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LUXURY, URBAN DESIGNED APARTMENTS SAN ANTONIO, TX

FAR WEST SUBMARKET 326 RESIDENCES

838 SF AVG

INVESTMENT OPPORTUNITY

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CULEBRA CROSSING

SAN ANTONIO, TEXAS

TABLE OF CONTENTS

Executive Summary ................................................................................................................................................................ 3

Development Team .......................................................................................................................................................... 12

Location ..................................................................................................................................................................................... 16

Market Summary ................................................................................................................................................................... 30

Metropolitan Statistical Area ....................................................................................................................................... 30

Primary Market Area (PMA) ........................................................................................................................................ 38

Supply & Demand Conclusion .......................................................................................................................................... 49

Deal Points ................................................................................................................................................................................ 50

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Executive Summary

Lynd and TR Inscore are pleased to present this investment memo in support of Culebra Crossing under FHA section 221(d)4 new construction.

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Project Overview

Culebra Crossing is a planned 326-unit, Class A market rate, multifamily development to be located on approximately 14.133 acres in west San Antonio, Texas. The Subject property is located near the northeast corner of Culebra Road and Loop 1604, a major growth corridor of west Bexar County. It is in the heart of the well-known Westover Hills area of San Antonio and its estimated 66,000 employment base. The property is also within fifteen minutes of Lackland Air Force Base and Port San Antonio, and twenty minutes to downtown San Antonio and the South Texas Medical Center. West San Antonio, and Westover Hills, has become San Antonio’s largest service employment center and will continue to provide a steady stream of employment growth.

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One of the leading retail developers in San Antonio, Fulcrum Development, is currently developing a three-phase retail project called Culebra Commons immediately adjacent to the site and on the frontage of Loop 1604 of which the first two phases have recently completed. Further, there is an approximately one-hundred-yard-wide ravine, including the Helotes Creek Greenway hike and bike trail, behind the site that offers uninterrupted views. There is currently great ingress and egress to the Site from Loop 1604, heading both north and south. Eventually, Ring Rd, abutting the site, will connect to Shaenfield Rd, making access to Loop 1604 even easier.

The Site is immediately surrounded by existing and forthcoming retail – and is the only truly walkable development in the area with directly adjacent retail and restaurants of this scale. Nestle Toll House Café, Stone Werks Grill, and HuHot Mongolian Grill already compose some of the tenants in Phase I of Culebra Commons. Two premier, national restaurants with cult-like followings are under negotiations to lease space in Phase II.

The Culebra - Loop 1604 area has seen explosive growth in the housing and retail sectors over the past five years. Over 2 million SF of retail and 40 pad site users populate this intersection. Big box retailers including Lowe's, Home Depot, Target, Ross, Marshalls, HEB, Best Buy, and Dick's Sporting Goods are among the retail establishments at the intersection in the Alamo Ranch Shopping Center and Culebra Market. A planned Methodist Hospital will be built less than two miles away at South Highway 151 and Loop 1604.

The Subject is a proposed three-story, 326-unit, multifamily property that will contain no age or income restricted units. The proposed development with flat roofs will be unlike any multifamily project in the submarket. The design drew its inspiration from urban, infill projects, then applied to a suburban setting. The unit types of the Subject are proposed to range from one bedroom/one bath

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530 SF to three bedroom/two bath 1,348 SF in size. The proposed project will include amenities of a swimming pool with a sunning ledge and cabanas, dog park, court yards, clubhouse, fitness center and gated entrance. The unit amenities will include nine-foot ceilings, quartz countertops in kitchen, faux-wood flooring, washer/dryers, and private yards for select ground-floor units. The site area is 14.133 acres and is zoned MF-33 which is San Antonio’s multifamily district, with a maximum density of 33 units per acre.

The following aerial photographs and maps show the site’s proximity to nearby economic drivers, shopping, schools, and medical services:

Previous Lynd development Previous Lynd development

Community Amenities

Secured Access Outdoor Children’s Playground Outdoor Fitness Area Adjacent to Hike & Bike Trail Private Pool Cabanas Detached Garages and Carports Grilling Areas Dog Run with Dog Wash Area Conference Rooms Cardio and Aerobic Center Access Controlled Building and

Parking Courtyards with Intimate Seating

Areas and Fire Pits and Water Features

Bicycle Storage

UNIT FEATURES

Stainless Steel Appliances with Side-by-side Refrigerator

Hardwood-look Flooring Throughout Dual Vanities with Framed Mirrors Full-size Washers and Dryers Open Kitchens with Islands Custom Cabinetry with 42” Upper

Cabinets Full-height Linen and Pantry Cabinets Frameless shower enclosures Quartz Countertops Glass Tile Backsplashes 2” window blinds 9’ Ceiling Heights Fully tiled bathrooms Rain Shower Heads Contemporary Hardware

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Subject

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Total development costs are estimated at approximately $47.5M. Proposed Sources include a $36.2M FHA-insured mortgage. There is a total equity requirement needed to capitalize the transaction of approximately $11.3M, of which the Sponsor is seeking an LP investor for 90%, or approximately $10.2M.

PROJECT SUMMARY STABILIZATION (Trended)Parcel Area 10.80 acres 470,448 sf FAR 0.85 Avg Rental Rate (Loaded Rent) 1,382$ Avg Rental Rate psf 1.65$ Total Gross Land Value 3,800,000$ 8.08$ $ Amount Per Unit Per SFBuilding Units GSF NSF Avg Unit Size Prkg | Ratio Apartment Rental Income 4,800,664$ 14,726$ 17.57$

Residential Units 326 400,000 273,308 838 505 | 1.55/unit Other Income 606,360$ 1,860$ 2.22$ Other - - Gross Potential Income 5,407,024$ 16,586$ 19.78$ Total 326 400,000 273,308 Less: Vacancy 6.00% (324,421)$ (995)$ (1.19)$

Effective Gross Income 5,082,603$ 15,591$ 18.60$

Less: Operating Expenses 38.16% (1,939,480)$ (5,949)$ (7.10)$ Net Operating Income 3,143,123$ 9,641$ 11.50$

DEVELOPMENT COSTS (USES) BUILDING SALE$ Amount Per Unit Per NSF Per GSF %

Land Costs 3,800,000$ 11,656 13.90 9.50 8.0% Exit/Sellout Date May-24 Exit NOI 3,656,226$ Soft Costs 7,551,081$ 23,163 27.63 18.88 15.9% Exit Cap 6.00%Hard Costs 33,648,375$ 103,216 123.12 84.12 70.8% $ Amount Per Unit Per SFDevelopment Costs 44,999,456$ 138,035 164.65 112.50 94.7% Gross Proceeds 53,589,794$ 164,386$ 196.08$ Financing Costs (excl. int.) 782,398$ 2,400 2.86 1.96 1.6% Sales Costs (535,898)$ (1,644)$ (1.96)$ Construction Interest 1,730,895$ 5,309 6.33 4.33 3.6% Net Sale 53,053,896$ 162,742$ 194.12$ Total Development Costs 47,512,749$ 145,745 173.84 118.78 100.0% Senior Loan Balance (35,120,827)$ (107,733)$ (128.50)$

Net Proceeds 17,933,070$ 55,009$ 65.61$

FINANCING (SOURCES)$ Amount % Construction Loan PROJECT RETURNS

Construction Loan $36,208,600 76.2% All-In Rate (Includes MIP) 5.25% Unused Escrows

Mezzanine Debt $0 0.0% HUD Orig./ 2.16% $782,398 ROC 6.62% 6.96%

LP Equity $10,173,734 21.4% Mezz Rate - Accrued initially 6.00% Spread 0.62%

Sponsor Equity $1,130,415 2.4% Mezz Orig. 2.00% $0 IRR 21.14%

Total Sources 47,512,749 100.0% CFx 2.18x

Net Leveraged Cash Flow (Profit) 13,282,748$

TIMING

Start Period Finish PARTNER RETURNS

Pre-Construction May-19 3 Month(s) Jul-19 Investment Period: 61 Mth(s) 5.08 yr(s)

Construction Aug-19 14 Month(s) Sep-20 Contributions Distributions Profit IRR / Multiple

Multi Open / Stabilization Apr-20 17 Month(s) Aug-21 GP - Sponsor (1,130,415) 4,700,179 3,569,764 36.11% / 4.16x

Multi Sale (months post Stab.) 33 Month(s) May-24 Limited Partner (10,173,734) 19,886,718 9,712,984 18.44% / 1.95x

Total Investment Period 61 Month(s) 5.1 Years Total (11,304,149) 24,586,897 13,282,748 21.14% / 2.18x

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USES

Uses273,308

Total Construction Cost (Including Contractor's Other Fees) 32,135,000Owner's Other Fees $1,627,000AIA & PE Design Fee $766,370Architectural Supervision Fee $125,000Construction Interest $1,730,895Taxes During Construction $250,000Insurance $65,000Mortgage Insurance Premium $182,200HUD Exam Fee $109,320HUD Inspection Fee $182,200Financing Fee $728,798Placement Fee $42,600Title And Recording $145,200Legal Fees $180,000FF&E $710,000Organizational (Including 3rd party Reports) $62,000Cost Certification Fee $11,000Land $3,800,000Initial Operating Deficit $1,595,820Working Capital $1,457,596Contractor's Fee $803,375Developer's Fee $803,375

Total Uses $47,512,749

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Development Team

The sponsors have assembled an excellent team with all key team members with previous HUD experience to develop, design, build, and manage the proposed Culebra Crossings. Most recently the team worked with the Department on Ranch at Arrington FHA# 115-35774 which had initial endorsement in September 2018.

Development Sponsors & General Contractor

The development team including the owner/developer, general contractor, architect, and management agent are extremely experienced in multifamily, including experience with HUD and have successfully worked together on multifamily developments prior to the current transaction.

The development team consists of Ron Inscore of T.R. Inscore LLC, who is well known to the Department and has developed in excess of 8,400 multifamily units over the past 25 years. Prior to founding T.R. Inscore in 2007, Mr. Inscore was partner and President of Guefen Construction from 2003 to 2007, as well as Senior Vice President at The Hanover Company. Mr. Inscore has overseen the completion of more than 8,700 units with over $1 Billion in completed project costs. Mr. Inscore has several successful FHA 221(d)(4) experiences, including The Ranch at State Highway 123 in Seguin, Texas (115-35564 – Developer/Owner/General Contractor) and The Ranch at the Guadalupe in New Braunfels, Texas (115-35744 – Developer/Owner). Mr. Inscore is the founding and controlling partner of T.R. Inscore, LLC, a construction and development company that manages the development, construction, lease-up and marketing components for all styles of multifamily and student housing developments including high-rise, mid-rise, garden style and ranch style residences. With over 45 combined years of development and construction expertise, T.R. Inscore has developed a unique production process that focuses on improved quality and velocity, which has resulted in the completed construction of over 8,700 multifamily units valued in excess of $1 billion throughout the United States. With experience in all stages of the development lifecycle including permit management, construction management, lease-up and marketing, T.R. Inscore has the ability to control the economic factors that may impact or influence the overall final development/construction budget. As a result, the company has always delivered and accomplished the occupancy timeline, project goals, and sales forecast for each property.

The Lynd Company will codevelop and manage the Mortgagor entity with Mr. Inscore. Mr. Lynd is the founder of the Lynd Company and has been involved in the management and ownership of multifamily properties for almost 40 years. Mr. Lynd presently is the principal owner in three FHA insured properties and also worked successfully with Mr. Inscore on the 221(d)(4) Ranch at Arrington that began construction in September.

Lynd Company is a well-established and highly regarded real estate firm based in Texas. Lynd has over 35 years of multifamily operations history, including garden, mid-rise, and high-rise.

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Headquartered in San Antonio, Lynd is a seasoned, full-service real estate firm with extensive experience in all facets of multifamily development. Lynd, founded in 1980, is one of the largest multifamily management companies in the country and currently manages approximately 15,000 units across 10 states. Since 2003, Lynd has acquired and / or developed over $1.5B of multifamily transactions. Lynd has developed over 2,000 units, including garden-style, mid-rise, and high-rise. Lynd has developed in Texas, Illinois, Colorado, and Florida. EnV Chicago, delivered in downtown Chicago, was awarded Multifamily Executive’s highly coveted Project of the Year and The Bowie, located in downtown Austin, was a Merit Award winner. Lynd has a boutique-style development mindset in that the firm is highly selective in its site selection and does not aggressively pursue many sites at once.

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Design Architect

Two architects are being considered, both with successful FHA experience

Bill Davies, AIA, LEED AP is the principal of Davies Collaborative, the proposed design architect. Based in Austin, Mr. Davies has designed 14 multifamily projects with a total of 3,765 units. Members of his staff have designed six multifamily housing projects in other parts of the US that are insured under the HUD program.

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W Partnership is based in Houston, Texas. The firm has a long and successful history in planning and design of multifamily with a national reputation. They have designed six 221(d)(4) multifamily properties with the Department.

The firm recently served as the architect on The Lodge at Guadalupe (FHA #115-35744), a 124-unit project financed under the 221(d)(4) program with Mr. Inscore.

Management Agent

The Lynd Company is the proposed management company for the Subject.

The Lynd Company was founded by Michael Lynd Sr. on April 28, 1980 and is based in San Antonio, Texas. During the 1980’s the Lynd Company grew into a buyer of both commercial and residential real estate to include 8,000 apartments and 3 million square feet of commercial space. By 1997, the Lynd Company owned/managed over 34,000 apartment units and 10 million square feet of commercial space, with a true national presence. The Lynd Company began managing HUD related projects in 1989 and currently manages approximately 58 HUD related projects representing in excess of 11k units. The Lynd Company currently has over 500 full time staff.

General Contractor

Three General Contractors are being considered, all with successful FHA experience:

Crane Contracting was formed in March of 2009 out of a 30-year-old company, Crane Contracting Group, Ltd. It was formed specifically to perform bonded multifamily work. Pat Crane and his staff have extensive commercial and multifamily construction experience and have built over 2,500 units during the past nine years. Most recently, Crane performed as General Contractor for the Lodge at the Guadalupe in New Braunfels, Texas (115-37744) and Oak Hollow Phase II in Seguin, Texas (115-35729) both FHA Insured apartments. Crane will also be the General Contractor for a 240 unit 221(d)(4) that was issued a firm commitment in October (Potranco Apartments 115-35818).

MW Builders, Inc. led by Todd Winnerman has extensive commercial and multifamily construction experience and has built over 2,500 multifamily units over the last five years including two FHA insured properties, Village of Verona Hills (084-23007) and Village of the Northland (084-23006) both in Kansas City. MW is also the General Contractor on the 221(d)(4) Ranch at Arrington in College Station that started construction in September. MW is a licensed GC in over 30 states and is currently building projects in Texas, Missouri, Kansas, and Georgia and has offices in Austin, Midland, and Kansas City. MW Builders is a perennial TOP 400 Contractor ranked by ENR magazine and a top 100 ESOP company. The company is 100% employee-owned.

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Cadence McShane is a design/build, construction management, and general contractor specializing in the multifamily housing, hospitality, commercial, industrial, and educational markets. Headquartered in the Dallas suburb of Addison, Cadence McShane has additional offices in Houston, Austin, and San Antonio, supporting projects throughout Texas as well as the surrounding region. As a builder of over 4,100 completed multifamily units and nearly 2,000 units in progress in Texas, Cadence McShane has in-depth experience constructing multifamily developments in Texas.

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Location

The Subject is located in west San Antonio, Bexar County, Texas. San Antonio is the center of economic and development activity for the South Texas area. Approximately 190 miles west of Houston and 78 miles southwest of Austin, San Antonio is located in an eight-county area known as the San Antonio Metropolitan Statistical Area (MSA). These counties include Atascosa, Bandera, Bexar, Comal, Guadalupe, Kendall, Medina, and Wilson.

The Subject site is located in far west San Antonio, near a major thoroughfare, outer Loop 1604. The property is located on the east side of Loop 1604, one mile north of its intersection with Culebra Road. At completion, the Subject will have access along an interior road that will connect to the northbound access road of Loop 1604 in two locations. This ring road in under construction.

The site is located in the heart of the high profile emplyment district titled Westover Hills. Westover Hills has become the city’s third largest employment district over the past decade. The area is home to a roster of high profile corporate campus employers that includes:

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West San Antonio, and in particular Westover Hills, has become San Antonio’s largest service employment center and will continue to provide a steady stream of employment growth.

The Culebra Rd. and 1604 intersection has seen tremendous growth in the past five years with restaurants and national retailers dominating the area. Single family residential development in the surrounding five mile area has been rather significant. For the past 10 years, traffic along Loop 1604 from I-10 to Culebra has been a tremendous problem as the growth in the area was not accompanied by sufficient road improvement. Starting in 2009, the 4.8 mile section between Bandera Rd. and Culebra was improved to first include dedicated turn lanes and major intersections. Despite this work, the commute from I-10 to Culebra during rush hour was around 40-45 minutes. In March 2014, the final phase of improvement to the Bandera Rd. - Culebra Rd. section commenced which included bridges over the final three intersections - Braun Rd., New Gilbeauand and Shaenfield Rd. The expected 30 month project was completed ahead of schedule in May 2016. The section of 1604 from I-10 to Culebra is now a full highway complete with frontage roads. This will have a profound positive impact on the commute times for residents of the Subject project.

Site Analysis

The Subject site consists of a 14.133-acre tract which is irregular in shape. The site is bordered by vacant land and a new GMC car dealership to the northwest in addition to W.Z. Burke Elementary School to the north and the new Culebra Commons shopping center to the north and south. Helotes Creek runs along the east side of the property and is bordered by single family use. The Subject site is also located just one mile north of the 1604/SH 151 interchange.

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The property is located on the east side of Loop 1604, 1/2 mile north of its intersection with Culebra Road. At completion, the Subject will have access along an interior road that connects to the northbound access road of Loop 1604 in two locations. TXDOT recently completed the expansion and renovation of Loop 1604 and the adjacent frontage roads with new entrance/exit ramps. The Subject is now situated in between both the exit and entrance ramps for Loop 1604 allowing for easy ingress and egress into the development. Visibility and exposure to Loop 1604 is second to none at this mixed use commerical, residential, and retail hub.

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Subject

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Retail

Alamo Ranch Shopping Center / Culebra Market:

Over 1.6 million SF of retail and 40 pad site users populate the Culebra Road and Loop 1604 intersection. This power center features a dynamic mix of powerful anchors, specialty retailers and entertainment options with easy access to Loop 1604, Culebra Road, and State Highway 151. Located in the heart of the city’s largest master-planned community, which has historically produced nearly 40 percent of the county’s new housing starts, Alamo Ranch is ideally positioned to serve an area experiencing explosive residential growth. Big box retailers including Lowe's, JCPenny, Home Depot, Super Target, Ross, Marshalls, HEB, Best Buy, Walmart Supercenter, and Dick's Sporting Goods are among the retail establishments at the intersection between the Alamo Ranch Shopping Center and the Culebra Market. This area saw a 100 percent increase in population growth from 2000 to 2016 and is projected to see an additional 15 percent growth within the next five years. Visibility and exposure to Loop 1604 is second to none at this major retail hub. Please see the aerial map on Page 18 for more information.

Culebra Commons:

Culebra Commons is a 56-acre mixed-use development strategically located at the northeast quadrant of Culebra Road and Loop 1604 in the fastest growing area of west San Antonio. Phase one of the Culebra Commons retail center, by Fulcrum Development of San Antonio, is complete with StoneWerks, and Roger’s Premier Salon Suits as anchors.

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The site for the first phase of development spans roughly nine acres, and the entire development includes 3,000 feet of frontage along the outer loop’s western rim. Initial retail space will provide about 54,000 square feet. Stone Werks Big Rock Grill, Lazyboy, Texas Roadhouse, Taco Palenque, Nestle Tollhouse, Longhorn Café, and Rogers Premier Salon Suites have executed leases and will anchor the first phase of the development. Other tennants that have signed a letter of intent to lease within the retail center include Hu-Hot Mongolian Grill and Emler Swim School.

Phase two of the Culebra Commons retail center is set to add over 120,000 SF of additional retail space to the area which is now under construction.

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Shaenfield Ranch Center:

The Shaenfield Ranch Center, constructed in conjunction with Foresite Commerical Real Estate and Dominion Advisory Group, is a recently completed 44,192-square foot retail center at the intersection of North Loop 1604 and Shaenfield Road. The retail develoment screens the Legacy Flats apartment complex that completed construction in 2016.

A Smokey Mo’s BBQ franchise opened September 26th. The brand launched in 2000 in Cedar Park and has since expanded to 15 locations with six total properties in the greater San Antonio area.

Stout’s Pizza Co. and the city’s second Lin’s International Buffet are scheduled to open before the end of the year.

Early next year, a 210 Frozen Yogurt is scheduled to open and an outpost of the popular San Antonio-based beer emporium Big Hops. Additionally, a 5,400-square-foot building currently under construction on a pad in the center’s parking lot will be home to a Wapo Taco with drive-thru and sit-down service.

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Culebra Commons Phase II – Renderings

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Nearby SHOPPING At Culebra Road and Loop 1604

Site

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Medical

The medical services industry is well represented in San Antonio; the Greater San Antonio Chamber of Commerce reports the medical sector of the San Antonio economy contributes approximately $7.45 billion annually. Since 1980, employment among medical center facilities has averaged 5.0 percent annual increases, and the combined annual budgets have more than doubled. In addition to health care, a significant portion of health services employment is attributed to organizations and companies involved with medical research. Some of these organizations include the University of Texas Health Science Center, Brooke Army Medical Center, Wilford Hall Medical Center (Air Force), Southwest Foundation of Biomedical Research, and Southwest Research Institute. Additionally, Texas Research Park, a 1,514-acre multi-disciplined research park located west of San Antonio in Bexar County, currently composed of many organizations whose work involves various stages of the very complicated drug development process. Institutions in the Texas Research Park are part of a larger alliance of organizations whose scientists are dedicated to developing and translating research into improved health care and cure of disease. The economic impact on the Texas Research Park is substantial and engenders exponential growth of the local economy. The majority of medical facilities in San Antonio are located in the 900-acre South Texas Medical Center (STMC). Within STMC are 45 medical related institutions, including the University of Texas Health Science Center, as well as 12 major hospitals (one of which is a veterans’ hospital), and five specialty institutions, totaling over 4,200 licensed beds. In 2011, 26,464 persons were directly employed at the center, and the combined budget of all entities at the South Texas Medical Center totaled $3.7 billion. Capital Projects at the STMC currently in progress and projected over the next five years total approximately $924.05 million. The University of Texas Health Science Center employs approximately 5,900 and has schools of medicine, dentistry, nursing and health sciences; a graduate school of biomedical science that trains more than 3,000 students per year is also part of this facility. With a $736 million budget, UTHSC contributes nearly $1.5 billion per year to the south Texas economy. In 2007, Baptist Health System opened the Westover Hills Medical Office Building, a 40-acre medical campus at SH 151 and Wiseman Road in western Bexar County. It includes a three-story, 60,000 SF medical facility accommodating imaging services, an outpatient surgical center, and medical office space. It will eventually include a hospital and employ at least 700 health care workers to meet growing demand in the area. At present, there is no hard price tag for the initial development or a specific timetable for the addition of a hospital. Upon completion of the entire medical campus, it is anticipated to serve an estimated 200,000 people. An 82,500 SF Consolidated Academic Complex was recently constructed at Brooks Air Force Base; this facility will be utilized to train aerospace medicine and environmental/occupational health personnel. Annually, over 5,000 medical officers and enlisted personnel will take advantage of a variety of courses, from physicians’ residency programs to environmental courses, to comply with Environmental Protection Agency (EPA) standards.

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Education

The site is located within the Northside Independent School District and is currently served by WZ “Doc” Burke Elementary School (0.25 miles northeast), HB Zachry Middle School (1.23 miles southeast), and William H. Taft High School (1.74 miles southwest). The Northside ISD is the largest in the San Antonio-Bexar County metro area and is the 6th largest school district in the state. The land area includes 355 square miles of urban landscape, suburban growth, and rural Texas Hill Country in the west quadrant of Bexar County. The District estimated a 2013-2014 school year enrollment totaling 101,477 students. The University of Texas at San Antonio (UTSA) is the largest provider of secondary education in the city and has a main campus at 6900 N. Loop 1604 West, a downtown campus, and a campus at 801 S. Bowie Street. The University enrolls more than 26,000 students annually in 107 undergraduate and graduate degree programs. UTSA is one of the fastest-growing universities in the state, as evidenced by its increasing enrollment, the vast expansion of campus buildings and land acquisitions. The university’s fall 2014 enrollment was 28,787, a slight increase from the 2014 figure of 28,628 students. In 2015, undergraduate enrollment was 24,462 students, while enrollment in UTSA's graduate and doctoral degree programs was 3,584 and 741 students, respectively. UTSA is the second-largest university in the University of Texas System and sixth-largest public university in Texas. Other higher education institutions in the city include: University of Texas at San Antonio Health Science Center; The Alamo Community College District (ACCD); National Autonomous University of Mexico; Our Lady of the Lake University (OLLU); St. Mary’s University; Texas A&M University; Trinity University; University of the Incarnate Word; and Wayland Baptist University. Major Employers

The Subject is close to local employers such as The University of Texas at San Antonio (UTSA), Westover Hills business center, USAA, Valero, 110-1604 Business Center, Sea World, Six Flags Fiesta Texas, La Cantera Mall, and the San Antonio Medical Center. Each of these key employers and attractions is located within 15 minutes of the Subject property. In addition, the following employers and employment venues are within the Westover Hills area: Chase, Nationwide Insurance, Hartford Group, Maxim’s integrated products plant, the National Security Agency campus, QVC service center, BABN Technologies, Capital Group/American Funds headquarters, both Microsoft and Lowes data centers, Northwest Vista College, and Christus Santa Rosa hospital. The major employer in the market area, as well as the second largest private employer in San Antonio, is United Services Automobile Association (USAA), which employs approximately 17,000 people and is growing rapidly. It is currently the fifth largest insurer of private automobiles in the country and the fourth largest homeowner insurer. USAA’s headquarters currently totals 3.2 million square feet. The USAA Campus is located between Fredericksburg Road and IH 10, south of Huebner Road, and 7.50 miles northeast of Subject.

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Market Summary

Metropolitan Statistical Area

The proposed project is located in the City of San Antonio in Bexar County, Texas and is located within the San Antonio – New Braunfels MSA. The MSA is also considered a part of the Texas Triangle as the cities are three of the largest metros in the United States (Houston, Dallas/Fort Worth, and Austin/San Antonio).

MSA Population

In a March 2018 issue of the San Antonio Business Journal, the San Antonio – New Braunfels MSA was the fifth fastest growing metropolitan area in the United States between 2010 to 2017 according to data published by the U.S. Census Bureau. The MSA added 331,458 new residents between this period recording a 15.47 percent growth rate. Over the last 5 years the MSA has outpaced the State of Texas in population growth as evident in the chart below.

Year State of Texas San Antonio – New Braunfels MSA Bexar County

Year-End 2013 26,479,279 2,279,878 1,821,250 July 2018 28,954,616 2,511,792 1,983,678

5-Year Growth 1.80% 1.96% 1.72% Annual Growth Rate 0.36% 0.39% 0.34%

Additionally, ERSI Demographics estimates there is a population of 15,927 within a 5-minute commute of the Subject, 175,496 within 10 minutes, and 569,005 within 15 minutes.

MSA Employment

According to the United States Bureau of Labor Statistics, total employment in the San Antonio – New Braunfels MSA is currently (June 2018) estimated at 1,140,992 jobs and has grown at an annual

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average pace of 2.44 percent over the past 3 years. Bexar County added 20,546 new jobs annually over this period and with an average growth of 2.38%.

Market June ‘15 June ‘16 June ‘17 June ‘18 Average Annual

New Jobs % Annual Job

Growth State of Texas 12,483,743 12,676,314 12,935,054 13,262,576 259,611 2.04% SA – NB MSA 1,061,430 1,094,244 1,122,639 1,140,992 26,521 2.44% Bexar County 843,013 866,884 889,886 904,652 20,546 2.38% Additionally, ERSI Demographics estimates there are in excess of 43,000 jobs within a 5-minute commute of the Subject, 136,000 within 10 minutes, and 339,176 within 15 minutes.

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Multifamily Summary

MSA Occupancy

Per Austin Investor Interest’s 3Q18 report, the average occupancy for the San Antonio-New Braunfels MSA was 92 percent for all conventional properties.

MSA Rental Rates

In 2010, the effective rental rate for the MSA was $706. Per Austin Investor Interest’s 3Q18 report, MSA effective rents has increased to $976 ($1.16 PSF), a 3.33 percent annual increase from 2010 (39% total growth rate). Per Austin Investor Interest’s 3Q18 report, Class A units achieved effective rental rates of $1.37 per square foot. Meanwhile, Class B units achieved effective rental rates of $1.18 per square foot. Lastly, Class C units achieved effective rental rates of $1.03 per square foot.

MSA New Construction

Per Austin Investor Interest’s 3Q18 report, the construction arena remains robust with activity, but the pace has begun to slow. The number of new submittals for the first half of the year is down almost 50 percent from the first half of 2017. And while the number of new starts seems impressive at 1,575 units in five properties, two properties are designated as affordable housing. With these new starts, there are now 46 properties, totaling 12,233 units, currently under construction. Of those, 3,215 have already completed, leaving 9,018 units still to come.

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The current construction is distributed throughout the San Antonio area, with the majority located in the Far West – FW, Far North West – FNW, New Braunfels – NB sectors. Properties in the development pipeline that have been submitted, approved or are actively in planning are concentrated in the Central (C), Far North Central (FNC), and Far West (FW) area. The upcoming year will see the Central (C), East (E), and Boerne (BN) sectors experience the bulk of new starts. MSA Absorption

Per Austin Investor Interest’s 3Q18 report, the third quarter saw absorption levels increase for the MSA, with 1,428 more occupied units over last quarter. Annually, there have been 6,733 units absorbed. Historically, the MSA absorbed 5,023 units in 2016 and 6,371 units in 2017. Through the 3rd quarter, the MSA has absorbed 3,457 units. Areas with strong absorption over the quarter were sectors with a high concentration of new units. These included the Far North Central (FNC), Far North West (FNW), and the Far West (FW).

Primary Market Area (PMA)

BBG completed a housing market study for this project location in October 2017. BBG identified the Primary Market Area (PMA) as IH 10 and IH 410 to the east, State Highway 151 to the south, Alamo Parkway to the west, and Loop 1604 to the north. This area encompasses a population of 334,308 and households of 141,410. The PMA is expected to grow by 12,864 households over the next five years. This indicates a growing demand but could easily be accommodated due to the availability of land for development and employment continues to be positive.

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Comparable Project Rent Analysis

The Subject property is proposed to have the following unit mix and pricing:

Unit Type Bed Bath Units Sq. Ft.Total

Sq. Ft.Monthly

RentTotal Mo.

Rent Rent / SFA1 1 1 27 530 14,310 $895 $24,165 $1.69

A2 1 1 77 610 46,970 $1,055 $81,258 $1.73

A3 1 1 48 715 34,320 $1,100 $52,800 $1.54

A4 1 1 45 730 32,850 $1,125 $50,625 $1.54

B1 2 2 54 995 53,730 $1,300 $70,200 $1.31

B2 2 2 38 1,140 43,320 $1,440 $54,720 $1.26

B3 2 22 11 1,160 12,760 $1,480 $16,280 $1.28

C1 3 2 26 1,348 35,048 $1,855 $48,230 $1.38

326 273,308 $398,278

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The below comparables have been selected as those within or adjacent to the PMA and are the most competitive to the Subject.

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Of these projects, Legacy Flats, Verandas at Alamo Ranch, and Avocet represent direct competitors and are most similar in terms of location and amenity offerings to the project. Legacy Flats is a Class-A, market rate property built in 2016 and located approximately 0.7 miles from the Subject. The apartment complex is screened by the newly built Shaenfield Ranch Center discussed in detail on Page 22. It currently has an occupancy of 98 percent and an average rent PSF of $1.27 PSF. This project is also the newest multifamily development completed and the closest comparable project in the Subject’s PMA.

Next, Verandas at Alamo Ranch, built in 2015, has a current occupancy of 92 percent and an average rent PSF of $1.38 PSF. This project is achieving the highest rent PSF of all comparable properties and is located near the Culebra and 1604 retail center.

Lastly, Avocet is the only multifamily development in the initial lease up phase within the Subject’s PMA. The project is currently in the initial lease up phase as it is 60 percent occupied. In the last 30 days, Avocet has absorbed 30 units. The Underwriter would like to note that Avocet has the largest units and asking rents among comparable properties. In turn, this results in a lower $/PSF.

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Property Units Rent Variance Sq. Ft. Variance Property Units Rent / SF Variance Sq. Ft. VarianceCulebra 326 $1,222 $64 838 (44) Culebra 326 $1.46 $0.15 838 (44)Legacy Flats 311 $1,182 $24 854 (28) Legacy Flats 311 $1.38 $0.07 854 (28)

Avocet 336 $1,167 $10 950 68 Fifty02 343 $1.34 $0.02 872 (11)

Fifty02 343 $1,164 $6 872 (11) Verandas 282 $1.32 $0.01 835 (47)

Verandas 282 $1,102 ($55) 835 (47) Avocet 336 $1.23 ($0.08) 950 68Average: 1 318 $1,157 882 Average: 1 318 $1.31 882

Property Units Rent Variance Sq. Ft. Variance Property Units Rent / SF Variance Sq. Ft. VarianceLegacy Flats 9 $855 $0 561 0 Legacy Flats 9 $1.52 $0.00 561 0Average: 1 9 $855 561 Average: 1 9 $1.52 561

Property Units Rent Variance Sq. Ft. Variance Property Units Rent / SF Variance Sq. Ft. VarianceLegacy Flats 182 $1,122 $94 729 5 Culebra 197 $1.63 $0.21 652 (72)Fifty02 229 $1,069 $40 758 33 Legacy Flats 182 $1.55 $0.13 729 5

Culebra 197 $1,060 $31 652 (72) Fifty02 229 $1.42 ($0.01) 758 33Avocet 168 $957 ($72) 716 (8) Verandas 142 $1.38 ($0.04) 675 (50)

Verandas 142 $930 ($99) 675 (50) Avocet 168 $1.34 ($0.09) 716 (8)Average: 1 180 $1,029 724 Average: 1 180 $1.43 724

Property Units Rent Variance Sq. Ft. Variance Property Units Rent / SF Variance Sq. Ft. VarianceCulebra 103 $1,371 $83 1,066 2 Culebra 103 $1.29 $0.07 1,066 2Avocet 144 $1,332 $44 1,156 92 Legacy Flats 102 $1.25 $0.04 1,019 (45)

Fifty02 106 $1,321 $34 1,088 24 Verandas 117 $1.25 $0.04 968 (95)

Legacy Flats 102 $1,277 ($11) 1,019 (45) Fifty02 106 $1.22 $0.00 1,088 24

Verandas 117 $1,212 ($76) 968 (95) Avocet 144 $1.15 ($0.06) 1,156 92Average: 1 117 $1,288 1,064 Average: 1 117 $1.21 1,064

Property Units Rent Variance Sq. Ft. Variance Property Units Rent / SF Variance Sq. Ft. VarianceCulebra 26 $1,855 $262 1,348 $75 Fifty02 8 $1.42 $0.16 1,266 ($7)Fifty02 8 $1,794 $201 1,266 (7) Verandas 23 $1.40 $0.14 1,150 (123)

Avocet 24 $1,651 $58 1,351 77 Culebra 26 $1.38 $0.12 1,348 75Verandas 23 $1,610 $17 1,150 (123) Avocet 24 $1.22 ($0.04) 1,351 77

Legacy Flats 18 $1,405 ($188) 1,331 58 Legacy Flats 18 $1.06 ($0.20) 1,331 58Average: 1 18 $1,593 1,273 Average: 1 18 $1.26 1,273

1. Culebra is not included in Averages

STUDIO

3-BDRM

1-BDRM

2-BDRM

PROJECT TOTAL PROJECT TOTAL / SF

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Property Units Sq. Ft.Market Rent

Market Rent / SF

Effective Rent Variance

Effective Rent / SF Variance

Legacy Flats 9 561 $855 $1.52 $855 $0 $1.52 $0.00Total / Avg: 1 9 561 $855 $1.52 $855 $1.52

Property Units Sq. Ft.Market Rent

Market Rent / SF

Effective Rent Variance

Effective Rent / SF Variance

Legacy Flats 60 850 $1,235 $1.45 $1,235 $206 $1.45 $0.03Fifty02 12 851 $1,159 $1.36 $1,159 $130 $1.36 ($0.06)Culebra 45 730 $1,125 $1.54 $1,125 $96 $1.54 $0.12Fifty02 4 841 $1,123 $1.34 $1,123 $94 $1.34 ($0.09)Fifty02 4 857 $1,118 $1.30 $1,118 $89 $1.30 ($0.12)Fifty02 36 840 $1,110 $1.32 $1,110 $82 $1.32 ($0.10)Fifty02 16 759 $1,109 $1.46 $1,109 $80 $1.46 $0.04Fifty02 4 839 $1,105 $1.32 $1,105 $76 $1.32 ($0.11)Culebra 48 715 $1,100 $1.54 $1,100 $71 $1.54 $0.11Fifty02 36 723 $1,091 $1.51 $1,091 $62 $1.51 $0.08Fifty02 4 769 $1,083 $1.41 $1,083 $54 $1.41 ($0.02)Legacy Flats 60 715 $1,079 $1.51 $1,079 $50 $1.51 $0.08Fifty02 10 638 $1,057 $1.66 $1,057 $28 $1.66 $0.23Legacy Flats 60 625 $1,057 $1.69 $1,057 $28 $1.69 $0.27Culebra 77 610 $1,055 $1.73 $1,055 $26 $1.73 $0.30Fifty02 60 780 $1,053 $1.35 $1,053 $24 $1.35 ($0.08)Fifty02 8 743 $1,046 $1.41 $1,046 $17 $1.41 ($0.02)Fifty02 15 626 $1,035 $1.65 $1,035 $6 $1.65 $0.23Legacy Flats 2 671 $1,027 $1.53 $1,027 ($2) $1.53 $0.11Verandas 44 735 $1,010 $1.37 $1,010 ($19) $1.37 ($0.05)Avocet 84 745 $1,062 $1.43 $974 ($55) $1.31 ($0.12)Verandas 28 742 $965 $1.30 $965 ($64) $1.30 ($0.12)Avocet 84 687 $1,025 $1.49 $940 ($89) $1.37 ($0.06)Fifty02 20 657 $925 $1.41 $925 ($104) $1.41 ($0.02)Verandas 28 618 $896 $1.45 $896 ($133) $1.45 $0.02Culebra 27 530 $895 $1.69 $895 ($134) $1.69 $0.26Verandas 42 605 $844 $1.40 $844 ($185) $1.40 ($0.03)Total / Avg: 1 721 724 $1,049 $1.45 $1,029 $1.43

Property Units Sq. Ft.Market Rent

Market Rent / SF

Effective Rent Variance

Effective Rent / SF Variance

Culebra 11 1,160 $1,480 $1.28 $1,480 $192 $1.28 $0.06Culebra 38 1,140 $1,440 $1.26 $1,440 $152 $1.26 $0.05Fifty02 16 1,110 $1,370 $1.23 $1,370 $82 $1.23 $0.02Avocet 80 1,181 $1,470 $1.24 $1,347 $60 $1.14 ($0.07)Fifty02 12 1,138 $1,344 $1.18 $1,344 $56 $1.18 ($0.03)Legacy Flats 51 1,070 $1,330 $1.24 $1,330 $42 $1.24 $0.03Fifty02 30 1,060 $1,321 $1.25 $1,321 $34 $1.25 $0.03Fifty02 2 1,131 $1,319 $1.17 $1,319 $31 $1.17 ($0.05)Fifty02 20 1,131 $1,319 $1.17 $1,319 $31 $1.17 ($0.05)Avocet 64 1,124 $1,433 $1.27 $1,313 $26 $1.17 ($0.05)Culebra 54 995 $1,300 $1.31 $1,300 $12 $1.31 $0.09Fifty02 16 986 $1,289 $1.31 $1,289 $1 $1.31 $0.09Verandas 40 973 $1,271 $1.31 $1,271 ($16) $1.31 $0.09Fifty02 10 1,143 $1,271 $1.11 $1,271 ($17) $1.11 ($0.10)Legacy Flats 51 968 $1,224 $1.26 $1,224 ($64) $1.26 $0.05Verandas 77 966 $1,181 $1.22 $1,181 ($107) $1.22 $0.01Total / Avg: 1 469 1,064 $1,325 $1.25 $1,288 $1.21

Property Units Sq. Ft.Market Rent

Market Rent / SF

Effective Rent Variance

Effective Rent / SF Variance

Culebra 26 1,348 $1,855 $1.38 $1,855 $262 $1.38 $0.12Fifty02 1 1,266 $1,794 $1.42 $1,794 $201 $1.42 $0.16Fifty02 7 1,266 $1,794 $1.42 $1,794 $201 $1.42 $0.16Avocet 12 1,379 $1,838 $1.33 $1,684 $91 $1.22 ($0.04)Avocet 12 1,322 $1,765 $1.34 $1,618 $25 $1.22 ($0.03)Verandas 23 1,150 $1,610 $1.40 $1,610 $17 $1.40 $0.14Legacy Flats 18 1,331 $1,405 $1.06 $1,405 ($188) $1.06 ($0.20)Total / Avg: 1 73 1,273 $1,642 $1.30 $1,593 $1.26

1. Culebra is not included in Totals / Averages

STUDIO

1-BDRM

2-BDRM

3-BDRM

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Renting vs. Homeownership

The potential cost or savings available by renting versus purchasing a home within the market is calculated to the right.

Per data obtained from the Texas A&M Real Estate Center, the Bexar County median home price has increased 33.27 percent over the last five years (6.65 percent annually), from $150,000 to $199,900 in 2017. Using the assumptions provided in the table to the right, there is a $360 per month advantage to renting versus purchasing a home within the market. Additionally, this equates to a $4,320 annual renting advantage. Renting at the Subject will be 25.5 percent more affordable than purchasing a home in Bexar County. Additionally, the average housing inventory for the last three years was 2.8 months. A balanced housing market is widely accepted to be in equilibrium at 6 months.

Source: Texas A&M Real Estate Center

While housing prices continue to rise across the city, so do apartment rents. The median rent in the San Antonio metro area rose 12 percent between the end of 2014 and the first quarter of 2018, from $1.01 a month per square foot to $1.13, an 11.88 percent increase according to Austin Investor Interest.

Homeownership Assumptions 2017 Median Home Price $199,900 Typical Down payment 20% ($39,980) Mortgage Amount $159,920 Interest Rate 4.00% Term 30 Yrs. Mill Rate (1:1,000 Value) 2.837642

Monthly Homeownership Expenses Monthly Principal & Interest $763 Real Estate Taxes $447 Insurance $100 Maintenance $100 Monthly Cost of Homeownership $1,410

Summary Cost of Homeownership $1,410 Average Subject Property Rent $1,050 Monthly Renting Advantage $360 Annual Renting Advantage $4,320

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PMA Absorption

The Market Analyst provided data on several new properties in the northeast San Antonio areas.

Absorption varied from 14 to 24 units per month. The average was approximately 19 units per month. The Market Analyst concluded to 20 units per month. This rate would conclude to a stabilized property by May 2020 if construction began in March 2019.

HUD Insured Projects

There are three HUD-Insured projects in the four nearest zip codes (78250, 78251, 78253, 78254) per the Insured Multifamily Mortgages Database page (updated 10-31-2018) on HUD.gov.

Based on the current occupancies of the existing properties, the Underwriter sees no significant risk associated to the Proposed or the existing HUD insured properties.

FHA # PROPERTY NAME UNITS Type Occpy115-11241 The Falls at Westover Hills 394 Market 96%115-35667 Bandera Commons Apartments 240 Affordable N/A115-35674 Cascadia Apartments 274 Market 91%

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Employment Growth

The next method for calculating multifamily demand is based on employment growth. Using data from ESRI Demographics, the Underwriter calculated the ratio of 1.0 jobs per rental unit within the PMA.

Jobs per Rental Unit

Area Number of Jobs Households Jobs per Household

Primary Market Area (PMA) 138,605 120,120 1.2 Source: ESRI

Next, based on data from the Real Estate Center at Texas A&M University and the United States Department of Labor, the HUD Underwriter calculated the average historical employment growth rate for the MSA and County. When averaged together, the three-year employment growth rate for the combined criteria is 2.67 percent as indicated below.

Employment Jobs Growth Growth %August '15 1,062,352 - -August '16 1,099,201 36,849 3.47%August '17 1,124,803 25,602 2.33%August '18 1,133,571 8,768 0.78%Average 23,740 2.19%

Source: U.S. Census Bureau; Esri, Inc.

San Antonio-New Braunfels

Employment Jobs Growth Growth %August '15 844,412 - -August '16 871,311 26,899 3.19%August '17 892,049 20,738 2.38%August '18 898,713 6,664 0.75%Average 18,100 2.10%

Source: U.S. Census Bureau; Esri, Inc.

Bexar County

Employment Jobs Growth Growth %August '15 654,148 - -August '16 674,404 20,256 3.10%August '17 690,455 16,051 2.38%August '18 695,614 5,159 0.75%Average 13,822 2.07%

Source: U.S. Census Bureau; Esri, Inc.

City of San Antonio

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Average 3 Year Employment Growth Rate

Criteria Rate X Weight = Weighted Rate MSA 2.19% X 33.33% = 0.72% County 2.10% X 33.33% = 0.69% City 2.07% X 33.33% = 0.68%

Average 3 Year Employment Growth Rate 2.10% Using the data calculated above, the Underwriter is able to project the annual multifamily unit demand based on future job growth for the Subject’s PMA. This demand is calculated at 304 units per year.

Annual Demand Based on Job Growth

PMA 2018 Jobs within the PMA 138,605 Average Growth Rate 2.10% 2023 Jobs (Based on Growth Rate) 141,519 Indicated Job Growth 2,914 / Jobs per Household 1.2 % Renter-Occupied Housing Units 46.90% Indicated Gross Annual Demand Based Upon Job Growth 1,184

Source: U.S. Census Bureau; Esri, Inc.

Historic Absorption

The next method for calculating multifamily demand is based on historic absorption. Using data from ALN Apartment Data, the Underwriter generated a report for the historic absorption for the comparable properties within the PMA for the last 12 months concluding 1,286 units were absorbed. The Underwriter has annualized this figure for estimation purposes at 1,200 units. Note – the occupancy below includes the occupancy of properties that are not stabilized and in their initial absorption period:

vs. 12-Months (End of July 2017)

Now Then Occupancy Rate: 88.4 % 90.4 % Average Rental Rate: $974.53 $937.77 Effective Rental Rate: $954.39 $915.30 New Units Added/(Lost): + 2,400 Net Absorption: + 1,286

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Supply and Demand Analysis

There are presently eleven projects either under construction or in various stages of lease up within the PMA. All other properties fall outside the defined PMA or are not expected to directly compete with the Subject according to the Market Analyst.

Under Construction/Lease UP Below is commentary on the projects that are under construction or leasing up with the most amount of units or that are less than 60% leased: The Citadel at Westpointe: is finalizing construction and recently commenced leasing. The

project is located at the northeast corner of Richland Hills Drive and Midhust Road. The project will consist of two three-story buildings, nine two-story structures, a clubhouse and 39 freestanding garages. The unit mix will total 282 apartments with 90 Big House-style floor plans and 192 eUrban units, featuring open-design floor plans with competitive unit and project amenities. This product is expected to compete with the Subject but will be stabilized prior to the Subject delivering units.

Broadstone at Medical Center Apartments: are a 284-unit apartment complex currently in its initial absorption period located at 7401 Wurzbach Road near the medical center and 8 miles from the subject. The project will include one and two-bedroom units that will feature amenities typical of Class A products. This product is expected to compete with the Subject but will be stabilized prior to the Subject delivering units.

Broadstone Oak Hill: is a planned 222-unit apartment complex that will be located at 7714

Louis Pasteur Drive, 7.5 miles east of the subject. The project is expected to feature two, 3-story buildings and urban style constriction. Reis indicates that Alliance Residential is the developer; however, no information was available on the company website and no timeline was available. We have reached out to the developer to obtain more information but have not yet received a response. Due to location within the PMA, this property is expected to compete with the Subject.

Revised Summary of Proposed Units Status Units Occ.Units to Stabilize

Dalian 151 Lease Up 360 71% 79The Pointe at La Esala (Estraya Westover Hills) Under Construction/Lease Up 278 60% 92Legacy Creekside Under Construction/Lease Up 338 60% 112Broadstone at the Medical Center (Hawthorne House) Under Construction/Lease Up 276 47% 128Valencia Lofts (FHA) Under Construction/Lease Up 192 21% 137Park on Wurzbach Under Construction/Lease Up 264 31% 164Addison Medical Center Under Construction/Lease Up 217 16% 168Citadel at Westpoint Under Construction/Lease Up 282 3% 254Broadstone Oak Hill Under Construction/Lease Up 330 14% 262Pradera Under Construction 250 0% 233Abacus Alamo Ranch (FHA) Proposed 320 0% 298Culebra Crossing (SUBJECT) Proposed 300 0% 279Total 3,407 2,204

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Legacy Creekside: is a 338-unit garden style project that is currently leasing up intersection

of Ingram Road and Potranco Road, approximately 5 miles southeast of the subject. This development will consist of 3-story garden style buildings with a leasing office/clubhouse and competitive unit finishes and project amenities. No timeline for estimated completion of this project could be obtained at this time; however, upon completion and stabilization it will compete with the Subject.

The Valencia Lofts: is a 192-unit market rate multifamily property located on Grissom Road, northeast of the Subject. The project secured HUD-insured financing and began construction in late summer 2017 and is currently leasing up. The development will provide a mix of 1BR, 2BR and 3BR units with good amenities and unit finishes, with close proximity to San Antonio Medical Center about 8 miles from the subject but within the PMA. This product is expected to compete with the Subject but will be stabilized prior to the Subject delivering units.

Under Construction/Proposed

Pradera: is a 250-unit market rate multifamily property located on at 11631 Culebra Road about 2 miles from the Subject. The project started construction in December 2017 and expects to deliver units this winter. The design is a gated community of single family detached rental homes with unit sizes approximately 2,000sf+.

Abacus Alamo Ranch: is a 320-unit market rate multifamily property located adjacent to Taft

High School about 2 miles north of the Subject on Culebra Rd. This project has received an FHA firm commitment and expected to commence construction in December.

Supply & Demand Conclusion

Based on the methodology described above, the Underwriter concludes that there is sufficient demand in the PMA to absorb the Subject and all other developments in the development and construction pipeline with still an additional need for 885 units in 2021 when the Subject completes its initial absorption period.

Future Demand (3 years) 3,089 - Net Proposed Additions (3 years) 2,204

Remaining Demand 885

Summary:

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The PMA occupancy is stable with a 94 percent occupancy rate. According to BBG’s market report, the PMA is expected to grow by 12,864 households over the next five years. The most recent properties that have leased up in the PMA have averaged 19 units per month absorption. Further, the area is marked by new road infrastructure, commercial development, business expansion, and employment growth. All of these combined factors evidence a market that is conducive to the Subject being a well performing and successful development. Sources

U.S. Census Bureau ALN Apartment Data, Inc. Austin Investor Interests, LLC 3Q18 Multifamily Trend Report ESRI Business Analyst - ArcGIS Real Estate Center at Texas A&M University Google Earth Pro

Deal Points

Green/Sustainability

The project will be designed to achieve either the Energy Star or the National Green Building Standards certification. The project will also obtain at least a 75 score on the Energy Star Portfolio Manager in accordance with the Federal Register 2016 MIP Reduction Notice, Part I

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Executive SummaryProject OverviewDevelopment TeamDevelopment Sponsors & General ContractorDesign ArchitectManagement AgentGeneral Contractor

LocationSite AnalysisRetailMedicalEducationMajor Employers

Market SummaryMetropolitan Statistical AreaMSA PopulationMSA EmploymentMultifamily SummaryMSA OccupancyMSA Rental RatesMSA New ConstructionMSA Absorption

Primary Market Area (PMA)Comparable Project Rent AnalysisRenting vs. HomeownershipPMA AbsorptionHUD Insured ProjectsEmployment GrowthHistoric AbsorptionSupply and Demand Analysis

Supply & Demand ConclusionSources

Deal PointsGreen/Sustainability