A Market Feasibility Study Of: Addison Apartments

A MARKET FEASIBILITY STUDY OF: ADDISON APARTMENTS

6500 Central Avenue Seat Pleasant, Prince George’s County, Maryland 20743

Effective Date: May 14, 2018 Report Date: June 13, 2018

Prepared for: Cary Weinstein Gershman Mortgage 3773 Cherry Creek Drive, Suite 110 Denver, CO 80209

Prepared by: Novogradac & Company LLP 6700 Antioch Road, Suite 450 Merriam, KS 66204 (913) 677-4600

June 13, 2018

Cary Weinstein Gershman Mortgage 3773 Cherry Creek Drive, Suite 110 Denver, CO 80209

Re: Market Study for Addison Apartments located at 6500 Central Avenue in Seat Pleasant, Maryland

Dear Mr. Weinstein:

At your request, Novogradac & Company LLP has performed a study of the multifamily rental market in the Seat Pleasant, Prince George’s County, Maryland area relative to the above-referenced proposed new construction mixed-income low income housing tax credit (LIHTC)/market rate property.

The purpose of this market study is to assess the viability of Addison Apartments (the “Subject”), a proposed new construction 88-unit LIHTC/market rate multifamily development with 28,300 square feet of ground floor commercial space. The following report provides support for the findings of the study and outlines the sources of information and the methodologies used to arrive at these conclusions. The scope of this report meets the requirements of the HUD MAP program, per the HUD MAP guide dated January 2016, including the following:

Analyzing appropriateness of the unit mix, rental levels, available amenities, and site. Estimating market rent, absorption and stabilized occupancy level for the market area. Investigating the health and conditions of the multifamily market. Calculating income bands, given the Subject rents. Estimating the number of income appropriate households. Reviewing relevant public records and contacting appropriate public agencies. Analyzing the economic and social conditions in the market area in relation to the Subject. Establishing the Subject Primary Market Area. Analyzing the commercial space.

This report contains, to the fullest extent possible and practical, explanations of the data, reasoning, and analyses that were used to develop the opinions contained herein. The depth of discussion contained in the report is specific to the needs of the client as well as HUD.

ADDISON APARTMENTS MARKET STUDY PAGE 2

Please do not hesitate to contact us if there are any questions regarding the report or if Novogradac & Company LLP can be of further assistance. It has been our pleasure to assist you with this project.

Respectfully submitted, Novogradac & Company LLP

Rebecca S. Arthur, MAI Kelly Gorman Partner Manager [email protected] [email protected] 913.312.4615 732.623.7005

Addam Fishel Connor Mattoon Analyst Junior Analyst [email protected] [email protected] 415.356.7624 415.356.8041

TABLE OF CONTENTS 1. Executive Summary ...... 1 2. Description of Proposed Project ...... 12 Project Location/Neighborhood Characteristics ...... 16 3. Primary Market Area Definition ...... 24 4. Economic Context ...... 27 5. Demographic Analysis ...... 35 6. Current Housing Market Conditions ...... 45 Competitive Rental Inventory ...... 51 Recent Market Experience ...... 54 Property Characteristics ...... 89 7. Characteristics of Rental Units in the Pipeline ...... 107 8. Demand Estimate and Analysis ...... 111 Penetration Rate ...... 122 Discussion of Most Comparable Properties ...... 127 9. Findings and Conclusions ...... 128 10. Additional Requirements/ Guidance for Income Restricted Projects ...... 132 11. Data, Estimates, and Forecast ...... 134 Data, Estimates, and Forecast ...... 135

Addenda A………………………………………………………………….Certifications, Assumptions, and Limiting Conditions Addenda B………………………………………………………………………………………………………………….Subject Photographs Addenda C…….……………………………………………………………………………………………….Qualifications of Consultants Addenda D…….…………………………………………………………………………………………………Site/Floor Plans and Survey

1. EXECUTIVE SUMMARY

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

EXECUTIVE SUMMARY 1) Description of Site and Immediate Surrounding Area The Subject site is located at 6500 Central Avenue, Seat Pleasant, Maryland 20743. The site is accessible from the north side of Central Avenue. Central Avenue is a six-lane road that provides access throughout the central portion of Prince George’s County. To the west Central Avenue turns into E Capitol Street SE and provides access to Washington D.C. Interstate 495 is accessible via Central Avenue to the east and provides access to cities surrounding Washington D.C. along with access to interstates 95, 270, 395, in addition to numerous state highways. Overall, access and traffic flow to the Subject site are considered excellent. The Subject site is located within close proximity to a number of locational amenities, including schools, grocery stores, hospitals, and retail.

The Subject site is located within Census Tract 1233.00, which is not a Qualified Census Tract. The Subject site is generally level and is approximately 0.259 acres or 11,280 square feet in size. The site is currently improved with four existing apartment buildings to be demolished, is rectangular in shape, and has frontage along the north side of Central Avenue. The Subject site is zoned Commercial Shopping Center (C-S-C), which allows for a variety of uses including multifamily residential uses, retail, recreational, office, among other commercial uses. Therefore, the Subject will be a legal, conforming use as proposed.

Surrounding land uses of the Subject site consist of commercial/retail uses, public transportation, and single-family and multifamily housing in average to good condition. The general boundaries of the Subject’s neighborhood are Backlog Street, and Seat Pleasant Drive to the north, Hill Road and Shady Glen Road to the east, Walker Mill Road to the north, and Brooke Road and Route 704 to the west.

Access to public transportation from the Subject is excellent, as the Addison Road Metro Station is located directly south of the Subject, across Central Avenue. The Addison Road Metro station provides access to the Washington, D.C in addition to other urban areas in the MSA. Uses north of the Subject include single-family homes in good condition and vacant land. Uses east include commercial uses, condominium townhomes and multi-family uses. The Villages at Peppermill is a three-story over parking townhouse condominium property located approximately 0.3 miles east of the Subject. Central Garden Apartments, located approximately 0.5 miles east of the Subject is a 106-unit, Section 8, subsidized multifamily property offering one, two and three-bedroom units. Central Garden Apartments has been excluded from our analysis due to subsidized rents. Single-family homes in the Subject’s neighborhood, including the condominiums at The Villages at Peppermill, range in price from $200,000 to $300,000. Uses south of the Subject include the Addison Road Metro Station, single-family uses in average condition, a house of worship, vacant land, and the Central High School, which is part of the Prince George’s County Public School District with enrollment of 985 students. Uses immediately west of the Subject include local shopping and retail options including Dunkin Donuts, and Exxon Mobil gas station. The Addison Plaza retail center is located farther west across Addison Road and includes a Subway, Domino’s Pizza, Taco Bell, Popeye’s, CVS, Wells Fargo, and Dollar Tree.

A strength of the Subject’s location is its excellent access to public transportation. The Addison Road Metro Station, which is part of the Washington Metropolitan Area Transit Authority (WMATA) provides access throughout the District of Columbia, Maryland, and Virginia Beach. Multiple bus stops are located within walking distance of the Subject, with the closest stop located at Central Avenue and Soper Lane, located adjacent to the Subject site. An elevated crime risk within the PMA in comparison to the surrounding MSA and the nation is a potential detrimental influence. However, our conversations with property managers and site visit did not suggest crime was a detrimental influence in the area. Additionally, the low vacancy rates at the LIHTC and market rate comparables suggest crime is not a concern and we do not anticipate crime to be a factor when marketing the Subject. The property will offer limited access and intercom systems in terms of security amenities.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

SUMMARY OF SUBJECT SITE Visibility/Views Excellent / Good Access/Traffic Flow Excellent / Excellent Layout/Curb Appeal Excellent /Excellent

2) Project Summary The Subject will contain a total of 88 studio, one, two, and three-bedroom units. Of the Subject’s units, 70 will be restricted to households earning 60 percent of the AMI or less, while the 18 remaining units will be market rate units. Based on the market and the proposed rent levels, we believe the 60 percent AMI and market rate units will be competitive with developments in the area. The Subject site will contain one ten- story elevator-serviced highrise-style building with a subterranean parking garage. In addition, there will be 28,300 square feet of commercial space on the ground floor. The proposed residential and commercial unit mix is detailed as follows.

PROPOSED RENTS Utility 2018 LIHTC 2018 HUD Unit Size Number of Gross Unit Type Asking Rent Allowance Maximum Allowable Fair Market (SF) Units Rent (1) Gross Rent Rents @60% 1BR / 1BA 650 12 $1,145 $174 $1,319 $1,319 $1,561 2BR / 1BA 850 12 $1,381 $201 $1,582 $1,582 $1,793 2BR / 1.5BA 1,025 26 $1,381 $201 $1,582 $1,582 $1,793 3BR / 2BA 1,235 20 $1,612 $216 $1,828 $1,828 $2,353 Market 1BR / 1BA 650 4 $1,800 N/A N/A N/A $1,561 2BR / 1BA 850 4 $2,100 N/A N/A N/A $1,793 2BR / 1.5BA 1,025 6 $2,200 N/A N/A N/A $1,793 3BR / 2BA 1,235 4 $3,000 N/A N/A N/A $2,353 88 Notes (1) Source of Utility Allowance provided by the Developer.

PROPOSED COMMERCIAL RENTS Unit Type Size (SF) Annual Rent PSF (NNN) Commercial 28,300 $28.80

Income Limits Seventy of the Subject’s units will be LIHTC restricted to household with income levels at 60 percent of the AMI or below. The 18 remaining units will be market rate units. HUD determines maximum income guidelines for tax credit properties, based on the AMI. For Prince George’s County, the 2018 AMI is $117,200 for a four-person household. Minimum income levels for the LIHTC units are calculated based on the assumption that lower-income households should pay no more than 35 percent of their income to rent. Based on our conversations with property managers at the market rate comparables, minimum income requirements generally range from 2.5 to 3.0 times the monthly rent annualized. As such, we have estimated the minimum income limits for the market rate units at 3.0 times the monthly rent annualized. There will be no maximum income limit for the market rate units. However, we believe a maximum income of 100 percent of AMI is reasonable given the Subject’s majority of affordable units. The minimum and maximum income limits for the Subject’s units are as follows.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

FAMILY INCOME LIMITS Minimum Maximum Minimum Maximum Unit Type Allowable Allowable Allowable Allowable Income Income Income Income @60% Market 1BR $45,223 $56,280 $64,800 $93,800 2BR $54,240 $63,300 $75,600 $105,500 3BR $62,674 $75,960 $108,000 $126,600

3) Summary Statements Regarding Economic and Demographic Conditions and Competitive Environment

Economic Employment in the PMA is concentrated in the public administration, healthcare/social assistance, and retail trade industries, which collectively comprise 38.5 percent of local employment. The large share of PMA employment in retail trade is notable as this industry is historically volatile, and prone to contraction during economic downturns. However, the PMA also has significant share of employment in the public administration and healthcare industries, which are historically known to offer greater stability during economic downturns. Relative to the overall nation, the PMA features comparatively greater employment in the public administration, admin/support/waste management services, and transportation/warehousing industries. Conversely, the PMA is under-represented in the manufacturing, wholesale trade, and agriculture/forestry/fishing/hunting industries. Prior to the national recession, average employment growth in the MSA generally exceeded the nation. Annual job growth in the MSA outpaced the nation in four of the six years between 2002 and 2007. Comparatively speaking, the MSA economy performed well during the recession. Total MSA employment contracted by only 1.8 percent, less than the 4.8 percent decline reported by the overall nation. Employment in the MSA recovered and surpassed pre-recessionary levels in 2010, four years prior to the overall nation. Since 2012, average employment growth in the MSA trailed the nation. As of February 2018, total employment in the MSA is at a post-recessionary record, and increasing at an annualized rate of 0.6 percent, compared to 1.6 percent across the overall nation. The largest private sector employers in Prince George’s County are concentrated in education, military and the federal government. The largest employer in Prince George’s County is the University Systems of Maryland, which is the state’s public higher education system and consists of 12 institutions. Job growth within Prince George’s County is expected to grow at an annualized rate of 4.3 percent through 2024.

Demographics The PMA experienced a slight negative population growth between 2000 and 2010, and lagged behind the surrounding MSA, which reported positive growth over the same time period. Although PMA growth also trended below the nation, population in the broader MSA increased 0.7 percentage points faster than the overall nation during this same time period. Population growth in the PMA accelerated slightly going into 2017, but increased less than the surrounding MSA and nation. According to ESRI demographic projections, annualized PMA growth is expected to grow to 0.8 percent through 2022, which is less than the growth projected for the surrounding MSA and overall nation. The number of households in the PMA and MSA increased from 2010 to 2017, with the MSA outpacing the PMA by 0.4 percentage points. Nationally, the number of households increased from 2010 to 2017 at the same pace as the PMA and 0.4 percentage points less compared to the MSA. Approximately 25.1 percent of the renter households in the PMA will income-qualify to reside in the Subject’s affordable units, while approximately 21.5 percent of the renter households in the PMA will income-qualify to reside in the Subject’s market rate units. As population continues to grow, the need for good quality affordable and market rate housing is also expected to increase.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Competitive Environment Upon completion, the Subject will offer competitive one, two and three-bedroom units, which will consist of LIHTC units restricted at the 60 percent AMI levels and market rate units. According to our survey, the market for affordable rental developments within the PMA is good.

Comparable properties reported vacancy rates ranging from zero to 5.7 percent with an average of 2.7 percent. In addition, several comparables reported waiting lists and most reported strong demand for affordable and market rate units in the area. The Subject will be similar to slightly inferior to the majority of the comparables in terms of in-unit and common area amenities and similar to slightly superior to the comparables in terms of location. The Subject will generally offer similar to superior condition relative to the comparables. We believe that the Subject would be able to achieve 2018 maximum allowable rents for its one, two, and three-bedroom 60 percent AMI units. Based on our analysis of the market rate comparables most similar to the Subject, we believe that the proposed market rate rents are above the achievable market rents. We concluded to achievable market rents of $1,400, $1,700, $1,800, and $2,450 for the Subject’s one, two-bedroom/one bathroom, two-bedroom/1.5 bathroom, and three-bedroom units, respectively. The Subject will provide excellent quality housing with excellent street appeal and competitive amenities in a desirable building design.

4) Statement of Key Conclusions Upon completion, the Subject will exhibit excellent condition. The development will be located in the central Seat Pleasant, which is located five miles east of downtown Washington D.C. The Subject will also offer a competitive amenities package, including balconies, central air conditioning, ceiling fans, coat closets, washer/dryer hookups, dishwashers, garbage disposals, microwaves, oven/range, and refrigerators. Community amenities will include common laundry facilities on each floor, on-site management, exercise facilities, elevators, and ground floor retail. The Subject site is located in a mixed-use neighborhood with land uses consisting of commercial/retail and residential uses. The proposed Subject will positively impact the neighborhood and the availability of good quality rental housing in Seat Pleasant; the site is suitable for the proposed use.

Absorption We were able to obtain absorption information from two of the stabilized comparables. We performed subsequent research on other properties within Prince George’s County and the adjacent Anne Arundel County. The following table summarizes our findings.

ABSORPTION Rent Year Property Name Location Tenancy Number of Units Units Absorbed / Month Structure Built The Arundel Prince George's County, MD Market Family 2017 233 27 The James Anne Arundel County, MD Market Family 2016 236 9 Alexan Concorde Apartments Anne Arundel County, MD Market Family 2016 310 13 Conifer Village At Oakcrest Prince George's County, MD LIHTC Senior 2016 120 20 Eastbrooke At Beulah Crossing Washington, D.C LIHTC Family 2015 39 39 Tapestry Largo Station Prince George's County, MD Market Family 2015 317 40

The Arundel was recently built August 2017, and was fully occupied by March 2018, equating to an absorption rate of approximately 27 units per month. The James opened in 2016 and reported absorbing nine units a month. Alexan Concorde Apartments began leasing units in August 2016, and has leased 247 units as of March 2018, resulting in an absorption rate of 13 units per month. Conifer Village At Oakcrest was opened in May 2016 and was fully occupied by May 2017, resulting in a absorption rate of 20 units per month. Eastbrooke At Beluah Crossing opened in September 2015 and reported absorbing all of its units within the first month, resulting in a absorption rate of 39 units. Tapestry at Largo Station recently completed construction in September in 2015 and reported reaching stabilized occupancy in eight months, equating to an absorption rate of 40 units per month.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Given the absorption data within the PMA, low vacancy rates among comparable properties, and waiting lists at affordable properties, we estimate the Subject should be able to reach a stabilized occupancy within 4.5 months, which equates to an a pace of approximately 20 units per month. This estimate assumes that the Subject will be properly marketed and that pre-leasing begins two or three months prior to completion of construction. Further, this assumes the market rents are appropriately positioned.

Achievable Residential Rent Discussion The following tables provide a comparison of the Subject’s and comparable properties’ rents. For the purposes of this market study, “Base Rents” are the actual rents quoted to the tenant, and are most frequently those rents that potential renters consider when making a housing decision. “Net rents” are rents adjusted for the cost of utilities (adjusted to the Subject’s convention) and are used to compensate for the differing utility structures of the Subject and the comparable properties. Net rents represent the actual costs of residing at a property, and help to provide an “apples-to-apples” comparison of rents. Additionally, it is important to note that we compared to concessed rent levels at the comparable properties.

The Subject will offer 88 units, of which 70 will be restricted to households earning 60 percent AMI or less. The following tables illustrate the Subject’s proposed 60 percent AMI units relative to comparable 60 percent AMI units in the market.

LIHTC RENT COMPARISON @60% Maximum Property Name 1BR 2BR 3BR Allowable Rent Addison Apartments Yes $1,145 $1,381 $1,612 LIHTC Maximum Rent (Net) $1,145 $1,381 $1,612 Allentown Apartments No $997 $1,081 $1,536 Eastbrooke At Beulah Crossing Yes $1,152 $1,363 $1,576 Parkland Village Yes $1,050 $1,275 - The Grays On Pennsylvania Yes $1,172 $1,409 - Windsor Crossing Yes - $1,321 $1,544 Average $1,093 $1,290 $1,552 Achievable LIHTC Rent $1,145 $1,381 $1,612

The Subject will offer one, two, and three-bedroom units at the 60 percent AMI level, all of which will be set at the 2018 maximum allowable levels. All of the comparables, with the exception of Allentown Apartments, reported their rents to be at the maximum allowable levels. It should be noted that, despite the majority of comparable property managers reporting that rents were at the maximum allowable levels, some of these comparable rents appear to be below the maximum allowable levels, which indicates either a differing utility allowance schedule or that the rents are actually set below maximum allowable levels but that the property manager provided incorrect information. The majority of comparables feature good condition and lack elevators, whereas the Subject will consist of a newly constructed building in excellent condition with elevator access.

The Subject will be most similar to Eastbrooke at Beulah Crossing, which was constructed, in 2015 features excellent condition, similar to the anticipated condition of the Subject. This property offers similar in-unit and similar common area amenities relative to the Subject. This comparable offers a slightly inferior location, similar one and two-bedroom unit sizes, and smaller three-bedroom unit sizes. All of the affordable properties maintain waiting lists and the majority reported very low vacancy rates. Thus, we would anticipate that the Subject would be able to achieve 2018 maximum allowable rents for its one, two, and three- bedroom 60 percent of AMI units.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

The achievable market rents were determined by comparing the aesthetic quality, amenities, unit sizes, etc. to that of the market rate projects in the area. Novogradac & Company concluded that the Subject will be competitive with the market rate competition; as such, achievable rents are within the market rental range. Achievable rents represent net market rate rent levels that we believe a project of the Subject’s condition and quality could reasonably achieve.

The following table shows both market rent comparisons and achievable market rents.

SUBJECT COMPARISON TO MARKET RENTS Rent Subject Pro Surveyed Surveyed Surveyed Achievable Unit Type Level Forma Rent Min Max Average Market Rent

1BR / 1BA Market $1,800 $1,101 $1,963 $1,552 $1,400 2BR / 1BA Market $2,100 $1,347 $2,643 $1,983 $1,700 2BR / 1.5BA Market $2,200 $1,347 $2,643 $1,983 $1,800 3BR / 2BA Market $3,000 $1,521 $2,840 $2,302 $2,450

We have placed the greatest weight upon the market rate rents at Tapestry Largo Station and Camden Summerfield in our determination of achievable market rents for the Subject.

Tapestry Largo Station was built in 2015 and exhibits excellent condition, similar to the proposed Subject. This comparable is located in a neighborhood with higher household incomes but also higher crime indices. Tapestry Largo Station is located directly north of the Largo Town Center Metro Station and is overall considered a similar neighborhood compared to the Subject. The comparable offers slightly superior unit sizes relative to the Subject. This comparable also offers slightly superior in-unit and superior common area amenities relative to the Subject. The property is currently 94.3 percent occupied and the property management reported typical occupancy is between 95 and 97 percent. Overall Tapestry Largo station is considered slightly superior to the Subject based on superior unit sizes and amenities.

Camden Summerfield was built in 2007 and exhibits good condition, slightly inferior to the proposed Subject. Camden Summerfield offers slightly superior in-unit and superior common area amenities relative to the Subject. This comparable is located in a neighborhood with a superior median household income and inferior crime indices and WalkScore, and is overall considered similar to the Subject’s location. Camden Summerfield offers generally larger unit sizes. This property is currently 97.9 percent occupied. Overall, the Subject is considered slightly inferior to Camden Summerfield based on the Subject’s inferior units sizes and amenities.

SUBJECT COMPARISON TO TAPESTRY LARGO STATION Subject Pro Square Subject Tapestry Largo Square Tapestry Largo Subject Rent Unit Type Forma Rent Feet RPSF Station Rent Feet Station RPSF Advantage

1BR / 1BA $1,800 650 $2.77 $1,679 853 $1.97 7.2% 2BR / 1BA $2,100 850 $2.47 $2,135 1,258 $1.70 1.6% 2BR / 1.5BA $2,200 1,025 $2.15 $2,135 1,258 $1.70 -3.0% 3BR / 2BA $3,000 1,235 $2.43 $2,770 1,417 $1.95 -8.3%

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

SUBJECT COMPARISON TO CAMDEN SUMMERFIELD Camden Subject Pro Square Subject Camden Square Subject Rent Unit Type Summerfield Forma Rent Feet RPSF Summerfield Rent Feet Advantage RPSF 1BR / 1BA $1,800 650 $2.77 $1,446 771 $1.88 24.5% 2BR / 1BA $2,100 850 $2.47 $1,908 1,178 $1.62 -10.1% 2BR / 1.5BA $2,200 1,025 $2.15 $1,908 1,178 $1.62 -15.3% 3BR / 2BA $3,000 1,235 $2.43 $2,840 1,564 $1.82 -5.6%

We have estimated the achievable market rents to be below the rents currently being achieved at Tapestry Largo Station. The Subject’s achievable market rents on a rent per square basis are above both comparables, this is due to lack of elasticity in the market.

Overall, based on the comparable data and our interviews with area managers, we believe that our concluded achievable rents, which are below the developer’s proposed rents, are reasonable.

The following table compares the achievable LIHTC rents to the achievable market rents.

SUBJECT COMPARISON OF ACHIEVABLE MARKET RENTS VS. LIHTC RENTS Achievable LIHTC Achievable Market Achievable Market Subject LIHTC Rent Unit Type Rents Rents RPSF Advantage 1BR/1BA $1,145 $1,400 $2.15 -18.2% 2BR/1BA $1,381 $1,700 $2.00 -18.8% 2BR/1.5BA $1,381 $1,800 $1.76 -23.3% 3BR/2BA $1,612 $2,450 $1.98 -34.2%

Demand The current and anticipated supply over the next few years is low, as we are aware of one market rate development in the pipeline within the PMA that will be competitive with the Subject as well as three existing projects that were recently awarded LIHTC. No competitive new construction LIHTC projects have been award in the PMA since 2015. As proposed, the Subject has a low overall capture rate of 0.8 percent for the LIHTC units and 0.2 percent for the market rate units, which indicates sufficient demand for the Subject. Likewise, the indicated penetration rate is 43.2 percent for the LIHTC and 42.1 percent for the market rate units, which are both reasonable and indicate that the Subject’s units would be absorbed in less than one year. It should be noted that these calculations assume that all tenants will come from within the PMA, whereas we estimate that approximately 90 percent of the Subject’s tenants will come from within the PMA. Based on the Subject’s proposed unit mix, amenity package, and close proximity to locational services, public transportation and employment, the marketability of the Subject is strong in relation to the comparable properties.

5) Competitive Advantages/Disadvantages The following summarizes the Subject’s characteristics. Most necessary services and amenities are located less than 1.5 mile from the Subject site and the site offers excellent access to public transportation. The Subject site is located across the street from the Addison Street Metro station that provides access to the greater D.C. metropolitan area.

Location: Most necessary services and amenities are located less than 5.1 miles from the Subject site and the site offers excellent access to public transportation. The Subject is located in the city of Seat Pleasant, MD with excellent access to employment, retail, and public transportation. The Subject is located directly north of the Addison Road Metro station, which provides the area of Seat Pleasant access to major cities including Washington D.C, located approximately 11.9 miles west of the Subject, Baltimore, located 40 miles

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY northeast of the Subject, and Annapolis, located approximately 26 miles east of the Subject. The two state highways that run through Seat Pleasant are Route 704 (Martin Luther King Highway), and Route 214 (Central Avenue). The Subject is located approximately 0.9 miles east of Route 704 and has frontage along Route 214.

Demographics: The PMA has demonstrated that it is an area projected for population and household growth, and growth trends are expected to continue through 2024. As population continues to grow, the need for good quality affordable and market rate housing is also expected to increase.

Amenities: Overall, the Subject’s proposed unit amenity package is considered generally slightly superior to the LIHTC comparables and slightly inferior to the market rate comparables.

Features: The Subject will be new construction in excellent condition. The Subject will offer an elevator- serviced high-rise design, which is marketable to varying tenancies given the accessibility.

Parking: The Subject will offer subterranean garage parking at no additional cost for tenants in the affordable units and a $129 per month fee for tenants in the market rate units. All of the comparables offer some form of off-street parking. Three of the comparables offer garage parking for an additional cost of $50 to $140 per month. Overall, the Subject’s parking structure is similar or slightly superior to the majority of comparables.

Supply: The comparables reported vacancy rates ranging from zero to 5.7 percent, with an overall weighted average of 2.7 percent. Two of the five LIHTC properties reported being 100 percent occupied. The average vacancy rate reported by the affordable comparables is 1.5 percent, which is below the 3.2 percent average reported by the market-rate properties. The average LIHTC vacancy rate of 1.5 percent is considered low, and indicative of supply constrained conditions. Based on the performance of the comparables, we expect the Subject will operate with a vacancy rate of five percent, or less.

6) Number of Units Currently Under Construction in the Development Pipeline We reached out to the Prince George’s Planning Department to discuss planned, proposed or under construction multifamily properties within the Subject’s PMA. Our contact at the Prince George’s Planning Department referred us to their online mapping database to determine any multifamily projects within the PMA. We have supplemented this research through the use of the commercial real estate data provider CoStar and other online research. We are aware of one proposed multifamily project within the Subject’s PMA.

A large development known as the Hampton Park Development has been approved to begin construction. The site of the project is located approximately 3.0 miles east along Central Avenue at the Hampton Mall. The development will transform the current mall into 25-acres of mixed use space. The plans call for 400 market rate residential units, 100,000 square feet of retail space and 125,000 square feet of office space. Plans for the development were released in May of 2017, and a construction timeline has not been made public at this time. Construction has not begun and there is no date yet for groundbreaking. A master plan of the project is shown below.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Source: Velocity Companies, May 2018

We researched the Maryland Department of Housing and Community Development allocation list to determine if there have been any new affordable properties allocated funds within the past three years. According to the allocation lists from 2015, 2016, and 2017, five projects have received credits in the PMA, all of which are detailed in the following table. It should be noted that the 2018 recipient list has not been made available at this time.

RECENT LIHTC ALLOCATIONS IN PMA Year Rent Competitive Distance Property Name Tenancy Total Units Allocated Structure Units to Subject Meadow Green Courts 2017 LIHTC Senior 60 0 3.6 miles Arnold Gardens 2016 LIHTC/Section 8 Family 68 14 4.5 miles Conifer Village at Oakcrest 2015 LIHTC Senior 120 0 3.3 miles Weinberg Commons 2015 LIHTC Family/Homeless 36 24 2.6 miles Woodland Springs 2015 LIHTC/Section 8/Market Family 506 347 2.1 miles Source: Maryland Department of Housing and Community Development , May 2018

Meadow Green Courts is a senior property that was awarded LIHTC in 2017. The renovations are currently under construction and the property consists of studio, one, and two-bedroom units restricted to senior households earning 30 and 50 percent of AMI or less. Arnold Gardens was allocated tax credits in 2016 to rehab an existing LIHTC property built in 1971. The property offers a total of 68-units and 54 of the units receive a project-based subsidy. The remaining 14-units are restricted to households earning 60 percent of AMI or less. The property offers one, two and three-bedroom units. Conifer Villages at Oakcrest is a senior LIHTC property awarded tax credits in 2015 and built in 2016. The property began leasing units in January 2017 and became fully stabilized in May 2017. The property is restricted to seniors ages 62 and years older. The property offers 120 units for

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

seniors earning 30, 50, and 60 percent of AMI. Weinberg Commons is an existing 36-unit affordable property in Washington D.C. that was awarded tax credits in 2015. Renovations have been completed and the property operates with 12 units restricted to the formerly homeless and 24 units restricted to families earning 60 percent of the AMI or less. Woodland Springs was allocated tax credits in 2015. The property, which was originally built in 1948 received tax credits for renovations. The properties renovations have been completed and includes one, two, three, and four-bedroom units restricted to households earning 20, 30, 50, and 60 percent of AMI or less. Of the units, 159 receive project-based Section 8 subsidies.

7) Analyst’s Opinion of Market Feasibility Upon completion, the Subject will offer competitive one, two and three-bedroom units, which will consist of LIHTC units restricted at the 60 percent AMI levels and market rate units. According to our survey, the market for affordable rental developments within the PMA is good. The affordable developments in the Subject’s neighborhood are a mix of new construction properties developed with LIHTC equity and older properties renovated with LIHTC equity and exhibit similar to inferior condition relative to the Subject as proposed. The market rate comparables also feature similar to inferior condition relative to the proposed Subject. Comparable properties reported vacancy rates ranging from zero to 5.7 percent with an average of 2.7 percent. In addition, several comparables reported waiting lists and most reported strong demand for affordable and market rate units in the area. The Subject will be similar to slightly inferior to the majority of the comparables in terms of in-unit and common area amenities and similar to slightly superior to the comparables in terms of location. The Subject will generally offer similar to superior condition relative to the comparables. Four of the five LIHTC comparables reported achieving the maximum allowable rents. We believe that the Subject would be able to achieve 2018 maximum allowable rents for its one, two and three- bedroom 60 percent AMI units and our achievable market rents are below the developer’s proposed market rents. The Subject’s achievable LIHTC rents are 18 to 34 percent below the achievable market rents. The Subject will provide excellent quality housing with excellent access to public transportation and competitive amenities.

8) Recommendations and/or Suggested Modifications Based on our analysis of the market rate comparables most similar to the Subject, we believe that the proposed market rate rents are above the achievable market rents. We concluded to lower achievable market rents of $1,400, $1,700, $1,800, and $2,450 for the Subject’s one, two-bedroom/one bathroom, two-bedroom/1.5 bathroom, and three-bedroom units, respectively. We concluded to achievable market rent for the Subject’s commercial space of $24.00 to $25.00 per square foot. We have no other major recommendations with respect to the development scheme as the Subject appears to be a well-conceived development, assuming market rate unit rents are appropriately positioned.

2. DESCRIPTION OF PROPOSED PROJECT

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

DESCRIPTION OF PROPOSED PROJECT 1. Unit Mix and Size Addison Apartments (Subject) is a proposed new construction ten-story elevator-serviced building with 70 LIHTC units and 18 market-rate units located at 6500 Central Avenue in Seat Pleasant, Maryland 20743. The Subject will consist of 16 one-bedroom units, 48 two-bedroom units, and 24 three-bedroom units. Upon completion, the Subject will exhibit excellent condition. Additionally, the Subject will offer 28,300 square feet of commercial space. The residential and commercial unit mixes are detailed below.

UNIT MIX AND SQUARE FOOTAGE - RESIDENTIAL Unit Type Number of Units Unit Size (SF) Gross Area Studio / 1BA 16 650 10,400 2BR / 1BA 16 850 13,600 2BR / 1.5BA 32 1,025 32,800 3BR/2BA 24 1,235 29,640 Total 88 86,440

UNIT MIX AND SQUARE FOOTAGE - COMMERCIAL Unit Type Number of Units Unit Size (SF) Total Area Commercial 1 28,300 28,300 Total 1 28,300

The Subject’s square footages are based on the Subject’s floor plans provided by BGO Architects.

2. Proposed Rents The Subject will contain a total of 16 one-bedroom units, 48 two-bedroom units, and 24 three-bedroom residential units. Seventy of the Subject’s units will be restricted to households with income levels at 60 percent of the AMI or below. The remaining 18 units will be market rate units. The table below details the Subject’s proposed unit sizes and asking rents.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

The Subject’s commercial space will consist of 28,300 square feet located on the first floor of the residential building.

PROPOSED COMMERCIAL RENTS Unit Type Size (SF) Annual Rent PSF (NNN) Commercial 28,300 $28.80

3. Description of Any Income or Rent Restrictions Seventy of the Subject’s units will be restricted to households with income levels at 60 percent of the AMI or below. The 18 remaining units will be market rate units. HUD determines maximum income guidelines for tax credit properties, based on the AMI. For Prince George’s County, the 2018 AMI is $117,200 for a four- person household. Minimum income levels for the LIHTC units are calculated based on the assumption that lower-income households should pay no more than 35 percent of their income to rent. We spoke with property managers at the comparable market rate properties to discuss their minimum income requirements. We spoke with property managers at the comparable market rate properties to discuss their minimum income requirements. Based on our conversations with these property managers, minimum income requirements generally range from 2.5 to 3.0 times the monthly rent annualized. As such, we have estimated the minimum income limits for the market rate units at 3.0 times the monthly rent annualized. There will be no maximum income limit for the market rate units. However, we believe a maximum income of 100 percent of AMI is reasonable given the Subject’s majority of affordable units. The minimum and maximum income limits for the Subject’s units are as follows.

According to the developer, the Subject will primarily target professional singles; couples; small and non- traditional families.

4. Utility Policy Tenants living in the Subject’s units will be responsible for general electric, air conditioning, electric heating, water heating, and cooking. The landlord will be responsible for water, sewer and trash expenses in addition to all common area utilities.

5. Unit and Project Amenities and Services The Subject’s amenities will include balconies/patios, drapes/blinds, central heating and air conditioning, coat closets, ceiling fans, granite countertops, and washer/dryer hookups. Appliances will be stainless steel and will include a refrigerator, range/oven, dishwasher, garbage disposal, and microwave. Common area amenities at the Subject will include an exercise facility, on-site management, garage parking, and laundry facilities. The Subject will offer 118 subterranean garage parking spaces, 70 of which will be available at no additional cost to the LIHTC tenants. The remaining parking spaces will be available to the market-rate residential and commercial tenants for $129 per month, which is within the range of comparables and appears reasonable. In terms of security, the Subject will offer an intercom system and controlled access.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

6. Rehabilitation Project Information Not applicable, as the Subject is proposed new construction.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

PROJECT LOCATION/NEIGHBORHOOD CHARACTERISTICS Location and Accessibility Addison Apartments (Subject) will be located at 6500 Central Avenue in the city of Seat Pleasant, which is located in the west/central portion of Maryland near the border of Washington D.C. The city of Seat Pleasant is located within the Washington-Arlington-Alexandria, DC-VA-MD-WV Metropolitan Statistical Area (MSA).

The site is accessible from the north side of Central Avenue. Central Avenue is a six-lane road that provides access throughout the central portion of Prince George’s County. To the west Central Avenue turns into E Capitol Street SE and provides access to Washington D.C. Interstate 495 is accessible via Central Avenue to the east and provides access to cities surrounding Washington D.C. along with access to interstates 95, 270, 395, and in addition to numerous state highways. Overall, access and traffic flow to the Subject site are considered excellent.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Subject Neighborhood

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Subject’s Neighborhood Boundaries The Subject is located in the city of Seat Pleasant, which is located directly east of Washington D.C., approximately 11.9 miles west of the Subject. The general boundaries of the Subject’s neighborhood are Seat Pleasant Drive to the north, Hill Road and Shady Glen Road to the east, Walker Mill Road to the south, and Brooke Road and Route 704 to the west. The Subject is located in a mixed-use neighborhood with land uses consisting of commercial/retail uses, public transportation hubs, vacant land, and single-family and multifamily uses in average to good condition. Access to public transportation is considered excellent, with access to the Addison Road Metro station located directly south of the Subject across Central Avenue.

Source: Google Earth; May 2018

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Transportation

Highway: Maryland Route 704 (Martin Luther King Highway) and Maryland Route 214 (Central Avenue) are the two main state highways that run through Seat Pleasant. Route 704 is located approximately 0.9 west east of the Subject, traveling north to south and connecting Seat Pleasant to other cities within Prince George’s County. The Subject has frontage along Route 214, also known as Central Avenue and connects the Subject with other cities within Prince George’s County and to areas of Anne Arundel County, to the east including Annapolis, MD, located approximately 26 miles from the Subject.

Air: The Subject is located approximately 12.9 miles southwest from Ronald Reagan National Airport. This airport serves approximately 20 million passengers annually. Washington Dulles International Airport also serves the area and is approximately 40 miles west of the Subject.

Public Transportation The Washington Metropolitan Area Transit Authority (WMATA) provides bus, rail, and paratransit service for the Washington, D.C region. Metrobus, the regions bus service, provides more than 400,000 trips each weekday serving 11,500 bus stops in the District of Columbia, Maryland, and Virginia. Regular fares for Metrobus are $1.75 for adults and $0.85 for seniors and people with disabilities. Bus fares can be paid by cash or a SmarTrip Card, which are reloadable transit debit cards that can be purchased at a variety of retail centers in the area. A bus stop is located at Central Avenue and Soper Lane, adjacent to the Subject site. The Subject is also located directly north of the Addison Road Metro Station. Public transportation uses at the Subject are considered excellent.

Public Education The Subject is located in the Prince George’s County public school system. The closest schools to the Subject within this district are the James Gholson Middle School (2.7 miles), Carmody Hills Elementary School (1.2 miles), H.D Woodson High School (2.0 miles) and Central High School (0.5 miles).

Higher Education Within Prince George’s County is the University of Maryland at College Park, which is approximately 9.0 miles north of the Subject (outside the PMA). This is the flagship campus of the University of Maryland system, which has an enrollment of approximately 40,521 undergraduate and graduate students, The Prince George’s Community College is located 4.4 miles east of the Subject in Largo, outside of the Subject’s PMA. This community college has an enrollment of approximately 40,000 full time and part-time students.

Healthcare The nearest hospital to the Subject is Prince George’s Hospital located approximately 5.0 miles north of the Subject. Prince George’s Hospital, which is part of the Dimensions Health System, is the primary provider of medical services in the Prince George’s County and offers a full range of services including behavioral health, cardiac care, critical care, emergency services, maternal & child health, medical imaging, physical rehabilitation, outpatient surgery, family practice, and psychiatric care.

Retail It appears that the availability of retail/shopping options for tenants at the Subject will be adequate. The Subject is located within walking distance of local restaurants and retail options. Additionally, larger retailers

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY are located 2.0 miles west of the Subject in the River Park Retail Center, which include Safeway, Dollar Tree and CVS.

Adequacy/Availability of Utilities All utilities are available in the neighborhood.

Proximity to Local Services The Subject site offers good access to services including schools, employment, healthcare, and recreational activities. The following are distances of various services from the Subject. A map depicting the location of services in relation to the Subject’s location follows.

Source: Google Earth; May 2018

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

LOCATIONAL AMENITIES Map # Service or Amenity Distance from Subject 1 Addison Road Metro Station <0.1 miles 2 Fire Department 0.2 miles 3 Bus Stop 0.5 miles 4 Central High School 0.5 miles 5 Police Station 0.7 miles 6 Post Office 0.9 miles 7 Save-A-Lot Grocery 1.1 miles 8 Bank of America 1.1 miles 9 Carmody Hills Elementary School 1.2 miles 10 CVS 1.3 miles 11 H.D Woodson High School 2.0 miles 12 James Gholson Middle School 2.7 miles 13 Prince George's Hospital 5.1 miles

Crime Statistics The following tables show data of crime statistics for the Primary Market Area (PMA) and the Washington- Arlington-Alexandria, DC-VA-MD-WV MSA as compared to the nation.

2017 CRIME INDICES Washington-Arlington-Alexandria, DC- PMA VA-MD-WV MSA Total Crime* 151 100 Personal Crime* 296 110 Murder 472 141 Rape 108 74 Robbery 411 147 Assault 257 96 Property Crime* 131 99 Burglary 129 70 Larceny 116 104 Motor Vehicle Theft 265 140 Source: Esri Demographics 2017, Novogradac & Company LLP, May 2018 *Unweighted aggregations

For comparison purposes, a crime index below 100 is below the national average, and a crime index above 100 is above the nation’s crime index average. As indicated in the table above, all crime indices in the PMA are above those of the MSA and that of the nation. The Subject will offer an intercom system and controlled access, which is similar to the security features offered at the comparables. Given the high crime rate in the area, we believe the proposed security features are reasonable and necessary in order to deter crime. In the supply analysis of this report we show crime indices within a 0.5 mile radius for the Subject and all of the comparables. Please reference for further detail on crime comparisons for the comparables.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Neighborhood Housing Stock The surrounding housing stock in the neighborhood of the Subject site consists of single-family residential developments and commercial uses, exhibiting conditions ranging from average to good. According to Zillow, the median home value in the Subject’s zip code is $216,244.

NEIGHBORHOOD ANALYSIS 0.5 Mile Radius PMA 2017 2017 Owner-Occupied Housing Units 61.4% 42.7% Renter-Occupied Housing Units 34.7% 46.2% Vacant Housing Units 3.9% 11.1% 2017 Median Household Income $44,595 $53,049 2017-2022 MHI Annual Growth -0.13% 0.63% 2018 Median Home Value $216,244 $207,195 Source: Esri Demographics 2017, Novogradac & Company LLP, May 2018; Zillow

As indicated in the previous table, the percentage of renter households within a 0.5 mile radius of the Subject site is lower than that of the PMA as a whole. According to 2017 data provided by ESRI, approximately 34.7 percent of the occupied housing units within 0.5 miles of the Subject are renter- occupied, compared to 46.2 percent renter-occupied housing units in the PMA. The median household income within a 0.5 mile radius of the Subject is projected to slightly decrease by 0.1 percent annually through 2022, a pace that is below the projected 0.6 percent annual increase for the PMA. Approximately 3.9 percent of housing units are vacant in the Subject’s neighborhood compared to 11.1 percent within the PMA, both of which are relatively low.

Other Characteristics/Conclusion Addison Apartments (Subject) will be located at 6500 Central Avenue in the city of Seat Pleasant, which is located in the west/central portion of Maryland near the border of Washington D.C. The general boundaries of the Subject’s neighborhood are Backlog Street, and Seat Pleasant Drive to the north, Hill Road and Shady Glen Road to the east, Walker Mill Road to the north, and Brooke Road and Route 704 to the west. The Subject is located in a mixed-use neighborhood with land uses consisting of commercial/retail uses, public transportation hubs, vacant land, and single-family and multifamily uses in average to good condition. Commercial uses in the Subject’s neighborhood appear to be 90 percent occupied. Excellent proximity to public transportation is a strength of the Subject, with access to the Addison Road Metro station located directly south of the Subject. There are currently four vacant apartment buildings on the Subject site that will be razed prior to construction of the Subject. The proposed Subject will positively impact the neighborhood and the availability of good quality rental housing in Seat Pleasant; the site is suitable for the proposed use. An aerial view of the Subject site is outlined as follows.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Subject site

Source: Google Earth, May 2018

3. PRIMARY MARKET AREA DEFINITION

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

PRIMARY MARKET AREA DEFINITION

1. Primary Market Area Map In some areas, residents are “neighborhood oriented” and are generally reluctant to move from the area where they grew up. In other areas, residents are more mobile and are willing to relocate to a new area. As such, it is necessary to define a primary market area (PMA), or the area from which we expect most of the Subject’s potential tenants to originate. The primary market area boundaries are as follows:

North: Landover Road East: Interstate 495 South: Suitland Parkway West: Highway 295

2. Description and Justification of the Primary Market Area The PMA boundaries and overall market health assessment are based upon an analysis of demographic and socioeconomic characteristics, target tenant population, political jurisdictional boundaries, natural boundaries, experience of nearby comparable developments, accessibility to mass transit or key transportation corridors and commute patterns, and market perceptions. Given the opportunity to locate

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY good quality housing, the renter base will move within these areas. We anticipate the majority of demand will be generated from this geographic area. The PMA is 33.4 square miles in size. The Subject will generally attract residents from the central portions of Prince George's County. However, we have estimated 10 percent supplemental demand is expected from outside the PMA from surrounding portions of Prince George’s County and the Washington D.C. area. We have used the Washington-Arlington-Alexandria, DC-VA- MD-WV Metropolitan Statistical Area (MSA), which includes the 21 counties in Maryland, Virginia, and West Virginia in addition to the District of Columbia as the secondary market area (SMA) for our analysis.

4. ECONOMIC CONTEXT

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

ECONOMIC CONTEXT Overview The Subject will be located in the city of Seat Pleasant, which is a located approximately 11.9 miles east of Washington D.C. The following section illustrates the findings of our analyses of key economic indicators, such as employment by industry, major employers, and unemployment trends. We analyzed data trends for the Subject’s PMA, as well as the metropolitan area, which is considered to be the Washington-Arlington- Alexandria, D.C-VA-MD-WV MSA. As of the 2017, the MSA had a population of 3,263,886.

Novogradac & Company LLP obtained economic information from the State of Maryland, the US Bureau of Labor Statistics, Maryland Chamber of Commerce, and ESRI Demographics, along with various other sources. These data sources are reliable and current sources.

Employment by Industry The following table illustrates the distribution of employment sectors by industry in the PMA and the nation.

2017 EMPLOYMENT BY INDUSTRY PMA USA Number Percent Number Percent Industry Employed Employed Employed Employed Public Administration 12,863 14.6% 6,982,075 4.5% Healthcare/Social Assistance 12,204 13.8% 21,941,435 14.2% Retail Trade 8,955 10.1% 17,038,977 11.0% Admin/Support/Waste Mgmt Srvcs 7,373 8.3% 6,968,170 4.5% Educational Services 7,121 8.1% 14,390,707 9.3% Transportation/Warehousing 6,592 7.5% 6,498,777 4.2% Prof/Scientific/Tech Services 6,524 7.4% 11,068,132 7.1% Accommodation/Food Services 6,049 6.8% 12,036,513 7.8% Other Services 4,816 5.5% 7,493,272 4.8% Construction 4,494 5.1% 9,872,629 6.4% Arts/Entertainment/Recreation 2,552 2.9% 3,448,696 2.2% Real Estate/Rental/Leasing 2,251 2.5% 3,130,712 2.0% Finance/Insurance 1,959 2.2% 7,200,593 4.6% Information 1,769 2.0% 2,741,630 1.8% Manufacturing 1,483 1.7% 15,589,157 10.1% Wholesale Trade 788 0.9% 4,064,621 2.6% Utilities 454 0.5% 1,401,281 0.9% Agric/Forestry/Fishing/Hunting 59 0.1% 2,288,795 1.5% Mgmt of Companies/Enterprises 41 0.0% 86,740 0.1% Mining 7 0.0% 609,828 0.4% Total Employment 88,354 100.0% 154,852,740 100.0% Source: Esri Demographics 2017, Novogradac & Company LLP, May 2018

Employment in the PMA is concentrated in the public administration, healthcare/social assistance, and retail trade industries, which collectively comprise 38.5 percent of local employment. The large share of PMA employment in retail trade is notable as this industry is historically volatile, and prone to contraction during economic downturns. However, the PMA also has significant share of employment in the public administration and healthcare industries, which are historically known to offer greater stability during economic downturns. Relative to the overall nation, the PMA features comparatively greater employment in the public administration, admin/support/waste management services, and transportation/warehousing

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY industries. Conversely, the PMA is under-represented in the manufacturing, wholesale trade, and agric/forestry/fishing/hunting industries.

The following table illustrates the 2017 employment by industry within the PMA, MSA, and the nation.

Employment and Unemployment Trends The following table details employment and unemployment trends for the MSA and the nation from 2002 through February 2018.

EMPLOYMENT & UNEMPLOYMENT TRENDS (NOT SEASONALLY ADJUSTED) Washington-Arlington-Alexandria, DC-VA-MD-WV MSA USA Total Unemployment Total Unemployment Year % Change Change % Change Change Employment Rate Employment Rate 2002 2,665,673 - 3.9% - 136,485,000 - 5.8% - 2003 2,682,624 0.6% 3.9% -0.1% 137,736,000 0.9% 6.0% 0.2% 2004 2,729,743 1.8% 3.7% -0.1% 139,252,000 1.1% 5.5% -0.5% 2005 2,803,963 2.7% 3.5% -0.3% 141,730,000 1.8% 5.1% -0.5% 2006 2,867,910 2.3% 3.1% -0.4% 144,427,000 1.9% 4.6% -0.5% 2007 2,905,565 1.3% 3.0% -0.2% 146,047,000 1.1% 4.6% 0.0% 2008 2,946,320 1.4% 3.7% 0.7% 145,363,000 -0.5% 5.8% 1.2% 2009 2,893,543 -1.8% 6.0% 2.3% 139,878,000 -3.8% 9.3% 3.5% 2010 2,950,674 2.0% 6.4% 0.4% 139,064,000 -0.6% 9.6% 0.3% 2011 3,002,205 1.7% 6.2% -0.2% 139,869,000 0.6% 9.0% -0.7% 2012 3,047,895 1.5% 5.8% -0.4% 142,469,000 1.9% 8.1% -0.9% 2013 3,075,645 0.9% 5.6% -0.2% 143,929,000 1.0% 7.4% -0.7% 2014 3,097,433 0.7% 5.1% -0.5% 146,305,000 1.7% 6.2% -1.2% 2015 3,127,735 1.0% 4.4% -0.7% 148,833,000 1.7% 5.3% -0.9% 2016 3,186,597 1.9% 3.8% -0.6% 151,436,000 1.7% 4.9% -0.4% 2017 3,263,886 2.4% 3.7% -0.2% 153,308,000 1.2% 4.4% -0.5% 2018 YTD Average* 3,278,838 0.5% 3.7% 0.0% 154,430,000 0.7% 4.1% -0.3% Feb-2017 3,235,446 - 3.9% - 151,594,000 - 4.9% - Feb-2018 3,253,670 0.6% 3.3% -0.6% 154,021,000 1.6% 4.1% -0.8% Source: U.S. Bureau of Labor Statistics May 2018 *2018 data is through Jan

The charts below depict employment and unemployment trends in the MSA.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Prior to the national recession, average employment growth in the MSA generally exceeded the nation. Annual job growth in the MSA outpaced the nation in five of the six years between 2002 and 2007. Comparatively speaking, the MSA economy performed well during the recession. Total MSA employment contracted by only 1.8 percent, less than the 4.9 percent decline reported by the overall nation. Employment in the MSA recovered and surpassed pre-recessionary levels in 2010, four years prior to the overall nation. Since 2012, average employment growth in the MSA trailed the nation except for most recently in 2016 and 2017 when employment growth in the MSA was above the national levels. As of February 2018, total employment in the MSA is at a post-recessionary record, and increasing at an annualized rate of 0.6 percent, compared to 1.6 percent across the overall nation.

The MSA experienced a lower average unemployment rate relative to the overall nation during the years preceding the recession. The local labor market demonstrated relative strength during the recession, as the rate of unemployment increased by only 340 basis points, compared to a 500 percent increase across the overall nation. Since 2012, the MSA generally experienced a lower unemployment rate compared to the overall nation between 2007 and 2010. According to the most recent labor statistics, the unemployment rate in the MSA is 3.3 percent, lower than the current national unemployment rate of 4.1 percent.

Employment Contraction/Expansion We spoke with David Lewis, Business Development Director with the Economic Development Corporation to discuss recent business expansions in Seat Pleasant, as well as the overall health of the area. We have also researched recent economic and business expansions within Prince George’s County and the surrounding areas. Our findings are highlighted below.

The University of Maryland Medical Center broke ground in December 2017. The center is a $543 million state-of-the-art teaching hospital at Largo Town Center, located approximately 6.0 miles east from the Subject. The hospital will include centers devoted to cancer and stroke care, a self- contained pediatric hospital, and programs in neuroscience and women’s health. The project is expected to be completed in 2021.

The U.S Citizenship and Immigration Services (CIS) department recently announced they are moving and expanding their offices to Prince George’s county. The offices, will be located at the Branch Avenue Station, located 8.0 miles south of the Subject will create 3,200 new jobs and 500 part time contractors. The move is expected to happen in 2018, but no official date has been made available at this time.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Kaiser Permanente opened a 176,000 square foot administrative and IT facility located at the New Carrolton Metro station, located approximately 7.0 miles north of the Subject. The facility, which will open in November 2018, has space for 850 employees.

La-Z-Boy Inc. recently announced they will be shifting its regional distribution and logistics operations from Anne Arundel County to Bowie, taking a full building within the Collington Park Industrial Center, located approximately 13 miles east of the Subject. La-Z-Boy will lease 220,800 square feet of space and will create 65 new jobs. The completion of the move, which was announced in April 2018, has not been made available at this time.

We have reviewed publications by the Maryland Department of Labor, Licensing and Regulation WARN (Worker Adjustment and Retraining Notification Act) notices for the past two years in Prince George’s County, as detailed in the following table.

WARN LISTINGS (2017 -2018) PRINCE GEORGE'S County Employees Company Industry Notice Date Affected Cintas Corporation Business Services 47 3/23/2018 McArdle Printing Company Printing 77 8/10/2017 Dollar Express Retail 61 3/30/2017 HHGregg, Inc. Retail 63 3/2/2017 Whole Foods Market Retail 136 1/20/2017 Comcast Communications 90 1/18/2017

Total 474 Source: Maryland Department of Labor, Licensing & Regulation, Novogradac & Company LLP, 5/2018

According to the Maryland Department of Labor, Licensing & Regulation, there have been six WARN notices that have been issued in Prince George’s County between 2017 and 2018 year-to-date totaling 474 jobs affected. Fifty-five percent of the total notices were in the retail sector. However, it should be noted that these job losses are negligible compared to the employment base in the county.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Major Employers The following table details the largest employers in Prince George’s County

MAJOR EMPLOYERS Prince George's County Employer Name Industry # Of Employees University System of Maryland Educational services 18,726 Joint Base Andrews Naval Air Facility Washington Military Installation 17,500 U.S. Internal Revenue Service Federal government 5,539 U.S. Census Bureau Federal government 4,414 United Parcel Service (UPS) Transportation and warehousing 4,220 NASA - Goddard Space Flight Center Federal government 3,397 Giant Food Retail trade 3,000 Prince George's Community College Educational services 2,785 Verizon Information 2,738 Dimensions Healthcare System Health care 2,500 Marriott International Resort and Convention Center Accommodation and food services 2,412 Shoppers Food Warehouse Retail trade 1,975 U.S. Department of Agriculture Federal government 1,850 National Maritime Intelligence-Integration Office Federal government 1,724 MedStar Southern Maryland Hospital Center Health care 1,709 Safeway Retail trade 1,605 Melwood Health care 1,428 Target Retail trade 1,400 National Oceanic and Atmospheric Administration Federal government 1,350 Doctors Community Hospital Health care 1,300 Adelphi Laboratory Center Federal government 1,200 Walmart Retail trade 1,200 Home Depot Retail trade 1,184 U.S. Food and Drug Administration Federal government 1,061 Capital One Finance and insurance 999 Source: Maryland Department of Commer, May 2018

The largest employers in Prince George’s County are concentrated in education, Military and the Federal Government. The largest employer in Prince George’s County is the University Systems of Maryland, which is the state’s public higher education system and consists of 12 institutions, two regional centers, and one system office. The number of employees stated for University Systems of Maryland includes University of Maryland – College Park, UMUC, and Bowie State University, which are all located in Prince George’s County. The Suitland Federal Center, located 4.6 miles south of the Subject, contains offices for the U.S. Census Bureau, Naval Ocean Office, the U.S. Weather Bureau, Federal Records Center, Naval Intelligence Support Center, Federal Protective Service, and Government Services Administration. Additionally, Joint Base Andrews is located outside the southern edge of the PMA, which has an enlisted employment of approximately 12,000 and civilian employment of approximately 2,000.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Wages by Occupation The following table details the number of employees, the mean hourly wage and the mean annual wage by occupation in the Washington-Arlington-Alexandria, DC-VA-WV MSA. The 2nd quarter 2016 data is the most recent information available for this region.

WASHINGTON-ARLINGTON-ALEXANDRIA, DC-VA-MD-WV MSA - 2ND QTR 2016 AREA WAGE Number of Mean Hourly Mean Annual Occupation Employees Wage Wage All Occupations 2,490,690 $33.12 $68,880 Legal Occupations 62,290 $69.52 $144,610 Management Occupations 193,260 $69.16 $143,840 Computer and Mathematical Occupations 189,120 $50.36 $104,750 Architecture and Engineering Occupations 49,000 $48.84 $101,580 Life, Physical, and Social Science Occupations 47,670 $48.77 $101,450 Business and Financial Operations Occupations 255,890 $44.61 $92,780 Healthcare Practitioners and Technical Occupations 105,760 $43.29 $90,040 Arts, Design, Entertainment, Sports, and Media Occupations 63,270 $37.47 $77,930 Education, Training, and Library Occupations 155,330 $31.04 $64,560 Community and Social Service Occupations 32,030 $27.79 $57,810 Protective Service Occupations 77,480 $27.37 $56,930 Installation, Maintenance, and Repair Occupations 74,340 $25.91 $53,880 Construction and Extraction Occupations 91,120 $24.09 $50,100 Sales and Related Occupations 209,650 $21.53 $44,780 Office and Administrative Support Occupations 323,710 $21.35 $44,400 Transportation and Material Moving Occupations 108,190 $20.06 $41,720 Production Occupations 39,920 $19.88 $41,360 Farming, Fishing, and Forestry Occupations 1,850 $18.17 $37,790 Healthcare Support Occupations 46,000 $16.18 $33,660 Personal Care and Service Occupations 71,320 $14.94 $31,080 Building and Grounds Cleaning and Maintenance Occupations 84,570 $14.47 $30,110 Food Preparation and Serving Related Occupations 208,910 $12.88 $26,780 Source: Department Of Labor, Occupational Employment Statistics, 5/2016, retrieved 5/2018

The previous chart illustrates average hourly and annual wages by employment classification. The classification with the lowest average hourly wage is food preparation and serving related occupations, at $12.88 per hour. The highest average hourly wage of $69.52 is for legal occupations.

The qualifying incomes for the Subject’s affordable units will range from $45,223 to $75,960 while the minimum income limit for the Subject’s market rate units will be $64,800 to $126,600, which encompasses a significant portion of the employment in the area. Utilizing the lower end of the Subject’s LIHTC qualifying income of $45,223 per year at 2,080 annual hours equates to a per hour wage of $21.74. Utilizing the high end of the qualifying incomes for the Subject’s affordable units of $75,960 per year at 2,080 annual hours equates to a per hour wage of $36.52, which is just above the mean hourly wage rate. A significant portion of the area would qualify to live at the Subject.

Employment Projection over the Forecast Period Per the HUD MAP Guide, the analyst should provide an estimate of employment projection over the forecast period. In order to determine an appropriate forecast we consulted the Maryland Employment Projections 2014-2024 report produced by the Maryland Department of Labor, Licensing, and Regulation. According to this report total occupations within the Prince George’s County Workforce Development Area, which consists

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY solely of Prince George’s County, are projected to increase 4.3 percent from 2014 to 2024, which is an increase of 15,982 jobs. This data demonstrates the continued need for good quality housing in the region. The following table outlines this data, excerpted from the report.

PRINCE GEORGE’S COUNTY WDA - EMPLOYMENT BY INDUSTRY Annual Average Annual Average Number Change Percent Growth Industry Title Employment 2014 Employment 2024 2014-2024 2014-2024 Total All Industries 372,890 385,188 15,982 4.3% Source: Maryland Department of Labor, Licensing, & Regulation, 5/2018

The above data is based on regional employment. On an annual basis, the projected growth equates to a net increase of 1,598 jobs. In order to estimate the percentage share of jobs in the PMA, we considered the population in the Prince George’s County Workforce Development Area versus the PMA; the indicated ratio is approximately 20.1 percent as detailed in the Demographic Analysis. Given the nature of the PMA, which includes Capital Heights, Forestville, and Suitland-Silver Hill, it is reasonable to assume that the PMA has a larger concentration of jobs than the population indicates. However, as a benchmark, we have relied upon the percentage indicated by the demographic breakdown. Therefore, 20.1 percent of the 1,598 projected annual job growth will be located in the PMA. This equates to approximately 322 new jobs annually. An increasing job base bodes well for continued demand for rental housing units within the PMA.

Summary Employment in the PMA is concentrated in the public administration, healthcare/social assistance, and retail trade industries, which collectively comprise 38.5 percent of local employment. The large share of PMA employment in retail trade is notable as this industry is historically volatile and prone to contraction during economic downturns. However, the PMA also has significant share of employment in the public administration and healthcare industries, which are historically known to offer greater stability during economic downturns. Relative to the overall nation, the PMA features comparatively greater employment in the public administration, admin/support/waste management services, and transportation/warehousing industries. Conversely, the PMA is under-represented in the manufacturing, wholesale trade, and agriculture/forestry/fishing/hunting industries. Prior to the national recession, average employment growth in the MSA generally exceeded the nation. Annual job growth in the MSA outpaced the nation in five of the six years between 2002 and 2007. Comparatively speaking, the MSA economy performed well during the recession. Total MSA employment contracted by only 1.8 percent, less than the 4.9 percent decline reported by the overall nation. Employment in the MSA recovered and surpassed pre-recessionary levels in 2010, four years prior to the overall nation. Since 2012, average employment growth in the MSA trailed the nation except for most recently in 2016 and 2017 when employment growth in the MSA was above the national levels. As of February 2018, total employment in the MSA is at a post-recessionary record, and increasing at an annualized rate of 0.6 percent, compared to 1.6 percent across the overall nation. The largest employers in Prince George’s County are concentrated in education, Military and the Federal Government. The largest employer in Prince George’s County is the University Systems of Maryland, which is the state’s public higher education system and consists of 12 institutions. Job growth within Prince George’s County is expected to grow at an annualized rate of 0.43 percent through 2024.

5. DEMOGRAPHIC ANALYSIS

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

DEMOGRAPHIC ANALYSIS Population and Households The tables below illustrate general population and household trends in the PMA, MSA, and the nation from 2000 through 2022.

POPULATION Washington-Arlington-Alexandria, Year PMA USA DC-VA-MD-WV MSA Number Annual Change Number Annual Change Number Annual Change 2000 180,947 - 4,837,251 - 281,038,168 - 2010 176,025 -0.3% 5,636,232 1.7% 308,745,538 1.0% 2017 187,619 0.9% 6,146,460 1.2% 327,514,334 0.8% 2022 195,484 0.8% 6,539,875 1.3% 341,323,594 0.8% Source: Esri Demographics 2017, Novogradac & Company LLP, May 2018

HOUSEHOLDS Washington-Arlington-Alexandria, Year PMA USA DC-VA-MD-WV MSA Number Annual Change Number Annual Change Number Annual Change 2000 67,933 - 1,815,141 - 105,403,008 - 2010 67,818 0.0% 2,094,048 1.5% 116,716,293 1.1% 2017 71,747 0.8% 2,271,070 1.2% 123,158,898 0.8% 2022 74,289 0.7% 2,405,714 1.2% 127,481,298 0.7% Source: Esri Demographics 2017, Novogradac & Company LLP, May 2018

The PMA experienced slight negative population growth between 2000 and 2010, and lagged behind the surrounding MSA, which reported positive growth over the same time period. Although PMA growth also trended below the nation, population in the broader MSA increased faster than the overall nation during this same time period. Population growth in the PMA was positive from 2010 through 2017, increasing at a greater rate than the nation but lower than the MSA. According to ESRI demographic projections, annualized PMA growth is expected to slightly decrease to 0.8 percent through 2022, which is less than the growth projected for the surrounding MSA and similar to the and overall nation. Household growth within the PMA is anticipated to follow the same patterns as population growth through 2022 relative to the MSA and nation.

The following map illustrates the annual population growth in the state of Maryland by county.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Prince George’s County

Annual population in the Subject’s county has increased by 0.8 to 1.47 percent.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Average Household Size The following table illustrates average household size in the PMA, MSA, and nation from 2000 to 2022.

AVERAGE HOUSEHOLD SIZE Washington-Arlington-Alexandria, Year PMA USA DC-VA-MD-WV MSA Number Annual Change Number Annual Change Number Annual Change 2000 2.65 - 2.61 - 2.59 - 2010 2.58 -0.3% 2.64 0.1% 2.58 -0.1% 2017 2.60 0.1% 2.66 0.1% 2.59 0.1% 2022 2.62 0.1% 2.67 0.1% 2.61 0.2% Source: Esri Demographics 2017, Novogradac & Company LLP, May 2018

Average household size in the PMA increased slightly between 2010 and 2017, similar to the MSA over the same time period. The average household size within the PMA, MSA and nation is projected to slightly rise through 2022.

Household Income Distribution The following tables illustrate the household income distributions in 2017 and 2022 for the PMA and MSA.

HOUSEHOLD INCOME PMA PMA Income Cohort 2017 2022 Annual Change 2017 to 2022 Number Percentage Number Percentage Number Percentage $0-9,999 6,904 9.6% 6,919 9.3% 3 0.0% $10,000-19,999 6,381 8.9% 6,486 8.7% 21 0.3% $20,000-29,999 6,886 9.6% 6,956 9.4% 14 0.2% $30,000-39,999 6,937 9.7% 7,185 9.7% 50 0.7% $40,000-49,999 6,745 9.4% 6,854 9.2% 22 0.3% $50,000-59,999 6,654 9.3% 6,716 9.0% 12 0.2% $60,000-74,999 8,109 11.3% 8,362 11.3% 51 0.6% $75,000-99,999 9,018 12.6% 9,352 12.6% 67 0.7% $100,000-124,999 6,097 8.5% 6,409 8.6% 62 1.0% $125,000-149,999 3,590 5.0% 3,908 5.3% 64 1.8% $150,000-199,999 2,923 4.1% 3,244 4.4% 64 2.2% $200,000+ 1,503 2.1% 1,898 2.6% 79 5.3% Total 71,747 100.0% 74,289 100.0% Source: HISTA Data / Ribbon Demographics 2017, Novogradac & Company LLP, May 2018

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

HOUSEHOLD INCOME MSA Washington-Arlington-Alexandria, DC-VA-MD-WV MSA Income Cohort 2017 2022 Annual Change 2017 to 2022 Number Percentage Number Percentage Number Percentage $0-9,999 97,037 4.3% 99,028 4.1% 398 0.4% $10,000-19,999 103,824 4.6% 106,594 4.4% 554 0.5% $20,000-29,999 119,012 5.2% 122,104 5.1% 618 0.5% $30,000-39,999 129,385 5.7% 133,184 5.5% 760 0.6% $40,000-49,999 137,059 6.0% 141,304 5.9% 849 0.6% $50,000-59,999 139,828 6.2% 144,974 6.0% 1,029 0.7% $60,000-74,999 205,181 9.0% 212,572 8.8% 1,478 0.7% $75,000-99,999 294,106 13.0% 307,868 12.8% 2,752 0.9% $100,000-124,999 256,569 11.3% 269,453 11.2% 2,577 1.0% $125,000-149,999 194,871 8.6% 209,558 8.7% 2,937 1.5% $150,000-199,999 254,844 11.2% 274,012 11.4% 3,834 1.5% $200,000+ 339,354 14.9% 385,063 16.0% 9,142 2.7% Total 2,271,070 100.0% 2,405,714 100.0% Source: HISTA Data / Ribbon Demographics 2017, Novogradac & Company LLP, May 2018

Renter Household Income Distribution The following tables illustrate renter household income distribution in 2017 and 2022 for the PMA and MSA.

RENTER HOUSEHOLD INCOME PMA Income Cohort 2017 2022 Annual Change 2017 to 2022 Number Percentage Number Percentage Number Percentage $0-9,999 5,315 14.3% 5,311 13.7% -1 0.0% $10,000-19,999 4,428 11.9% 4,504 11.7% 15 0.3% $20,000-29,999 4,280 11.5% 4,328 11.2% 10 0.2% $30,000-39,999 4,290 11.5% 4,447 11.5% 31 0.7% $40,000-49,999 3,962 10.6% 4,064 10.5% 20 0.5% $50,000-59,999 3,495 9.4% 3,575 9.2% 16 0.5% $60,000-74,999 3,837 10.3% 4,008 10.4% 34 0.9% $75,000-99,999 3,624 9.7% 3,855 10.0% 46 1.3% $100,000-124,999 1,705 4.6% 1,879 4.9% 35 2.0% $125,000-149,999 1,100 3.0% 1,204 3.1% 21 1.9% $150,000-199,999 719 1.9% 797 2.1% 16 2.2% $200,000+ 518 1.4% 680 1.8% 32 6.3% Total 37,273 100.0% 38,652 100.0% Source: HISTA Data / Ribbon Demographics 2017, Novogradac & Company LLP, May 2018

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

RENTER HOUSEHOLD INCOME Washington-Arlington-Alexandria, DC-VA-MD-WV MSA Income Cohort 2017 2022 Annual Change 2017 to 2022 Number Percentage Number Percentage Number Percentage $0-9,999 65,894 7.6% 66,832 7.3% 188 0.3% $10,000-19,999 63,893 7.4% 64,961 7.1% 214 0.3% $20,000-29,999 69,997 8.1% 70,876 7.7% 176 0.3% $30,000-39,999 74,144 8.6% 75,233 8.2% 218 0.3% $40,000-49,999 74,079 8.5% 75,621 8.2% 308 0.4% $50,000-59,999 70,378 8.1% 72,991 8.0% 523 0.7% $60,000-74,999 97,547 11.3% 100,764 11.0% 643 0.7% $75,000-99,999 116,904 13.5% 123,706 13.5% 1,360 1.2% $100,000-124,999 80,557 9.3% 87,357 9.5% 1,360 1.7% $125,000-149,999 51,554 5.9% 57,770 6.3% 1,243 2.4% $150,000-199,999 51,817 6.0% 59,298 6.5% 1,496 2.9% $200,000+ 49,729 5.7% 61,273 6.7% 2,309 4.6% Total 866,493 82.3% 916,682 80.5% Source: HISTA Data / Ribbon Demographics 2017, Novogradac & Company LLP, May 2018

The income limits for the Subject’s affordable units will range from $45,223 to $75,960, while the minimum income limit for the Subject’s market rate units will be $64,800 with no maximum income limit. As shown in the table above, approximately 68.3 percent of the renter households in the PMA earn between $40,000 and $200,000+ annually, while approximately 27.9 percent of renter households in the PMA earn between $40,000 and $74,999 annually, which indicates strong demand for quality multifamily housing in the PMA.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

The map below is a illustrates the annual median household income growth in the state of Maryland by county.

Prince George’s County

As shown in the previous image, median household income has grown annually between 1.6 percent and 2.0 percent in the Subject’s county.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

Household Size Distribution The following tables illustrate the overall household size distribution for the PMA and the MSA.

PMA HOUSEHOLD SIZE DISTRIBUTION 2000 2017 2022 Household Size Total Percent Total Percent Total Percent 1 persons 18,395 27.1% 22,923 31.9% 23,878 32.1% 2 persons 18,835 27.7% 19,481 27.2% 20,117 27.1% 3 persons 13,151 19.4% 12,506 17.4% 12,935 17.4% 4 persons 9,264 13.6% 8,107 11.3% 8,372 11.3% 5+ persons 8,288 12.2% 8,730 12.2% 8,987 12.1% Total 67,933 100.0% 71,747 100.0% 74,289 100.0% Source: Esri Demographics 2017, Novogradac & Company LLP, May 2018

MSA HOUSEHOLD SIZE DISTRIBUTION 2000 2017 2022 Household Size Total Percent Total Percent Total Percent 1 persons 479,081 26.4% 631,042 27.8% 670,687 27.9% 2 persons 558,965 30.8% 671,929 29.6% 707,990 29.4% 3 persons 308,558 17.0% 375,188 16.5% 398,175 16.6% 4 persons 265,920 14.7% 313,156 13.8% 329,595 13.7% 5+ persons 202,617 11.2% 279,755 12.3% 299,267 12.4% Total 1,815,141 100.0% 2,271,070 100.0% 2,405,714 100.0% Source: Esri Demographics 2017, Novogradac & Company LLP, May 2018

The majority of households are between one and three persons, which bodes well for the Subject, which will offer one, two, and three-bedroom units.

Renter Household Size Distribution The following tables illustrate the renter household size distribution for the PMA.

RENTER HOUSEHOLD INCOME BY HOUSEHOLD SIZE PMA 2017 Income Cohort 1 2 3 4 5+ $0-9,999 2,367 1,114 970 485 379 $10,000-19,999 2,249 809 639 324 407 $20,000-29,999 1,896 1,046 628 396 314 $30,000-39,999 1,387 1,103 985 446 369 $40,000-49,999 1,530 1,259 491 310 372 $50,000-59,999 1,217 851 681 264 482 $60,000-74,999 1,004 1,229 731 458 415 $75,000-99,999 867 941 509 685 622 $100,000-124,999 354 451 269 200 431 $125,000-149,999 257 230 185 132 296 $150,000-199,999 186 263 124 39 107 $200,000+ 152 135 68 91 72 Total 13,466 9,431 6,280 3,830 4,266 Source: HISTA Data / Ribbon Demographics 2017, Novogradac & Company LLP, May 2018

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

The Subject will target households containing one to five persons. As such, the majority of renter households will be size-eligible to reside at the Subject.

Building Permit Activity The following table demonstrates building permit information from 2000 through April 2018 (the most current data available).

BUILDING PERMITS: PRINCE GEORGE'S COUNTY 2000 - 2018* Single-family and Three and Four- Five or More Year Total Units Duplex Family Family 2000 3,179 0 277 3,456 2001 3,049 0 0 3,049 2002 2,485 0 78 2,563 2003 2,810 0 128 2,938 2004 1,875 0 73 1,948 2005 3,255 0 170 3,425 2006 2,918 0 115 3,033 2007 1,462 0 721 2,183 2008 1,296 0 10 1,306 2009 811 8 440 1,259 2010 702 0 5 707 2011 984 0 243 1,227 2012 878 0 75 953 2013 1,176 0 0 1,176 2014 1,292 0 0 1,292 2015 1,438 0 319 1,757 2016 1,560 0 500 2,060 2017 1,677 0 1,224 2,901 2018* 494 0 84 578 Total 33,341 8 4,462 37,811 Average* 1,755 0 235 1,990 *YTD, preliminary Source: US Census Bureau Building Permits, May 2018

The preceding table indicates that local permit issuance peaked in 2000, well before the onset of the national recession. Permit volume declined by 80 percent during the recession, reaching a low in 2010. Permit issuance rose in five out of six years between 2010 and 2017; however, the majority of these permits is for single-family and duplex buildings. Since 2012, multifamily permits issued represents 22 percent of total permits. The most recent years with finalized data indicate construction activity increased by 40.8 percent between 2016 and 2017. The high percentage of renter households and the high percentage of older housing stock indicate a need for quality housing in the market. The construction of the Subject will provide good quality rental housing in an area that is currently being revitalized.

Conclusion The PMA experienced slight negative population growth between 2000 and 2010, and lagged behind the surrounding MSA, which reported positive growth over the same time period. Although PMA growth also trended below the nation, population in the broader MSA increased faster than the overall nation during this same time period. Average household size in the PMA increased slightly between 2010 and 2017, similar to the MSA over the same time period. The average household size within the PMA, MSA and nation is projected to slightly rise through 2022.

ADDISON APARTMENTS – SEAT PLEASANT, MARYLAND – MARKET STUDY

The majority of households are between one and three persons, which bodes well for the Subject, which will offer one, two, and three-bedroom units. Permit issuance rose in five out of six years between 2010 and 2017. The most recent years with finalized data indicate construction activity increased by 40.8 percent between 2016 and 2017. The high percentage of renter households and the high percentage of older housing stock indicate a need for quality housing in the market.

6. CURRENT HOUSING MARKET CONDITIONS