8 Units | Built 2018 Queen Anne | Seattle, WA

OFFERING MEMORANDUM BERTONA STEPS 3402 15th Avenue West Seattle, 98119

Investment Contacts

Matt Kemper Vice President +1 206 607 1752 [email protected]

Don Flanigan Vice President +1 206 971 7020 [email protected]

Jordan Louie Vice President +1 206 971 7007 [email protected]

Financing Contacts

Seth Heikkila Senior Vice President +1 206 607 1732 [email protected]

Drew Heitstuman Associate +1 206 971 7021 [email protected] CONTENTS

Executive summary 04

Property description 08

Submarket overview 14

Market overview 18

Rent & sales comparables 22

Financial analysis 28

Transaction guidelines 32 EXECUTIVE SUMMARY EXECUTIVE SUMMARY 5

The Offering

JLL is pleased to present Bertona Steps to the investment community. Completed in 2018, the condo-quality asset offers eight spacious units with Scandinavian designer finishes and high energy efficiency. Bertona Steps sits on the western side of Queen Anne, providing easy access to the amenities and employment opportunities of Greater Seattle. The property is less than a five-minute walk to the RapidRide D line, as well as the future Interbay Light Rail Station. The upcoming Expedia campus is also nearby, less than 10 minutes by car. Property Details

Name Bertona Steps Address 3402 15th Avenue West, Seattle, Washington 98119 Parcel Number 277060-3480 Built 2018 Construction Type Wood frame Number of Units Eight apartment homes Average Unit Size 905 square feet Residential Space 7,238 net rentable square feet Floorplans Live-work (1x1.5) and two bedroom / one bath options Parking Five parking stalls

OFFERING MEMORANDUM 6 EXECUTIVE SUMMARY

Investment Highlights

RESIDENTIAL DESTINATION Queen Anne is among the most coveted and trendy neighborhoods for the young city-dwelling professionals of Seattle. It offers a quintessential residential environment and is filled with clusters of activity desired by the urbanites of the Millennial generation. An influx of this demographic toward Queen Anne has bolstered its residential base and solidified its status as an in-demand community of Seattle.

COMPELLING LOCATION Bertona Steps is within close proximity of restaurants, shopping and entertainment such as QFC and Whole Foods, the Interbay Golf Center and Athletic Complex, as well as Seattle Pacific University and the University of Washington. The asset is conveniently located near key regional employment hubs, offering quick commuting options to notables in high-tech and bio-tech including Amazon, Google, Facebook and Microsoft, among others. Bus routes currently run within a block of the property and future light rail will open just steps away in 2035. Meanwhile, Expedia’s nearby 40-acre campus will host a staff of 4,500 and sits within a direct route of Bertona Steps. The new Expedia campus/world headquarters opens in 2019.

EXCEPTIONAL PRODUCT Recently opened in summer 2018, Bertona Steps exemplifies modern, high-end design with elements such as stainless steel appliances, quartz countertops, oversized windows, plank flooring, in-unit washer/dryers and air conditioning. Luxury is blended with technology with a state-of-the-art security monitoring system, while the incorporation of energy saving appliances, light fixtures and heating/cooling keeps each unit’s energy consumption optimally low.

CHALLENGING FOR-SALE HOUSING MARKET Within the immediate proximity of Bertona Steps, household incomes are $82,108, yet homeownership remains elusive with average home values of $828,500. In comparison, new construction rents average $2,308 per month and rent growth (all vintages) has averaged 5.2%. Overall home prices in Greater Seattle have climbed 85% since 2012 and sale price appreciation is number one in the country.

LEADING METRO Even with surging home prices, Seattle offers 31% more disposable income over the Bay Area. As a result, Seattle is the top ranked city for career-oriented professionals and the nation’s top relocation destination. 110,000 new jobs are listed on LinkedIn and more than 100 out-of-state tech companies have planted a flag in the Seattle region in the past three years. Of the 35 Fortune 500 companies headquartered in the Bay Area, 10 now offer a significant presence in Seattle – the Urban Land Institute’s top real estate investment market for 2018.

LISTED EXCLUSIVELY BY JLL EXECUTIVE SUMMARY 7

University District 5 Central Business South District Lake Union Amazon Lake Union Google Seattle Center Woodland Park Zoo Google Facebook Fremont Microsoƒ Queen Anne Elliott Bay RapidRide D Line & Future Light Rail

Interbay Ballard

Magnolia

Discovery Park

N

OFFERING MEMORANDUM PROPERTY DESCRIPTION PROPERTY DESCRIPTION 9

The Asset

Bertona Steps is a four-story multifamily asset built upon a 5,550-square UNIT MIX foot site. With a location along 15th Avenue West, it has a sought-after Queen Anne address, yet enjoys the close-in amenities of Interbay. The Floorplan Number of Units Avg. Unit Size (SF) % of Unit Mix single structure includes four live-work units and four two bedroom / one Live-Work (1x1.5) 4 790 50% bath units ranging in size from 790 to 1,020 square feet. Total net rentable space equals 7,238 square feet. The property includes five parking stalls Two Bedroom / One Bath 4 1,020 50% and private decks for the upper-level apartments. Expansive windows Total / Average 8 7,238 / 905 100% provide views out towards the west.

OFFERING MEMORANDUM 10 PROPERTY DESCRIPTION

 sqftsqft sqft sqft L L/ W/ W 1 1 808 808 1 1 L1.5 / 1.5WL / 2 W 808 2 808 1 1 1.5 1.5

LOFT LOFT LOFT LOFT DN DN DN DN

UP UP

UP UP

LIVE-WORK LOFT 34023402 15th 15thAve W, Ave Seattle, W, Seattle, WA. 98119WA. 98119 LIVE-WORK LOFT 3402 15th Ave3402 W, 15th Seattle, Ave WA.W, Seattle, 98119 WA. 98119 1 Bd / 1.5 Ba 1 Bd / 1.5 Ba 808 SF 771 SF

LISTED EXCLUSIVELY BY JLL PROPERTY DESCRIPTION 11

 sqft sqft Unit 1 1020 2 1 Plan 2 1020 2 1

BEDROOM BEDROOM BEDROOM

DINING

LIVING DINING

BEDROOM

LIVING

3402 15th Ave W, Seattle, WA. 98119 3402 15th Ave W, Seattle, WA. 98119 TWO BEDROOM TWO BEDROOM 2 Bd / 1 Ba 2 Bd / 1 Ba 1,020 SF 1,020 SF

OFFERING MEMORANDUM 12 PROPERTY DESCRIPTION

Property Details

CONSTRUCTION DETAIL CONSTRUCTION DETAIL Exterior Finish Smooth HardyPanel, HardyPlank, natural wood Cabinets Oak veneer with contemporary hardware package Roof Thermoplastic polyolefin (TPO), three solar panels on roof Counter Surfaces Quartz Framing Conventional framing Subway tile kitchen backsplash, full tile surround on tub Backsplash and shower Live/work units: 16’ 8” Ceiling Height 2x1 units: 11’ 4” Appliances Frigidaire stainless appliances, smooth top range Windows Ply Gem Sinks Undermount Sound Insulation Floor joist bays are insulated Interior Doors Single panel contemporary Flooring Vinyl plank Decks All 2x1 units

MECHANICAL DETAIL Electricity and Gas All electric Plumbing PEX plumbing with low-flow, high-efficiency shower heads Water and Sewer $60 bill back per person Water Heater Electric 36 gallon hot water tank Laundry In-unit Whirlpool stackable Lighting LED lighting package Air Conditioning 2x1 units with Daiken FTX12NMVJV ductless mini split A/C Sprinkler System All units sprinklered and alarmed Heating Stiebel Eltron convection heating units COMMUNICATION DETAIL/UTILITIES Comcast, cable in all bedrooms and living rooms, control Notes panel in master bedrooms

LISTED EXCLUSIVELY BY JLL PROPERTY DESCRIPTION 13

OFFERING MEMORANDUM SUBMARKET OVERVIEW SUBMARKET OVERVIEW 15

Queen Anne / Interbay

QUEEN ANNE INTERBAY •• Queen Anne is largely residential with historic mansions, Victorian homes and •• Traditionally, Interbay has been characterized by industrial use and the BNSF craftsman style houses. It is the architectural style of the area that gave Queen Anne rail yard. However, as industrial tenants moved south to the Kent Valley, it has its name. The main business district of this “urban village” runs atop the hill, along taken on a new residential focus for Seattle’s booming multifamily market. The Queen Anne Avenue North. Sidewalks are filled with residents and visitors enjoying Interbay area is quickly emerging as a vibrant place to live for Millennials seeking the shopping and dining of this pedestrian friendly corridor. an active lifestyle.

•• Lower Queen Anne also features a strong business sector, with an eclectic mix of shops, •• In 2007, Interbay was rezoned to 85’ feet to help promote growth in the area. bars, restaurants and cinemas, as well as period inns. Several chains are located in As Whole Foods and other popular restaurants moved into the neighborhood, Lower Queen Anne including traditional banks, grocers and drug stores. so did new residents. In the past several years, Interbay has taken on a new identity as a lively Seattle neighborhood. Flat bike paths link Interbay with the •• On the cusp of Lower Queen Anne is the headquarters for the Bill & Melinda Gates Downtown Waterfront. The residents of Interbay are afforded access to several Foundation, as well the Seattle Center, site of the 1962 World’s Fair. The fairgrounds retail options in the immediate area including a popular Whole Foods. People are now home to the Space Needle, Pacific Science Center, Museum of Pop are also drawn to Interbay to golf at the city-owned nine-hole course, or to Culture, KeyArena, Chihuly Glass and Garden Center and the north terminal of the watch college soccer matches at the Interbay Athletic Complex. Seattle Center monorail. Numerous festivals including Folklife, Bite of Seattle and Bumbershoot take place here every year. •• Light rail is coming to Interbay as part of the Ballard Link Extension with a station to be built at West Dravus Street and 15th Avenue West. Currently in the •• Queen Anne’s access to the Seattle waterfront was solidified in 2012 with the planning phase, the start of service is expected to begin in 2035. The Ballard completion of the West Thomas Street Pedestrian and Bicycle Overpass Project. Link will travel from Ballard’s Market Street area through Interbay to Downtown This new structure now provides pedestrians and bicyclists with direct access from Seattle. Futher connections will transport riders to Capitol Hill, University the lower Queen Anne community to Myrtle Edwards Waterfront Park and Olympic District, West Seattle, Bellevue, Redmond and Seattle-Tacoma International Sculpture Park. Airport, among other regional destinations.

OFFERING MEMORANDUM 16 SUBMARKET OVERVIEW

Queen Anne / Interbay

$2,128 $2,308 5.2% 5.1% Average market Average new 3-year average Market vacancy rent construction rent rent growth

Q2 RENT ($ PER UNIT) RENT VS. OWN

$2,128 $2,055 $2,128 $3,981 $2,055 $3,981 $1,939 $3,667 $1,939 $1,830 $3,667 $1,725 $1,830 $1,621 $1,725 $1,621 $1,470 $1,470 $2,308 $2,281 $2,308 $2,128 $2,281 $2,128

2012 2013 2014 2015 2016 2017 2018 Rent 1/3 Median New 1/3 Median Tech Average 2012 2013 2014 2015 2016 2017 2018 Rent 1/3Inc Medianome ConstructionNew 1/3 MedianIncome Tech MortAveragegage Rent Income Construction Income Mortgage Rent Rent Payment Rent Payment

•• Queen Anne / Interbay has one of the highest densities of Millennial concentrations because of its proximity 5.03% 5.08% to core employers5.03% and curated retail. 5.08%

4.64% •• Based on the median4. household64% income of $82,108, the typical resident can afford up to $2,281 in monthly rent. Software engineers earn on average $132,000, yielding up to $3,667 in monthly rent.

3.96% 40 •• New construction rent sits at $2,308, which3.96% leaves runway for rental growth. 958 40 3.76% 958 3.70% 3.76% 3.70% 3.62% • 3.62% • The high demand for renting comes from the difficulty to own in a close-in neighborhood.502 The average home value in511 502 462 426 424 511 462 426 424 the area is $828,500. This results in a mortgage payment of $3,981 (with a 20% down275 payment). 287 171 203 275 287 171 92 203 92 0 2012 2013 2014 2015 2016 2017 2018 2008 2009 20100 2011 2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Deliveries Under Construction Deliveries Under Construction

LISTED EXCLUSIVELY BY JLL SUBMARKET OVERVIEW 17

  

Ballard 28 29 31 Restaurants | Bars | Grocery Salmon Bay 27 26 13 33 34 1. La Palma Family Mexican 12. New China Express 24. Chinook’s at Salmon Bay NW Ballard Way Restaurant 13. Time 4 Pho 25. Pono Ranch 30 30 31 32 29 2. Java Jazz 14. Americano 26. Staple & Fancy 25 12 32 14 11 3. QFC 15. Whole Foods Market 27. The Walrus & the Carpenter 10 4. Pagliacci Pizza 16. Malena’s Taco Shop 28. Peddler Brewing Co. Leary Way34 NW 33 5. Tuk Tuk Thai Kitchen 17. Macrina Bakery & Cafe 29. Mean Sandwich 6. Red Mill Burgers 18. S & L Cafe 30. Trader Joe’s 35 15 7. The Cheese Wizards 19. Targy’s Tavern 31. New Seasons Market 16 8. Yasuko’s Teriyaki 20. Einstein Bros. Bagels 32. Giddy Up Burgers 9 9. Boxcare Ale House 21. Rooƒop Brewing Co. 33. Fred Meyer 10. Mulleady’s Irish Pub 22. Highliner Public House 34. Bad Jimmy’s Brewing Co. 27 11. Hub Coœee 23. Fishermen’s Green Market 35. Hale’s Brewery 24 21 Ship Canal Trail 23 28 22 8 W Nickerson St Shopping | Services | Schools 1. Point S Aœordable Tire & 11. Magnolia Montessori 23. Wink Hair Studio 1 Service 12. Sprocketts Recycled 24. Salon Joseph 2. Third & Wall Art Group Bicycle 25. Coe Elementary School 2 2 1 3. Sound Animals 13. Lullaby Nail Salon 26. Seattle Pacific University 5 3 4. French Mornings 14. Magnolia Salon 27. Adventure Ready 9 6 4 W Bertona St 20 Preschool 15. Tigerlily Salon 28. Fisherman’s Terminal 3 26 5. Metro Dog 16. Alpine Hut 29. Western Pioneer Inc 4 7 7 8 North 6. Helena’s Cleaners 17. Total Wine & More 30. Ballard Blocks W Dravus St Queen Anne 7. Seattle Film Institute 18. Broken Time Records 31. Sherwin-Williams 10 5 6 8 20th Ave W 10 9 8. Princess Nails 19. Elliott Bay Animal Hospital 32. Salty Dog Pottery 1 Future light rail station on Ballard Link 9. Interbay Veterinary Care 20. Petco Animal Supplies 33. OœiceMax 12 11 11 Extension - opens 2035 Center 21. Idunn Salon & Spa 34. Big 5 Sporting Goods 12 14 10. Cassandra McClure 22. Rhinestone Rosie 13 13 3 2 4 Interbay 15th Ave W Parks | Fitness | Recreation 14 1. Interbay Athletic Complex 7. Tulina Yoga 14. Crossfit Twenty Pound 2. Interbay Golf Center 8. Sync Fitness Hammer 3. Yogafrica 9. Crossfit Interbay 15. Jordan Pilates 25 4. Bayview Playground 10. Vertical World 16. Mind Body Sanctuary 7 Thorndyke Ave W 15 5. The Little Gym 11. Ballard Jiu Jitsu 16 16 24 6. Northwest Crossfit & 12. LA Fitness 5 2317 18 18 Holistic Health 13. CorePower Yoga 17 22 19 6 21 19 RapidRide Bus - D Line 20 15 OFFERING MEMORANDUM MARKET OVERVIEW MARKET OVERVIEW 19

Puget Sound Region

The Puget Sound Region is one of the most economically vibrant metropolitan areas in the world and boasts a diversified economy with strong office employment drivers. Known as the Silicon Valley of the Northwest, the metro area’s strategic location and thriving economy have made it the commercial, cultural and advanced Seattle ranked #1 in the technology hub of the Pacific Northwest and a major port city for country for real estate trans-Pacific trade. investment in 2018

Nestled between bodies of water and mountain ranges, the Puget Sound Region offers an urban city environment surrounded by breathtaking scenery with the Cascade Range to the east and the Olympic Mountains to the west. On top of its unmatched natural beauty, the region is also home to an impressive list of companies including Amazon, Microsoft, Boeing, Nordstrom, Starbucks, Costco, T-Mobile, Expedia, Tableau, F5 Networks, the Bill & Melinda Gates Foundation, Fred Hutchinson Cancer Research Center, Weyerhaeuser and many more. In addition, many Bay Area Population & Housing companies are expanding in the region including Google, Facebook, Apple, Twitter and Salesforce. Of the 35 Fortune 500 companies headquartered in the Bay Area, 10 now offer a significant presence • The Seattle-Tacoma-Bellevue MSA is the 15th largest in the nation, with 3.8 million people calling the area in Seattle. home. Seattle’s growth represents the largest concentration of population north of San Francisco and west of Chicago. By 2040, the population is expected to increase by 38%. In 2017, Washington State saw the RANKINGS largest net migration of Millennials, adding 39,590 more Millennials than were lost. Of all cities in the state, • Bloomberg’s 2016 U.S. Innovation Index ranked Seattle as the Seattle saw the largest share of net Millennial migration. 8th most innovative city among top U.S. metro areas. Seattle’s rich tech sector continues to anchor the economy and Seattle is • Historically, for every nine jobs added in the Seattle metro area, one apartment unit was absorbed. After three times more high-tech concentrated than the U.S. average, the recession, this number decreased to only seven new jobs needed to absorb one unit. Currently, there is ranking it #2 in the nation. Tech employment has grown by impressively high demand with only five new jobs needed to absorb one apartment unit. As a result, annual 77.7% since 2001, the fourth highest growth rate in the country. absorption has increased by 75% since the post-recession time period. This is due in part to a high number of new jobs, surging population and changing living preferences of renters. • Seattle has been a top-ten favorite in ULI and PWC’s Emerging Trends in Real Estate and this year is no different. Seattle was • Home prices have also been surging for the past six years. According to the Seattle Times, single-family ranked the #1 overall market in the U.S. for 2018. This is the first home prices have grown faster here than anywhere else in the country and surpassed the housing bubble of time the city has captured the top ranking since 2009. the last decade. The Case-Shiller Home Price Index shows Seattle home prices climbing by 85% since 2012, resulting in sale price appreciation that is number one in the country. Year-over-year, Seattle home values have grown by 12.7%.

OFFERING MEMORANDUM 20 MARKET OVERVIEW

Employment Transportation

Seattle ranked #1 on the Robert Half Career City Index, due to its • Total passenger traffic at Seattle-Tacoma International Airport increased 2.6% in 2017 to 46.9 million attractive career opportunities and relatively low cost of living. passengers, making Sea-Tac the 9th busiest airport in the U.S. By 2034, the Port of Seattle projects Seattle’s tech sector continues to anchor the economy as home-grown Sea-Tac will reach 66 million annual passengers and 540,000 annual aircraft operations of landings and companies like Expedia and Tableau, as well as Bay Area tech giants like departures (up from 416,000 in 2017). Google and Facebook expand and attract more talent to the area. The Seattle metro area experienced 12% and 7.6% growth over the last two • Sound Transit 3 is a $54 billion master plan, adopted in 2016, that will add light rail as well as bus and years in tech and STEM jobs. heavy rail in the tri-county metro area. This supplements the voter-approved Sound Transit 2 ballot measure, passed in 2008, that allocated funds for North, East and South Corridor projects. Aside from LIFE SCIENCE / TECHNOLOGY increasing connectivity, the master plan initiatives of Sound Transit will serve as catalysts, spurring further employment and population growth throughout the Puget Sound Region. • Known as one of the nation’s premier life sciences markets, Seattle has some of the world’s largest philanthropic organizations, including the Bill & Melinda Gates Foundation. The Seattle metro continually ranks in the top ten nationally in VC and NIH funding, as well as patents issued.

AEROSPACE • According to the Seattle Trade Alliance, the Greater Seattle area is home to over 1,350 aerospace-related companies, which are responsible for 95% of the nation’s commercial airplane production. Fastest growing major Washington state ranked #1 as the best location in the U.S. for U.S. city and top national aerospace manufacturing, according to an Aerospace Competitive Economics Study that was conducted by the Teal Group. relocation destination

INTERNATIONAL TRADE • Long a leader in international trade, Seattle’s naturally deep water port is one shipping day closer to major Asian Pacific Rim ports and handles over 25% of all Pacific Rim imports into the United States. Nearly 75% of Washington’s trade traffic passes through the Ports of Seattle and Tacoma. Washington’s exports to FTA markets have grown by 24% since 2007 to $18.5 billion in 2017.

LISTED EXCLUSIVELY BY JLL Kirkland REDMOND

FREMONT KIRKLAND Microsoƒ Google Redmond U DISTRICT Google 5 520 CORRIDOR Fremont Microsoƒ 520 520 Facebook Queen Sahalee Country Club Anne Bellevue South Capitol Puget DOWNTOWN BELLEVUE Sound Lake Hill Union Amazon Microsoƒ Central District 405 Lake Seattle Washington

Facebook DOWNTOWN SEATTLE/SOUTH LAKE UNION 90 Amazon Facebook Microsoƒ

Apple Eastgate Mercer Google Island 90 Lake Sammamish I-90 CORRIDOR State Park T-Mobile

ISSAQUAH

Issaquah Fauntleroy 405 Boeing Field Cougar Mountain Regional Wildland Park

Rainier Beach Rainier Golf and Country Club 5

RENTON

Seatac Renton

Seattle-Tacoma International Airport 167 RENT & SALES COMPARABLES RENT & SALES COMPARABLES 23

Rent Comparables

BERTONA STEPS AIRE APARTMENTS 3406 15th Avenue West 2572 Gilman Drive West Seattle, WA, 98109 Seattle, WA 98119 Built...... 2018 Built...... 1988 & 1991 # of Units...... 8 # of Units...... 69 Avg. SF...... 905 Avg. SF...... 790

HENRY ELAN UPTOWN FLATS 22 Etruria Street 300 1st Avenue West Seattle, WA 98109 Seattle, WA 98119 Built...... 2017 Built...... 2018 # of Units...... 100 # of Units...... 182 Avg. SF...... 646 Avg. SF...... 771

THE FLATS AT INTERBAY CRANE @ INTERBAY 3036 16th Avenue West 3200 16th Avenue West Seattle, WA 98119 Seattle, WA 98119 Built...... 2014 Built...... 2018 # of Units...... 117 # of Units...... 37 Avg. SF...... 642 Avg. SF...... 617

VIBE FREMONT QUEEN ANNE FLATS 3601 Greenwood Avenue North 521 2nd Avenue West Seattle, WA 98103 Seattle, WA 98119 Built...... 2015 Built...... 2015 # of Units...... 64 # of Units...... 33 Avg. SF...... 531 Avg. SF...... 540

OFFERING MEMORANDUM 24 RENT & SALES COMPARABLES

   

CRANE INTERBAY 99

15TH AVE W AVE 15TH VIBE FREMONT 5

North Queen Anne THE FLATS AT INTERBAY

Interbay

AIRE HENRY LAKE APARTMENTS W MCGRAW ST UNION

Queen Anne

QUEEN ANNE FLATS 99 ELAN UPTOWN FLATS

ELLIOTT AVE W MERCER ST

South Lake Union 5

LISTED EXCLUSIVELY BY JLL RENT & SALES COMPARABLES 25

 

Live-Work Comparables Live-Work Comparables NAME Avg. SF Avg. Rent Rent / SF LIVE-WORKLive-Work COMPARABLES Comparables Elan Uptown Flats 924 $3,215 $3.48 $3,200 Elan Uptwon Flats $3,000$3,200 Elan UptwonHenry Flats Henry 927 $3,000 $3.24 $3,000 Henry $2,800 Vibe Fremont Vibe Fremont 857 $2,750 $3.21 $2,600$2,800 Vibe Fremont

Queen Anne Flats 611 $2,195 $3.59 Rent $2,400$2,600 Rent $2,200$2,400 Crane @ Interbay (One Bedroom) 750 $2,150 $2.87 Queen Anne Flats Crane @ Interbay (One Bedroom) $2,200 $2,000 Queen Anne Flats Crane @ Interbay (One Bedroom) Bertona Steps (Pro Forma) 790 $1,850 $2.34 $1,800$2,000 Flats at Interbay Bertona Steps (Pro Forma) Bertona Steps (Pro Forma) Flats at Interbay 633 $1,700 $2.69 $1,600$1,800 Flats at InterbayAire (One Bedroom) $1,600600 650 Aire700 (One Bedroom)750 800 850 900 950 Aire (One Bedroom) 665 $1,700 $2.56 600 650 700 750Square Feet 800 850 900 950 Square Feet

Two Bedroom Comparables NAME Avg. SF Avg. Rent Rent / SF TWO BEDROOMTwo Bedroom COMPARABLES Comparables Elan Uptown Flats 962 $3,295 $3.43 Two Bedroom Comparables Elan Uptwon Flats Bertona Steps (Pro Forma) 1,020 $2,900 $2.84 $3,200 Elan Uptwon Flats $3,200 Crane @ Interbay (2x2) 1,066 $2,785 $2.61 $3,000 $3,000 Bertona Steps (Pro Forma) Aire 810 $2,300 $2.84 $2,800 Bertona Steps (Pro Forma) Rent Vibe Fremont 671 $2,295 $3.42 $2,800 Crane @ Interbay (2x2) Rent $2,600 Crane @ Interbay (2x2) Queen Anne Flats 734 $2,295 $3.13 $2,600 Vibe $2,400 FremontVibe Queen Anne Flats $2,400 Fremont Queen Anne FlatsAire $2,200 Aire $2,200650 700 750 800 850 900 950 1,000 1,050 1,100 650 700 750 800 Square850 Feet900 950 1,000 1,050 1,100 Square Feet

OFFERING MEMORANDUM 26 RENT & SALES COMPARABLES

Sales Comparables

47 + 7 Jupiter Gallaway Apartments Mod 19 Solo Lofts 4558 7th Ave NE 155 17th Ave 1126 N 90th St 1814 E Denny Way 2018 NW 57th St Seattle, WA 98105 Seattle, WA 98122 Seattle, WA 98103 Seattle, WA 98122 Seattle, WA 98107 Built...... 2015 Built...... 2015 Built...... 2015 Built...... 2013 Built...... 2015 # of Units...... 24 # of Units...... 20 # of Units...... 8 # of Units...... 8 # of Units...... 20 Avg SF...... 480 Avg SF...... 252 Avg SF...... 588 Avg SF...... 506 Avg SF...... 798 Sale Date...... Dec-17 Sale Date...... Sep-17 Sale Date...... Jun-17 Sale Date...... Sep-16 Sale Date...... Aug-16 Sale Price...... $8,800,000 Sale Price...... $3,843,000 Sale Price...... $2,500,000 Sale Price...... $2,949,200 Sale Price...... $9,950,000 Price / Unit...... $366,667 Price / Unit...... $192,150 Price / Unit...... $312,500 Price / Unit...... $368,650 Price / Unit...... $497,500 Price / SF...... $764 Price / SF...... $763 Price / SF...... $531 Price / SF...... $729 Price / SF...... $623

LISTED EXCLUSIVELY BY JLL RENT & SALES COMPARABLES 27

   

GALLAWAY APARTMENTS

SOLO LOFTS

5 99 4850 Green Lake WayBallard 4850 Green Lake Way N Seattle, WA 98103 Built ...... 2009 47 + 7 # of Units ...... 7 Avg SF ...... 1,474 Sale Date ...... Apr-16 Sale Price ...... $3,980,000 Price / Unit ...... $568,571 Price / SF ...... $386

Interbay LAKE 520 UNION Queen Anne LAKE WASHINGTON Capitol Hill MOD 19 99 South Lake Union

ELLIOTT BAY 5

JUPITER

90

OFFERING MEMORANDUM FINANCIAL ANALYSIS FINANCIAL ANALYSIS 29

   

PRO FORMA RENTS MARKET RATE TYPE UNITS AVG. UNIT SF TOTAL SF AVG. RENT RENT/SF ANNUAL INCOME Live-Work (1x1.5) 4 790 3,158 $1,850 $2.34 $88,800 Two Bedroom / One Bath 4 1,020 4,080 $2,900 $2.84 $139,200 Total / Average 8 905 7,238 $2,375 $2.63 $228,000

CURRENT OCCUPANCY, IN-PLACE RENTS MARKET RATE TYPE UNITS AVG. UNIT SF TOTAL SF AVG. RENT RENT/SF ANNUAL INCOME Live-Work (1x1.5) 4 790 3,158 $1,836 $2.33 $88,140 Two Bedroom / One Bath 2 1,020 2,040 $2,850 $2.79 $68,400 Total / Average 6 866 5,198 $2,174 $2.51 $156,540

  

PRO FORMA YEAR 1 PER UNIT PERCENT PRO FORMA YEAR 1 PER UNIT PERCENT OPERATING REVENUE OPERATING EXPENSES Potential Market Rate Rent $228,000 $28,500 Utilities $11,608 $1,451 Gross Potential Rent $228,000 $28,500 Repairs & Maintenance $4,000 $500 Turnover $1,600 $200 Loss to Lease $0 $0 0.00% Marketing & Leasing $1,600 $200 Vacancy -$6,840 -$855 -3.00% Landscaping / Contract Services $1,600 $200 Concessions $0 $0 0.00% Administrative $1,200 $150 Collection Loss / Bad Debt -$570 -$71 -0.25% Management Fee $11,973 $1,497 5.00% Total Economic Loss -$7,410 -$926 -3.25% Insurance $3,000 $375 Real Estate Taxes $32,956 $3,662 Net Rental Income $220,590 $27,574 Total Operating Expenses $69,536 $8,234 Parking Income $4,500 $563 Replacement Reserves $2,000 $250 Pet Rent $1,080 $135 Net Operating Income $167,914 Utility Reimbursement $10,080 $1,260 Miscellaneous Income $3,200 $400 Expenses and Reserves Per Unit $8,942 Total Other Income $18,860 $2,358 Expense Ratio 29.04%

Total Operating Income $239,450 $29,931

OFFERING MEMORANDUM 30 FINANCIAL ANALYSIS

Notes to Pro Forma

APARTMENT INCOME OPERATING EXPENSES •• Pro Forma Rents: The Pro Forma assumes average rents of $2,375 ($2.63 •• Utilities: The Pro Forma assumes utility expense of $11,608 ($1,451 per unit), per square foot) across the 8 units at Bertona Steps. Our Pro Forma rents are which is in line with comparable properties in the market. assumed to grow by 4.0% in year 2, 3.5% in years 3 and 4, and by 3.0% in year •• Repairs & Maintenance: The Pro Forma assumes repairs and maintenance 5, and annually throughout the remainder of the holding period. See below for expense of $4,000 ($500 per unit), which is in line with comparable properties in further details: the market. • Live-Work: The Pro Forma assumes average rents at live-work units of $1,850 • •• Turnover: The Pro Forma assumes turnover expense of $1,600 ($200 per unit), per unit ($2.34 per square foot). which is in line with comparable properties in the market. • Two Bedroom / One Bath: The Pro Forma assumes average rents at two • •• Marketing & Leasing: The Pro Forma assumes marketing and leasing expense of bedroom / one bath units of $2,900 per unit ($2.84 per square foot). $1,600 ($200 per unit), which is in line with comparable properties in the market. • : The Pro Forma assumes no loss to lease. • Loss / Gain to Lease •• Landscaping / Contract Services: The Pro Forma assumes landscaping FINANCIAL ANALYSIS •• Vacancy: The Pro Forma assumes vacancy losses equal to 3.0% of gross and contract services expense of $1,600 ($200 per unit), which is in line with potential rent, which is in line with comparable properties of this size and comparable properties in the market. income level in the market. •• Administrative: The Pro Forma assumes administrative expense of $1,200 ($150 •• Concessions: The Pro Forma assumes no concessions, which is in line with per unit), which is in line with comparable properties in the market. comparable properties of this size and income level in the market. •• Management Fee: The Pro Forma assumes a management fee equal to 5.0% of •• Collection Loss / Bad Debt: The Pro Forma assumes bad debt losses equal to 0.25% total operating income. This level is in line with what a competitive third-party of gross potential rent, which is in-line with comparable properties in the market. manager would charge to manage a property of this size and income level. •• Insurance: The Pro Forma assumes insurance expense of $3,000 ($375 per unit), ADDITIONAL INCOME which is in line with comparable properties in the market. • : The Pro Forma assumes real estate taxes of $32,956 ($3,662 •• Parking: The property contains 5 parking stalls. We assume 100% occupancy • Real Estate Taxes and that management charges $75 per stall, per month. This equates to parking per unit or $5.56 per square foot). Our Pro Forma tax value is based on the income of $4,500 ($563 per unit). current millage rate and fees, and a post trade step-up of approximately 90%. The Pro Forma assumes that taxes will increase by 5.50% in year 2, 5.21% in year •• Pet Rent: The Pro Forma assumes that 25.0% of units at the building have at 3, and 3.0% in year 4, and throughout the remainder of the holding period. least one pet at rate of $45 per pet, per month. Overall, this equates to total pet rent income of $1,080 ($135 per unit). •• Replacement Reserves: The Pro Forma assumes replacement reserves of $2,000 ($250 per unit), which is in line with comparable, new construction •• Utility Reimbursement: The Pro Forma assumes utility reimbursement of properties of this size and income level. $10,080 ($1,260 per unit). This assumes that management bills back tenants approximately $60 per occupant, per month, for utilities. The Pro Forma •• Debt: Please contact Seth Heikkila or Drew Heitstuman with the JLL Seattle assumes six units have two occupants, and two units have one occupant. Finance Team to discuss potential financing options. •• Miscellaneous Income: The Pro Forma assumes miscellaneous income of $3,200 ($400 per unit), which is in line with comparable properties of this size and income level in the market.

LISTED EXCLUSIVELY BY JLL FINANCIAL ANALYSIS 31

OFFERING MEMORANDUM TRANSACTION GUIDELINES TRANSACTION GUIDELINES 33

Offering Procedure

The offering of Bertona Steps is being conducted exclusively by JLL. All questions and inquiries should be addressed to the JLL representatives listed herein.

The JLL team will be available to assist prospective investors with their review of the offering. This includes on-site inspections of the property and tours of the market area.

Investors will receive advanced notification of the bid deadline via email. Offers should include, at a minimum, the following:

•• The purchase price and closing date •• The source of capital, both equity and debt, for the transaction •• The amount of earnest money deposit •• A detailed schedule of the due diligence and requisite approval process •• A description of assumptions utilized for the offer

Terms & Conditions

Copyright Jones Lang LaSalle IP, Inc. 2018. This publication is the sole property of Jones Lang LaSalle (JLL) and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of JLL. The information contained in this publication has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. JLL does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication. Jones Lang LaSalle Americas, Inc. License #01223413.

OFFERING MEMORANDUM Investment Contacts

Matt Kemper Vice President +1 206 607 1752 [email protected]

Don Flanigan Vice President +1 206 971 7020 [email protected]

Jordan Louie Vice President +1 206 971 7007 [email protected]

Financing Contacts

Seth Heikkila Senior Vice President +1 206 607 1732 [email protected]

Drew Heitstuman Associate +1 206 971 7021 [email protected]