chief Executive Officer through April 2005. Prior to the formation of DBMC, Mr. Brown served as President of WMF Capital Corp. in 1998, where he oversaw all commercial real estate finance and capital markets activities of the company. Before joining WMF CC, Mr. Brown was the Managing Director of Commercial Real Estate Finance at First Union National Bank (now known as Wells Fargo) from 1994 to 1997. Prior to joining FUNB, Mr. Brown practiced law at Donaldson, Lufkin & Jenrette, Baker & McKenzie and Mudge, Rose, Guthrie, Alexander & Ferdon.

Mr. Brown earned a Bachelor of Arts, magna cum laude from Tufts University, and Juris Doctor degree from Georgetown University School of Law.

Disclosure and General Risks of Investing in a Private, Non-Traded Real Estate Investment Trust



This summary presentation is confidential and contains proprietary strategies and trade secrets. By accepting delivery of these materials, the recipient agrees to keep such information confidential and to use it solely for the purpose of evaluating an investment in the REIT. Recipient may not reproduce the document, in whole or part, or distribute the document except by authorized permission of the REIT, Ginkgo or properly engaged representatives working for either. This document may be distributed only in conjunction with the accompanying confidential Private Placement Memorandum of the REIT, as amended or supplemented from time to time, including exhibits and appendices thereto (the “PPM”).

The REIT has been established to invest in the strategies of the REIT and is managed by its Advisor, Ginkgo Residential LLC (the “Advisor”). The Advisor will generally appoint itself as the property manager for the assets of the REIT (the “Property Manager”) but in certain instances may elect to employ other parties to serve as the property manager for specific assets.

This information should not be considered or construed as investment advice or any other type of advice. It is presented for information purposes only and is not intended to be a specific offer to sell a security, provide any particular financial product or service, or for any specific invitation for a consumer to apply for such products or services.

The Following General Risks Should Be Considered When Investing in Illiquid, Private, Non-Traded REITs

• Investors may lose their entire investment and should only invest if they can afford the complete loss of their investment. • Past performance of the REIT advisor or its sponsors is not indicative of future results. • An investment in a private equity REIT involves significant risks which also includes illiquidity on a long-term basis. • Private equity investors don’t have the right to transfer, assign or otherwise dispose of their interests without the consent of that REIT advisor, which

consent might never be given. The only form of disposition available to investors will likely be the repurchase of shares by the REIT. • Private equity REITs may have less transparency than public investments and private equity REIT investors may be afforded less regulatory protection

than investors in registered public securities, including the investor’s acceptance of possible adverse and complex tax consequences as a result of their investment in a private REIT.

• Private equity REITs are subject to significant fees and expenses, including management fees and a carried interest in the net profits generated by the REIT, which fees in total typically exceed 25% of the net cash flow in aggregate; all of such fees and carried interests being paid to and for the sole economic benefit of the advisor, employees or similarly situated party to a REIT.

• Distributions to investors during the life of the REIT are not guaranteed. • Private Non-Traded REITs may make a limited number of investments, and such investments generally will involve a high degree of risk and may utilize

significant leverage. This may cause a REIT to have a substantially adverse outcome as the result of a single investment of the REIT. • The purchase price and repurchase price per share of stock will vary and will generally equal the prior month’s net asset value (“NAV”) per share as

determined monthly, but the REIT may offer share prices that reflect more or less than the NAV where the REIT determines there has been a material change (positive or negative) to the NAV from the prior month.

• They often have no employees and are dependent on their advisor to conduct operations. The advisor will face conflicts of interest as a result. • If the REIT fails to qualify as a REIT for Federal Income Tax purposes and no relief provisions apply, the NAV and cash available for distribution to

shareholders could materially decrease. • The acquisition of investments will be financed in substantial part by borrowing, which increases the exposure to loss. The use of leverage involves a high

degree of financial risk and will increase the exposure of the investment to adverse economic factors.



Disclosure and General Risks of Investing in a Private Non-Traded REIT (Continued) This document does not contain a complete description of the REIT and the risks associated with an investment therein, and is subject to and qualified in its entirety, by the PPM and the underlying organization documents of the REIT. This document does not constitute an offer of or an invitation to subscribe for or purchase shares in the REIT (the “Shares”) and does not constitute investment or any other advice. The offering of the Shares may only be made through the PPM, which describes investment strategies and risks associated with an investment in the REIT. Any decision to invest in the REIT must be based solely upon the information set forth in the PPM, WHICH SHOULD BE CAREFULLY READ by prospective subscribers (and their advisors) for the REIT Shares. All prospective shareholders of the REIT (each a “Shareholder” or an “Investor”) should familiarize themselves with the information contained in the PPM prior to making an investment in the REIT. Unless otherwise indicated, all capitalized terms used herein shall have meanings given to them in the PPM. The REIT will contribute all the capital invested by Shareholders, net of fees and expenses incurred by the REIT to Ginkgo Multifamily L.P. (the “Operating Company”) in exchange for membership units in the Operating Company. The REIT may reserve a small percentage of the capital contributed to it to pay its fees and expenses or may pay all or a portion of such fees and expenses out of capital contributions from Investors, distributions from the underlying investments or, when pending receipt of capital contributions from Investors or distributions from the underlying investments, may borrow from the Advisor or other financial intermediaries. Through investments in the REIT, Investors will have no interests in any of the entities for which prior performance is included herein, or in any of the portfolio investments of such prior entities. Past performance of these investments is not indicative of the future results of the REIT. The information contained herein is not a guarantee of the performance of the REIT. The material herein is not directed at, nor intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or would subject the REIT or the Manager to licensing or the REIT Interests to registration requirements. These Shares will not be registered. Information contained in this document contains forward-looking statements, opinions or beliefs. Due to various risks and uncertainties, actual performance of the REIT may differ materially from such statements, opinions or beliefs and no undue reliance should be placed thereon. Certain information herein has been obtained from third party sources and although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be guaranteed. No representation is made with respect to the accuracy, completeness or timeliness of this document. No third party was engaged to verify the completeness or accuracy of these statements, opinions or beliefs. Private Non-Traded REITs are subject to the risks associated with the business underlying the investment, including market conditions, changes in regulatory requirements, reliance on management at the REIT and its underlying affiliated companies, interest rate and currency fluctuations, general economic conditions, domestic or foreign political developments, capital market conditions and other factors Illiquid Non-Traded REIT investments may not be suitable for all investors, are not transferable and will not be listed or traded on any exchange. It may be difficult to realize any returns on an investment in an Interest prior to the wind up and liquidation of the REIT. It may be difficult to obtain reliable information about the market value of such investments or the extent of the risks to which they are exposed, including the risk of total loss of capital. This material is confidential and intended solely for the authorized recipient. Reproduction of and/or transmission to third parties is not allowed. Investment Interests are not insured or otherwise protected by any company, any government authority, Ginkgo or Ginkgo’s Principals.

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