Texas Student Housing Portfolio

TEXAS STUDENT HOUSING PORTFOLIO

A 3-PROPERTY, 768-BED INVESTMENT OPPORTUNITY OFFER SOLICITATION PROCESS

PROPERTY VISITATION Prospective purchasers will have the opportunity to visit the Properties via pre-scheduled property tours. These tours will include access to a representative sampling of units and access to maintenance and other similar facilities. In order to accommodate the Property’s ongoing operations, property visitation will require advance notice and scheduling.

ARA NATIONAL STUDENT HOUSING GROUP

Chris Bancroft Pat Jones [email protected] [email protected] 512.342.8100 Ext. 57 512.342.8100 Ext. 53 [email protected]

OFFER SUBMISSION Offers should be presented in the form of a non-binding Letter of Intent, spelling out the significant terms and conditions of Purchasers’ offers including, but not limited to (1) asset pricing, (2) due diligence and closing time frame, (3) Earnest Money Deposit, and (4) a description of the debt/equity structure. The purchase terms shall require all cash to be paid at closing. Offers should be delivered to the attention of Chris Bancroft at the address and/or fax number listed below.

CONTACT INFORMATION

Arboretum Plaza 1 9442 Capital of Texas Highway North Suite 750 Austin, TX 78759

Tel: 512.342.8100 Fax: 512.637.1740

Primary Contacts: Secondary Contacts:

Pat Jones Jeff Patterson [email protected] [email protected]

Chris Bancroft Kelly Witherspoon [email protected] [email protected] TABLE OF CONTENTS

Portfolio Summary and Highlights ...... 1-2

Beaumont ...... 3

The Village at Lamar 7

Huntsville ...... 23

Montgomery Village ...... 27

The Village at Sam Houston ...... 33

Information on Brokerage Relationships ...... 39

Disclaimer 40

TEXAS student housing PORTFOLIO A 3-PROPERTY, 768-bed investment opportunity Portfolio summary

Year Number Number Net Rentable Average Rent Average Property Name Total Rent Price Price/Bed Built of Units of Beds Square Feet Unit Size (SF) Per Bed Rent PSF

BEAUMONT

1. The Village at Lamar 2006 96 384 117, 5 0 4 1,224 $435 $1.422 $167,0 4 0 $12,975,000 $33,789

HUNTSVILLE

3. Montgomery Village 2007 48 192 58,572 1,224 $435 $1.422 $83,520 $8,500,000 $44,271 4. The Village at Sam Houston 2004 48 192 78,720 1,640 $415 $1.012 $79,680 $6,900,000 $35,938

Portfolio Totals / Averages 192 768 254,796 1,328 $430 $1.320 $330,240 $28,375,000 $ 36,947

1 | CONFIDENTIAL OFFERING MEMORANDUM Portfolio HIGHLIGHTS 1 • The Texas Student Housing Porfolio is comprised of three properties totaling 192 units and 768 beds, 105 each well located in close proximity to growing universities: Sam Houston State (Huntsville, Texas) 69 The Village at Lamar 384 Beds

and Lamar University (Beaumont, Texas) 287 12

96 BEAUMONT • All of the properties are located in close proximity 105 Vidor

to their respective universities 105 287

• Each property is a class “A” student apartment 105 90 community with spacious, four-bedroom floorplans 380

LAMAR UNIVERSITY and countless property and unit amenities 287 2 3 96

• The portfolio can be purchased on an individual 45 or portfolio basis Nederland

287 Montgomery Village The Village at Sam Houston • The portfolio is being offered on an ALL CASH HUNTSVILLE 347 192 Beds 192 Beds

BASIS 365 BEAUMONT

HUNTSVILLE 247 19 MUNICIPAL 2821 AIRPORT 2821

45 75

190 30 SAM HOUSTON STATE UNIVERSITY CORPUS CHRISTI

3411

HUNTSVILLE

1374 19

TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 2 BEAUMONT

105 BEAUMONT property summary

Year # of # of Avg. Rent / Avg. Property Name NRA Total Rent Price Price/Bed 69Built Units Beds Size Bed Rent PSF BEAUMONT

The Village at Lamar 2006 96 384 117, 5 0 4 1,224 $435 $1.422 $167,0 4 0 $12,975,000 $33,789

287 12

96 BEAUMONT

105 Vidor

105 287

105 90 380

LAMAR UNIVERSITY 287 96

Nederland

5 | CONFIDENTIAL OFFERING MEMORANDUM 287 347

365 BEAUMONT HIGHLIGHTS EXCELLENT LOCATION: Beaumont is the center for trade and travel in efficient energy systems for its strategic missions. courses. southeast Texas. Located at the intersections of Interstate 10 and Highways 69/90/96/287, Beaumont is only 25 miles from the Louisiana border and 90 This includes the generation of chemically stored energy in systems that SUMMARY: Beaumont is not only a city with a rich heritage it is also a city miles east of Houston. The Port of Beaumont provides access to the Gulf produce hydrogen from conventional and renewable sources. Along which has seen dramatic change in recent years. Much of the economic of Mexico via the Sabine-Neches Ship Channel. Four major rail carriers with military applications, advanced fuel cell research holds the promise growth has come from petrochemical, refinery and call center expansions, connect the Port of Beaumont to points throughout the southern United of utilizing non-polluting hydrogen energy that will eventually allow but commercial retail development and single-family construction have States. In addition, Continental Express offers access to the Beaumont- energy independence for the United States while reducing environmental also increased. The city is ideally located on major highways and can be Port Arthur area with daily flights into the Southeast Texas Regional Airport stresses. accessed via road, rail, air or water. in Beaumont. This ongoing research by the new Lamar University energy laboratory and POPULATION/DEMOGRAPHICS: Beaumont is the seat of Jefferson County its numerous collaborating partners places Southeast Texas, and the Gulf and the largest city in the region with a population of 111,799 in 2005. Coast region, squarely at the forefront as leaders in developing sustainable The Beaumont-Port Arthur MSA which includes; Beaumont, Port Arthur, and renewable energy for decades to come. Orange, Nederland, Groves and Port Neches, reported a population of The spacious Sheila Umphrey Recreational Sports Center is now open and 383,530 in 2005. After a slow period of population growth between 1990 students enjoy the many recreational sports opportunities and amenities it and 2000, the Beaumont-Port Arthur MSA is growing at a more rapid pace has to offer. The Umphrey Center is the latest – and largest – quality-of-life due to several major commercial projects completed or currently under enhancement on campus. construction. The facility encompasses the landmark McDonald Gym, with spectator ECONOMY: The entire Beaumont area was changed on January 10, 1901 seating for volleyball and basketball games. The renovated areas and with the discovery of oil at Spindletop Beaumont became a household new construction will include 13,000 square feet of cardiovascular and name. This discovery began an era of prosperity for southeast Texas that free-weight training; a one-tenth-mile walking/jogging track; a 43-foot influences the economy to this day. With ExxonMobil employing 2,500 climbing wall; basketball, volleyball and badminton courts; racquetball, workers, the Beaumont-Port Arthur MSA is still heavily influenced by the handball and squash courts; a wellness and fitness center; health food oil industry but the economy has diversified over the past decade. The café and juice bar; lounge areas with pool tables; an outdoor putting northwest Beaumont, near Parkdale Mall, has seen increased retail and green; and air hockey, foosball, video games and television. single-family development. Barnes and Noble, Hobby Lobby, JC Penney, Kohl’s, The Gap, Abercrombie & Fitch, Gander Mountain, Best Buy and Lamar University in Beaumont and the Lamar State College campuses dozens of other national retailers have opened new locations in this area in Port Arthur and Orange recently received $8.2 million for construction of Beaumont. The medical industry has al so seen growth at both Christus projects. Texas Governor Rick Perry signed House Bill 153 in July 2006 at St. Elizabeth and Memorial Hermann Baptist Hospitals, which are both Lamar University, legislation which authorizes nearly $1.9 billion in tuition included in Beaumont’s top ten employers. revenue bonds for construction at 48 Texas colleges and university campuses. More than half of the $8.2 million would go to Lamar University Valero recently completed a $443.5 million to expansion of its Port Arthur to renovate the Lucas Engineering Building. Lamar State College in refinery, increasing crude oil processing from 250,000 barrels per day to Orange will get $1.8 million to transform the Hibernia Bank Building into a 325,000 barrels per day. In the first Quarter of 2006 Motiva Enterprises new center dedicated to help at-risk students stay in school; the remaining LLC announced plans to more than double the capacity of its Port Arthur $1.8 million will go toward a new computer center for Lamar State College- oil refinery, an expansion that would put it among the largest in a North Port Arthur. The funding should be available in fiscal year 2007-2008; the American refining market clamoring for supplies. Construction will begin in expansion projects are currently underway. 2007 to boost capacity from 275,000 to 600,000 barrels per day; the project once finished would make the Port Arthur facility the largest in the nation. OTHER SOCIAL CONSIDERATIONS: The city of Beaumont is rich in history and culture. Because of its proximity to Louisiana, the French Cajun culture And on the manufacturing front, Chicago Bridge & Iron recently announced influences the food, traditions, and entertainment. Beaumont has a lot the purchase of a dormant manufacturing facility from Trinity Industries. to offer in the way of recreational activities and entertainment. Known as Trinity Island is a 74 acre site, located south of the Interstate 10 Neches River the “Museum Capitol of Texas”, the city boasts more than 17 museums with Bridge. Chicago Bridge & Iron will manufacture modular buildings and exhibits ranging from the world’s largest fire hydrant to the early days of ship them to construction sites and various locations worldwide. The new electricity. The Crockett Street Dining Entertainment District is comprised owners will revitalize the site and bring between 300 to 500 jobs to the area of five beautiful, historic buildings which have been restored and host four in the next 12 to 18 months, with plans to hire 1,000 employees in the next of southeast Texas’ newest restaurants, a banquet facility, bars and night three years. clubs. Another venue for special events is the newly named Ford Park in LAMAR UNIVERSITY: Lamar University was founded 80 years ago as a Beaumont. The facility includes a 9,500 seat air conditioned multi-purpose junior college. Today, the four-year university offers 76 undergraduate arena, a 18,000 seat outdoor amphitheater, a 48,000 square foot multi- and 33 masters and doctoral degrees to a student body nearing 10,000 use exhibition hall and meeting facility, and over 70,000 square feet of in enrollment. The University is located on a 270-acre campus housing six agricultural facilities. academic colleges. Sports enthusiasts have a wide range of opportunities both for participating There are more than 130 student clubs, organizations, honor societies, in and viewing sporting events. The Beaumont Wildcatters is a professional fraternities and sororities from which to choose. The eight-story Mary and hockey team that began playing in the Ford Park Arena just last fall. John Gray library includes resources that exceed 1,000,000 volumes and Professional football is also new to the city with the Beaumont Drillers has electronic access to millions more. With an enrollment that exceeds beginning play in 2003 as well. More than 2 million visitors flock to the area 10,500 and continues to grow, Lamar continues to offer a personalized each year to take advantage of the superior fishing, hunting and boating. environment and a student/faculty ratio that focuses on individual The Big Thicket National Preserve is a 85,000-acre rare ecosystem of plant success. and animal life. Scientists, birders and ecologists travel from around the world to enjoy and study this region. In addition, golf is a popular outdoor Lamar’s Fuel Cell and Energy Research Lab is conducting frontier research activity in Beaumont. There are currently more than 20 golf courses in to meet the needs of the United States military by developing clean and Beaumont ranging from membership golf clubs to semi-private and public

TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 6 THE VILLAGE AT LAMAR 5230 South Martin Luther King Pky. | Beaumont, Texas 77705 Jefferson County

NUMBER OF BEDS 384

YEAR OF 2006 CONSTRUCTION

NRA 117,504 SF

ACREAGE & 5.965 acres DENSITY 16.09 units/acre

OCCUPANCY 92% Occupied (PROFORMA FALL OF 2008)

NUMBER OF 5 three-story residential buildings 1 clubhouse BUILDINGS 6 TOTAL BUILDINGS

Beaumont ISD SCHOOL DISTRICT Bingman Elementary School DATA South Park Middle School Clifton J. Ozen High School

From Houston: Take Interstate 10 East towards Beaumont. Continue on Interstate 10 for approximately 80 miles. Exit DIRECTIONS TO #849 toward Washington THE PROPERTY Boulevard/Port Arthur. Merge onto US-69 and continue for 4.7 miles. Exit towards Martin Luther King Parkway and turn left. The Property will be on the left.

7 | CONFIDENTIAL OFFERING MEMORANDUM UNIT MIX

TOTAL RENT RENT TOTAL UNIT TYPE BEDS TOTAL SF SF PER BED PER SF RENT

4 BEDROOM / 2 BATHROOM 384 1,224 $435 $1.422 $167,0 4 0 117, 5 0 4

Community Amenities CONSTRUCTION DETAIL • Central clubhouse with internet cafe, weight and fitness studio, game room, business/computer center and tanning beds STYLE Garden-style apartments • Resort-style swimming pool FOUNDATION Concrete post tension slabs • Water volleyball EXTERIOR WALLS Brick and hardi-plank siding • Sand volleyball • Fully gated access community ROOF SYSTEM Pitched roof with composition shingles

• Extensive professional landscaping and maintenance FLOOR COVERING Carpeting and vinyl tile • Ample parking PAVING Concrete • Pest control WIRING Copper

Interior Features • 1,224 square foot units MECHANICAL SYSTEMS • Full-size washer and dryers

• Comprehensive kitchen appliance package including: frost-free ELECTRICAL Individually metered (resident pays) refrigerator with ice maker, range, multi-cylce dishwasher, built-in microwave oven and double stainless steel sink with disposal HVAC Individually climate controlled units • Designer raised-panel cabinetry WATER Sub-metered • Generous pantry and linen storage • Oversized closets HOT WATER Individual hot water heaters • Color coordinated interior decorating • Window treatments • Decorative ceiling fans in all bedrooms and living area • Private balconies or patios • Multiple telephone jacks • Pre-wired for cable television and fire safety • All rooms pre-wired for high-speed internet access

TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 8 fEES & dEPOSITS

APPLICATION FEE $25 (non-refundable)

DEPOSIT $100

$100 pet deposit PET POLICY $100 pet fee (non-refundable)

personnel overview

Manager 1

Assistant Manager 1

Leasing Consultant, seasonal .25

Maintenance Supervisor 1

Maintenance Technician, seasonal .25

TOTAL 3.5

PARKING SPACES

Open surface spaces 383

Handicap spaces 8

TOTAL PARKING SPACES 391

PARKING SPACES PER BED 1.02

SERVICE CONTRACTS

CANCELLATION SERVICE VENDOR TERM EXPIRATION POLICY Cable television & internet Time Warner Cable 10 years None 1/26/2016

Landscaping Torres Lawn Service Year to year 30 days Year to year

Swimming pool AmeriClear MTM 30 days MTM maintenance

Pest control Security Pest Management MTM 30 days MTM

Trash IESI Hauling MTM 30 days MTM

Answering service LTC II, Inc. MTM 30 days MTM

Alarm security Alarmtechs 3 years 30 days 5/6/2009

Water and sewer Ista North America, Inc. 1 year then MTM 30 days 7/25/2008

9 | CONFIDENTIAL OFFERING MEMORANDUM 2 3 4 RENT COMPARABLES

YEAR SQ FT PER RENT MARKET PROPERTY TYPE BEDS BUILT UNIT PER BED RENT/SF

Subject Property 2006 4 BR 384 1,224 $435 $1.422

The Village at Lamar 5230 S. Martin Luther King Pky. Beaumont, TX 77705

92% Occupancy (Proforma Fall of 2008) Mgmt: Hammond Jones

Totals/Averages 384 1,224 $435 $1.422 Blvd. Martin Luther Ki ngton Community Amenities: Swimming pool, clubhouse, business center, fitness center, sport court, bil- Washi liards, access gates, barbecue grills

Interior Features: Washer/dryer units and connections, alarm, patio/balcony, walk-in closet, micro- n S g Parkway wave, 9’ ceilings, ceiling fans, water and electricity paid by resident, internet and cable paid by ou H

i t g h owner h e

l r a n n

Pacifi d

A ve.

Comp #1 2001- 2 BR 2,032 400 $466 $2.328 c Univer

2007 Rd Cardinal Village .

4601 Cheek Street y

Beaumont, TX 77705 D

y Lamar . University 100% Occupied C 1 Mgmt: Lamar University heek

Totals/Averages 2,032 400 $466 $2.328 t 9 6 Florida Ave. . Community Amenities: Parking available for $15/month, swimming pool and spa, clubhouse, business center, clothes care facility, sports court, billiards, barbecue grills, jogging trail, furnished units . Cardinal Dr 6 9 available, mandatory meal plan for $940/semester

Interior Features: Kitchenette with microwave, 9’ ceilings, ceiling fans, water, electricity, internet 287 and cable paid by owner

TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 10 5 6

INVESTMENT HIGHLIGHTS Excellent Location: Village at Lamar Apartments is located on South Martin Luther King Parkways, just north of the Lamar University campus with easy access to the major thoroughfares. 3 N Spacious Units with Countless Amenities: The Village at Lamar is 2 a spacious class “A” garden-style student apartment community with countless amenities. All units are 1,224 square feet with a UNIVERSITY DR. 1 LAMAR UNIVERSITY comprehensive kitchen appliance package including frost- CAMPUS free refrigerator with ice maker, range, multi-cycle dishwasher, built-in microwave oven, and double stainless steel sink with 4 disposal. Each unit has oversized closets in each room, full-size IOWA ST. washer & dryer, window treatments, private balconies, designer OREGON AVE. raised-panel cabinetry, large pantry and linen storage, multiple telephone jacks, high speed internet in each bedroom, cable in each bedroom and decorative ceiling fans in each bedroom. FLORIDA AVE. Community features include a central clubhouse with an internet café, weight and fitness studio, game room, business/ computer center and tanning beds. There is a resort style swimming pool with water volleyball and extensive professional HUNTER ST. landscaping throughout the property.

Lamar University: Lamar University was founded 80 years ago as a junior college. Today, the four-year university offers 76 undergraduate and 33 masters and doctoral degrees to a student body of more than 10,500. Spring Enrollment was up 16.1 percent from 2007. The University is located on a 270-acre campus housing six academic colleges.

The Lamar MBA program was ranked a Top 10 in the State of Texas and Princeton Review ranked Lamar’s College of Business as one of the top 282 business schools in the nation. VEATCH ST. Lamar’s Fuel Cell and Energy Research Lab is conducting frontier research to meet the needs of the U. S. military by developing clean and efficient energy systems for its strategic missions.

With annual operating budget of more than $103.8 million and MARTIN LUTHER KING JR. PKY. a work force of almost 2,000 people, full and part time, Lamar is a vital force for growth in Southeast Texas. The school has an economic impact of more than $238 million on the region.

All Cash Transaction: The seller is offering the Village at Lamar for sale on an all cash basis, allowing prospective buyers to take 1 CARDINAL VILLAGE advantage of today’s favorable interest rate environment and 2 TY TERRELL TRACK aggressive capital markets. 3 LAMAR INSTITUTE OF TECHNOLOGY 4 CARDINAL STADIUM

11 | CONFIDENTIAL OFFERING MEMORANDUM PROFORMA tax summary

Jefferson County Identification #235222-000-000300-00000-1 VILLAGE AT LAMAR 2008 ASSESSED VALUE $10,498,270 INCOME & EXPENSE SUMMARY 2007 ASSESSED VALUE $5,923,710 REVENUE S MONTHLY ANNUAL TAXING JURISDICTIONS 2006 MILL RATE 2007 MILL RATE MARKET RENT POTENTIAL1 $151,680 100% $1,820,160 Beaumont ISD Less: Vacancy (13,651) 9.00% (163,814) $1.362900 $1.095000 NET RENTAL INCOME $138,029 91.00% $1,656,346 Beaumont Port $0.079121 $0.074437 Plus: Other Income $5,760 3.80% $69,120 Drain Dist #6 $0.200039 $0.195587 Plus: Utility Income $1,920 1.27% $23,040 Sabine Neches Nav $0.026322 $0.024257 TOTAL INCOME $143,789 $1,725,466 Jefferson County $0.400000 $0.390000 EXPENSES PER SF PER UNIT MONTHLY ANNUAL City of Beaumont $0.659000 $0.654000 Property Taxes2 $2.15 $2,631 $21,048 14.64% $252,575 TOTAL MILL RATE $2.7273820 $2.4332810 Insurance $0.20 $250 $2,000 1.39% $24,000 Utilities $0.49 $600 $4,800 3.34% $57,600 Management Fees3 $0.44 $539 $4,314 3.00% $51,764 Repair & Maintenance4 $0.98 $1,200 $9,600 6.68% $115,200 Payroll $1.63 $2,000 $16,000 11.13% $192,000 Marketing $0.25 $300 $2,400 1.67% $28,800 Administration $0.25 $300 $2,400 1.67% $28,800 Total Operating Expenses $6.39 $7,820 $62,562 43.51% $750,739

NET OPERATING INCOME $8.30 $2,538 $81,227 56.49% $974,727 Replacement Reserves $0.20 $250 $2,000 1.39% $24,000

NOI AFTER REPLACEMENT RESERVES $8.09 $2,476 $79,227 55.10% $950,727

COMMENTs 1 Proforma market rent has not been increased, but remains at $395 per bed 2 The proforma tax assessment is estimated to be 80% of the ask price of $12,975,000, or $10,380,000, multiplied times the 2007 millage rate of $2.433 per $100 3 Management Fees are estimated at 3.0% of Total Income 4 Repairs & Maintenance are estimated at $300 per bed or $1,200 per unit and includes the cost of cable and internet access

TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 12 huntsville

HUNTSVILLE property summary

Year # of # of Avg. Rent / Avg. Property Name NRA Total Rent Price Price/Bed Built Units Beds Size Bed Rent PSF

BEAUMONT

Montgomery Village 2006 48 192 58,572 1,224 $435 $1.422 $83,520 $8,500,000 $44,271 The Village at Sam Houston 2004 48 192 78,720 1,640 $415 $1.012 $79,680 $6,900,000 $35,938

HUNTSVILLE 247 19 MUNICIPAL 2821 AIRPORT 2821

45 75

190 30 SAM HOUSTON STATE UNIVERSITY

3411

HUNTSVILLE

25 | CONFIDENTIAL OFF E R i n G M E MORA N D U M

1374 19

45 HUNTSVILLE HIGHLIGHTS Excellent Location: Huntsville is located in Walker County, million had already been raised. Waterwood was designed by famed course designer Peter Dye, approximately 70 miles north of Houston and 170 miles south of one of the toughest courses in the country, according to Golf Dallas on Interstate 45. Huntsville is located at the crossroads of In southern Walker County, New Waverly ISD is consistently Digest. Raven Nest Golf Club, which features native trees and Texas Highway 30 (west to Bryan-College Station) and Highway recognized by the state for student academic achievement. grasses, is owned by Sam Houston State University and is already 190 (east to Livingston). Sam Houston State University, a four-year New Waverly competes against other small schools across the gaining a reputation for the toughest course in the area. college with a Spring 2007 enrollment of 14,968, is located within state on the Class 2A level. Walker County has two private the city. schools – Alpha Omega Academy and Heritage Christian With Sam Houston being the main historical focal point around Academy that offer K-through-12 education. Huntsville has five Huntsville and Walker County, there are many other historic sites Population and Demographics: Huntsville covers 31.0 square elementary schools, two middle schools and one high school. that generate interest from tourists coming to town. The Cabin miles within Walker County, which encompasses 790 square on the Square was built in 1840 and is just west of Huntsville. miles. The estimated population in July 2006 of Huntsville was Other Social Considerations: Huntsville provides a unique Texas The cabin served as the home of Hezekiah Farris, a San Jacinto roughly 37,537, a 7.0% increase in population from the 2000 feel with many tourism destinations, downtown shopping and veteran and captor of Santa Anna. The Texas Prison Museum has Census population of 35,078. Other towns encompassing Walker great outdoor activities. Sam Houston has been a “monumental” all the history about the Texas Department of Criminal Justice County include New Waverly, Dodge, Crabbs Prairie, Phelps and figure in constructing the entire Huntsville, Walker County area. and lets visitors be on both sides of the bars. The Gibbs-Powell Riverside. Walker County has an overall population of 63,304. The former U.S. Senator, president of the Republic of Texas, and Home Museum was built in 1862 for both families, who were very the hero of the battle of San Jacinto resided in Huntsville. Sam close personal friends of General Sam Houston. It is one of the Economy: Huntsville, Texas is recognized by many people around Houston was also influential in bringing SHSU to Huntsville and last remaining classical Greek Revival structures in the area. the world because it is the headquarters of the state prison the state prison system. Huntsville celebrates Sam Houston and system – known officially as the Texas Department of Criminal his accomplishments throughout Texas with a 67-foot statue built Whether it’s outdoor adventuring, historic site-seeing, or college Justice (TDCJ). The department’s relationship with Huntsville off of Interstate 45. His homestead still stands today near the living, Huntsville provides a unique mix of activities for tourists and Walker County is unique, and is one that has huge financial center of town. and residents looking to come to this rich, Texas city. benefits for both. TDCJ is the largest employer in the county with a total of 6,096 employees. There are also more than 1,400 other Huntsville Memorial Hospital has experienced tremendous Walker County residents who work with TDCJ through agencies growth over the last few years. In October 2004, Huntsville such as the Windham School District (the prison school system) Memorial became part of the much larger Memorial Hermann and the University of Texas Medical Branch. The first state-run Healthcare system. HMH recently revamped its Women’s Health prison opened in Huntsville in 1849. There are now more than Unit to appeal to families seeking a place of comfort and service 100 facilities across the state, with seven in Walker County alone. while giving birth. There is also the infant security system that In Walker County, the Ellis, Estelle, Goree, Holliday, Huntsville, was installed in 2005. It is an electronic system that provides the Wynne and Byrd Units serve the state as prison facilities. TDCJ latest technology in security for this unit. As HMH strives to offer payroll in Walker County exceeds $18 million per month. In the most efficient and up-to-date care, local patients will have addition to the prison system, the Huntsville education sector is a access to new programs and technologies in order to get them major economic driver, employing over 4,200 people in Walker healthier quicker. County. Much of Huntsville’s downtown shopping a couple years ago was Education: Education in Huntsville dates back to the late 1800’s, mostly frequented by visitors and tourists looking for antiques or with Texas historical icon Sam Houston founding Sam Houston a bit to eat. The trend has shifted with a large number of locals, State University. SHSU’s College of Criminal Justice is the largest combined with tourists to make a vibrant downtown setting. program of its kind in the United States. The college is recognized Shoppers can find fabric, clothes, jewelry, guitars, work uniforms, around the world as the leader in education and training for motorcycles and candy. A dentist has even opened an office future generations of law enforcement officers. The Criminal on the square in a beautiful remodeled building. Dr. Roche said Justice department has 30 faculty and more than 2,000 students. the investment has changed everything for the business, the Other recognized programs within the University are Arts and clients and the aesthetics of downtown, not to mention his vision Sciences, Business Administration, Education, Humanities and for the future. The downtown historic district gives Huntsville its Social Sciences. Overall, SHSU offers 84 undergraduate degrees, small town feel, while bringing many modern and contemporary 47 masters programs and four doctoral programs. SHSU continues shops for locals and visitors alike. to be one of the fastest growing colleges in Texas. The Spring 2007 enrollment of 14,968 students represented a 4.1% increase over Huntsville is well-known for its prison and history, but what’s the Spring 2006 total of 14,374. Current construction, renovation not widely known are several places that will entertainer the and improvement programs total over $150 million. adventurer looking for outdoor fun. There is Huntsville State Park, which has over 2,000 acres of recreational space among the East Over the past five years, Sam Houston has implemented a much Texas Piney Woods. It’s a hiking, biking and boating paradise, needed construction program of more than $150 million. The with 15.5 miles of hiking trails, 11 miles of mountain bike trails and Smith-Hutson expansion, new science building, baseball-softball a 1.3 mile nature trail, all of which run through the park. In the complex, recreation facility expansion, a much needed parking center of the park is the 210-acre Lake Raven, created artificially garage, and significant new housing have been completed. in 1956. Fishing piers, boat launching ramps and docks, and The Visitor’s Center is currently underway. In Spring 2006, the other fishing and boating facilities are available. One of the University kicked off the “Share The Vision” $50 million capital area’s hot spots is the Blue Lagoon. Located in the northern part campaign to be raised over the next five years. Campaign of the county, the Blue Lagoon features crystal-clear water in objectives include $10 million for student scholarship and program town lagoons ideal for divers. No swimmer or pets are allowed, endowment, $18 million for faculty and staff endowment, $14 so diving enthusiasts don’t have to worry about swimmers, million for academic program endowment, $5.25 million for fishing lines or boaters. The lagoon’s water has such a low pH, construction projects, and $2.75 million for program and project that fish can’t survive in it. There are two golf courses in the area, enhancement funding. As of the Spring 2007 semester, over $25 Waterwood National Golf Course and Raven Nest Golf Club. TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 26 MONTGOMERY VILLAGE 2456 Montgomery Road | Huntsville, Texas 77340 Walker County

NUMBER OF BEDS 192

YEAR OF 2007 CONSTRUCTION

NRA 58,572 SF

ACREAGE & 3.827 acres DENSITY 12.54 units/acre

OCCUPANCY 92% Occupied (PROFORMA FALL OF 2008)

NUMBER OF 2 three-story residential buildings 1 one-story clubhouse BUILDINGS 3 TOTAL BUILDINGS

Huntsville ISD SCHOOL DISTRICT Mary McAshan Gibbs Elementary School DATA Mance Park Middle School Huntsville High School

From Houston: Take Interstate 45 North for 67 miles. Exit #114 DIRECTIONS TO toward FM-1374/Montgomery THE PROPERTY Road. Turn right on Montgomery Road. The Property will be on the left.

27 | CONFIDENTIAL OFF E R i n G M E MORA N D U M UNIT MIX

AVERAGE RENT RENT TOTAL UNIT TYPE BEDS TOTAL SF SF PER BED PER SF RENT

4 BEDROOM / 2 BATHROOM 192 1,224 $435 $1.422 $83,520 58,572

Community Amenities CONSTRUCTION DETAIL • Central clubhouse with internet cafe, weight and fitness studio, game room, business/computer center and tanning beds STYLE Garden-style apartments • Resort-style swimming pool FOUNDATION Concrete post tension slabs • Water volleyball • Extensive professional landscaping and maintenance EXTERIOR WALLS Brick and hardi plank siding

• Ample parking ROOF SYSTEM Pitched roof with composition shingles

• Pest control FLOOR COVERING Carpeting and vinyl tile

Interior Features PAVING Concrete

• 1,224 square foot units WIRING Copper • Full-size washer and dryers in every unit

• Comprehensive kitchen appliance package including: frost-free MECHANICAL SYSTEMS refrigerator with ice maker, range, multi-cylce dishwasher, built-in microwave oven and double stainless steel sink with disposal ELECTRICAL Individually metered (resident pays) • Designer raised-panel cabinetry • Generous pantry and linen storage HVAC Individually climate controlled units • Oversized closets • Color coordinated interior decorating WATER Sub-metered • Window treatments HOT WATER Individual hot water heaters • Decorative ceiling fans in all bedrooms and living area • Private balconies or patios • Multiple telephone jacks • Free high speed internet and cable television in each bedroom • Pre-wired for fire safety

TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 28 fEES & dEPOSITS

APPLICATION FEE $0

DEPOSIT $0

$100 pet deposit PET POLICY $100 pet fee (non-refundable)

personnel overview

Manager 1

Assistant Manager 1

Leasing Consultant, seasonal .25

Maintenance Supervisor 1

TOTAL 3.25

PARKING SPACES

Open surface spaces 195

Handicap spaces 6

TOTAL PARKING SPACES 201

PARKING SPACES PER BED 1.05

SERVICE CONTRACTS

CANCELLATION SERVICE VENDOR TERM EXPIRATION POLICY

Landscaping PALM Landscaping 1 year 60 days 4/19/2008

Cable television, inter- Suddenlink 8 years None 8/1/2015 net and telephone Communication

Water and sewer Ista North America, Inc. 1 year, then MTM 30 days 7/25/2008

29 | CONFIDENTIAL OFF E R i n G M E MORA N D U M RENT COMPARABLES

YEAR AVG RENT MARKET PROPERTY TYPE BEDS BUILT SF PER BED RENT/SF

Subject Property 2006 4 BR 192 1,224 $435 $1.422

Montgomery Village 2456 Montgomery Road 92% Occupancy (Proforma Fall of 2008) Mgmt: Hammond Jones r. T D X e 7 id Totals/Averages 192 1,224 $435 $1.422 5 rs -N ve Ri Community Amenities: Swimming pool, clubhouse, business center, fitness center, sports court, billiards, access gates barbecue grills Phelps Dr. / 11th St. Interior Features: Washer/dryer units and connections, alarms, patio/balconies, walk-in closets, microwave, 9’ ceilings, ceiling fans, water and electricity paid by resident, internet and cable television paid by owner Normal Park Normal Comp #1 1999 EFF 48 374 $529 $1.414 45 Sam Houston Arbors of Sam Houston 1 BR 96 621 $701 $1.148 State 555 Bowers Boulevard University 2 BR 336 922 $469 $ 1.025 100% Occupied R B Mgmt: American Communities d BowerB s lvd. / 20th St. e 3 BR 324 1,089 $414 $1.142 . S a y rk 1 c at a B Totals/Averages 804 816 $475 $1.115 lvd m .

Community Amenities: Covered parking for $15/month, swimming pool and spa, clubhouse, busi- o S r ness center, fitness center, sports court, billiards, access gates, barbecue grills, jogging trail, furnished a e

m units available Ho A ust v

o e n

Interior Features: Washer/dryer units*, washer/dryer connections, patio/balconies, walk-in closets, mi- Av . crowave, 9’ ceilings, ceiling fans, water and electricity paid by resident, internet and cable television e. paid by owner (*in select units) 2 . d . R Rd lps Comp #2 2007 4 BR 528 1,333 $487 $1.461 ry Phe e Old m Aberdeen Place o 3 1410 Nottingham Street tg n 4 92% Occupied o Mgmt: Place Properties M

45 Totals/Averages 528 1,333 $487 $1.461 69 Community Amenities: Covered parking for $15/month, swimming pool and spa, clubhouse, business center, fitness center, theatre, sports court, billiards, access gates, barbecue grills, furnished units available

Interior Features: Washer/dryer units and connections, patio/balconies, walk-in closet, microwave, 9’ ceilings, ceiling fans, water, electricity, internet and cable television paid by owner

Comp #4 2006 1 BR 32 491 $612 $1.245 Comp #3 2005 3 BR 204 1,105 $465 $1.261 Gateway of Huntsville 2 BR 128 986 $538 $1.090 Brook Place 4 BR 320 1,515 $480 $1.267 5050 Sam Houston Ave. 5020 Sam Houston Avenue 90% Occupied 4 BR 256 1,515 $442 $1.166 90% Occupied Mgmt: Asset Campus Mgmt: Place Properties Totals/Averages 416 1,128 $490 $1.130 Totals/Averages 524 1,327 $474 $1.265 Community Amenities: Covered parking for $15/month, swimming pool and spa, Community Amenities: Covered parking for $15/month, swimming pool and spa, clubhouse, busi- clubhouse, business center, fitness center, sports court, billiards, access gates, ness center, fitness center, sports court, billiards, barbecue grills, furnished units available barbecue grills, furnished units available

Interior Features: Washer/dryer units and connections, alarm, patio/balconies, walk-in closets, micro- Interior Features: Washer/dryer units and connections, alarms, patio/balconies, wave, 9’ ceilings, ceiling fans, water and electricity paid by resident, internet and cable television walk-in closet, microwave, ceiling fans, water and electricity paid by resident, paid by owner internet and cable television paid by owner

TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 30 5 6

4 3 4

INVESTMENT HIGHLIGHTS Excellent Location: Montgomery Village Apartments is located on Montgomery Road, just north of Sam Houston Avenue and within three blocks of the Sam Houston State University campus with easy N access to retail, restaurants, entertainment and grocery. SHSU is one of the fastest growing universities in Texas. From Fall 2003 to Fall 2007, the student body size has grown 22% to a total enrollment of 16,445.

Spacious Units with Countless Amenities: Montgomery Village is a spacious class “A” garden-style student apartment community with countless amenities. All units are 1,224 square feet with a comprehensive kitchen appliance package including frost- 2 free refrigerator with ice maker, range, multi-cycle dishwasher, built-in microwave oven, and double stainless steel sink with SAM HOUSTON disposal. Each unit has oversized closets in each room, full-size STATE UNIVERSITY washer & dryer, window treatments, private balconies, designer BOWERS BLVD. raised-panel cabinetry, large pantry and linen storage, multiple telephone jacks, high speed internet in each bedroom, cable in each bedroom and decorative ceiling fans in each bedroom.

Community features include a central clubhouse with an internet 1 café, weight and fitness studio, game room, business/computer center and tanning beds. There is a resort style swimming pool

with water volleyball and extensive professional landscaping AVENUE I throughout the property.

Sam Houston State University and Economic Impact: Sam Houston State University represents a major and vital force in the area, accounting for roughly 20% of all locally-based jobs. According to a 2005 university study, the university’s annual payroll was over $30 million. The combined off-campus expenditures of students, faculty and staff had a $99 million impact on the local retail economy. These off-campus expenditures accounted for 23% of local retail sales. Approximately 27% of the children attending Huntsville Independent School District schools have some connection to SHSU. $6.6 million of the money received by H.I.S.D. MONTGOMERY RD. from the state is related to the presence of SHSU.

All Cash Transaction: The seller is offering Montgomery Village for sale on an all cash basis, allowing prospective buyers to take 1 BEARKAT VILLAGE advantage of today’s favorable interest rate environment and 2 BOWERS STADIUM aggressive capital markets.

31 | CONFIDENTIAL OFF E R i n G M E MORA N D U M PROFORMA tax summary

Walker County Identification #790974 MONTGOMERY VILLAGE 2008 ASSESSED VALUE $5,222,560 INCOME & EXPENSE SUMMARY 2007 ASSESSED VALUE $1,990,440 R e v e n u e s MONTHLY ANNUAL TAXING JURISDICTIONS 2006 MILL RATE 2007 MILL RATE MARKET RENT POTENTIAL1 $86,016 100% $1,032,192 Huntsville City Less: Vacancy (4,301) 5.00% (51,610) $0.419200 $0.413500 Less: Non-Revenue Units (860) 1.00% (10,322) Huntsville ISD $1.526700 $1.210000 Less: Concessions (1,720) 2.00% (20,644) Walker County $0.566700 $0.545000 NET RENTAL INCOME $79,135 92.00% $949,617 Walker County Hospital $0.172000 $0.160000 Plus: Other Income $4,800 5.58% $57,600 TOTAL MILL RATE $2.6846000 $2.3285000 Plus: Utility Income $ 1,920 2.23% $23,040 TOTAL INCOME $85,855 $1,030,257 EXPENSES PER SF PER UNIT MONTHLY ANNUAL Property Taxes2 $3.03 $3,711 $14,844 17.29% $178,130 Insurance $0.20 $250 $1,000 1.16% $12,000 Utilities $0.49 $600 $2,400 2.80% $28,800 Management Fees3 $0.53 $644 $2,576 3.00% $30,908 Repair & Maintenance4 $0.98 $1,200 $4,800 5.59% $57,600 Payroll $1.63 $2,000 $8,000 9.32% $96,000 Marketing $0.25 $300 $1,200 1.40% $14,400 Administration $0.25 $300 $1,200 1.40% $14,400 Total Operating Expenses $7.36 $9,005 $36,020 41.95% $432,238

NET OPERATING INCOME $10.18 $3,115 $49,835 58.05% $598,019 Replacement Reserves $0.20 $250 $85,855 1.16% $12,000

NOI AFTER REPLACEMENT RESERVES $9.97 $3,052 $48,835 56.88% $586,019

COMMENTS 1 Proforma market rent is increased by $13 per bed from $435 to $448, which represents an increase of approximately 3.0% 2 The proforma tax assessment is estimated to be 90% of the ask price of $8,500,000, or $7,650,000, multiplied times the 2007 millage rate of 2.3285 per $100 3 Management Fees are estimated at 3.0% of Total Income 4 Repairs & Maintenance are estimated at $300 per bed or $1,200 per unit and includes the cost of cable and internet access

TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 32 THE VILLAGE AT SAM HOUSTON 102 Varsity Drive | Huntsville, Texas 77320 Walker County

NUMBER OF BEDS 192

YEAR OF 2004 CONSTRUCTION

NRA 78,720 SF

ACREAGE & 11.2 acres DENSITY 4.29 units/acre

OCCUPANCY 92% Occupied (PROFORMA FALL OF 2008)

NUMBER OF 48 one-story buildings BUILDINGS 48 TOTAL BUILDINGS

Huntsville ISD SCHOOL DISTRICT Estella Stewart Elementary School DATA Mance Park Middle School Huntsville High School

From Houston: Take Interstate 45 North for 65 miles. Exit #113 DIRECTIONS TO onto TX-19 and continue for THE PROPERTY 2.3 miles. Turn left on Bearkat Boulevard. The Property will be on the left.

33 | CONFIDENTIAL OFF E R i n G M E MORA N D U M UNIT MIX

AVERAGE RENT RENT TOTAL UNIT TYPE BEDS TOTAL SF SF PER BED PER SF RENT

4 BEDROOM / 4 BATHROOM 192 1,640 $415 $1.012 $79,680 78,720

Community Amenities CONSTRUCTION DETAIL • Sand volleyball

• Extensive professional landscaping and full yard maintenance STYLE Single-family detached • Common green areas FOUNDATION Pier and beam • Irrigation system EXTERIOR WALLS Hardi-plank siding

Interior Features ROOF SYSTEM Pitched roof with composition shingles

• Distinctive four bedroom-four bath units consisting of 1,640 FLOOR Carpeting and vinyl tile square feet COVERING • Individual, by-the-bedroom leases PAVING Asphalt

• Full-size washer and dryers in utility room WIRING Copper • Comprehensive kitchen appliance package including: frost- free refrigerator with ice maker, range, multi-cylce dishwasher, MECHANICAL SYSTEMS microwave oven and double sink with disposal • Designer raised-panel cabinetry ELECTRICAL Individually metered (resident pays) • Generous pantry and linen storage • Color coordinated interior decorating HVAC Individually climate controlled units • Large porches • Fully fenced backyard WATER Individually metered

HOT WATER Individual hot water heaters

TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 34 fEES & dEPOSITS

APPLICATION FEE $25 (non-refundable)

DEPOSIT $125

$100 pet deposit PET POLICY $100 pet fee (non-refundable)

personnel overview

Manager 1

Assistant Manager 1

Maintenance Supervisor 1

TOTAL 3

PARKING SPACES

Open surface spaces 192

TOTAL PARKING SPACES 192

PARKING SPACES PER BED 1.0

SERVICE CONTRACTS

CANCELLATION SERVICE VENDOR TERM EXPIRATION POLICY

Cable television and Cox Communications 5 years None 8/1/2010 internet

Precision Pest Control, Pest control MTM 30 days MTM Inc.

Landscaping PALM Landscaping 1 year, then MTM 60 days 3/31/2008

35 | CONFIDENTIAL OFF E R i n G M E MORA N D U M RENT COMPARABLES

YEAR TOTAL RENT MARKET PROPERTY TYPE BEDS BUILT SF PER BED RENT/SF

Subject Property 2004 4 BR 192 1,640 $415 $1.012

The Village at Sam Houston 102 Varsity Drive 92% Occupancy (Proforma Fall of 2008) Mgmt: Hammond Jones r. T D Totals/Averages 192 1,640 $415 $1.012 X e 7 id 5 rs -N ve Community Amenities: Sports court, barbecue grills, irrigation system Ri

Interior Features: Washer/dryer units and connections, patios/balconies, walk-in closet, microwave, Phelps Dr. / 11th St. 9’ ceilings, ceiling fans

Comp #1 1999 EFF 48 374 $529 $1.414 Park Normal 45 Arbors of Sam Houston 1 BR 96 621 $701 $1.148 Sam Houston 555 Bowers Boulevard State 2 BR 336 922 $469 $ 1.025 100% Occupied University Mgmt: American Communities 3 BR 324 1,089 $414 $1.142

R d Bowers Blvd. / 20th St. . S Totals/Averages 804 816 $475 $1.115 y Be 1 c ar a k at Community Amenities: Covered parking for $15/month, swimming pool and spa, clubhouse, busi- m Blv ness center, fitness center, sports court, billiards, access gates, barbecue grills, jogging trail, furnished d. o

units available S r a e

m Ho A Interior Features: Washer/dryer units*, washer/dryer connections, patio/balconies, walk-in closets, mi- ust v

o e crowave, 9’ ceilings, ceiling fans, water and electricity paid by resident, internet and cable television n

Av . paid by owner (*in select units) e.

Comp #2 2007 4 BR 528 1,333 $487 $1.461 2 . d d. R R y lps Aberdeen Place r Phe e Old 1410 Nottingham Street m 92% Occupied o 3 tg Mgmt: Place Properties n 4 o M Totals/Averages 528 1,333 $487 $1.461 45 Community Amenities: Covered parking for $15/month, swimming pool and spa, clubhouse, busi- 69 ness center, fitness center, theatre, sports court, billiards, access gates, barbecue grills, furnished units available

Interior Features: Washer/dryer units and connections, patio/balconies, walk-in closet, microwave, 9’ ceilings, ceiling fans, water, electricity, internet and cable television paid by owner

Comp #3 2005 3 BR 204 1,105 $465 $1.261 Comp #4 2006 1 BR 32 491 $612 $1.245

Brook Place 4 BR 320 1,515 $480 $1.267 Gateway of Huntsville 2 BR 128 986 $538 $1.090 5020 Sam Houston Avenue 5050 Sam Houston Ave. 90% Occupied 4 BR 256 1,515 $442 $1.166 90% Occupied Mgmt: Asset Campus Mgmt: Place Properties Totals/Averages 416 1,128 $490 $1.130 Totals/Averages 524 1,327 $474 $1.265 Community Amenities: Covered parking for $15/month, swimming pool and spa, Community Amenities: Covered parking for $15/month, swimming pool and spa, clubhouse, busi- clubhouse, business center, fitness center, sports court, billiards, access gates, ness center, fitness center, sports court, billiards, barbecue grills, furnished units available barbecue grills, furnished units available

TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 36 5 6

4 2 1 3 4

INVESTMENT HIGHLIGHTS Excellent Location: Village at Sam Houston is a unique rental community located on Varsity Drive, just west of Highway 19, and less than half a mile east of the Bowers Blvd. and Bearkat Blvd. intersection, leading directly into the campus N of Sam Houston State University. SHSU is one of the fastest growing universities in Texas. From Fall 2003 to Fall 2007, the student body size has grown 22% to a total enrollment of 16,445. SAM HOUSTON STATE UNIVERSITY Unique Single-Family Style Living for Students: The Village of Sam Houston is a unique subdivision of four-bedroom, BOWERS four-bath, single-family homes designed especially for and STADIUM marketed exclusively to students. Each unit has a full kitchen, full-sized washers and dryers, parking in front of the unit, a SYCAMORE AVE. fenced back yard, and high-speed internet connections.

Sam Houston State University and Economic Impact: Sam Houston State University represents a major and vital force in the area, accounting for roughly 20% of all locally-based jobs. According to a 2005 university study, the university’s annual payroll was over $30 million. The combined off- campus expenditures of students, faculty and staff had a $99 million impact on the local retail economy. These off- campus expenditures accounted for 23% of local retail sales. Approximately 27% of the children attending Huntsville Independent School District schools have some connection to SHSU. $6.6 million of the money received by H.I.S.D. from

the state is related to the presence of SHSU. BEARKAT BLVD.

All Cash Transaction: The seller is offering Montgomery Village for sale on an all cash basis, allowing prospective buyers to take advantage of today’s favorable interest rate environment and aggressive capital markets.

1 BEARKAT VILLAGE 2 BOWERS STADIUM

37 | CONFIDENTIAL OFF E R i n G M E MORA N D U M PROFORMA tax summary

Walker County Identification #790974 THE VILLAGE AT SAM HOUSTON 2008 ASSESSED VALUE $5,460,480 INCOME & EXPENSE SUMMARY 2007 ASSESSED VALUE $5,460,480 R e v e n u e s MONTHLY ANNUAL TAXING JURISDICTIONS 2006 MILL RATE 2007 MILL RATE MARKET RENT POTENTIAL1 $81,600 100% $979,200 Huntsville City Less: Vacancy (4,080) 5.00% (48,960) $0.419200 $0.413500 Less: Non-Revenue Units (816) 1.00% (9,792) Huntsville ISD $1.526700 $1.210000 Less: Concessions (1,632) 2.00% (19,584) Walker County $0.566700 $0.545000 NET RENTAL INCOME $75,072 92.00% $900,864 Walker County Hospital $0.172000 $0.160000 Plus: Other Income 4,800 5.88% 57,600 TOTAL MILL RATE $2.684600 $2.328500 Plus: Utility Income 1,920 2.35% 23,040 TOTAL INCOME $79,872 $958,464 EXPENSES PER SF PER unit MONTHLY ANNUAL Property Taxes2 $1.63 $2,678 $10,711 13.41% $128,533 Insurance $0.15 $250 $1,000 1.25% $12,000 Utilities $0.37 $600 $2,400 3.00% $28,800 Management Fees3 $0.37 $599 $2,396 3.00% $28,754 Repair & Maintenance4 $0.73 $1,200 $4,800 6.01% $57,600 Payroll $1.22 $2,000 $8,000 10.02% $96,000 Marketing $0.18 $300 $1,200 1.50% $14,400 Administration $0.18 $300 $1,200 1.50% $14,400 Total Operating Expenses $4.83 $7,927 $31,707 39.70% $380,487

NET OPERATING INCOME $7.34 $12,041 $48,165 60.30% $577,977 Replacement Reserves $0.15 $250 $79,872 1.25% $12,000

NOI AFTER REPLACEMENT RESERVES $7.19 $11,791 $47,165 59.05% $565,977

COMMENTS 1 Proforma market rent is increased by $12 per bed from $413 to $425, which represents an increase of approximately 3.0% 2 The proforma tax assessment is estimated to be 80% of the ask price of $6,900,000, or $5,520,000, multiplied times the 2007 estimated millage rate of 2.3285 per $100. 3 Management Fees are estimated at 3.0% of Total Income 4 Repairs & Maintenance are estimated at $300 per bed or $1,200 per unit and includes the cost of cable and internet access

TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 38 INFORMATION ON BROKERAGE RELATIONSHIPS

Before working with a real estate broker, you should know that the duties of a broker depend on whom the broker represents. If you are a prospective seller or landlord (owner) or a prospective buyer or tenant (buyer), you should know that the broker who lists the property for sale or lease is the owner’s agent. A broker who acts as a subagent represents the owner in cooperation with the listing broker. A broker who acts as a buyer’s agent represents the buyer. A broker may act as an intermediary between the parties if the parties consent in writing. A broker can assist you in locating a property, preparing a contract or lease, or obtaining financing without representing you. A broker is obligated by law to treat you honestly.

IF THE BROKER REPRESENTS THE OWNER: The broker becomes the owner’s agent by entering into an agreement with the owner, usually through a written listing agreement, or by agreeing to act as a subagent by accepting an offer of subagency from the listing broker. A subagent may work in a different real estate office. A listing broker or subagent can assist the buyer but does not represent the buyer and must place the interests of the owner first. The buyer should not tell the owner’s agent anything the buyer would not want the owner to know because an owner’s agent must disclose to the owner any material information known to the agent.

IF THE BROKER REPRESENTS THE BUYER: The broker becomes the buyer’s agent by entering into an agreement to represent the buyer, usually through a written buyer representation agreement. A buyer’s agent can assist the owner but does not represent the owner and must place the interests of the buyer first. The owner should not tell a buyer’s agent anything the owner would not want the buyer to know, because a buyer’s agent must disclose to the buyer any material information known to the agent.

IF THE BROKER ACTS AS AN INTERMEDIARY: A broker may act as an intermediary between the parties if the broker complies with The Texas Real Estate License Act. The broker must obtain the written consent of each party to the transaction to act as an intermediary. The written consent must state who will pay the broker and, in conspicuous bold or underlined print, set forth the broker’s obligations as an intermediary. The broker is required to treat each party honestly and fairly and to comply with The Texas Real Estate License Act. A broker who acts as an intermediary in a transaction:

(1) shall treat all parties honestly; (2) may not disclose that the owner will accept a price less than the asking price unless authorized in writing to do so by the owner; (3) may not disclose that the buyer will pay a price greater than the price submitted in a written offer unless authorized in writing to do so by the buyer; and (4) may not disclose any confidential information or any information that a party specifically instructs the broker in writing not to disclose unless authorized in writing to disclose the information or required to do so by The Texas Real Estate License Act or a court order or if the information materially relates to the condition of the property.

With the parties’ consent, a broker acting as an intermediary between the parties may appoint a person who is licensed under The Texas Real Estate License Act and associated with the broker to communicate with and carry out instructions of one party and another person who is licensed under that Act and associated with the broker to communicate with and carry out instructions of the other party.

If you choose to have a broker represent you, you should enter into a written agreement with the broker that clearly establishes the broker’s obligations and your obligations. The agreement should state how and by whom the broker will be paid. You have the right to choose the type of representation, if any, you wish to receive. Your payment of a fee to a broker does not necessarily establish that the broker represents you. If you have any questions regarding the duties and responsibilities of the broker, you should resolve those questions before proceeding. TEXAS LAW REQUIRES THAT ALL REAL ESTATE LICENSEE’S PRESENT THIS INFORMATION TO PROSPECTIVE SELLERS, LANDLORDS, BUYERS OR TENANTS.

ACKNOWLEDGMENT: Please acknowledge your receipt of this information, for Broker’s records:

Date: OWNER OR BUYER OR AUTHORIZED REPRESENTATIVE

39 | CONFIDENTIAL OFFERING MEMORANDUM DISCLAIMER

Prospective purchasers are hereby advised that the Owner (“Owner”) of Texas Student Housing Portfolio (“Property”), is soliciting offers through Apartment Realty Advisors (“ARA”), which may be accepted or rejected by the Owners at the Owners’ sole discretion.

Any solicitation of an offer for the Property offered hereunder will be governed by this Offering, as it may be modified or supplemented. Prospective purchasers are advised that as part of the offer process, the Owners will be evaluating several factors including the experience and financial qualifications of the purchasing entity.

The Owners shall have no obligation to accept any offer from any prospective purchaser. The Owners reserve the right to withdraw the Property from consideration at any time prior to final execution of a Purchase Agreement.

This Offering document is furnished to prospective purchasers for the purpose of determining whether to invest in the Property offered hereby. The information contained herein, or any other related information provided by the Owners, may not be reproduced, redistributed or used in whole or in part without the prior written consent of the Owners.

No person has been authorized to give any information or make any representation or warranty, either expressed or implied and, if given or made, such information or representation must not be relied upon.

While the Owners and ARA have no reason to believe that the information provided herein or in subsequent information updates delivered to potential purchasers hereunder contains any material inaccuracies, neither the Owners nor ARA nor any of the Owners’ or ARA’s respective subsidiaries, affiliates, companies, or the officers, directors, employees, agents and representatives of any such entities, etc., make any representations or warranties, expressed or implied, as to the validity, accuracy or completeness of the information provided or to be provided, and nothing herein shall be deemed to constitute a representation, warranty or promise by any such parties as to the future performance of the Property or any other matters set forth herein.

Any obligations to prospective purchasers that the Owners may have with respect to the Property are limited to those expressly set forth in a fully executed Purchase Agreement between the parties. Prospective purchaser’s sole and exclusive rights against the Owners, with respect to this prospective transaction, the Property, or information provided herein or subsequently, shall be limited to those remedies expressly provided in an executed Purchase Agreement, which shall not survive the closing. Further, in no event shall prospective purchasers have any claims against the Owners, ARA, or any of their respective affiliates for any damages, liability, or causes of action relating to the Purchase Agreement.

Prospective purchasers are not to construe the contents of this Offering or any prior or subsequent information communications from the Owners or any of their respective officers, employees or agents as legal, tax or other advice. Prior to purchasing, prospective purchasers should consult with their own legal counsel and personal and tax advisors to determine the consequences of an investment in the Property and arrive at an independent evaluation of such investment.

No commission or finder’s fee shall be payable to any party by the Owners nor any affiliate or agent thereof in connection with the sale of the Property unless otherwise agreed to by the Owners in writing.

Acquisition of property such as the one offered hereunder involves a high degree of risk and are suitable only for persons and entities of substantial financial means.

TEXAS STUDENT HOUSING PORTFOLIO, A 4-PROPERTY, 1,080-BED INVESTMENT OPPORTUNITY | 40 ARA NATIONAL STUDENT HOUSING GROUP 9442 Capital of Texas Highway North Suite 750 Austin, Texas 78759 T 512.342.8100 MULTIHOUSING INVESTMENT SERVICES

Pat Jones Jeff Patterson Atlanta • Austin • Boca Raton • Boston • Charlotte • Dallas • Dayton • Denver [email protected] [email protected] Houston • Kansas City • Phoenix • Seattle • Salt Lake City • Tampa

Chris Bancroft Kelly Witherspoon www.ARAusa.com [email protected] [email protected]