Promenade Place

875 S. Geneva Rd. | Orem, UT 84058 Offering Memorandum PROMENADE PLACE

Rawley Nielsen Mark Jensen Darren Nielsen Colliers International +801 441 5922 +1 801 441 1200 +1 801 448 2662 111 Main Street | Suite 2200 [email protected] [email protected] [email protected] Salt Lake City, UT 84111 P: +1 801 947 8300 Table of Contents

> Executive Summary...... 3

> Property Summary...... 10

> Market Summary...... 17

> Financial Overview...... 32

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 2 PROMENADE PLACE Offering Memorandum > Executive Summary

COLLIERS INTERNATIONAL EXECUTIVE SUMMARY

Property Overview > THE MARKET

> THE PROPERTY • No On-Campus Housing at UVU

Newly constructed in 2017, Promenade Place is a transit-oriented 429-bed student housing project adjacent to • Utah’s Largest and Fastest-Growing Utah Valley University (UVU) -- the largest and fastest-growing university in Utah. UVU is located in Orem, Utah University: 7.1% UVU Enrollment Growth from -- the #1 best-performing economy in the nation in 2017 (Milken Institute) -- and is located about 10 minutes Fall 2017 (37,282) to Fall 2018 (39,942). from Brigham Young University and 45 minutes from Salt Lake City. Due to its proximity to UVU’s campus, the new pedestrian bridge, and its market-leading modern finishes, Promenade Place has gained a quick reputation • Fall 2018 UVU Enrollment is Outpacing as one of the most-desirable properties among students at UVU. Growth Projections by 6.3%.

The 114 units at Promenade Place consist of either studio or four bedroom floor plans, featuring all private • UVU Enrollment is projected to approach bedrooms with either private or shared bathrooms. 100% of apartment units at Promenade Place are leased by 50,000 by 2025. the bed on 12-month leases. • Orem/Provo is the #1 Best-Performing Economy in the Nation (Milken Institute, 2017) OUTPACING GROWTH EXPECTATIONS IN AN ALREADY-UNDERSERVED STUDENT HOUSING MARKET UVU is already the largest university in the State of Utah and, based on a study two years ago, its enrollment • ULI #3 Emerging Market in 2018 was projected to grow more than 25% by 2025. As of Fall 2018, however, actual enrollment is outpacing this • #1 Highest Job/Population Growth in US previous estimate by 6.3%-- 2,365 students ahead of projections. From Fall 2017 to Fall 2018 alone, there has been a 7.1% growth in enrollment--a 2,660 single-year headcount growth. Due to this rapid pace, the • Current Market Occupancy for Purpose-Built university is currently at enrollment levels that, just two years ago, it did not project to reach until about Fall Student Housing at over 99% 2020. UVU has no on-campus housing and a very limited supply of off-campus housing. Due to both the existing shortage of student housing and the limited land around the university that could be developed into student housing, Promenade Place is well-positioned to continue to be fully-occupied and to experience ongoing rent growth for many years to come.

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 4 EXECUTIVE SUMMARY

Executive Overview

Property Promenade Place Name: Property 875 South Geneva Road Address: Orem, Utah 84058

Price: $40,395,000

Cap Rate: 5.00%

Year Built 2017

APN: 49-863-0001

Lot Size: 3.42 acres

Units 114

Beds: 429

4x2: 384 Beds/96 Units Unit Mix: 4x4: 36 Beds/9 Units Studio: 9 Beds/9 Units 266 Total Stalls Parking (116 Covered)

Lease Types: 12-Month

5 Total Buildings (4 Resident & 1 Clubhouse)

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 5 EXECUTIVE SUMMARY

Opportunity Highlights > PROMENADE PLACE • New construction. Completion in 2017.

• 100% occupancy achieved very early on. Current opportunity exists to increase rents.

• #1 State Economy (Utah) | #2 State for Higher Education

• #1 City Economy (Orem/Provo)

• Utah Valley University is Utah’s Largest and Fastest-Growing University: 7.1% UVU Enrollment Growth from Fall 2017 (37,282) to Fall 2018 (39,942).

• Fall 2018 UVU Enrollment is Outpacing Previous Growth Projections by 6.3%.

• UVU Enrollment is projected to approach 50,000, or more, by 2025.

• Located next to Frontrunner (commuter rail), Utah Valley Express (new/free bus system), Orem Pedestrian Bridge (Bike/Walk), UVU West Campus

• Best possible location to access both UVU East Campus, UVU West Campus, and the UVU Vineyard Expansion Campus-- All without the need for a car

• Located minutes, via Frontrunner commuter rail, from the core Utah’s Silicon Slopes-- the cause of Utah’s nation-leading tech industry growth. (Computing Technology Industry Association, 2018)

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 6 EXECUTIVE SUMMARY

The Strategic Core of UVU

Student Housing New Covered Pedestrian Bridge. Completion Due in Fall 2019. Promenade Place is perfectly positioned at the core of what has purposefully become the largest concentration of student housing available at Utah Valley University--the fastest growing university in THE HUB Utah. As the beneficiary of a strategic unified effort by (PROPOSED DEVELOPMENT) state, local, and university officials, Promenade Place STE sits directly next to the Orem Intermodal Center (Frontrunner/UVX) and the New Orem Pedestrian Bridge, making it a uniquely pedestrian-friendly environment for walking, cycling, catching a free shuttle, or riding the train. This project truly is the ideal gateway to access the main UVU East Campus, the expanding UVU West Campus, and Utah’s fast growing employment center--the Silicon Slopes.

While historically there has been a limited supply of PARKWAY LOFTS (2016) purpose-built student housing at the university, the rapid growth of the university has led to a major WOLVERINE CROSSING (2003) increase in demand for the product. This demand can no longer be supported by surrounding conventional apartments. The university has chosen to leave all UNIVERSITY DOWNS LAND housing development to private off-campus housing (PROPOSED DEVELOPMENT) developers in order to focus university resources on constructing and managing its expanding portfolio of academic buildings. The Orem Intermodal Center--and the new development of purpose-built student projects like Promenade Place and The Hub-- are ensuring indefinitely that this area will continue to have a gravitational pull for students at the largest university in the state.

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 7 EXECUTIVE SUMMARY

The Strategic Core of UVU Student Housing

UVU Vineyard Expansion Campus

UVU Expansion Land

New Covered Pedestrian Bridge. Completion Due in Fall 2019. STE THE HUB (PROPOSED DEVELOPMENT)

UTAH VALLEY UNIVERSITY VINEYARD EXPANSION UVU owns more than 250 acres of land in Vineyard, which sits about 1.5 miles north of the West Campus, also on the west side of I-15. Current plans contemplate a further densification of academic buildings on the existing campus with expanded athletic and academic facilities on the UVU expansion land in Vineyard. The location of Promenade Place on Geneva Road, and next to the Orem Frontrunner Station, give the property ideal access to this forthcoming expansion.

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 8 EXECUTIVE SUMMARY

The Strategic Core of UVU Student Housing: UVX

UTAH VALLEY EXPRESS (UVX) BUS SYSTEM > ARTICLE: The Utah Valley Express bus system is brand new, just recently STUDENTS EMBRACE UVX AS KEY beginning service on August 13, 2018, and features new infrastructure with exclusive lanes and stops in Orem/Provo. It TRANSIT TOOL has already been a gamechanger for students at UVU and BYU, (THE DAILY UNIVERSE, 9/18/2018) allowing them to access campus, shopping, and social A new high-capacity bus rapid transit system called the Stevenson said she became aware UTA services were experiences without the need of a car--all for free. With Utah Valley Express is a key part of student life in free to BYU students through an Instagram post. She Promenade Place’s location next to the UVX stop at Orem Provo and Orem this fall. said she now uses UVX occasionally to go shopping. Station, the value of this already ideally-located property According to Utah Transit Authority, UVX is meant to Ewerton Barroso, a 24-year-old student at Provo continues to get better. connect FrontRunner train stations with key locations in language center Internexus, said he uses UVX for his Utah Valley. Designed to increase urban mobility and daily commute, carrying his bicycle on the bus with provide more travel options, UVX uses buses with him. He said UVX works more effectively than the dedicated lanes and traffic signal priority to transport bus rapid transit systems in his hometown of Manaus, though UVX could do more to move quickly STE commuters. Brazil, through traffic. UVX began operating on Aug. 13, and students from BYU and UVU have already come to rely on the Though neither Tanner nor Stevenson said they have system to get around. UVX will be free to use for the access to other forms of transportation, the UVX next three years, according to Utah Transit Authority. system is also useful to students with vehicles. The line connects the Provo and Orem FrontRunner Daniel McPherson, a junior studying physics at BYU, train stations, wrapping to BYU and UVU along the has access to a car, but said he uses UVX daily in way. tandem with the older bus system. Still, McPherson Citing the bus system’s reliability and frequent stops, said he uses UVX to save gas and share a car with his students ride UVX for everything from daily commutes wife. to Walmart trips. UVX is particularly helpful for Grace Green, a freshman at UVU, owns a car but said UVX BUS ROUTE: students who have limited access to other she uses UVX for her daily commute so she does not BUSES AT OREM STATION EVERY transportation. have to deal with campus parking. She said the timing APPROX. 6 MINUTES “It’s my go-to method for going off campus,” said of the buses is sometimes inconvenient, but is generally BYU freshman Ashton Tanner, who is studying not a problem. > EVERY 6 MINUTES, CAR-FREE DIRECT ACCESS TO: biology. Though Tanner said she accidentally left the According to the Utah Transit Authority, UVX will have • Utah Valley University East Campus bus at an incorrect stop on the first day of classes this semester, she now finds UVX straightforward to up to 18 buses on the road at a time serving 18 stations, • University Place Mall use and has made UVX part of her daily routine. every six minutes during heavy commute hours of the • Trader Joes day, 10 minutes throughout the rest of the day and One of Tanner’s roommates, Emma Stevenson, also a 15–60 minutes in the early and late hours of the day. • Cinemark Theater freshman compared UVX with Provo’s older bus lines • Costco and called UVX “the easiest to figure out.” She also • Abundant Retail Along University Parkway praised the frequency with which buses arrive at stops. • Brigham Young University • Much more

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 9 PROMENADE PLACE Offering Memorandum > Property Summary

COLLIERS INTERNATIONAL PROPERTY OVERVIEW

Promenade Place

Project Construction Overview

Property Promenade Place Name: Property 875 South Geneva Road Address: Orem, Utah 84058 Year Built: 2017 5 Buildings Building 1: 40 Units Building 2: 32 Units Buildings: Building 3: 24 Units Building 4: 18 Units Building 5: Clubhouse

Square 116,418 Rentable Square Feet Footage: • 4 Levels Wood-Framed Construction on Podium Construction: • Precast Double Tee Podium Slab • I-Joist Framing Lot Size: 3.42 acres

Units: 114

Beds: 429

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 11 PROPERTY OVERVIEW

Promenade Place: Amenities

Completed in 2017, Promenade Place is among the most modern available student housing in the area. It has 100% private bedrooms, the top finishes available in the market, and is well located next to the Orem Transmodal Center.

> IN-UNIT AMENITIES > PROPERTY AMENITIES

• 100% Private Bedrooms • Hot Tub

• Mix of private and shared bathrooms • 24-Hour Fitness Center

• Large Living Area • Barbecue

• Natural Light • Clubhouse

• Nine-Foot Ceilings • Covered Parking • Elevator Serviced Buildings • Washer/Dryer in Each Unit • Bike Storage • Granite Counter Tops • Free shuttle service • Balcony for Most Units • Next to Frontrunner • LVT and Carpet Flooring • Next to New Pedestrian Bridge (Completion • Microwave & 36-Inch Refrigerator Due in Fall 2019) • Electric Range Oven

New-Owner Opportunity: Each floor of every building contains under-utilized common area space directly off elevator lobbies. These spaces offer potential for foosball, ping pong, study rooms, music rooms, conference rooms, and much more.

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 12 PROPERTY OVERVIEW

Photos

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 13 PROPERTY OVERVIEW

Photos

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 14 PROPERTY OVERVIEW

Floor Plans

> STUDIO (9 BEDS/9 UNITS) > 4 BED X 2 BATH (384 BEDS/96 UNITS)

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 15 PROPERTY OVERVIEW

Floor Plans

> 4 BED X 4 BATH (36 BEDS/9 UNITS)

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 16 PROMENADE PLACE Offering Memorandum > Market Summary

COLLIERS INTERNATIONAL MARKET SUMMARY Custom Map Promenade Region Map

LehiLei

American Fork / Pleasant Groverove

NEW SALT LAKE CITY AIRPORT (2020)

EagleEale Mountain Orem / LindonLinon

SILICON SLOPES: UTAH’S TECH CORRIDOR AND THE HEART OF UTAH’S TECH JOB GROWTH, #1 IN THE NATION Provo STE

STE

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October 22, 2018

Area Overview

> THE MARKET: > PROVO-OREM METRO AREA

The real estate market continues to be extremely robust Provo-Orem Metro Area has a population of 613,430 people with a median age of 24.7 and a median household for the Provo-Orem MSA, which has been touted as the income of $64,315. second-best market to invest in housing in 2018 by Forbes Magazine. The young, highly educated, family- The largest universities in Provo-Orem Metro Area are Brigham Young University-Provo, with 33,517 students, Utah oriented demographic that dominates the region bodes Valley University, with 39,942 students, and Mountainland Applied Technology College, with about 2,400 students. well for continued multi-family absorption and rent The median property value in Provo-Orem Metro Area is $277,000, and the homeownership rate is 67.2%. Most growth. More broadly, Provo-Orem was ranked as the people in Provo-Orem Metro Area commute by driving alone, and the average commute time is 19.7 minutes. best performing economy in 2017 by the Milken Institute, due in large part to strong job growth (extraordinary low unemployment of 2.5%) and the competitive cost of doing business compared to coastal primary markets, without having to sacrifice accessibility to lifestyle and well-being that is afforded in close proximity to the Rocky Mountains. Additionally, Utah continues to prove fiscal prudence and maintains a AAA credit rating by all three major rating agencies—one of ten to receive the credential which will continue to prove a major competitive advantage over other markets.

> OREM, UTAH

Orem has a population of 93,220 people with a median age of 25.9 and a median household income of $56,376. Between 2015 and 2016 the population of Orem grew from 91,697 to 93,220, a 1.66% increase and its median household income grew from $55,166 to $56,376, a 2.19% increase. Utah Valley University is Utah’s largest university by enrollment, with official 3018 enrollment at 39,942 students. The median property value in Orem is $215,200, and the homeownership rate is 60%. Most people in Orem commute by driving alone, and the average commute time is 16.7 minutes.

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State Population Projections

UTAH POPULATION PYRAMID (2025)

A Long-Term Look at Utah’s College Age Population ”As eight out of ten Utah high school graduates who go to college attend one of Utah’s public colleges or universities, these projections serve as a reminder that USHE institutions need to prepare now for this dramatic increase of these future new students.” -- Utah System of Higher Education

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Utah County Population Projections

UTAH COUNTY CITIES POPULATION GROWTH: PROJECTED 2.7X GROWTH WITHIN 50 YEARS

Sources of Growth: Utah County Growth Past and Present “More people are moving in from outside the county, from within the U.S. and from international areas, than ever before, according to the estimates. For the whole period since 2010, about 79.6 percent of the growth is accounted for by natural birth and death rates within the county. About 20.7 percent has come from migration from outside the county. But during the past year, about 36.2 percent of the growth has come from migration, and about 63.6 percent from natural growth.” “The growth of Utah County is part of a larger picture of growth in the state and nation. Utah’s statewide growth between 2016 and 2017 was the third fastest in the nation, with a 1.9 percent increase (57,512 individuals), according to a Census Bureau fact sheet issued in March.” -- Daily Herald (2018)

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Utah County Conventional Apartment Market Overview

For the last approximately 10 years, Utah County Currently, about 33% of all households in has been known for its strong employment growth, Utah County are renters. About 42% of its low vacancy rates, and its steadily increasing the rental units are single family homes or rental rates. According to a recent rent survey mobile homes; 23% are in two to four- highlighted by Western States Multifamily, recent units structures. The remaining 35% are occupancy data of over 5,300 in approximately in structures with five or more units. thirty modern stabilized apartment projects in the county showed vacancy at 4.5%. A large study toward the end of 2017 even showed that average Utah County rental rates had grown to a higher level than its larger Salt Lake County neighbor.

Apartment market conditions have been strong Source: Western States Multifamily since 2009. Currently, vacancy rates in Utah County average about 4% to 5%. Rental rates have been increasing at about 5% annually since 2010. With Utah County expected to nearly double in size over the next 30 years, this trend is expected to continue. Several new apartment projects have been developed over the past few years- including the subject property’s neighbor, Parkway Lofts. All of these projects have experienced a quick lease-up. Much of the increased demand for apartments can be attributed to the weakness of the “for sale” housing market, which has led to strong growth in the number of renter households. Western States Multifamily study of the market stated that there are currently about 55,664 occupied rental units in Utah County. This is projected to increase to 61,648 by 2021, an average annual increase of about 1,995 renter households. Strong trends in job growth (despite a nation- leading 2.5% unemployment rate) and population increases have led to increased demand for rental housing in the area.

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 22 MARKET SUMMARY

Utah Valley University

> FOUNDED: 1941 > STUDENT HOUSING AT UVU: UVU does not have 2016 UVU ENROLLMENT GROWTH PROJECTIONS On-Campus Housing. The university website states: Year Fall Head Count Fall FTE Annual Head Count Annual FTE > LOCATION: Orem, Utah 2016 34,964 23,815 37,411 25,524 “Utah Valley University helps to establish revenue 2017 36,245 24,712 38,782 26,459 > HISTORY: Originally founded in 1941, the school was within the local economy by not competing against ** 2018 37,577 25,644 40,207 27,431 renamed Utah Valley State College in 1993 and began 2019 38,960 26,614 41,687 28,441 the local housing market. Through off-campus 2020 40,398 27,622 43,225 29,491 awarding four-year degrees. The Utah legislature housing we believe UVU engages the community in 2021 41,802 28,583 44,728 30,515 approved renaming Utah Valley State College as a mutually beneficial collaboration while students are 2022 43,057 29,446 46,070 31,432 university in February 2007 (effective July 1, 2008), here attending school.” 2023 44,241 30,237 47,337 32,296 2024 45,372 30,957 48,548 33,122 allowing it to begin offering master’s degrees, although > EMPLOYMENT: UVU is the largest employer in Orem, 2025 46,494 31,618 49,748 33,941 the school continues to place particular emphasis on its with over 1,900 full-time faculty and staff and over two- and four-year degree programs. 3,300 part-time faculty and staff. **The projections above come from an official 2016 UVU enrollment study. However, actual growth over the last > ENROLLMENT: Utah Valley University is the largest > STUDENT BODY: UVU students represented all 50 two years has been significantly greater than reflected public university in the state of Utah, with an enrollment US states, the District of Columbia, and 74 countries. here with actual Fall 2018 headcount officially reaching of 39,942 students in Fall 2018. UVU will increase by Utah County’s population doubled 39,942 students, which is 6.3% ahead of this 2016 14,400 students between 2016 and 2025, when it is > UTAH COUNTY: between 1990 and 2010 and will grow by 60% between projection. See below for updated data. expected to reach about 50,000 students. 2010 and 2030. (Actuals)

2013 2014 2015 2016 2017 *2018 39,942

New Covered Pedestrian Bridge. Completion Due in Fall 2019.

STE

*Actual Fall 2018 Headcount is officially 39,942 students. Registration type figures for 2018 have not yet been released.

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 23 data-yduf1 X.1 UofU USU WSU SUU SNOW DSUUVU ProjectedSLCCUVU Actual 32451 28986 27236 9598 5414 8991 35126 32133 35126 2016 33228 28986 29367 9905 5604 9798 36397 32335 37282 2017 34247 29566 30730 10222 5819 10665 37742 32985 39942 2018 35246 30157 32123 10549 6063 11541 39141 33658 2019 36078 30760 33505 10887 6340 12530 40594 34348 Utah System of Higher Education 2020 36459 31375 34852 11253 6652 13229 41880 35052 Enrollment Projections for Public Universities, 2016(Actual)—2026

2021 Utah Valley University 36749 32003 36149 11539 7004 13911 43347 35760 50,000 2022 37058 32643 37393 11850 7402 14629 44870 36468 Actual UVU Enrollment 39,942 Students, 2023 6.3% Ahead of 2016 Projection. Weber State University 37512 33296 38587 12182 7849 15433 46451 37168 40,000 University of Utah 2024 Salt Lake Community College 38075 33962 39739 12523 8351 16246 48092 37869 2025 Utah State University 38635 34641 40753 12874 8917 17078 49795 38563 2026 30,000

20,000 Dixie State University

Projected Headcount Projected Southern Utah University data-zFIDP (1) 10,000 TOTAL HEADCOUNT 2018 % CHANGE OVER LAST YEAR Snow College

Utah Valley University 39942 7.11 MARKET SUMMARY University of Utah 33023 0.68 Salt Lake Community College 29156 -1.57 Weber State University 28247 1.07 0 Utah State University 27932 0.91 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Southern Utah University 10196 7.69 Year Dixie State University 9950 2.86 Snow College 5514 -0.88 Utah’sUVU PublicUofU Universities:USU WSU SUU 2018SNOW DSU EnrollmentSLCC UVU Actual Utah System of Higher Education (USHE) 183949 2.17

2018 Actual Enrollment at Utah’s Public Colleges and Universities 45,000 39,942 37,500 33,023 30,000 29,156 28,247 27,932

22,500 Headcount 15,000 10,196 9,950 7,500 5,514

Snow College University of Utah Utah State University Dixie State University Utah Valley University Weber State University Southern Utah University Salt Lake Community College Source: Utah’s public colleges and universities enroll nearly 4,000 additional students for the 2018-19 school year; Utah System of Higher Education, 2018

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!1 MARKET SUMMARY

data-yduf1 X.1 UofU USU WSU SUU SNOW DSUUVU ProjectedSLCCUVU Actual 32451 28986 27236 9598 5414 8991 35126 32133 35126 2016 Utah’s Public Universities: Enrollment Growth 33228 28986 29367 9905 5604 9798 36397 32335 37282 2017 34247 29566 30730 10222 5819 10665 37742 32985 39942 2018 35246 30157 32123 10549 6063 11541 39141 33658 2019 36078 30760 33505 10887 6340 12530 40594 34348 Utah System of Higher Education 2020 36459 31375 34852 11253 6652 13229 41880 35052 Enrollment Projections for Public Universities, 2016(Actual)—2026

20,000 Dixie State University

Projected Headcount Projected Southern Utah University data-zFIDP (1) 10,000 TOTAL HEADCOUNT 2018 % CHANGE OVER LAST YEAR Snow College

Utah Valley University 39942 7.11 University of Utah 33023 0.68 Salt Lake Community College 29156 -1.57 Weber State University 28247 1.07 0 Utah State University 27932 0.91 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Southern Utah University 10196 7.69 Year Dixie State University 9950 2.86 Snow College 5514 -0.88 UVU UofU USU WSU SUU SNOW DSU SLCC UVU Actual Utah System of Higher Education (USHE) 183949 2.17

Source: USHE enrollment expected to grow to over 241,000 students by 2026; Utah System of Higher Education, 2017

According to the Utah System of Higher Education, Utah’s public universities are anticipated to increase by ~45,000 combined students by the 2027-2028 academic year. During this period, UVU is expected to maintain2018 growthActual at close Enrollment to the highest atrate Utah’s (over 3% perPublic year) and Colleges by the largest and number Universities of students (~14,400 new students). 45,000 39,942 37,500 33,023 Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 25 30,000 29,156 28,247 27,932

22,500 Headcount 15,000 10,196 9,950 7,500 5,514

Snow College University of Utah Utah State University Dixie State University Utah Valley University Weber State University Southern Utah University Salt Lake Community College

!1 MARKET SUMMARY

UVU Enrollment Growth

50,000 Total Fall Student Headcount History and Projections - Based on 2016 UVU Enrollment Study 50,000 46,494 45,372 Actual Fall 2018 Headcount is 39,942, 44,241 43,057 41,802 6.3% more than projected 2 years ago. 40,398 37,500 38,960 37,577 36,246 37,500 34,978 9,755 9,996 33,211 9,257 9,512 8,987 31,556 31,332 8,686 UVU Expansion Land 30,564 8,376 8,079 7,793 25,000 6,688 7,530 5,814 6,144 25,000 5,735

Fall Headcount Fall 36,498 33,800 34,729 35,617 12,500 31,712 32,815 29,498 30,584 27,448 28,453 12,500 25,742 24,829 25,188 26,523

0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Year New Covered Pedestrian Bridge. Non High School Student Headcount High School Student Headcount Completion Due in Fall 2019. STE Actual Fall 2017 Enrollment Student Body Make-up

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UVU Student Housing Supply and Demand

UVU ENROLLMENT IS OUTPACING OFFICIAL PROJECTIONS

Actual 2017 Enrollment Place of Origin - All Students In an official UVU enrollment study released by the university in 2016, Utah Valley University estimated a projected 10-year growth of about 3.7% annually over the next three years and continuing at an average annual growth of 2.9% Student Origin Students until 2025. Based on this study, the number of students needing housing each year is shown below. Utah County 22,335 60% Utah (Outside UT County) 9,494 25% It should also be noted that, in the two years since this 2016 study, actual enrollment figures from 2017 & 2018 reveal Out of State 4,304 12% that total student headcount growth is outpacing projections by a significant margin. For example, the projected 2018 International 759 2% headcount in the study was 37,577 students while the actual 2018 headcount is officially 39,942 students-- an actual 1-year growth of 7.1%. Unreported 390 1% Total Student Headcount 37,282 100% Projected Student Housing Demand 50,000

Actual 2017 Enrollment Place of Origin - Non High School Students 37,500 Student Origin Students Utah County 15,027 53% 25,000 48,228 49,420 Utah (Outside UT County) 8,156 29% 44,433 45,767 47,025 39,942 41,412 42,941 Out of State 4,229 15% 34,978 37,282 International 751 3% 12,500 22,059 22,624 23,183 18,736 19,426 20,143 20,843 21,469 Unreported 312 1% 16,408 17,205

Total Non High School Headcount 28,475 100% 0 2016 Actual 2017 Actual 2018 Actual 2019 2020 2021 2022 2023 2024 2025 Total Student Headcount Estimated Students Needing Housing

Actual 2017 Enrollment Place of Origin - Estimated Students Needing Housing Student Origin Students Assumptions/Notes Historically, an estimated 25% of local Utah County students Utah County 3,757 live away from home while attending school. Utah (Outside UT County) 8,156 Out of State 4,229 International 751 Unreported 312 Total Students Needing Housing 17,205

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UVU Student Housing Supply and Demand

2018 Supply of Existing Purpose-Built Student Housing Projects Currently Proposed or Under Construction at Purpose-Built Student Housing Projects at Utah Valley University Utah Valley University Property Beds Project Units Beds

University Towers 256 The Hub (Fully entitled) 282 1,044 Summerwood Condominiums 282 Village on the Parkway 432 University Downs (Proposed) 446 1,200

University Gateway 286 Palos Verdes (Proposed) 450 1,605 Ventana 428 Wolverine Crossing 1,233 Totals 1,178 3,849 Promenade Place 429

Total Current Purpose-Built Supply at UVU: 3,346 Utah Valley University Purpose-Built Student Housing Supply and Demand 2018 Through 2021 Housing Supporting Student Demand in 2018 Demand Beds Percentage of Description Beds total UVU Notes Actual Enrollment — 2018 39,942 renter market Projected Enrollment Growth — 2018-2021 4,491 Current Purpose-Built Student Supply at UVU 3,346 18% Total Enrollment — 2021 44,433 Due to lack of purpose-built supply at UVU, 22% of all BYU Student Housing is Estimated Current Demand — 2018 18,736 currently rented by UVU students (Fall Current Purpose-Built Student Beds at BYU 4,955 26% 2017). These students are required to Estimated New Demand — 2018-2021 2,107 Rented by UVU Students comply with strict BYU housing requirements and commute 10-15 mins to Estimated Total Demand — 2021 20,843 UVU’s campus.

Total Purpose-Built Student Housing for UVU Students 8,301 44% Purpose-Built Supply

Due to lack of purpose-built supply at Current Purpose-Built Supply (Beds) — 2018 8,301 UVU, these students are renters who, by Estimated New Purpose-Built Supply (Beds) — Current UVU Students living in Ad Hoc Arrangements and/or 10,435 56% necessity, are living in Ad Hoc 3,849 Conventional Apartments arrangements or other conventional 2018-2021* apartments in other parts of Orem or neighboring cities. Estimated Total Purpose-Built Supply — 2021 12,150

Total UVU Student Renter Market 18,736 100% Purpose-Built Bed Shortage — 2021 8,693

*Assumes all of the proposed purpose-built student pipeline is built by 2021.

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Student Rent Comparables

Year # of BR Per BA Per 12-Month 12-Month Monthly Monthly No Name Occupancy Notes Built Beds Unit Unit Private Shared Utilities Parking 0 1 $940 - 1 Promenade Place 2017 429 4 2 $465 - $18 + Usage 100% $25 4 4 $549 - 1 1 $905 - $150 2 2 $640 $390 2 Wolverine Crossing 2003 1239 99% $7 3 3 $640 $370 $76 4 2 $510 - 5 3 $375 $299 3 University Towers 2005 248 $60 100% $10 6 3 $410-$460 $310

4 Summerwood Condos 2002 282 4 2 $410-$460 - $20 + Usage 100% $6

5 Village on the Parkway 2002 423 4 2 $410 $330 Usage 100% $0

6 University Gateway 1989 279 4 2 $410-$460 $350-$390 $60 99% $10

7 Ventana 2009 416 4 2 $410-$460 - $60 100% $0 4 2 $510 BYU 8 College Place 2015 336 $55 99% $50 4 4 $510

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 29 MARKET SUMMARY

Student Housing Rent Comparables Map

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 30 MARKET SUMMARY

UVU Student Housing Development Pipeline

DEVELOPMENT PIPELINE- STUDENT HOUSING - UVU Property Address # of Units # of Beds Status

The Hub at UVU Orem, Utah 282 1044 Planned to begin construction Fall 2018. Will be built in phases.

University Downs Orem, Utah 446 1200 In early stages of proposal.

Palos Verdes Orem, Utah 450 1605 Planned. Will be built in phases. Construction start date TBD. Total 1178 3849

STE

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 31 PROMENADE PLACE Offering Memorandum > Financial Summary

COLLIERS INTERNATIONAL FINANCIAL INFORMATION

Pricing

Value New Financing Assumptions ASKING PRICE $40,395,000 Loan Amount $26,256,750 Loan Constant 6.46% Down Payment $14,138,250 I/O Payment ($1,247,196) Loan to Value 65.00% Amort Payment ($1,697,263) Price Per Bed $94,161 Cash on Cash (I/O) Interest Rate 4.75% Term 10 Years Cap Rate - Year 1 5.00% 3.46% Amortization 30 Interest Only 2 Year(s) All Cash IRR 8.22% 5.28% Leveraged IRR 12.49% Loan Begins Year 1 Debt quote provided by Northmarq Capital: Nate Barnson - 801-273-4103, [email protected]

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 33 FINANCIAL INFORMATION

Financial Analysis

Jan to Aug 2018 Actual + Projected Year 1 Proforma Stabilized Notes OPERATING INCOME Total $ $/Bed Total $ $/Bed 1) Gross Monthly Rent Potential 199,806 466 219,850.92 512 2) Gross Scheduled Rent 2,397,675 5,589 2,638,211 6,150 Based on growth from 2018 budget, in line with market and projections GROSS POTENTIAL RENT 2,397,675 5,589 2,638,211 6,150 3) Loss to Lease (177,010) (413) (50,000) (117) Based on projections, in line with market 4) Vacancy Loss (95,855) (223) 5.0% (131,911) (307) Vacancy rate of 5% applied, in line with lender underwriting and industry standards 5) Concessions (33,371) (78) (15,000) (35) Based on projections, in line with market 6) Bad Debt (25,390) (59) - - 7) Other (701) (2) - - NET RENTAL INCOME 2,065,347 4,814 2,441,300 5,691 8) RUBS 147,307 343 159,812 373 Based on annualized actuals from Jan - Sept 2018 with 11% growth 9) Utility Billing Income & Setup Fees 15,177 35 2,846 7 Based on annualized actuals from Jan - Sept 2018 with 3% growth 10) Communication Fee Income 86,881 203 85,007 198 Based on annualized actuals from Jan - Sept 2018 with 8% growth 11) Late Fee/Admin/Misc Fees 90,366 211 95,201 222 Based on annualized actuals from Jan - Sept 2018 with 8% growth 12) Parking Fees 55,853 130 65,892 154 Based on projections, in line with market - average of $19 per stall/month TOTAL OTHER INCOME 395,584 922 408,758 953 EFFECTIVE GROSS INCOME 2,460,931 5,736 2,850,059 6,643 OPERATING EXPENSES 13) Payroll (149,874) (349) (192,940) (450) Based on actual trailing 12 month from Sept 2018 with 2.5% increase 14) Maintenance & Grounds (43,745) (102) (43,900) (102) Based on actual trailing 12 month from Sept 2018 with 2.5% increase 15) General & Administrative (40,941) (95) (43,469) (101) Based on actual trailing 12 month from Sept 2018 with 2.5% increase 16) Leasing & Advertising (54,079) (126) (58,647) (137) Based on actual trailing 12 month from Sept 2018 with 2.5% increase CONTOLLABLE EXPENSE SUBTOTAL (288,639) (673) (338,954) (790) FIXED OPERATING EXPENSES 17) Property Taxes (74,725) (174) (80,703) (188) Actual 2018 taxes with a 8% increase, Utah is a non-disclosure state and values are assessed on a 5 yr cycle 18) Insurance (20,129) (47) (20,632) (48) Based on actual trailing 12 month from Sept 2018 with 2.5% increase 19) Utilities (250,901) (585) (259,604) (605) Based on actual trailing 12 month from Sept 2018 with 2.5% increase 20) Management Fee 3.5% (86,133) (201) (99,752) (233) Percentage based on existing Redstone Management Contract, in line with market 21) Capex Reserves - - (30,030) (70) Reserve is based on actual turnover costs in first year (roughly $70 per unit) FIXED OPERATING EXPENSE SUBTOTAL (431,887) (1,007) (490,721) (1,144) TOTAL OPERATING EXPENSES (720,527) (1,680) (829,676) (1,934) NET OPERATING INCOME 1,740,404 4,057 2,020,383 4,710

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 34 FINANCIAL INFORMATION

Financial Analysis: 10-Year IRR

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 IRR OPERATING INCOME 2) Gross Scheduled Rent 2,638,211 2,796,504 2,950,311 3,097,827 3,221,740 3,318,392 3,401,352 3,486,386 3,573,545 3,662,884 3) Loss to Lease (50,000) (53,000) (55,915) (58,711) (61,059) (62,891) (64,463) (66,075) (67,727) (69,420) Gross Potential Rent 2,588,211 2,743,504 2,894,396 3,039,116 3,160,681 3,255,501 3,336,889 3,420,311 3,505,819 3,593,464 4-7) Vacancy/Concessions/BD (146,911) (155,725) (164,290) (172,505) (179,405) (184,787) (189,407) (194,142) (198,995) (203,970) Net Rental Income 2,441,300 2,587,778 2,730,106 2,866,612 2,981,276 3,070,714 3,147,482 3,226,169 3,306,824 3,389,494 8-12) Other Income 408,758 433,284 457,114 479,970 499,169 514,144 526,998 540,173 553,677 567,519 Effective Gross Income 2,850,059 3,021,062 3,187,221 3,346,582 3,480,445 3,584,858 3,674,480 3,766,342 3,860,500 3,957,013 OPERATING EXPENSES 13) Payroll (192,940) (198,728) (204,690) (210,830) (216,101) (221,504) (227,041) (232,717) (238,535) (244,498) 14) Maintenance & Grounds (43,900) (45,217) (46,573) (47,970) (49,170) (50,399) (51,659) (52,950) (54,274) (55,631) 15) General & Administrative (43,469) (44,773) (46,116) (47,499) (48,687) (49,904) (51,151) (52,430) (53,741) (55,085) 16) Leasing & Advertising (58,647) (60,406) (62,218) (64,085) (65,687) (67,329) (69,012) (70,737) (72,506) (74,319) Contollable Expense Subtotal (338,954) (349,123) (359,596) (370,384) (379,644) (389,135) (398,863) (408,835) (419,056) (429,532) FIXED OPERATING EXPENSES 17) Property Taxes (80,703) (83,124) (85,618) (88,187) (90,391) (92,651) (94,967) (97,342) (99,775) (102,270) 18) Insurance (20,632) (21,251) (21,889) (22,545) (23,109) (23,687) (24,279) (24,886) (25,508) (26,146) 19) Utilities (259,604) (267,392) (275,414) (283,676) (290,768) (298,037) (305,488) (313,125) (320,953) (328,977) 20) Management Fee (99,752) (102,745) (105,827) (109,002) (111,727) (114,520) (117,383) (120,318) (123,325) (126,409) 21) Capex Reserves (30,030) (30,931) (31,859) (32,815) (33,635) (34,476) (35,338) (36,221) (37,127) (38,055) Fixed Operating Expense Subtotal (490,721) (505,443) (520,606) (536,225) (549,630) (563,371) (577,455) (591,892) (606,689) (621,856) TOTAL OPERATING EXPENSES (829,676) (854,566) (880,203) (906,609) (929,274) (952,506) (976,319) (1,000,727) (1,025,745) (1,051,388) NET OPERATING INCOME 2,020,383 2,166,496 2,307,018 2,439,973 2,551,171 2,632,352 2,698,161 2,765,615 2,834,756 2,905,624 ACQUISITION Acquisition Cost (40,395,000) All Cash IRR Net Residual Value 52,829,536 Cash Flow Before Debt (40,395,000) 2,020,383 2,166,496 2,307,018 2,439,973 2,551,171 2,632,352 2,698,161 2,765,615 2,834,756 55,735,160 8.22% DEBT FINANCING Principal 26,256,750 Debt Service (1,247,196) (1,247,196) (1,659,675) (1,659,675) (1,659,675) (1,659,675) (1,659,675) (1,659,675) (1,659,675) (24,012,662) Loan Cost (262,568) Leveraged IRR Cash Flow After Debt (14,400,818) 773,188 919,301 647,343 780,298 891,496 972,678 1,038,486 1,105,940 1,175,081 31,722,498 12.49%

Promenade Place | Offering Memorandum COLLIERS INTERNATIONAL P. 35 875 S. Geneva Rd. | Orem, UT 84058 Offering Memorandum PROMENADE PLACE