MULTIFAMILY INVESTMENT OPPORTUNITY

920 Westcott Street, Houston Texas

Elan Memorial Park Houston, TX

2016 Built, Core Class A Asset, 297 Units apartments,

8 Retail

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Legal Disclaimer

The information contained in this presentation is considered confidential, intended solely for the individuals to whom it is delivered. The circulation of this document or disclosure of its contents to any other party is expressly prohibited. The information is solely for the use of prospective investors to determine the level of interest in Clark Ridge Canyon Apartments.

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While the information contained in this presentation has been compiled from source’s we believe to be reliable, neither of the sponsors or their representatives make any representations or warranties as to the accuracy or completeness contained herein. All financial information and projections are provided for reference only and are based on assumptions relating to the general economy, market conditions, and other factors beyond our control.

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All references to acreage, square footage and other measurements are approximations and must be independently verified. Prospective investors are encouraged to conduct their own independent due diligence investigation, review financial projections, and consult with their legal, tax, and other professional advisors before making an investment decision.

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• Purpose of the Meeting
• What is Private Equity?
• What is the Proposed Structure?
• The Investment Opportunity

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• What is it? > Investors come together to tap into the opportunity to realize better than average return
• Regulations > SEC Regulations D 506 (b)
• Liquidity > Not a Liquid asset like cash or stock/bond
• Accredited Investors
• Through Assets
• Through Income
• Real Estate PE – Typically a Long-term investment
• 90% of millionaires are made through real estate
• Recession resilient asset class
• Conservation of Principal
• Most favored hedge against inflation

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Proposed Structure

Apartment Investment, LLC

General Partner (GP)

(Organizing & Managing Responsibility)

Investor ..N (LP)

Investor 8 (LP)

Investor 7 (LP)

Investor 6 (LP)

Investor 5 (LP)

Investor 3 (LP)

Investor 2 (LP)

GP as

Investor 1 (LP)

Funds

Funds

Funds

Funds

Funds

Funds

Funds

Funds

Houston Portfolio

• 978 Units
• 7 properties
• Class A and B
• Avg. Occupancy: 92%

Cambria Cove

Apt Portfolio – Reserve at Eagle Landing

The Augusta North Houston

Live Oak

Grove at Sea Brook

Elan Memorial Park

Safety & Stability

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Tax Benefits

Leverage

Time & Money

Consistent

Passive Income

Record Low Rates

Inflation Hedge

An Asset Like No Other

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5-year projection of cash flow and profits on sale over 5 years after take over Stabilization - Based on $100,000 investment:

Preferred Returns

7%

Average Cash-on-Cash

Year 1

Year 2

Year 3

Year 4

Year 5

7.00%

$7,000

7.00%

$7,000

7.00%

$7,000

7.00%

$7,000

7.00%

$7,000

35.00%

$35,000

45.00%

$45,000

80%

$80,000

Total Cash Flow

Profits on Sale

Total ROI

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5-year projection of cash flow and profits on sale over 5 years after take over Stabilization - Based on $100,000 investment:

9%+

Average Cash-on-Cash

Year 1

Year 2

Year 3

Year 4

Year 5

1.618%

$1,618

8.312%

$8,312

9.796%

$9,796

11.885%

$11,885

14.717%

$14,717

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+

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Returns might fluctuate slightly

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• This submarket is one of six urban submarkets in Central Houston. It is the most desirable address in Houston’s urban core, offering rare walkability and incomparable lifestyle. Primary drivers of rent growth include expensive single-family homes, high-end new apartments setting new pricing standards, and lack of cost-effective opportunities to build substantially more supply in the future.
• Average home sale price in submarket is $1.9MM

• The Inner Loop River Oaks retail submarket spans most of Houston’s urban core and boasts the metro highest-end signature retail destinations. Affluent neighborhoods and luxury multifamily have elevated local buying power, bolstering retail spending and foot traffic in 2021. The local demographic profile will continue to boost retail demand in 2022 and improve overall fundamentals

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Memorial Park

• Houston’s largest urban park and 2X the size of Central Park in NYC
• 1,466 Acres
• $1B estimated value
• 4MM visitors annually
• 30 miles of hike and bike trails
• 600-acre nature park
• Sporting activities: Tennis, basketball, soccer, baseball, football, etc.…
• Memorial Park Golf Course is host of PGA’s Houston open

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This asset comes with 8 retails spaces. 7 of them have been leased and one spot remains vacant. The current retail tenants are high profile tenants with an average of 5yrs left on the lease. The upscale retail tenants is a reflection of the lifestyle of the local tenants.

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Market Rent Comps - 1/1 Bedrooms

600 SqFt

700 SqFt

800 SqFt

900 SqFt

1000 SqFt

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1500+ SqFt

1300 SqFt

1200 SqFt

1100 SqFt

1000 SqFt

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Average $318 per Sq. Ft.

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1000 SqFt

5-year Cash Flow Projections – Conversative UW

1000 SqFt

Reverse Cap Rate 1% higher

Conversative UW

1%

Acquisition Fee

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1

4

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ROI (<=5 years)

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Class A – 1.8x

or

Class B – 2.0x+

Core Class A+

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Great location near employment centers

Rents below $100+ Comps

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$100K+ in other income opportunities

Conversative UW against COVID-19 economic environment

Experienced and reputable property management company with strong track record.

Experienced sponsorship team with over 10 years in real estate investments.

100% year-1 write off due to Cost Seg. Study and bonus depreciation.

Reversion (Exit) Cap-rate => 100 basis points above entry cap rate

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Step 1

Link to subscription docs will be provided after the webinar.

Step 2

Review and sign all documents via link provided.

Discuss any questions with your sponsor.

Step 3

Verify wire instructions..

Step 4

Wire funds. Accepted on first-come first-served basis.

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Q&A

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Multifamily Real Estate Terminologies &

General FAQ

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General FAQs

• What is Cost Segregation
• Cost Segregation is an application by which commercial property owners can accelerate depreciation and reduce the amount of taxes owed. This savings generates substantial cash flow that owners often use to reinvest in the business, purchase more property, apply to their principal payment, or spend on themselves.
• How Does Cost Segregation Work?
• An experienced and qualified company, performs the engineering-based cost segregation study on your property. The study accelerates the depreciation of your building/renovation components into shorter depreciation categories such as 5-, 7-, 15-year rather than conventional 27.5- and 39.5-year schedules. Five-and 7-year items might include decorative building elements, electrical for dedicated computer equipment, and carpet. Fifteen-year items might include site utilities, landscaping and paving. This engineering-based cost segregation study results in a much higher depreciation expense and significantly reduced taxable income for the property owner. Best of all, the U.S. tax code states cost segregation can be applied to categories of buildings purchased or built since 1986, including renovations, and there is no need to amend your tax returns.

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General FAQs

• What is Bonus Depreciation?
• Bonus depreciation is a tax incentive that allows a business to immediately deduct a large percentage of the purchase price of eligible assets, such as a carpet, rather than write them off over the "useful life" of that asset. Bonus depreciation is also known as the additional first year depreciation deduction. The Tax Cuts and Jobs Act, passed in 2017, made major changes to the rules on bonus depreciation. Most significantly, it doubled the bonus depreciation deduction for qualified property, as defined by the IRS, from 50% to 100%. The 2017 law also extended the bonus to cover used property under certain conditions. Formerly it applied only to property bought new.

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• What is Accelerated Depreciation?
• Accelerated depreciation is any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. While the straight-line depreciation method spreads the cost evenly over the life of an asset, an accelerated depreciation method allows the deduction of higher expenses in the first years after purchase and lower expenses as the depreciated item ages.

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General FAQ Continued

• What is IRR:
• Simply stated, the Internal rate of return (IRR) for an investment is the percentage rate earned on each dollar invested for each period it is invested. IRR is also another term people use for interest. Ultimately, IRR gives an investor the means to compare alternative investments based on their yield.
• What is Capitalization Rate?
• The capitalization rate (also known as cap rate) is used in the world of commercial real estate to indicate the rate of return that is expected to be generated on a real estate investment property. This measure is computed based on the net income which the property is expected to generate and is calculated by dividing net operating income by property asset value and is expressed as a percentage. It is used to estimate the investor's potential return on their investment in the real estate market.

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Multifamily Real Estate Terminology

1031 EXCHANGE

ABSORPTION RATE

ACCELERATED

DEPRECIATION

SEC Section 1031 of the US Internal Revenue Code allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale within certain time limits in a property or properties of like kind and equal or greater value.

The proportion of newly completed units that are or have been leased, usually over a given period (such as 3 months).

Accelerated depreciation is any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. While the straight-line depreciation method spreads the cost evenly over the life of an asset, an accelerated depreciation method allows the deduction of higher expenses in the first years after purchase and lower expenses as the depreciated items ages

ACCREDITED INVESTOR

An accredited investor is a person or business entity who is allowed to deal in securities that may not be registered with financial authorities. According to the SEC, at least one of the following conditions must apply to you: you must have earned an individual income of more than $200,000 per year, or a joint income of $300,000, in each of the past two years and expect to reasonably maintain the same level of income.

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Multifamily Real Estate Terminology

AMORTIZATION

A method of paying off debt through regular principal and interest payments over time.

ASSET

MANAGEMENT FEE

A fee charged to the investors based on the amount of money they have invested in the real estate asset for the account. Asset management is meant to improve the value of the property.

ACQUISITION FEE

A fee to cover the expenses incurred for arranging the deal (i.e.: closing costs, real estate commissions, construction fees, etc.).

BASIS POINTS

A hundredth of a percentage point, often used in relation to interest rates. A unit of measure for the change in interest rates for bonds and notes. Example: if an interest rate rises from 5.00% to 5.30%, that is a rise of 30 basis points (it can also be described as an increase of three-tenths of a percentage point).

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BONUS

DEPRECIATION

1. The cap rate is the ratio of net operating income to property value. As such, it provides a current snapshot of the (unlevered) percentage return an investor would get on purchasing the property.

2.If the cap rate for comparable properties is known, it can be used to estimate the property value.

Bonus depreciation is a tax incentive that allows a business to immediately deduct a large percentage of the purchase price of eligible assets, such as a carpet, rather than write them off over the "useful life" of that asset. Bonus depreciation is also known as the additional first year depreciation deduction. The Tax Cuts and Jobs Act, passed in 2017, made major changes to the rules on bonus depreciation. Most significantly, it doubled the bonus depreciation deduction for qualified property, as defined by the IRS, from 50% to 100%. The 2017 law also extended the bonus to cover used property under certain conditions. Formerly it applied only to property bought new

Multifamily Real Estate Terminology

CAPITALIZATION

RATE

(or “CAP RATE”)

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Multifamily Real Estate Terminology

CAPITAL EXPENDITURE

(CAPEX)

These are the funds used to acquire or upgrade an asset. It should not be confused with operating expenses, which are short-term in nature. These expenditure are depreciated over the life of the asset.

CASH FLOW

A cash flow property is an investment property that generates a surplus of money each month after all expenses have been paid.

CASH ON CASH RETURN

The annual before-tax cash flow of an investment expressed as a percentage of the initial cash invested

CONCESSION

An economic incentive granted by an owner to encourage the leasing of space or the renewal of a lease. Concessions are usually related specifically to the rental rate (e.g., a month’s free rent)

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Multifamily Real Estate Terminology

COST SEGREGATION

Cost Segregation is an application by which commercial property owners can accelerate depreciation and reduce the amount of taxes owed. This savings generates substantial cash flow that owners often use to reinvest in the business, purchase more property, apply to their principal payment, or spend on themselves.

DEBT SERVICE

COVERAGE RATIO

DEPRECIATION

This is a measure of the cash flow available to pay current debt obligations. The ratio states net operating income as a multiple of debt obligation due within one year, including interest, principal, sinking-fund and lease payments.

Real estate depreciation is an income tax deduction that allows a taxpayer to recover the cost of other basis of certain property placed into service by the investor.

DISPOSITION FEE

A fee typically charged by the investment advisors or manager for services rendered in an investment disposition, including the sales, marketing, negotiating and closing of the deal.

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Multifamily Real Estate Terminology

DUE DILIGENCE

The process of examining a property, financial records, related document and procedures conducted by or for the potential lender or purchases to reduce risk.

ECONOMIC BASE

The businesses or industries that provide an area with the basis for its economy.

EQUITY

EQUITY MULTIPLE

Equity is essentially how much the stake in ownership on a property is worth; it is the difference between the current market value of a property and the amount owned by the owner on a mortgage (if any). As a mortgage gets paid off the owner’s equity grows.

When a property is sold, the equity is the difference between the purchase price and the sale price. The market drives the property’s equity but improving and upgrading the property can increase it.

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INTERNAL RATE OF

RETURN (IRR)

Simply stated, the Internal rate of return (IRR) for an investment is the percentage rate earned on each dollar invested for each period it is invested. IRR is also another term people use for interest. Simply stated, the Internal rate of return (IRR) for an investment is the percentage rate earned on each dollar invested for each period it is invested. IRR is also another term people use for interest

Multifamily Real Estate Terminology

IRA INVESTING

IRA investing allows people to transfer funds to a self-directed IRA to purchase real estate. Returns on property purchased with an IRA are generally tax-deferred. Returns must go back into the IRA account and cannot be spent prior to retirement.

Generated at year end. This allows the company to utilize a pass-through taxation which shifts the income tax liability from the entity earning the income to those who have a beneficial interest in it.

K-1 FORM

The use of borrowed funds to help finance an investment, to increase either the potential rate of return or one’s purchasing power.

LEVERAGE

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Multifamily Real Estate Terminology

LOAN TO VALUE

(LTV)

LOSS TO LEASE

MORTGAGE DEBT SERVICE

NET OPERATING INCOME (NOI)

The loan-to-value (LTV) ratio of a property is the percentage of the property's value that's mortgaged. You can get the LTV by dividing the mortgage amount by the lesser of either the appraised value or the selling price.

For all leased units, the difference between market rents and actual contract rents.

The amount of money required to cover a mortgage principal payments, interest payments, and any credit enhancement costs such as FHA mortgage insurance premiums or guarantee fees.

Revenue minus all operating costs, excluding debt service, depreciation, capital expenditures, and income taxes.

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Multifamily Real Estate Terminology

OCCUPANCY RATE

OPERATING EXPENSE RATIO (OER) OR EXPENSE RATIO

The percentage of total apartment units that are occupied.

The cost of operating a property in proportion to the income that the property generates. A general rule of thumb is 50% although this varies from property to property.

PREFERRED RETURN

This is the first claim on profits (promised to investors) until a target return has been achieved. This helps minimize the risk to investors and thus makes the investment more attractive.

PROFORMA

These are the projected financial results over a number of future years.

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Multifamily Real Estate Terminology

RETURN ON COST

A term used by developers to evaluate the viability of a project by dividing the return or net income of a property by the cost to develop the property.

RETURN ON INVESTMENT (ROI)

An undiscounted return over a single period expressed as a percentage of the initial capital invested. ROI = (Gains - Cost) / Cost

REVERSION

CAP RATE

The capitalization rate that is used to derive reversion value. A benefit that an investor expects to receive as a lump sum at the end of an investment.

SOPHISTICATED INVESTOR

An investor who has sufficient capital, experience and net worth to engage in more advanced types of investment opportunities.

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Multifamily Real Estate Terminology

SYNDICATE

TOTAL OPERATING

EXPENSES

TURNOVER RATE

VACANCY COST

A team of individuals or companies that pool their resources in order to raise capital for a multifamily asset

The sum of all operating costs, not including interest, depreciation, and amortization.

Typically expressed as the ratio between the number of move-outs or units vacated during a specific time period, usually one year, and the total number of units in a property.

The amount of rent that could have been collected from vacant units if they had been occupied and leased at current market rates.

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Multifamily Real Estate Terminology

VALUE-ADD

WATERFALL

A commercial real estate investment in which investors seek to improve the cash flow over time by making improvements to or repositioning the property.

A method for splitting profits amongst partners in a multifamily deal.

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