OFFERING MEMORANDUM BROWN APARTMENTS 67 Units • Portland,

www.hfore.com • (503) 241.5541 Brown Apartments OFFERING MEMORANDUM BROWN APARTMENTS 807 SW 14th Avenue • Portland, OR 97205

TABLE OF CONTENTS

I. Executive Summary 4

II. Location 17

III. Operations Analysis 30

IV. Offer Terms 36

HFO INVESTMENT REAL ESTATE

Rob Marton Greg Frick [email protected] [email protected] (971) 717.6335 (971) 717.6332

www.hfore.com • 503.241.5541

Licensed in the States of Oregon and Washington ASSET SUMMARY INVESTMENT SUMMARY Property Brown Apartments Address 807 SW 14th Avenue Rare opportunity, unique historic bricker. The Brown Apartments has been owner- Portland, OR 97205 managed for more than 20 years and offers a rare opportunity to acquire a historic bricker in Portland’s urban core. Much of the Brown Apartments’ historic character has been County Multnomah maintained with original hardwood floors, period lighting fixtures, clawfoot bathtubs, Year Built 1915 and trundle hideaway beds. Common area updates include new laundry systems, updated elevator and entryway. Total Units 67 Outstanding central location, high-demand district. The Brown Apartments is located Approx NR Sq Ft 30,018 sq ft on the eastern edge of the Goose Hollow neighborhood placing the asset between the Avg Unit Size 448 sq ft exclusive Pearl District, the Timber’s Major League Soccer stadium, and the West End, one of Portland’s newest retail districts. Portland’s living room, Pioneer Court House Square, Stories 5 floors Portland State University urban campus and the Northwest District, which includes the Alphabet District, Nob Hill and Slabtown are short distances to the Brown Apartments via Acreage 0.23 acres walking, biking or public transportation.

The Brown is immediately adjacent to the MAX light rail blue line. Both MAX line and bus service are accessible just two blocks away at the MAX Station. The PRICING Portland Streetcar is less than three blocks away connecting the Brown Apartments to the Northwest District, the Central Eastside and Lloyd Center. Price $10,000,000 Stable operating history, increasing rents. The Brown Apartments’ self-management Price per Unit $149,254 provides an opportunity to increase cash flow. The property does not currently charge Price per Sq Ft $333 for utilities. The property has the ability to implement individual metering of gas to each unit. Current rents average $997 per unit, or $2.23 per sq ft and are trending 3.6% higher than trailing 12-month rents. Leases signed over the previous six months average $1,039 per unit, or $2.32 per sq ft; an increase of 4.1% over current scheduled rents. Tours and Inquiries: All tours and inquiries regarding the Brown Apartments are to be directed to HFO UNIT MIX Investment Real Estate at (503) 241.5541. Unit Type Unit Count Avg Sq Ft Total Sq Ft % of Total Units Studios 50 395 19,750 74.6% Rob Marton Greg Frick 1 Bedrooms 17 604 10,268 25.4% [email protected] [email protected] (971) 717.6335 (971) 717.6332 Total / Averages 67 448 30,018 100.0%

4 HFO INVESTMENT REAL ESTATE LOCATION

NW DISTRICT NW Lovejoy St LLOYD DISTRICT NW 23rd Ave KINGS HEIGHTS NORTHWEST PEARL DISTRICT 84 DISTRICT NW Glisan St

KERN 405 OLD TOWN Burnside St Grand Ave SW Alder St

SW Washington St 99W 5 BROWN APARTMENTS PORTLAND BUCKMAN GOOSE HOLLOW PIONEER PLACE Martin Luther Blvd King Jr Martin DOWTOWN PORTLAND

SW Madison St 12th Ave Washington Park CENTRAL EAST 26 WILLAMETTE RIVER GOOSE HOLLOW SW Clay St PORTLAND SOUTHWEST HILLS SW Market St

SW Vista Ave

LADD’S ADDITION SOUTHWEST HILLS

Marquam SOUTH Nature Park Barbur Blvd WATERFRONT 26

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 5 GOOSE HOLLOW Residents enjoy easy access to The Goose Hollow neighborhood is located on the western edge of Portland’s main downtown business district. Its central location provides residents with easy access to the city’s best Interstate 405 and U.S Highway amenities, including Washington Park, the Timbers’ stadium in Providence Park, Portland State University, the Portland Art Museum, and the Arlene Schnitzer Concert Hall. The Blue and Red 26, creating a quick commute to max lines connect this vibrant neighborhood with the rest of the city, and the suburbs beyond. the west side’s major employers 46% of households in the Goose Hollow neighborhood do not own a car, and 20% commute via public transit. like Nike, Columbia Sportswear and Intel, as well as OHSU and The neighborhood’s walk score Portland’s Inner Eastside. 97 90 94

Walk Score Transit Score Bike Score

According to Enterprise Community Partners, the Goose Hollow neighborhood is in the 99th percentile nationwide for accessibility of jobs, goods, and services, as well as for community institutions. Residents of Goose Hollow are highly educated – in the census tract, 58% of adults have a bachelor’s degree or higher, and 96% have at least a high school diploma. 87% of Goose Hollow residents are renters.

Demographic Snapshot: 1-mile Radius

41,934 +13.2% 79% 37.4% 26% Current Est. Est. Population % Renter-occupied Bachelor’s Degree Postgraduate Degree Population Growth (2019–2024) Housing Units

6 HFO INVESTMENT REAL ESTATE PORTLAND MARKET SNAPSHOT PORTLAND METRO AREA The Portland Metro Area is one of 4.4% 38.3% 3.9% the strongest apartment markets Metro-area vacancy Metro area renter- Unemployment rate in the nation, as reflected in occupied housing rate (November 2019) strong year-over-year rent growth and consistently tight vacancy. The area’s strong job market and high quality of life continues to attract $68,125 7.4% 54% Median household Year-over-year Millennials 25-34 in Portland new residents; between 2018 and income rent growth* with a bachelor’s degree or higher 2019 approximately 72 people moved to the Portland metro area each day.* New apartment construction has not caught up to the housing demand created by 8,360 4,474 #2 in-migration. New Portland residents Portland residents for Oregon in Migration (2018-2019) per square mile in US *Portland Center for Population Research and State of Washington Office of Financial Management

*Multifamily NW Apartment Report (Oct. 2018-2019)

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 7 8 HFO INVESTMENT REAL ESTATE BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 9 10 HFO INVESTMENT REAL ESTATE BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 11 12 HFO INVESTMENT REAL ESTATE Many of the apartments at the Brown have original built-ins and classical fixtures. Upper floor units have downtown skyline views.

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 13 14 HFO INVESTMENT REAL ESTATE The Brown Apartments offers residents common area laundry and bike storage.

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 15 ASSET OVERVIEW SITE CONSTRUCTION SUMMARY SUMMARY City Portland Year Built 1915 County Multnomah County No. Of Buildings 1 Residential Building Jurisdiction Portland Stories 5 stories Tax Account No. / R246743 / 1N1E33DD 6900 Construction Type Brick walls with wood-frame floors and roof Map and Tax Lot Foundation Concrete Zoning CX – Central Commercial High-Density Exterior Walls Brick façade Residential. The CX zone is a high- Roofing Duro-Last density commercial zone intended for Windows Wood with interior storm windows development within Portland’s most Laundry Service 1 common area laundry room urban and intense areas. The CX zone Heating Common steam heat allows for intense development with high building coverage and large buildings placed close together. Development is intended to be pedestrian-oriented with a strong emphasis on a safe and attractive streetscape. Specific allowable uses include retail sales and services, office space, household living, and institutional uses.

16 HFO INVESTMENT REAL ESTATE LOCATION

GROCERIES BANK COFFEE DINING ENTERTAINMENT

0.3 mile 1.2 mile 0.1 mile 0.07 mile 0.3 miles

Brown Apartments SCHOOL PARK MEDICAL SHOPPING LIGHT RAIL 807 SW 14th Avenue Portland, OR 97205 0.2 mile 0.3 miles 0.8 miles 0.04 mile 0.3 mile

Nearby lifestyle conveniences:

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 17 GOOSE HOLLOW – THE NEIGHBORHOOD Public school students in Goose Hollow and Downtown attend Chapman Elementary School, West Sylvan Middle School, and Lincoln High School.

CHAPMAN ELEMENTARY SCHOOL 1.7 mile – 8 minutes driving Chapman students also outperform their state peers on all subject tests, and the school building itself is famous for the migrating Swifts that return to nest in its chimney every Fall. WEST SYLVAN MIDDLE SCHOOL 4.5 mile – 10 minutes driving The historic Multnomah Athletic West Sylvan Middle School receives a 9/10 score on Great Schools, due to its students’ impressive Club (MAC), which overlooks test scores and high rates of academic progress. Providence Park stadium where the Timbers and Thorns play, is LINCOLN HIGH SCHOOL a central feature of the Goose 0.3 mile – 1 minutes driving Hollow neighborhood. The MAC Lincoln High students outperform their statewide peers in science, English, and math. Lincoln’s is a full-service athletic club, graduation rate is 94%, well above state average. and also hosts conferences and events throughout the year. A major renovation of Providence Park was completed in 2019 adding 4,000 seats and bringing total capacity to 25,218.

18 HFO INVESTMENT REAL ESTATE EDUCATION PORTLAND STATE UNIVERSITY Downtown Portland is home In the neighborhood directly surrounding Portland State University, 96% of adults have a to the city’s thriving central high school diploma, while 60% of adults have a bachelor’s degree or higher. 80% of residents report feeling safe and secure in their neighborhood. The homeownership rate is extremely low business district, as well as downtown – approximately 90% of households rent. Most neighborhood residents are young Portland State University. It is students and professionals – only 2% of households have children, and the average number of occupants per household is 1.58. the central transit hub in the

Portland State University’s total enrollment for the 2017-18 school year was 27,670 students. city, featuring MAX light rail, 21,848 of these students were undergraduates. While 77.5% of PSU students are from Oregon, buses, and the Portland Street the university attracts people from all 50 states as well as 98 countries. The top non-US countries represented are China, India, Saudi Arabia, Kuwait, and Japan. PSU employs 7,258 full and part Car. 47% of households do time workers, including 1,947 faculty members. The university partners with a variety of local stakeholders including Intel, OHSU, Portland Public Schools, City of Portland, Multnomah not have a vehicle, and 22% County, and PGE for student and community programs. of workers commute by public transportation. The area has a walk score of 96, a transit score of 95, and a bike score of 92. Residents have access to a wide variety of amenities within walking distance, including bars and restaurants, grocery stores, shopping areas, parks, schools, and cultural attractions. More than 45% of residents living in the vicinity of PSU walk to work.

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 19 TO THE WEST

Washington Park

Montgomery Park Multnomah Athletic Club

Providence Park MAX Station

Lincoln High School Track & Field

SW 15th Ave

Brown Apartments Blue & Red lines SW Yamhill St

SW Taylor St

20 HFO INVESTMENT REAL ESTATE TO THE NORTHEAST

Broadway Bridge Tiffany Center

McMenamins Crystal Ballroom

Blue & Red lines SW Yamhill St

SW 15th Ave Brown Apartments 405 14th Ave

Representative Tenants • KPFF Consulting Engineers • Smith Freed & Eberhard PC • Open Mesh, Inc. • Magnate Worldwide (US Bancorp Building) • Survey Monkey • All Med Healthcare Management • Thede Culpepper Moore Munro & • Naegeli Deposition & Trial • KBCM Technology Group • Regus Silliman LLP • Geranium Lake Flowers • US Bank • Clinicient • InComm Digital Solutions • Vevo • Five Pines Dental • New Relic, Inc. • Holland & Knight LLP • Edward Jones • Sather, Byerly & Holloway LLP • Betts, Patterson & Mines, PS • Iovation Inc. • Deloitte Development LLC • Fisher & Phillips LLP • Willamette Management Associates • CorVel Corporation • Digital Trends • Northwest Analytics Inc. • Brighton Jones • Miller Nash Graham & Dunn LLP • Portland City Grill • Kivel & Howard LLP • Symbeo

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 21 TO THE SOUTHEAST

Financial District (Downtown Portland)

405

Brown Apartments

14th Ave

SW 14th Ave

Blue & Red lines SW Yamhill St

22 HFO INVESTMENT REAL ESTATE NEARBY TRANSIT & POINTS OF INTEREST EDUCATION Drive Distance Pacific Northwest College Of Art 5 min 0.8 mi Portland State University 5 min 1.4 mi Oregon Health and Science University 5 min 2.0 mi COMMUTER RAIL Drive Distance Beaverton Transit Center (West Side Express) 14 min 7.6 mi Hall/Nimbus 15 min 9.4 mi

SHOPPING CENTER Walk Distance Fred Meyer Stadium 9 min 0.4 mi Stadium Shopping Center 9 min 0.5 mi Whole Foods Market 5 min 0.3 mi

PARKS AND RECREATION Drive Distance Forest Park Conservancy 2 min 0.2 mi Director Park 3 min 0.5 mi Friends of the Columbia River Gorge 5 min 0.8 mi Lan Su Chinese Garden 6 min 0.9 mi Oregon Maritime Center and Museum 7 min 1.2 mi

AIRPORT Drive Distance Portland International 20 min 13.9 mi

MILITARY BASES Drive Distance Portland Airport Air Guard Station 17 min 8.9 mi Camp Withycombe National Guard 25 min 17.3 mi Camp Bonneville Military Reservation 34 min 23.0 mi

Source: Apartments.com

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 23 NEARBY TRANSIT & POINTS OF INTEREST

Good Samaritan Hospital Union Station

Steel Bridge NW Glisan St 84

OLD TOWN

23rd Ave 23rd CHINA TOWN BROWN APARTMENTS W Burnside St Burnside Bridge Portland Saturday Market

SW Washington St 5 SW Alder St Washington Park Lincoln High School 405 WILLAMETTE RIVER GOOSE HOLLOW Pioneer Morrison Bridge Ave NE Grand Courthouse SW Park Ave

Square NE Martin King Jr Blvd Luther DOWNTOWN

Portland Art SW Broadway MAX Blue Line Museum SW Madison St NW Naito Pkwy 26 Tom McCall Waterfront Park MAX Green Line SW Jefferson St 99E MAX Orange Line Hawthorne Bridge SW Clay St 99E MAX Red line SW Market St MAX Yellow Line Portland Streetcar A Loop Portland Streetcar B Loop Portland Streetcar North South Line

24 HFO INVESTMENT REAL ESTATE LIFESTYLE CONVENIENCES AND EMPLOYERS

1 Trader Joe’s 34 Stumptown Coffee Roasters 2 Fred Meyer 35 Pine Street market 1 NW Glisan St 3 Walgreens 36 T.J Maxx 4 13 4 St. Mary’s Cathedral 37 Office Depot 2 3 NW Everett St 5 Providence Park 38 Nordstrom NW Broadway 6 Multnomah Athletic Club 39 Regal Fox Tower 7 Little Red’s Bakeshop & Coffee 40 Columbia Sportswear 405 8 Tiffany Center 41 Arlene Schnitzer Concert Hall 14 15 Burnside St 9 Westside Market 42 Departure Restaurant + Lounge 16 17 19 31 33 10 Lincoln High School 43 Pioneer Courthouse Square 32 5 18 20 34 35 11 KGW Media Group 44 Chase Bank 12 45 7 8 Leaky Roof Gastro Pub Pioneer Place 21 Broadway SW 18th Ave 22 23 13 Deschutes Brewery 46 Apple Store 6 24 36 SW Washington St 25 SW Morrison St 14 47 37 Whole Foods Market Nike Portland 9 SW Alder St 15 Powell’s City of5 Books 48 Buffalo Wild Wings Brown Apartments 26 38 42 49 43 47 16 McMenamins Crystal Ballroom 49 Killer Burger 10 39 45 48 44 50 51 17 Jake’s Famous Crawfish 50 Nordstrom Rack 14th Ave 52 40 46 18 Tasty n Alder 51 Bank of America 11 27 SW Park Ave 53 12 54 19 52 SW Jefferson St SW 10th Ave 41 Living Room Theater Ross Dress for Less 55 20 53 56 Stumptown Coffee Roasters Microsoft Store 28 SW 6th Ave 29 SW 5th Ave 58 21 Blue Star Donuts 54 The UPS Store 57 26 22 Starbucks 55 Auditorium Building SW 2nd Ave 23 Jake’s Grill 56 Multnomah County Courthouse 30 SW Columbia St 24 Saint Cupcake 57 Portland Building 59 25 Target 58 Word Trade Center Portland 60 99W SW Market StSW Clay St 26 Multnomah County Central Library 59 24 Hour Fitness 61 62 27 Portland International Film Festival 60 Oregon DMV 28 Portland Art Museum 61 St. Mary’s Academy WILLAMETTE RIVER 29 Safeway 62 Keller Auditorium 30 McMenamins 31 U.S. Bancorp MAX Line(s) 32 Portland City Grill Streetcar(s) 33 Voodoo Doughnut

56 BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 25 TRANSPORTATION SYSTEMS The Portland/Vancouver metro area including Clackamas county and • The Blue Line continues through downtown Portland to the cities of the City of Happy Valley, is well served by an outstanding public transit Beaverton and Hillsboro system. • The Red Line terminates at the Portland International Airport The MAX Blue Line was the first of the light rail’s five separate projects • The Green Line connects to Clackamas Town Center to be built, and was the first federally funded light rail project that used • The Orange Line is the MAX’s newest extension and connects to the City money initially earmarked to build freeways. The initial 15 miles of the of Milwaukie Blue Line opened in 1986, with 30 rail stops that connect downtown Portland with the City of Gresham. • Planners are working on funding and initial planning of a new line from downtown Portland to a new terminus roughly 8 miles south at The Green Line was completed 2009 connecting Clackamas, along Bridgeport Village shopping mall in Tigard. Interstate 205, to the Gateway Transit Center. The 8.3 miles of track provides transportation between 8 additional stations before connecting to the previously built I-84 track. W I

L L A M

E T T E

R I

V E

R MAX Blue Line MAX Green Line MAX Orange Line MAX Red line MAX Yellow Line DOWNTOWN GRESHAM PORTLAND WILLAMETTE RIVER

HILLSBORO BEAVERTON

Portland Streetcar A Loop Portland Streetcar B Loop Portland Streetcar North South Line Brown Apartments CLACKAMAS

26 HFO INVESTMENT REAL ESTATE PORTLAND REGION HIGH TECH & CHIP MANUFACTURING GOVERNMENT Attracted by the Portland area’s educated The U.S. Federal Government is among Portland workforce and relative low cost of doing business, largest employers, with 18,300 workers. The State tech companies continue opening branches and— of Oregon gives employment to an additional in some cases—relocating to the area entirely. 15,100 residents in government and education.

With over 20,000 employees, Intel is the area’s largest private employer. Intel acquired its first HEALTHCARE AND RESEARCH Portland location in 1974. The company is currently Health services are another major employment expanding its presence with forthcoming D1X sector for the Portland area. The top healthcare microprocessor chip facilities at the Ronler Acres employers in the area are Providence Health Campus in Hillsboro. This 1.1 million square foot Systems, with 18,885 employees, and The Oregon factory is part of a five-year, $6 billion expansion, Health Sciences University (OHSU), with 17,556 and is part of the company’s long-term plans for workers. OHSU is the recent recipient of a total of $1 growth. Intel is the largest property taxpayer billion in donations for cancer research from over in Washington County, with payments of 10,000 Oregon donors. Grants from the National approximately $30 million a year. Institutes of Health totaled $245.62 million in 2018.

Other notable Portland-area high-tech companies include ON Semiconductor and Tektronix. MANUFACTURING In trucking and transportation, Daimler Trucks— SPORTSWEAR with nearly 2,800 area workers—has big plans for the Portland area. The company recently spent $150 Nike has its world headquarters in Beaverton million renovating its Portland facility and invests and employs 12,000 Portland-area residents. The heavily in research and development, including company designs, develops and manufactures autonomous driving. footwear, apparel, equipment and accessories. From here, Nike orchestrates production and design for one of the world’s most recognizable brands. In 2020 Nike will complete a $1 billion expansion of its Washington County campus.

Nike’s two key competitors have a major local presence as well. Those employers include the North American headquarters of Adidas with 1,898 employees, and a new 70,000 SF outpost of Under Armour. Under Armour has moved 100 employees into an iconic former YMCA. BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 27 PORTLAND RANKINGS Portland consistently receives glowing reviews and rankings from the media.

2019 lists include: No.1 No.2 No.2 Best Food City in America Best Cities for Foodies Fiscally Fit Cities – WalletHub (2019) – – Sperlings (2019) – – Sperlings 2019 (FISCALLY not physically) –

No.4 No.4 No.5 Best City for an Active Lifestyle Best Cities for a Healthy Retirement Best Places for Business and Careers – Wallethub – – Sperlings (2019) – – Forbes (2015-2019) –

No.5 No.7 No.7 Best Cities to Work from Home U.S. Cities with Lowest Startup Costs Healthiest Cities to Live – Yahoo Finance (2020) – – Embroker (2019) – – Thrillist.com –

No.7 No.8 No.8 Best Cheap Destinations in the U.S. Best Place to Live in the U.S. Fittest Cities in America – U.S. News and World Report – – U.S. News and World Report – – CBS News –

2018 lists include: • No.1 Restaurant City of the Year – Bon Appetit No.9 • No.3 Healthiest City in the U.S. – Active.com Best Foodie Cities in the USA • No.4 Best City for Biking – Fast Company – U.S. News and World Report – • No.5 Fittest Cities in America – American College of Sports Medicine

28 HFO INVESTMENT REAL ESTATE JOB GROWTH BY INDUSTRY MSA PORTLAND According to the State of Oregon Employment Department, the Portland Metro region Full time employment increased 1.6% created jobs at the rate of 1.7% in 2019. Portland ranks 16th among the 50 largest between October 2018 – October 2019, an increase of 20,200 positions. Below metropolitan areas in the United States. is an overview of net job creation by industry from October 2018 through Among the influx of companies to the Portland metropolitan area—including many who have transplanted their world, North American or U.S. headquarters here—are Adidas, October 2019: Daimler Trucks, KinderCare and Keen.

Other significant companies in the close-in Portland metro area include Umpqua Holdings, Weiden+Kennedy, NW Natural, PacifiCorp, PGE, New Seasons, Storables, McMenamins, McCormick & Schmick’s, Franz Bakery, Portland Brewing, Powell’s Books, ZGF Architects, and 6,600 Professional and Business Services two major West Coast law firms: Stoel Rives and Schwabe, Williamson & Wyatt.

Transportation, Warehousing & Utilities 3,500

Education & Health Services 3,300 Healthcare & Social Assistance 3,300 Financial Activities 3,300 Administrative and Waste Services 2,500 Government

2,500

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 29 OPERATIONS ANALYSIS BROWN APARTMENTS • 67 UNITS • PORTLAND, OR

Income T6 Lease Rents Annualized Projected Operations Note Scheduled Gross Rent $835,569 $12,471 $835,569 $12,471 1 Less: Vacancy/Credit Loss -$41,778 -$624 -5.0% -$41,778 -$624 -5.0% 2 Net Rental Income $793,791 $11,848 $793,791 $11,848 Other Income $8,205 $122 $67,925 $1,014 3 Includes: Laundry $6,900 $103 $6,900 $103 Includes: Utility Billing (RUBs) $0 $0 0.0% $51,025 $762 65.0% Includes: Miscellaneous $1,305 $19 $10,000 $149 Gross Operating Income $801,995 $11,970 $861,715 $12,861 Expenses November 2019 TTM Per Unit % GOI Projected Operations Per Unit % GOI Real Estate Taxes $38,807 $579 4.8% $76,682 $1,145 8.9% 4 Insurance $10,288 $154 1.3% $35,000 $522 4.1% 5 Garbage $17,073 $255 2.1% $17,073 $255 2.0% Sewer/Water $44,500 $664 5.5% $44,500 $664 5.2% Electric $15,218 $227 1.9% $15,218 $227 1.8% Gas $16,927 $253 2.1% $16,927 $253 2.0% Total Utilities $93,718 $1,399 11.7% $93,718 $1,399 10.9% Administrative $10,679 $159 1.3% $10,679 $159 1.2% Fee Management $24,060 $359 3.0% $25,851 $386 3.0% 6 On-site Payroll $57,598 $860 7.2% $45,557 $680 5.3% 7 Contracted Services $6,619 $99 0.8% $6,619 $99 0.8% Maintenance/Repairs $41,796 $624 5.2% $41,796 $624 4.9% Turnover $12,194 $182 1.5% $12,194 $182 1.4% Reserves $16,750 $250 2.1% $16,750 $250 1.9% 8 Total Expenses -$312,509 -$364,845 Expenses per Unit -$4,664 -$5,445 % of Gross Operating Income 39.0% 42.3% Net Operating Income (NOI) $489,487 $496,870

30 HFO INVESTMENT REAL ESTATE OPERATIONS ANALYSIS BROWN APARTMENTS • 67 UNITS • PORTLAND, OR

1. RENTS The Brown Apartments has demonstrated consistent rent increases. Rents achieved on move-ins over the last six- months (T6) average $1,039 per unit, or $2.32 per unit. Currently, scheduled rents average $997 per unit or $2.23 per sq ft and T6 lease annualized demonstrate an increase of 4.1%. T6 leases are 7.5% higher than March 2020 TTM average rents. RENT ROLL ANALYSIS: MARKET RENTS Average T6 Square Lowest Highest Average T6 Unit Type Unit % Diff Leases Rent Count Achieved Rent Achieved Rent Leases Feet per Sq Ft Studio 50 395 $900 $995 10.6% $989 $2.50 1 Bedroom / 1 Bathroom 17 604 $1,050 $1,195 13.8% $1,186 $1.96 Totals / Averages 67 448 $975 $1,095 12.2% $1,039 $2.32

2. VACANCY/CREDIT LOSS, The historical operations do not include historical vacancy. Projected operations include a 5.0% vacancy rate CONCESSIONS, AND BAD based on lender underwriting requirements. Lenders consider the long-term nature of a property and its market location. Lenders typically underwrite to a 5.0% vacancy. DEBT Approximately 19 units signed leases in 2019 resulting in an average 1.6% vacancy.

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 31 OPERATIONS ANALYSIS BROWN APARTMENTS • 67 UNITS • PORTLAND, OR

RENT RANGES BY UNIT TYPE MOST RECENT LEASES $1,250 Average Rent Average Rent per Move-In Date $1,200 Sq Ft Studio One-Bedroom Sq Ft 3/11/2020 415 $995 $2.40 $1,150 3/10/2020 719 $1,150 $1.60

$1,100 2/5/2020 359 $995 $2.77 2/1/2020 539 $995 $1.85

$1,050 1/31/2020 341 $950 $2.79 Scheduled Rent 1/24/2020 594 $1,195 $2.01 $1,000 1/15/2020 594 $1,195 $2.01 $950 1/9/2020 650 $1,195 $1.84 1/9/2020 377 $995 $2.64 $900 1/1/2020 398 $995 $2.50

$850 Average 499 $988 $1,184 $2.24 Studio One-Bedroom

Minimum Rent Average Rent Maximum Rent

32 HFO INVESTMENT REAL ESTATE OPERATIONS ANALYSIS BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 3. OTHER INCOME The Brown Apartments’ other income is minimal for a property of this size. Communities the size of The Brown could generate up to $10,000 annually in additional revenue—not including laundry or utility RUBs. The table below estimates potential other income collections, which have been rounded up in the projected operations to cover lease termination fees.

Other Income Estimates Late Fees/ NSF/ Application Fees Pet Premium Annual Total Administrative Fees Non-Compliance Total Units 67 % of Total Units 30% 35% 40% # of Units 20.1 23.5 26.8 Charge Per Unit 1.50 1.00 1.00 Fees $45 $25 $25 Annual Total $1,357 $586 $8,040 $9,983 Annual Per Unit $20 $9 $120 $149

• RUBs. A few of The Brown Apartments’ competitors are charging residents for utilities (RUBs). An investor may implement RUBs charges to align with the Portland market. The projected RUBs collections are based on charges found at comparable properties and would cover water, sewer, garbage, and gas (heat). Stabilized RUBs charges could generate more than $48,402 of income annually. The average cost to residents would be $60 monthly per unit. This charge covers approximately 65% of water, sewer, garbage and gas expenses.

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 33 OPERATIONS ANALYSIS BROWN APARTMENTS • 67 UNITS • PORTLAND, OR EXPENSES The Brown Apartments’ operating expenses include limited property taxes due to the historical tax abatement that expires in 2023. The property insurance is also limited as the current owner does not have earthquake coverage. Expenses have been adjusted to include earthquake insurance coverage and for fully assessed property taxes. Unless noted below, operating expenses were created utilizing November 2019 TTM operations.

4. PROPERTY TAXES Oregon’s property taxes are evaluated on a fiscal TAX HISTORY year starting July 1. Property tax values were Tax Year released October 15 for the 2019-2020 tax year. 2017/2018 2018/2019 2019/2020 The current historical tax abatement places the Account # property taxes for the Brown at $40,008 for the R246743 $39,212 $39,760 $40,008 2019-2020 tax year. Total $39,212 $39,760 $40,008 % Change 5.22% 1.38% 0.62%

The Brown Apartments currently has a historical tax abatement that expires in 2023 and cannot be renewed. The following table includes tax comparables for similar vintage properties. Based on the tax comparables and properties with related average unit sizes to the Brown Apartments. The projected taxes, should they be fully assessed today, are estimated at approximately $1,145 per unit, or $2.55 per sq ft.

Property Units Year Built 2019 Taxes Per Unit per Sq Ft Average Chelsea Court Apartments 32 1925 $31,740 $992 $2.31 430 Amber Court Apartments 39 1926 $41,600 $1,067 $2.24 477 Chapman Court 38 1926 $39,289 $1,034 $2.08 497 Marcella 46 1926 $54,984 $1,195 $2.27 527 Average 39 1926 $41,904 $1,072 $2.22 483

5. INSURANCE Property insurance has been adjusted to include earthquake insurance due to the building’s unreinforced masonry construction. The projected cost for insurance is $522 per unit or $35,000 annually.

6. FEE MANAGEMENT Projected operations include a management fee of 3.0% of GOI, which reflects typical management costs for assets like The Brown Apartments in the Portland metro area.

34 HFO INVESTMENT REAL ESTATE OPERATIONS ANALYSIS BROWN APARTMENTS • 67 UNITS • PORTLAND, OR

7. PAYROLL Payroll has been adjusted to reflect third-party management. The payroll cost is for administration only and assumed a ¾ time for an on-site manager and additional leasing back up.

8. RESERVES Lenders require reserves to be set aside to address future capital costs associated with any property as it ages. The projected operations include reserves of $250 per unit.

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 35 ASSET SUMMARY OFFER TERMS Property Brown Apartments Address 807 SW 14th Avenue QUESTIONS & TOUR REQUESTS: Portland, OR 97205 All inquiries, questions, or tour requests are to County Multnomah be directed to HFO Investment Real Estate at (503) 241.5541. Year Built 1915 Please do not disturb the residents. Total Units 67 Approx NR Sq Ft 30,018 sq ft Rob Marton • [email protected] Greg Frick • [email protected] Avg Unit Size Sq Ft 448 sq ft Tyler Johnson • [email protected] Jack Stephens • [email protected] Lee Fehrenbacher • [email protected] PRICING Adam Smith • [email protected] Todd Tully • [email protected] Price $10,000,000 Rand Hoffman • [email protected] Per Unit $149,254 HFO Investment Real Estate Per Sq Ft $333 2424 SE 11th Avenue Cap Rate 4.97% Portland, Oregon 97214 www.hfore.com Avg Unit Size 448 sq ft (503) 241.5541 Fax: (503) 241.5548 FINANCING Brokers licensed in the States of Oregon and Washington. Please contact Blake Hering with Gantry, Inc. for for financing terms and information.

Blake Hering, Jr. Gantry, Inc. (503) 273.0370 [email protected]

36 HFO INVESTMENT REAL ESTATE Providence Park

Lincoln High School

Brown Apartments

BROWN APARTMENTS • 67 UNITS • PORTLAND, OR 37 HFO Investment Real Estate Passion • Collaboration • Specialization

2424 SE 11th Avenue • Portland, OR 97214 www.hfore.com • 503.241.5541

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