Investment Proposal The Acadia Arlington Virginia Morgan Privitte

Investment Proposal The Acadia Arlington, Virginia Morgan Privitte, Will Mu, Ryan Li, Robin Chen & Jennie Sohn

Introduction Another Option: Condominium Development OPTION 1 OPTION 2 Apartments Condominiums OPTION 3 Apartments & Condominiums FINAL RECOMMENDATION

Property Basic Information Location: Pentagon City, Virginia Type: Class A Apartment Building Physical Volume: 411 Units Site: 91, 050 SF Construction Cost Land Cost (21%) $ 32, 904, 636 Hard Cost (61%) $ 96, 173, 519 Soft Cost (14%) $ 21, 801, 036 Construction Cost before Debt $ 150, 879, 191 Operating Shortfall $ 127, 930 Kettler Fee $ 4, 401, 815 Construction Cost after Debt $ 155, 408, 936

Market Analysis Economic Highlights Washington Metro Area, 2013 Payroll Employment: 3. 0 million at February 2013. Job Change: grew 45, 739 during 2012. Compares to 39, 800/year long-term average. Unemployment Rate: 5. 5% at February 2013, down from 5. 9% one year ago and lowest among the nation's largest metro areas. Inflation: prices increased 1. 4% during the 12 months ending March 2013. Housing Prices: increased 6. 00% during the 12 months ending January 2013. Source: Bureau of Labor Statistics, S&P Case Shiller

Apartment Market

Condominium Market 12000 The District 10000 Arlington 40% 8000 30% Alexandria 20% 6000 Fairfax Washington Metro Area Condo Unit Deliveries DC Metro Area Resale Inventory % Of Metro Supply Years of Supply Yearly Units Sold & Price % Change 339 Sub MD District 12% No VA Normalized Range Sales 93 Change 3% Price Change 401 14% 122 4% 10% Loudoun 4000 857 29% 0% Prince William 2006 2007 585 2008 2009 20%2010 2000 -10% Montgomery 427 15% -20% 0 Prince Georges 2006 2007 2008 2009 2010 97 3% 2011 -30% Total 2, 921 2013 1 Source: Delta Association, March 0. 7 0. 6 28. 8% 1. 6 0. 5 7. 8% 1. 7 2011 1. 4 2012 0. 8 2012 0. 62013 1 Year

Development Team JV Partnership During Construction 10% - KETTLER 90% - Lion Properties Fund (Clarion Partners) After Construction 100% - Lion Properties Fund (Clarion Partners)

Financial Analysis Option 1: Apartment Assumption and Quick Facts Monthly Average Rent (2014) Rent Growth Expense Growth $2. 80/SF 3. 5% 3% Cap Rate 4. 5% Discount Rate 7. 5% Development Cost Sensitivity Analysis Best Vacancy Rate Rent Growth Expenses Growth Cap Rate Present Value IRR $155, 208, 367 $176, 825, 895 10. 5% Operating CF 43. 2% 9. 5% Sales Reversion 56. 8% Present Value IRR Payback Period 8. 8% 10 years Most-likely 2. 5% 4. 5% 2. 0% 4. 0% $220 M 11. 4% 10. 6% 4. 0% 3. 5% 3. 0% 4. 5% $177 M 8. 8% Worst 6. 0% 2. 0% 4. 0% 6. 0% $121 M 4. 6% Holding Period IRR 8. 5% 8. 8% 7. 5% 2016 2020 2024

Financial Analysis Option 2: Condominium Sensitivity Analysis 80% Studio Unit Price Average Price Selling Pace 30% -20% -30% $ 10, 000 Selling Pace -15% 0% 15% 30% Selling Price Increase Median Price Sale Term 10 units/ months $ 524, 896 /unit $ 591 /sq. ft. $ 417, 000 /unit $ 562/ sq. st. 42 months Presale $ 5, 000 $$ (5, 000) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 $ (10, 000) $ (15, 000) $ 10, 000 Pay Back Term 35 months IRR 35% 1 Year Hold $- $ (10, 000) 1 2 3 4 5 6 7 8 9101112131415161718192021222324252627282930313233343536373839404142434445464748495051525354555657585960616263646566676869707172737475767778 RISK & RETURN ANALYSIS $ (20, 000) Pay Back Term 60 months ACADIA IRR 14%

Financial Analysis Option 3: Mix Condominium 211 Units Return Pre-sell IRR 14. 4% 10 units/ month Cash Flow 10 years Price $ 591/ sq. ft. Liquidity 2/3 of investment Proceeds $104, 979, 285 Apartment 200 Units Strategy 1 year lease up Strategy 17 units/ month 10 years holding Price $ 2. 80/ sq. ft. Present Value $ 90, 847, 740

Rent vs. Buying PURCHASE COSTS Cost Year 6 　 Down payment Closing costs Total Cost Year 1 to 6 INITIAL RENTING COSTS 　 　 MONTHLY COSTS $3, 779 　 Mortgage payment 1, 445 Condo fees 410 Property taxes 289 Maintenance 682 Homeowner's insurance 954 OPPORTUNITY COSTS 　 　 S&P 500 investment 9, 107 SELLING COSTS 　 　 Renting Rent deposit Broker's fee 95, 911 19, 182 MONTHLY COSTS 102, 829 28, 084 19, 323 46, 738 63, 900 35, 633 Renter's Insurance 　 　 OPPORTUNITY COSTS S&P 500 investment LEAVING YOUR RENTAL 22, 905 335, 349 - Proceeds from home sale 　 (572, 614) 　 $197, 240 　 $54, 458 　 Total Cost Year 1 to 6 　 2, 313 - 　 $2, 831 　 2, 814 17 184, 105 1, 105 　 　 4, 117 12, 026 　 Closing costs Remaining principal Tax on profit YEAR 6 TOTALS Cost Year 6 　 　 Return of rent deposit (2, 313) 　 　 $38, 089 $197, 236

Conclusion OPTION 1: Apartments Pros OPTION 2: Condominiums • Long-term Return • Low Inventory • Previous Experience Cons • Over Supply OPTION 3: Apartments & Condominiums • Liquidity • Long-term Return • Temporary Revenue • Opportunity Cost • Marketing Risk FINAL RECOMMENDATION: 1. Continue with construction as planned. 2. File application with Arlington County to convert top 9 floors (approx. 200 units) into condos. 3. Create teams to market the property. 4. Begin to prelease the apartment units, and presell condominium units.

The Acadia Team Will Mu Robin Chen Financial Analyst tmu 4@jhu. edu zchen 27@jhu. edu Jennie Sohn Ryan Li Property Consultant Financial Analyst jsohn 13@jhu. edu fli 15@jhu. edu Morgan Privitte Property Consultant mprivit 2@jhu. edu

Rent vs. Buy Assumptions Median Home Price Down Payment Mortgage Rate Annual Property Tax Monthly Condo Fee Closing Cost Term of Mortgage (yrs) Annual Maintenance Cost Homeowner's Insurance Rate Annual Home Appreciation Annual Rent Increase Capital Gains Exclusion Rate of Return on Investment Marginal Tax Rate Inflation Rate Median Monthly Rent Deposit Renter's Insurance Rate $479, 555 20% 3. 5% 0. 84% $371 4% 30 1. 5% 2. 0% 3% 4% $5, 000 3% 28% 2% $2, 313 0. 6%

Market Comparable: Apartment

Market Comparable: Condos Price Bed Sq. Ft. Price /Sq. Ft. Built 3650 S Glebe Rd. , #665, Arlington, VA 544, 900 2 1200 454 2007 3600 S Glebe Rd. , #418 W, Arlington, VA 539, 900 2 1242 434 2006 3600 S Glebe Rd. , #408 W, Arlington, VA 325, 000 1 669 485 2006 3600 S Glebe Rd. , #606 W, Arlington, VA 239, 900 0 411 583 2006 1, 299, 555 2 1800 721 2009 4195 S Four Mile Run Dr. , #203, Arlington, VA 383, 900 2 1180 325 2006 1201 N Garfield St. , #711, Arlington, VA 589, 000 2 980 601 2006 3650 S Glebe Rd. , # 665, Arlington, VA 544, 900 2 1200 454 2007 2001 15 th St. , N, #1505, Arlington, VA 975, 000 2 1396 698 2006 4167 S Four Mile Run Dr. , #403, Arlington, VA 381, 900 2 1135 336 2006 888 N Quincy St. , #2107, Arlington, VA 792, 500 2 1248 635 2007 2220 Fairfax Dr. , #206, Arlington, VA 559, 000 2 1178 474 2007 1800 Wilson Blvd. , #438, Arlington, VA 495, 000 1 870 568 2007 Condominium Arlington-22202 Arlington-All 1881 N Nash St. , #610, Arlington, VA