Housing

Leesburg, Loudon County, USA

Updated 5/13/2025

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In this deck, we outline the thesis �for building the NOTCH

• We will discuss the following:
• Housing scarcity in the USA, generally
• Housing products
• Single-family detached (SFD)
• Single-family attached (SFA)
• Two over two – stacked townhomes(2o2)
• Multifamily (MF)
• Population growth projections [??]
• Loudoun county
• Leesburg

The NOTCH Investment Thesis​

The NOTCH is uniquely positioned to capitalize on an acute, but long-term, supply/demand imbalance in Leesburg resulting from the local regulatory environment and regional/national economic trends.​

​For the foreseeable future, market conditions in Leesburg will favor outsized rent growth that will reward patient investors. ​

​Investors will be protected by the project’s irreplaceable location, extreme high barrier-to-entry jurisdiction, and established trends pulling demand away from home ownership and toward long-term rental. ​

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SUPPLY

DEMAND

Summary: Economic trends favor the NOTCH

Persistent Undersupply of Housing �in the US​

• NIMBYism​
• Difficult regulatory environments, particularly in �coastal MSAs and especially in Leesburg, VA​
• Housing starts in the US, DMV, and Loudoun are �at 25-year lows, but demand is still very strong.​

Move Toward a Renting Majority

• High home prices make ownership difficult​
• Increased interest rates have raised the cost of owning​
• Resale market stagnates as many prefer to keep their low-interest mortgages​

Undersupply Will Get Worse as �Uncertainty Dampens Investment

• Recent spikes in interest rates and construction costs are a challenge​
• Tariff uncertainty

Housing Deficit in Leesburg​

• Compare population and household forecasts with expected unit deliveries.​

Housing in the US

• In general, we have been under-building in the US over the last decade, even 2 decades. Studies show we are millions of units behind demand. Estimates range from 3-5 million units.
• This is largely due to no-growth attitudes of the general population and, thus, public decision makers. Once a homeowner has their home, they seem to want to stop others from enjoying the same opportunity. NIMBYs
• This has created a significant reduction in new home supply, driving up prices that are out of reach for most Americans, and certainly for young first-time homebuyers.
• This trend is especially true in non-sunbelt markets. Sunbelt MSAs have not enacted significant growth controls to date. MSAs like the DC region have erected significant barriers to entry in delivering new home product.
• In 2004, there were 25,918 single-family permits issued in the DC MSA
• In 2024, there were 12,141 permits issued, a decrease of 53%

Housing in the US

• In addition, many US homeowners locked in super low interest rates on home purchases in the 2013-2021 timeframe, and are therefore incentivized to stay in that home, rather than pay a higher rate. This has reduced the supply of resale homes, further limiting the overall available supply. The “move up” trend of the past 30 years has stalled.
• So, there is a limited supply of both new homes and resale homes available.
• As shown on the following slides, this has driven a shift in homeownership by age and product type
• First-time homebuyers are much older �– now 38 years old, vs 30 in 2008
• And, we are becoming more of a renter nation, as for-sale housing is not only out of reach for many, but it is also more affordable to rent vs own.
• High home prices and higher interest rates have driven ownership costs up, which excludes higher insurance costs and other ownership obligations.

The median age of repeat buyers is 60+ !!!

Source: NAR Apollo Chief Economist

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The median age of a first-time homebuyer is up 8 years since the GFC - from 30 to 38

Homeowners who locked in low rates are not moving up,�reducing the resale supply

EFFECTIVE OUTSTANDING MORTGAGE RATE IS 4%

Source: Freddie Mac, BEA, Bloomberg. Apollo Chief Economist. The effective interest rate (16) reflects the amortization of initial fees and charges over a 10-year period, which is the historical assumption of the average life of a mortgage loan

Multi-Family Housing

• Multi-family housing has taken up the slack in the system, delivering a record number of units in 2022-2024
• Delivery of new units almost reached 600k in 2024
• The most in US history
• Yet, these new units were absorbed
• Some markets like Austin and Nashville experienced a bit of oversupply, but on a national basis, absorption exceeded supply, and completely in the DC MSA
• People seeking shelter are also realizing it is cheaper to rent than own, given high home prices and high mortgage rates

Apartment Supply & Demand

Apartment supply surged to 50-year highs, and… demand kept up!?

Source: NAR Apollo Chief Economist

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Absorption

2024 absorption at 667k units - 2.2x above pre-covid average

Q4 2024 ANNUAL ABSORPTION: �667K UNITS

2015-2019�AVERAGE ANNUAL

ABSORPTION: 256K

Source: RealPage

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Renters are now older than ever, �as we shift to becoming more of a renter nation

Apartment Supply Surged to 50-Year Highs,�and… Demand Kept Up!?

Delayed homeownership means the typical US renter is older. 72% of the US renter population is age 30 or older, and an all-time high.

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And, it’s now cheaper to rent than own

Source: various, updated 4-3 2025

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Buy Vs. Rent - The Delta Between Owning and Renting Remains Prohibitively Wide

May 2022

Transition point when mortgage rates began to rise and pandemic era home price appreciation began pricing potential homebuyers out of the market

Monthly

P&I

Zillow Median List Price

RealPage Monthly Rent

Buy Vs Rent in Leesburg

The cost to own an apartment in downtown Leesburg�is nearly twice the cost of renting.

*Cost on average King Street Station 2br condo with 20% down, 7% Rate v. average 2br apartment in the Notch

Renters are staying longer in their units �turnover is notably down

Apartment REIT turnover�hits record lows

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With no good options to buy,�renters are remaining put.

This reduces operating expenses to the building owner, �turning over units is expensive

Trend decline in the percentage of renters moving to new apartments or houses

However, even with positive economic metrics, supply is declining, as evidenced by permits declining since mid-May 2022

Multifamily units authorized are going down,

And single-family housing units authorized moving sideways

Source: Census Bureau, Haver Analytics, Apollo Chief Economist

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Completions are up, but construction starts are way down through the end of 2024

Source: RealPage

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COMPLETIONS

Q4-2024

589K

STARTS

Q4-2024

213K

Multifamily construction

Record annual deliveries along with 64% Decline from peak starts

Q3-2024

589K

Why is supply slowing?

• Entitlements are challenging
• Construction costs are up 30+% over the last 3 years
• Tariffs remain an unpredictable variable, and most believe they will be inflationary on many apartment building components, such as lumber, appliances, gypsum, and aluminum, just to name a few
• Confidence is low given the current Administration's policies
• Financing is challenging. Most of the deliveries in 2024 were financed in the 2021-22 era of lower rates. 4% financing is now 7%+

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Tariffs & other policies are having an impact�on confidence & construction risk

Retail Sales Slowing

Jobless Claims Bumping Higher

Delinquency Rates (30 days late)

Layoff Announcements Spiking

Business Uncertainty is at an All-Time High

Consumer Confidence Falling

Beginning to impact the economy

Source: various, updated 4-3 2025

Construction Pricing

CONSTRUCTION COST

• Yellow June VS Today
• Blue 2019 VS Today

Source: Freddie Mac, BEA, Bloomberg. Apollo Chief Economist. The effective interest rate (16) reflects the amortization of initial fees and charges over a 10-year period, which is the historical assumption of the average life of a mortgage loan

• Rents are still rising
• Permits are declining
• The supply/demand imbalance will push rents further
• The impacts of DOGE are yet to be felt, although it remains a regional risk
• Construction firms are more aggressive than they have needed to be, as jobs are wrapping up and the pipeline is not as robust
• Locking in construction pricing today and delivering in 2027-28 will reward those who start now
• Rents will rise, and construction costs will as well

Yet, DC MSA remains strong

2024 Multifamily Permits vs Previous 5 Years

DC is still in the favored Quadrant with Rising rents and falling permits

DC MSA Rents

Rising 3%,

permits falling 40%

Top 50 Metro�Rent VS.�2024 Multifamily�Permitting

Housing in Leesburg �& Loudoun County

In Loudoun County, available land with public water and sewer service is declining rapidly. The following is reflective of such land. We exclude western Loudoun well/septic land as it doesn’t support production housing density, in general.

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Single-Family Detached (SFD) and Single-Family Attached (SFA) unit deliveries will decline significantly over the coming decade

SFD builders in Loudoun have delivered 1,000-1,500 units per year over the last 10 years. That number is projected to be less than 600 in the next few years and likely drop to 200 by 2030 and beyond.

SFA will trend in the same manner. Historically in the 1,000 to 1,500 range, that number will drop into 400-600 range in the coming few years, then to the 250-300 range by 2030. [Note this excludes 2 over 2 product, which we address below].

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Housing in Leesburg�& Loudoun County

Housing starts at 25-year lows for Loudoun

Housing in Leesburg�& Loudoun County

• SFD and SFA have been the primary housing product delivered in Loudoun since the mid 1980s. In the 1990s, permits for such product were in the 7-8,000/year range.
• Shrinking land supply has led to higher lot prices, and thus higher home prices.
• SFD and SFA delivery of the remaining inventory will be available only to those with significant income levels, as scarcity will continue to drive pricing higher
• Loudoun Development projects combined SFD/SFA unit deliveries in total over the next 10 years is projected to be 6,000 units - total
• Meanwhile, the County projects that the population of Loudoun will grow by 58,000 people over the next 10 years, driving demand for 21,000 households.

Housing in Leesburg�& Loudoun County

• Multi-Family Housing (MF) will have to fill the gap.
• The county breaks out MF into two components
• MFA – apartments
• MFS – Stacked townhomes �(often referred to as 2 over 2 units)
• The county projects that there will be 4,500 MFS units delivered over the next 10 years and 8,175 MFA units.
• We think the MFA unit projection is unrealistic, but should it occur, it will be in the very eastern end of the county, where most of the MF units have been entitled near Metro Stations.

Of the 8,000+ MFA units projected to be built over the next 10 years, the County shows only 700 in Leesburg proper in the coming decade.

Harrison Post (aka Virginia Village) has approval for 562 of those units, or 80%.

• Leesburg is the most difficult entitlement jurisdiction in NoVA
• The barriers to entry are very high
• We have the scars to prove it
• It is also one of the most charming downtowns in NoVA
• Our proximity to downtown will be unique among any other apartment projects in the county
• Literally an 8-minute walk
• There has not been an apartment building built inside the Leesburg bypass since 1989. That garden-style building, which is not really walkable to Downtown commands rent similar to our rent projections

The town

of Leesburg

WE BELIEVE

• Notwithstanding the efforts of DOGE, the Washington DC MSA will continue to thrive, especially in Loudoun County
• All housing product types are underbuilt, and renting will become a more dominant lifestyle choice for many reasons
• Supply is declining, and a large percentage of the permit pipeline is LIHTC (Low Income Housing Tax Credit) projects
• Market rate deliveries will be less than 1/3 of what they have been over the last couple of years
• Locking in construction pricing today will be better than 2 years from now
• With the dearth of deliveries in 2026-28, rents will rise well beyond the 3% we have in our model. Leesburg’s rents were up 10% last year on substandard B/C product
• This downtown Leesburg location is irreplaceable.
• The NOTCH is a long-term, wealth-generating asset

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So, the question is, why build now?

-The team at Keane

Thank you!�We Welcome Your Questions,

Thoughts, & Challenges

to this Thesis