OFFERING MEMORANDUM RED ROCK TERRACE APARTMENTS 3164 W AVE COLORADO SPRINGS, CO 80904

SEAN HOLAMON JASON KOCH Senior Advisor Partner

[email protected] [email protected] 303.588.2119 303.918.8909 TABLE OF CONTENTS

EXECUTIVE SUMMARY PROPERTY OVERVIEW FINANCIAL OVERVIEW LOCATION OVERVIEW EXECUTIVE SUMMARY PROPERTY HIGHLIGHTS

Prime “live/work/play” location adjacent to and Red Rock Canyon Open Space offers easy access to employment, entertainment and recreation as well as downtown Colorado Springs, and Manitou Springs.

New rents are 11% higher than in-place proving rental upside for new owner.

Well maintained asset has no deferred maintenance.

Diverse unit-mix with large apartments set this unique asset apart from the local competition.

Units renovated within last 2 years. PROPERTY OVERVIEW AREA STREET MAP

3164 COLORADO AVE

La Unica

31ST STREET

W COLORADO AVE LOCATION MAP

KISSING CAMELS GARDEN OF THE GOLF CLUB GODS VISITOR AND NATURE CENTER (5 min, 2.1 miles away)

3164 COLORADO AVE SONDERMANN in, 2 PARK 6 m .2 mile s to M anitou Springs

W UINTAH ST

RED OPENROCK SPACECANYON 10 min, 3.6 miles to Down MIDLAND EXPY

tow n Colorado Springs

S 21ST STREET

OLD COLORADO CITY RETAIL - Front Range BBQ - Simpich Showcase - Jives Co ee Lounge - Sun Mountain Cafe - Uchenna - Hunter-Wol Gallery - Pizzeria Rustica - Colorado City Creamery - Lorig’s Western Wear - Jake & Telly’s Greek Taverna - Chavez Art Gallery NEIGHBORHOOD MAP DINING 1 Starbucks 2 Weldwerks Brewing and Taproom 3 La Unica 4 Sonic 5 Trails End Taproom 39 6 Paravicini's Italian Bistro 7 Fossil Craft Beer Company 8 Alchemy 9 Pizzeria Rustica 10 Jake & Telly's Greek Taverna

11 Front Range Barbeque N 31ST ST 12 Nara Sushi & Grill 13 Mountain Shadow's Restaurant 14 Smiling Toad Brewery 3164 COLORADO AVE 15 Colorado City Creamery 16 Dat's Italian 17 High Rise Coffee Roaster 35 18 Wild Ginger Thai 21 36 4 3 19 The Mason Jar 26 20 Mcdonalds 27 34 1 21 Domino's Pizza 3212 31 22 22 A&W Restaurant 23 Trails End Taproom 37 5 23 2 38 24 Taco Bell 41 24 25 Rudy’s BBQ 26 IHOP 20 19 6 30 RETAIL 18 10 25 40 27 Safeway 15 28 8 16 28 King Soopers 7 29 29 Walgreens MIDLAND EXPY 9 45 44 43 30 Dollar Tree 42 31 UPS Store 33 32 Red Rock Liquors 33 Olde Town Plaza Shopping Mall 17 11 34 Routes Outfitter 35 Carhartt Clothing Store 13 36 Supercuts 37 Fedex Onsite

LIFESTYLE 14 38 Mountain Song Community School 39 Garden of the Gods 40 The University School 41 Red Rock Canyon Open Space 42 Old Colorado City History Center Museum 43 The loft Music Venue 44 Chavez Gallery 45 Empower Personal Training OLD COLORADO CITY

Old Colorado City, formerly Colorado City, was once a town, but it is now a neighborhood within the city of Colorado Springs, Colorado. Its commercial district was listed on the National Register of Historic Places in 1982. It was founded during the Gold Rush of 1859 and was involved in the mining industry, both as a supply hub and as a gold ore processing center beginning in the 1890s.

Old Colorado City is the perfect blend of small town charm, historic character, and all the good times and excitement visitors have come to expect from a top Colorado destination.

Historic Old Colorado City has it all! With over 100 unique businesses perfect for strolling the day away down the beautiful, brick, tree-lined sidewalks. Fine galleries, specialty shops, eclectic boutiques, award-winning restaurants, charming local art galleries and other services offer hours of entertainment. Special attractions include Simpich Showcase and Magic Town at The Michael Garman Museum and Gallery.

During the evening, enjoy live music and performances from some of the pubs and restaurants as well as some of the country’s best local beer, wine and spirits. RED ROCK CANYON OPEN SPACE

Red Rock Canyon Open Space is a 1,474-acre city park in Colorado Springs, Colorado. It is situated on the west side of the city, adjacent to Manitou Springs and south of U.S. Route 24. The park consists of a series of parallel ridges (called "hogbacks") and eroded canyons, a continuation of the same sandstone rocks of the Fountain Formation that make up Garden of the Gods a few miles to the north.

The ridges and canyons offer beautiful views and sheltered enclaves for inspiration, varied terrain for recreation, and a 240 million year slice of sedimentary geology for education. In Section 16, the sedimentary geology is truncated by the Fault where the geology abruptly changes to much older rock. The varied terrain and geology support a wide variety of plant and animal communities. Human use of the area has left a heritage of varied and colorful history including Ute defensive positions, stone quarries, and gold mills.

The park contains many miles of trails of varying difficulty that wind through and around the rock formations, and is popular with hikers, joggers, and mountain bikers. The park trails connect to the Intemann trail to Manitou Springs and the Section 16 conservation area to the south. Technical rock climbing is allowed with a permit. In 2012, it was awarded the Stewardship Award by the Trails and Open Space Coalition. PHOTOS 3164 W COLORADO AVE PHOTOS 3164 W COLORADO AVE PHOTOS 3164 W COLORADO AVE PROPERTY DETAILS 3164 W COLORADO AVE

UNIT MIX & CURRENT RENTS

Unit Type Unit Amount Unit SF Current Avg. Rent Current Rent/SF Market Rent Market Rent/SF

Studio 2 400 $847 $2.12 $925 $2.31

1 Bed / 1 Bath 16 683 $929 $1.36 $1,035 $1.52

2 Bed / 1 Bath 5 980 $1,111 $1.13 $1,245 $1.27

Total / Average 23 723 $961 $1.38 $1,071 $1.53

BUILDING HIGHLIGHTS BUILDING DETAILS Building Units Year Built Units: 23

Building 1 3 1938 Building SF: 15,946

Building 2 4 1972 Parking 26

Building 3 8 1972 Land 27,325

Building 4 8 1972 Zoning: C-5

Year Built: 1972

SYSTEMS

Gas / Elec Meters: Master / Individual

Water: Master

Trash: Waste Management

Roof: Flat

Heating: Boiler FINANCIAL OVERVIEW INVESTMENT & DEBT SUMMARY

INVESTMENT SUMMARY DEBT SUMMARY

Purchase Price: $4,125,000 Loan to Value: 70.00%

Units 23 Loan Amount: $2,887,500

Price Per Unit: $179,348 Loan Term: 84 Months

Total SF: 15,946 Interest Rate: 3.25%

Price Per SF: $259 Interest Only: 12 Months

T12 Cap Rate: 4.71% Amortization: 30 Years

Year 1 Cap Rate: 5.61%

Year 1 Cash Flows: $137,667

5 Year IRR: 24.56%

% 8.12 % 11.12 % 7.08 % 7.66 Cash on Cash Return Cash on Cash % 8.25 % 8.87

100,404 $ 37,667 1 $ 87,610 $ 94,766 $ Total Cash Flow Cash Total 102,137 $ 109,729 $

) 93,925 ($ 93,925) ($ Debt Service - Yr 1 Yr - Service Debt ) 50,930 ($1 ) 150,930 ($ ) 150,930 ($ ) 150,930 ($

1% 7 4. 1% 6 5. Cap Rate Cap % 78 5. % 96 5. % 6.13 % 6.32

94,329 $1 NET OPERATING INCOME OPERATING NET $231,592 $231,592 $238,540 $238,540 $245,696 $245,696 $253,067 $253,067 $260,659 $260,659

) 576 ($4, ) 241 ($4, Expenses Per Unit Per Expenses ) 368 ($4, ) 499 ($4, ) 634 ($4, ) 4,773 ($

) 05,250 ($1 ) 97,541 ($ Total Expenses Total ) 0,467 ($10 ) 3,481 ($10 ) 06,586 ($1 ) 09,783 ($1

) 552 ($ ) 552 ($ Admin and Other and Admin ) 569 ($ ) 586 ($ ) 603 ($ ) 621 ($

PROJECTIONS

) 839 ($27, ) 839 ($27, Property Management Property ) 674 ($28, ) 534 ($29, ) 420 ($30, ) 333 ($31,

) 7,426 ($ ) 7,426 ($ Real Estate Taxes Estate Real ) 7,649 ($ ) 7,878 ($ ) 115 ($8, ) 8,358

($ AREA CASH FLOW CASH

($10,055) Insurance ($10,055) ($10,357) ($10,667) ($10,987) ($11,317)

) 3,154 ($3 ) 3,154 ($3 Utilities ) 4,149 ($3 ) 5,173 ($3 ) 6,228 ($3 ) 7,315 ($3

) 6,224 ($2 Repairs and Maintenance and Repairs ($18,515) ($19,070) ($19,643) ($20,232)

($20,839) STREET MAP

EXPENSES EXPENSES

9,579 $29 9,133 $32 Effective Gross Revenue Gross Effective 9,007 $33 9,177 $34 9,652 $35 70,442 $3

103, $11, Other Residential Income Residential Other $11,456 $11,456 $11,800 $11,800 $12,154 $12,154 $12,518 $12,518 $12,894 $12,894

2,105 $3 2,206 $3 Expense Reimbursements Expense 3,172 $3 4,167 $3 5,192 $3 6,248 $3

6,371 $25 85,471 $2 Rental Revenue Rental 94,035 $2 302,856 $ 11,942 $3 21,300 $3

) 7,929 ($ ) 8,829 ($ Vacancy ) 9,094 ($ ) 9,367 ($ ) 9,648 ($ ) 9,937 ($

$264,300 $264,300 Gross Potential Revenue Potential Gross $294,300 $294,300 $303,129 $303,129 $312,223 $312,223 $321,590 $321,590 $331,237 $331,237

REVENUE REVENUE

T12 T12 Year 1 Year Year 2 Year 3 Year 4 Year 5 Year 4 Year 3 Year 2 Year KEY UNDERWRITING ASSUMPTIONS

INCOME: • Property is currently running 11% loss to lease. • 3% increase on market rents year-over-year

EXPENSES: • 3% inflation added on to all operating expenses • Added $9,642 from Repairs & Mainteance to Capital Expenses

DEBT: • Typical debt quote for asset type LOCATION OVERVIEW DEMOGRAPHICS

2020 SUMMARY 1 Mile 3 Miles 5 Miles

Population 8,823 48,711 123,007

Households 4,246 22,740 58,017

Families 2,241 11,104 28,451

Average Household Size 2.04 2.04 2.05

Owner Occupied Housing Units 2,661 12,856 31,855

Renter Occupied Housing Units 1,585 9,884 26,162

Median Age 50.1 44.3 43.1

Median Household Income $58,811 $55,025 $52,495

Average Household Income $81,810 $81,114 $75,529

Average Housing Value $401,907 $440,580 $392,918

2025 SUMMARY 1 Mile 3 Miles 5 Miles 1 MILE Population 9,183 51,138 128,662

Households 4,431 23,985 60,975

3 MILES Families 2,313 11,558 29,471 Average Household Size 2.04 2.03 2.04

Owner Occupied Housing Units 2,788 13,610 33,479 5 MILES Renter Occupied Housing Units 1,642 10,375 27,496 Median Age 50.5 44.6 43.8

Median Household Income $63,266 $59,625 $56,033

Average Household Income $88,405 $88,241 $81,808

Average Housing Value $491,741 $517,946 $465,260 COLORADO SPRINGS NOTABLE RANKINGS #1 MOST DESIRABLE PLACE TO LIVE (U.S. NEWS & WORLD REPORT, 2018)

#1 MOUNTAIN CITY #21 BEST CITY IN AMERICA #2 BEST PLACES TO LIVE (MONEY MAGAZINE, 2016) FOR STARTING A BUSINESS (U.S. NEWS & WORLD REPORT, 2018) (INC'S, 2019 )

3RD BEST CITY TOP 5 RENT GROWTH #2 FITTEST CITY IN AMERICA FOR LIVABILITY MARKET IN THE U.S. (MEN'S FITNESS) (U.S. NEWS & WORLD REPORT, 2016) (AXIOMETRICS)

#1 BEST CITY NATIONAL HUB FOR CYBERSECURITY TO LIVE - ROOT9B - #1 SECURITY COMPANY (MONEY MAGAZINE) IN THE WORLD (U.S. NEWS & WORLD REPORT, 2016)

5TH BEST REAL 10% INCREASE IN ESTATE MARKET MEDIAN HOME PRICES (WALLETHUB, 2018) Y-O-Y (NATIONAL ASSOCIATION OF REALTORS, 2018) COLORADO SPRINGS

The 186-square mile city of Colorado Springs is located near the base of one of the most famous American mountains, Pikes Peak, and 61 miles south of Denver. Popular destinations include:

It is one the fastest growing cities in Colorado, and in the country. With an estimated population of 456,568, Colorado Springs is the most populous city in El Paso County and it is estimated that the population will increase 58.6% by 2050. In 2019 the city was ranked #29 in the nation for fastest growing large cities (over 300,000 people) by Wallethub.

Many factors contribute the popularity of the city, as well as the unprecedented growth. The city was ranked "Most Desirable Place to Live" in 2018 by US News.

Along with many trails and parks, major attractions include:

Pikes Peak Colorado Springs Pioneers Garden of the Gods Park Peterson Air and Space Museum The Broadmoor Seven Falls Air Force Academy Cave Of The Winds Mountain Olympic Training Center Heritage Center Cheyenne Mountain Colorado Springs Fine Arts Center COLORADO SPRINGS (3085) Colorado Springs is currently undergoing a downtown transformation. These new developments are the seeds of a new and modern downtown at the heart of Colorado Springs. The entertainment, restaurants and services that follow will contribute to a re-imagined experience for both visitors and residents. The energy and vibrancy will further the quality of life enjoyed by this community that attracts top jobs and talent. These benefits radiate beyond downtown into the greater metro area.

Here are the upcoming additions:

U.S. Olympic Museum & Hall of Fame Professional Soccer Stadium Multi-use Stadium - directly across from soccer stadium 82 acre master planned redevelopment across from both new stadiums 3,000 seat NCAA D-1 Hockey Arena University of Colorado Sports Medicine and Performance Center 4 Downtown Hotels Colorado Springs Fine Arts Center 2,700 apBrtment units under construction, 2,800 more planned. "NB[PO'VMGJMMNFOU$FOUFS MILITARY IN COLORADO SPRINGS Colorado Springs is heavily influenced by the military. Approximately 5.40% of the city’s population is in the military, and the military presence accounts for nearly 40% of the city’s economy with an annual impact of $2.5 billion. Additionally, a significant number of defense corporations and bases are located within the area. El Paso County is unique as the only county in the nation that is home to five military commands:

Fort Carson Base Cheyenne Mountain U.S. Air Force Academy Schriever Air Force

Together, these bases employ approximately 60,000 people and contribute almost $6 billion to the local economy. Putting these numbers in context, the Pikes Peak region has a population of almost 680,000 people and a salaried workforce of 257,000 people.

Although the military population in Colorado Springs has been declining over the past few years due to reduced defense spending from the 2011 sequestration plan, some of the military bases, such as , have added to their capabilities and troop levels as other bases around the country were forced to close.

Andy Merritt, Chief Defense Industry Officer of the Colorado Springs Regional Business Alliance, continues to work with many people, organizations and the regional government to support our military retention efforts. Military operations in Colorado Springs have been supported, enhanced, and grown in the area for over fifty years. AIR FORCE ACADEMY

The U.S. Air Force Academy, located north of Colorado Springs, is both a military organization and University for the undergraduate education of officers for the United States Air Force. Graduates of the four-year program receive a Bachelor of Science degree and most are commissioned as Second Lieutenants. The Academy is also one of the largest tourist attractions in Colorado, welcoming more than one-million visitors each year.

The U.S. Air Force Academy is among the most selective colleges in the United States. Candidates are judged based on their academic achievement, demonstrated leadership, athletics and character. The academy offers more than 500 courses across 32 academic disciplines. To gain admission, candidates must also pass a fitness test, undergo a thorough medical examination and secure a nomination, which usually comes from one of the candidate’s members of Congress. Recent incoming classes have usually consisted of about 1,400 cadets; just under 1,000 of those usually make it through to graduation. Cadets pay no tuition, but are committed to serve a number of years in the military service after graduation.

In addition to serving 4,400 cadets, the U.S. Air Force Academy employs 300 Air Force and civilian support personnel and manages more than $250 million worth of staff agencies and faculty resources. The surrounding military community includes 25,000 people, including 3,000 military, civilian, and contract personnel who conduct all base-level support activities, including law enforcement and force protection, civil engineering, communications, logistics, financial management, the clinic, and other services.

The academy is also well-known for its stunning chapel. The $3.5 million aluminum, glass, and steel structure is 150 feet tall and features 17 spires. The chapel was recently named one of CNN’s most epic churches in America. The building contains a separate chapel for four major religious faiths — Protestant, Catholic, Jewish, and Buddhist — plus an all-faiths room used by Muslim cadets and available for members of the other faiths as well. Each chapel has its own entrance, and services may be held simultaneously without interfering with one another.

*Some information sourced from http://www.usafa.af.mil/About-Us/Base-Information U.S. OLYMPIC MUSEUM

The U.S. Olympic Museum will be located where many Olympic and Paralympic dreams begin – at 6,035 feet above sea level, in the shadow of Pikes Peak – just a few blocks away from the United States Olympic Committee headquarters in Colorado Springs. This will be the first full-fledged Olympic museum in the United States and will be developed on 1.7 acres of land in Colorado Springs’ Southwest Downtown Urban Renewal District, creating a stunning gateway to Downtown Colorado Springs and America the Beautiful Park. It is set to open in early 2020 and has an estimated cost of roughly $75 million.

The Museum is dedicated to U.S. Olympic and Paralympic athletes and their compelling stories. It will be a world-class destination, with the artifacts, media and technology behind the athletes who make the United States proud. It will focus on the core values of the Olympic and Paralympic movements: friendship, respect and excellence; determination, equality, inspiration and courage.

While The Olympic Training Center draws about 130,000 visitors a year. Museum officials are expecting their 60,000-square-foot showcase to eventually draw up to 350,000 a year, with more than half the visitors coming from outside the state. The 60,000-square-foot building will embody the forward-looking values of Team USA, with 20,000 square feet of highly interactive exhibit space, a state-of-the-art theater, gift shop, café, and broadcast studio. BROADMOOR HOTEL

The Broadmoor in Colorado Springs is known for being a member of the Historic Hotels of America of the National Trust for Historic Preservation, as well as the longest-running consecutive winner of both the AAA Five-Diamond and Forbes Five-Star awards. The property originally started as a dairy farm, was turned into a casino in 1891, and became a hotel in 1918. Blending European elegance and Western hospitality, The Broadmoor has been the destination of a long list of presidents, statesmen, foreign dignitaries, sports stars, and celebrities. The Broadmoor is not only the premier attraction for the Springs, but draws consistent visitors nationwide.

The Broadmoor continues to offer impeccable service, distinctive amenities, and endless opportunities to explore the picturesque mountains, streams, and canyons that have inspired generations. The hotel offers over 185,000 square feet of meeting space and 779 rooms including suites, cottages, and cabins. Fine dining includes 18 award-winning restaurants and lounges, including the Five Diamond Penrose Room. The Forbes Five-Star Spa at The Broadmoor offers luxurious spa services. The Broadmoor features three of Colorado’s championship golf courses and is also ranked among the Top 10 tennis resorts in the United States. Additionally, there are 26 specialty shops located across from the resort. Nearby activities include fly fishing, horseback riding, waterfall treks, and ziplining adventures. MANITOU SPRINGS

Manitou Springs is a small town located at the base of Pike’s Peak, just 15 minutes west of Colorado Springs with about six miles from one downtown to the other. “Manitou” is a Native American word meaning “great spirit.” The Ute, Cheyenne and other Native Americans considered this area sacred for its healing springs and clean mountain air. Manitou Springs features eight naturally carbonated mineral spring fountains, which are free to use. Health and wellness continues to be a draw for residents and visitors who come to the area for its unparalleled quality of life and holistic, spiritually uplifting charm. Additionally, with Colorado Springs banning recreational marijuana stores, Manitou Springs has emerged as the closest option for those in Colorado Springs to purchase marijuana.

Manitou Springs is a vibrant artisan community with art, music, theater, and sidewalk sculpture displays. The Historic District is lined with unique art galleries, one of a kind gift shops, and trading posts with handcrafted Native American treasures. It is also home to dozens of artists and art galleries.

Manitou Springs is known for its proximately to Pikes Peak. The Manitou and Pikes Peak Cog Railway take travelers to the top of Pikes Peak with an elevation of 14,115 feet. For those that prefer to walk, there are a variety of hiking trails leading to spectacular views at the top, with the 13-mile Barr Trail serving as one of the most popular routes. The area also features the famous Garden of the Gods Park and The Incline, a popular hiking train that gains over 2,000 feet of elevation in less than 1 mile. The Cave of the Winds, Miramont Castle, and Cliff Dwellings Museum are also popular destinations. Additionally, the North Pole and Santa’s Workshop, , Seven Falls, Dinosaur Resource Center, Colorado Wolf and Wildlife Center, and the Air Force Academy are all a short drive away. CAPSTONE TEAM

JASON KOCH SEAN HOLAMON Partner Senior Advisor [email protected] [email protected] 303.918.8909 303.588.2119

JOSH BENARD KIM HOFF Transaction Coordinator Marketing Manager [email protected] [email protected] 916.216.4606 612.669.2068 CONFIDENTIALITY DISCLAIMER

Capstone Apartment Partners has been engaged as the exclusive listing Broker representative of the Owner for the sale of this property. No contact shall be made by any prospective purchaser or agents to the Owner, its executives, staff, personnel, tenants, or related parties.

This Investment Offering Memorandum is a confidential solicitation of interest, and the information provided herein is provided for the sole purpose of considering the purchase of the Property. The Owner expressly reserves the right, at its sole discretion, to reject any or all expressions of interest to purchase the Property or to terminate discussions with any entity at any time with or without notice. The Owner shall have no legal commitment or obligation to any entity reviewing the Investment Offering Memorandum or making an offer to purchase the Property unless and until the Owner executes and delivers a signed Purchase Agreement on terms acceptable to the Owner. By receipt of this Offering Memorandum, prospective purchaser will be deemed to have acknowledged the foregoing and agrees to release the Owner from any and all liability with respect hereto. The enclosed materials are being provided solely to facilitate the prospective purchaser’s own due diligence for which the purchaser shall be fully and solely responsible. All information contained herein is confidential in nature, and recipient agrees not to photocopy, duplicate, forward, distribute, or solicit third party interest without written permission and consent from Owner or Capstone Apartment Partners.

Neither Capstone Apartment Partners nor the Owner make any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein, and nothing contained herein shall be relied upon as a promise or representation as to the future performance of the Property.

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