a Berkshire Hathaway and Leucadia National company

HUNTSVILLE APARTMENTMARKET OVERVIEW

PRESENTED BY DAVID D. WILSON, MAIFOR THE

APARTMENT ASSOCIATION OF NORTH ALABAMAOCTOBER 15, 2015

WHO IS BERKADIA?

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Nation’s Largest Brokerage Company exclusively focused on Multifamily Investment Sales

The Nation’s Largest Multifamily Investment Banking Company

Best Capitalized Non-Regulated Commercial Mortgage Banking Company in the US

ONE STOP SHOP Acquisitions Dispositions Financing Equity Placement Advisory Research Servicing

NATIONWIDE OFFICES

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75 Offices 225 Producers 1,200+ Employees

BERKADIA ALABAMA

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6 Investment Brokers

2 Mortgage Bankers

Support Staff

Alabama Office +

Marketing and Research Center

+India Support

INVESTMENT SALES TEAM

WHAT WE’LL COVER TODAY

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Employment in Huntsville New Construction Market Fundamentals Apartment Sales Major Renovation Projects Conclusions / Outlook

EMPLOYMENT IN HUNTSVILLE

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TOTAL EMPLOYMENT, LABOR FORCE & UNEMPLOYMENTMADISON COUNTY, ALABAMA

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0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

145,000

150,000

155,000

160,000

165,000

170,000

175,000

LABOR FORCE EMPLOYMENT UNEMPLOYMENT RATE

EMPLOYMENT TRENDS

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YTD Job Growth Up 3,600 Jobs 12 Month Growth Up 2,300 Jobs Majority of Growth from:

Construction Education Health Services

NEW CONSTRUCTION

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NEW SUPPLY – HISTORY GRAPH

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 15Affordable 208 0 0 80 0 112 0 86 64 56 0 80Conventional 655 355 72 160 860 781 644 0 189 538 557 627

0

100

200

300

400

500

600

700

800

900

1000

NEW UNIT DELIVERIES - HISTORYHuntsville/Madison, Alabama

as of October 1, 2015

Conventional Affordable

PIPELINE SUMMARY

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HUNTSVILLE AREA PIPELINE

as of October 1, 2015

STATUS TOTAL PROPERTIES TOTAL UNITS COMMENTS

Actively Under Construction 12 1,306 2 are LIHTC properties (128 units)

Future Starts 4 671 1 is LIHTC property (60 units)

Future Starts (Land in Inventory) 3 704 All conventional

Subtotal 7 1,375

Source: David D. Wilson, MAI

NEW SUPPLY – PIPELINE | STARTS

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HUNTSVILLLE AREA PIPELINEActively Under Construction - Started

as of October 1, 2015

Project Name SubmarketUnits to be Delivered 1st Deliveries Comments

Total Units Upon

Completion1 Limestone Creek, III West Huntsville 72 Spring 2016 Class B 5472 Bridges at Research Park West Huntsville 84 Summer 2016 Class A- 1563 Addison Park West Huntsville 24 Spring 2016 Class A- 4804 Cottages at Watercress, II West Huntsville 42 Summer 2016 Class A, 1 and 2 story 825 Lodge at Johns Road West Huntsville 83 Fall 2015 Senior 836 Villas at Nature Walk, II West Huntsville 112 Fall 2015 Class A, 1-story 1967 Capital Park at 72 West Huntsville 185 Aug 2015 Class A 2338 The Avenue Downtown Huntsville 186 Late 2016 Class A urban 1869 Providence Place, II West Huntsville 90 Late 2016 Class A 9010 Modern at Providence West Huntsville 300 Late 2016 Class A, big-house 300

Subtotal 1,178

1 Clarkston Square SE Huntsville 56 Spring 2016 LIHTC elderly 562 Flint River Apartments SE Huntsville 72 Summer 2016 LIHTC family 72

Subtotal 128

TOTAL 1,306

Source: David D. Wilson, MAI

COTTAGES AT WATERCRESS

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VILLAS AT NATURE WALK

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LEGACY AT JONES FARM

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THE LODGE AT JOHNS ROAD (SENIOR 55+)

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NEW SUPPLY – PIPELINE | FUTURE

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HUNTSVILLLE AREA PIPELINE

Future Starts

as of October 1, 2015

Project Name Submarket Units Start Date Comments

Future Starts / Near-Term1 Limestone Creek, IV+ West Huntsville 331 TBD Class B2 Addison Park West Huntsville 120 TBD Class A-3 City Center Downtown 160 TBD Class A urban

Subtotal 611

1 Lenox Park North Huntsville 60 4Q 2015 LIHTC elderlySubtotal 60

TOTAL 671

Future Starts / Land Held in Inventory / Timing Dependent on Market1 Arbor of River Landing West Huntsville 348 TBD Land held in inventory for years2 Legacy at Jones Farm, II SE Huntsville 252 Uncertain Start depends on market3 Hampton Falls, II SE Huntsville 104 Uncertain Land held in inventory for years

TOTAL 704

Source: David Wilson, MAI

NEW SUPPLY COMMENTS / OUTLOOK

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Huntsville’s pipeline now includes several “niche” properties ranging from Class A single-story to seniors only. It also includes some low-cost and limited amenity product.

Due to robust multifamily construction pipelines in many markets across the state and region, the workload for architects, general contractors and sub-contractors has reached a point driving labor and mobilization costs dramatically higher in recent years.

These labor challenges and rising costs should slow the pace of new construction starts over the near-term and makes feasibility of new projects even more difficult.

HUNTSVILLE AREAMARKET FUNDAMENTALS

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OCCUPANCY & RENT TRENDSHUNTSVILLE, ALABAMA

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$600

$650

$700

$750

$800

$850

90.0%

91.0%

92.0%

93.0%

94.0%

95.0%

Current Period Occupancy Current Period Asking Rent Current Period Effective Rent

Source: Axiometrics

CONCESSION TRENDSHUNTSVILLE, ALABAMA

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$0

$10

$20

$30

$40

$50

$60

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Current Period Concession Level Current Concession Value

Source: Axiometrics

OCCUPANCY SPOT SURVEY & COMPARISONHUNTSVILLE/MADISON AREA | FALL 2015

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Sample Size Occupancy Rate

Data Set Properties Units Fall 2015 June 2014 Change Absorption

Total Sample 37 8,792 92.6% 92.3% 0.3% 227

Class A 10 2,537 91.5% 87.4% 4.1% 291

Class B 19 5,017 93.2% 94.0% -0.8% -43

Class C 8 1,238 92.6% 94.3% -1.7% -21

Huntsville - SE 9 1,998 93.9% 94.0% -0.1% -2

Huntsville - SW 3 463 95.0% 94.4% 0.6% 3

Huntsville - West 16 4,055 91.0% 91.9% -0.9% 62

Madison Area 9 2,276 94.0% 90.9% 3.1% 165

Sources: Berkadia and David Wilson, MAI for Fall 2015 data | Rock Apartment Advisors for June 2014 data

NEW SUPPLY RENT LEVELS

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The newest top-end Class A product is commanding “weighted average” per SF rents in the following ranges:

Suburban - $1.10 to $1.15 psf (avg. SF 1,000+)

Downtown - up to $1.50+ ps (avg. SF under 850)

APARTMENT SALES

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2015 APARTMENT SALESHUNTSVILLE

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Property Name Area Units Built Occupancy Sale Price Price Per Unit GRM

The Enclave SE 224 1987 95% $12,500,000 $55,804 6.28

The Landing West 168 1989 98% $8,000,000 $47,619 6.19

Governors House West 146 1979 73% $6,909,085 $47,323 6.10

Vanderbilt Manor SE 32 1973-78 78% $1,350,000 $42,188 5.74

Cabana SW 189 1962 99% $6,050,000 $32,011 5.35

Park Place SE 231 1964 Not stable $4,000,000 $17,316 3.10

MAJOR RENOVATION PROJECTS

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PRESERVE AT CRESTWOOD

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Total Units – 160 Year Built – 1955 Owner – Brookside Properties

FERN PARC

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Total Units – 342 Year Built – 1974Purchased – August 2013Owner – Panther Property Investment

FERN PARCINTERIOR RENOVATIONS

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AFTER

THE ENCLAVE (REBRANDED - INDIGO AT GRISSOM)

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Total Units – 224 Year Built – 1987Purchased – April 2015Owner – Brookside Properties

THE ENCLAVEEXTERIOR RENOVATIONS

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BEFORE

AFTER

THE ENCLAVEINTERIOR RENOVATIONS

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AFTER

AFTER

BRIXWORTH AT BRIDGE STREET

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Total Units – 208Year Built – 1986Purchased – October 2013Owner – BRECAP

BRIXWORTH AT BRIDGE STREETEXTERIOR RENOVATIONS

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BEFORE

AFTER

BRIXWORTH AT BRIDGE STREETINTERIOR RENOVATIONS

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BEFORE

AFTER

BEFORE

Total Units – 32Year Built – 1973-78Purchased – May 2015Owner – A Birmingham group

VANDERBILT MANOR

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RENOVATION RENT PREMIUMS

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Several of the most significant renovation projects have achieved rent increases of $125 to $175 per month compared to their pre-renovation rents (transforming properties from Class C to Class B or B+ in the best submarkets).

Several more moderate renovations have resulted in rent premiums of $40 to $60 per month, with select floorplans as high as $75 to $100 (transforming Class B- to B+).

HUNTSVILLE MARKET CONCLUSIONS

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CONCLUSION

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Economic Outlook is Positive Effective Rent Growth 3.3% over the Past Year Concessions Declining Trend Occupancy Change Up 0.5% over the Past Year Sales Very Active, Aggressive Prices Renovations Increasing, Raising the Bar for Class

“B” Rents New Supply Continued Strong Pace

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