Pathfinder Partners Opportunity Fund VII, L.P. A Multifamily and Residential Fund Pathfinder Partners Opportunity Fund VII, L.P. A Multifamily and Residential Fund Overview of Pathfinder Pathfinder Track Record From May 2010 to September 2018 we fully-cycled Seasoned fund manager with excellent track 72 investments, generating the following project-level record launching 7th opportunity fund returns: Outstanding brand reputation and deep 6 109 72 relationships drive robust deal flow pipeline Funds Properties Dispositions Sponsored Acquired Conservative underwriting approach; institutional level asset management IRR Equity Multiple Gross Disciplined and thoughtful use of debt leverage Gross Net Net 26% 1.6x 20% 1.4x (See Disclosures) Pathfinder Investment Strategy What We Are Buying • Value-add, Class-B apartments We focus on smaller multifamily 1 properties that are “below the • Target markets: San Diego, Denver, Seattle, Portland, Phoenix, radar” of larger funds/buyers Las Vegas and Sacramento We only acquire properties where we can add significant value; we Who We Are Buying From 2 seek properties which have been • Fatigued owners, liquidating funds and non-profits who don’t starved of capital maintain or adequately invest in their properties • “Off-market” transactions sourced from our extensive network We identify sellers with a catalyst to sell — life-cycle events, liquidating 3 funds, distressed, non-profit Fund VII Target Returns organizations with non-core real • 16-18% gross / 12-14% net IRR estate • 1.9x-2.1x gross / 1.6x-1.8x net Equity Multiple We leverage our extensive We Invest at the Intersection of Opportunistic, relationships, strong reputation and 4 the trust built with our investors Value-Add and Distressed Situations through the management of our prior funds Value-Add Distressed Opportunistic 4380 La Jolla Village Drive, Suite 250 | San Diego, CA 92122 | Phone: 858.875.4400 | www.pathfinderfunds.com Pathfinder Target Markets Benefiting from Robust Population and Job Growth San Diego Seattle One of the most desirable and supply-costrained Rents increased 4.9% in 2017. Escalating rents housing markets in U.S. Rents expected to rise combined with high occupancies (94.7% in Feb. 3.8% in 2018 and 3.7% in 2019. 2018) causing upward pressure on rental rates. Portland Denver Rents increased 2.9% in 2017. Rents are A shortage of affordable housing. Rents have e x p e c t e d t o i n c r e a s e a t h i g h e r r a t e s t h a n t h e increased 61.8% (7.7% per year) since 2009. U.S. average through 2020. Further rent increases projected through 2020. Phoenix Las Vegas Current demand for housing is greater than new Projected annual rent increases averaging 3.8% supply. Solid job growth creating upward expected through 2020. Current demand for pressure on rental rates and home prices. housing is greater than supply. 4380 La Jolla Village Drive, Suite 250 | San Diego, CA 92122 | Phone: 858.875.4400 | www.pathfinderfunds.com Pathfinder’s Competitive Strengths Seasoned Fund Manager | Excellent Track Record Seventh broad-based real estate opportunity fund Successfully managed six broad-based opportunity funds and two specialty funds since founding in 2006 72 dispositions have generated gross project-level IRR of 26% (20% net) and gross equity multiple of 1.6x (1.4x net) (See Disclosures) Conservative Underwriting and Acquisition Approach Incorporates deep research into market dynamics, sub-markets and competitive set Supported by comprehensive third-party research of market trends, historical and projected occupancies and rent growth and competition Institutional-level due diligence reduces risk Investors Benefit from Pathfinder’s Proprietary Sourcing and Extensive Value-Add, Multifamily Experience in Existing Target Markets Deep relationships and strong reputation drive deal flow pipeline Fund focused on value-add, Class-B apartments Fund will only acquire properties in existing Target Markets (San Diego/ Southern California, Seattle, Portland, Denver, Phoenix, Las Vegas and Sacramento) Institutional Level Asset Management Strategic focus on driving property income through higher rental/ other income and hands-on oversight of expense reduction opportunities Best-in-class property management, tenant marketing and rent optimization techniques Deep renovation experience aimed at materially altering a property’s profile, tenant appeal and value 4380 La Jolla Village Drive, Suite 250 | San Diego, CA 92122 | Phone: 858.875.4400 | www.pathfinderfunds.com Why Value-Add, Class-B Apartments? Massive Supply-Demand Imbalance for Apartments Data below from a report commissioned by Pathfinder in December 2017 from John Burns Real Estate Consulting, LLC (“JBREC”) • Multifamily has highly favorable fundamentals (95%+ occupancy and robust rent growth in all Pathfinder markets) due to an acute supply/demand imbalance in housing and a societal shift toward renting that is expected to continue through 2025. • The homeownership rate, 69.3% in 2004, declined to 62.5% in 2017 and is projected to decline to 61% in 2025 as millions who owned homes rent, driving occupancies and rent growth. In Pathfinder’s markets, home prices are well above the national average, creating a substantial need for more affordable apartments. (see chart on the right) • Job growth is strong and housing supply is constrained. The U.S. ratio of employment growth to home construction (employment-to-permit or E/P ratio) is 1.8 to 1. A balanced E/P ratio is 1.1 to 1.5; in many of Pathfinder’s markets, E/P ratios are much higher (2.2 in San Diego, 1.8 in Seattle and Portland). • Housing supply must increase to keep pace with population growth; projecting 6.2 million more renters through 2025. The U.S. is in a housing supply/demand imbalance, with more renters than rental units. The population has increased each year for 55 years; the supply of housing needs to increase simply to maintain the current imbalanced condition. There are 45.7 million rental households today, growing 12.7% to 51.9 million in 2025. • New apartment supply is concentrated in expensive, Class-A properties. Due to the high cost of land and labor, most new construction is Class-A apartments, in urban areas, not more affordable apartments. Superior Long-Term Performance for Apartments vs. Other Properties • Apartments have a long record of providing the highest risk-adjusted returns compared to other property types. (National Multifamily Housing Council) High Homes Prices Driving More to Apartments • High land/construction costs make it difficult for builders to deliver entry-level homes. Home prices are growing faster than rents and home construction is depressed in Pathfinder’s markets. Renters who would otherwise purchase must continue to rent. • Home affordability is weakening, which will likely propel more owners/potential owners to rent. The 30-year fixed mortgage rate is well below historical averages. If interest rates and home prices rise as expected, mortgage payments could increase 36% through 2020. Rising costs will push millions of potential buyers to remain renters and even cause some existing owners to become renters, further exacerbating the supply/ demand imbalance. The Tax Cuts and Jobs Act, signed into law in December 2017, advantages renting at the expense of homeownership because it doubles the standard deduction and caps deductions on mortgage interest and property taxes. Some fund investors may also benefit from tax advantages on pass-through income included in the Act. 4380 La Jolla Village Drive, Suite 250 | San Diego, CA 92122 | Phone: 858.875.4400 | www.pathfinderfunds.com Pathfinder Fund VII Summary of Terms A Multifamily and Residential Fund Offering $100,000,000 to $150,000,000 General Partner’s Commitment $5,000,000 Committed Capital $45,000,000 Minimum Investment $100,000 Major Investors $1,000,000+ Investment Period Dec. 31, 2019 Target Internal Rates of Return (gross) 16%-18% Target Equity Multiple (gross) 2.0x-2.2x Preferred Return 8% / 9% (Major Investors) Management Fee (on contributed capital) 1.5% Acquisition Fee 1.0% (waived for Major Investors) Profit Distributions 80% Investors / 20% GP Initial Closing / Final Closing March 2018 / Dec. 2018 4380 La Jolla Village Drive, Suite 250 | San Diego, CA 92122 | Phone: 858.875.4400 | www.pathfinderfunds.com Executive Team Lorne Polger Co-Founder and Senior Managing Director • 25+ years real estate / legal experience • Prior head of Real Estate department at San Diego’s largest law firm • Advised clients on $7 billion of multifamily transactions • B.A., Colorado College; Cum Laude, J.D., UCLA Oversees acqusitions and dispositions Mitch Siegler Co-Founder and Senior Managing Director 30+ years investment, real estate and senior management experience • Partner in investment banking/venture capital firm • Founder/CEO of several companies • B.S., Finance, University of Missouri, Columbia (honors); M.B.A, Pepperdine University • (highest honors) Oversees corporate strategy and company operations Brent Rivard Managing Director, and COO/CFO • 20+ years of real estate, wealth management and business experience • Executive positions with big four accounting and NYSE-traded firms • Participated in placement of $1 billion in debt and equity securities • Previously COO and CFO for Grubb & Ellis BRE Commercial (now Cushman & Wakefield) • B.A. in Business Economics, UCLA (Cum Laude), CPA Oversees financial, accounting, banking, compliance and IT functions Scot Eisendrath Managing Director, Acquisitions and Investments • 20+ years commerical real estate experience • Involved with acquisitions, dispositions and/or financing of $8 billion of real estate • Former executive with CB Richard Ellis, Burnham Real Estate (Cushman & Wakefield) • B.B.A., Real Estate, Univ. of Wisconsin, Madison; M.B.A., San Diego State University Oversees financial modeling and analytics 4380 La Jolla Village Drive, Suite 250 | San Diego, CA 92122 | Phone: 858.875.4400 | www.pathfinderfunds.com INFORMATION IS AS OF SEPTEMBER 2018. THIS PRESENTATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY, EQUITY, DEBT, OR OTHER CAPITAL INVESTMENT IN PATHFINDER PARTNERS OPPORTUNITY FUND VII, L.P.