Offering Memorandum Sonata Townhomes 8101 Kelton Drive Gilroy, CA 95020 NON - ENDORSEMENT AND DISCLAIMER NOTICE Confidentiality and Disclaimer The information contained in the following Marketing Brochure is proprietary and strictly confidential. It is intended to be reviewed only by the party receiving it from Marcus & Millichap and should not be made available to any other person or entity without the written consent of Marcus & Millichap. This Marketing Brochure has been prepared to provide summary, unverified information to prospective purchasers, and to establish only a preliminary level of interest in the subject property. The information contained herein is not a substitute for a thorough due diligence investigation. Marcus & Millichap has not made any investigation, and makes no warranty or representation, with respect to the income or expenses for the subject property, the future projected financial performance of the property, the size and square footage of the property and improvements, the presence or absence of contaminating substances, PCB's or asbestos, the compliance with State and Federal regulations, the physical condition of the improvements thereon, or the financial condition or business prospects of any tenant, or any tenant's plans or intentions to continue its occupancy of the subject property. 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SONATA TOWNHOMES Gilroy, CA ACT ID ZAB0010145 2 SONATA TOWNHOMES TABLE OF CONTENTS SECTION INVESTMENT OVERVIEW 01 Offering Summary Property Photos Aerial Photos, Regional and Local Maps Discover Gilroy FINANCIAL ANALYSIS 02 Rent Roll Summary Operating Statement Pricing Detail MARKET COMPARABLES 03 Sales Comparables MARKET OVERVIEW 04 Demographic Analysis 3 Investment Overview SONATA TOWNHOMES OFFERING SUMMARY PROPERTY SUMMARY THE OFFERING PROPOSED FINANCING Property Sonata Townhomes First Trust Deed Price $7,500,000 Loan Amount $5,625,000 Property Address 8101 Kelton Dr, Gilroy, CA Loan Type Proposed New Assessors Parcel Number 790-39-023 Interest Rate 3.6% Zoning R-3 Amortization 30 Years SITE DESCRIPTION Loan Term 5 Years Number of Units 18 Loan to Value 75% Number of Buildings 5 Debt Coverage Ratio 1.27 Number of Stories 2 Year Built/Renovated 1987 Rentable Square Feet 27,000 Lot Size 1.4 acre(s) Type of Ownership Fee Simple Parking 18 Garages / 18 Open / 7 Guest UTILITIES Water Master metered Electric Individual Gas Individual CONSTRUCTION Foundation Crawl Framing Wood Frame Exterior Wood Siding Parking Surface Concrete Driveways, Asphalt Open Parking Roof 30-year Composition 5 SONATA TOWNHOMES OFFERING SUMMARY INVESTMENT OVERVIEW Sonata Townhomes, consisting of (18) 3 bedroom / 1 ½ bath townhomes in a family oriented residential neighborhood in northwest Gilroy, provides the benefits of a "single family home" lifestyle and historically securing long-term residents for owners. Townhome units are unique in Gilroy and its surrounding neighborhoods, and three bedroom units are even more rare in the local markets. Sonata brings a high demand rental option to this dynamic location in Santa Clara County. The 18 townhomes in 5 buildings are dispersed on a generous 1.4 acre parcel and open green spaces. 11 of the units have been recently renovated with sophisticated upgrades including new quartz counter tops, interior LED lighting, new vinyl wood plank flooring, fixtures and hardware, window coverings, custom paint, and new appliances. Residents appreciate the added convenience of private fenced patios, the comfort of forced individual air conditioners, washer/dryer hookups, and individual garages with automatic garage door openers and direct in-unit access. Sonata offers additional rent growth thru a combination of the generous California rent control ordinance (5% + annual CPI index = 7.8% in 2019), and continuation of the unit renovation program for the remaining 7 thus capturing $180 per unit/month income growth. The property has received a clean property inspection report and Section 1 termite clearance, based on the seller’s attention to remediation of maintenance items including, exterior siding and trim repairs, drainage repairs, new LED exterior lighting lends itself to owners pride of ownership. INVESTMENT HIGHLIGHTS ▪ Townhouse complex - 3 BR/1.5 BA ▪ Private Yards / Private garage with opener and direct access ▪ Washer/Dryer Hook Ups ▪ Forced Heat And Air Conditioning ▪ 11 Renovated Units 6 SONATA TOWNHOMES OFFERING SUMMARY EXECUTIVE SUMMARY VITAL DATA Price $7,500,000 CURRENT YEAR 1 Down Payment 25% / $1,875,000 CAP Rate 5.19% 5.57% MAJOR EMPLOYERS Loan Amount $5,625,000 GRM 12.27 11.68 Net Operating Loan Type Proposed New $389,569 $417,957 EMPLOYER # OF EMPLOYEES Income Net Cash Flow Interest Rate / Advance Services Inc 2,167 3.6% / 30 Years After Debt 4.41% / $82,683 5.92% / $111,072 Amortization Service Saint Louise Hospital 500 Price/Unit $416,667 Total Return 10.09% / $189,127 11.81% / $221,411 Gavilan Jint Cmnty Cllege Dst 345 Price/SF $277.78 Footh-De Anza Commun Colleg Di 318 Number of Units 18 Giacalone Electrical Svcs Inc 275 Rentable Square Feet 27,000 Walmart 259 Number of Buildings 5 Cordevalle Golf Club LLC 250 Number of Stories 2 Year Built / Renovated 1987 / 2020 Soares Lumber Company 230 Lot Size 1.4 acre(s) Gilroy Gardens Family Theme Pk 204 Target 200 UNIT MIX Costco 196 NUMBER APPROX. Communty Slns For Chldrn Fmls 185 UNIT TYPE OF UNITS SQUARE FEET 18 3 BR/1.5 BA 1,500 DEMOGRAPHICS 18 Total 27,000 1-Miles 3-Miles 5-Miles 2018 Estimate Pop 22,407 61,088 69,865 2010 Census Pop 18,764 51,069 58,430 2018 Estimate HH 7,051 17,846 20,562 2010 Census HH 5,849 14,807 17,079 Median HH Income $93,159 $88,925 $91,520 Per Capita Income $39,933 $35,295 $37,049 Average HH Income $126,285 $119,981 $125,056 #7 8101 Kelton Drive OFFERING SUMMARY DETAILED CAPITAL IMPROVEMENTS Since 2019, Sonata Townhomes has received the following upgrades: Interior Full Unit Renovation (11 of 18 units) $189,408 Includes: Granite kitchen countertops, vinyl plank flooring, bedroom carpeting, full paint, lighting, hardware replacement - Units 2, 3, 4, 7, 8, 9, 10, 11, 14, 15, 18 Exterior Motorized Garage Doors (18) $8,640 Door and Trim Paint $7,000 Dry Rot Remediation – trim, fascia, parapet walls $12,975 TOTAL CAPITAL IMPROVEMENTS $218,023 Sonata Townhomes provides residents the best of both worlds ~ The look and feel of “single-home living”, and the community of shared open green spaces. Sonata Townhomes 8101 Kelton Gilroy, CA Located in a quiet residential pocket Renovated units feature updated modern bathrooms and kitchens SONATA TOWNHOMES AERIAL PHOTO Sonata Townhomes 8101 Kelton Gilroy, CA 11 SONATA TOWNHOMES REGIONAL MAP 12 SONATA TOWNHOMES LOCAL MAP 13 GILROY ~ Quality of Life LOCATION HIGHLIGHTS ❖ Excellent Proximity to Top RegionalEmployers ❖ Anritsu, Morgan Hill, 500 Employees, 11.7 mi. ❖ IBM, San Jose, 1,500 Employees, 17.7mi. ❖ Hitachi Data Systems, San Jose, 3,000* Employees, 22.7 mi. ❖ Ernst & Young, San Jose, 650 Employees, 29.8 mi. ❖ Adobe Systems, San Jose, 1,000 Employees, 29.9 mi. ❖ PricewaterhouseCoopers, San Jose, 700 Employees, 29.9mi. ❖ Netflix, Los Gatos, 2,000* Employees, 32.6 mi. Gilroy Caltrain Station - Downtown Gilroy ❖ eBay, San Jose, 16,200* Employees, 33.5 mi. ❖ Intel, Santa Clara, 5,700* Employees, 35.9mi. ❖ Cisco Systems, San Jose, 8,000 Employees, 36.3mi. ❖ The Gilroy Caltrain Station, located Two miles from Sonata Townhomes, ❖ Saint Louise Regional Hospital, Gilroy, 500 Employees, 3.4 mi. offers residents convenient commutes to San Jose, Santa Clara, Sunnyvale, ❖ Monterey Gourmet Foods, Gilroy, 250 Employees, 4.0 mi. Mountain View, Palo Alto, the Peninsula and San Francisco. Just a short drive ❖ Gavilan College, Gilroy, 460 Employees, 4.2 mi. from the community is US Hwy 101 that provides access to the Bay Area’s key transportation arteries, including State Routes 85, 87 and 237, and *Total number of employees at multiple metro locations Interstates 280, 680 and 880. ❖ Minutes to extensive retail options – including the Gilroy Premium Outlet Center (145 Designer and Name Brand Outlet Stores), Pacheco Pass Center (WalMart, Costco and Best Buy), Gilroy Crossings (Target, Kohl’s, Pier 1) and Gilroy’s Boutique Downtown District. The Gilroy Plaza Shopping Center and Town Center Shopping Center, Home to Safeway, CVS Pharmacy, Nob Hill Foods and Starbucks, are both within blocks from Sonata Townhomes. ❖ Gilroy demographics demonstrate the strength of the Multifamily market and the potential for continued rent growth: only 37 percent of the population can afford a median-priced home, and the Own-versus-Rent Affordability Gap is $833, a 51% cost premium. ❖ Abundant parks, open space, recreation centers, hiking and biking paths throughout the city and region, including the 87,000-acre Henry W.