City View Feasibility Analysis

Feasibility Analysis and

Offering Memorandum

Ryan Smyth, Principal

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Table of Contents

I. Project Summary 5

Site Plan 6

Total Project Breakdown and Strategy 8

II. Site Analysis 11

Location 11

Neighborhood Facilities 13

Availability of Public Transit 14

Views of Subject Site 15

Views of Surrounding Land Uses 18

Schools and Employers 20

Current and Future Development 21

III. Development Plan and Design 24

Traffic, Circulation and Parking 24

Architecture and Landscape 26

IV. Market Analysis 26

National Economy 26

Local Economic Context 26

Income 29

V. Residential Market Overview 31

Vacancy 32

Survey of Generay Occupancy Residential Communities 33

Location of Communities 34

Advertised Rent and Unit Sizes 35

Community Amenities 36

Proposed New Residential Development 36

Residential Vision 36

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VI. Retail Market Overview 37

National and Local Retail 37

Proposed New Development 38

Retail Vision 38

VII. Financial Analysis 40

Introduction 40

Project Programming 40

Construction Schedule 43

Development Costs 44

Funding Sources 46

Construction Draws 48

Internal Rate of Return 49

Income Assumptions and Analysis 50

Rents and Unit Mix 51

Lease-Up Schedule 53

Property Performance at Stabilization 54

Income and Expenses 55

Cash Flow Projections 55

Disposition 56

Project Sensitivity 57

Conclusion 59

VIII. Appendix 60

Sample Construction Cost Estimates 61

Endnotes 64

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I. Project Summary

Located in the Morgantown, West Virginia Metropolitan Statistical Area, City View Luxury

Apartments will be an exciting, vibrant and financially successful mixed-use development

along Gyorko Drive adjacent to University Town Centre and Monongalia County Ballpark.

Envisioning an upscale multifamily community aimed at young professionals and dinks (dual

income, no kids) that includes many onsite amenities for residents, along with first floor

retail abutting Gyorko Drive; a leasing, financing and design plan have been crafted that will

add a high density residential component to the myriad of new retail and commercial

businesses that are being currently constructed along Gyorko Drive.

The proposed programming on site has been maximized given the site’s topography,

location and market. The new development will consist of nine apartment buildings which

will contain 12,800 square feet of first floor retail along Gyorko Drive, 70,400 square feet of

structured parking and approximately 252 apartment units consisting of 428 beds, totaling

nearly 268,800 square feet of gross leasable residential space. A 6,400 square foot central

clubhouse with a full size pool and hot tub in the middle of the site will tie all nine buildings

together to create community cohesiveness and give residents a gathering place to

socialize. There will be ample docking space behind the buildings containing the first floor

retail to allow for freight shipments to the retail spaces without creating traffic issues.

City View Luxury Apartments would be the first residential project to market in Phase III of

University Town Centre’s continued development along Exit 153 off Interstate 79. Exit 153

opened to the public in September of 2016 and is the key to the next wave of development

in the Morgantown MSA.

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Site Plan

BEFORE

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AFTER

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Total Project Breakdown

Total Development Costs: $40,045,495

Total Equity: $9,600,000

Total Debt: $30,445,495

Overall Project Construction Timeline: 24 Months

Phasing: Two Phases

Start Pre-Construction/Construction: Quarter 1, 2017

Total Project Delivery: December 2018

Stabilization: Early Quarter 4, 2019

Investor Returns: Five and Ten-Year Disposition

5 YEAR DISPOSITION 10 YEAR DISPOSITION

Before-Tax IRR Before-Tax IRR

19.91% 15.50%

Cash on Cash Return Cash on Cash Return

11.76% 13.04%

Equity Multiple Equity Multiple

5.20 5.46

Strategy

Keys to the Project:

Retail is situated along Gyorko Drive for prominent visibility for those traversing the

route and those attending events at Monongalia County Ballpark.

The project will benefit from recent completion of Exit 153 on Interstate 79. This

$22,000,000 project was opened to the public on September 1, 2016. Future residents

can now easily access Interstate 79 from two points: the brand new Exit 153

interchange, or from the long existing Exit 155 interchange. As pads develop along this

route of I-79, housing will become more of a necessity in this area. City View Luxury

Apartments has the ability to be first to market in this area.

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Delivery of the buildings containing the first floor retail along with the completion of the

clubhouse and pool will make the remaining residential portion of the development

more attractive to potential residents. The onsite amenities will be a key selling point in

accelerating absorption of the units.

The residential buildings will be stick built overtop concrete podium construction,

offering residents covered parking at a monthly fee. This will allow the project to

recoup some construction cost for the podium through ancillary fees.

The site design promotes walkability and sociability. By having the clubhouse in the

middle of the development, it creates a community anchor for residents. The site

design also allows for traffic to flow freely in and out of the development.

Units facing to the east and northeast can be offered at a premium rental price, driving

up potential returns. Residents of these units will enjoy the best views that Monongalia

County has to offer, with a wide, panoramic shot of downtown Morgantown and

surrounding areas.

The development will feature elevations and exterior finishes with unique architectural

accents to promote curb appeal and desirability.

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II. Site Analysis

Location

The development site for this development is located in the city of Morgantown, West

Virginia with approximately 328 feet of excellent road frontage along Gyorko Drive, located

at the back end of University Town Center, the largest retail and commercial center in

Monongalia County. The site, labeled “Parcel C” in marketing material, has been graded,

cleared and has all utilities already on site. There are currently no structures on the site,

which was used as a construction staging area during development of nearby structures.

The proposed development has easy, immediate access to a multitude of stores,

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restaurants, medical facilities, recreational destinations and major employers. The site’s

proximity to such a multitude of demand drivers along with its ease of access to Interstate

79 will make it a very attractive option to Morgantown area residents.

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The development site is mostly flat, with a steep downslope on the north and northeast

boundaries of the site.

The land uses directly bordering the subject site, starting from the north and proceeding in

a clockwise direction, are as follows:

North: There are no land uses directly north of the site. The steep terrain is not suitable for

development. This allows for uninhibited panoramic views north of Morgantown and

Monongalia County. An enormous selling point for the project.

East: To the east of the site is a Courtyard by Marriott containing 107 guest rooms. The

hotel was completed and opened to the public in March of 2016.

South: To the south of the site is Monongalia County Ballpark. The stadium, which opened

in April of 2015, has a 3,500 seat capacity and hosts both the West Virginia University

baseball team and the West Virginia Black Bears of the Class A-Short Season New York-Penn

League. To the southwest is WVU Medicine University Town Centre. This medical facility is

home to many branches of WVU Medicine, including Dermatology, Podiatry, Orthopedics

and the Clark K. Sleeth Family Medicine Center. WVU plans to open a surgical pavilion by

August of 2017.i

West: Directly west of the site is a Walmart Supercenter. To the northwest is Sam’s Club.

Neighborhood Facilities

University Town Centre is the home of a multitude of retail giants including Target, Best

Buy, Barnes & Noble, Dick’s Sporting Goods, Giant Eagle, Regal Cinemas, Ulta Beauty, Five

Below, Petco, Bed Bath & Beyond and GameStop. In addition to these businesses, multiple

restaurants are within a half mile of the site including Firehouse Subs, Cheddar’s Scratch

Kitchen, Cracker Barrel, Olive Garden, Longhorn Steakhouse, Red Lobster, Chili’s and

Chipotle.

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Located on the northwestern section of the Exit 155 interchange of Interstate 79 is The

Gateway, a retail development consisting of Triple S Harley Davidson, Hobby Lobby, The

Greene Turtle and multiple hotels. More projects are currently in pre-development.

New businesses projected to open in 2017 within a half mile of the site are Buffalo Wild

Wings, Fusion Steakhouse, Los Mariachis, Wendy’s, Hampton Inn and Star Furniture.

Availability of Public and Private Transit

The nearest bus stop is provided by the Mountain Line Transit Authority and is located at

the adjacent Walmart Supercenter. This bus route, named Route 11 Cassville, runs every 45

minutes on the weekdays with limited service on Sundays. This public transportation

service will greatly appeal to residents without vehicles, as this bus route stops near the

WVU Downtown Campus and Walnut Street Personal Rapid Transit (PRT) Station which

gives residents access to other areas of the Morgantown MSA. In addition to public

transportation, the site is also serviced by the area taxi services and Uber’s private driving

service, UberX. Access to these types of transportation is another huge plus for the

development site’s location.

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Views of Subject Site

View of the development site looking north.

View of the development site looking northwest. The back wall of Walmart is visible.

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View of the development site looking southwest. WVU Medicine UTC is visible.

View of development site looking southeast. Courtyard by Marriott is visible.

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View of the road frontage along Gyorko Drive.

Panoramic view of Monongalia County along the eastern site boundary.

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Views of Surround Land Uses

Courtyard by Marriott, to the southeast.

Monongalia County Ballpark, to the south.

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WVU Medicine at University Town Centre

Multiple retail pad development south and southwest of the site along Exit 153.

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Schools and Employers

The schools that service the development site are Mylan Park Elementary, South Middle

School and Morgantown High School. Mylan Park Elementary is 3.5 miles from the

development site. South Middle School is 6.8 miles from the site. Morgantown High School

is 4.3 miles from the site.

Higher education options include West Virginia University, the state’s flagship institution

with an on-campus enrollment of approximately 29,000 studentsii, and West Virginia Junior

College. Both are located in downtown Morgantown.

Exhibit 1: Major Employers in Monongalia Countyiii

Company Employees*

West Virginia University 7,654

WVU Medicine 6,000

Mylan Pharmaceuticals 2,200

Monongalia County Board of Education 1,800

Monongalia General Hospital 1,200

Morgantown Energy Technology Center 750

US Center for Disease Control 536

TeleTech 343

Greer Industries 320

Monongalia County Government 309

*Approximate

MONOGALIA COUNTY'S TOP 10 EMPLOYERS

The site is located within short driving distance of the employers listed in Exhibit 1. West

Virginia University’s Downtown Campus is located 4.6 miles from the development site,

while WVU’s Evansdale Campus is located 3.4 miles from the site. Mylan Pharmaceuticals,

one of the largest manufacturer of generic drugs in the world, has a processing plant that is

located 4.3 miles from the site. Both major county hospitals, Monongalia General Hospital

and Ruby Memorial Hospital, are located 5.1 miles and 4.2 miles from the site, respectively.

All of Morgantown’s major employers are located within a 15-minute drive from the

development site, providing easy access to employment for most potential residents.

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Zoning/Regulatory Conditions

There is currently no zoning, and by right development is permitted.

Current and Future Development

The new development in proximity to City View is being funded by tax increment financing

(TIF), real estate taxation and bond debt. Given the challenging terrain in the Morgantown

MSA, the pad development around the Exit 153 interchange represents some of the best

remaining developed acreage in the county. The future development plans were met with

great enthusiasm by local and state leaders. Exhibit 2 shows the current development plan

and businesses for Phase III of University Town Centre development. Exhibit 3 shows the

development plan for the all of the remaining buildable land surrounding Exit 153. Right

now, there is no residential component planned for any of the available pad sites. It is

expected that multiple more businesses, in addition to the ones listed in in Exhibit 2, will

relocate or expand to the new development pads, bringing more jobs and more potential

residents to the immediate area. The absorption of units at City View will hinge upon the

continued development of these site pads. National carrier FedEx recently completed a

105,000 square foot distribution center that is easily accessible from Exit 153.iv It was

recently announced that a Fortune 500 company will be building its new headquarters at

the development, although the company has yet to be named.v The Gateway, a retail

development located a mile from the subject site at Exit 155, currently has outparcels

available for sale. The development is home to Triple S Harley Davidson, The Greene Turtle,

Hobby Lobby and multiple hotels. Exhibit 4 shows an aerial of the entire development area

as of May, 2016, including Mylan Park and the location of The Mountaineer Center, the

county’s new state of the art aquatic facility. This facility will have an Olympic size pool,

water slides, diving boards and other equipment geared towards indoor watersports.vi

Proposed completion is year 2017. Mylan Park contains 300 acres of recreation, social and

educational facilities in addition to multiple employers at the Mylan Park Business Park.

Mylan Park and The Mountaineer Center represent more nearby amenities that will be an

attractive draw for potential residents at City View.

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Exhibit 2: Phase III Development for University Town Centre

Exhibit 3: Future Exit 153 Development

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Exhibit 4: Western Monongalia County Development

#1 - The Mountaineer Center

#2 - Mylan Park

#3 - Future Mylan Park Access Road

#4 - The Gateway

#5 - Exit 155

#6 - Future Commercial/Industrial Pad Sites

#7 - Rumored Location of Future Fortune 500 HQ

#8 - FedEx Distribution Facility

#9 - Exit 153

#10 - University Town Centre

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III. Development Plan and Design

Traffic, Circulation and Parking

Overview

The proposed development plan for City View will add the first residential component to

the new Exit 153 interchange development. Gyorko Drive will continue to see an increase is

vehicular traffic as more businesses open along the route and along the interchange. The

development site currently has great automobile access. The site design for City View is set

up in a way to allow for easy vehicular access for those wanting to visit the onsite retail, or

for those living at the complex.

Traffic

The primary access point to City View is in the center of the southern property boundary

along Gyorko Drive. This primary access is easily accessible from Gyorko Drive, as it is a four

lane highway with a middle turning lane. No changes in the traffic pattern are needed.

Circulation

There will be one point of ingress and egress to the development. Vehicles will enter at the

main entrance, travel in a semicircle and exit at the main entrance.

Parking

There will be an ample amount of parking situated on the site. At the entrance, angled

parking spaces will flank both sides of the street to allow for retail parking. The buildings

with first floor retail will be placed along the Gyorko Drive road frontage with a 60-foot

buffer from the larger residential buildings on the back of the development site to allow for

parking and freight off-loading. Each large 64’ x 200’ residential building will have one story

of concrete podium parking. Each podium garage will have a maximum of 38 parking spaces

as shown in Exhibit 5.

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Exhibit 5: Podium Parking Layout

There will also be parking along the front of each apartment building in an effort to

maximize site loading. Given the location of the development and the lack of multiple

public transportation options in the market, having as many parking spaces as possible is

ideal, as many residents will be using a vehicle as their main mode of transportation.

Exhibit 6: Monongalia County Parking Requirements

Unit Type Parking Requirement

1 Bedroom Unit 1 Space Per Unit

2 Bedroom Unit 1.6 Spaces Per Unit

3 Bedroom Unit 1.8 Spaces Per Unit

Retail 3 Spaces Per 1,000 SF

Based on the above ratios and the amount of retail and residential to be included in the

development, Exhibit 6 displays the required parking ratios, and Exhibit 7 displays the

amount of parking the development will need based on unit count. The development plan

was designed to maximize as much square footage as possible while still being able to

satisfy the intended parking requirements.

Exhibit 7: Parking Needed Onsite

Unit Type Spaces Needed

1 Bedroom Unit 101

2 Bedroom Unit 201

3 Bedroom Unit 45

Retail 38

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Given the current development plan, 386 parking spaces will be needed to satisfy the

parking requirements. The current site plan calls for approximately 416 parking spaces. 209

spaces of street parking and 207 spaces of premium covered podium parking.

Architecture and Landscape

The development will have great curb appeal along Gyorko Drive. The retail store fronts will

have backlit logos and the front elevation of the retail-anchored buildings will be of a

unique architectural design. The residential buildings will have architectural accents and

features that are not typically found in the Morgantown market that will reflect the

development’s quality. Landscaping will be typical of what is seen in the market.

LEED

LEED certified construction materials will be used where applicable with the ability to value

engineer. No minimum green building standard is required to be met.

IV. Market Analysis

National Economyvii

The U.S economy is currently on a self-sustaining growth path that should continue well

into 2017. The economy is predicted to have grown by 1.4 percent this year, with an

expected gain of 2 percent in 2017. Job growth is steady with 150,000 to 200,000 job hires

per month in 2016. Housing prices are currently up 5 percent, and are expected to increase

by 6 percent in 2017. The national unemployment rate sits at a little under 5 percent, which

is the lowest rate since the pre-recession years.

Local Economic Context

The total population in Monongalia County, West Virginia in the 2010 Census was 96,189.

The population of the Morgantown MSA, which includes Monongalia County and Preston

County to the east was 129,709 in 2010.viii The estimated population for Monongalia

County was 104,236 in 2015 with an average median age of 29.9. These numbers represent

an increase of over 8,000 county residents within the past five years. Exhibit 8 shows the

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age makeup in the county. Exhibit 9 shows the age makeup in the city of Morgantown. A

large percentage of Morgantown’s population is between the ages of 15 to 24. This can be

attributed to the students at West Virginia University that are permanent residents. City

View will have units that will appeal to those students either finishing up their

undergraduate degrees or those working towards their graduate degrees that are looking

for a quieter, higher end housing option off campus.

Exhibit 8: Age Makeup in Monongalia Countyix

Exhibit 9: Age Makeup in City of Morgantown

4,467

8,238

28,273

24,628

20,757

8,543

1,283

-

5,000

10,000

15,000

20,000

25,000

30,000

< 5 5 to 14 15 to 24 25 to 44 45 to 64 65 to 84 > 85

Monongalia County Population By Age

786 1,219

15,874

5,465

3,922

1,991

403

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

< 5 5 to 14 15 to 24 25 to 44 45 to 64 65 to 84 > 85

City of Morgantown Population By Age

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Exhibit 10: Population Trend in Monongalia County

x

Monongalia County has seen a steady increase in population since 1970. As of 2015, the

county’s population was 104,236. This growth trend is the exception in the state of West

Virginia, where the vast majority of counties are losing population. Forecasts for the county

show an expected growth of 1.4 percent annually, which would make it the fastest growing

county over the next 20 years.xi The county is expected to add at least 10,000 new residents

between now and 2030 as development continues. This positive trend in population bodes well

for the future success and absorption of units at City View.

Exhibit 11: Population Trend in City of Morgantown

63,71475,024 75,509

81,866

96,189104,236

0

20,000

40,000

60,000

80,000

100,000

120,000

1970 1980 1990 2000 2010 2015

Population of Monongalia County

29,431

27,605

25,879

26,809

29,660

30,708

23,000

24,000

25,000

26,000

27,000

28,000

29,000

30,000

31,000

32,000

1970 1980 1990 2000 2010 2015

Population of the City of Morgantown

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The City of Morgantown had a population of 29,660 as of the 2010 Census. The estimated

population as of 2015 was 30,708, an increase in population of 1,048 in the past five years.

The growth of Morgantown can be attributed to the growth of major employers in the area.

Within the past 20 years, WVU and WVU Medicine have greatly expanded operations while

Mylan Pharmaceuticals has grown into one of the largest maker of generic drugs in the

United States.

Exhibit 12: Unemployment Trend in Monongalia County

xii

The unemployment rate in Monongalia County saw an uptick in 2012, but has since leveled

off around 5.0 percent, which is in line with the national average. The Morgantown MSA

consistently ranks as the lowest metro area in the state in terms of unemployment.

Income

Monongalia County ranks fourth in Per Capita Income and eight in Median Household

Income in the state of West Virginia.xiii In Monongalia County, 39.1 percent of households

have an income between $50,000 and $149,999. If an individual in this income range were

to spend 28 percent of their household income on housing, they would be able to afford a

monthly rental payment between $1,166 and $3,500. This is the segment of the population

that City View will appeal to as an attractive housing option.

5.4

5.6

5.0

4.8

5.0 5.0

4.2

4.4

4.6

4.8

5.0

5.2

5.4

5.6

5.8

2011 2012 2013 2014 2015 2016

Unemployment Rate in Monongalia County

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Exhibit 13: Households by Income in Monongalia County

Exhibits 13 and 14 show the discrepancy in income distribution between Monongalia

County and the city of Morgantown. Many of the city’s residents are permanent college

students with little income, which brings down the city’s median income and household

income statistics, creating an inaccurate picture as to the city’s economic health. Many

permanent students have their housing costs subsidized by other means (loans, family,

etc.). However, the family median income in the city of Morgantown is $72,213, which puts

the city $7,628 above the family median income of the United States. This family median

income amount is indicative of the strong workforce amongst families within the city.

Exhibit 14: Households by Income in City of Morgantown

15.10%5.90%

11.50%8.40%

11.70%17.20%

10.70%11.20%

4.30%4.00%

0.00% 5.00% 10.00% 15.00% 20.00%

Less Than $10,000$10,000 to $14,999$15,000 to $24,999$25,000 to $34,999$35,000 to $49,999$50,000 to $74,999$75,000 to $99,999

$100,000 to $149,999$150,000 to $199,999

$200,000 or More

Income by Household, Monongalia County

25.90%6.30%

12.80%6.80%

10.50%13.20%

8.50%9.50%

3.10%3.50%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%

Less Than $10,000$10,000 to $14,999$15,000 to $24,999$25,000 to $34,999$35,000 to $49,999$50,000 to $74,999$75,000 to $99,999

$100,000 to $149,999$150,000 to $199,999

$200,000 or More

Income by Household, City of Morgantown

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V. Residential Market Overview

Exhibit 15: Housing by Tenure in Monongalia Countyxiv

Owner Occupied 55.66%

Renter Occupied 44.34%

HOUSING BY TENURE - MONONGALIA COUNTY

Owner Occupied 41.62%

Renter Occupied 58.38%

HOUSING BY TENURE - CITY OF MORGANTOWN

The City of Morgantown has a large number of residents that are renters, with 58.38

percent of units being renter-occupied, mainly due to the amount of WVU students who live

within the city limits. When the entire county is taken into consideration, owner vs. renter

is more evenly distributed. Based on the information provided by the U.S. Census, the

market area rental housing stock has a diverse selection of all housing types. In Monongalia

County and the city of Morgantown, 1-unit single-family detached homes are the most

prevalent, with approximately 21,850 housing units and 5,450 housing units, respectively.

The age of the housing stock in Monongalia County is diverse, with every decade since the

1930s being well represented in Exhibit 17. However, within the city of Morgantown, a

large share of the housing stock is obsolete. Over 60 percent of the housing stock within

the city limits was built prior to 1969. The city, via its comprehensive plan, is taking steps to

replace this obsolete housing with denser and more attractive alternatives.xv

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Exhibit 16: Housing by Unit by Structure

Exhibit 17: Housing by Year Structure Built

Vacancy

Monongalia County boasts a homeowner vacancy rate of 2.2 percent and a rental vacancy

rate of 5 percent. The city of Morgantown has consistently enjoyed rental vacancy rates

that were below the national average until 2014 as shown in Exhibit 18. However, from

-

5,000

10,000

15,000

20,000

25,000

1-unit,detached

1-unit,attached

2 units 3 or 4units

5 to 9units

10 to 19units

20 ormoreunits

Mobilehome

Boat, RV,van, etc.

Units By Structure

City of Morgantown Monongalia County

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Built2010 or

later

Built2000 to

2009

Built1990 to

1999

Built1980 to

1989

Built1970 to

1979

Built1960 to

1969

Built1950 to

1959

Built1940 to

1949

Built1939 orearlier

Units By Year Structure Built

City of Morgantown Monongalia County

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2013 to today, the city of Morgantown has seen over 4,000 beds added to the market to

meet the increasing demand for quality student housing. This, in turn, has greatly affected

the rental vacancy rate within the city, mainly with Class ‘C’ student housing properties and

student housing located outside of the city limits. Yet, even with this rise in vacancy rates

within the city limits, potential returns on the project will not be negatively affected, as this

increase in housing stock has all been aimed to provide more quality student housing

options. The student housing market is not the market City View is trying to capture;

therefore, the increase in the vacancy rate is not a cause for concern.

Exhibit 18: Rental Vacancy Rate in the City of Morgantownxvi

Survey of General Occupancy Rental Communities

For the competitive analysis, four rental properties were evaluated within a six-mile radius

of the subject site. Age-restricted communities, subsidized communities and tax credit

properties were not included in the analysis. Only one complex dedicated to student

housing was included in this analysis, The Domain at Town Centre, because it is located

within close proximity of the subject site and has a slight mix of market renters (Comparable

Property #1). For rent by owner units were also not included in this analysis. Currently, the

Morgantown MSA lacks a variety of higher end rental communities aimed at the non-

5.12% 5.17%

7.91%

4.93% 4.56%

2.48% 2.37%

3.94% 3.92%

12.25%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Vacancy Rate in City of Morgantown

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student population. The closest competitor is Whisper Creek Apartments, located along the

eastern boundary of Morgantown. Whisper Creek is property #4 in Exhibit 19.

Location of Communities

Exhibit 19: Location of Comparable and Competing Communities in Relation to Subject Site

All competition is to the north and east of the subject site. City View will be the community

in closest proximity to the new Exit 153 interchange development and only the second

community in greater Morgantown area built in the last ten years that is marketed toward

the non-student population after Whisper Creek, which is still under development. This

would allow the community to be the first to the market to cater to employees of the many

businesses that will be located on Gyorko Drive and around Exit 153 as the development

continues to grow.

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Advertised Rents and Unit Sizes

Exhibit 20: Competitive Properties Advertised Rents

Comparable

Properties SF Rent Rent PSF SF Rent Rent PSF SF Rent Rent PSF

#1 - The Domain at Town Centre 601 $1,250 $2.08 860 $1,400 $1.63 1,172 $1,845 $1.57

#2 - Burroughs Place 800 $955 $1.19 1,200 $1,185 $0.99 N/A N/A N/A

#3 - Windwood Village 700 $755 $1.08 1,300 $1,350 $1.04 2,300 $2,200 $0.96

#4 - Whisper Creek Apartments 840 $1,065 $1.27 1,045 $1,315 $1.26 1,540 $1,885 $1.22

Average 735 $1,006 $1.41 1,101 $1,313 $1.23 1,671 $1,977 $1.25

One Bedroom Two Bedroom/Two Bath Three Bedroom

Exhibit 20 shows the advertised rents of the four comparable properties. The average rent

for a one-bedroom unit among the four properties is $1,006 for an average size of 735

square feet, or $1,41 per square foot. The average rent for a two-bedroom, two-bath unit

among the four properties is $1,313 for an average size of 1,101 square feet, or $1.23 per

square foot. The average rent for a three-bedroom unit among the three properties that

feature those unit types is $1,977 for an average size of 1,671 square feet or $1.25 per

square foot. Projected rents at City View by the time the units come online in 2018 will be

roughly 10 cents higher per square foot than Whisper Creek’s current advertised rents.

Construction Style

Exhibit 21: Most Comparable Properties Construction Styles

Comparable Properties Construction Style Exterior Finish

The Domain at Town Centre Three-story garden style Hardie plank and vinyl siding

Burroughs Place Four-story over first floor retail Brick and stone

Windwood Village Two-story and townhome-style Vinyl siding

Whisper Creek Apartments Three-story garden style Stone veneer and Hardie plank

Community Amenities

Of the four comparable communities, The Domain at Town Centre and Whisper Creek

Apartments have a full slate of onsite amenities including a pool and clubhouse. This allows

them to command higher rents than the other two comparable properties. The Domain at

Town Centre has upscale interior finishes including granite countertops and luxury vinyl tile.

Whisper Creek features carpet, tile and solid surface countertops along with garage stalls

included with some units.

P a g e 36 | 64

Exhibit 22: Comparable Properties Amenities Offered

Comparable Properties Clubhouse Fitness Center Pool Lounge Picnic Area Rec Courts

#1 - The Domain at Town Centre X X X X X X

#2 - Burroughs Place X X X

#3 - Windwood Village X X

#4 - Whisper Creek Apartments X X X X X X

Comparable Properties Washer/Dryer Granite Hardwood Secured Access Secured Parking Pet Friendly

#1 - The Domain at Town Centre X X X

#2 - Burroughs Place X X X X X

#3 - Windwood Village

#4 - Whisper Creek Apartments X X X

Proposed New Residential Developmentxvii

There is one large student housing development currently in the pipeline within Monongalia

County. It is located in downtown Morgantown and its target market will be WVU students.

This development will not be considered direct competition to City View.

Current Development Pipeline

Whisper Creek Apartments is the only residential apartment community currently under

development. The second phase of the project is now underway. There is one residential

community beginning site work, Newberry Place, which will be a five-story, 100,000 square

foot apartment complex designed to accommodate residents with disabilities.xviii This

project will be 100 units.xix Current plans do not call for any onsite amenities. There are no

other multi-family development projects in the pipeline within 15 miles of the subject site.

Residential Vision

Monongalia County has experienced a large amount of new construction over the past 20

years. However, the residential housing stock for young professionals, dinks and empty

nesters has been neglected in favor of construction aimed at WVU students. Many young

professionals and dinks have been relegated to older apartment and townhome rentals

with less upscale finishes, aging appliances and no onsite amenities. Empty nesters have

had no choice but to stay in a home they no longer desire to maintain. City View will fill a

void in the market by offering the young professional, dink and empty nester segment a

P a g e 37 | 64

new appealing housing option in close proximity to shopping, healthcare and

entertainment. The community will be a modern, upscale community with a variety of

onsite amenities including a pool and hot tub, secured parking, business center and an

exercise room. The proposed rents will be at the high-end of the market, reflecting the

quality of construction, ideal location adjacent to business and retail, proximity to Interstate

79 and amenities located onsite.

VI. Retail Market Overviewxx

National Retail

The national retail market is slowly emerging from the depths of the recession. According

to data from the National Council of Real Estate Investment Fiduciaries, U.S. metropolitan

areas added just 6.5 million square feet of new retail construction in 2013, and 8 million

square feet will be added by the end of 2014. REIS recently reported that the national

vacancy rate for neighborhood and community shopping centers was 10.3 percent.

Countless retailers remain susceptible to the increasing popularity of online retail. Online

retailer, Amazon, currently has the seventh most popular website according to traffic

rankings by Alexa.com.xxi

Local Retail

The Morgantown MSA has seen the development of two large retail centers within the last

10 years. University Town Centre, which is adjacent to the subject site, is the home of

multiple retail giants, which were mentioned earlier in this report. Suncrest Town Center,

located 2.8 miles from the subject site, is the home to retail businesses such as Kroger, Five

Guys, Buffalo Wild Wings, Jos A. Bank, PNC Bank and SunTan City. Both developments are

considered “Large Neighborhood Centers” by the International Council of Shopping

Centers.xxii Both developments have enjoyed a great absorption rate, and there is only

2,100 square feet of available space between the two retail centers according to

Loopnet.com.

P a g e 38 | 64

Approximately 19,500 square feet of retail space is currently being constructed at Fort

Pierpont, a new neighborhood center located off Exit 7 off Interstate 68 near the Cheat Lake

area. This project is located 5.60 miles from the subject site, in the eastern part of

Monongalia County. It would not be considered a direct competitor to the retail space at

City View given its location on the eastern side of the greater Morgantown area.

Proposed New Retail Development

Future development in the Morgantown MSA will continue along Gyorko Drive as illustrated

in Section II of the analysis. Wendy’s, Buffalo Wild Wings, Star Furniture, Fusion

Steakhouse, Los Mariachis, Hampton Inn and a Ford/Kia dealership are either under

construction or projected to begin construction within the next year. 5,509 square feet of

ground floor retail is planned along Maple Drivexxiii, which is 2.4 miles from the subject site

in the North Hills area of Morgantown.

Retail Vision

Given the development’s proximity to Monongalia County Ballpark, the vision is to provide

highly visible retail space for those traveling Gyorko Drive and to provide a few places for

visitors to hang out before or after events at the ballpark. In 2016, WVU’s baseball team

had 24 games at the ballpark, while the West Virginia Black Bears at 40 games at the

ballpark. The retail space is easily walkable from Gate A at the ballpark. See Exhibit 23.

Including miscellaneous events at the ballpark, there are over 70 days of the year where

ballpark foot traffic will be walking past the retail space in additional to the vehicular traffic.

This exposure will help drive customers to the retail businesses at City View. Being in close

proximity to the ballpark will also give these businesses the potential opportunity to do

some cross promotions with the WVU baseball team or the West Virginia Black Bears to

drive foot traffic before and after games.

P a g e 39 | 64

Exhibit 23: Retail Proximity to Monongalia County Ballpark Entrance

The amount of retail, 11,520 total square feet of leasable space is a modest amount meant

to attract smaller retailers that will draw business from onsite residents, visitors to the

ballpark, employees at the WVU UTC and hotel guests at the adjacent Courtyard Marriott.

The intended first floor retail space along Gyorko Drive also creates a synergistic use, as the

remaining development pads along Gyorko Drive are retail/commercial. Lastly, the fact that

University Town Centre currently has zero vacancies bodes well for the marketability of the

retail space at City View. Top end retail space in the market has been leasing at anywhere

from $22 per square foot to $40 per square foot for trophy space.xxiv Namely, Starbucks and

Chipotle recently signed long term leases at >$35 per square foot. The projected rental rate

for the retail space will be $26.00 per square foot with a gross lease structure based off of

current asking rents.

P a g e 40 | 64

VII. Financial Analysis

Introduction

City View Luxury Apartments is a financially viable development with strong cash flow

potential. Throughout the financial analysis, a moderate approach is taken with the

projected rents and the future income factor assumptions to demonstrate the performance

strength of the project. The analysis covers the project through the first two phases of

construction, lease-up and ten years of stabilized operation of the asset.

The financial analysis will assume a disposition in year 2024, five years after the completion

of Phase Two, and disposition in year 2029, ten years after completion of Phase Two. Given

the future development growth around Exit 153 over the next ten years, an assumed exit

cap rate for the project will be seven percent. However, given the project’s cash flow

potential and growing market, a long-term hold position is advised.

Project Programming

Exhibit 24: Project Program

Uses GSF

Residential 268,800

Retail 12,800

Structure Parking 70,400

Clubhouse, Pool and Rec Area 20,400

Total 372,400

TOTAL PROGRAM - CITY VIEW CONDOMINIUMS

The project consists of approximately 268,800 gross square feet of residential, 12,800 gross

square feet of retail, 70,400 square feet of structured parking and 20,400 square feet of

recreational space (including the clubhouse). Exhibit 25 details the programming per

building and the gross and net square footage per floor.

P a g e 41 | 64

Exhibit 25: Programming for Individual Buildings

Dimensions 64 X 100 Dimensions 64 X 100

Building Footprint 6,400 Building Footprint 6,400

Four Story Building GSF Four Story Building GSF

1 - Retail 6,400 1 - Retail 6,400

2 - Residential 6,400 2 - Residential 6,400



Total Retail 6,400 Total Retail 6,400

Total Residential 19,200 Total Residential 19,200




1 - Structured Parking 12,800 1 - Structured Parking 12,800




Total Structured Parking 12,800 Total Structured Parking 12,800




Four Story Building GSF Four Story Building 12,800







BUILDING FOUR - PARKING/RESIDENTIAL

BUILDING FIVE - PARKING/RESIDENTIAL BUILDING SIX - PARKING/RESIDENTIAL

BUILDING ONE - RETAIL/RESIDENTIAL BUILDING TWO - RETAIL/RESIDENTIAL

BUILDING THREE - PARKING/RESIDENTIAL

P a g e 42 | 64












Four Story Building GSF One Story Building GSF

2 - Residential 6,400 1 - Office/Gym/Banquet 6,400

3 - Residential 6,400

4 - Residential 6,400

Total Residential 19,200

BUILDING NINE - RESIDENTIAL ONLY

BUILDING EIGHT - PARKING/RESIDENTIALBUILDING SEVEN - PARKING/RESIDENTIAL

BUILDING TEN - CLUBHOUSE

After adjusting for core loss, the total net square footage for the residential portion of the

development is 202,752 square feet and 11,520 square feet for the retail portion.

Exhibit 26: Total Leasable Square Footage

Total Residential GSF 268,800

Core Loss 12.00%

Total Leasable Square Footage 236,544

Total Number of Residential Units 252

Total Retail GSF 12,800

Core Loss 10.00%

Total Leasable Square Footage 11,520

DEVELOPMENT SQUARE FOOTAGE

DEVELOPMENT SQUARE FOOTAGE

P a g e 43 | 64

Construction Schedule

Exhibit 27: Illustrated Construction Schedule

Pre-Construction - November 2016

Phase Two Begins - January 2018

Phase One Construction

Phase One Begins Phase Two Construction Stabilization - December 2019

Quarter 1, 2017

Initial Lease Up of Phase One - January 2018

Lease Up

The project will begin its due diligence and entitlements period in November 2016. Given

the lack of permitting needed to begin initial site work, pre-construction and development

will begin in the first quarter of 2017 with roughly a 9-12 month construction timeline. The

first phase of the project will include the construction of Building One, Building Two,

Building Three, Building Four and the Clubhouse. Initial infrastructure will be completed

during this phase of construction. The estimated cost of development for Phase One is

approximately $21,300,000. Substantial completion is estimated to be in December 2017.

Phase Two will begin construction immediately following substantial completion of Phase

One, with an estimated start date in January of 2018. Construction on Phase Two is

expected to take 12 months, with substantial completion in December of 2018. This phase

of construction will include the construction of Building Five, Six, Seven, Eight and Nine as

well as any remaining site work items. The estimated construction cost for Phase Two is

approximately $18,700,000. It is estimated that full lease up of the entire development will

take 24 months, with project stabilization in December of 2019.

P a g e 44 | 64

Construction and Development Costs

Exhibit 28: Construction Cost Estimatesxxv

Type Cost PSF

Pool & Recreation Areas $45.00

Residential $82.00

Retail $80.00

Concrete Podium & Garages $13.00

Clubhouse $120.00

Open Space Costs $5.00

CONSTRUCTION COST ESTIMATES

Exhibit 28 displays the construction cost estimates for the project. These approximate costs

were derived from the 2016 National Building Cost Manual by Craftsman. Exhibit 29 and

Exhibit 30 are snapshots of the project’s total construction costs and total development

costs. With the addition of onsite, financing and capitalized costs, the total development

cost for City View over two phases of construction is approximately $40,000,000. A

development fee has not been added to the project. It is projected that there will not be

any offsite work required, as no community benefit agreements are expected, nor any road

improvements to Gyorko Drive.

P a g e 45 | 64

Exhibit 29: Development Costs by Phase

Site Acquisition 3,877,390$

Site Costs 94,500$

Soft Costs 461,384$

Building One 2,336,000$

Building Two 2,336,000$

Building Three 3,648,000$

Building Four 3,648,000$

Elevators 840,000$

Clubhouse 768,000$

Pool & Rec Area 630,000$

Roads and Sidewalks 277,122$

Construction Contingency 724,156$

Construction Financing 811,803$

Permanent Financing 206,871$

Reserves 167,533$

Capitalized Payroll 472,895$

Total 21,299,654$

DEVELOPMENT COSTS - PHASE ONE

Site Costs 94,500$

Soft Costs 267,500$

Building Five 3,648,000$

Building Six 3,648,000$

Building Seven 3,648,000$

Building Eight 1,824,000$

Building Nine 1,824,000$

Elevators 1,050,000$

Roads and Sidewalks 277,122$

Construction Contingency 795,956$

Construction Financing 879,470$

Permanent Financing 183,252$

Reserves 93,729$

Capitalized Payroll 512,312$

Total 18,745,841$

DEVELOPMENT COSTS - PHASE TWO

P a g e 46 | 64

Exhibit 30: Total Development Costs

Site Acquisition 3,877,390$ 9.68%

On-Site Work 189,000$ 0.47%

Off-Site Work -$ 0.00%

Hard Construction Costs 31,922,356$ 79.72%

Soft Costs 728,884$ 1.82%

Construction Financing 1,691,272$ 4.22%

Permanent Financing 390,123$ 0.97%

Reserves 261,262$ 0.65%

Capitalized Payroll 985,207$ 2.46%

Development Fee -$ 0.00%

Total Development Costs 40,045,495$ 100%

TOTAL DEVELOPMENT COSTS

Funding Sources

Source of project funding is to be determined based off investor interest. Approximately

$9,600,000 in equity is needed over the life of the project to arrive at an approximate 75

percent loan-to-value ratio.

Exhibit 31: Loan Assumptions

Months of Construction 24 Debt Coverage Ratio 1.25

Loan Origination 0.50% LTV Ratio: 23.97%

Retainage 10.00% Term 25

Interest Rate 7.50% Interest Rate 4.40%

CITY VIEW CONDOMINIUMS - LOAN ASSUMPTIONS

Construction Loan Permanent Loan

P a g e 47 | 64

Exhibit 32: Sources of Funds

PROPOSED FUNDING

Capital Stack Equity %

Equity Percentage 23.97%

Equity - Sponsor 100,000$ 1%

Equity - Investors, LP, and/or LLC 9,500,000$ 99%

Equity - Owner (Land/Buildings) -$ 0%

Equity - Owner (Other) -$ 0%

Total Equity 9,600,000$

Debt

1st Mortgage (Conventional) 30,445,495$

2nd Mortgage (Mezz/Conv) -$

Other Mortgage (Mezzanine) -$

Total Debt: 30,445,495$

Other

City Loan (Soft) -$

County Loan (Soft) -$

Grants -$

40,045,495$

Current Excess/(Shortfall) -$

SOURCES

Total Capital Needed

Exhibit 33 shows the construction draw schedule for the two years of construction. The

total of the two construction loans is $33,825,447 with $1,353,018 in interest expense

during the periods of construction. For this analysis, it is simply assumed that the draws

are divided evenly over 12 months for each phase of construction with a 10 percent

retainage paid in the final month of construction leading up to substantial completion.

P a g e 48 | 64

Exhibit 33: Construction Draw Schedule

Construction Months: 24

Construction Loan: 33,825,447$

Loan Origination: 1.00% 338,254$

Rate: 7.50%

Retainage: 10.00%

Draw % Month Draw Retainage Net Draw Balance Interest

9.09% January-17 1,476,005$ (147,601)$ 1,328,405$ 1,328,405$ 8,303$

9.09% February-17 1,476,005$ (147,601)$ 1,328,405$ 2,656,809$ 16,605$

9.09% March-17 1,476,005$ (147,601)$ 1,328,405$ 3,985,214$ 24,908$

9.09% April-17 1,476,005$ (147,601)$ 1,328,405$ 5,313,619$ 33,210$

9.09% May-17 1,476,005$ (147,601)$ 1,328,405$ 6,642,023$ 41,513$

9.09% June-17 1,476,005$ (147,601)$ 1,328,405$ 7,970,428$ 49,815$

9.09% July-17 1,476,005$ (147,601)$ 1,328,405$ 9,298,833$ 58,118$

9.09% August-17 1,476,005$ (147,601)$ 1,328,405$ 10,627,237$ 66,420$

9.09% September-17 1,476,005$ (147,601)$ 1,328,405$ 11,955,642$ 74,723$

9.09% October-17 1,476,005$ (147,601)$ 1,328,405$ 13,284,047$ 83,025$

9.09% November-17 1,476,005$ (147,601)$ 1,328,405$ 14,612,451$ 91,328$

0.00% December-17 (0)$ 1,623,606$ 1,623,606$ 16,236,057$ 101,475$

9.09% January-18 1,599,035$ (159,904)$ 1,439,132$ 1,439,132$ 8,995$

9.09% February-18 1,599,035$ (159,904)$ 1,439,132$ 2,878,264$ 17,989$

9.09% March-18 1,599,035$ (159,904)$ 1,439,132$ 4,317,396$ 26,984$

9.09% April-18 1,599,035$ (159,904)$ 1,439,132$ 5,756,528$ 35,978$

9.09% May-18 1,599,035$ (159,904)$ 1,439,132$ 7,195,660$ 44,973$

9.09% June-18 1,599,035$ (159,904)$ 1,439,132$ 8,634,792$ 53,967$

9.09% July-18 1,599,035$ (159,904)$ 1,439,132$ 10,073,924$ 62,962$

9.09% August-18 1,599,035$ (159,904)$ 1,439,132$ 11,513,056$ 71,957$

9.09% September-18 1,599,035$ (159,904)$ 1,439,132$ 12,952,188$ 80,951$

9.09% October-18 1,599,035$ (159,904)$ 1,439,132$ 14,391,319$ 89,946$

9.09% November-18 1,599,035$ (159,904)$ 1,439,132$ 15,830,451$ 98,940$

0.00% December-18 (0)$ 1,758,939$ 1,758,939$ 17,589,390$ 109,934$

100% 33,825,447$ PAID 33,825,447$ 1,353,018$

CITY VIEW CONDOMINIUMS - CONSTRUCTION DRAW SCHEDULE

Project Snapshot and Potential Returns

The entire project is expected to completely stabilize approximately eleven to twelve

months after substantial completion of Phase Two. Exhibit 34 shows the project’s start of

construction, stabilization and exit year at the end of 2029.

P a g e 49 | 64

Exhibit 34: Project Timeline

Today's Date 10/19/2016

Acquisition Date 12/1/2016

Acquisition/Predevelopment Duration 2 months

Construction Commencement 2/1/2017

Construction Duration 11 months

Initial Occupancy Date 1/1/2018

Lease-Up Duration 12 months

Units Leased Per Month 6

Stabilization 1/1/2019

Hold Period 11 years

Total Months of Operation 144 months

Property Reversion 12/31/2029

Today's Date 10/19/2016

Acquisition Date 12/1/2016

Acquisition/Predevelopment Duration 13 months

Construction Commencement (If Any) 1/1/2018

Construction Duration 12 months

Initial Occupancy Date 1/1/2019

Lease-Up Duration 12 months

Units Leased Per Month 12

Stabilization 1/1/2020

Hold Period 10 years

Total Months of Operation 132 months

Property Reversion 12/31/2029

PROJECT TIMELINE - PHASE ONE

PROJECT TIMELINE - PHASE TWO

Exhibit 35 details the project’s before-tax cash flow and internal rate of return for the length

of operation. The project shows a substantial internal rate of return of 15.50 percent and a

large net present value at disposition indicating that the initial capital outlay is worth the

discounted cash flow year after year using a 12 percent hurdle rate. The before-tax net

present value of the initial investment is approximately $3,000,000.

P a g e 50 | 64

Exhibit 35: Cash Flow and Return Analysis (Before-Tax)

Total

LLC Cash Flow Before-Tax LLC

Equity Before Property Before-Tax

Year Pay-In Tax Sale Distribution

2017 (5,050,000)$ (5,050,000)$

2018 (4,550,000)$ (638,306)$ (5,188,306)$

2019 -$ (152,020)$ (152,020)$

2020 -$ 1,012,442$ 1,012,442$

2021 -$ 1,042,711$ 1,042,711$

2022 -$ 1,072,245$ 1,072,245$

2023 -$ 1,100,970$ 1,100,970$

2024 -$ 1,128,806$ 1,128,806$

2025 -$ 1,155,671$ 1,155,671$

2026 -$ 1,181,475$ 1,181,475$

2027 -$ 1,206,127$ 1,206,127$

2028 -$ 1,229,528$ 1,229,528$

2029 -$ 1,251,574$ 31,363,534$ 32,615,108$

Total (9,600,000)$ 10,591,222$ 31,363,534$ 32,354,757$

Before-Tax Internal Rate of Return: 15.50%

Before-Tax Net Present Value: 2,913,042$

Hurdle Rate: 12.00%

NPV Rate: 12.00%

CITY VIEW CONDOMINIUMS - BEFORE-TAX INTERNAL RATE OF RETURN

Income Assumptions and Analysis

In calculating the net operating income over the course of operation, the following

assumptions were used in Exhibit 36 to accurately gauge future returns. The total expense

ratio at project commencement is 24 percent, which will increase by 2.5 percent every year

as show in Exhibit 37. The annual vacancy and credit loss factor is a combined 5.5 percent.

P a g e 51 | 64

Exhibit 36: Income Assumptions

Category % of GOI

Salaries and Personnel 4.00%

Insurance 1.00%

Taxes 7.00%

Utilities 2.50%

Management Fees 2.00%

Administrative 2.00%

Marketing 1.00%

Contract Services 2.00%

Repairs and Maintenance 2.50%

Total 24.00%

OPERATIONAL EXPENSES

Exhibit 37: Income Factor Assumptions

Vacancy Rate 5.00%

Credit Loss 0.50%

Core Loss Factor Residential 12.00%

Core Loss Factor Retail 10.00%

Income Escalation (Pre-Stable) 2.00%

Income Escalation (Stabilization) 3.00%

Expense Escalation 2.50%

Cap Rate At Disposition 7.00%

INCOME FACTOR ASSUMPTIONS

Rents

Given the amenities onsite and the development’s location adjacent to Wal-Mart,

Monongalia County Ballpark, WVU UTC and other demand drivers, we can command top

tier rents in the market. The further expansion and development of businesses along Exit

153 with keep demand strong through asset operation allowing for future positive rent

adjustments. The bedroom mix will be 40 percent 1BR/1BA units, 50 percent 2BR/2BA units

and 10 percent 3BR/3BA units. A two-bedroom, two-bath unit is the most in demand unit

type in Morgantown, according it landlords in the area.

P a g e 52 | 64

Exhibit 38: Rents and Unit Mix

Type Rent Average SF PSF Beds Units Monthly Yearly

1 Bedroom/1 Bath $1,050 750 1.40$ 101 101 105,690$ 1,268,278$

2 Bedroom/2 Bath $1,375 1,000 1.38$ 252 126 173,004$ 2,076,051$

3 Bedroom/2 Bath $1,900 1,400 1.36$ 75 25 47,812$ 573,745$

Retail Space $26 1 24,960$ 299,520$

Total/Average $1,298 1,050 1.38$ 428 253 326,506$ 3,918,075$

PROJECTED RENTS

Exhibit 38 shows the total potential development income at full stabilization minus ancillary

fees. Exhibit 39 shows the total income produced by the apartment units with a vacancy

and credit loss factor of 5.5 percent factored into the analysis. It is projected that the

development will make approximately $167,000 a year in ancillary income from late fees,

forfeited depositions and miscellaneous fees related to operation of the apartment units.

The project’s gross potential rent in 2019 will be approximately $3,918,000.

Exhibit 39: Annual Gross Operating Income

Monthly: Yearly: Per Unit, Per Yr. Per NSF

Potential Rental Income 301,546$ 3,618,555$ 14,380$ 15.30$

- Vacancy 15,077$ 180,928$ 719$ 0.76$

- Credit Loss 1,508$ 18,093$ 72$ 0.08$

= Effective Rental Income 284,961$ 3,419,534$ 13,589$ 14.46$

+ Late Fees 3,750$ 45,000$ 179$ 0.19$

+ Forfeited Deposits 2,500$ 30,000$ 119$ 0.13$

+ Vending Machine Income 167$ 2,000$ 8$ 0.01$

+ Laundry Income -$ -$ -$ -$

+ Miscellaneous Income 7,500$ 90,000$ 358$ 0.38$

= Total Other Income 13,917$ 167,000$ 664$ 0.71$

= Gross Operating Income 298,878$ 3,586,534$ 14,252$ 15.16$

ANNUAL APARTMENT RENTAL INCOME

P a g e 53 | 64

Lease-Up Schedule

Lease-up activity for City View will take place over the course of 24 months. A flurry of pre-

leasing activity is expected in the second half of 2018 and the first half of 2019. It is

projected that the development will achieve full stabilization by December 31, of 2019.

Exhibit 40 shows the potential rent, GOI, expenses and NOI as the project achieves full

stabilization through the first three years of operation.

Exhibit 40: Lease-Up Schedule in 2018 and 2019

1st Yr. Lease Up 2nd Yr. Lease Up Stabilization

Period Beginning Date January 2018 January 2019 January 2020

Period Ending Date December 2018 December 2019 December 2020

INCOME:

Gross Potential Rent 1,618,859$ 4,001,516$ 4,283,685$

Gross Potential Parking 120,829$ 249,351$ 264,897$

Other Income 52,882$ 165,710$ 178,840$

Vacancy & Credit Loss 893,820$ 1,318,070$ 260,008$

GROSS OPERATING INCOME: 898,750$ 3,098,507$ 4,467,414$

EXPENSES:

Salaries and Personnel 67,201$ 170,184$ 186,635$

Insurance 16,800$ 42,546$ 46,659$

Taxes 117,603$ 297,822$ 326,611$

Utilities 42,001$ 106,365$ 116,647$

Management Fees 33,601$ 85,092$ 93,317$

Administrative 33,601$ 85,092$ 93,317$

Marketing 16,800$ 42,546$ 46,659$

Contract Services 33,601$ 85,092$ 93,317$

Repairs and Maintenance 42,001$ 106,365$ 116,647$

TOTAL OPERATING EXPENSES 403,209$ 1,021,105$ 1,119,809$

NET OPERATING INCOME (NOI) 495,541$ 2,077,401$ 3,347,605$

RESERVES 61,035$ 219,391$ 325,133$

LEASE UP INCOME AND EXPENSES

P a g e 54 | 64

Property Performance at Stabilization

Exhibit 41 shows the financial and operational ratios for the first year of stabilization

operation. The project demonstrates strong financial indicators at this point of operation: a

break-even percentage of approximately 70 percent, debt service coverage ratio of 1.67, an

average operational expense ratio of 25.07 percent between the two phases, stabilized debt

yield of 11 percent, cash on cash return of 11.76 percent and an equity multiple of 4.98.

Exhibit 41: Property Performance Ratios

Break-Even 70.06% Net Income Multiplier 11.96

Capitalization Rate 7.00% Vacancy & Collection Rate 5.50%

Cash on Cash Return 11.76% Maximum Mortgage Constant 12.97%

Debt Coverage Ratio 1.67 Loan Per Unit 64,319$

Debt Service Ratio 60.04% Mortgage Multiplier 3.62

Gross Rent Multiplier 2.24 Total Cost Per Square Foot 169.29$

LTV 76.03% Price Per Unit 158,507$

Operating Expense Ratio 25.07% NOI Per Unit 13,250$

Stabilized Debt Yield 11.00% Equity Multiplier 4.98

FINANCIAL RATIOS FOR FIRST FULL YEAR OF OPERATION

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Income and Expenses

A detailed income and expense statement was created for the first 10 years of stabilized

operation. Below, Exhibit 42 details the project at stabilization, in year five and in year ten.

Exhibit 42: Income and Expense Statement

Stabilization Year 5 Year 10

Period Beginning Date January 2020 January 2024 January 2029

Period Ending Date December 2020 December 2024 December 2029

INCOME

Gross Potential Rent 4,283,685$ 4,636,798$ 5,119,400$

Gross Potential Parking 264,897$ 286,733$ 316,577$

Other Income 178,840$ 193,583$ 213,731$

Vacancy & Credit Loss 260,008$ 281,441$ 310,734$

GROSS OPERATING INCOME 4,467,414$ 4,835,673$ 5,338,974$

EXPENSES

Salaries and Personnel 186,635$ 222,992$ 278,554$

Insurance 46,659$ 55,748$ 69,638$

Taxes 326,611$ 390,236$ 487,469$

Utilities 116,647$ 139,370$ 174,096$

Management Fees 93,317$ 111,496$ 139,277$

Administrative 93,317$ 111,496$ 139,277$

Marketing 46,659$ 55,748$ 69,638$

Contract Services 93,317$ 111,496$ 139,277$

Repairs and Maintenance 116,647$ 139,370$ 174,096$

TOTAL OPERATING EXPENSES 1,119,809$ 1,337,951$ 1,671,323$

NET OPERATING INCOME (NOI) 3,347,605$ 3,497,722$ 3,667,651$

RESERVES 325,133$ 358,886$ 406,047$

INCOME AND EXPENSE STATEMENT

Cash Flow Analysis

Exhibit 43 analyses the property’s yearly before-tax and after-tax cash flow. An assumed

tax rate of 46.10 percent was used for Federal and State taxation on ordinary income. The

property has a substantial after-tax cash flow during each year of operation after

stabilization even with the assumed higher taxation percentage.

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Exhibit 43: Cash Flow Analysis

Period Beginning Date January 2018 January 2019 January 2020 January 2024 January 2029

Period Ending Date December 2018 December 2019 December 2020 December 2024 December 2029

ANNUAL TAXABLE INCOME ANALYSIS

+ Net Operating Income 495,541$ 2,077,401$ 3,347,605$ 3,497,722$ 3,667,651$

- Interest Expense 707,680$ 1,309,521$ 1,278,069$ 1,137,493$ 923,220$

Cost Recovery

- Cost Recovery (Depreciation) 633,386$ 1,335,711$ 1,335,711$ 1,335,711$ 1,263,570$

- Cost Recovery Additions -$ -$ -$ -$ -$

= Total Annual Cost Recovery 633,386$ 1,335,711$ 1,335,711$ 1,335,711$ 1,263,570$

- Non-Operating Expenses (Amortization) 8,275$ 15,605$ 15,605$ 15,605$ 15,605$

= Taxable Income (Loss) (853,799)$ (583,435)$ 718,220$ 1,008,913$ 1,465,256$

ANNUAL CASH FLOW ANALYSIS

Net Operating Income 495,541$ 2,077,401$ 3,347,605$ 3,497,722$ 3,667,651$

- Annual Debt Service 1,072,812$ 2,010,030$ 2,010,030$ 2,010,030$ 2,010,030$

- Capital Additions -$ -$ -$ -$ -$

- Reserves 61,035$ 219,391$ 325,133$ 358,886$ 406,047$

+ Reserves to Capital Additions -$ -$ -$ -$ -$

= Cash Flow Before Tax (638,306)$ (152,020)$ 1,012,442$ 1,128,806$ 1,251,574$

Taxable Income (Loss) (Ordinary) (853,799)$ (583,435)$ 718,220$ 1,008,913$ 1,465,256$

x (Federal & State) 46.10% 46.10% 46.10% 46.10% 46.10% 46.10%

= Tax Liability (393,601)$ (268,964)$ 331,099$ 465,109$ 675,483$

Cash Flow Before Tax (638,306)$ (152,020)$ 1,012,442$ 1,128,806$ 1,251,574$

- Less Tax Liability -$ -$ 331,099$ 465,109$ 675,483$

Cash Flow After Tax (638,306)$ (152,020)$ 681,343$ 663,697$ 576,091$

Debt Service Coverage Ratio 0.46 1.03 1.67 1.74 1.82

ANNUAL CASH FLOW ANALYSIS

Sales Schedule

Exhibit 44 determines both the before and after tax sale proceed returns. It also accounts

for accumulated depreciation at time of sale and the project’s adjusted basis. A seven

percent capitalization rate was used to determine the sales price for the asset. The total

gain from the asset in 2024 is nearly $19,000,000 and nearly $28,000,000 in 2029 indicating

a substantial net gain on investment when depreciation is taken into account.

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Exhibit 44: Sales Schedule

Year 5 Year 10

Period Beginning Date January 2024 January 2029

Period Ending Date December 2024 December 2029

Sales Proceeds Before Tax

Building Sales Price Cap Rate 7.00% 49,967,459$ 52,395,012$

+ Reserve Fund 358,886$ 406,047$

- Less Commission 2.00% 999,349$ 1,047,900$

= Adjusted Sales Price 49,326,996$ 51,753,159$

- Less Mortgage Balance 25,376,324$ 20,389,625$

= Total Sale Proceeds Before Tax 23,950,672$ 31,363,534$

Sales Proceeds Before Tax 23,950,672$ 31,363,534$

- Tax On Capital Gains 5,713,076$ 8,360,713$

- Tax On Ordinary Income 132,869$ 96,900$

= Sales Proceeds After Tax 18,104,727$ 22,905,922$

Calculations

Acquisition Basis 38,760,724$ 38,760,724$

+ Capital Additions -$ -$

- Cost Recovery (Depreciation) 8,647,650$ 15,006,724$

= Adjusted Basis 30,113,074$ 23,754,000$

Sales Price 49,967,459$ 52,395,012$

- Cost of Sale 999,349$ 1,047,900$

- Adjusted Basis 30,113,074$ 23,754,000$

= Total Gain 18,855,036$ 27,593,112$

SALES SCHEDULE

Sensitivity

Lastly, Exhibit 45 shows three different sensitivity analyses to display the asset’s reaction to

fluctuations in market conditions and operation. The income and expenses used in the

sensitivity analyses are pulled from the first year of stabilized operation.

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Exhibit 45: Sensitivity Analysis

SENSITIVITY IS FOR FIRST YEAR AFTER STABILIZATION

SENSITIVITY ANALYSIS #1: GOI vs. EXPENSES

$4,219,569 $4,343,601 $4,467,414* $4,591,665 $4,715,697

NOI

$3,348,864* $17.01 $17.51 $18.01 $18.51 $19.01

$3.51 $3,348,864 $3,472,896 $3,596,928 $3,720,960 $3,844,992

$4.01 $3,224,832 $3,348,864 $3,472,896 $3,596,928 $3,720,960

Expenses PSF $4.51 $3,100,800 $3,224,832 $3,348,864 $3,472,896 $3,596,928

$5.01 $2,976,768 $3,100,800 $3,224,832 $3,348,864 $3,472,896

$5.51 $2,852,736 $2,976,768 $3,100,800 $3,224,832 $3,348,864

SENSITIVITY ANALYSIS #2: NOI vs. CAP RATE

$3,100,800 $3,224,832 $3,347,605* $3,472,896 $3,596,928

Valuation

$47,840,914* $12.50 $13.00 $13.50 $14.00 $14.50

6.00% $51,680,000 $53,747,200 $55,814,400 $57,881,600 $59,948,800

6.50% $47,704,615 $49,612,800 $51,520,985 $53,429,169 $55,337,354

Cap Rate 7.00% $44,297,143 $46,069,029 $47,840,914 $49,612,800 $51,384,686

7.50% $41,344,000 $42,997,760 $44,651,520 $46,305,280 $47,959,040

8.00% $38,760,000 $40,310,400 $41,860,800 $43,411,200 $44,961,600

SENSITIVITY ANALYSIS #3: EXPENSES vs. CAP RATE

$870,705 $994,737 $1,119,809* $1,242,801 $1,366,833

Valuation

$47,840,914* $3.51 $4.01 $4.51 $5.01 $5.51

6.00% $59,948,800 $57,881,600 $55,814,400 $53,747,200 $51,680,000

6.50% $55,337,354 $53,429,169 $51,520,985 $49,612,800 $47,704,615

Cap Rate 7.00% $51,384,686 $49,612,800 $47,840,914 $46,069,029 $44,297,143

7.50% $47,959,040 $46,305,280 $44,651,520 $42,997,760 $41,344,000

8.00% $44,961,600 $43,411,200 $41,860,800 $40,310,400 $38,760,000

*Numbers are approximate

Total Operating Expenses

Operating Expenses PSF

Gross Operating Income PSF

Total Gross Operating Income

Total Net Operating Income

Net Operating Income PSF

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Conclusion

In conclusion, City View Luxury Apartments has the potential to be a great long term

investment opportunity. The vision for the development takes advantage of its topography,

location and surrounding market. With its ideal location in close proximity to the new

Interstate 153 interchange and with the continued development of this portion of

Monongalia County, this development project has the potential to be a very profitable for

an investor’s portfolio, provides a new and exciting housing option for young professionals,

dinks and empty nesters and would be a great long-term addition to the Morgantown MSA.

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VIII. APPENDIX

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Exhibit 46: Construction Cost Estimate for One 64’ X 200’ Multi-Family Building

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Exhibit 47: Construction Cost Estimate for Clubhouse

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Exhibit 48: Construction Cost Estimate for Retail Space (Warm Vanilla Box)

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Endnotes:

i http://www.wvha.org/Media/NewsScan/2016/March/3-30-16-WVU-Medicine-expanding-facilities,-service.aspx ii https://about.wvu.edu/wvu-facts iii http://www.morgantown.org/detail.php?page_id=1 iv http://thedpost.com/Big-business-ahead-for-I--79-dev v http://www.wvalways.com/story/32293241/fortune-500-headquarters-expected-to-be-built-in-monongalia-county vi http://www.timeswv.com/sports/plans-for-morgantown-aquatic-park-unveiled/article_49b39b30-f712-11e5-a0ac-c706d26e8bde.html vii http://www.kiplinger.com/tool/business/T019-S000-kiplinger-s-economic-outlooks/ viii www.factfinder2.census.gov ix www.factfinder2.census.gov x www.census.gov xi http://be.wvu.edu/bber/pdfs/BBER-2014-04.pdf xii http://data.bls.gov xiii http://westvirginia.hometownlocator.com/wv/monongalia/ xiv www.factfinder2.census.gov xv http://www.morgantownwv.gov/wp-content/uploads/MCP-6.-Neighborhoods-and-Housing-compressed.pdf xvi http://www.deptofnumbers.com/rent/west-virginia/morgantown/ xvii http://thedpost.com/Permits-sought-for-11--story-apa xviii http://www.acceleratedconstructionservices.com/newberry-place-2/ xix http://www.washingtontimes.com/news/2015/jul/30/morgantown-developer-feds-settle-housing-lawsuit/ xx www.ncreif.org xxi www.alexa.com xxii http://www.icsc.org/uploads/research/general/US_CENTER_CLASSIFICATION.pdf xxiii http://www.loopnet.com/Listing/19335102/1053-Maple-Dr-Morgantown-WV/ xxiv http://www.loopnet.com/for-lease/wv/?sk=aee25f14cdbd3f0c9efe5b36d6816186&e=u xxv https://www.craftsman-book.com/2016-national-building-cost-manual

City View Feasibility Analysis

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